[Federal Register: January 28, 2005 (Volume 70, Number 18)]
[Rules and Regulations]
[Page 4193-4585]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28ja05-21]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 400, 403, 411, 417, and 423
Medicare Program; Medicare Prescription Drug Benefit; Final Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 400, 403, 411, 417, and 423
[CMS-4068-F]
RIN 0938-AN08
Medicare Program; Medicare Prescription Drug Benefit
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule implements the provisions of the Social
Security Act (the Act) establishing and regulating the Medicare
Prescription Drug Benefit. The new voluntary prescription drug benefit
program was enacted into law on December 8, 2003 in section 101 of
Title I of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173). Although this final
rule specifies most of the requirements for implementing the new
prescription drug program, readers should note that we are also issuing
a closely related rule that concerns Medicare Advantage organizations,
which, if they offer coordinated care plans, must offer at least one
plan that combines medical coverage under Parts A and B with
prescription drug coverage. Readers should also note that separate CMS
guidance on many operational details appears or will soon appear on the
CMS website, such as materials on formulary review criteria, risk plan
and fallback plan solicitations, bid instructions, solvency standards
and pricing tools, plan benefit packages.
The addition of a prescription drug benefit to Medicare represents
a landmark change to the Medicare program that will significantly
improve the health care coverage available to millions of Medicare
beneficiaries. The MMA specifies that the prescription drug benefit
program will become available to beneficiaries beginning on January 1,
2006.
Generally, coverage for the prescription drug benefit will be
provided under private prescription drug plans (PDPs), which will offer
only prescription drug coverage, or through Medicare Advantage
prescription drug plans (MA PDs), which will offer prescription drug
coverage that is integrated with the health care coverage they provide
to Medicare beneficiaries under Part C of Medicare. PDPs must offer a
basic prescription drug benefit. MA-PDs must offer either a basic
benefit or broader coverage for no additional cost. If this required
level of coverage is offered, MA-PDs or PDPs, but not fallback PDPs may
also offer supplemental benefits through enhanced alternative coverage
for an additional premium. All organizations offering drug plans will
have flexibility in the design of the prescription drug benefit.
Consistent with the MMA, this final rule also provides for subsidy
payments to sponsors of qualified retiree prescription drug plans to
encourage retention of employer-sponsored benefits.
We are implementing the drug benefit in a way that permits and
encourages a range of options for Medicare beneficiaries to augment the
standard Medicare coverage. These options include facilitating
additional coverage through employer plans, MA-PD plans and high-option
PDPs, and through charity organizations and State pharmaceutical
assistance programs. See sections II.C, II.J, and II.P, and II.R of
this preamble for further details on these issues.
The proposed rule identified options and alternatives to the
provisions we proposed and we strongly encouraged comments and ideas on
our approach and on alternatives to help us design the Medicare
Prescription Drug Benefit Program to operate as effectively and
efficiently as possible in meeting the needs of Medicare beneficiaries.
DATES: These regulations are effective on March 22, 2005.
FOR FURTHER INFORMATION CONTACT: Lynn Orlosky (410) 786-9064 or Randy
Brauer (410)786-1618 (for issues related to eligibility, elections,
enrollment, including auto-enrollment of dual eligible beneficiaries,
and creditable coverage).
Melvin Sanders (410) 786-8355 (for issues related to marketing and
user fees).
Vanessa Duran (214) 767-6435 (for issues related to benefits and
beneficiary protections, including Part D benefit packages, Part D
covered drugs, coordination of benefits in claims processing and
tracking of true-out-of-pocket costs, pharmacy network access
standards, plan information dissemination requirements, and privacy of
records).
Craig Miner, RPh. (410) 786-1889 for issues of pharmacy benefit
cost and utilization management, formulary development, quality
assurance, medication therapy management, and electronic prescribing).
Mark Newsom (410) 786-3198 (for issues of submission, review,
negotiation, and approval of risk and limited risk bids for PDPs and
MA-PD plans; the calculation of the national average bid amount;
determination and collection of enrollee premiums; calculation and
payment of direct and reinsurance subsidies and risk-sharing; and
retroactive adjustments and reconciliations.)
Jim Owens (410) 786-1582 (for issues of licensing and waiver of
licensure, the assumption of financial risk for unsubsidized coverage,
and solvency requirements for unlicensed sponsors or sponsors who are
not licensed in all States in the region in which it wants to offer a
PDP.)
Jim Slade (410) 786-1073 (for issues related to pre-emption of
State law) and (for issues related to solicitation, review and approval
of fallback prescription drug plan proposals; fallback contract
requirements; and enrollee premiums and plan payments specific to
fallback plans.)
Christine Hinds (410) 786-4578 (for issues of coordination of Part
D plans with providers of other prescription drug coverage including
Medicare Advantage plans, State pharmaceutical assistance programs
(SPAPs), Medicaid, and other retiree prescription drug plans; also for
issues related to eligibility for and payment of subsidies for
assistance with premium and cost-sharing amounts for Part D eligible
individuals with lower income and resources; for rules for States on
eligibility determinations for low-income subsidies and general State
payment provisions including the phased-down State contribution to drug
benefit costs assumed by Medicare).
Mark Smith (410) 786-8015 (for issues related to conditions
necessary to contract with Medicare as a PDP sponsor, as well as
contract requirements, intermediate sanctions, termination procedures
and change of ownership requirements.)
Jean LeMasurier (410) 786-1091 (for issues related to employer
group waivers and options).
Frank Szeflinski (303) 844-7119 (for issues related to cost-based
HMOs and CMPS offering Part D coverage.)
John Scott (410) 786-3636 (for issues related to the procedures PDP
sponsors must follow with regard to grievances, coverage
determinations, and appeals.)
Mark Smith (410) 786-8015 (for issues related to solicitation,
review and approval of fallback prescription drug plan proposals;
fallback contract requirements; and enrollee premiums and plan payments
specific to fallback plans.)
Jim Mayhew (410) 786-9244 (for issues related to the alternative
retiree
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drug subsidy and other employer-based sponsor options.)
Joanne Sinsheimer (410) 786-4620 (for issues related to physician
self-referral prohibitions.)
Brenda Hudson (410) 786-4085 (for issues related to PACE
organizations offering Part D coverage.)
Julie Walton (410) 786-4622 or Kathryn McCann (410) 786-7623 (for
issues related to provisions on Medicare supplemental (Medigap)
policies.)
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.
Table of Contents
I. Background
A. Medicare Prescription Drug, Improvement, and Modernization Act
of 2003
B. Codification of Regulations
C. Organizational Overview of Part 423
II. Discussion of the Provisions of the Final Rule
A. General Provisions
1. Overview
2. Discussion of Important Concepts and Key Definitions
B. Eligibility and Enrollment
1. Eligibility and Enrollment
2. Enrollment Process
3. Enrollment of Full Benefit Dual Eligible Individuals
4. Disenrollment process
5. Enrollment Periods
6. Effective Dates
7. Involuntary Disenrollment by the PDP
8. Late Enrollment Penalty
9. Information about Part D
10. Approval of Marketing Materials and Enrollment Forms
11. Information Provided to PDP sponsors and MA Organizations
12. Procedures to Determine and Document Creditable Status of
Prescription Drug Coverage
C. Voluntary Prescription Benefits and Beneficiary Protections
1. Overview and Definitions
2. Plan Formularies
3. Establishment of Prescription Drug Plan Service Areas
4. Access to Covered Part D Drugs
5. Special Rules for Out-of-Network Access to Covered Part D Drugs
at Pharmacies
6. Dissemination of Plan Information
7. Public Disclosure of Pharmaceutical Prices for Equivalent Drugs
8. Privacy, Confidentiality, and Accuracy of Enrollee Records
D. Cost Control and Quality Improvement Requirements for Part D
Plans
1. Overview (Scope)
2. Drug Utilization Management, Quality Assurance, and Medication
Therapy Management Programs (MTMPs)
3. Consumer Satisfaction Surveys
4. Electronic Prescription Program
5. Quality Improvement Organizations (QIO) Activities
6. Treatment of Accreditation
E. RESERVED
F. Submission of Bids and Monthly Beneficiary Premiums: Plan
Approval
1. Overview
2. Requirements for Submission of Bids and Related Information
3. General CMS Guidelines for Actuarial Valuation of Prescription
Drug Coverage
4. Determining Actuarial Equivalency for Variants of Standard
Coverage and for Alternative Coverage.
5. Test for Assuring the Same Protection against High Out-of-Pocket
Costs
6. Review and Negotiation of Bid and Approval of Plans
7. National Average Monthly Bid Amount
8. Rules Regarding Premiums
9. Collection of Monthly Beneficiary Premiums
G. Payments to Part D Plan Sponsors for Qualified Prescription Drug
Coverage
1. Overview
2. Definitions
3. General Payment Provisions
4. Requirement for Disclosure of Information
5. Determination of Payment
6. Low-Income Cost-Sharing Subsidy Interim Payments
7. Risk Sharing Arrangements
8. Retroactive Adjustments and Reconciliation
9. Reopening
10. Payment Appeals
H. RESERVED
I. Organization Compliance with State Law and Preemption by Federal
Law.
1. Overview
2. Waiver of Certain Requirements in Order to Expand Choice
3. Temporary Waiver for Entities Seeking to Offer a Prescription
Drug Plan in more than One State in a Region
4. Solvency Standards for Non-Licensed Entities
5. Preemption of State Laws and Prohibition of Premium Taxes
J. Coordination Under Part D Plans with Other Prescription Drug
Coverage
1. Overview and Terminology
2. Application of Part D Rules to Certain Part D Plans on and after
January 1, 2006
3. Application to PACE Plans
4. Application to Employer Groups
5. Medicare Secondary Payer Procedures
6. Coordination of Benefits with Other Providers of Prescription
Drug Coverage.
K. Application Procedures and Contracts with PDP Sponsors
1. Overview
2. Definitions
3. Application Requirements
4. Evaluation and Determination Procedures for Applications to Be
Determined Qualified to Act as a Sponsor
5. General Provisions
6. Contract Provisions
7. Effective Date and Term of Contract
8. Nonrenewal of Contract
9. Modification or termination of contract by mutual consent
10. Termination of Contracts by CMS
11. Termination of Contract by the Part D Plan Sponsor
12. Minimum Enrollment Requirements
13. Reporting Requirements
14. Prohibition of Midyear Implementation of Significant New
Regulatory Requirements
15. Fraud, Waste and Abuse
L. Effect of Change of Ownership or Leasing of Facilities during
the Term of Contract
1. General Provisions
2. Change of Ownership
3. Novation Agreement Requirements
M. Grievances, Coverage Determinations, and Appeals
1. Introduction
2. General Provisions
3. Grievance Procedures
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4. Coverage Determinations
5. Formulary Exceptions Procedures
6. Appeals
7. Effectuation of Reconsideration Determinations
8. Federal Preemption of Grievances and Appeals
9. Employer Sponsored Prescription Drug Programs and Appeals
10. Miscellaneous
N. Medicare Contract Determinations and Appeals
1. Overview
2. Provisions of the Final Rule
O. Intermediate Sanctions
1. Kinds of Sanctions
2. Basis for Imposing Sanctions
3. Procedures for Imposing Sanctions
P. Premiums and Cost-Sharing Subsidies for Low-Income Individuals
1. Definitions
2. Eligibility for the Low-Income Subsidy
3. Eligibility Determinations, Redeterminations and Applications
4. Premium Subsidy and Cost-Sharing Subsidy
5. Administration of Subsidy Program
Q. Guaranteeing Access to a Choice of Coverage (Fallback
Prescription Drug Plans)
1. Overview
2. Terminology
3. Assuring Access to a Choice of Coverage
4. Submission and Approval of Bids
5. Rules Regarding Premiums
6. Contract Terms and Conditions
7. Payment to Fallback Plans
R. Payments to Sponsors of Retiree Prescription Drug Plans
1. Introduction
2. Options for Sponsors of Retiree Prescription Drug Programs
3. Definitions
4. Requirements for qualified retiree prescription drug plans
5. Retiree drug subsidy amounts
6. Appeals
7. Change of Ownership
8. Construction
S. Special Rules for States-Eligibility Determinations for Low-
Income Subsidies, and General Payment Provisions
1. Eligibility Determinations
2. General Payment Provisions
3. Treatment of Territories
4. State Contribution to Drug Benefit Costs Assumed by Medicare
T. Part D Provisions Affecting Physician Self-Referral, Cost-Based
HMO, PACE, and Medigap Requirements
1. Definition of Outpatient Prescription Drugs for Purposes of
Physician Self-Referral Prohibition
2. Cost-Based HMOs and CMPS offering Part D coverage
3. PACE Organizations Offering Part D Coverage
4. Medicare Supplemental Policies
III. Provisions of the Final Rule
IV. Collection of Information Requirements
V. Regulatory Impact Analysis
In addition, because of the many organizations and terms to which
we refer by acronym in this final rule, we are listing these acronyms
and their corresponding terms in alphabetical order below:
ABN Advanced beneficiary notice
ADAP AIDS Drug Assistance Program
AEP Annual coordinated election period
AHRQ Agency for Healthcare Research and
Quality
AI/AN American Indians and Alaska Natives
AIC Amount in controversy
ALJ Administrative Law Judge
AMA American Medical Association
AMCP Academy of Managed Care Pharmacy
ANCI American National Standards Institute
AO Accreditation organization
ASAP American Society of Automation in
Pharmacy
ASHP American Society of Health Systems
Pharmacists
AWP Average wholesale price
BBA Balanced Budget Act
BLS Bureau of Labor Statistics
CAHP Consumer Assessment of Health Plan
CBI Confidential business information
CBO Congressional Budget Office
CCIP Chronic care improvement programs
CCP Comprehensive Compliance Program
CFR Code of Federal Regulations
CHOW Change of ownership
CMP competitive medical plan
CMS Centers for Medicare & Medicaid
Services
COB Coordination of benefit
COBRA Consolidated Omnibus Budget
Reconciliation Act (of 1985)
CPI-PD Consumer Price Index for Prescription
Drugs and Medical Supplies
CPT Current Procedural Terminology
CY Calendar year
DAB Departmental Appeals Board
DHS Designated health services
DME Durable medical equipment
DoD Department of Defense
DOL Department of Labor
DUR Drug utilization review
EOB explanation of benefits
ERISA Employee Retirement Income Security
Act of 1974
ESRD End stage renal disease
FAR Federal Acquisition Regulation
FDA Food and Drug Administration
FEHBP Federal Employee Health Benefits
Program
FFP Federal financial participation
FOIA Freedom of Information Act
FQHCs Federally qualified health centers
FPL Federal poverty level
FR Federal Register
FSA Flexible savings account
FY Fiscal year
HEDIS Health plan Employer Data and
Information Set
HHS Department of Health and Human
Services
HIC Health insurance claim
HIPAA Health Insurance Portability and
Accountability Act of 1996
HMO Health maintenance organization
HPMS Health Plan Management System
HRA Health reimbursement account
HRSA Health Resources and Services
Administration
HSA Health savings account
ICFs/MR Intermediate care facilities for the
mentally retarded
IDIQ Indefinite duration, indefinite
quantity
IEP Initial enrollment period
IHS Indian Health Service
IRE Independent review entity
I/T/U Indian Tribes and Tribal
organizations, and urban Indian
organizations
JCHACO Joint Commission on Accreditation of
Health Care Organizations
LIS Low-income subsidy
LTC Long term care
MA Medicare Advantage (formerly
Medicare+Choice)
MA-PD Medicare Advantage prescription drug
plans
MAC Medicare Appeals Council
MAX Medicaid Analytic extract
MCBS Medicare Current Beneficiary Survey
MMA Medicare Prescription Drug,
Improvement, and Modernization Act of
2003
MSA Medicare savings account
MSIS Medicaid Statistical Information
System
MSP Medicare Secondary Payor
MTMP Medication Therapy Management Program
NAIC National Association of Insurance
Commissioners
NCQA National Committee for Quality
Assurance
NCPDP National Council for Prescription Drug
Programs
NCVHS National Center for Vital and Health
Statistics
NDC National Drug Code
NHE National Health Expenditure
NPA National PACE Association
NPI National Provider Identifier
OACT Office of the Actuary (CMS)
OBRA Omnibus Budget Reconciliation Act
OCR Office for Civil Rights
OEPI Open enrollment period for
institutionalized individuals
OIG Office of the Inspector General
OPM Office of Personnel Management
P&T Pharmaceutical and therapeutic
PBA Pharmacy benefit administrator
PBMs Pharmacy benefit managers
PBP Plan Benefit Package
PDP Private prescription drug plan
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PDSC Phased-down State contribution
PFFS Private fee-for-service plan
PHI Protected health information
PhRMA Pharmaceutical Manufacturers and
Researchers of America
PPO Preferred provider organization
PPV Pharmaceutical Prime Vendor
PSO Provider-sponsored organization
QDWIs Qualified disabled and working
individuals
QIl Qualified individuals
QIO Quality Improvement Organization
QMB Qualified Medicare beneficiaries
REACH Regional Education About Choices in
Health
RHC Rural Health Center
SCHIP State Children's Health Insurance
Program
SEP Special enrollment period
SHIP State health insurance assistance
program
SLMB Special Low-Income Beneficiaries
SOW Scope of work
SPAP State Pharmaceutical Assistance
Program
SPD Summary Plan Description
SPOC Single point of contact
SSA Social Security Administration
SSI Supplemental Security Income
SSRI Selective serotonin reuptake inhibitor
SSSGs Similarly Sized Subscriber Groups
TANF Temporary assistance for needy
families
TrOOP True out-of-pocket
U&C Usual and customary
URAC Utilization Review Accreditation
Commission
USP U.S. Pharmacopoeia
VA Department of Veterans Affairs
VDSA Voluntary data sharing agreement
I. Background
A. Medicare Prescription Drug, Improvement, and Modernization Act of
2003
Section 101 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended Title XVIII
of the Social Security Act (the Act) by establishing a new Part D: the
Voluntary Prescription Drug Benefit Program. (For ease of reference, we
will refer to the new prescription drug benefit program as Part D of
Medicare and we will refer to the Medicare Advantage Program described
in Part C of title XVIII of the Act -as Part C of Medicare.)
We believe that the new Part D benefit constitutes the most
significant change to the Medicare program since its inception in 1965.
The addition of outpatient prescription drugs to the Medicare program
reflects the Congress' recognition of the fundamental change in recent
years in how medical care is delivered in the U.S. It recognizes the
vital role of prescription drugs in our health care delivery system,
and the need to modernize Medicare to assure their availability to
Medicare beneficiaries. This final rule is designed to broaden
participation in the new benefit both by organizations that offer
prescription drug coverage and by eligible beneficiaries. In
conjunction with complementary improvements to the Medicare Advantage
program, these changes should significantly increase the coverage and
choices available to Medicare beneficiaries.
Effective January 1, 2006, the new program establishes an optional
prescription drug benefit for individuals who are entitled to or
enrolled in Medicare benefits under Part A and Part B. Beneficiaries
who qualify for both Medicare and Medicaid (full-benefit dual
eligibles) will automatically receive the Medicare drug benefit unless
Medicare has identified the individual as having other creditable
coverage through an employer-based prescription drug plan. The statute
also provides for assistance with premiums and cost sharing to eligible
low-income beneficiaries.
In general, coverage for the new prescription drug benefit will be
provided through private prescription drug plans (PDPs) that offer
drug-only coverage, or through Medicare Advantage (MA) (formerly known
as Medicare+Choice) plans that offer integrated prescription drug and
health care coverage (MA-PD plans). PDPs must offer a basic drug
benefit. MA-PDs must offer either a basic benefit, or a benefit with
broader coverage than the basic benefit, but at no additional cost to
the beneficiary. If this required level of coverage is offered, MA-PDs
or PDPs, but not fallback plans, may also offer supplemental benefits,
called ``enhanced alternative coverage,'' for an additional premium.
All organizations offering drug plans will have flexibility in
terms of benefit design, including the authority to establish a
formulary to designate specific drugs that will be available, and the
ability to have a cost-sharing structure other than the statutorily-
defined structure, subject to certain actuarial tests. Most Part D
plans also may include supplemental drug coverage such that the total
value of the coverage offered exceeds the value of basic prescription
drug coverage. The specific sections of the Act that address the
prescription drug benefit program are the following:
1860D-1 Eligibility, enrollment, and
information.
1860D-2 Prescription drug benefits.
1860D-3 Access to a choice of qualified
prescription drug coverage.
1860D-4 Beneficiary protections for qualified
prescription drug coverage.
1860D-11 PDP regions; submission of bids; plan
approval.
1860D-12 Requirements for and contracts with
prescription drug plan (PDP)
sponsors.
1860D-13 Premiums; late enrollment penalty.
1860D-14 Premium and cost-sharing subsidies for
low-income individuals.
1860D-15 Subsidies for Part D eligible
individuals for qualified
prescription drug coverage.
1860D-16 Medicare Prescription Drug Account in
the Federal Supplementary Medical
Insurance Trust Fund.
1860D-21 Application to Medicare Advantage
program and related managed care
programs.
1860D-22 Special rules for employer-sponsored
programs.
1860D-23 State pharmaceutical assistance
programs.
1860D-24 Coordination requirements for plans
providing prescription drug coverage.
1860D-41 Definitions; treatment of references
to provisions in Part C.
1860D-42 Miscellaneous provisions.
Specific sections of the MMA that also
relate to the prescription drug
benefit program are the following:
Sec. 102 Medicare Advantage Conforming
Amendments
Sec. 103 Medicaid Amendments
Sec. 104 Medigap
Sec. 109 Expanding the work of Medicare Quality
Improvement Organizations to include
Parts C and D.
B. Codification of Regulations
The final provisions set forth here are codified in 42 CFR Part
423-Voluntary Medicare Prescription Drug Benefit. Note that the
regulations--
for Medicare supplemental policies (Medigap) will continue
to be located in 42 CFR part 403 (subpart B);
for exclusions from Medicare and limitations on Medicare
payment (the physician self-referral rules) will continue to be located
in 42 CFR part 411;
for managed care organizations that contract with us under
cost contracts will continue to be located in 42 CFR part 417, Health
Maintenance Organizations, Competitive Medical Plans, and Health Care
Prepayment Plans;
for PACE organizations will continue to be located in 42
CFR part 460.
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C. Organizational Overview of Part 423
The regulations set forth in this final rule are codified in the
new 42 CFR Part 423-Voluntary Medicare Prescription Drug Benefit. There
are a number of places in which statutory provisions in Part D
incorporate by reference specific sections in Part C of Medicare (the
MA program). The MA regulations appear at 42 CFR Part 422. Since the
same organizations that offer MA coordinated care plans will also be
required to offer MA-PD plans, we believed it was appropriate to adopt
the same organizational structure as part 422. Wherever possible, we
modeled the prescription drug regulations on the parallel provisions of
the part 422 regulations.
The major subjects covered in each subpart of part 423 are as
follows:
Subpart A, General Provisions: Basis and scope of the new part 423,
Definitions and discussion of important concepts used throughout part
423, and sponsor cost-sharing in beneficiary education and enrollment-
related costs (user fees).
Subpart B, Eligibility, Election, and Enrollment: Eligibility for
enrollment in the Part D benefit, enrollment periods, disenrollment,
application of the late enrollment penalty, approval of marketing
materials and enrollment forms, and the meaning and documentation of
creditable coverage. (Please note that other, related topics, are
discussed in the following subparts: Subpart P, eligibility and
enrollment for low-income individuals; Subpart S, provisions relating
to the phase-down of State contributions for dual-eligible drug
expenditures; Subpart F, calculation and collection of late enrollment
fees; Subpart C, plan disclosure; Subpart Q, eligibility and enrollment
for fallback plans; and Subpart T, the definition of a Medicare
supplemental (Medigap) policy.)
Subpart C, Benefits and Beneficiary Protections: Prescription drug
benefit coverage, service areas, network and out-of-network access,
formulary requirements, dissemination of plan information to
beneficiaries, and confidentiality of enrollee records. (Please note
that actuarial valuation of the coverage offered by plans, as well as
the submission of the bid, is discussed in subpart F. Access to
negotiated prices is discussed in subpart C, while the reporting of
negotiated prices is discussed in subpart G. Formularies are discussed
in subpart C, while appeals related to formularies are discussed in
subpart M. Incurred costs toward true out-of-pocket (TrOOP
expenditures) are discussed in subpart C, while the procedures for
determining whether a beneficiary's Part D out-of-pocket costs are
actually reimbursed by insurance or another third-party arrangement are
discussed in subpart J. Information that plans must disseminate to
beneficiaries is discussed in subpart C, while Part D information that
CMS must disseminate to beneficiaries is discussed in subpart B.)
Subpart D, Cost Control and Quality Improvement Requirements for
Part D Plans: Utilization controls, quality assurance, and medication
therapy management, as well as rules related to identifying enrollees
for whom medication therapy management is appropriate, consumer
satisfaction surveys, and accreditation as a basis for deeming
compliance.
Subpart E, Reserved.
Subpart F, Submission of Bids and Monthly Beneficiary Premiums;
Plan Approval: Bid submission, the actuarial value of bid components,
review and approval of plans, and the calculation and collection of
Part D premiums.
Subpart G, Payments to Part D plans for Qualified Prescription Drug
Coverage: Data submission, payments and reconciliations for direct
subsidies, risk adjustment, reinsurance, and risk-sharing arrangements.
Subpart H, Reserved.
Subpart I, Organization Compliance with State Law and Preemption by
Federal Law: Licensure, assumption of financial risk, solvency, and
State premium taxes.
Subpart J, Coordination Under Part D With Other Prescription Drug
Coverage: Applicability of Part D rules to the Medicare Advantage
program, waivers available to facilitate the offering of employer group
plans, waivers of part D provisions for PACE plans and 1876 cost plans
offering qualified prescription drug coverage, and procedures to
facilitate calculation of true out-of-pocket (TrOOP) expenses and
coordination of benefits with State pharmaceutical assistance programs
and other entities that provide prescription drug coverage. (Please
note that subpart C discusses, in more detail, coordination of benefits
from the perspective of which prescription drug benefits are covered by
Part D and the determination of which incurred beneficiary costs will
be counted as TrOOP expenditures. Provisions relating to disenrollment
for material misrepresentation by a beneficiary are discussed in
subpart B.)
Subpart K, Application Procedures and Contracts with PDP Sponsors:
Application procedures and requirements; contract terms; procedures for
termination of contracts; reporting by PDP sponsors.
Subpart L, Effect of Change of Ownership or Leasing of Facilities
during Term of Contract: Change of ownership of a PDP sponsor; novation
agreements; leasing of a PDP sponsor's facilities.
Subpart M, Grievances, Coverage Determinations and Appeals:
Coverage determinations by sponsors, exceptions procedures, and all
levels of appeals by beneficiaries.
Subpart N, Medicare Contract Determinations and Appeals:
Notification by CMS about unfavorable contracting decisions, such as
nonrenewals or terminations; reconsiderations; appeals.
Subpart O, Sanctions: Provisions concerning available sanctions for
participating organizations.
Subpart P, Premiums and Cost-Sharing Subsidies for Low-Income
Individuals: Eligibility determinations and payment calculations for
low-income subsidies.
Subpart Q, Guaranteeing Access to a Choice of Coverage (Fallback
Plans): Definitions, access requirements, bidding process, and contract
requirements for fallback PDPs.
Subpart R, Payments to Sponsors of Retiree Prescription Drug Plans:
Provisions for making retiree drug subsidy payments to sponsors of
qualified retiree prescription drug plans.
Subpart S, Special Rules for States--Eligibility Determinations for
Subsidies and General Payment Provisions: State/Medicaid program's role
in determining eligibility for low-income subsidy and other issues
related to the Part D benefit.
In addition, in subpart T, this final rule also makes changes to:
part 400 relating to definitions of Parts C & D, part 403 relating to
Medicare supplemental policies (Medigap), part 411 relating to
exclusions from Medicare and limitations on Medicare payment (the
physician self-referral rules), part 417 relating to cost-based health
maintenance organizations (HMOs), and part 460 relating to PACE
organizations.
II. Provisions of the Proposed Rule
We received 7,696 items of correspondence containing comments on
the August 2004 proposed rule. Commenters included managed care
organizations and other insurance industry representatives, pharmacy
benefit management firms, pharmacies and pharmacy education and
practice-related organizations, pharmaceutical manufacturers,
representatives of physicians and other health care professionals,
beneficiary advocacy
[[Page 4199]]
groups, representatives of hospitals and other healthcare providers,
States, employers and benefits consulting firms, members of the
Congress, Indian Health Service, Tribal and Urban Health Programs,
American Indians and Alaska Natives, beneficiaries, and others. We also
received many comments expressing concerns unrelated to the proposed
rule. Some commenters expressed concerns about Medicare unrelated to
the Prescription Drug Benefit, while others addressed concerns about
health care and health insurance coverage unrelated to Medicare.
Because of the volume of comments we received in response to the
proposed rule, we will be unable to address comments and concerns that
are unrelated to the proposed rule.
Most of the comments addressed multiple issues, often in great
detail. Listed below are the areas of the regulation that received the
most comments:
Transition of Coverage for Dual Eligibles from Medicaid to
Medicare
Access to Drugs in Long Term Care Facilities
Formulary Policies
Medication Therapy Management Requirements
Network Access Standards
Part B/Part D Drug Identification and Coordination
Dispensing Fees
In this final rule, we address comments received on the proposed
rule. For the most part, we will address issues according to the
numerical order of the related regulation sections.
A. General Provisions
1. Overview
Section 423.1 of subpart A specified the general statutory
authority for the ensuing regulations and indicated that the scope of
part 423 is to establish requirements for the Medicare prescription
drug benefit program. We proposed key definitions at Sec. 423.4 for
terms that appear in multiple sections of part 423.
Consistent with the MMA statute, in many cases we proposed
procedures that parallel those in effect under the MA program. Our goal
was to maintain consistency between these two programs wherever
possible; thus we evaluated the need for parallel changes in the MA
final rule when we received comments on provisions that affect both
programs.
Comment: Many commenters urged us to finalize regulations by early
January--and detailed business requirements soon thereafter. Some also
recommended that we make public certain key decisions and data sooner
than January in order to promote planning.
Response: We agree that the earliest possible release of program
requirements and final rules will facilitate planning and
implementation of new business processes required to offer and
administer this new program. Consequently we have made numerous draft
documents, such as the risk plan solicitation, PDP solvency
requirements, formulary review policies, and the actuarial bidding
instructions, available for public comment in November and December of
2004 and have expedited the rulemaking process to meet these goals. In
response to the lack of specificity regarding the PDP regions in our
proposed rule, we conducted extensive outreach in order to obtain
public input prior to the publication of our final rule. On December 6,
2004, we announced the establishment of 26 MA regions and 34 PDP
regions.
2. Discussion of Important Concepts and Key Definitions (Sec. 423.4)
a. Introduction
For the most part, the proposed definitions were taken directly
from section 1860D-41 of the Act. The definitions set forth in subpart
A apply to all of part 423 unless otherwise indicated, and are
applicable only for the purposes of part 423. For example, ``insurance
risk'' applies only to pharmacies that contract with PDP sponsors under
part 423.
Definitions that have a more limited application have not been
included in subpart A, but instead are set forth within the relevant
subpart of the regulations. For example, in subpart F, we have included
all the definitions related to bids and premiums. The detailed
definitions and requirements related to prescription drug coverage are
included in subpart C, but because of their direct relevance to the
bidding process they are also referenced in subpart F.
Following our discussion of important concepts, we provide brief
definitions of terms that occur in multiple sections of this preamble
and part 423. We believe that it is helpful to define these frequently
occurring terms to aid the reader, but that these terms do not require
the extended discussion necessary in our section on important concepts.
b. Discussion of Actuarial Equivalence, Creditable Prescription Drug
Coverage, PDP Plan Regions, Service Area, and User Fees
Discussion of the Meaning of Actuarial Equivalence
The concept of actuarial equivalence is applied in several
different contexts in Title I of the MMA. In very general terms,
actuarial equivalence refers to a determination that, in the aggregate,
the dollar value of drug coverage for a set of beneficiaries under one
plan can be shown to be equal to the dollar value for those same
beneficiaries under another plan. Given the various uses for this term
in the Part D provisions, we proposed the following relatively general
definition: ``Actuarial equivalence'' means a state of equivalent
values demonstrated through the use of generally accepted actuarial
principles and in accordance with section 1860D-11(c) of the Act and
Sec. 423.265(c)(3) of this part. This concept is discussed in further
detail in those sections of this preamble, such as section II.F, where
actuarial equivalence comes into play. We will provide further detailed
guidance on methods required to demonstrate actuarial equivalence.
Comment: One commenter requested that the definition of actuarial
equivalence be refined through examples or more descriptive language.
Response: We agree that it is critical to disclose our requirements
for calculation of actuarial values under Part D requirements as fully
and as expeditiously as possible to reduce uncertainty on the part of
potential plan sponsors. To that end we made available our draft bid
preparation rules and processes early in December 2004 for public
comment, and we will continue to refine our guidance to bidders through
vehicles such as the annual 45-day notice and the CMS website. We have
modified our definition to refer to this separate guidance.
Discussion of the Meaning of Creditable Prescription Drug
Coverage
Comments on creditable coverage are addressed in the preamble for
subparts B and T.
Prescription Drug Plan Regions
Prescription drug plan regions are areas in which a contracting PDP
sponsor must provide access to covered Part D drugs. Although we
included specifications for regions in Sec. 423.112, the regions
themselves were not set forth in the proposed rule. To the extent
feasible, we tried to establish PDP regions that were consistent with
MA regions. The MMA specifically required no fewer than 10 regions and
no more than 50 regions, not including the territories. For a further
discussion of the PDP regions, see section II.C of this preamble.
Comment: Many commenters expressed concerns about the MA and PDP
region decisions. Many argued that
[[Page 4200]]
regions should closely mirror existing State insurance markets to
maximize participation. Others representing rural constituencies argued
for larger regions to encourage offering of coverage in rural areas.
Response: We conducted a market survey and analysis, including an
examination of current insurance markets as required in the MMA. Key
factors in the survey and analysis included payment rates; eligible
population size per region; preferred provider organization (PPO)
market penetration; current existence of PPOs, MA plans, or other
commercial plans; and presence of PPO providers and primary care
providers. Additional factors were also considered, including solvency
and licensing requirements, as well as capacity issues. Recognizing the
lack of specificity regarding the PDP regions in our proposed rule, we
conducted extensive outreach in order to obtain public input prior to
the publication of our final decision. On December 6, 2004, we
announced the establishment of 26 MA regions and 34 PDP regions. For
maps and fact sheets on the regions, please see http://www.cms.hhs.gov/medicarereform/mmaregions/
.
Service Area
In the proposed rule we proposed that Medicare beneficiaries would
be eligible to enroll in a PDP or an MA-PD plan only if they reside in
the PDP's or MA-PD plan's ``Service Area.'' For PDPs the service area
is defined as the region or regions for which they must provide access.
This is the Region established by CMS either pursuant to proposed Sec.
423.112, or, in the case of fallback plans, the fallback service area
pursuant to Sec. 423.859, within which the PDP is responsible for
providing access to the Part D drug benefit in accordance with the
access standards in proposed Sec. 423.120. Under the MA program, an MA
plan's service area is defined in Sec. 422.2. For coordinated care
plans, the definition of ``service area'' expressly includes the
condition that the service area is an area in which access is provided
in accordance with access standards in Sec. 422.112.
We also proposed that for purposes of enrolling in Part D with a
PDP, or under an MA-PD plan, the definition of Service Area that
governs eligibility to enroll is the area within which the Part D
access standards under Sec. 423.120 are met. Beneficiaries in jail or
prison do not have access to pharmacies available as required under
Sec. 423.120. Therefore, such beneficiaries would not be considered to
be in a PDP or MA-PD plan's Service Area for purposes of enrolling in
Part D. Incarcerated individuals accordingly would not be assessed a
late penalty when they enroll in Part D (either with a PDP or MA-PD
plan) upon being released. The same analysis applies with regard to a
beneficiary who lives abroad, and does not reside within the boundaries
of any PDP Region or MA-PD Service Area. We have modified our
definition of service area to clarify our intent as proposed.
Comment: Several commenters asked that we waive the service area
requirement for employer group PDP plans.
Response: We agree that we have the authority to waive the service
area requirement for employer-sponsored group prescription drug plans,
and we plan to do so in appropriate cases. We will provide further
details on waivers in separate CMS guidance.
Sponsor Cost-Sharing in Beneficiary Education and Enrollment
Related Costs-User Fees (Sec. 423.6)
The last section of subpart A proposed regulations implementing the
user fees provided for in section 1857(e)(2) of the Act, as
incorporated by section 1860D-12(b)(3)(D) of the Act. These fees are
currently required of MA plans for the purpose of defraying part of the
ongoing costs of the national beneficiary education campaign that
includes developing and disseminating print materials, the 1-800-
MEDICARE telephone line, community based outreach to support State
health insurance assistance programs (SHIPs), and other enrollment and
information activities required under section 1851 of the Act and
counseling assistance under section 4360 of the Omnibus Budget
Reconciliation Act of 1990 (Pub. L. 103-66).
The MMA expands the user fee to apply to PDP sponsors as well as MA
plans. The expansion of the application of user fees recognizes the
increased Medicare beneficiary education activities that we would
require as part of the new prescription drug benefit. In 2006 and
beyond, user fees will help to offset the costs of educating over 41
million beneficiaries about the drug benefit through written materials
such as a publication describing the drug benefit, internet sites, and
other media. The user fee provisions establish the applicable aggregate
contribution portions for PDP sponsors and MA organizations through two
calculations.
Comment: Several commenters supported the extension of user fees to
PDP sponsors in addition to MA plans. One commenter emphasized the need
for Medicare to provide national beneficiary educational materials in
accessible formats (including Braille and other languages commonly used
by beneficiaries), as well as telecommunications equipment to support
beneficiaries with hearing impairments, in order to meet the various
needs of Medicare beneficiaries with disabilities. Another commenter
urged us to focus beneficiary education efforts on helping
beneficiaries make a choice, as opposed to simply describing the array
of choices. This commenter also urged us not to overlook the M+C
population in its outreach campaign.
Response: We have a long-standing tradition of making our
beneficiary education materials accessible in a variety of formats to
meet the needs of people with disabilities and special communications
barriers. Beneficiary publications on a variety of topics are available
in Braille, large print, and audiotape versions, in addition to
conventional formats. We expect to continue these practices when
educating beneficiaries about MMA topics. In addition, we are
finalizing a partnership with the Social Security Administration (SSA)
that will allow some of our educational products to be translated into
14 languages (other than English and Spanish) and reach a broader
audience.
We are currently planning the development of a range of tools and
strategies that will help beneficiaries make a choice that meets their
needs. We agree that this action is an essential part of our education
process, in addition to building general awareness and understanding.
We will address the needs of multiple audiences through our outreach
and education efforts, including those with M+C (MA) plans.
c. Definitions of Frequently Occurring Terms
The following definitions were discussed in the preamble to our
proposed rule:
Full-benefit dual eligible beneficiary means an individual who
meets the criteria established in Sec. 423.772 (Subpart P), regarding
coverage under both Part D and Medicaid.
Comment: One commenter asked us to clarify whether individuals
eligible for Medicaid at the special income level for long term care
qualify as full benefit dual eligibles for a full subsidy.
Response: Yes, all individuals who qualify for Medicaid, including
expansion populations and persons eligible for Medicaid in long term
care facilities under a State's special income standard which does not
exceed 300 percent of the supplemental security income (SSI) payment
standard will qualify as full benefit dual eligible beneficiaries
eligible for a full subsidy.
Insurance risk means, for a participating pharmacy, risk of the
type
[[Page 4201]]
commonly assumed only by insurers licensed by a State and does not
include payment variations designed to reflect performance-based
measures of activities within the control of the pharmacy, such as
formulary compliance and generic drug substitutions, nor does it
include elements potentially in the control of the pharmacy (for
example, labor costs or productivity).
Comment: Several commenters supported our definition of `insurance
risk', including the exclusion of performance-based compensation as
this is not commonly viewed as insurance risk.
Response: We will adopt the definition as proposed.
MA means Medicare Advantage, which refers to the program authorized
under Part C of Title XVIII of the Act.
MA-PD plan means an MA plan that provides qualified prescription
drug coverage.
Medicare prescription drug account means the account created within
the Federal Supplementary Medical Insurance Trust Fund for purposes of
Medicare Part D.
Part D eligible individual means an individual who is entitled to
Medicare benefits under Part A or enrolled in Medicare Part B. For
purposes of this part, enrolled under Part B means ``entitled to
receive benefits'' under Part B.
Prescription drug plan or PDP means prescription drug coverage that
is offered under a policy, contract, or plan that has been approved as
specified in Sec. 423.272 and that is offered by a PDP sponsor that
has a contract with CMS that meets the contract requirements under
subpart K or in the case of fallback PDPs also under subpart Q.
PDP region means a prescription drug plan region as determined by
CMS under Sec. 423.112.
PDP sponsor means a nongovernmental entity that is certified under
this part as meeting the requirements and standards of this part for
that sponsor.
Comment: Several commenters noted that the terms PDP sponsor and MA
organization offering an MA-PD plan were not consistently used in the
proposed rule to represent distinct and mutually exclusive entities. As
a result the proposed rule was not always clear regarding when
requirements or options applied only to one or the other entity, or
both.
Response: We acknowledge that the terminology regarding sponsors
and plans was inconsistently applied. We have revised the language in
the final rule accordingly and have also standardized the terms `Part D
plan' and `Part D plan sponsor' when referring to all plans and
sponsors in general. Consequently we have relocated these terms from
subpart C to this subpart and clarified that references to ``Part D
plans'' in the final rule refer to any or all of MA-PD plans, PDPs,
PACE plans and cost plans. Likewise, the term ``Part D plan sponsor''
refers to MA organizations offering MA-PD plans, PDP sponsors, and
sponsors of PACE plans and cost plans.
Comment: Several commenters asked that we be flexible in its
definition of a non-governmental entity to allow either the creation of
State-sponsored entities as PDPs or the selection of a preferred PDP
entity for Medicaid dual eligible and SPAP populations.
Response: While we understand and support the goals of minimizing
client confusion and facilitating continuity of care, we believe the
requirements imposed by sections 1860D-41(13) and 1860D-23(b)(2) of the
Act do not allow us to approve State-sponsored PDPs or the selection of
preferred PDPs for State populations. We would note, however, that we
believe we can waive the non-governmental requirement in section 1860D-
41(23) of the Act under the employer waiver authority for States that
seek to sponsor Part D plans on behalf of their employees. This is
discussed in more detail in subpart J of this rule.
d. Financial Relationships between PDP Sponsors, Health Care
Professionals and Pharmaceutical Manufacturers
The financial relationships that exist between or among PDP
sponsors, health care professionals (including physicians and
pharmacists), or pharmaceutical manufacturers may be subject to the
anti-kickback statute and, if the relationship involves a physician,
the physician self-referral statute. Nothing in this regulation should
be construed as implying that financial relationships described in this
final rule meet the requirements of the anti-kickback statute or
physician self-referral statute or any other applicable Federal or
State law or regulation. All such relationships must comply with
applicable laws.
In addition to the provisions in these regulation, under section
6(a)(1) of the Inspector General Act of 1978, as amended, OIG has
access to all records, reports, audits, reviews, documents, papers and
other materials to which the Department has access that relate to
programs and operations for which the Inspector General has
responsibilities under the Inspector General Act. The provisions in
these regulations do not limit the Office of the Inspector General's
(OIG) authority to fulfill the Inspector General's responsibilities
under Federal law.''
e. ERISA application and requirements
The rules contained in this rulemaking apply for purposes of Title
I of the MMA and no inference should be drawn from anything in this
rule regarding the applicability of title I of ERISA. In addition,
nothing in this rulemaking should be construed as relieving a plan
administrator or other fiduciary of obligations under title I of ERISA.
B. Eligibility and Enrollment
We outlined the eligibility and enrollment requirements for Part D
plans in subpart B of the August 2004 proposed rule. We received over
100 comments on this subpart. Below we summarize the provisions of the
proposed rule and our final rule and respond to public comments.
(Please refer to the proposed rule (69 FR 46637) for a detailed
discussion of our proposals.)
1. Eligibility for Part D (Sec. 423.30)
Section 101 of the MMA established section 1860D-1 of the Act,
which includes the eligibility criteria an individual must meet in
order to obtain prescription drug coverage and enroll in a Part D plan.
Section 1860D-1(a)(3)(A) of the Act defines a ``Part D eligible
individual'' as an individual who is entitled to Medicare benefits
under Part A or enrolled in Part B. Further, in order to be eligible to
enroll in a PDP plan, Sec. 423.30(a) of the proposed rule provided
that the individual must reside in the plan's service area, and cannot
be enrolled in an MA plan, other than a Medicare savings account (MSA)
plan or private fee-for-service (PFFS) plan that does not provide
qualified prescription drug coverage. In addition, Sec. 423.4 of the
proposed rule provided the definition of service area, which describes
that for purposes of eligibility to enroll to receive Part D benefits,
certain access standards must be met, hence, making certain individuals
ineligible to enroll.
Generally, a Part D eligible individual enrolled in an MA plan that
does not provide qualified prescription drug coverage (that is, an MA
plan) may not enroll in a PDP. There are, however, exceptions under
sections 1860D-1(a)(1)(B)(iii) and (iv) of the Act for individuals who
are enrolled in either an MA private fee-for-service plan (as defined
in section 1859(b)(2) of the Act) that does not provide qualified
prescription drug coverage or an MSA plan (as defined in section
1859(b)(3) of the Act). We provided for these
[[Page 4202]]
exceptions in Sec. 423.30(b) of the proposed rule.
Except as provided above, in accordance with section 1860D-
1(a)(1)(B)(i) of the Act, and as provided in Sec. 423.30(c) of the
proposed rule, a Part D eligible individual who is enrolled in an MA-PD
plan must obtain prescription drug coverage through that plan. In order
to enroll in an MA-PD plan, a Part D eligible individual must also meet
the eligibility and enrollment requirements of the MA-PD plan as
provided in Sec. 422.50 through Sec. 422.68 of the proposed rule
establishing and regulating the MA program (CMS-4069-P) which was also
published August 2004.
Except as otherwise provided below, the final rule adopts the
eligibility criteria set forth in Sec. 423.30 of the proposed rule.
Comment: Several commenters requested clarification of the
definition of a Part D eligible individual. One commenter stated than a
literal reading of the proposed definition appears to say that any
individual who is eligible for Medicare but not enrolled could get the
Part D benefit, and asks if an individual must enroll in Part A or Part
B in order to be eligible for Part D. One commenter indicated that it
was unclear how CMS would coordinate Part D eligibility with any
retroactive eligibility determinations made by SSA.
Response: Section 1860D-1(a)(3)(A) of the Act defines a ``Part D
eligible individual'' as ``an individual who is entitled to benefits
under Part A or enrolled under Part B.''
In other context, we generally have interpreted the concept of
``entitled'' to benefits to mean that an individual has met all of the
necessary requirements for a benefit (that is, is eligible for the
benefit), and has actually applied for and been granted coverage. We
believe for purposes of applying the definition of ``Part D eligible
individual'' under section 1860D-1(a)(3) of the Act, we believe this
interpretation of ``entitlement'' is the appropriate interpretation.
Accordingly, we will deem an individual ``entitled'' to Part A, and
thus a Part D eligible individual, if the individual is eligible for
benefits under Part A, and has actually applied for and been granted
coverage under Part A. On the other hand, under our Medicare Part B
regulations at part 407, an individual is considered to be ``enrolled''
in Part B when he or she has applied for Part B coverage (or is deemed
to have applied). Nevertheless, we do not believe this interpretation
of ``enrolled'' in Part B is the correct interpretation of section
1860D-1(a)(3)(A) of the Act, and instead interpret ``enrolled under
Part B'' to mean that the individual is entitled to receive benefits
under Part B.
When establishing eligibility and enrollment rules for the MA
program upon its inception, we adopted a similar interpretation of
section 1851(a) (3) of the Act. Section 1851(a) (3) of the Act defined
the term ``Medicare+Choice eligible individual'' to mean an individual
who is entitled to benefits under part A ``and enrolled under part B.''
As we explained in our proposed rule for the Medicare+Choice program
(see 63 FR 34979), we believe that the Congress intended that we
provide an individual the opportunity to enroll in the Medicare+Choice
program only if entitled to actually receive benefits under Part B in
addition to Part A. As we explained, under some situations, an
individual may apply for or be deemed to have applied for Part B before
he or she is actually entitled to receive coverage. For example, if an
individual applies for Part B coverage after he or she reaches age 65,
the individual may not actually be entitled to Part B coverage under
section 1837 of the Act until one or several months after the month of
application and enrollment. If we had interpreted section 1851(a) (3)
of the Act to permit individuals to enroll in a Medicare+Choice plan
when an individual has only been enrolled in Part B, but is not yet
entitled to Part B, he or she could be entitled to the benefits under a
Medicare+Choice plan before actually being entitled to Medicare Part B
coverage. In order to avoid such a result, we interpreted the language
``enrolled'' in Part B in section 1851(a) (3) of the Act to mean
``entitled'' to Part B.
We similarly will interpret section 1860D-1(a)(3)(A) of the Act as
providing that an individuals is eligible for Part D only if the
individual is entitled to receive benefits under Part A or Part B.
Section 1860D-1(b)(1)(B) of the Act requires us to use rules similar to
and coordinated with certain rules for enrollment that govern
eligibility for the MA program. Hence, we believe that the Congress
intended that we provide an individual the opportunity to enroll in
part D only if entitled to actually receive benefits under Part B (or
Part A); otherwise an individual would be entitled to receive coverage
of Part D drugs under PDP before being entitled to receive benefits
under original fee-for-service Medicare.
Our regulations at Sec. 422.2 define an MA eligible individual as
someone who meets the requirements of Sec. 422.50, which outlines the
various criteria that an individual must meet to be eligible to elect
an MA plan, including: entitlement to Parts A and B, residency in a
plan's service area, making an enrollment election and agreeing to
abide by the rules of the MA plan. We intend to apply a parallel
approach to the Part D program. We will amend Sec. 423.4 to define a
Part D eligible individual as an individual who meets the requirements
at Sec. 423.30, that is, the individual is entitled to Medicare
benefits under Part A or enrolled in Part B and lives in the service
area of the Part D plan. We clarify, however, that ``enrolled'' in Part
B means that the individual not only has applied for and enrolled in
Part B, but is also receiving coverage for Part B services, in
accordance with part 407.
We have included in Sec. 423.30 to be eligible to enroll in a Part
D plan, the individual must also reside in the Part D plan's service
area and not be enrolled in another Part D plan.
We have clarified Part D eligibility for those individuals for whom
eligibility determinations for Medicare Part A or B have been made
retroactively, which results in retroactive entitlement to these
programs. The MA statute at section 1851(f) of the Act provides that
initial elections shall take effect upon the date the individual
becomes entitled to Part A or B, except as the Secretary may provide
``in order to prevent retroactive coverage.'' Under the MA program, an
individual who has received a retroactive eligibility determination for
Medicare Part A or B is not permitted to enroll in an MA plan
retroactively. Again, using section 1860D-1(b)(1)(B) of the Act that
directs us to establish rules similar to those in MA, we envision
individuals enrolling in a Part D plan prospectively and have revised
Sec. 423.30 so that individuals who become entitled to Medicare Part A
or Part B benefits for a retroactive effective date are deemed Part D
eligible as of the month in which notice of Medicare Part A or Part B
entitlement is provided.
Such revisions at Sec. 423.4 and Sec. 423.30 will clarify that an
individual is eligible for Part D at the same time an individual is
eligible to enroll in Part D.
Comment: Commenters requested clarification on the eligibility of
incarcerated individuals. One commenter did not believe that we had the
authority to create such exclusion. Another requested clarification of
the ability of individuals released from incarceration on probation or
parole to enroll in Part D.
Response: In the preamble of the proposed rule, we explained that
individuals who are incarcerated likely do not have access to Part D
services, as they cannot obtain their prescription drugs from network
pharmacies, yet
[[Page 4203]]
technically the jail or prison may be located within the larger
geographic area encompassing a PDP's service area. As a result, the
individual would be subject to a late enrollment penalty for not
enrolling in a Part D plan. As a result, we believe that it is
appropriate to provide in Sec. 423.4 that a PDP's service area would
exclude areas in which incarcerated individuals reside (that is, a
correctional facility) and as a result, incarcerated individuals would
be ineligible to enroll in a PDP and we have revised the definition to
clarify this point. Upon release from incarceration, such as for
probation or parole, individuals will be considered eligible for Part D
by living in a PDP service area, if they meet other Part D eligibility
requirements.
Comment: One commenter suggested that we consider individuals who
are residents of a State mental institution to be out of the service
area and therefore ineligible for enrollment in a Part D plan.
Response: We would not consider individuals who are residing in a
State mental institution to be out of the service area. Medicare
beneficiaries residing in such institutions have access to Medicare
benefits under Parts A and B and therefore would be entitled to enroll
in a Part D plan. However, we do recognize that individuals in a State
mental institution may be limited to the pharmacy network contracted
with the facility. Therefore, we will provide such individuals a
Special Enrollment Period (SEP) to enable them to join the appropriate
Part D plan based upon their situation. We will clarify this in
guidance following publication of this rule.
Comment: One commenter asked that we clarify Sec. 423.30(c) in the
final rule to indicate when an individual in an MA-PD plan can change
plans.
Response: The provisions explaining the opportunities for
individuals to make PDP enrollment choices are fully set forth at Sec.
423.38 of the final rule. The requirements for MA plans are outlined
under Sec. 422.50 through Sec. 422.80.
Comment: One commenter suggested that we permit beneficiaries
enrolled in an MA plan to enroll in a PDP or disenroll from the MA plan
and enroll in an MA-PD plan.
Response: Section 1860D-1(a)(1) of the Act specifically prohibits
an MA plan enrollee from enrolling in a PDP except in the case of
enrollees of a MA PFFS plan that does not provide qualified
prescription drug coverage or enrollees of an MSA plan. All
individuals, including enrollees of MA plans, can enroll in a Part D
plan during the established enrollment periods, as described at Sec.
423.38 of the final rule.
2. Enrollment Process (Sec. 423.32)
Section 1860D-1(b)(1) of the Act requires that we establish a
process for the enrollment, disenrollment, termination, and change of
enrollment of Part D eligible individuals in prescription drug plans.
The statute further requires that this process use rules similar to,
and coordinated with, the enrollment, disenrollment, termination, and
change of enrollment rules for MA plans under certain provisions of
section 1851 of the Act. Thus, we proposed, where possible, to adopt
the MA enrollment requirements provided under Sec. 422.50 through
Sec. 422.80.
Generally, a Part D eligible individual who wishes to make, change,
or discontinue an enrollment during applicable enrollment periods must
file an enrollment with the PDP directly. However, we will allow PDPs
to use other enrollment mechanisms, as approved by us. In addition,
Sec. 423.32 of the final rule provides that beneficiaries will remain
enrolled in their PDP without having to actively re-enroll in that PDP
at the beginning of each calendar year. Except as otherwise provided
below, the final rule adopts the enrollment rules set forth in Sec.
423.34 of the proposed rule.
Comment: Several commenters submitted identical comments on various
aspects of the coordination of the enrollment process reflected at both
Sec. 423.34(b) and Sec. 423.42(a).
Response: Commenters provided similar comments about the enrollment
process at Sec. 423.34(b)(1) of the proposed rule and the coordination
of enrollment and disenrollment process at Sec. 423.42(a) of the
proposed rule. After reviewing these comments, we recognized that these
sections were duplicative and could cause confusion. To address this
problem, we have reorganized the following subjects in subpart B into a
more logical order: the enrollment process at Sec. 423.32 (previously
proposed Sec. 423.34); auto-enrollment process for dual eligible
individuals at Sec. 423.34 (previously proposed Sec. 423.34(d); the
disenrollment process at Sec. 423.36; the enrollment periods in Sec.
423.38; and the effective dates at Sec. 423.40. We believe that this
will simplify and clarify these provisions.
Comment: Several commenters supported the inclusion of regulatory
provisions that would permit enrollment through means other than the
submission of signed, hard-copy enrollment forms in order to facilitate
flexibility for future enrollments. These commenters supported allowing
alternative mechanisms for enrollment, particularly electronic
enrollments, to enable beneficiaries with access to computers to enroll
or disenroll through secure websites established by PDP sponsors.
Another commented that we should make the same enrollment mechanisms
that are available to Medicare Advantage plans available to PDP
sponsors. A few commenters requested clarification as to the ``other
mechanisms'' referenced by us in the proposed rule, specifically what
types of enrollment are envisioned and the populations to which these
``other mechanisms'' would be applied. One commenter recommended we
allow electronic enrollments through a CMS-hosted web site, and that we
develop a standard registration process to authenticate the
enrollments. Another stated that processing applications via the
Internet would require significant systems changes and that the
regulation appeared to lack requirements necessary to process
applications in such a manner.
Response: We were pleased by the general support for flexibility
and creativity in this important part of the enrollment process, and we
anticipate working in collaboration with all of our partners to develop
enrollment processes that will be convenient, reliable and secure for
all beneficiaries. We will adopt this provision as proposed at Sec.
423.32(b), rather than specify or limit the types of alternative
enrollment processes that may be used. We will continue to assess the
technology available and provide additional operational guidance in the
future, including specific systems requirements and other information
necessary to implement these processes.
Comment: We received several comments requesting clarification of
what parties are authorized to act on behalf of a beneficiary for
enrollment purposes. One commenter noted that the regulation does not
appear to recognize a beneficiary's ``authorized'' or ``personal''
representative who could be designated to make decisions for
individuals and refers to the personal representative definition that
we created in subpart P of the proposed rule. Another commenter was
concerned that individuals in long-term care facilities do not have a
designated surrogate decision maker in place to make such a decision
and lack the cognitive capacity to select a PDP. While some commenters
stated that we should allow an individual's personal representative to
enroll a person into a PDP, others requested that we recognize specific
representatives who could effectuate
[[Page 4204]]
such an enrollment within the regulatory text (for example, SPAP).
Response: In the regulation, we refer to a Part D eligible
``individual'' who wishes to enroll. An individual who has been
appointed as the legal representative to execute such an enrollment on
behalf of the beneficiary, in accord with State law, would constitute
the ``individual'' for purposes of making the enrollment or
disenrollment. As with the Medicare Advantage provisions, we will
recognize State laws that authorize persons to effect an enrollment for
Medicare beneficiaries. We will include more information on this
clarification in future operational guidance.
Comment: Several commenters asked that we clarify that nothing
would prevent a person or entity from assisting a beneficiary in
completing and submitting his or her application to the PDP, as the MA
program allows at Sec. 422.60(c).
Response: We agree and have revised the regulatory language at
Sec. 423.32(b) to allow for such assistance, consistent with the MA
regulations.
Comment: One commenter suggested that we set forth an appeals
process for beneficiaries who are denied enrollment.
Response: Although we agree with the commenter that we should
establish a procedure for beneficiaries to dispute enrollment denials,
we do not believe that a formal appeals process is necessary. Instead,
we intend to address beneficiary complaints regarding enrollment in a
similar manner as we have done under the MA program. Under the MA
program, individuals are advised through their notice of denial of
enrollment that if they disagree with the decision to deny enrollment,
they may contact the MA organization. We monitor MA organizations
periodically to ensure that they are providing this notification. We
also respond to specific inquiries from beneficiaries and investigate
possible situations where MA organizations have failed to notify
beneficiaries of the process or where an organization may have
incorrectly denied a beneficiary's enrollment. If we discover a
beneficiary was incorrectly denied enrollment we can require the MA
organization to enroll that individual, as provided in our manual
instructions. We believe our current process provides adequate remedies
to beneficiaries and will therefore establish a similar process for
PDPs. We decline to establish a separate appeals process for these
denials at this time.
Comment: One commenter requested that we specify in the final rule
that PDPs must provide written notice of enrollment decisions to each
consumer.
Response: In Sec. 423.32(d) we require PDPs to provide all
individuals prompt notice of acceptance or denial of enrollment in the
PDP in a format and manner specified by CMS. We will provide specific
instructions on the format and manner of these required notices in
operational guidance and intend to provide model language and materials
for PDPs to use as well. Looking ahead, we believe that beneficiaries
may want to receive documents (such as notices) in a variety of
formats, rather than just in writing. To that end, we decline to
require a specific format in regulation, thereby preserving the
flexibility to foster innovation and creativity to satisfy beneficiary
and industry expectations in the future.
Comment: One commenter suggested that individuals enrolled in PACE
should remain enrolled in the PACE organization for purposes of Part D
coverage effective January 1, 2006. Another commenter suggested a
similar process be established for cost plans.
Response: Section 1860D-21(f) of the Act provides that a PACE plan
may elect to provide qualified prescription drug coverage to its Part D
eligible enrollees. Section 1860D-21(e) of the Act establishes a
similar directive to cost-based HMO or competitive medical plan (CMP)
plans. Discussion of the application of the Part D benefit to both PACE
and cost-based HMO or CMP plans can be found under subpart T of the
proposed rule. For PACE plans, we stated that PACE plans generally will
be treated similar to MA local plans. Applying the appropriate MA rules
from Sec. 422.66, PACE enrollees will receive their Part D benefits
through the PACE plan if the PACE plan has elected to provide such
coverage. Beneficiaries who are enrolled in PACE plans that provide
such coverage as of December 31, 2005 will remain enrolled in that plan
on January 1, 2006. For cost-based HMO or CMP plans, we state that cost
contracts may offer Part D coverage only to individuals also enrolled
for Medicare in the cost contract. As a result of the provisions for
PACE and cost-based HMO or CMP plans, we revised Sec. 423.32(f) to
provide that individuals who are in PACE or cost-based HMO or CMP plans
that provide prescription drug coverage on December 31, 2005 will
remain enrolled in that plan and be enrolled in the Part D benefit
offered through that plan as of January 1, 2006.
3. Enroll Full-Benefit Dual Eligible Individuals (Sec. 423.34)
In the proposed rule, Sec. 423.34(d) required that full benefit
dual eligible individuals who fail to enroll in a PDP or MA-PD during
their initial enrollment period would be automatically enrolled into an
appropriate Part D plan, specifically a PDP with a Part D premium that
does not exceed the low-income premium subsidy amount. When there is
more than one available PDP in a region, full benefit dual eligible
individuals would be auto-enrolled on a random basis.
All beneficiaries in an MA plan with any prescription drug coverage
on December 31, 2005 will be deemed enrolled on January 1, 2006 in an
MA-PD plan offered by the same MA organization in accordance with Sec.
422.66(e)(2) and (e)(3) of Title II of the final regulation even if the
monthly beneficiary premium exceeds the low-income premium subsidy
amount. For full-benefit dual eligible individuals only, the proposed
rule provided that those already enrolled in an MA plan without any
prescription drug coverage would be auto-enrolled into an MA-PD plan
offered by the same organization, and that has a monthly Part D premium
that does not exceed the low-income premium subsidy amount. The
proposed rule clarified that those auto-enrolled into a Part D plan may
affirmatively decline Part D coverage or change Part D plans.
In a related area, Sec. 423.36(c) of the proposed rule provided a
SEP for full-benefit dual eligible individuals that permits them to
change Part D plans at any time. Separately, there already exists a SEP
for full-benefit dual eligible individuals to enroll in or disenroll
from a Medicare Advantage plan at any time, and this will be expanded
to include MA-PD plans. This SEP is provided in operational guidance
(see section 30.4.4-5 of Chapter 2 of the Medicare Managed Care
Manual), in accordance with section 1851(e)(4)(D) of the Act, which
gives us the authority to provide Special Enrollment Periods for
exceptional circumstances. Taken together, the PDP and MA-PD plan SEPs
mean a full-benefit dual eligible individual may switch from Original
Medicare and a PDP into an MA-PD plan and vice versa; from one PDP to
another; and from one MA-PD plan to another MA-PD plan at any time.
We requested comment on two areas: whether we or States should
conduct auto-enrollment, and how to address an inherent conflict in the
statute, whereby the statute requires auto-enrollment of full-benefit
dual eligible individuals
[[Page 4205]]
into a Part D plan with a premium that does not exceed the low-income
premium subsidy amount, but does not speak to those instances in which
an individual is enrolled in an MA organization whose premium for the
available MA-PD plan(s) exceeds the low-income premium subsidy amount.
Except as otherwise provided below, the final rule adopts the
enrollment rules for full-benefit dual eligible individuals set forth
in Sec. 423.34(d) of the propose rule.
Comment: Several commenters supported CMS performing the auto-
enrollment function. They viewed it as the most appropriate entity
because it is in the best position to randomly assign beneficiaries to
MA-PD plans or PDPs in the region, and to establish links with each MA-
PD plan or PDP in each region, thereby more efficiently auto-enrolling
individuals. Some commenters also suggested that we consider adding an
enrollment broker to the process for populations with special health
care needs.
A number of other commenters recommended that States either be
required or have the option to perform the auto-enrollment function, as
they view the States as having more readily available data identifying
dual eligible individuals and a vested interest in ensuring these
individuals are enrolled in appropriate Part D plans. This option was
also viewed as advancing care coordination and ensuring continuity of
care. It was noted that these options also present a disincentive for
States to maximize enrollment, since the phased-down State contribution
payments are tied to the number of Part D eligible individuals enrolled
in Part D plans. Commenters also acknowledged that, if we were to
afford States the option of conducting the auto-enrollment function, we
would have to develop its own systems for auto-enrollment in States
that lack the capacity to develop such systems. Commenters supporting
this option felt strongly that we should reimburse States for all of
their costs related to enrollment activities they are required to
perform.
Some commenters recommended that an independent third party
coordinate the enrollment process. Those parties could include State
and local officials and representatives of nonprofit organizations
specializing in care for seniors. One also suggested that the
contracted agent would need to be compliant with the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) privacy rule and
should have no financial incentives regarding a full-benefit dual
eligible individual's assignment beyond the contract between it and
CMS.
Response: We agree with those who commented that we, or a
contractor on our behalf, should perform the auto-enrollment function
because we can better ensure consistent, timely implementation. In
addition, we would not have to develop and implement a separate
administrative structure to oversee auto-enrollment being performed by
some or all of the States. Finally, it would likely be more cost
effective for us to have a single entity perform auto-enrollment,
rather than pay 51 separate entities. For these reasons, we will modify
the final regulation to specify that we will conduct the auto-
enrollment process.
At this time, we do not envision contracting with an enrollment
broker to provide more intensive choice counseling for beneficiaries
subject to auto-enrollment. Because the statute makes us ultimately
responsible for the auto-enrollment process, we will, at least
initially, conduct it ourselves. Instead of hiring a new third party,
we believe it would be more effective to partner with existing
stakeholders to conduct broad-based outreach and education; provide
clear and comprehensive information to beneficiaries; and refer
individuals to either the 1-800-MEDICARE toll-free line or to Part D
plans for additional information. However, if we decide in the future
to contract with an independent enrollment broker, we agree with the
commenter that the entity would need to be free of conflicts of
interest and comply with HIPAA privacy rules. We note that any
delegation to a third party would make the third party a business
associate of ours for HIPAA purposes, since the entity would be
performing a function on behalf of us.
Comment: Many commenters recommended that we define ``random'' to
include auto-enrollment based on beneficiaries' particular drug needs,
pharmacy affiliation, or on their classification as a special needs
population. Many commenters expressed concerns about how random
assignment will impact individuals who are on drug regimens on which
they have been previously stabilized. They were concerned that these
individuals would be auto-enrolled in a ``low-cost'' plan that may not
cover the drugs they need. Without direct access to the coverage they
need, this population would have no real choice but to switch
medications, even though changing medications can be difficult and lead
to adverse health outcomes, reactions, and so on.
Several other commenters expressed similar concerns about
individuals who reside in long-term care facilities. In addition, some
long-term care facilities require residents to use a pharmacy selected
and contracted by the facility. One commenter requested that we define
``random,'' specifically detail how we envision the random process
would work, and seek further public comment.
Response: We share the commenters' concerns with ensuring access to
necessary prescription drug coverage for vulnerable populations. For
ensuring continued access to existing drugs prescribed for an
individual, please refer to comments on Sec. 423.120(b) of the final
regulation. For ensuring access to long-term care facilities'
contracted pharmacies, please refer to comments on Sec. 423.120(a) of
the final regulation.
The systems challenges associated with anything other than a random
process would be significant, and possibly result in inappropriate
assignment or delayed implementation. For example, we have drug
utilization data for Medicaid beneficiaries, but there is a time lag in
receiving those data. Furthermore, we do not currently have access to
information about the pharmacies that contract with long-term care
facilities. Finally, we realize that pharmacy affiliation and
particular drug needs are only two of the variables that impact a
beneficiary's choice of a Part D plan. For example, a beneficiary may
also consider cost-sharing, formulary structure, customer service and,
in the case of MA-PD plans, whether she or he would want to receive all
of her or his Medicare benefits from one organization.
Given these data limitations, and the many and varied reasons for
choosing a Part D plan, we do not believe we are in a position to make
a judgment about what is best for individual beneficiaries, and decline
to change the proposed regulations. However, we will make every effort
to ensure that beneficiaries and community organizations receive enough
information in time for them to determine the appropriate plan for the
beneficiary. The SEP provided for full-benefit dual eligible
individuals in the statute and in our final rule at Sec. 423.38(c)(4)
also ensures that they can change plans to better accommodate their
pharmaceutical needs and pharmacy affiliations.
Comment: One commenter recommended that we establish a bid process
whereby PDPs with an expected enrollment by full-benefit dual eligible
individuals that is higher than the proportion in the total Medicare
eligible population in the relevant PDP region
[[Page 4206]]
automatically qualify for inclusion in the auto-enrollment process. The
commenter further recommended that, if such a plan has a monthly
beneficiary premium above the low-income premium subsidy amount, we
should permit a ``waiver'' based on a subsidy or payment of that excess
premium by CMS or another entity in order to reduce the premium to an
amount equal to or below the low-income premium subsidy amount.
Response: Those plans available for purposes of auto-enrollment are
ones that have premiums at or below the low-income premium subsidy
amount. This includes fallback plans in areas where they exist. It is
our intent to implement the Part D program and adhere to the statute as
closely as possible, assuming tenable options are available to do so.
In the case of PDPs that serve a disproportionate share of full-benefit
dual eligible individuals, and whose premium exceeds the low-income
premium subsidy amount, we believe there are tenable options, that is,
other PDPs with premiums at or below the low-income premium subsidy
amount. However, we note that risk-adjustment should correct for the
higher costs incurred by plans with larger proportions of full-benefit
dual eligible individuals.
Comment: A few commenters recommended that we not limit the Part D
plans available for auto-enrollment to just those plans with premiums
below the low-income premium subsidy amount, as this limits full-
benefit dual eligible individuals to the ``lowest cost'' plans, which
may offer a less generous benefit. The commenters suggested that,
regardless of whether these individuals enroll on their own or are
auto-enrolled, they should be permitted to enroll in any plan and not
be charged any additional premium. At a minimum, a beneficiary's
medical provider could attest that a higher premium plan will better
meet his or her medical needs and therefore be allowed to enroll in a
higher premium plan without the added premium.
Response: We appreciate the commenters' concern that full-benefit
dual eligible individuals be able to enroll in the plan best suited for
them, not just ``low cost'' plans. We note that a full-benefit dual
eligible individual is free to enroll in any Part D plan during the
initial enrollment period or annual coordinated election period.
For auto-enrollment, however, section 1860D-1(b)(1)(C) of the Act
only permit us to, auto-enroll full-benefit dual eligible individuals
into those plans with premiums at or below the low-income premium
subsidy amount. In addition, those full-benefit dual eligible
individuals randomly auto-enrolled in a particular plan may still
choose another plan pursuant to a special enrollment period.
In addition, as we do not have the authority under section 1860D-
14(a)(1)(A) of the Act to increase the low-income premium subsidy
amount (as defined under section 1860D-14(b)(2)(B) of the Act), full-
benefit dual eligible individuals who elect to enroll in a plan with a
premium exceeding the low-income premium subsidy amount must pay the
difference in premium. We are also precluded under sections 1860D-
13(a)(1)(F) and 1854(c) of the Act from requiring or even permitting
Part D plans from waiving any premium in excess of the premium subsidy
amount, including allowing MA-PD plans to use rebate dollars to reduce
the premium only for this portion of their enrolled population.
Comment: We received numerous comments related to the timing of the
auto-enrollment process for full-benefit dual eligible individuals.
Commenters identified the possibility of a gap in coverage for some of
those individuals if the auto-enrollment did not occur until the close
of the Initial Enrollment Period on May 15, 2006, since Medicaid
coverage of Part D drugs ends several months earlier, on January 1,
2006. They proposed that we require auto-enrollment of these
individuals to be completed prior to Medicaid coverage ending on
December 31, 2005. Some commenters recommended that the process be
completed as early as November 15, 2005, and one commenter suggested
starting the 2005 Initial Enrollment Period for full-benefit dual
eligible individuals prior to November 15, 2005. Another commenter
recommended that auto-enrollment precede Part D eligibility by 6
months, and that Medicaid coverage of Part D drugs be continued until
auto-enrollment can be done.
Response: We did not intend to implement a process that would
create a gap in drug coverage for full-benefit dual eligible
individuals. We do not believe that the Congress intended for such a
gap to occur. Therefore, we will modify the final rule so that the
auto-enrollment of these individuals will begin as soon as Part D plans
with premiums at or below the low-income premium subsidy amount are
known prior to January 1, 2006. We will also modify the final rule to
provide that those full-benefit Medicaid individuals who become
eligible for Medicare after January 1, 2006, will be enrolled as soon
as their Medicare Part D eligibility is determined. For the suggestion
to start the 2005 Initial Enrollment Period for full-benefit dual
eligible individuals before November 15, 2005, we are precluded from
doing so, as this date is explicitly identified in section 1860D-
1(b)(2)(A) of the Act as the date upon which enrollment in Part D may
commence.
Comment: Many other commenters suggested that we delay
implementation of the Part D program for full-benefit dual eligible
individuals by at least five or six months, and some recommended a
year's delay, although the commenters recognized that such a delay
would require a legislative change. The commenters' concern was based
on the limited time to transition drug coverage for these full-benefit
dual eligible individuals from Medicaid to Medicare. The commenters
expressed concern about the feasibility of identifying, educating, and
enrolling the population of full-benefit dual eligible individuals in
time for a smooth transition of drug coverage. Some commenters
highlighted the need to ensure adequate time for physicians and
patients to navigate administrative barriers and change medications to
comply with formularies. One commenter suggested Medicare beneficiaries
who currently participate in Medicaid buy-in programs (that is,
qualified Medicare beneficiaries (QMB), special low-income
beneficiaries (SLMB), and qualified individuals (QI1)) be permitted to
keep Medicaid drug coverage after Part D starts.
A few commenters recommended that, assuming Part D coverage begins
for full-benefit dual eligible individuals on January 1, 2006, Medicaid
coverage of Part D drugs be extended past December 31, 2005, and
continued until such time as full-benefit dual eligible individuals are
enrolled in Part D.
One commenter recommended that full-benefit dual eligible
individuals who are American Indians or Alaska Natives (AI/AN) be
exempt from Part D and continue to be eligible for Medicaid drug
coverage after January 1, 2006. The commenter argued that this would
prevent loss of revenues to pharmacies operated by Indian Health
Services (IHS), Tribal Clinics, and Urban Indian Clinics, who may
receive lower payments from Part D plans than they currently receive
from Medicaid, and eliminate barriers for this population.
Response: As the commenters correctly point out, a delay in the
implementation of the Part D program, including auto-enrollment for
full-benefit dual eligible individuals would require a change to the
statute. Similarly, extending Medicaid coverage of prescription drugs
covered under Part D would also require a legislative
[[Page 4207]]
change. Absent such changes, we cannot delay implementation, extend
Medicaid coverage of Part D drugs, nor can we exclude full-benefit dual
eligible individuals who are AI/AN, or participants in Medicaid buy-in
programs from Part D.
Comment: A couple of commenters requested clarification about the
circumstances under which a beneficiary may affirmatively decline
participation in Part D. They expressed concern that individuals with
diminished mental faculties may not fully understand the impact of
their decision, and that States would likely bear additional costs
associated with full-benefit dual eligible individuals whose health
deteriorates due to their failure to take necessary medications. One
commenter urged that States be able to obtain FFP to provide
prescription drug coverage in these instances. Another commenter
asserted that permitting a full-benefit dual eligible individual to
affirmatively decline enrollment in Part D contradicts numerous
statutory and regulatory provisions that require this population's
enrollment in Part D. One commenter urged CMS to make disenrollment
contingent upon selection of another Part D plan to ensure there is no
lapse in coverage. Finally, one commenter suggested expanding the
ability to affirmatively decline enrollment in Part D to Medicare
beneficiaries who are not auto-enrolled.
Response: The Congress specified that prescription drug coverage
under this program is voluntary, and section 1860D-1(b)(1)(C) of the
Act specifically stipulates that auto-enrollment does not prevent a
full-benefit dual eligible individual from declining or changing such
enrollment. Absent any legislative change, we cannot intervene with an
individual's right to decline coverage. Nor can we adopt the suggestion
to permit Federal financial participation (FFP) for State Medicaid
agencies that choose to provide drug coverage for full-benefit dual
eligible individuals who affirmatively decline auto-enrollment. Section
1935(d)(1) of the Act stipulates that no FFP is available for any Part
D drugs or cost-sharing for Part D drugs for full-benefit dual eligible
individuals who are eligible for Part D, even if they are not enrolled
in a Part D plan. However, we will be making every effort to ensure
that beneficiaries and community organizations have sufficient
information to assist individuals in making the most appropriate
choices about participating in Part D.
Concerning the comment that we should make disenrollment from a
Part D plan contingent upon enrolling in another Part D plan to prevent
a coverage gap for full-benefit dual eligibles, we decline to do so in
regulation, but will continue to work develop strategies to prevent a
coverage gap in this instance.
We decline to expand the ability to affirmatively decline Part D
enrollment to individuals who are not auto-enrolled or for whom we do
not facilitate enrollment into a Part D plan. This population is
comprised of those who are not deemed or determined eligible for the
low-income subsidy. If these individuals do not want Part D coverage,
they can simply choose not to enroll in a Part D plan.
Comment: One commenter suggested that there should be flexibility
for CMS to change the plan into which a beneficiary has been auto-
enrolled should the plan no longer meet the needs of the enrollee.
Response: We agree that it would be prudent to retain the
flexibility to enroll an individual in subsequent years in a different
plan from the one into which we originally enrolled the individual, and
have modified the final rule to provide for this. We note that this
will require an exception to the maintenance of enrollment provision in
Sec. 423.32(e), so we have modified the final rule to provide for one.
We envision this may only be necessary in certain limited
circumstances. For example, we may want to consider doing this if the
plan's premium in a subsequent year exceeded the low-income premium
subsidy amount. We will ensure that beneficiaries are fully notified,
and have the option to remain in their original plan. We will examine
the need for this as the program evolves and provide operational
guidance should we implement it.
Comment: A number of commenters responded to our request in the
preamble for solutions to an inherent conflict in the statute. In this
instance, the statute requires auto-enrollment of full-benefit dual
eligible individuals into a Part D plan with a premium at or below the
low-income premium subsidy amount. Section 423.34(d) of the proposed
rule stipulated that those in an MA-only plan would be auto-enrolled
into an MA-PD plan in the same organization that has a premium that
does not exceed the low-income premium subsidy amount. However, there
may be instances in which an individual is enrolled in an MA-only plan
offered by an MA organization, and all the MA-PD plans in that
organizations have premiums that exceed the low-income premium subsidy
amount.
We note that most MA enrollees will be deemed to be enrolled into
an MA-PD plan in accordance with Sec. 422.66(e)(2) and (e)(3).
However, deeming does not address those who elect an MA-only plan that
does not offer any drug coverage in 2005, nor qualified prescription
drug coverage thereafter.
Several commenters supported auto-enrolling these full-benefit dual
eligible individuals into an MA-PD plan offered by the same
organization with the lowest Part D premium, even if it was higher than
the low-income premium subsidy amount. This would provide seamless
continuation of their Medicare benefits through the same organization.
Commenters noted that these individuals retain the right to decline
Part D coverage, and have a SEP that permits them to change PDPs or MA-
PD plans at any time.
One commenter noted that excluding full-benefit duals from auto-
enrollment in an MA-PD plan with a premium higher than the low-income
premium subsidy amount would give those MA plans an unfair advantage by
removing from their risk pool full-benefit dual eligible individuals,
who tend to have higher drug utilization.
Response: We agree with commenters' concerns about ensuring
continuity of care through the same MA organization, if possible.
However, as we discussed in the preamble to the proposed regulation,
there is an inherent statutory conflict that would seem to preclude
using auto-enrollment authority to accomplish this. Section 1860D-
1(b)(1)(C) of the Act directs the Secretary to auto-enroll full-benefit
dual eligible individuals who do not enroll in a PDP or MA-PD plan on a
random basis into a PDP with a premium at or below the low-income
premium subsidy amount; it does not identify an MA-PD plan as an entity
into which an individual could be auto-enrolled.
General principles of statutory interpretation requires us to
reconcile two seemingly conflicting statutory provisions rather than
allowing one provision to effectively nullify the other provision. We
had proposed to resolve this by interpreting the reference to
``prescription drug plans'' in section 1860D-1(b)(1)(C) of the Act as
including both PDPs and MA-PD plans, thereby allowing auto-enrollment
of an MA full-benefit dual eligible individual into an MA-PD offered by
the same organization offering his or her MA plan if the premium for
such plan did not exceed the low-income premium subsidy amount.
[[Page 4208]]
Upon further consideration, we believe there continue to be legal
concerns as to whether we have the authority to auto-enroll full-
benefit dual eligible individuals into an MA-PD plan. Rather than rely
on auto-enrollment authority under section 1860D-1(b)(1)(C) of the Act
to ensure continuity of Part D coverage for full-benefit dual eligible
individuals enrolled in MA-only plans, we instead will rely on our
general authority to establish enrollment procedures under section
1860D-1(b)(1)(A) of the Act to establish a facilitated enrollment
process that substantially fulfills the intent of ensuring no
prescription drug coverage gap for these individuals.
We will therefore facilitate enrollment into Part D for full-
benefit dual eligible individuals enrolled in a MA plan that does not
offer qualified prescription drug coverage by assigning them to an MA-
PD plan with the lowest premium offered by the same MA organization,
even if the plan's MA monthly prescription drug beneficiary premium
exceeds the low income premium subsidy amount. We will inform them in
advance of this assignment. If the beneficiary fails to affirmatively
elect an alternative plan or declines enrollment in Part D, she or he
will be enrolled into the plan into which she or he has been assigned.
In this instance, a beneficiary's silence would be deemed consent to
the enrollment choice we are making on their behalf. We note that the
right to affirmatively decline in Sec. 423.34(e), on affirmatively
declining Part D enrollment, and the Special Enrollment Period in Sec.
423.38(c)(4), apply equally to all full-benefit dual eligibles, whether
they are auto-enrolled or have their enrollment facilitated.
In the case of a full-benefit dual eligible for whom we facilitate
enrollment into an MA-PD plan with a premium higher than the low-income
premium subsidy amount, we acknowledge that this creates a new
financial obligation for the enrollee to pay the balance of the monthly
MA monthly prescription drug beneficiary premium not covered by the
low-income premium subsidy amount. However, this option best preserves
informed enrollee choice, is consistent with statutory intent, respects
the beneficiary's initial choice to enroll in an MA plan, and ensures
continuity of prescription drug coverage. These individuals will have
information about other plan choices available and retain their right
to a Special Enrollment Period to choose another plan at any time, as
provided by section 1861D-1(b)(3) of the Act for PDPs, and section
1851(e)(4)(D) of the Act and section 30.4.4-5 of Chapter 2 of the
Medicare Managed Care Manual for MA-PD plans.
Comment: A few commenters generally supported auto-enrolling full-
benefit dual eligible individuals into an MA-PD plan, but urged CMS to
find a solution that would ensure no additional costs were imposed on
beneficiaries. Some of the commenters that supported auto-enrollment
into the MA-PD plan with the lowest Part D premium provided suggestions
as to how to minimize the financial impact on beneficiaries. A few
suggested that for those who are institutionalized, the excess premium
should be considered an incurred medical expense and deducted from
their monthly share of cost to the facility. For non-institutionalized
beneficiaries, in States with State Pharmacy Assistance Programs
(SPAPs), SPAPs should be allowed to pay the balance. For full-benefit
dual eligible individuals who are medically needy, the balance should
be considered an incurred medical expense contributing towards their
spend-down. Otherwise, individuals should be counseled about the
premium discrepancy and about the right to disenroll from an MA plan
and enroll in Original Medicare with a PDP.
Response: We appreciate these suggestions for minimizing the
financial impact on beneficiaries. We intend to highlight the impact of
our facilitating enrollment into an MA-PD plan with a premium higher
than the low-income premium subsidy amount to these beneficiaries and
advise them of their ability to switch plans. We note that under
Medicaid, whatever portion of the premium the individual pays would be
an incurred medical expense, including any portion of the premium that
is paid by the SPAP. Since incurred medical expenses are deducted from
income when determining patient liability for an institutionalized
individual, and are deducted from income for medically needy spend-down
purposes, the commenter's suggestions correctly characterize how
Medicaid would treat any premium difference paid by the individual. The
commenter is also correct in noting that SPAPs will be allowed to pay
the balance for their enrollees, but we note this is an option for all
enrollees of an SPAP, not just non-institutionalized enrollees. Since
these options are already permitted under the regulatory language in
the proposed rule, we will not modify the regulation further to specify
them.
Comment: One commenter suggested that we permit MA-PD plans to
waive the portion of their premium above the low-income premium subsidy
amount. The commenter suggested that explicit authorization by CMS
would be a contract amendment, not an inducement to a beneficiary to
enroll, which would ensure that the waiver of the excess premium does
not implicate the Federal anti-kickback rules or be considered
disparate treatment.
Response: We appreciate the intent of the commenter's suggestion.
However, we are precluded from permitting MA-PD plans to waive a
portion of the Part D premium for a subset of their enrollees by
section 1854(c) of the Act, which requires uniform premiums for all
enrollees of an MA plan.
Comment: A few commenters urged CMS to prohibit auto-enrollment of
full-benefit dual eligible individuals into MA-PD plans. Instead, these
MA enrollees should be auto-enrolled into a PDP for their Part D
benefit. The commenters note that these beneficiaries could always
switch to an MA-PD plan.
Response: Section 1861D-1(a)(1)(B)(ii) of the Act specifies that,
with limited exceptions, individuals in an MA plan may not also enroll
in a PDP. The only exceptions are those enrolled in a MSA plan, or in a
MA private fee-for-service plan or cost-based HMO or CMP that does not
offer qualified prescription drug coverage, may enroll in a PDP. Thus,
auto-enrolling these individuals into a PDP would require us to also
disenroll them from their MA plan, which could be inconsistent with our
current MA requirements Sec. 422.66(e), which provide that an
individual who elects an MA plan is considered to have continued to
have made that election until he or she voluntarily changes that
election, or the plan is discontinued or no longer serves the service
area.
Comment: Finally, one commenter suggested that if no MA-PD plan is
available, or if the Part D premium of the available MA-PD plan exceeds
the low-income premium subsidy amount, CMS should auto-enroll these
beneficiaries into another organization's MA-PD plan whose premium does
not exceed the low-income premium subsidy amount.
Response: For the concern that no MA-PD plan would be available, we
note that section 1860D-21(a) of the Act requires all MA organizations
to offer at least one MA-PD plan.
Involuntarily disenrolling the individual from his or her MA plan,
and auto-enrolling him or her into another MA-PD plan offered by
another MA organization, is inconsistent with MA requirements at Sec.
422.66(e) described above.
Comment: A few commenters urged expanding Part D auto-enrollment in
the
[[Page 4209]]
case of full-benefit dual eligible individuals who are in an
organization's Medicaid managed care product, but currently receive
Part A and B benefits through Original Medicare. Specifically, the
commenters recommended that these beneficiaries be auto-enrolled into
an MA-PD plan that is offered under common ownership and control of the
organization offering the Medicaid managed care plan.
Response: Please refer to responses to comments on Sec. 422.66(d)
in Title II of the final regulation for a discussion on this issue.
Comment: A few commenters proposed that, where a full-benefit dual
eligible individual in Original Medicare will be auto-enrolled into a
PDP that is affiliated with an MA Special Needs Plan, CMS auto-enroll
the individual into the MA Special Needs Plan for their Part A and B
benefits, as a way to promote better overall coordination of care. To
preserve the beneficiary choice, the commenter suggested the regulation
provide an opportunity for the individual to ``opt out'' within some
specified period of time (for example, 90 days).
Response: The statute prohibits beneficiaries who have Part D
coverage through a PDP from getting their Medicare A and B coverage
through an MA-only plan. As a result, we decline to make the suggested
change.
Comment: One commenter asked CMS to clarify that, if a full-benefit
dual eligible individual is auto-enrolled into an MA-PD plan with a
premium higher than the low-income premium subsidy amount, that the
State Medicaid program would not be obliged to pay the balance on
behalf of the beneficiary.
Response: We confirm that the State Medicaid agency has no
obligation to pay any Part D premium in excess of the low-income
premium subsidy amount. Further, section 1905(a) of the Act, which
provides Federal medical assistance for Medicare cost-sharing (as
defined in section 1905(p)(3)(A) of the Act), does not include Part D
premiums.
Comment: A few commenters recommended that we consider establishing
a process for automatically enrolling or at least facilitating the
enrollment into Part D plans all individuals deemed eligible for the
full low-income subsidy. In effect, this would expand auto-enrollment
to individuals in Medicare Savings Programs. These are individuals for
whom State Medicaid agencies pay for Medicare cost sharing, but who are
not eligible for comprehensive Medicaid benefits and thus are not
considered full-benefit dual eligible individuals. They include QMB,
SLMB, and QI1. To the extent that we accept this recommendation, the
commenters suggested we also broaden the SEP provision to cover any
full subsidy eligible individual who is auto-enrolled in a Part D Plan.
A few commenters advocated expanding auto-enrollment even further
to all those who receive the low-income subsidy. This would include not
only those deemed eligible for the subsidy, but also those who have to
apply and be determined eligible. Auto-enrollment would ensure that
these individuals are not subject to a late enrollment penalty.
Response: We agree that there are compelling reasons to promote
Part D enrollment of all individuals deemed or determined eligible for
the low-income subsidy. These individuals typically are less healthy
and often face barriers to care. Effective medication management and
prescription drug coverage can lead to reduced inpatient hospital
expenditures, making it more cost-effective to provide drug coverage.
Facilitating enrollment into Part D would promote access to drug
coverage for these beneficiaries by ensuring that they have drug
coverage starting in 2006, while also preserving the voluntary nature
of enrollment in Part D. Doing so would also ensure that beneficiaries
with limited means would not be liable for a late enrollment penalty
for failing to enroll in Part D when first eligible.
We intend to pursue many steps to assist beneficiaries,
particularly low-income beneficiaries, in taking advantage of the new
Medicare drug coverage. Such steps could include facilitating
enrollment into Part D for those beneficiaries. We will provide details
in operational guidance to be issued shortly after the publication of
the final regulation, including details on the population for whom we
will facilitate enrollment. By facilitating enrollment, we mean giving
beneficiaries an opportunity to choose a Part D plan first; if they do
not choose, we would notify them that we intend to facilitate their
enrollment into a specific plan prospectively. If the beneficiary fails
to affirmatively elect an alternative plan or declines enrollment in
Part D by a given date, she or he would be enrolled into the plan into
which she or he has been assigned. In this instance, a beneficiary's
silence would be deemed consent to the enrollment choice we are making
on their behalf. If we facilitate enrollment in this manner, we would
likely follow rules for assigning beneficiaries to Part D plans similar
to those for the auto-enrollment and facilitated enrollment process for
full-benefit dual eligibles: MA enrollees would be enrolled into an MA-
PD plan with the lowest Part D premium; Original Medicare beneficiaries
would be enrolled in a PDP with a Part D premium that does not exceed
the low-income premium subsidy amount, and, if there is more than one
such PDP available, the individual would be randomly enrolled into one
of the plans available. In establishing a process for this facilitated
enrollment, we would rely upon discretion afforded the Secretary under
section 1860D-1(b)(1)(A) of the Act to establish enrollment processes
for Part D eligible individuals. Similarly, we would extend some of the
same protections afforded the full-benefit dual eligible population who
are auto-enrolled to those whose enrollment we facilitate. These
protections would include a Special Enrollment Period, the right to
affirmatively decline Part D enrollment, and where possible,
facilitating enrollment into plans whose premiums do not exceed the
low-income premium subsidy amount.
Comment: One commenter suggested expanding auto-enrollment to PACE
enrollees, that is, CMS auto-enroll them into their PACE organization
for purposes of Part D coverage effective January 1, 2006, unless the
PACE enrollee makes another enrollment choice. PACE organizations would
provide their enrollees an opportunity to opt out of enrollment in Part
D (and, as a result, out of the PACE organization).
Response: We agree that PACE enrollees should not be required to
take any additional steps to obtain their Part D benefit through their
PACE organization. Individuals who enroll in a PACE organization elect
to get all their Medicaid (if eligible for Medicaid) and Medicare
benefits through the PACE organization. As noted in response to a
similar comment on Sec. 423.32 of the final regulation, we will modify
the final regulation to deem individuals enrolled in a PACE
organization as of December 31, 2005 to be enrolled with that PACE
organization for their Part D benefit as of January 1, 2006. This
precludes the need to expand auto-enrollment to PACE enrollees, so we
decline to make that change.
Comment: One commenter noted that no provision was made for auto-
enrollment of full-benefit dual eligible individuals enrolled in
Medicare cost-based HMO or CMPs. The commenter suggested that for full-
benefit dual eligible individuals enrolled in a cost-based HMO or CMP,
CMS auto-enroll these individuals into the cost-based HMO or CMP for
Part D benefits if the cost-based HMO or CMP offers Part D,
[[Page 4210]]
even if the Part D premium is higher than the low-income premium
subsidy amount. If the cost-based HMO or CMP does not offer Part D
benefits, the commenter recommends auto-enrolling the beneficiary into
a PDP.
Response: We agree that we should ensure that full-benefit dual
eligible individuals, and potentially others eligible for the low-
income subsidy who are enrollees of a cost-based HMO or CMP obtain Part
D benefits. As noted in response to a similar comment on Sec. 423.32
of the final regulation, we will modify the final regulation to specify
that all individuals enrolled in a cost-based HMO or CMP that offers
any prescription drug coverage as of December 31, 2005, will be deemed
to be enrolled in the cost-based HMO or CMP for Part D benefits as of
January 1, 2006, if the cost-based HMO or CMP opts to provide Part D
benefits, and regardless of whether the Part D premium exceeds the low-
income subsidy amount.
We believe the same legal concerns noted above for auto-enrolling
full-benefit dual eligible individuals into MA-PD plans arise for auto-
enrolling them into a cost plan HMO or CMP. As a result, we decline to
expand auto-enrollment a suggested by this commenter. Instead, we will
use a facilitated enrollment process discussed above to accomplish
substantially the same end. We will facilitate the enrollment of full-
benefit dual eligible individuals enrolled in a cost plan HMO or CMP
that offers Part D benefits and who fail to enroll in a Part D plan
into the Part D benefits offered by their cost plan HMO or CMP. If the
cost plan HMO or CMP does not offer Part D benefits, the individual
will be enrolled in a PDP. We may similarly facilitate the enrollment
of other cost plan enrollees eligible for the low-income subsidy who
fail to elect a Part D plan into the Part D benefit offered by their
cost plans.
Comment: One commenter requested clarification as to whether auto-
enrollment into a PDP will only occur for Medicare beneficiaries who
receive comprehensive health care benefits (full hospital and physician
services) from both Medicare and Medicaid, or whether auto-enrollment
also applies to Medicare beneficiaries that receive pharmacy-only
benefits through Medicaid.
Response: The final rule will limit auto-enrollment to only those
dual eligible individuals who receive comprehensive health benefits
from both Medicare and Medicaid. As noted above, we may facilitate
enrollment of all others deemed or determined eligible for the low-
income subsidy into Part D plans. To the extent that a Medicare
beneficiary with pharmacy-only Medicaid benefits is in the population
whose enrollment we facilitate, we would facilitate that individual's
enrollment into a Part D plan.
Comment: One commenter recommended that we explore auto-enrolling
residents of long term care facilities who are not full-benefit dual
eligible individuals, and permitting these beneficiaries to disenroll
or choose another Part D plan. The commenter was especially concerned
about residents who lack the cognitive capacity to select a PDP and who
do not have a designated surrogate decision-maker in place.
Response: Generally, enrollment in Part D is voluntary. Section
1860D-1(b)(1)(C) of the Act provides for auto-enrollment of full-
benefit dual eligible individuals. As noted above, we may facilitate
enrollment of others deemed or otherwise determined eligible for the
low-income subsidy into Part D plans. To the extent that a resident of
a long term care facility is in the population whose enrollment we
facilitate, we would facilitate that individual's enrollment into a
Part D plan.
Since the Act limits auto-enrollment to full-benefit dual eligible
individuals, we decline to auto-enroll long-term care residents who do
not receive the low-income subsidy. While we acknowledge that access to
prescription drug coverage is critical for this population, we believe
they generally have the resources and support to make timely enrollment
decisions. We will, however, continue to explore options regarding
enrollment for all individuals in long-term care facilities.
Comment: A number of commenters urged CMS to permit SPAPs to act as
authorized representatives and enroll some or all of the beneficiaries
they serve into the SPAP's preferred PDP. These beneficiaries should be
permitted to decline enrollment in the SPAP's preferred PDP or to
change to another Part D plan.
Response: With regard to the issue of authorized representatives,
we defer to State law, as discussed in response to comments on Sec.
423.32. However, it is important to note that SPAPs that act as the
authorized representative for the individual must also comply with the
nondiscrimination provisions at Sec. 423.464(e). Please see responses
to related comments in subpart J.
Comment: One commenter noted that it appears that a full-benefit
dual eligible individual cannot enroll in an MA-PD plan if the
individual is not already an MA enrollee. The commenter urged that MA-
PD plans that bid at or below the low-income premium subsidy amount
should be an enrollment option for all full-benefit dual eligible
individuals.
Response: During the Part D initial enrollment period that starts
November 15, 2005, full-benefit dual eligible individuals who are in
Original Medicare are free to change to an MA-PD plan. Further, we have
established in our operational guidance a Special Enrollment Period
(SEP) that permits full-benefit dual eligible individuals to enroll in
and disenroll from an MA plan at any time, and will extend this SEP to
MA-PD plans. This will ensure that MA-PD plans are an option for all
full-benefit dual eligible individuals.
As indicated previously, any individual enrolled in a PACE
organization as of December 31, 2005 will be deemed to be enrolled with
that organization for their Part D benefit as of January 1, 2006.
The chart below provides a summary of the enrollment rules for all
beneficiaries, including those with and without the low-income subsidy,
in accordance with Sec. 423.32, Sec. 423.34, and Sec. 422.66.
------------------------------------------------------------------------
Population Enrollment Rules
------------------------------------------------------------------------
General Medicare Population (1) A beneficiary who chooses to
enroll a Part D plan must do so as
follows:
Original Medicare [rtarr2] Original
Medicare with separate PDP
MA Plan without drug coverage
[rtarr2] MA-PD plan
Medical Savings Account (MSA) Plan
[rtarr2] MSA with separate PDP
PFFS with Part D [rtarr2] PFFS with
Part D
Private Fee-For-Service Plan (PFFS)
without Part D [rtarr2] PFFS with
separate PDP
Cost Plan with Part D [rtarr2] Cost
plan Part D or cost plan with
separate PDP
[[Page 4211]]
Cost Plan without Part D [rtarr2]
Cost Plan with separate PDP
(2) A beneficiary enrolled in an
entity that offers any drug
coverage in 2005, CMS deems him or
her enrolled as follows* :
MA Plan [rtarr2] MA-PD Plan
Cost Plan [rtarr2] Cost Plan with
Part D
PACE Organization [rtarr2] PACE
Organization
(3) On a case-by-case basis, CMS
may allow an MA organization to
process ``seamless'' enrollments
into the organization's MA-PD plan
if individuals are enrolled in a
health plan offered by that MA
organization that includes
prescription drug coverage upon
their entitlement to Medicare.
------------------------------------------------------------------------
Full-Benefit Dual Eligible (1) A beneficiary who chooses to
Beneficiaries enroll in a Part D Plan follows
the same rules as above; otherwise
CMS auto-enrolls or facilitates
enrollment for him or her as
follows:
Original Medicare [rtarr2] PDP
MSA Plan [rtarr2] PDP
PFFS Plan without Part D [rtarr2]
PDP
Cost Plan with Part D [rtarr2] Cost
plan with Part D
Cost Plan without Part D [rtarr2]
PDP
MA-Only Plan [rtarr2] MA-PD Plan
(2) For a beneficiary enrolled in
an entity that offers any drug
coverage in 2005, CMS deems him or
her enrolled as follows:
MA Plan [rtarr2] MA-PD Plan
Cost Plan [rtarr2] Cost Plan with
Part D
PACE Organization [rtarr2] PACE
Organization
(3) On a case-by-case basis, CMS
may allow an MA organization to
process ``seamless'' enrollments
into the organization's MA-PD plan
if individuals are enrolled in a
health plan offered by that MA
organization that includes
prescription drug coverage upon
their entitlement to Medicare.
------------------------------------------------------------------------
* Those in an MA Plan without any drug coverage in 2005 will not be
deemed into an MA-PD plan, but instead must actively choose one if they
want Part D benefits.
** We may facilitate enrollment for other beneficiaries eligible for the
low income subsidy; if so, we would likely follow these same rules.
For additional detail, please see discussion on:
Sec. 423.32--Beneficiary's choice
Sec. 422.66(d)(5)--``Seamless'' enrollment on case-by-case basis
Sec. 422.66(e)(2)-(3)--Deemed enrollment in 2005
Sec. 423.34--Auto-enrollment and facilitated enrollment
------------------------------------------------------------------------
4. Disenrollment process (Sec. 423.36)
Section 1860D-1(b)(1)(A) of the Act authorizes us to establish a
process to allow disenrollment from prescription drug plans. In the
proposed rule, we outlined the rules for a Part D eligible individual
who wishes to change or discontinue an enrollment during applicable
enrollment periods, including filing a disenrollment with the PDP
directly or enrolling in another PDP.
While we initially envision a paper disenrollment process, we
retain the flexibility for other secure and convenient mechanisms that
we may approve in the future. Any such mechanism will be available at
the option of each PDP sponsor. We believe it is important to clarify
that, as other mechanisms are approved and implemented, we will require
all PDPs offer a minimum standard process, which at this time would be
a paper process, along with any optional election mechanism available
to prospective enrollees and plan members in conjunction with the paper
process. In the future, as technology evolves, another process may be a
more appropriate minimum standard. Except as provided below, the final
rule adopts the disenrollment rules set forth at Sec. 423.42 of the
proposed rule.
Comment: One commenter asked that we clarify whether an enrollment
in a different PDP would automatically disenroll the beneficiary from
his or her previous PDP effective the first day of enrollment in a new
PDP and asked who is responsible for that notification.
Response: We envision creating a process similar to that created
for the MA program, under which an individual who is eligible to enroll
in another PDP will automatically be disenrolled from the previous PDP
upon enrollment in the new PDP. The PDP to which the individual submits
an enrollment is required to provide a notice of acceptance or denial,
as provided in Sec. 423.32(d). We will notify the previous PDP of the
disenrollment and that PDP will inform the individual that he or she
has been disenrolled. As for the specifics of the notice requirements,
we will issue guidance to PDPs following the publication of this rule.
Comment: One commenter requested that we clarify in the regulations
that proper beneficiary protections for retroactive disenrollments are
in place for beneficiary requests that are made but not properly acted
upon.
Response: We will treat an individual's request for disenrollment
that was made but not properly acted upon as if the disenrollment had
properly occurred. We will provide guidance to PDPs as to how to handle
the processing of such requests, including proper notification to the
beneficiary.
Comment: One commenter asked CMS to address the issue for those
retirees who enroll in both a PDP and the employer sponsored plan due
to their confusion over the variety of new coverage options. The
commenter indicated that this not only results in duplicative coverage
and unnecessary premium costs. In addition, the commenter was concerned
because
[[Page 4212]]
many retirees may not be aware that a consequence of enrolling in Part
D may be the discontinuation of their employer group benefits, often
permanently prevented from ever being able to rejoin the group once he
or she enrolls in other coverage, such as Part D. One commenter
requested that we allow for retroactive disenrollment from Part D and
refund of the Part D premiums for these retirees who enrolled by
mistake into a PDP.
Response: We recognize that during the initial enrollment period
that some retirees may be confused about how their employer-based
coverage may coordinate with Part D coverage. While we feel that
establishing a retroactive disenrollment process specifically for this
reason would generally be inappropriate, we can establish a process in
which we would work with employer group sponsors, PDPs and MA-PDs to
educate beneficiaries prior to open enrollment and at the time of
enrollment. In addition, we intend to establish a process for the PDPs
and MA-PDs to verify an enrollment request for those individuals who
have been identified to CMS as having been claimed by an employer group
sponsor to receive the employer based subsidy. We will also include
information in beneficiary education and enrollment materials targeted
to those individuals who already have other prescription drug coverage
to provide assistance in determining whether enrollment in Part D would
be appropriate for that individual. We will issue operational guidance
on this process shortly following publication of the final rule.
5. Part D Enrollment Periods (Sec. 423.38)
In the proposed rule, as directed by the MMA, we established three
coverage enrollment periods: (1) the initial enrollment period (IEP);
(2) the annual coordinated election period (AEP); and (3) SEPs.
Generally, in accordance with section 1860D-1(b)(2)(B) of the Act, the
IEP for Part D is the same as the initial enrollment period established
for Part B. In addition, as part of the implementation of the Part D
program, and in accordance with section 1860D-1(b)(2)(A) of the Act, we
have established an initial enrollment period for Part D from November
15, 2005 until May 15, 2006 for those individuals who are already
eligible to enroll in a Part D plan as of November 15, 2005.
In accordance with section 1860D-1(b)(1)(B)(iii) of the Act, the
AEP for Part D is concurrent with the annual coordinated election
period for the MA program under section 1851(e)(3) of the Act. It is
during this annual period in which all PDP plans must open enrollment
to Medicare beneficiaries. For coverage beginning in 2006, the annual
coordinated election period begins on November 15, 2005 and ends on May
15, 2006. As a result, the initial enrollment period for individuals
who are eligible to enroll in a Part D plan as of November 15, 2005 and
the annual coordinated election period will run concurrently during
this time frame. In accordance with section 1851(e)(3)(B)(iv) of the
Act, Sec. 423.36(b)(2) of our proposed rule provides that, for 2007
and subsequent years, the annual coordinated election period will be
November 15 through December 31 for coverage beginning on January 1 of
the following year.
The MMA also establishes SEPs. SEPs allow an individual to
disenroll from one PDP and enroll in another PDP. Similarly, the SEP
rules that will apply for individuals in an MA-PD plan will be provided
under Sec. 422.62(b). We will include in regulation those SEPs that
have been specifically named in the statute. Those SEPs established for
exceptional circumstances for PDPs and MA-PDs, as authorized by section
1860D-1(b)(3)(C) of the Act and section 1851(e)(4) for MA-PDs of the
Act, respectively, will be provided in our manual instructions. The
final rule adopts the enrollment periods as proposed.
Comment: We received several comments regarding SEPs. Several
commenters supported the SEPs for exceptional conditions we proposed to
provide through manual guidance. Specifically, these include certain
SEPs already established in the MA program for circumstances where a
plan terminates its contract or the individual changes his or her
permanent residence. These commenters also supported an SEP to enroll
in a PDP for individuals disenrolling from an MA-PD plan during the MA
Open Enrollment Period, and for institutionalized individuals. Other
commenters suggested we establish various other SEPs, including the
following:
A subsidy-eligible individual who leaves private
prescription drug coverage for any reason, including his or her
inability to pay;
A change in a person's health status that makes a current
plan choice no longer suitable to his or her needs;
Individuals eligible for the low-income subsidy, other
than full benefit dual eligible individuals;
If there are substantial changes to the plan's formulary;
Individuals with ``life-threatening situations;''
Individuals whose situations are pharmacologically
complex;
All individuals for the first 18 months of the program as
it may be a confusing time;
All beneficiaries leaving MA plans throughout the year so
that they can enroll in a PDP;
Medicare-eligible retirees whose plan sponsor changes
their retiree drug coverage so that it no longer meets the criteria for
creditable coverage;
Individuals enrolled in, or desiring to enroll in PACE, as
the PACE program has continuous enrollment and disenrollment; and
Full benefit dual eligibles at any time, including every
time a PDP changes its plan in a way that directly effects these
individuals, such as removing a drug from its formulary, changing the
co-payment tier for a drug, or denying their appeal concerning a non-
formulary drug or an effort to change the co-payment tier.
Response: We appreciate this feedback. As previously mentioned, we
have historically included in regulation only those SEPs that have been
specifically named in the statute. The SEPs explicitly provided for in
statute include an SEP for full-benefit dual eligible individuals,
individuals who permanently change their residence so that they no
longer reside in their PDP's service area, and individuals enrolled in
a PDP whose contract is terminated.
We will issue guidance regarding the above SEPs and other
additional SEPs that we choose to establish following publication of
the regulation. We intend to establish in this guidance an SEP for
those individuals eligible for the low-income subsidy whose enrollment
into a Part D plan will be facilitated, individuals in long-term care
facilities, individuals enrolled in, or desiring to enroll, in PACE and
individuals enrolled in employer group health plans. However, we
decline to establish SEPs for other reasons included in the comments
described above, because we do not view these circumstances as
exceptional. However, we retain the right to establish additional SEPs
in the future and will do so in our operational guidance. Furthermore,
we may establish SEPs on a case-by-case basis, where warranted by an
immediate exceptional circumstance, such as an individual with a life-
threatening condition or illness. For the commenter's request that we
provide an SEP for the first 18 months of the program, we do not
believe that such an SEP is warranted in the circumstances. First, we
are committed to ensuring all beneficiaries have adequate information
to make informed choices about participating in the Part D program.
Second, the statute provides for an
[[Page 4213]]
extended AEP and provides a concurrent IEP at the beginning of this
program. These extended enrollment periods, in conjunction with the
planned education and information campaigns, will provide all
beneficiaries with adequate time and information to make an enrollment
decision. Therefore, we do not believe that such an SEP is warranted.
Comment: A few commenters recommended that we should provide a SEP
to permit those individuals who will receive the low-income subsidy
under subpart P but who are not full-benefit dual eligible individuals
to change to a plan of their choosing.
Response: We strongly agree that we should permit those individuals
who are enrolled or whose enrollment is facilitated by CMS the
opportunity to change to a plan of their choosing. Since we are
generally limiting in regulation those SEPs specified in statute, we
will provide for this SEP in operational guidance.
Comment: One commenter recommends that we change the provision of
an SEP for the involuntary loss of creditable coverage to include
individuals who lose such coverage due to failure to pay premiums. The
commenter believes the provision as proposed is too restrictive and
should be modified.
Response: Section 1860D-1(b)(3)(A)(iii) of the Act is clear that
disenrollments for failure to pay premiums will be considered a
voluntary disenrollment action. We therefore do not believe it
appropriate to treat this disenrollment as an exceptional circumstance
justifying an SEP.
Comment: One commenter asked if MA-PD plans are required to
participate in the AEP.
Response: The MA enrollment periods are discussed in the MA
regulations at Sec. 422.62. The AEP applies to both PDP and MA-PD
plans.
Comment: One commenter requested clarification of how many times an
individual may use an SEP to enroll in a PDP and encouraged CMS to
limit the number of times an SEP may be used to enroll.
Response: The duration and applicability of an SEP is specific to
each SEP and may vary from one specific circumstance to another. For
example, an SEP in the MA program for individuals affected by a plan
termination is specific to the circumstances surrounding that specific
action and limited in duration. Other SEPs apply more generally to
individuals, for example, full-benefit dual eligible dual individuals.
We will provide detailed guidance concerning each SEP following the
publication of this rule.
Comment: One commenter requested clarification of proposed Sec.
423.36(c)(3) regarding the SEP for individuals whose enrollment or
nonenrollment in Part D is caused by an error of a Federal employee or
any person authorized by the Federal government to act on its behalf.
The commenter suggests that we include all sponsors of Part D plans as
``persons authorized by the Federal Government to act on its behalf.''
Response: We have interpreted this statutorily required SEP to
apply to Federal government employees, staff, and contractors hired by
the Federal government to perform government duties. We would not
consider Part D plans to be performing enrollment functions as a
subcontractor on the behalf of CMS; rather, Part D plans must perform
certain enrollment functions as requirement of their direct contract
with CMS. While it is unlikely that an SEP would be necessary, we will
correct any errors made by the plan and not hold the individual liable
for the plan's mistake. Thus, we may allow an SEP in individual
situations, if appropriate.
Comment: One commenter asked if SEP enrollment in a PDP could be
retroactive in order to maintain continuity of care.
Response: An SEP enrollment in a PDP will generally be prospective.
We establish the effective date for SEPs and can accommodate unusual
circumstances on a case-by-case basis.
Comment: One commenter suggested that we establish an SEP with no
late enrollment penalty if a Medigap issuer or other entity fails to
provide adequate or accurate notice of whether such coverage is
creditable.
Response: Section 423.38(c)(2) of the final rule establishes an SEP
for all individuals who are not adequately informed when their
creditable prescription drug coverage is lost or changes so that it is
no longer creditable prescription drug coverage or that the individual
never had such creditable coverage. We believe that these provisions
adequately protect an individual who does not receive the required
notice from a Medigap issuer or other entity. Regarding the late
enrollment penalty, the provision of an SEP is not directly related to,
nor does it have a direct effect upon, the imposition of applicable
late enrollment penalties. The late enrollment penalty is discussed in
more detail at Sec. 423.46 and its relationship to creditable
prescription drug coverage is discussed at Sec. 423.56. Specifically,
at Sec. 423.56(g) of the final rule we describe the available remedy
for an individual who was not adequately informed that their
prescription drug coverage is not creditable.
Comment: One commenter believed the enrollment process should
ensure that residents of a long-term care facility are enrolled in a
PDP that provides access to the pharmacy located in the long-term care
facility.
Response: We understand the issue raised by the commenter.
Individuals who are in a long-term care facility will be given an SEP
to ensure they can choose the PDP that is appropriate for their
situation. This will be clarified in guidance following publication of
this rule.
6. Effective Dates of Coverage and Change of Coverage (Sec. 423.40)
Section 1860D-1(b)(1)(B)(iv) of the Act directs us to apply the
effective date requirements provided under the MA program at section
1851(f) of the Act. As described above, the three enrollment periods
provided under Part D are the IEP, the AEP, and SEP. In the proposed
rule, we established the following effective dates for these enrollment
periods:
a. Initial Enrollment Period
In accordance with section 1851(f)(1) of the Act, as incorporated
into Part D under section 1860D-1(b)(1)(B)(iv) of the Act, an
enrollment made during the initial enrollment period will generally be
effective the first day of the calendar month following the month in
which the individual enrolled in Part D. An enrollment made prior to
the month of entitlement to Part A or enrollment in Part B is effective
the first day of the month the individual is entitled to Part A or
enrolled in Part B. Since the Part D provisions are not effective until
January 1, 2006, we clarified that in no case may enrollment in Part D
be effective prior to this date. We also clarified that initial
enrollments made between November 15 and December 31, 2005 will be
effective January 1, 2006. An enrollment made during or after the month
of entitlement to Part A or enrollment in Part B is effective the first
day of the calendar month following the month in which the enrollment
in Part D is made.
b. Annual Coordinated Election Period
In accordance with section 1851(f)(3) of the Act, as incorporated
into Part D under section 1860D-1(b)(1)(B)(iv) of the Act, an
enrollment made during the annual coordinated election period is
effective as of the first day of the following calendar year, that is,
January 1\st\. One exception to this rule occurs during 2006 in the
special annual coordinated election period in 2006, in
[[Page 4214]]
which elections made between January 1, 2006 though May 15, 2006 will
be effective the first day of the calendar month following the month in
which the enrollment in Part D is made.
c. Special Enrollment Period
A SEP is effective in a manner that we determine to ensure
continuity of health benefits coverage.
The final rule adopts the effective dates as proposed.
Comment: Three commenters suggested that we specify a distinct
effective date for the SEPs in the final rule (as described in Sec.
423.38(c) of the proposed rule) to ensure adequate consumer protection.
Two commenters suggested adding: ``but no later than the first day of
the second calendar month following the month of the request for the
enrollment change'' to the end of this section. The third commenter
suggested we add: ``changes made before the 20\th\ of the month are
effective the first day of the second month following'' the change.
Response: We have outlined the specific effective date requirements
for SEPs granted in the MA program in operational guidance and will
follow the same process for the Part D program. We believe that in so
doing, we retain our ability to react quickly to changes or unforeseen
circumstances.
7. Involuntary Disenrollment by the PDP (Sec. 423.44)
Section 1860D-1(b)(1)(B) of the Act generally directs us to use
disenrollment rules similar to those established under section 1851 of
the Act. The proposed disenrollment provisions for PDPs were outlined
in Sec. 423.44 of our proposed rule, including the basis for
disenrollment--both optional and required--and guidance for notice
requirements.
Specifically, we proposed at Sec. 423.44(b)(2) that a PDP is
required to disenroll an individual who dies, no longer resides in the
PDP's service area, loses entitlement or enrollment to Medicare
benefits under Part A and is no longer enrolled in Part B, or knowingly
misrepresents to the PDP that he or she has received or expects to
receive reimbursement for covered Part D drugs through other third-
party coverage. The proposed rule also required a PDP to disenroll an
individual if the PDP sponsor's contract is terminating.
In addition to providing requirements for mandatory disenrollments,
we also provided under Sec. 423.44(d) of our proposed rule that PDPs
may disenroll individuals who do not pay monthly premiums or whose
behavior is disruptive, consistent with section 1860D-1(b)(1)(B)(v) of
the Act.
As with the MA program, PDP sponsors will be required in the final
rule to provide proper notice to the beneficiary, as outlined at
proposed Sec. 423.44(c), and afford him or her due process in
accordance with the procedures outlined in our operational instructions
prior to disenrolling the individual. For example, a PDP that wishes to
disenroll a beneficiary for disruptive behavior must receive our prior
approval and demonstrate to our satisfaction that it has made a good
faith effort to resolve the issue prior to requesting the
disenrollment. We will review these requests on a case-by-case basis,
taking into account all of the facts and circumstances of a particular
case, prior to making its decision. PDP sponsors must apply their
policies for optional disenrollment for failure to pay premiums and
disruptive behavior consistently among individuals enrolled in their
plans, unless we permit otherwise, and must do so consistent with
applicable laws regarding discrimination on the basis of disability.
Except as otherwise provided below, the final rule adopts the
involuntary disenrollment rules set forth in Sec. 423.44 of the
proposed rule.
Comment: Several commenters urged CMS to establish a process for
individuals to appeal disenrollment decisions. Several commenters
believed that individuals should have access to an outside independent
review process, especially if these individuals are disenrolled without
an SEP. Another commenter stated that involuntary disenrollments must
be heavily scrutinized and an appeal right be available on an expedited
basis.
Response: As we discussed under a previous comment regarding
appeals for enrollment denials, we do not believe that a formal appeals
process is necessary. Instead, we intend to address beneficiary
complaints regarding disenrollment in a manner addressed under the MA
program. Under the MA program, MA plans are required to follow a
specific process, which includes notice of potential disenrollment if
the individual does not address situation. We currently provide
assistance to MA organizations to handle beneficiary inquiries and
complaints regarding disenrollment through staff assigned to each MA
organization. We envision a similar process being established under the
PDP program.
Comment: Several commenters pointed out an error in the numbering
of the regulatory text for disruptive behavior at proposed Sec.
423.44(b)(1).
Response: We concur and have corrected the numbering.
Comment: A commenter requested that we clearly define how long an
individual would need to reside out of the PDP service area before we
would consider the individual as no longer residing in the service
area. One commenter did not think that it was reasonable to apply a 6-
month time limit to PDPs; PDPs should not be required to disenroll
individuals if the PDP can provide individuals access to benefits out
of the service area through a PDP in another region, or the PDP's
network of pharmacies in other regions, or mail order pharmacies. One
commenter believed the decision should be left to the individual as to
when he or she has permanently moved out of the PDP service area. A few
commenters did not believe that a person's residency should be a factor
in a plan's basis for disenrollment. Another commenter stated that a
PDP should not be required to disenroll an individual if the PDP meets
licensure requirements in the State where the individual has moved and
the PDP has a national pharmacy network in place. Another commenter
suggested that PDP maintain members if they are an established sponsor
and meet certain network adequacy requirements in the region in which
the beneficiary moves.
Response: We agree that disenrolling a beneficiary after being
temporarily out of the service area for a certain period of time may be
less appropriate for PDPs than in the MA program. The MMA directs us to
use rules similar to (and coordinated with) the MA residency
requirements at section 1851(b)(1)(A) of the Act, which provides that
an individual may elect an MA plan only if the plan serves the
geographic area in which the individual resides, except as the
Secretary may otherwise provide. However, the MA regulation at Sec.
422.74(d)(4) generally provides for disenrollment of an individual if
that individual is out of the service area, even temporarily, for 6
months, unless the MA organization offers visitor or traveler benefits
that provide for benefits while outside of the service area. We believe
that the nature of the prescription drug benefit and the ability for
many individuals to access the benefit through mail order or chain drug
stores provide greater flexibility in accessing the prescription drug
benefit while temporarily being out of the PDP's service area. However,
while an individual has greater flexibility to be temporarily outside
the service area and still access the PDP benefit, we maintain that the
individual must maintain his or her permanent residence within the
[[Page 4215]]
PDP's service area to be a member of the PDP. If the PDP learns of a
change in the individual's permanent address, the PDP would initiate
the disenrollment process. It is, however, an individual's
responsibility to notify the PDP if the individual permanently moves
out of the service area. We will provide further guidance to PDPs on
the process of disenrollment when an individual permanently moves out
of the service area following publication of this rule.
Comment: One commenter asked how a PDP will learn of loss of
entitlement to Part A or Part B.
Response: We will notify the PDPs of the loss of Part A or B
benefits. We will issue detailed operational guidance for PDPs prior to
2006.
Comment: A few commenters requested that we further clarify the
provision that an individual who ``knowingly misrepresents to the PDP
that he or she has received or expects to receive reimbursement for
covered Part D drugs through other third party coverage'' (that is,
whether his or her costs are expected to be reimbursed through
insurance or otherwise, such as a group health plan) must be
disenrolled. These commenters also asked how ``knowingly'' will be
determined and what entity would be responsible for investigating such
a case. One commenter indicated that a beneficiary should not be
penalized for unintended errors or inadvertent omissions, and that many
beneficiaries will be confused at the outset about their PDP coverage
and how it may coordinate with other insurance.
Response: Section 1860D-2(b)(4)(D)(ii) of the Act provides that
``material misrepresentation'' by an individual as to whether his or
her costs are expected to be reimbursed through insurance or otherwise
(through a group health plan or other third party payment arrangement)
shall be grounds for termination by the PDP. Since section 1860D-
2(b)(4)(D)(ii) of the Act also provides that a PDP sponsor may
periodically ask Part D eligible individuals about such reimbursement,
the statute establishes a penalty for an individual who ``materially''
misrepresents such information. This provision is not intended to
disenroll individuals who simply make an error, but instead apply to
those individuals who knowingly provide such false information. We
would be responsible for reviewing and issuing the final decision on
such a case. We plan to issue further guidance on this for PDPs prior
to 2006.
Comment: We received several comments on the disenrollment for
nonpayment of premium provision, both supporting and opposing inclusion
of such a process. Several commenters requested that we clarify the
details of disenrollment for nonpayment of premium, including what we
view as ``reasonable efforts'' to collect the premium. Several
commenters recommended providing a minimum grace period for repayment
before permitting disenrollment. One commenter requested that we waive
payment of past premiums for full-benefit dual eligible individuals or
low-income subsidy individuals. Some commenters believe that it is
inappropriate for us to disenroll any individual from Part D for
nonpayment of premium. One commenter stated that individuals enrolled
in a PACE plan should not be subject to the disenrollment requirements
under Sec. 423.44 of the proposed rule.
Response: Section 1860D-1(b)(1)(B)(v) of the Act specifically
directs us to apply rules to PDPs that are similar to (and coordinated
with) the MA provisions at section 1851(g) of the Act related to
disenrollment for nonpayment of premium. While some commenters objected
to disenrollment by the PDP on those grounds, we note that such
disenrollment is at the PDP sponsor's option and PDP sponsors therefore
have the ability to apply this rule to their plan enrollees. In
contrast, under Part B, individuals who fail to pay their Part B
supplementary medical insurance premiums must be disenrolled from Part
B. While we do not review and approve such disenrollments, we maintain
that if a PDP chooses the option to disenroll a beneficiary for
nonpayment of the premium, we would require that the PDP apply this
policy consistently, as we direct, amongst all its members and could
not ``waive'' the premium for a certain group of its members. As
indicated in the preamble of subpart T of this rule, we will issue
additional guidelines that will include a comprehensive listing of Part
D waivers applicable to PACE organizations. However, we agree that PACE
organizations should not be subject to the disenrollment requirements
of Sec. 423.44 as they are duplicative of the PACE disenrollment
requirements associated with Sec. 460.164 of the PACE regulation.
Comment: Several commenters recommended that we permit plans to
deny reinstatement following disenrollment for failure to pay premiums
unless the enrollee pays the outstanding amount that is due. Other
commenters stated that PDP should not be required, under any
circumstance, to re-enroll individuals who are disenrolled for
nonpayment of the premium.
Response: We have provided in the final regulation at Sec.
423.44(d)(1)(iii) that a PDP may decline future enrollment to
individuals who have been disenrolled for failure to pay premiums until
past due premiums are paid to the PDP. However, we would not allow a
PDP to prohibit an individual from enrolling in its plan if the
individual has paid all past due premiums to the PDP.
Comment: We received a substantial number of comments on proposed
Sec. 423.44(d)(2) to allow PDP sponsors to disenroll individuals who
exhibit disruptive behavior.
One commenter supported the definition established in the proposed
rule, while several commenters supported the due process safeguards
afforded by our approval of disenrollment requests. Two commenters
suggested that we provide guidance to PDP sponsors on the symptoms of
mental illness and dementia and other personality disorders to
distinguish between disruptive behavior and behavior resulting from a
medical condition. There were other commenters who asked us to clearly
define the terms and requirements for disenrolling a beneficiary for
disruptive behavior. These commenters recommended that we include in
the final rule such requirements as documentation of a PDP sponsor's
effort to provide a reasonable accommodation for individuals with
disabilities and sufficient notice of the sponsor's actions during the
course of the disenrollment process.
Numerous commenters expressed concern that the proposed definition
of disruptive behavior does not adequately protect individuals whose
behavior is induced by disability, mental illness, cognitive
impairment, or certain prescribed drugs and who rely on prescription
drug therapy to stabilize their behavior. Some commenters recommended
that we prohibit PDP sponsors from disenrolling certain populations for
disruptive behavior, explaining that State Medicaid programs will not
be able to claim Federal matching funds for prescription drugs spending
on behalf of full-benefit dual eligibles who have been disenrolled by a
PDP sponsor. Other commenters suggested that we develop more stringent
criteria for PDP sponsors requesting to disenroll a full-benefit dual
eligible individual. Several commenters stated that, in cases where an
individual is unstable, disruptive behavior could be related to
unsuccessful attempts to find the proper medication. There were also a
number
[[Page 4216]]
of commenters who asserted that we lacked statutory authority to permit
PDPs sponsors to disenroll individuals for disruptive behavior. Two
commenters questioned the appropriateness of applying a policy of
involuntary disenrollment for disruptive behavior to PDPs. One
commenter suggested that we allow an individual who is disruptive to
designate an authorized representative to access services on his or her
behalf.
Response: In the final rule, we aim to strike a balance between
allowing PDP sponsors to disenroll individuals who exhibit disruptive
behavior and creating adequate protections for individuals who face
involuntary disenrollment from a PDP. In accordance with the statute
(at section 1860D-1(b)(1)(B)(v) of the Act), we must establish a
process that is similar to and coordinated with the process under the
MA program that permits MA organizations to disenroll an individual for
disruptive behavior. At the same time, we recognize the impact of such
a disenrollment on an individual's ability to access prescription drug
coverage under the Medicare program, and the need for adequate
safeguards for individuals whose disruptive behavior is due to mental
illness or a medical condition. Continuity of care for these
individuals is essential, especially if they are taking prescription
medications that can minimize the debilitating impact of their illness
and restore their functioning.
Therefore, in revising our proposed definition of disruptive
behavior in Sec. 423.44(d)(2)(i) of the final rule, we focus on
behavior that substantially impairs a PDP sponsor's ability to arrange
or provide care for the individual or other plan members. Behavior that
is related to the use of medical services or compliance (or non-
compliance) with medical advice is not disruptive behavior.
We also agree with commenters that arranging or providing care for
individuals with mental illness, cognitive impairments such as
Alzheimer's disease or other dementias, and medical conditions and
treatments that may cause disruptive behavior warrant special
consideration, and therefore revise Sec. 423.44(d)(2)(v) to require
PDP sponsors to provide a reasonable accommodation to individuals in
such exceptional circumstances that we deem necessary. Such
accommodation is intended to ensure that the individual can maintain
Medicare prescription drug coverage and may include granting an
individual a SEP to choose another plan, or requiring the plan to
continue the individual's enrollment until the Annual Coordinated
Election Period, when the individual has an opportunity to enroll in
another plan. We will determine the type of accommodation necessary
after a case-by-case review of the needs of all parties involved. This
review will be conducted as part of our review and approval of the PDP
sponsor's request, as required in regulations at Sec. 423.44(d)(2)(v),
and will include expert opinion from our staff with appropriate
clinical or medical background.
In addition, we recognize that circumstances may arise where an
individual is only able to obtain qualified prescription drug coverage
from a fallback prescription drug plan operating in his or her service
area. In such instances, allowing a fallback entity to disenroll an
individual may create substantial barriers to accessing prescription
medications under the Medicare program. Section 1860D-11(g)(4)(B) of
the Act grants us authority to establish additional requirements
specifically for fallback prescription plans. Under this authority, we
reserve the right at Sec. 423.44(d)(2)(vi) to deny a fallback
prescription drug plan's request to disenroll an individual for
disruptive behavior.
In the proposed rule, we established procedures that PDP sponsors
must follow prior to requesting to disenroll a member for disruptive
behavior. Under proposed Sec. 423.44(c), a PDP sponsor must give an
individual timely notice of the disenrollment, which includes an
explanation of the individual's right to a hearing under the PDP's
grievance procedures. We further required at proposed Sec.
423.44(d)(2)(ii) a sponsor to make a serious effort to resolve the
problems presented by the individual, including the use or attempted
use of the organization's grievance procedures. Finally, we established
under proposed Sec. 423.44(d)(2)(iii) that a PDP sponsor must document
the individual's behavior, its own efforts to resolve the problem, and
the use or attempted use of its internal grievance procedures. We are
preserving all of these requirements in the final rule at Sec.
423.44(c) and Sec. 423.44(d)(2)(iii) and (d)(2)(iv).
We believe that the final rule achieves the twin goals of
permitting involuntary disenrollment based on an individual's
disruptive behavior, while also establishing necessary protections for
individuals who are subject to our disenrollment rules.
Comment: Several commenters contended that allowing a PDP sponsor
to disenroll an individual for disruptive behavior provides an
opportunity for PDP sponsors to discriminate against individuals with
disabilities, mental illness, Alzheimer's, and other cognitive
conditions.
Response: We appreciate the commenters concern about the need to
ensure that individuals are not discriminated against on the basis of
their disability. However, the Part D plans are not provided the
authority to make the decision on such a disenrollment. In addition to
establishing safeguards in the final rule for individuals with special
needs by requiring PDP sponsors to make reasonable accommodations where
we deem necessary, it is CMS who reviews the request for disenrollment
and makes the decision to approve or deny the request. In our review,
we will include our staff with the appropriate clinical or medical
expertise review the case before a final decision is made.
Comment: Several commenters noted that the proposed rule denies
protection to individuals who comply with medical advice by trying an
on-formulary drug instead of the drug originally prescribed and
subsequently experience an adverse reaction that triggers the
disruptive behavior. A few commenters asked us to prohibit PDPs from
disenrolling an individual because of his or her refusal or inability
to adhere to a treatment plan developed by the PDP or other health care
professionals associated with the plan.
Response: We agree with the commenters and clarify in the final
rule at Sec. 423.44(d)(2)(i) that an individual cannot be considered
disruptive if such behavior is related to the use of medical services
or compliance (or non-compliance) with medical advice or treatment.
Comment: Two commenters supported the flexibility afforded PDP
sponsors by our allowing PDP sponsors to limit re-enrollment for
individuals who are disenrolled for disruptive behavior, and one of
these commenters specifically asked us to establish criteria for re-
enrolling an individual such as a minimum waiting period and a
commitment by the individual to discontinue such behavior. On the other
hand, there were many commenters who opposed the ability of a PDP
sponsor to decline re-enrollment of an individual. These commenters
contended that prohibiting an individual from re-enrolling in a PDP for
a specified period could cause undue harm and lapses in coverage,
especially if the individual is not able to enroll in another PDP. One
commenter requested that we specify the maximum period of time that a
PDP sponsor may prohibit re-enrollment of
[[Page 4217]]
an individual who has been disenrolled for disruptive behavior.
Response: In the proposed rule, we enabled PDP sponsors to request,
at their option, the ability to decline future enrollment by an
individual who had been disenrolled for disruptive behavior. While we
retain this option for PDPs in the final rule, we require these
sponsors to request future conditions on re-enrollment as part of their
disenrollment request. At the same time, we reserve the right in
accordance with Sec. 423.44(d)(2)(v) to review each request on a case-
by-case basis. In the review process, we will give due consideration to
exceptional circumstances that may warrant reasonable accommodations in
addition to the appropriateness of conditions on re-enrollment.
Comment: There were several commenters who objected to the
expedited disenrollment process. The commenters noted that the
expedited process lacks even the minimal standards and requirements
that are in place to protect beneficiaries in these circumstances.
Response: It is our intent to ensure that all individuals facing
involuntary disenrollment for disruptive behavior have sufficient
opportunity, as provided by the notice requirements, to change their
behavior or grieve the PDP sponsor's decision to request involuntary
disenrollment from us. We have therefore removed this provision from
the final regulation.
Comment: One commenter asked us to clarify whether a full-benefit
dual eligible individual who is disenrolled for disruptive behavior is
entitled to a SEP.
Response: In accordance with the Sec. 423.38(c)(4), a full-benefit
dual eligible individual as defined under section 1935(c)(6) of the Act
is entitled to a SEP. A full benefit dual eligible individual who is
involuntarily disenrolled for disruptive behavior remains entitled to a
Special Enrollment Period.
Comment: We received two comments asking us to adopt an
interpretation of nonpayment of cost sharing as disruptive behavior as
we had discussed in the preamble of the proposed rule for MA
organizations.
Response: We appreciate the feedback provided on the consideration
to include nonpayment of cost-sharing as disruptive for the purposes of
applying the provisions under disruptive behavior. We will consider
these comments in developing guidance for the disruptive behavior
provisions.
8. Late Enrollment Penalty (Sec. 423.46)
Section 1860D-13(b) of the Act establishes late enrollment
penalties for beneficiaries who fail to maintain creditable
prescription drug coverage for a period of 63 days following the last
day of an individual's initial enrollment period and ending on the
effective date of enrollment in a Part D plan. We outlined this process
for imposing the penalty in the proposed rule. We also proposed that an
uncovered month is any month in which an individual does not have
creditable coverage at any time during that month. We also reference
the calculation of the amount of the penalty, which was described at
Sec. 423.286(d)(3) of the proposed rule.
The final rule adopts the rules for late enrollment penalties as
proposed.
Comment: Several commenters requested that we waive the late
enrollment penalty for certain individuals, such as full-benefit dual
eligible individuals, subsidy eligible individuals, individuals who are
eligible for a special enrollment period and individuals who are
involuntarily disenrolled. One commenter asked that State Medicaid
programs be allowed to request and obtain such a waiver. Other
commenters urged CMS to delay the implementation of the late enrollment
penalty for one to two years, or be flexible with the application of
the penalty, stating the Part D program was new and complex. Another
commenter asked if we would provide any exception to the penalties for
exceptional circumstances, such as natural disaster, family death, or
clinical justification. A few commenters did not see a late penalty
appeals process in the regulation and requested that we add an
opportunity to appeal the late penalty.
Response: There is nothing in the statute that would provide us
with the authority to waive or delay the late enrollment penalty at any
time unless an individual was not adequately informed that his or her
prescription drug coverage as described at Sec. 423.56 was not
creditable. Only in this limited situation will we be able to deem the
individual's prescription drug coverage as creditable, regardless of
whether it actually is creditable, so as not to impose the late
penalty. Further, it is clear that the statute intended this provision
to apply to full-benefit dual eligible individuals since the
application of the penalty is specifically referenced in the definition
of the full premium subsidy under section 1860D-14(a)(1)(A) of the Act,
for which full-benefit dual eligible individuals are eligible.
Specifically, section 1860D-14(a)(1)(A) of the Act provides that full
subsidy eligible individuals, including full-benefit dual eligible
individuals, are responsible for 20 percent of any late enrollment
penalty for the first 60 months during which such penalty is imposed.
As discussed in the proposed rule, we will develop a process for
individuals to apply to CMS for reconsideration of the penalty. We
appreciated the feedback that organizations provided on setting up such
a process.
Comment: Several commenters asked CMS to clarify that those who do
not receive a notice that their prescription drug coverage was not
creditable (or received the wrong notice) are not subject to the late
enrollment penalty.
Response: As provided in Sec. 423.56(g) of the final rule, an
individual who is not adequately informed that his or her prescription
drug coverage was not creditable may apply for our review and make a
determination if this occurred. If we determine that the individual did
not receive adequate notice or received incorrect information, we may
deem the individual to have had creditable coverage so that the late
enrollment penalty will not be imposed.
Comment: One commenter asked CMS to clarify how the 63-day period
would be counted. The commenter recommended from the end of the IEP to
the date of the application for the low-income subsidy since
individuals may delay a decision until he or she knows whether there
will be a subsidy.
Response: The count of the 63-day period will commence the day
following the end of the individual's IEP or, once the IEP has passed,
the day following the last day of creditable coverage or Part D
enrollment (in a PDP or MA-PD plan). The application of the 63-day
period will be consistently applied to all individuals, regardless of
when an individual may or may not apply for the low-income subsidy.
Comment: One commenter asked how the late enrollment penalty will
be coordinated with the late enrollment penalty for Part B.
Response: We are currently developing operational and system
requirements to implement the late enrollment penalty process.
Additional guidance will be provided to PDPs and individuals with
specific information as to how this will occur.
9. Part D Information That CMS Provides to Beneficiaries (Sec. 423.48)
As provided under section 1860D-1(c)(1) of the Act, we will conduct
activities designed to broadly disseminate information about Part D
coverage to individuals who are either eligible or prospectively
eligible for Part
[[Page 4218]]
D benefits. In the proposed rule, we indicated that this information
will be made available to beneficiaries at least 30 days prior to their
initial enrollment period.
Each organization offering a PDP or MA-PD plan must provide us
annually with the information to disseminate to individuals who are
currently or prospectively eligible for Part D benefits. The
information dissemination activities for Part D will be similar to, and
coordinated with, the information dissemination activities that we
currently perform for Medicare beneficiaries under sections 1851(d) and
1804 of the Act.
As required under section 1860D-1(c)(3) of the Act, we proposed to
include the following comparative information for qualified
prescription drug coverage provided by PDPs and MA-PD plans as part of
our dissemination of Part D information and our efforts to promote
informed beneficiary decisions:
Benefits and prescription drug formularies;
Monthly beneficiary premium;
Quality and performance;
Beneficiary cost-sharing; and
Results of consumer satisfaction surveys.
We also proposed to provide information to beneficiaries regarding
the methodology we will use for determining late enrollment penalties,
as provided in Sec. 423.286(d) of our proposed rule.
In carrying out the annual dissemination of Part D information, we
will conduct a significant public information campaign to educate
beneficiaries about the new Medicare drug benefit and to ensure the
broad dissemination of accurate and timely information. We will work
with SSA and the States to ensure that low-income individuals eligible
for or currently enrolled in Part D benefits are aware of the
additional benefits available to them and how to receive those
benefits. In order to maximize the enrollment of Part D eligible
individuals, this public information campaign would include outreach,
information, mailings, and enrollment assistance with and through
appropriate State and Federal agencies, including SHIPs, and will
coordinate with other Federal programs providing assistance to low-
income individuals. In addition, we will undertake special outreach
efforts to disadvantaged and hard-to-reach populations, including
targeted efforts among historically underserved populations, and
coordinate with a broad array of public, voluntary, private community
organizations, plan sponsors and stakeholders serving Medicare
beneficiaries to explain the options available under this program.
Materials and information will be made available in languages other
than English where appropriate.
This information will enable beneficiaries to make informed
decisions regarding their Part D coverage options. Organizations
offering a PDP or MA-PD plan will be required to provide this
information in a format and to use standard terminology that we will
specify in further operational guidance.
In the interest of broadly disseminating information that promotes
informed decision-making among Part D enrollees and prospective Part D
enrollees, as required under Section 1860D-1(c) of the Act, we would
extend the price comparison requirements to PDP sponsors and MA
organizations offering MA-PD plans and making comparative information
about Part D plans' negotiated prices available to beneficiaries
through http://www.medicare.gov.
Since the introduction of http://www.medicare.gov in 1998, we have
substantially increased the amount of personalized information
available to Medicare beneficiaries, making it one of the government's
most comprehensive and customer-oriented sites available to the public.
The web site hosts twelve separate database applications to help
individuals make their own health care decisions. The most significant
ones are: the Medicare Personal Plan Finder (which contains costs,
benefits, quality, satisfaction and disenrollment measures), Nursing
Home Compare (which contains basic characteristics, staffing
information and inspection results), the Prescription Drug and Other
Assistance Programs application (which contains the most extensive,
nationally complete listing of the Medicare-approved discount drug
cards, including price comparisons, as well as other government and
private programs designed to help with prescription drug costs), and
the Medicare Eligibility Tool (which assists users in determining when
they are eligible, how to enroll and what they need to consider when
joining Medicare). Other tools providing customized results include:
the Participating Physician and Supplier Directories, Home Health and
Dialysis Facility Compare, Your Medicare Coverage, Helpful Contacts,
Publications, and Frequently Asked Questions. By updating all
information on the web site at least once a month, the information
provided to Medicare beneficiaries via http://www.medicare.gov is the most
reliable and consistent information available.
Much of the information available through http://www.medicare.gov is also
available via the 1-800-MEDICARE helpline. 1-800-MEDICARE is a major
information channel for providing the most personalized and reliable
information to people with Medicare. The beneficiary can call 1-800-
MEDICARE to find out the most reliable information on public and
private programs that offer discounted or free medication, programs
that provide help with other health care costs, and Medicare health
plans that include prescription drug coverage. The caller can always
talk to a live person at 1-800-MEDICARE to get the facts they need. We
can also give the beneficiary personalized brochures containing
information on their health plan choices, nursing homes and Medicare
participating physicians in their area. 1-800-MEDICARE is available 24
hours a day, 7 days a week, to provide the one-on-one service that our
Medicare beneficiaries need to make appropriate health care decisions.
The final rule adopts the information requirements set forth in the
proposed rule.
Comment: Several commenters were concerned that the web site should
reflect accurate information that is presented in an appropriate
context and in a way that is useful for beneficiaries to use. Many
commenters noted that the web site should provide beneficiaries with
the ability to compare plans on the basis of estimating their out-of-
pocket spending, including premiums and applicable cost sharing.
Several commenters encouraged CMS to rely not only on price as the
factor in determining which Part D plan fits beneficiary needs. Another
commenter urged CMS to include specific information regarding which
drugs are covered by each plan. Other commenters indicated that other
information that the beneficiaries would need to consider would be the
level of coinsurance, the amount a beneficiary would pay during any
period he or she is liable for 100 percent of the cost sharing, whether
the drug is on or off the formulary, and other cost management
techniques that may apply, such as step therapy and prior
authorization. Another commenter stated that we must post prices on its
website of retail pharmacies that offer maintenance supplies of
medications. One commenter stated that beneficiaries need to know
whether the pharmacy is included in the plan's network.
Response: We appreciate this feedback and will consider this when
[[Page 4219]]
developing the requirements for the Part D price comparison web tool.
Comment: Another commenter stated that we need to ensure that any
website includes price comparisons about generic drugs compared to
their innovator brands, as well as generics compared to other brand
name drugs in a similar therapeutic class.
Response: This comment will be considered when developing the
requirements for the Part D price comparison web tool. As with the
current price comparison tool for the Medicare-approved drug discount
card program, we include pricing information for both brand and generic
drugs.
Comment: One commenter noted that correct information may not be
provided to seniors if we require plans to post the maximum price that
could be charged, since the maximum price is typically the pharmacy's
usual and customary cash price.
Response: It is our understanding that usual and customary pricing
data is not readily accessible; therefore, we anticipate posting the
maximum negotiated prices for prescription drugs on the website with
the understanding that beneficiaries will pay the lower of the
negotiated or usual and customary price at the point of sale. It is
anticipated that the prices displayed on the website would reflect what
enrollees would expect to pay at the point of sale for their
prescriptions under the respective plans.
Comment: One commenter asked that we define the process for the
information sharing exchange between PDPs and CMS.
Response: The process has not been defined at this time. Once we
have developed the data requirements and process for submission of
data, we will share this information with all prospective Part D plans.
Comment: Several commenters believe that the price comparison tool
should not be a requirement for PDP sponsors or MA organizations
offering MA-PD plans.
Response: It is important for beneficiaries to have access to all
information in order to make informed choices. We are committed to
providing Medicare beneficiaries with information about both PDPs and
MA-PD plans through the price comparison tool. Therefore, we will keep
this requirement.
Comment: One commenter expressed a general concern with the
disclosure of negotiated prices and the negative impact that disclosure
of such information could have on competition. The commenter further
noted that negotiated prices may be subject to confidentiality
agreements. The commenter suggested that we disclose only estimated or
average prices and that this information only be posted on the specific
website of the Part D plan.
Response: As mentioned previously, it is anticipated that the
prices displayed on the website will reflect what enrollees would
expect to pay at the point of sale for their prescriptions under the
respective plans.
Comment: A commenter stated it was unacceptable for CMS not to
provide quality and performance information in the first year or second
year of the Part D program.
Response: Quality data will not be available for the first year
since this is a new program and historical data will not be available
for reporting. For year two, the regulation simply states that if it is
impractical to obtain data or if it is not available, it will not be
reported; this is not the same as stating that it will not be available
for the second plan year. From the perspective of many beneficiaries,
cost and availability are the most important quality issues. Hence, we
will be able to report timely in response to these issues.
Comment: One commenter urged the agency to work closely with
pharmacies to ensure that any price comparison website is
understandable and free of errors before it is made public.
Response: Historically, we have worked closely with beneficiaries,
stakeholders, partners, and advocacy groups to ensure the information
disseminated meets the needs of the Medicare population we serve. We
will continue this practice in the development of the website for Part
D plan information.
Comment: One commenter stated that we are silent on the
notification timeframe for beneficiaries. CMS simply refers to the 30-
day notice period. The commenter thinks that beneficiaries will need
much more than 30 days to digest all of the information they will
receive from CMS to enable them to make informed choices about their
Part D coverage. The commenter urges information to be disseminated as
soon as possible and urges CMS to plan numerous information campaigns
now and involve numerous organizations in developing education
activities and materials. Another commenter suggests dissemination
activities occur at least 60 days prior to the initial enrollment
period for Part D, which begins November 15, 2005.
Response: We are planning outreach and education activities that
will occur throughout 2005 and 2006. Detailed information about drug
plans and their individual benefit structures will be released as soon
as possible after this information is approved. It is impossible to
send out plan data any sooner due to submission dates for plan
information and the process steps needed to translate the raw data into
consumer-friendly information, as well as the print production steps
for the publication that will house this comparative information.
Comment: One commenter asked what information we will provide to
SSA, SHIPs, and other groups to educate beneficiaries about the late
enrollment penalty.
Response: We will provide important details about the penalty
associated with late enrollment in the information provided to SSA and
SHIPs, as well as in SHIP training materials. In addition, we will
develop materials that can be used by employers, unions, partners,
advocacy groups and other stakeholders to educate beneficiaries about
the late enrollment penalty.
Comment: One commenter stated that we must give greater attention
to developing materials and education campaigns focused on informing
beneficiaries, especially those with special needs, about the new drug
benefit and to help them to enroll in the best plan available.
Response: We are planning a multi-tiered education program to
repeatedly reach all beneficiaries. This program will include plans for
specific important target audiences, including those with special
needs. Mailings and outreach activities to dual eligibles are currently
being planned. Education and outreach materials developed for
beneficiaries will be thoroughly tested with the target audience.
Comment: Another commenter stated that we should mail, no later
than October 15, 2005, standardized, easy-to-understand notices to
full-benefit dual eligible individuals that, among other things: inform
them of their eligibility to receive the low-income subsidy if they
enroll in a PDP; list of choices of health plans, clearly denoting
those that meet the benefit premium assistance limit, and contact
information for each plan; explain that full-benefit dual eligible
individuals will be randomly enrolled in a prescription drug plan at a
specified date if they fail to opt out or enroll in a plan themselves;
explain how they may change their drug plans if they wish at any time;
and inform them of where in their community they can go to get help
with enrollment. The commenter also recommended that these notices
should be tested for readability by focus groups and experts.
[[Page 4220]]
Response: We plan to consumer test beneficiary notices and send out
the information noted by the commenter above by October 15, 2005. We
are considering using the mailing to inform the full-benefit dual
eligible individuals about what plan they will be auto-enrolled in if
they fail to elect a Part D plan by December 31, 2005 or affirmatively
opt of Part D, and that they have a right to choose to enroll in a
different plan.
Comment: One commenter stated that the website should be provided
in languages other than English to reflect the language spoken in a PDP
service area.
Response: We appreciate this feedback and will consider this when
developing the requirements for the website.
Comment: CMS should include in the final rule binding and
enforceable standards defining information plans must provide to
beneficiaries with various types of disabilities. For example, this
information must be available to individuals who are blind or have low-
vision. Further, CMS must require PDP internet websites to be
accessible for individuals with vision impairments.
Response: Our websites are accessible to people with various
disabilities, including those who are blind or have low-vision. Under
our marketing requirements in Sec. 423.50, we require Part D plans to
demonstrate that marketing resources are allocated to marketing to the
vulnerable populations, as well as beneficiaries age 65 and over. It is
also important to note that Section 508 of the Rehabilitation Act of
1973 allows individuals with disabilities to access electronic
information.
Comment: Commenters stated that the proposed rule focused largely
on support through Internet sources and the 1-800 Medicare number, and
argued that both are necessary and helpful but insufficient to meet the
needs of many duals, as well as those eligible for the low-income
subsidy.
Response: Although the basis for information dissemination is
through publications, http://www.medicare.gov and 1-800-MEDICARE, we do not
plan to solely rely on these resources to reach the population as a
whole. We will work closely with SSA, SHIPs, Area Associations on Aging
as well as other national stakeholders and partners, to provide
assistance to those who may qualify for the low-income subsidy. Through
a broad network of support from community based organizations, we will
make considerable efforts to reach those beneficiaries who do not have
access to the Internet or are uncomfortable calling 1-800-MEDICARE.
Comment: CMS should also make detailed information about PDPs
available electronically to others in accessible formats that would
enable them to conduct independent analyses about what plan would be
best for a particular individual.
Response: Because the actual plan data underlying the price
comparison tool is considered proprietary, we do not anticipate making
the underlying data available electronically to outside organizations.
Since nothing in the MMA addresses disclosure of plan data, the Freedom
of Information Act (FOIA) rules apply. FOIA Exemption 4 protects
certain confidential commercial information that is submitted to a
Federal agency. Determinations about the applicability of FOIA
Exemption 4 to plans' pricing data would be made on a case-by-case
basis depending on whether the submitter of the data could demonstrate
that disclosure of this information would likely cause substantial
competitive harm to the submitter's competitive position. If FOIA
Exemption 4 is found to protect submitted price information, we cannot
disclose this information because to do so would violate the Trade
Secrets Act (18 U.S.C. 1905).
Comment: Several commenters stated that we should develop specific
outreach and education strategies for vulnerable populations, including
disabled Medicare beneficiaries and dual eligibles. Another commenter
stated that PDPs should be required to include specific plans for
encouraging enrollment of hard-to-reach populations, including
individuals with mental illness. Another commenter indicated that
outreach efforts must involve community-based groups on a collaborative
basis and not just use these groups as conduits for distributing
written materials produced by CMS regarding the new benefit. Resources
must be provided to enable these groups to educate beneficiaries about
their choices and help enroll them. This collaboration with community
groups must begin as soon as possible to establish the infrastructure
needed once Part D goes into effect.
Response: We are developing an extensive outreach campaign for
these individuals and are working closely with U.S. Department of
Health and Human Services' Office of Disability to ensure that this
important audience is reached.
Comment: One commenter strongly urged CMS to develop a specific
plan for facilitating enrollment of beneficiaries with disabilities
that incorporates collaborative partnerships with State and local
agencies and disability advocacy organizations.
Response: In addition to working closely with the HHS Office of
Disability to ensure we reach this group of individuals, we plan to
broaden local partner networks though the Regional Education About
Choices in Health (REACH) campaign to provide training, information and
planning support to provide outreach and assistance to these
populations. REACH is a national education and publicity campaign
implemented at the local level by our Regional Offices and their
partners. The REACH campaign works through partnerships to increase
awareness of the Medicare program and resources among hard to reach
populations.
Comment: A commenter suggested that we should develop and implement
effective outreach strategies utilizing the Medicare Beneficiary
Ombudsman authorized under section 923 of the MMA.
Response: Section 923 of the MMA states that, to the extent
possible, the Ombudsman shall work with SHIPs to facilitate the
provision of information to individuals entitled to benefits under Part
A or enrolled under Part B, or both regarding MA plans and changes to
those plans. We will ensure that SHIPs receive sufficient training in
all aforementioned subjects so that SHIPs can provide information and
assistance to beneficiaries referred to them by the Ombudsman. The
Ombudsman operational design assumes that 1-800-MEDICARE will refer
callers to appropriate sources, including SHIPs, for resolution of
complaints and appeals and, when necessary, refer them directly to the
Ombudsman as a last resort.
Comment: We received two comments that strongly recommended that we
clarify the SHIPs mandate to ensure that they address the needs of
individuals with disabilities, including non-elderly individuals.
Response: Section 4360 of the Omnibus Budget Reconciliation Act
(OBRA) 1990, which created SHIP, requires that SHIPs provide
information, counseling and assistance to Medicare eligible
beneficiaries, including beneficiaries with disabilities. All CMS SHIP
grant announcements expressly reference beneficiaries with disabilities
as intended recipients of SHIP services. In addition, we provide
training and information on the special needs and issues related to
this population. We agree with the commenters and will clarify the SHIP
mandate through the methods described here to address this need.
[[Page 4221]]
Comment: One commenter suggested that we partner with and fund
community-based disability organizations to conduct outreach,
information, and referral activities on the new Part D benefit.
Response: While we agree to partner with these organizations in
these activities, funding these groups are subject to available funds
in our budget.
Comment: One commenter was concerned about beneficiaries being
inundated with marketing and outreach materials. Since many
beneficiaries will need counseling on plan selection, this commenter
asked for clarification regarding whether counseling will be available,
what the States' role will be, and whether there will be Federal
financial participation available for such costs.
Response: States that had SPAPs on October 1, 2003 will have
Federal assistance available to them through the transitional grant
program authorized under section 1860D-23(d) of the Act. These States
will use the transitional grant funds to educate SPAP enrollees about
the plans that are available to them under part D, as well as provide
technical assistance, phone support, counseling, and other activities
the SPAP believes will promote the effective coordination of enrollment
in Part D. States that do not have a SPAP operational as of October 1,
2003 will not have these transitional funds available to them.
In addition, we will continue to provide grants to the States
through the SHIP. SHIP is a national program that offers one-on-one
counseling and assistance to people with Medicare and their families.
Through grants directed to States, SHIPs provide free counseling and
assistance via telephone and face-to-face interactive sessions, public
education presentations and programs, and media activities. We expect
SHIP counseling to be an important source of information for
beneficiaries about Part D.
Comment: One commenter was concerned that the targeted and hands-on
outreach, education and decision support and enrollment services,
particularly outreach to lower income, rural and disabled beneficiaries
is not adequate.
Response: Through the REACH campaign, we plan to broaden local
partner networks in order to provide training, information and planning
support to provide outreach and assistance to these populations.
Through a broad network of support from community-based organizations
as well as national stakeholders and partners, considerable effort will
be made to reach those beneficiaries who do not have access to the
Internet or who are uncomfortable calling 1-800-MEDICARE.
Comment: One commenter stated that we should consider preparing
educational materials that would help pharmacists understand the
benefits and other material that they can use to educate beneficiaries.
Response: We are working with our provider education staff to
develop materials for all providers, including pharmacists, for
educational use.
10. Approval of Marketing Materials and Enrollment Forms (Sec. 423.50)
Section 1860D-1(b)(1)(B)(vi) of the Act directs us to use rules
similar to those established under section 1851 of the Act to review
PDPs' marketing materials and application forms.
In the proposed rule, we generally replicated the marketing
provisions established under Sec. 422.80 for MA plans as appropriate
for PDPs. Therefore, we proposed at Sec. 423.50(a) guidance for our
review of marketing materials, definition of marketing materials,
deemed approval, and standards for PDP marketing. We do recognize that
the differences between PDPs and MA plans will require different
marketing requirements and we requested comments on this issue. We have
drafted the final rule to apply the marketing requirements to all Part
D sponsors, although we may waive the Part D provisions in deference to
similar MA, PACE and cost plan requirements.
We also proposed to add Sec. 423.50(a)(3) in order to streamline
the marketing review process for all PDP sponsors for those materials
which pose the lowest risk of confusing or misleading beneficiaries.
This aspect of the File and Use program allows the PDP sponsor, prior
to distribution, to submit and certify that for certain types of
marketing materials it followed all applicable marketing guidelines, or
for certain other marketing materials that it used, without
modification, proposed model language as specified by CMS.
Except as otherwise provided below, the final rule adopts the
marketing rules set forth in Sec. 423.50 of the proposed rule.
Although the following area generally applies to Fallback plans,
subpart Q specifically addresses issues related Fallback plans.
In addition to marketing materials and enrollment forms, comments
provided the opportunity to respond to enrollment issues related to
SPAPs, pharmacist and physician marketing to beneficiaries, and
organizations marketing additional products in conjunction with PDP
services.
Comment: We received several comments on types and quantity of
information that should be disseminated to beneficiaries. Many
commenters suggested that specific formulary information needs to be
provided including specific drugs (top 25-50), pricing and premium
information, benefit structure, pharmacy networks, plan availability by
region, medication management services offered (and who is eligible for
them), appeals and exception process and information on plan
performance. Most agreed that this information should be mailed, as
well as provided on the Internet and that comparison tables with this
information for all plans in a geographic region should be provided so
that beneficiaries can compare plans side-by-side. One commenter was
concerned that beneficiaries would be overwhelmed with materials and
expressed concern about the potential for adverse selection. It was
suggested that strict and detailed regulations on marketing be issued
to protect beneficiaries. One commenter suggested that we need more
detail in the final rule around patient education.
Response: We agree with the commenters that beneficiaries will need
information on the Part D plans available in their areas. Our goals in
providing information has always been to ensure that beneficiaries have
access to timely, accurate and reliable information that helps them
make informed health care decisions. Our education and outreach efforts
related to Part D are no exception. We will employ multiple tactics,
including publications, direct mailings, the Internet
(http://www.medicare.gov), toll-free telephone numbers, and localized
grassroots partnerships to help beneficiaries access the level of
detailed information that they want and need to make their best choice
among Part D plans. Our tiered communications approach recognizes that
different beneficiaries have varying information needs and what might
be an overwhelming level of detail to some individuals may only meet
the baseline needs of another. By using multiple, integrated education
and outreach approaches and thoroughly market testing our products and
messages during development, we are working to strike the best balance
of providing the right information at the right time. In addition, we
are committed to making sure plans provide clear, accurate information
on covered benefits, including formulary, pharmacy networks, and costs.
We intend to require such information in guidance rather than
specifying the full range of materials in the regulations so that we
[[Page 4222]]
can modify our requirements in a timely manner to meet beneficiary
needs.
Comment: We received several comments regarding the use of various
marketing vehicles to promote PDPs. Several of the commenters supported
the distribution of information through websites, 800 numbers, written
communications and telemarketing. One commenter stated that marketing
should be limited to mail contacts only due to concerns regarding
fraud. One commenter stated that the restrictions on marketing need to
be expanded due to the potential for fraud. Many commenters opposed
telemarketing and one was explicitly against email as well.
Response: Section Sec. 1860(D)(1)(b) of the Act allows for similar
marketing rules for the drug benefit as those for MA. We intend to
follow this guidance and promote marketing guidelines that are in line
with those under the MA program. The MA program supports the use of
websites, 800 numbers, mailings, email and telemarketing for plan
marketing. By allowing plans multiple routes for marketing, we believe
that greater numbers of beneficiaries will be reached and thus enrolled
in drug benefit plans. We believe this is an important goal given the
penalty for late enrollment in Part D. We understand that this is
contrary to what we allowed in the drug discount programs. We did not
allow the drug discount card programs to participate in telemarketing
practices because many of the drug card sponsors were stand alone
start-up companies that did not have a previous history of doing
business. We expect that the PDP sponsors will have previous experience
administering drug plans, insurance or other lines of similar business,
with established reputations, much like MA plans.
Marketing guidelines are in the process of being established, and
these will set forth in greater detail what will be expected of the
plans. PDP sponsors may be barred from engaging in certain practices if
abuses occur. In addition, PDPs will be prohibited from requesting
beneficiary identification numbers over the telephone or via email as
related to marketing activities.
Comment: One commenter stated that the States should be able to
steer its SPAP enrollees toward the most appropriate plan.
Response: Section 1860D-23(b)(2) of the Act defines an SPAP as a
State program which, in determining eligibility and the amount of
assistance to a Part D eligible individual under the program, provides
assistance to such individuals in all Part D plans and does not
discriminate based upon the Part D plan in which the individual is
enrolled. We further interpreted that provision in the preamble of the
proposed regulation such that a SPAP may not designate a preferred PDP,
even if the State allows beneficiaries to choose a non-preferred plan
and provides for benefits equivalent to that which it also provides for
the preferred plan (referred to as wrap-around benefits). We believe
that, regardless of whether the SPAP is authorized under State law to
make enrollment decisions on behalf of the beneficiary, we interpret
using that authority to steer beneficiaries to a preferred PDP or MA-PD
plan would be interpreted to violate the non-discrimination provision
under section 1860D-23(b)(2) of the Act.
Section 1860D-23(d) of the Act provides for grants to SPAPs, in
existence as of October 1, 2003, which were awarded in September of
2004 for fiscal year 2005, for the purpose of educating their members
about options to access Medicare drug benefit coverage and about
comparing options so they can choose the best value to them. We will
reach out to SPAPs with information to help people with Medicare
understand their drug plan options. We will also assist SPAPs in
adapting this information to ensure that their members understand the
way that the new Part D plans coordinate with their SPAP benefit and
supporting their members in making informed decisions about drug
benefit plan options. Outreach to SPAPs would also include instruction
on the educational/outreach/assistance activities SPAPs could pursue
while not discriminating against Part D plans.
SPAPs cannot discriminate amongst plans; however, they may provide
beneficiaries with comparable education on all of the available Part D
plans (PDPs, MA-PD plans, and PACE and cost-based HMO or CMPs offering
qualified prescription drug coverage) in terms of the following: which
plans have lower premiums after application of any uniform SPAP premium
subsidy; which plans offer formularies that cover the drugs utilized by
the beneficiaries so that beneficiaries can continue to use the same
drugs; which plans offer the drugs used by the beneficiary at the most
favorable combination of deductibles, coinsurance/co-pays, and
negotiated prices; which plans use the same network pharmacies as the
SPAP so that beneficiaries can continue to use the same pharmacy; and
which plans (if any) have ID cards that include an emblem or symbol
indicating its coordination with the SPAP to facilitate secondary
payment at the point of service.
In addition, SPAPs are prohibited from recommending Part D plans
based on their financial interest in minimizing their cost of providing
coverage that supplements (wraps-around) their members Part D benefits.
They are required to mirror our process auto-enrolling full-benefit
dual eligible individuals among PDPs on a random basis in the event
that members do not actively select a Part D plan during their IEP or
after enroll in the SPAP.
Part D plans benefit coordination requirements include establishing
procedures to share information with SPAPs on enrollment files, the
processing and payment of claims, claims reconciliation reports and
whether the beneficiary has satisfied the out-of-pocked limit. Part D
plans are encouraged to work with all SPAPs to co-brand the Part D
benefits by providing (in its electronic claim response to the
pharmacy) information on payment of premiums and coverage, and whether
claims should be sent to an SPAP for processing. Plans should also
consider including the SPAPs' benefits in marketing and educational
materials to beneficiaries, which includes SPAP benefit information,
eligibility criteria, order of party payment, and a phone number for
SPAP enrollment and claims payment information.
Comment: Two commenters were concerned that SPAP beneficiaries will
be confused by materials and decline enrollment if premiums,
deductibles and coverage gaps are discussed since SPAP participants
were never required to pay these amounts. It was also stated that
marketing materials for this population should include coordination of
benefit (COB) information.
Response: We expect that SPAPS will provide information to
beneficiaries on their drug plan choices in their States. We expect
that plans will work cooperatively with SPAPs to co-brand materials,
when appropriate, to ensure that beneficiaries are provided with
comprehensive, appropriate, coordinated information that will
facilitate education and understanding of their benefits. Requirements
for coordination of benefits with other providers of prescription drug
coverage are described under Sec. 423.464 (e). We expect Part D plans
to work with SPAPs on coordination of benefit activities to ensure that
beneficiaries are provided seamless care that is easily understandable.
Comment: We received multiple comments regarding the specific
requirements for marketing materials. Many commenters agreed that
marketing materials should be available in Spanish and in other
languages that
[[Page 4223]]
are in the plan's service area. Two commenters stated that marketing
materials should be developed at an appropriate health literacy level.
Two commenters stated that the information will need to be adapted for
the blind/low vision, those with cognitive disabilities, in Braille,
large print and on audio or computer disks. It was also stated that
there should be a requirement that the Internet site be accessible for
the visually impaired and that interpreters and alternative
communication methods should be mandated. Another commenter stated that
a subpart should be devoted to notice requirements.
Response: We agree that there are special needs of beneficiaries
that will need to be provided for. The regulation currently dictates
that marketing materials need to be available in low-literacy formats.
While we do not require materials to be available in other languages,
it is highly encouraged. In addition, basic enrollee information should
be developed to accommodate the visually impaired. Call centers must be
able to accommodate non-English speaking/reading beneficiaries. Plan
sponsors should have appropriate individuals or translation services
available to call center personnel to answer questions that
beneficiaries may have concerning aspects of the drug benefit. We are
working on developing guidance shortly following publication of the
final rule that is similar to the MA requirements to ensure appropriate
information is available to beneficiaries.
Comment: Several commenters stated that marketing materials should
be consistent with other Medicare programs.
Response: We are currently developing additional marketing
guidelines and expect them to be similar to other Medicare programs
(for example, the MA and the Medicare-approved prescription drug
discount card programs), to the extent possible, in order to reduce the
administrative burden for plans that participate in these programs.
Comment: We received many conflicting comments regarding whether
providers (pharmacists and physicians) should be allowed to market to
beneficiaries. This includes the display of materials from Part D
sponsors as well as verbally steering beneficiaries to particular
plans. Several commenters were in support of pharmacies marketing MA/PD
and PDPs; some of these commenters stated that equal attention should
be provided to all plans in the particular area. In addition, some
commenters specifically mentioned that they were in support of
physicians marketing Part D plans.
Other commenters were against marketing of Part D plans in the
pharmacy setting; three specifically mentioned the prohibition of
physicians from marketing to beneficiaries. Most stated that the
reasons for their positions were that physicians or pharmacists could
steer a beneficiary to inappropriate Part D plans.
Response: Both the MA and the Medicare-approved prescription drug
discount card programs allow some provider marketing to occur. Our
position is that it is appropriate to allow providers and pharmacies to
market to beneficiaries. This marketing provides beneficiaries with
access to information about the options available to them under Part D
that they may not have received through other sources because
beneficiaries often look to their health care professionals to provide
them with complete information regarding their health care choices.
Therefore, we believe that providers and pharmacies should provide
prospective enrollees with information on the full range of options
available to them under Part D. This process is similar to the process
followed for the discount drug card program, where pharmacies may
provide information on where beneficiaries may get complete information
regarding all the Medicare-approved discount cards available in the
region in their service area. We would require Part D sponsors that
want their network pharmacies to provide marketing materials to
prospective enrollees to include in their contracts language requiring
the pharmacies Part D eligible individuals with information on all Part
D options available in the service area. This requirement would be
specified in the further guidance issued by CMS. Any remuneration
offered to providers in exchange for providing to patients information
about particular Part D plans must comply with applicable Federal and
State laws on fraud and abuse.
Comment: Two commenters stated that Part D sponsors should be
prohibited from using Medicare discount card enrollee and applicant
information to provide leads for marketing their Part D plans.
Response: We acknowledge the importance of beneficiary privacy, and
the marketing limitations that drug cards operate in accordance with
section 1860D-31(h)(7) of the Act. The drug card provisions under
section 1860D-31 of the Act contemplate a transition from the drug card
program to Part D, and we are considering what will be the specific
drug card responsibilities of drug card sponsors during transition.
From that understanding we will assess whether PDP sponsors currently
offering a drug card may use of beneficiary drug card information to
market their Part D plans and we will provide further guidance to the
drug card sponsors and Part D sponsors at a later time. We note,
however, that the HIPAA Privacy Rules may limit the ability of drug
card sponsors to disclose their enrollees' information to un-affiliated
Part D sponsors.
Comment: One commenter suggested that the File & Use program should
be delayed one year until we have more experience with evaluating the
practice of the PDPs, and that the term ``performance requirements''
needs to be defined.
Response: We will define the eligibility and performance
requirements associated with the File & Use program in further
guidance.
Comment: There was concern over the amount of time that was stated
was necessary for a review of PDP and MA-PD marketing materials. Some
suggestions included decreasing the time of this review from 45 days to
30 days, and instituting a 10-day review period for resubmitted
materials. In addition, if unaltered model materials were used, the
review should be limited to 10 days.
Response: We agree that that timelines for reviewing marketing
materials should be shortened. However, we intend on maintaining the
proposed timelines for Part D marketing materials as defined in the
statute. We will work to develop a review process that is as efficient
as possible. We will develop a range of model materials for Part D
sponsors.
Comment: We also received a comment that the amount of materials
that must be individually approved should be limited. There was also
concern that we may not have enough staff to review the materials and
that the process needs to be open, fair and constructive.
Response: We will develop a range of model materials for Part D
sponsors to choose from to improve efficiency of the marketing review
process. Materials that utilize ``model language'', without
modification, are subject to a streamlined review process. We will work
to develop a review process that is as efficient and effective as
possible utilizing standardized criteria to review the materials.
Comment: Two commenters stated that it is unacceptable that
marketing materials are deemed approved if we fail to approve them
within the time
[[Page 4224]]
period and materials should be reviewed multiple times for multiple
regions.
Response: It is a statutory requirement that we approve marketing
materials within 45 days or that they are then deemed approved. In
developing sub regulatory marketing guidance and processes, we will
work to ensure that our reviews are completed within the statutory
timeframe.
Comment: Commenters stated that guidelines for CMS review under
Sec. 423.5(c)(i),(ii), and (iii) of the proposed rule need to be more
specific. These sections lay out the information that Part D plans need
to provide to beneficiaries.
Response: We will provide greater detail in the sub regulatory
guidance in order to facilitate any necessary future changes that would
need to be made.
Comment: Many commenters gave input as to whether additional
products, such as financial services, should be marketed to Medicare
beneficiaries in conjunction with the Part D benefit. Several of the
organizations expressed their concerns over the fact that beneficiaries
may be confused with receiving additional information for other
products and services in conjunction with information about the Part D
benefit. The major concern is that beneficiaries would choose not to
participate in Part D because they did not like some of the other
products or that they may mistakenly believe that we have approved
these products. One commenter suggested that individuals must actively
agree to receive marketing materials other than enrollment materials.
Some commenters suggested that financial institutions should not be
encouraged to participate as PDPs, since the potential for abuse, as in
selection of healthier beneficiaries into plans and avoidance of
financial services to less healthy individuals, is enormous.
Some health plans commented that they are in favor of allowing PDP
sponsors to market additional health-related and non-health-related
products to beneficiaries. These products could be provided for an
additional fee or at no additional cost to the beneficiary. The belief
is that the additional tools could help beneficiaries manage their
expenses and financial securities. One organization also stated that if
PDP sponsors are permitted to provide these additional products, than
MA-PD plans should be allowed to similarly provide these additional
products.
Response: We do not want to restrict beneficiaries from receiving
materials about of health-related and non-health-related services that
may be of benefit to them in managing their health or payments for
health care. All organizations that are qualified to be a Part D
sponsor are encouraged to participate in providing services under Part
D. In situations where plans want to use or disclose protected health
information (PHI), for purposes of marketing these other products or
services, for example beneficiary enrollment information, Part D plans
must comply with the HIPAA Privacy Rule and obtain a written
authorization from the beneficiary prior to using the beneficiary's PHI
to market non-health-related products and services. In other cases
where Part D plans implement general marketing mailings that do not use
beneficiary PHI, we would not object to plans providing such
information to beneficiaries as long as the information is not
contingent upon PHI to do so. For example, a plan may obtain a general
mailing list from a non-related marketing vendor to mail materials to
all individuals over age 65 in a geographic area to promote its
products. The use of beneficiary names and addresses obtained from a
plan and used for mailings to beneficiaries only, would presumably use
PHI. Consequently, plans could not market non-health-related products
through mailings using beneficiary information absent authorization.
Comment: One commenter recommended that any Part D sponsor offering
other health coverage to its Part D plan enrollees be required to
provide anti-duplication notices like those that are required under the
National Association of Insurance Commissioners (NAIC) model regulation
for Medigap policies. The purpose of these anti-duplication notices is
to advise Medicare beneficiaries as to whether other non-Medigap types
of coverage being offered to them might duplicate coverage they already
have under Medicare.
Response: The disclosure statements that are required under the
NAIC model regulation for Medigap policies were adopted by the NAIC
pursuant to anti-duplication provisions contained in section 171(d) of
the Social Security Act Amendments of 1994 (SSAA'94-Pub. L. 103-432)
that amended section 1882(d)(3)(A) of the Act. These statements apply
to all issuers of health insurance coverage that is offered to Medicare
beneficiaries that is neither a Medigap policy nor a type of coverage
that is listed as exempt from this requirement in a Federal Register
notice that CMS [then HCFA] published on June 12, 1995. Section 171(d)
required CMS to either publish the disclosure statements developed by
the NAIC or publish its own. The FR notice through which CMS accepted
the 10 separate disclosure statements developed by the NAIC for the
various types of coverage commonly offered to Medicare beneficiaries
contained a list of types of policies not requiring disclosure
statements (See 60 FR 30880).
Among the types of coverage not requiring the use of a disclosure
statement were managed care organizations with Medicare contracts under
section 1876 of the Act. The notice went on to explain that these types
of policies are exempt because ``these plans do not `duplicate'
Medicare benefits; rather their purpose is to actually provide all
covered Medicare benefits directly to enrolled beneficiaries.'' In
1995, cost and risk managed care organizations with contracts under
section 1876 of the Act were the primary alternative to fee-for-service
Medicare. Medicare+Choice plans were authorized by the Balanced Budget
Act (BBA) in 1997, and the program has now been renamed Medicare
Advantage by MMA. MMA also provided for private prescription drug plans
(PDPs) to contract to deliver Medicare prescription drug benefits under
Medicare Part D. Because Part D plans will actually provide all covered
Medicare drug benefits directly to enrolled beneficiaries, we wish to
clarify that these entities will not have to provide anti-duplication
notices for their provision of coverage pursuant to their Medicare Part
D contracts. However, if Part D plans choose to market to their
enrollees other (non-Medigap) health insurance products that are not
part of their contracts under Part D, these other types of health
insurance products will have to bear the disclosure statements required
by section 1882(d)(3)(A) (vi) of the Act and the NAIC model regulation
unless the other coverage comes within one of the specified exemptions.
11. Information Provided to PDP sponsors and MA Organizations
Section 1860D-1(b)(4)(A) of the Act authorizes us to provide
information about Part D eligible individuals to PDP sponsors and MA
organizations to facilitate the marketing and enrollment of
beneficiaries in their PDP and MA-PD plans. This information is
intended to ensure participation in the Part D program, as well as to
reduce costs to those plans.
In the final rule, it is not necessary to provide regulatory text
implementing this provision; however, we intend to provide additional
guidance shortly following publication of this rule, as explained
below.
[[Page 4225]]
Comment: We received several comments on this MMA provision.
Several of the commenters supported the provision of such information
to organizations, with a few offering to work with CMS to develop
guidance and ensure that the appropriate beneficiary protections are in
place. Many who supported this initiative believed that, at a minimum,
the name, address, and telephone number of the individual should be
provided. Another commenter believed that the statute permits
organizations to contact beneficiaries through written, electronic, or
phone communication. Another commenter stated that the individual's
dual eligible or low-income subsidy status should also be provided. The
commenter also noted that we should provide the information to
organizations upon request, as opposed to being limited to only
receiving such information at certain times of the year. The commenter
also believed that the statute would permit PDP sponsors to obtain
marketing information on low-income and dual eligible individuals
directly from States and SPAPs.
Several commenters also opposed such information being provided to
organizations. One commenter believed that providing such information
to Part D competitors would generate more problems and ``incite'' more
negative beneficiary reaction that would outweigh any value in
enhancing beneficiary outreach. Other commenters were concerned that
such information would be used to ``cherry pick'' healthier and less
expensive beneficiaries. Several commenters noted that if we were to
provide such information to organizations, such information should be
limited to the minimum amount necessary. They stated that certain
information, such as health or financial information or telephone
numbers should not be provided. Further, beneficiaries should be given
the option to request that we not share their information with plans.
Several commenters did not believe that PDPs or MA-PD plans should be
able to use the information for telemarketing purposes. Another
commenter indicated that we should only disclose information to the
plan if the plan's marketing material contains formulary and drug
pricing information and is accompanied by an application form.
Response: We decline to provide specifics on the provision of this
information at this time but reserves the right to provide this
information to plans in the future. We will develop further guidance on
this issue shortly after publication of this rule.
12. Procedures to Determine and Document Creditable Status of
Prescription Drug Coverage (Sec. 423.56)
Section 1860D-13(b)(6) of the Act identifies certain entities,
which we describe in our proposed rule that must disclose whether the
prescription drug coverage that they provide to their members who are
Part D eligible is creditable prescription drug coverage.
Sections 1860D-13(b)(4) (A) through (G) of the Act lists seven
forms of potential creditable prescription drug coverage: Coverage
under a PDP or under an MA-PD plan; Medicaid; a group health plan
(including coverage provided by a Federal or a nonfederal government
plan and by a church plan for its employees); a State pharmaceutical
assistance program; veterans' coverage of prescription drugs,
prescription drug coverage under a Medigap policy; and military
coverage (including Tricare). Many of these terms are defined elsewhere
in Federal regulations; some of them are under the jurisdiction of
other Federal agencies.
In addition to the forms of creditable coverage identified in
sections 1860D-13(b)(4) (A)-(G) of the Act, section 1860D-13(b)(4)(H)
of the Act provides the Secretary with the flexibility to identify
``other coverage'' that could be considered to be creditable
prescription drug coverage. We proposed, at Sec. 423.56, to expand the
list of types of creditable prescription drug coverage.
As discussed in Sec. 423.46 of the proposed rule, upon becoming
eligible for Part D, beneficiaries must decide whether to enroll in
Part D, or forego that opportunity and face a possible financial
penalty should they later decide to enroll. Beneficiaries who decide
not to enroll in Part D because they have creditable prescription drug
coverage will not face such a penalty if they later decide to enroll in
Part D.
According to section 1860D-13(b)(5) of the Act, an enrollee who
would otherwise be subject to a late enrollment penalty may avoid the
penalty if his or her previous coverage met the standards of
``creditable prescription drug coverage''. Under section 1860D-13(b)(5)
of the Act, previous coverage will only meet those standards ``if the
coverage is determined (in a manner specified by the Secretary) to
provide coverage of the cost of prescription drugs the actuarial value
of which (as defined by the Secretary) to the individual equals or
exceeds the actuarial value of standard prescription drug coverage.''
In the proposed rule, we interpreted ``to the individual'' in this
case as being to the average individual under the plan, as opposed to
the sponsor of the plan. For purposes of determining creditable
coverage, we proposed a ``gross'' test: will the expected plan payout
on average be at least equal to the expected plan payout under the
standard benefit? We also proposed at Sec. 423.56(c) that any entity
seeking to offer coverage of the type described in Sec. 423.56 must
attest to the actuarial equivalence (or non-equivalence) of its
prescription drug coverage in their notice to Medicare beneficiaries
and in a submission to CMS, and must maintain documentation of the
actuarial analysis and assumptions supporting the attestation.
In coordination with the provisions regarding the late enrollment
penalty, we proposed at Sec. 423.56 to establish a process under which
these entities will disclose the creditable status of their
prescription drug coverage to us and to each part D eligible
beneficiary enrolled in such coverage.
Section 1860D-13(b)(6)(C) of the Act, implemented at Sec.
423.56(g) of the proposed rule, provides that an individual who was not
adequately informed that his or her prescription drug coverage was not
creditable prescription drug coverage may apply to CMS to have such
coverage treated as creditable prescription drug coverage for purposes
of not having the late penalty imposed.
Comment: One commenter stated that Medicaid should not be
considered creditable prescription drug coverage, for the purposes of
Part D, because no Medicaid benefit for Part D covered prescription
drugs is available to Part D eligible beneficiaries.
Response: All entities listed under Sec. 423.56(b), except PDPs
and MA-PDs under (b)(1) and PACE plans and cost-based HMOs and CMPs
offering qualified prescription drug coverage, must provide notice to
both CMS and its members whether the prescription drug coverage
provided is or is not creditable. The purpose of the notice of
creditable coverage is to ensure that individuals are aware of whether
such coverage is creditable prescription drug coverage and its
implication to the late enrollment penalty.
Medicaid is prohibited from providing Part D drugs to full-benefit
dual eligible individuals. However, since there may be other
individuals who are not receiving the full range of benefits from
Medicaid but who will continue to receive some drug coverage from the
State, these individuals must also receive this notice providing status
of the coverage.
Comment: One commenter requested that we include SPAP in the
definition
[[Page 4226]]
of types of coverage that may be creditable.
Response: The proposed rule at Sec. 423.56(b)(4) includes SPAPs as
potentially creditable. Section 1860D-13(b)(4)(D) of the Act specifies
these programs, as described in section 1860D-23(b) of the Act, as
such. To ensure this concept is clear, we will revise Sec.
423.56(b)(4) to include the acronym ``SPAP.''
Comment: We received a comment indicating that the value of
prescription drug coverage under PACE will likely equal or exceed the
actuarial value of Part D standard prescription drug coverage as a
result of existing requirements in sections Sec. 460.90 and Sec.
460.92 of the PACE regulation. The commenter recommended incorporating
PACE into the CMS definition of creditable prescription drug coverage
found in Sec. 423.56(a).
Response: We agree with the commenter and have incorporated PACE
into the definition of potentially creditable prescription drug
coverage found in Sec. 423.56(b). Additional discussion of the
applicability to Part D benefits and requirements to PACE are outlined
in subpart T of the final rule.
Comment: A few commenters inquired about the actuarial equivalence
test that the entities listed will be required to meet, since the
actuarial equivalence reference in Sec. 423.265 refers to bid
submissions. Commenters supported both the concept of ``gross'' test
and an ``aggregate test'' for calculation of the actuarial equivalence
for plans, including group health plans which offer several benefit
packages to determine if the prescription drug coverage is creditable.
Response: The basic actuarial equivalence value test for the
determination of creditable coverage of alternative coverage is
determined by calculating whether the expected plan payout on average
will be at least equal to the expected plan payout under defined
prescription drug coverage (gross test). We believe Section 1860D-
22(a)(2) of the Act is subject to two reasonable interpretations of
calculating the creditable coverage test (gross test). Under the first
interpretation, the actuarial equivalence standard for determining
creditable coverage would be applied to the alternative coverage as a
whole, and under the second interpretation the actuarial standard would
be applied for each benefit option (including separate cost-sharing
arrangements) within a single group health plan. Whereas our proposed
rule required plans to apply the actuarial equivalence standard at the
aggregate level, for the final rule we instead require plans to apply
the actuarial equivalence standard to each benefit option within its
plan.
Our rationale for revising the actuarial equivalence test is to
ensure that beneficiaries are adequately informed that their coverage
is or is not creditable prescription drug coverage. A sponsor may offer
many different benefit options to beneficiaries. One of those benefit
options may not pass the gross test but be included in an overall (or
``aggregate'') text. As a result, this would leave beneficiaries in
certain benefit options with a determination that their coverage is
creditable, when in actuality it is not. For example, a sponsor has a
group in which richer benefits are offered, compared to another group
that has more limited benefits. If the sponsor would aggregate the two
benefits together, the lower benefit will end up as ``creditable'' when
the benefit packages are averaged together.
We will issue guidance on the aspects of actuarial equivalence
shortly following publication of the final rule.
Comment: One commenter asked if any coverage that is less than full
pharmacy benefits could be considered creditable prescription drug
coverage, such as coverage for maintenance or coverage of specific
disease-only drugs.
Response: We believe that the definition of creditable prescription
drug coverage would prohibit us from concluding that such coverage is
creditable. To be creditable prescription drug coverage, the coverage
must equal or exceed the actuarial value of defined standard
prescription drug coverage, as we will define in guidance referenced in
the previous response. It is likely that coverage of a very limited
scope such as the commenter refers will not likely meet our actuarial
equivalence test.
Comment: In response to our request for comments on other forms of
coverage that may potentially be considered creditable, two commenters
requested that we cost-based HMOs and CMPs authorized under section
1876 of the Act as potential providers of creditable prescription drug
coverage. Both commenters also suggest that we include a provision
allowing CMS to designate other types of coverage as potentially
creditable prescription drug coverage in the future without requiring
such an addition be accomplished through the rule making process.
Another commenter suggested that coverage provided by State high risk
insurance pools also be included in the types of coverage that may be
creditable.
Response: We agree with these suggestions and have revised Sec.
423.56(b) to include cost-based HMOs and CMPs and coverage offered by
State high risk pools, as defined under the HIPAA regulations at Sec.
146.113(a)(1)(vii), as well as a provision permitting CMS to recognize
other types of coverage as potentially creditable prescription drug
coverage, which we would do so in separate guidance as determined
necessary.
Comment: Several commenters supported permitting the disclosure of
the creditable prescription drug status of coverage through the
inclusion of this information in already existing beneficiary
materials, such as Summary Plan Descriptions (SPDs), or annual notices.
One commenter suggested that because beneficiaries are already familiar
with these documents, they provide a more recognizable and familiar
avenue for this important information. On the other hand, several
commenters supported requiring all notices of the creditable status of
coverage to ``stand alone;'' that is; to be provided separately in a
specific notice to each individual. Some commenters expressed concern
that if this disclosure were not highlighted in a separate notice, the
important message could go unnoticed and inadvertently subject an
individual to the late enrollment penalty. Another commenter suggested
that all notices be linked to ERISA disclosure documents (that is,
SPDs), and to HIPAA or COBRA required notices. One commenter suggested
that notice of creditable status could be incorporated into already
existing beneficiary information materials, while notice of non-
creditable status should stand alone. Lastly, a commenter requested
that we specify the elements that would be required to be included in
these notices.
Response: We specifically requested comment on the disclosure of
creditable prescription drug notice requirements and appreciate the
feedback received. Based on the comments we received we believe that
linking the notice of creditable status to other required documents is
an acceptable vehicle provided it is conspicuous and includes standard
information elements. This approach appropriately recognizes the
importance and familiarity of materials that beneficiaries currently
receive regarding coverage they have. Further, we believe that it is
important to encourage compliance with the provision of these notices
by eliminating duplication and the undue burden associated with it. To
that end, we have revised Sec. 423.56(c) to allow notices of
creditable and non-creditable status to be provided in the same manner,
and will provide specific guidance following the publication of the
rule. This guidance will require that
[[Page 4227]]
a notice of creditable and non-creditable status be provided, at
minimum, prominently with other beneficiary information materials, and
will include model language for both types of notices.
We may specify different requirements for those entities identified
at Sec. 423.56(b) that are required to provide these notices, where
appropriate, to reduce beneficiary confusion and minimize
administrative burden. For example, as explained in our discussion of
Sec. 423.34 above, we intend to notify full benefit dual eligible
individuals that they are eligible for the low-income subsidy. This
notice will also inform individuals that Medicaid will no longer cover
those prescription drugs covered under Part D and that any additional
prescription drug coverage provided by Medicaid would not be creditable
coverage under Part D. Including this information in the same notice
will avoid duplication of effort and possible beneficiary confusion.
Comment: Several commenters felt that requiring an attestation by
group health plans of actuarial equivalence for creditable coverage
when the sponsor of such coverage elects not to enroll in the retiree
drug subsidy program under subpart R was an unnecessary cost and an
administrative burden. The commenters believed that for those employer
groups that offer prescription drug coverage to active employees who
might be Part D eligible individuals, such coverage should be assumed
to be ``creditable'' and should only have to provide notices to those
qualified retirees and dependents who are Part D eligible individuals.
The commenters also suggested that notices could be published in
summary plan descriptions, on employer website and via e-mail.
Response: Section 1860D-13(b)(6)(B) of the Act requires specific
entities that offer prescription drug coverage to provide notices to
all Part D eligible individuals enrolled in their plans regarding
whether such prescription drug coverage is creditable. This would
include sponsors (as defined under Sec. 423.880) not electing the
Retiree Drug Subsidy, as described in subpart R. A notice of creditable
or non-creditable coverage must be provided to active Medicare eligible
employees and Medicare eligible dependents so that a late enrollment
penalty will not be imposed when the beneficiary enrolls in Part D
coverage.
We will provide further guidance on a simplified method of
determining creditable coverage for those sponsors not electing the
retiree drug subsidy.
We will also provide guidance to sponsors on the form, manner, and
timing of such notice requirements, following publication of this final
rule. Notices may be provided, at minimum, prominently with other plan
participant information materials (for example, summary plan
descriptions, or HIPAA notices) that the sponsor is required to provide
as long as it is conspicuous and includes standard information elements
as determined in our guidance. This approach appropriately recognizes
the importance and familiarity of materials that beneficiaries
currently receive regarding coverage they have.
Comment: Many commenters responded to our request for comments on
the timing of the delivery of creditable coverage status notices to
Part D eligible individuals. Several of these commenters suggested that
the initial notice should be required to be delivered prior to the
commencement of the AEP which begins on November 15, 2005. One
commenter suggested that notices also be issued at least 60 days prior
to the effective date of any change to current coverage. Another
commenter suggested that entities required to deliver these notices
should do so within 30 to 45 days of the end of Part D enrollment
periods.
Response: We appreciate the feedback we received regarding the
timing of notices to disclose creditable prescription drug coverage. We
agree that, in order to ensure beneficiaries are making informed
choices regarding enrollment in Part D, notice must be provided to all
Part D eligible individuals each year prior to the commencement of the
AEP, which begins on November 15\th\. We also believe there are three
other key times when notice must be provided: (1) prior to the
commencement of the individual's initial enrollment period in Part D;
(2) prior to the effective date of enrollment in such coverage or any
change in creditable status of that coverage; and, (3) upon request by
the beneficiary. We will revise Sec. 423.56(f) to require that notice
be provided, at minimum, at these 4 times.
Comment: One commenter requested that we clarify the meaning of the
words in Sec. 423.56(b) of the proposed rule ``with the exception of
PDPs and MA-PD plans.'' for the duty to furnish notices of creditable
coverage to beneficiaries. The commenter also requested clarification
of the duty of Cost plans offered under section 1876 of the Act that
provide qualified prescription drug coverage to furnish such notice.
Lastly, the commenter asked us to clarify if the provision at Sec.
423.56(d) of the proposed rule regarding the disclosure of creditable
status to CMS applies to any entity that is exempted from notice
requirements according to Sec. 423.56(b).
Response: It is our view that the practical need for disclosure of
creditable status notices is directly related to a beneficiary's
understanding of their options related to enrolling in Part D and any
consequences should they choose not to, such as the late enrollment
penalty. It also provides the beneficiary with information about how
their coverage compares to what is available under a Part D plan.
Beneficiaries enrolled in a PDP, MA-PD plan, PACE plan or cost plan
that provides qualified prescription drug coverage are enrolled in Part
D, and therefore not subject to any consequence of choosing not to
enroll. Including these types of coverage in the list of coverage that
may be considered creditable ensures that at no time could a
beneficiary who has maintained enrollment in a legitimate Part D plan
be subject to the late enrollment penalty for the same time period.
However, sending notice of creditable status seems superfluous since,
as these plans are Part D plans, the creditable status is automatic.
The statute at 1860D-13(b)(6)(B) of the Act exempts PDP sponsors
and MA organizations from providing notice of creditable coverage to
its members. Since sections 1860D-21(e) and (f) of the Act provide that
we treat cost-based HMO and CMPs and PACE organizations that elect to
provide qualified prescription drug coverage similar to MA-PD local
plans, such cost-based HMO and CMP and PACE organizations offering
qualified prescription drug coverage will also be excepted from this
notice requirement. We will revise the notice requirements under Sec.
423.56(c) to reflect that PACE plans and 1876 Cost plans offering
qualified prescription drug coverage as excepted entities from the
notice requirements under Sec. 423.56(c). We also note that PACE plans
and section 1876 of the Act cost plans that do not offer qualified
prescription drug coverage must provide notices, as required. To ensure
that Part D plan members understand their options, we will ensure that
an explanation of the late enrollment penalty and the concept of
creditable coverage are included in plan documents.
Similarly, a requirement for organizations that provide Part D
benefits to submit separate notice would be duplicative by their nature
as CMS approved Part D plans, they are creditable. We will revise Sec.
423.56(e) to clarify that all entities providing CMS-approved Part D
coverage do not have
[[Page 4228]]
to disclose creditable status of Part D coverage to us under this
paragraph.
Comment: One commenter suggests that we consider ways that entities
could provide the required notice of creditable status to beneficiaries
and CMS via electronic means.
Response: We recognize that most plan documents have been
historically provided to beneficiaries in hard-copy (that is, paper)
but know from the comments received from plan sponsors and business
advocates that participants are receiving plan information through
other electronic means, such as websites and e-mail. Most beneficiaries
are probably accustomed to receiving materials in one of these manners.
We feel that paper documents have better ensured that the beneficiary
receives and understands the information. In addition, paper documents
will provide beneficiaries a hard copy that they can present whenever
needed to show proof of creditable coverage. Since beneficiaries may
already be choosing to receive information electronically, we will
explore this option as we develop operational guidance for creditable
notice requirements.
As for entities notifying us of the creditable status of their
coverage, we will describe the form and manner in which entities
disclose this information to us in operational guidance and will
consider various options for entities to do so.
C. Voluntary Prescription Benefits and Beneficiary Protections
1. Overview and Definitions (Sec. 423.100)
Proposed subpart C of part 423 implemented sections 1860D-2, 1860D-
4(a), 1860D-4(b), 1860D-4(i), 1860D-4(k), 1860D 11(a), 1860D-21(a),
1860D-21(c)(3), and 1860D 21(d)(2) of the Act. This subpart set forth
requirements regarding--
Definitions for terms that are frequently used in this
subpart.
The benefits offered by Part D sponsors.
The establishment of prescription drug plan service areas.
Access standards with regard to covered Part D drugs.
Part D sponsor formularies.
Information dissemination by Part D sponsors.
Disclosure to beneficiaries of pricing information for
generic versions of covered Part D drugs.
Privacy, confidentiality, and accuracy of PDP sponsors'
beneficiary records.
Below we summarize the provisions of subpart C and respond to
public comments. (Please refer to the proposed rule (69 FR 46646) for a
detailed discussion of our proposals.)
a. Part D Drug
The definition of a covered Part D drug in Sec. 423.100 of our
proposed rule closely followed the statutory definition in section
1860D-2(e) of the Act. According to this definition, a covered Part D
drug was available only by prescription, approved by the Food and Drug
Administration (FDA), used and sold in the United States, and used for
a medically accepted indication (as defined in section 1927(k)(6) of
the Act). A covered Part D drug included prescription drugs, biological
products, insulin as described in specified paragraphs of section
1927(k) of the Act, and vaccines licensed under section 351 of the
Public Health Service Act. The definition also included ``medical
supplies associated with the injection of insulin (as defined in
regulations of the Secretary).'' We proposed to define those medical
supplies to include syringes, needles, alcohol swabs, and gauze.
In accordance with section 1860D-2(e)(2) of the Act, the definition
of a covered Part D drug specifically excluded drugs or classes of
drugs, or their medical uses, which may be excluded from coverage or
otherwise restricted under Medicaid under section 1927(d)(2) of the
Act, with the exception of smoking cessation agents. In accordance with
section 1927(d)(2) of the Act, the drugs or classes of drugs that may
currently be excluded or otherwise restricted under Medicaid include:
(1) agents when used for anorexia, weight loss, or weight gain; (2)
agents when used to promote fertility; (3) agents when used for
cosmetic purposes or hair growth; (4) agents when used for the
symptomatic relief of cough and colds; (5) prescription vitamins and
mineral products, except prenatal vitamins and fluoride preparations;
(6) nonprescription drugs; (7) outpatient drugs for which the
manufacturer seeks to require that associated tests or monitoring
services be purchased exclusively from the manufacturer or its designee
as a condition of sale; (8) barbiturates; and (9) benzodiazepines.
The definition of a covered Part D drug also excluded any drug for
which, as prescribed and dispensed or administered to an individual,
payment would be available under Parts A or B of Medicare for that
individual (even though a deductible may apply).
Except as otherwise provided below, the final rule adopts the
definition of ``covered Part D drug'' set forth in Sec. 423.100 of the
proposed rule.
Comment: Several commenters were confused about the distinction
between drugs that may be covered under Part D given the definition of
the term ``covered Part D drug'' in section 1860D-2(e) of the Act and
those drugs that are actually included on a Part D plan's formulary.
Response: In order to clarify when we are referring to a drug that
may be covered under Part D and one that not only is covered by Part D
but is also included on a particular Part D plan's formulary, we refer
to drugs that may be covered under Part D, consistent with the
definition of the term ``covered Part D drug'' in section 1860d-2(e) of
the Act, simply as ``Part D drugs.'' We use the term ``covered Part D
drug'' to refer to a drug that not only is a Part D drug, but that is
included in a Part D plan's formulary or treated (through a coverage
determination or appeal described in subpart M of this preamble) as
being included in a Part D plan's formulary, and is obtained at a
network pharmacy or at an out-of-network pharmacy in accordance with
Sec. 423.124 of our final rule. Both terms are defined in Sec.
423.100 of our final rule.
Comment: One commenter recommended that we consider expanding the
definition of ``medically accepted indication'' beyond the FDA-approved
indications to include uses in official compendia or research. Another
commenter was concerned that the definition of ``medically accepted
indication'' may allow Part D sponsors to limit their payments for use
of Part D drugs solely to FDA-approved indications even though clinical
standards allow for alternative uses. Another commenter was concerned
that pharmacists will be penalized for dispensing prescriptions that
are prescribed for an indication that is not a medically accepted
indication. This commenter indicated that pharmacists cannot be
expected to contact each physician for each prescription in question to
determine if the drug is being prescribed for a medically-accepted
indication.
Response: To qualify as a Part D drug, a drug or biological must be
used for a medically accepted indication, as defined under section
1927(k)(6) of the Act. This definition states that a medically accepted
indication means not only any use for a covered outpatient drug which
is FDA-approved, but also a use which is supported by one or more
citations included or approved for inclusion in any of the compendia
listed in section 1927(g)(1)(B)(i) of the Act-the American Hospital
Formulary Service Drug Information, United States
[[Page 4229]]
Pharmacopoeia-Drug Information, the DRUGDEX Information System, and
American Medical Association Drug Evaluations. We cannot extend the
meaning of ``medically accepted indication'' to cover uses in research,
as one commenter notes, since the definition of ``medically accepted
indication'' in section 1927(k)(6) of the Act does not include the
reference in section 1927(g)(1)(B)(ii) of the Act to peer-reviewed
medical literature. Thus, a ``medically accepted indication'' is
limited by statute to a use for a covered outpatient drug which is
approved by the FDA, or the use of which is supported by one or more
citations in the compendia listed above. It will be Part D plans'
responsibility to ensure that covered Part D drugs are prescribed for a
medically accepted indication; plans may, for example, rely on
utilization management policies and procedures (which we will review as
part of our comprehensive review of Part D plan benefits) to ensure
that drugs are prescribed and used for medically accepted indications.
We clarify that pharmacists will not be required to contact each
physician to verify whether a prescription is being used for other than
a medically accepted indication.
Comment: Some commenters recommended including coverage for all
EPA-recommended disposal methods and disposal solutions as part of the
definition of ``medical supplies associated with injection of
insulin''. The commenters noted that proper disposal of needles and
lancets are necessary to patient safety and important to public health.
Some commenters requested that the definition include lancets, blood
glucose test strips, glucometers, syringes, and needles. One commenter
suggested that gauze not be included.
Response: We are interpreting the term ``medical supplies
associated with the injection of insulin'' in section 1860D-2(e)(1)(B)
of the Act as comprising syringes, needles, alcohol swabs, gauze, and
insulin delivery devices not otherwise covered by Part B, such as
insulin pens, pen supplies, and needle-free syringes. Given that
section 1860D-2(e)(2)(B) of the Act excludes products covered by Part B
from the definition of a Part D drug, test strips and lancets, which
are covered under Part B, cannot be covered under Part D. While we
recognize the importance of needle disposal systems, we also do not
consider the systems to be directly associated with injection. Thus,
these devices fall outside of our interpretation of medical supplies
associated with the injection of insulin.
We note that it is our intention to narrowly construe further Part
D plan determinations of what constitutes ``medical supplies associated
with the injection of insulin'' in order to ensure that such
determinations are consistent with the examples we have provided, and
that they do not lead to an inappropriate expansion of the Part D
benefit.
Comment: Some commenters asked for clarification on coverage of
smoking cessation products, specifically regarding whether over-the-
counter products will be covered under Part D. Another commenter
suggested that in order to cover smoking cessation products, Part D
plans should require proof of smoking cessation classes.
Response: Section 1860D-2(e)(1)(A) of the Act specifies that a Part
D drug is a drug that may be dispensed only upon a prescription.
Although section 1860D-2(e)(1)(B) of the Act specifically allows
smoking cessation agents to be covered under Part D, such agents must
not otherwise be excluded from coverage under Part D. Over-the-counter
smoking cessation products (for example, gum and most patches), by
virtue of being not being drugs that may be dispensed only upon a
prescription, therefore cannot be considered Part D drugs, even though
they are smoking cessation products. Smoking cessation products that
may be dispensed only upon a prescription, however (for example, some
patches, oral inhalants, nasal sprays, and Zyban), may be considered
Part D drugs provided they meet all other applicable requirements under
the definition of a Part D drug in Sec. 423.100 of the final rule. We
do not have the authority to require Part D plans to condition coverage
of permissible smoking cessation agents on proof of smoking cessation
classes.
Comment: One commenter requested clarification in the final rule
that Part D plans are not prohibited from providing drugs on the
exclusion list (under section 1927(d)(2) of the Act, other than smoking
cessation drugs) if they are provided through an enhanced benefit.
Response: As provided in Sec. 423.104(f)(1)(ii)(A) of our final
rule and in accordance with section 1860D-2(a)(2)(A)(ii) of the Act,
Part D plans may only provide coverage of drugs that are specifically
excluded as Part D drugs under section 1860D-2(e)(2)(A) of the Act,
that is, drugs or classes of drugs, or their medical uses, which may be
excluded from coverage or otherwise restricted under Medicaid under
section 1927(d)(2) of the Act, with the exception of smoking cessation
agents--if they do so as supplemental benefits through enhanced
alternative coverage and if they would otherwise meet the definition of
a Part D drug under section 1860D-2(e)(1) of the Act, but for the
application of section 1860D-2(e)(2)(A) of the Act.
Comment: Many commenters urged us to remove benzodiazepines from
the exclusion list indicating the multiple therapeutic uses of this
drug. One commenter was concerned that excluding drugs such as these
from the Part D benefit would force health care providers to alter how
they treat patients based on which medications are Part D drugs. Many
commenters noted that benzodiazepines serve as valuable therapy for
anxiety disorders, bipolar disorder, Parkinson's disease, seizures, and
other conditions. Some commenters noted that excluding drugs such as
benzodiazepines that are inexpensive, first-line therapies would
require more expensive drugs to be prescribed simply because they are
covered. Some commenters were concerned about the dangers of
beneficiary withdrawal from benzodiazepines if these drugs are not
covered under Part D. Some commenters were concerned about loss of drug
coverage for benzodiazepines for dual eligibles, especially because
benzodiazepines are covered in many States. Many commenters also urged
us to remove barbiturates from the exclusion list, citing similar
reasons as those listed for benzodiazepines.
Some commenters urged us to make an exception for vitamins used
under special circumstances, specifically with ESRD patients. Another
commenter was concerned about the exclusion of renal vitamins under
Part D and requested that we allow the coverage of water-soluble
vitamins lost during dialysis to be covered under Part D. Another
commenter noted that prescription vitamins are relatively inexpensive.
Some commenters requested coverage of over-the-counter medications
for beneficiaries with certain conditions. One commenter asked us to
reconsider excluding over-the-counter drugs that were formerly
prescription-only drugs and now have over-the-counter status. Another
commenter recommended including a provision allowing over-the-counter
drugs to be covered if prescribed in the same manner as a prescription
item. Another commenter asked us to consider over-the-counter drugs and
medications for unintended weight loss as a covered drug under Part D.
One commenter suggested that we amend the exclusion for ``agents used
for symptomatic relief of cough or cold'' to ``non-prescription agents
used for symptomatic relief of cough or cold''.
[[Page 4230]]
Response: Section 1860D-2(e)(2) of the Act clearly requires us to
exclude certain drugs from the definition of a Part D drug. According
to the statute, the definition of a Part D drug specifically excludes
certain drugs or classes of drugs that may be excluded from Medicaid
coverage under section 1927(d)(2) of the Act, including agents when
used for anorexia, weight loss, or gain; agents when used for cosmetic
purposes or hair growth; agents when used for symptomatic relief of
cough and colds; prescription vitamins and mineral products, except
prenatal vitamins and fluoride preparations; outpatient drugs for which
the manufacturer seeks to require that associated tests or monitoring
services be purchased exclusively from the manufacturer or its designee
as a condition of sale; nonprescription drugs; barbiturates; and
benzodiazepines. We have no flexibility to allow Part D coverage of any
of these drugs, including over-the-counter drugs used to treat certain
medical conditions, except as provided in Sec. 423.104(f)(1)(ii)(A) of
the final rule, which permits Part D plans to provide coverage of drugs
that otherwise meet the definition of a Part D drug under section
1860D-2(e)(1) of the Act and are not otherwise excluded under section
1860D-2(e)(2)(B) of the Act, if they do so as supplemental benefits
through enhanced alternative coverage. We also note that insurance or
otherwise, group health plans, or third party payment arrangements
(including States under Medicaid and State Pharmaceutical Assistance
Programs) may, at their discretion, provide Part D enrollees with
supplemental coverage for drugs excluded from coverage under Part D.
Comment: One commenter said that many of the categories of
excludable drugs in section 1927(d)(2) of the Act refer to drugs when
used for a specific purpose and that it is inappropriate to simply
exclude these drugs when they may be covered depending on the specific
clinical use. This commenter recommended that that we provide coverage
for potentially excludable drugs when they are prescribed for a
clinical use not covered by section 1927(d)(2) of the Act. Two examples
provided were ``weight loss agents'' when used not for cosmetic
purposes, but for the treatment of morbid obesity, and decongestant
combination products, which while commonly prescribed to treat coughs
and colds, could be used for the treatment of allergic conditions.
Response: Drugs that are excluded from coverage under Part D when
used as agents for certain conditions may be considered covered when
used to treat other conditions not specifically excluded by section
1927(d)(2) of the Act, provided they otherwise meet the requirements of
section 1860D-2(e)(1) of the Act and are not otherwise excluded under
section 1860D-2(e)(2)(B) of the Act. To the extent this is the case,
and a drug is dispensed for a ``medically accepted indication'' as
described in the statute, weight loss agents may be covered for the
treatment of morbid obesity, and decongestant products for example, may
be covered when used to treat allergies. However, we clarify that Part
D plans may establish utilization management processes in order to
ensure that such drugs are being prescribed for medically accepted
indications that are not excluded under section 1927(d)(2) of the Act
(for example, decongestant products when used for ``symptomatic relief
of coughs and colds'').
Comment: One commenter suggested excluding drugs that have non-
prescription drug alternatives available as Part D drugs. Two
commenters supported excluding drugs that are ``lifestyle'' drugs such
as Viagra, Levitra, and Cialis.
Response: We do not have the authority to exclude the drugs if they
meet all the criteria of a Part D drug as provided under section 1860D-
2(e)(1) of the of the Act and are not otherwise excluded under section
1860D-2(e)(2) of the Act. However, we clarify that Part D plans may
subject these drugs to utilization management processes provided we do
not find such processes to discourage enrollment by certain Part D
enrollees as part of the benefits package review we will conduct (and
which is discussed in detail elsewhere in this preamble).
Comment: One commenter supports the current statutory language
regarding the manufacturer tying arrangements exclusion, whereas
another commenter supports expanding this prohibition but does not
specify how we should expand it. One commenter opposes any CMS effort
to mandate the interactions between Part D plans and pharmaceutical
manufacturers, and another asks us to affirm that this exclusion will
not interfere with Part D plan decisions to cover drugs/diagnostic test
combinations if manufacturers do not require the purchase of the
combinations. Yet another commenter points out that the tying
arrangement exclusion would exclude drugs from Part D coverage that are
tied to one pharmacy system because of requirements for patient
monitoring.
Response: We appreciate the clarification provided by the various
commenters. We are not expanding the manufacturer tying arrangement
exclusion of coverage under Part D in our final rule. We believe that
existing Federal fraud and abuse laws, including the anti-kickback
statute at section 1128B(b) of the Act, as well as the civil monetary
penalty provision at Section 1128A(a)(5) of the Act, provide clear
guidance regarding what are and are not inappropriate manufacturer
tying arrangements. Manufacturers remain responsible for ensuring that
they do not engage in any tying arrangements that violate the anti-
kickback statute or, where applicable, the civil monetary penalty
provision prohibiting inducements to beneficiaries.
Comment: Some commenters asked for clarification on which vaccines
are covered under the Part D benefit and suggested that we provide
additional guidance on how non-Part B vaccines are to be covered under
Part D, including administrative fees. Another commenter requested that
we strongly encourage Part D plans to include all vaccines that are not
covered under Part B on their formularies.
Response: The definition of a Part D drug in section 1860D-2(e) of
the Act clarifies that Part D may cover a biological product described
in sections 1927(k)(2)(B)(i) to (k)(2)(B)(iii) of the Act--to include a
vaccine licensed under section 351 of the Public Health Service Act.
Since section 1860D-2(e)(2)(B) of the Act excludes an otherwise covered
Part D drug from coverage under Part D ``if payment for such drug as so
prescribed and dispensed or administered with respect to that
individual is available (or would be available but for the application
of a deductible) under Part A or B for that individual,'' certain drugs
and vaccines would be covered under Part D only to the extent they are
not covered under Part B.
In addition to excluding Part B vaccines from coverage under Part
D, section 1860D-2(e)(3) of the Act provides that a Part D plan may
exclude from coverage covered Part D drugs for which payment may not be
made under section 1862(a) of the Act if applied to Part D. Section
1862(a)(1)(A) generally excludes from payment items and services that
are not reasonable and necessary for the diagnosis or treatment of
illness or injury or to improve the functioning of a malformed body
member, except those vaccines identified in section 1862(a)(1)(B) of
the Act as covered Part B vaccines. Section 1862(a)(1)(A) of the Act,
however, excepts from this rule vaccines covered under Part B.
Therefore, if these provisions are read literally, Part D plans would
be permitted to exclude
[[Page 4231]]
from coverage preventative vaccines that are covered Part D drugs
because they are not ``reasonable and necessary for the diagnosis or
treatment of an illness or injury.''
However, we argue that whereas section 1862(a)(1)(B) of the Act
requires coverage under Part B of covered Part B vaccines, by analogy,
section 1862(a)(1)(B) of the Act as applied to Part D should be read as
requiring coverage under Part D of vaccines that are covered Part D
drugs. This argument is buttressed by the fact that the Congress
specifically defined Part D drugs under section 1860D-2(e)(1) of the
Act to include vaccines. Moreover, section 1860D-2(e)(3) of the Act
references all of section 1862(a) of the Act, and the only way to give
meaning to the reference to section 1862(a)(1)(B) of the Act is to
extend the provision to permit coverage of Part D vaccines. In other
words, if section 1862(a)(1)(B) of the Act as applied to Part D were
read literally as only permitting coverage of Part B vaccines, the
reference in section 1860D-2(e)(3)(A) of the Act to section
1862(a)(1)(B) of the Act would be rendered meaningless.
Building on the argument that by analogy section 1862(a)(1)(B) of
the Act should be extended to Part D so as to require coverage of non-
Part B vaccines under Part D, the standard under Part D should reflect
a standard similar to section 1862(a)(1)(b) of the Act but adapted to
apply to preventative vaccines. Therefore, we believe such standard
should be vaccines that are ``reasonable and necessary for the
prevention of illness.'' Plans will need to develop explicit criteria
that can be applied on a case-by-case basis to determine that the
administration of Part D vaccine is ``reasonable and necessary'' and
that the Part D vaccine is therefore a covered Part D drug. Presumably
these will comply with any widely accepted practice guidelines. If
widely accepted practice guidelines are not available for certain
vaccines, Part D plans will need to develop criteria that they can
support with sound clinical reasoning.
Currently, most vaccines of interest to the Medicare population are
covered under Part B. Although Part B makes only three exceptions
(influenza, pneumococcal, and hepatitis B vaccines for high risk
patients) to its rule requiring injury or direct exposure, these three
exceptions probably account for the majority of vaccinations needed by
an elderly population. Since many of the remaining vaccines on the
market are administered during childhood, we do not expect that Part D
will cover a large number of vaccines. However, as more vaccines are
developed and practice guidelines develop, Part D plans might face a
growing burden with supplying vaccinations to significant numbers of
their Part D patient populations. Therefore, the ability of Part D
plans to limit payment to those situations that are ``reasonable and
necessary for the prevention of illness'' will become more and more
important.
Given the definition of dispensing fees we have incorporated in the
final rule, the costs of Part D-covered vaccine administration could
not be covered as part of a dispensing fee. Neither could those costs
be covered as separate administrative fees, since as discussed
elsewhere in this preamble, other than medication therapy management
programs (described in subpart D), we do not expect medical or clinical
services to be included in administrative fees.
As discussed in subpart J, Part D-covered vaccines administered in
a physician's office will be covered under the out-of-network access
rules at Sec. 423.124 of our final rule. The costs of vaccine
administration may be included in physician fees under Part B since
Part B pays for the medically necessary administration of non-covered
drugs and biologicals. However, there is currently no ready mechanism
for physicians to bill Part D plans for Part D-covered vaccine costs.
In the short-term, we will require that a Part D enrollee self-pay the
physician for the Part D-covered vaccine cost and submit a paper claim
for reimbursement by his or her Part D plan. This approach is
consistent with how beneficiaries accessing covered Part D drugs at an
out-of-network pharmacy will be reimbursed by Part D plans for costs
associated with those drugs. Once Part D is implemented, we will get a
better sense for the actual volume of Part D-covered vaccines (and
other covered Part D drugs appropriately dispensed and administered in
a physician's office) and the need and most appropriate mechanisms for
any automatic cross-over procedures such that physicians could submit
claims for reimbursement of Part D-covered vaccine ingredient costs
directly to the appropriate Part B carrier. Any such automatic cross-
over procedures would mean that beneficiaries would not have to submit
paper claims and, instead, physicians could submit a single claim for
reimbursement of both the Part D-covered vaccine ingredient costs and
the administration fee directly to the appropriate Part B carrier,
which would forward the Part D charge to the appropriate Part D plan.
Comment: One commenter asked that we cover individually compounded
medications or combinations of medications. Another commenter stated
that we should not consider compounded drugs as meeting the definition
of a Part D drug, as it is contrary to the definition in the MMA and
would put patients at risk.
Response: Historically, extemporaneous compounding has filled an
important role in pharmacy practice and continues to be an important
part of contemporary pharmacy practice. While less than one percent of
prescriptions are compounded, these compounded prescriptions often
provide medically necessary drug therapies that would otherwise be
unavailable to patients. Compounding also provides many independent
pharmacies with the opportunity to offer services that competitively
differentiate them from the chain industry. In addition, compounded
prescription drug products are frequently reimbursed under commercial
prescription drug benefit plans. Therefore, excluding compounded
prescription drug products from Medicare Part D would be a significant
change from current pharmacy practice.
Section 1860D-2(e)(1)(A) of the Act defines a Part D drug as
including a drug that may be dispensed only upon a prescription and
that is described in section 1927(k)(2)(A)(i), (A)(ii) or (A)(iii) of
the Act. As a matter of simplification, we refer to these products as
``FDA approved prescription drug products,'' and note that, as used in
this part of the preamble, that term incorporates the non-FDA approved
drug products specifically described under sections 1927(k)(2)(A)(ii)
and (A)(iii) of the Act.
Compounded prescription drug products may contain: (1) all FDA
approved prescription drug products; (2) some FDA approved prescription
drug products; or (3) all non-FDA approved drug products. While the
strictest reading of section 1927(k)(2) of the Act appears to indicate
that non-FDA approved compounded prescription drug products are not
Part D drugs, we believe that FDA-approved prescription drug product
components of a non-FDA approved compounded prescription drug product
could be considered to be Part D drugs. The definition of a Part D drug
is not based on the final form of the drug as dispensed to the
beneficiary; rather, section 1860D-2(e)(1)(A) of the Act speaks to a
drug ``that may be dispensed'' only upon a prescription and that meets
the requirements of section 1927(k)(2) of the Act. Therefore,
[[Page 4232]]
the FDA approved component can satisfy section 1860D-2(e)(1)(A) of the
Act even if the finished product does not. Although reimbursement must
be limited to the FDA approved prescription drug components (that is,
no reimbursement is available for compounded products containing only
products that are not approved by the FDA, or otherwise described under
sections 1927(k)(2)(A)(ii) and (A)(iii) of the Act, or only over-the-
counter products), these usually account for the most significant drug
costs and, accordingly, current commercial practice often limits
reimbursement to the most expensive component only. In addition, the
labor costs associated with mixing a compounded drug product that
contains at least one FDA approved prescription drug component can be
included in dispensing fees (as defined in Sec. 423.100 of our final
rule).
Comment: Two commenters suggested covering medical foods under the
Part D benefit because medical foods contain vitamins and nutrition
that are beneficial to beneficiaries with certain diseases such as End
Stage Renal Disease (ESRD). Another commenter asked that we cover
parenteral nutrition therapy.
Response: It is not clear what the commenter meant by ``medical
foods.'' If ``medical foods'' refers to products that are vitamins and
mineral products, these are excluded from the definition of Part D
drugs and are not a covered Part D benefit. In addition, enteral
nutrients are not regulated as drugs by the FDA and are therefore not
covered under Part D.
On the other hand, parenteral nutrition frequently contains primary
components such as amino acids, nitrogen products, and dextrose
mixtures that are regulated by the FDA as drugs and therefore meets the
definition of a Part D drug if prescribed for a medically accepted
indication and not otherwise excluded under section 1860D-2(e)(2) of
the Act. Vitamins and minerals added to parenteral nutrition are not be
considered Part D drugs, and costs associated with these vitamins or
minerals cannot be paid for under Part D.
Part D plans would only need to include parenteral nutrition
coverage for reasonable and necessary medically accepted indications
that are not covered under Parts A or B. These situations would likely
involve long-term care facility or home infusion patients who do not
qualify for Part B coverage under the prosthetic benefit provision for
permanent dysfunction of the alimentary tract. This could include
temporary situations in which patients are unable to swallow or absorb
nutrients from the alimentary tract, either for physical or cognitive
reasons. We are currently unable to estimate the potential impact of
such coverage on Part D expenditures. However, Part D plans will need
to establish appropriate policies and procedures in order to limit Part
D coverage of parenteral nutrition to patients with medically accepted
indications that are not otherwise covered by Parts A or B. In
addition, we note that Part D plans are not responsible for the costs
of supplies and equipment related to parenteral nutrition therapy.
Comment: One commenter suggested additional supplies to consider
for Part D coverage: spacers and aerochambers for administration of
inhalation products, devices for administration of eye drops, and
flushing supplies (for example, saline and heparin for home infusion
therapy).
Response: Section 1860D-2(e)(1) of the Act provides us with
authority to deem medical supplies to be Part D drugs to the extent
they are associated with the injection of insulin. Thus, the supplies
mentioned by this commenter cannot be covered under Part D, as they are
not associated with the injection of insulin. We clarify that although
heparin is a Part D drug, a heparin flush is not used to treat a
patient for a medically accepted indication, but rather to dissolve
possible blood clots around an infusion line. Therefore, heparin's use
in this instance is not therapeutic but is, instead, necessary to make
durable medical equipment work. It would therefore not be a Part D drug
when used in a heparin flush.
Comment: One commenter recommended that Part D drugs should include
liquid, chewable, transdermal and other special dosage forms and
delivery mechanisms to accommodate swallowing limitations and
intravenous medications, such as antibiotics.
Response: The definition of a Part D drug at section 1860D-2(e) of
the Act places no limitations on drug dosage forms and delivery
mechanisms provided that a drug or biological product is not otherwise
excluded by the statute. We expect Part D plans to provide an adequate
benefit that includes coverage of special dosage forms and delivery
mechanisms to fit the needs of all their enrollees.
Comment: Several commenters supported our proposed framework for
Part D coverage wrapping around Part B coverage at the individual
level. However, other commenters recommended that drugs currently
covered under Part B be excluded from coverage under Part D until the
mandated study on the transitioning of Part B prescription drug
coverage into Part D is released. Another commenter recommended that
individual drugs be paid by either Part B or Part D in all
circumstances.
Response: The statutory definition of the term ``covered Part D
drug'' would, under section 1860D-2(e)(2)(B) of the Act, exclude any
drug for which, as dispensed and administered to an individual, payment
would be available under Parts A or B of Medicare for that individual
(even though a deductible may apply). By including the language ``as so
prescribed and dispensed or administered,'' section 1860D-2(e)(2)(B) of
the Act makes a distinction between what would be paid for under Part D
as opposed to Part B. This language indicates that the Congress was
aware that some drugs could qualify for payment under Part B in some
circumstances and Part D in others, depending on the way those drugs
are dispensed or administered. Given the statutory definition of the
term ``covered Part D drug'', we cannot preclude drugs that may be
covered under Part B under some circumstances (for example, when they
are furnished ``incident to'' a physician's service), but that are not
covered under Part B under other circumstances, from being covered
under Part D under such other circumstances (for example, because they
are self-administered by the patient at home). Such a policy would
require statutory changes by the Congress. The various issues raised by
the drugs covered under Part B for the administration of the Part D
drug benefit will be addressed in our report mandated by section 1860D-
42(c) of the Act.
Comment: We solicited comments concerning any drugs that may
require special guidance with regard to their coverage under Part D,
and any gaps that may exist in the combined ``Part D & B'' coverage
package. A number of commenters requested that we further clarify the
relationship between drugs covered under Medicare Part B and drugs that
will be covered under Part D. These commenters would like us to clarify
how Part D plans can recognize Part B covered drugs since no universal
list exists, Part B coverage differs by patient and situation, and Part
B coverage policies differ regionally. They raise concerns about
appropriately limiting coverage of drugs under Part D while achieving
our goal of wrapping around Medicare Part B to the greatest extent
possible.
Response: We acknowledge that there are numerous complexities
involved in the distinction between drugs covered
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under Parts B and D, as well as with wrapping around existing drug
coverage under Part B. Nevertheless, section 1860D-2(e)(2)(B) of the
Act states that Part D plans must exclude any drug that would otherwise
be considered a Part D drug for which, as so prescribed and dispensed
or administered to that individual, payment would be available under
Parts A or B (even though a deductible may apply). Furthermore, we
believe that the language ``as so prescribed and dispensed or
administered'' indicates the Congress's awareness that the
determination regarding whether a particular drug is covered under Part
B or Part D could differ on a case-by-case basis.
Despite the complexities, we believe Part D plans can best wrap
around existing Part B coverage under Part D by understanding the scope
of the definition of covered Part D drug, becoming familiar with the
general categories of Part B covered drugs, and planning for potential
Part B interactions that are likely to be encountered in specific
settings with regard to some of these categories.
Part D drugs are not limited to typical outpatient prescription
drugs. The definition includes injectable prescription drugs (for
example, intramuscular, intravenous, and infusible drugs, as well as
vaccines). Some Part D plans may lack experience with covering the
drugs under an outpatient prescription drug benefit program because
they are more commonly covered under commercial medical benefits, as
opposed to commercial prescription drug benefits.
The implementation of the Part D benefit does not alter coverage or
associated rules for drugs currently covered under Part B. Part B
covers drugs in a variety of settings. In almost all of these settings
the question of whether coverage should be provided under Part D will
not arise since the drugs are being provided in the context of a
service or procedure. For a limited number of categories, however,
pharmacists and infusion providers will have to determine whether to
bill Part B or Part D, and Part D sponsors will need to confirm whether
Part D is being billed correctly. In some cases, this determination can
be made on the basis of the drug. For example, in the case of oral
anti-cancer drugs, there is a list of drugs covered under Part B based
on certain statutory criteria. All other oral anti-cancer drugs will be
covered under Part D, provided they otherwise meet the definition of a
Part D drug. In other cases, the pharmacist or infusion provider would
need information about the member in order to bill appropriately. For
example, in the case of drugs used in immunosuppressive therapy, Part B
should be billed in the case of a beneficiary whose transplant has been
covered by Medicare. Part D should make payment in all other instances.
We will provide more information and guidance on the relation between
Part B and Part D coverage in separate guidance to Part D plans.
Based upon the definition of the term ``Part D drug'' and the
general categories of coverage under Part B, we believe that Part D
plans could implement utilization management strategies to identify
potential Part B drug coverage overlap for individuals and verify
appropriate coverage accordingly. For example, if a Part D beneficiary
were filling a retail prescription for an antiemetic, prior
authorization could be used to ensure that the drug is not covered by
Part B. Similarly, prior authorization could be used to flag drugs
dispensed via home infusion that are covered under the Part B durable
medical equipment policy. Plans will need to ensure that they do not
cover any drugs which, as prescribed and dispensed or administered, are
covered under Part B in a specific region under its local medical
review policy (LMRP).
We clarify that MA organizations must follow fee-for-service
coverage rules as provided in section 1852(a)(1) of the Act in
determining whether to pay for a drug under its Part A/Part B or Part D
benefits. Payment for injectable drugs that Medicare considers to be
usually not self-administered should be paid under the Part A or Part B
benefits if provided in a physician's office, and under Part D if
dispensed by a network pharmacy. Even if an MA plan offers coverage
under Part D of an injectable drug that Medicare considers to be
usually not self-administered (for example, Avonex) the plan cannot
deny coverage of this drug under its Part A or Part B benefits when
furnished in a physician's office.
Comment: Several commenters noted that excluding Part B drugs from
coverage under Part D regardless of whether the consumer is enrolled in
Part B is seriously detrimental to consumers who enroll in Part B but
who cannot effectuate their enrollment for many months due to the Part
B enrollment timeframes. Consumers without Part B coverage, but who
intend to enroll, could enroll in Part D in April of 2006 but would not
be able to gain coverage for Part B drugs until 15 months later
(enrollment in January effective in July). These commenters argue that
we should make an exception for beneficiaries in this predicament such
that their Part D plans could cover Part B drugs. This is especially
important for full-benefit dual eligible individuals in this situation,
since they would be unable to fall back on Medicaid to obtain coverage
for Part B-covered medications. They recommend that Part D plans be
required to cover Part B medications for a consumer for up to 15 months
(the maximum amount of time it could take to effectuate an enrollment
under Part B).
Response: Section 1860D-2(e)(2)(B) of the Act specifies that a drug
prescribed to a Part D eligible individual that would otherwise qualify
as a Part D drug cannot be considered a covered Part D drug if payment
for such drug ``... is available (or would be available but for the
application of a deductible) under part A or B for that individual.''
We interpreted this to mean that if payment could be available under
Part A or Part B to the individual for such drug, then it will not be
covered under Part D. Thus, for all Part D eligible individuals, drugs
covered under Parts A and B are available if they choose to pay the
appropriate premiums.
This will be the case even if a beneficiary has Part A, but not
Part B, or vice versa, since, as we explain in subpart F of this
preamble and at Sec. 423.265(c) of the Act, Part D sponsors must offer
a uniform benefit package in order to carry out the Congress's intent
in section 1860D-13(a)(1)(F) of the Act. If Part B covered drugs were
included in the Part D benefit package only for those enrollees without
Part B, but not for others, it would not be possible for Part D
sponsors to offer uniform benefit packages for a uniform premium to all
enrollees. In addition, we believe that payment for a drug under Part A
or B is available to any individual who could sign up for Parts A or B,
regardless of whether they actually enrolled or are waiting to be
enrolled, as these commenters describe. All individuals who are
entitled to premium-free Part A are eligible to enroll in Part B. This
includes individuals who are entitled to Part A based on age,
disability, and ESRD. All individuals who are entitled to Part B only
are age 65 or older and, in almost all instances, not eligible for
premium-free Part A. However, they are eligible to buy into Part A for
a premium.
Comment: Some commenters recommended that we introduce more
consistent coverage rules by adopting national standards rather than
relying on local carriers for coverage and payment decisions.
Response: Policies with regard to coverage of infusible drugs
covered as DME supplies are uniform across the
[[Page 4234]]
country. Some differences do exist between carriers with regard to
which injectable drugs will be covered under Part B ``incident to'' a
physician service. These differences in coverage in a physician's
office setting, however, should not impact whether a Part D plan will
cover a prescription for an injectable drug presented at a
participating pharmacy. The statute does not exclude ``all drugs''
covered under Medicare, but rather, drugs when Medicare coverage under
Part B is available ``as so prescribed and dispensed or administered.''
Comment: One commenter asked about the interface between the
hospice benefit and Part D, specifically whether we anticipated that
Part D would account for or impact the delivery of hospice drugs.
Response: As provided in section 1861(dd)(1) of the Act, the
hospice benefit covers all medications related to a beneficiary's
terminal illness. There is no change in Medicare coverage of these
drugs. However, all other medications provided to the beneficiary are
currently paid for either out-of-pocket or by private insurance. These
drugs could now be covered by Part D plans on either a primary or
secondary basis depending on the presence or nature of other insurance.
Given the life expectancy of beneficiaries receiving hospice benefits,
we do not expect this to be a large expense for Part D plans.
b. Dispensing Fees
The MMA does not define the term ``dispensing fee,'' although the
terms ``dispensing fee'' and ``dispense'' appear several times
throughout the MMA. Because the statute is ambiguous on the meaning of
``dispensing fee,'' in the proposed rule we did not propose a specific
definition of ``dispensing fee,'' but instead offered three different
options we believed would be reasonable, permissible definitions of the
term and invited comments on which option would be most appropriate
under Part D.
Option 1: The dispensing fee will include only those
activities related to the transfer of possession of the covered Part D
drug from the pharmacy to the beneficiary, including charges associated
with mixing drugs, delivery, and overhead. The dispensing fee will not
include any activities beyond the point of sale (that is, pharmacy
follow-up phone calls) or any activities for entities other than the
pharmacy.
Option 2: The dispensing fee will include the activities
included in Option 1, but in addition will include amounts for the
supplies and equipment necessary for the drugs to be provided in a
State in which they can be effectively administered.
Option 3: The dispensing fee will include the activities
in Option 2, but in addition will include activities associated with
ensuring proper ongoing administration of the drugs, such as the
professional services of skilled nursing visits and ongoing monitoring
by a clinical pharmacist.
We also requested comments regarding any implications for our
proposed options for defining dispensing fees vis-[agrave]-vis the
administration of other drugs (for example, vaccines and injectable
long-acting antipsychotic drugs).
Comment: The majority of commenters favored Option 1 claiming that
this definition is consistent with current industry practice regarding
dispensing fees. Several said that professional services involved in
providing medications should more appropriately be covered under Parts
A and B, and another commenter opined that Options 2 and 3 were
burdensome for Part D sponsors. Another commenter expressed concern
that what is currently covered under Part B should not be shifted to
Part D through the dispensing fees. Other commenters stated that,
although they supported Option 1, they believed that the definition
proposed for Option 1 was too narrow. One commenter suggested that
pharmacists are required to provide patient counseling for Medicaid
patients under OBRA 1990 and that they should be reimbursed for those
efforts. They also felt that the definition of what it means to
dispense a drug should be clarified. One commenter argued that
supplies, equipment and professional services needed to deliver a drug
should be covered under ancillary fees negotiated between pharmacies
and Part D plans and should not be included in dispensing fees. Another
commenter pointed out that requiring PBMs to pay for professional
services, as contemplated under Option 3, would require them to
renegotiate tens of thousands of contracts with the pharmacies in their
networks.
Several commenters supported Option 2. One commenter focused on
medication packaging and the need to cover packaging specifically
designed for the cognitively impaired or those with physical
impairments.
Other commenters favored adoption of Option 3. Some of these
commenters argued that the Congress meant for home infusion to be
covered and that failure to pay for the supplies, equipment and
services involved in delivering home infusion drugs was tantamount to
failure to cover the drug itself. Since Part D specifically covers
those drugs, (antibiotics, pain management, chemotherapy, parenteral
nutrition, immune globulin and other infused drugs) they argued that we
must require that dispensing fees cover the resources needed to deliver
them. Other commenters argued that new treatment modalities were
allowing patients to remain at home, a cost-effective setting, to
receive their medications, and that some patients might not be able to
receive their medications at home should the definition of dispensing
fee fail to cover the service, equipment, and supplies needed to
deliver the medications in the home setting. One commenter specifically
noted the need to cover supplies and services surrounding infusion of
long-term anti-psychotic medications in community mental health
centers. Two commenters focused on the need to pay for physician
services involved in home infusion of certain drugs given that many
infections and adverse events take place in this setting. Direct
physician supervision of these services is required to mitigate these
potential problems.
Other commenters argued for Part D plan flexibility in establishing
dispensing fees that would be appropriate for the setting and
medication at issue, allowing each Part D plan to define dispensing
fee. One commenter thought that Part D plans should be allowed to use
tiered dispensing fees to encourage the use of generic drugs. One
commenter indicated that point of sale systems in place today already
support multiple variations of dispensing fees based on drug or amount
of effort required to prepare or administer medication and such systems
could handle the multiple variations for the drug benefit. Another
commenter specified that the transmission standard should be the
National Council of Prescription Drug Program's Telecommunication
Standard Version 5.1.
Response: We agree with the majority of commenters that Option 1--
including only those activities related to the transfer of possession
of the covered Part D drug from the pharmacy to the beneficiary,
including charges associated with mixing drugs, delivery, and overhead
is the most appropriate definition of the term ``dispensing fees'' for
Part D, and we have included a definition of dispensing fees in Sec.
423.100 of our final rule consistent with Option 1.
Although we recognize that Options 2 or 3 would eliminate current
gaps in coverage relative to home infused drugs, such approaches would
also extend the definition of dispensing fee beyond the
[[Page 4235]]
mere transfer of possession of the drug, and certainly beyond what we
believe to have been Congressional intent regarding the scope of an
outpatient drug benefit. The inclusion of professional services in the
definition of dispensing fees is also problematic given the potential
for double billing with regard to some of the skilled nursing costs
associated with home infusion. In many cases, these skilled nursing
costs are separately billable to Part A, Medicaid, or supplemental
insurance, and we are concerned about Part D supplanting these other
sources of payment.
We believe Option 1 represents the best reading of the statute,
since it will limit dispensing fees to a transfer of possession of the
drug and will not include any fees associated with administering the
drug. We also note that where the Congress wished for us to include the
cost of supplies under Part D, it specifically directed us to do so
(for example, by requiring that the supplies associated with the
injection of insulin be included in the definition of the term Part D
drug).
Even though some commenters suggest that the supplies, equipment,
and services associated with Options 2 and 3 could be paid for through
a separate fee or additional compensation to home infusion and other
providers, we caution that such separate administrative fees would not
be allowed under Part D. Other than medication therapy management
programs, as described in section 1860D-4(c)(2) of the Act, we do not
expect medical or clinical services to be included in administrative
fees. Please refer to the subpart G preamble discussion of the types of
costs that Part D plans may include as administrative costs in their
bids. Thus, the costs for professional services associated with home
infusion could not be included in the premium bid. In addition,
professional services, including those associated with home infusion,
may not be included in Part D plan supplemental coverage, given that
section 1860D-2(a)(2) of the Act defines supplemental coverage as
consisting of: (1) a reduction in the deductible, coinsurance
percentage, initial coverage limit, or any combination thereof; or (2)
coverage of drugs that are excluded from the definition of a ``Part D
drug'' because of the application of section 1927(d)(2) or (3) of the
Act.
Provided that Part D plans include only those activities allowed
under our definition of dispensing fees in the dispensing fees
negotiated with network pharmacies and offer standard contracting terms
and conditions to all pharmacies, we note that Part D plans have the
flexibility to vary the actual dispensing fee paid to pharmacies. For
example, Part D plans may need to increase the dispensing fees paid to
rural or long-term care pharmacies in order to obtain their
participation in networks and meet the pharmacy access standards.
As detailed elsewhere in this preamble, Part D plans will be
required to ensure adequate access to home infusion services as part of
their pharmacy network access standards. Thus, enrollees will have
access to home infusion services, though they may have to pay for
supplies, equipment, and professional services out-of-pocket
particularly if they are enrolled in a Part D plan and have no source
of supplemental coverage.
As we noted in the proposed rule, our definition of dispensing fees
under Part D will not carry over to Part B of the Medicare program.
Section 1842(o)(2) of the Act gives the Secretary discretionary
authority to pay a dispensing fee to a licensed pharmacy that furnishes
certain covered Part B drugs and biologicals to Medicare beneficiaries.
While the term ``dispensing fee'' is not defined in section 1842(o)(2)
of the Act, the considerations under Medicare Part B, a more
comprehensive health insurance product that has separate payment
mechanisms for durable medical equipment and professional services, are
different from those under Part D.
Comment: Some commenters did not support a particular option for
defining the term ``dispensing fees,'' but were more concerned about
including certain activities in the definition of dispensing fees (for
example, staff, equipment, automation, facilities overhead, time
inputting information into a computer, resolving problems with PBMs and
prescribing practitioners, counseling the patient, waste disposal,
turning the medication over to the patient, particularly when it
involved home delivery, and actually packaging the medications). Many
of these commenters noted that pharmacists merit a small profit and
that dispensing fees should not be specifically designed simply to meet
costs. Others felt that terms used in the proposed options were too
vague. Specifically, they wanted the meaning of dispensing to be
defined to include the costs they outlined. They also wanted to account
for the level of complexity and include clear definitions of
reconstituting, mixing and compounding drugs, which they believe
involve very different equipment, skill and time resources.
Response: We have defined the term ``dispensing fees'' in Sec.
423.100 of our final rule to include reasonable pharmacy costs
associated with ensuring that possession of the appropriate covered
Part D drug is transferred to a Part D enrollee. We specify that
reasonable pharmacy costs may include costs associated with a
pharmacist's time in checking the computer for information about an
individual's coverage, performing quality assurance activities
consistent with Sec. 423.153(c)(2) of our final rule, measurement or
mixing of the covered Part D drug, filling the container, physically
providing the completed prescription to the Part D enrollee, delivery
costs, special packaging costs, and overhead costs associated with
maintaining the facility and equipment necessary to operate the
pharmacy. We clarify that in using the term ``reasonable'' pharmacy
costs, our intent is to convey that such costs be appropriate for the
typical beneficiary in that pharmacy setting. We believe that our
definition clarifies commenters' concerns about the inclusion of some
overhead costs, time spent inputting information into a computer and
resolving problems with PBMs and prescribing practitioners,
transferring the medication to the patient, and special packaging
costs.
We clarify that reasonable delivery costs include only those costs
appropriate for the typical beneficiary in a particular pharmacy
setting. Thus, while it would be appropriate for Part D plans to
reimburse long-term care, mail-order, and home infusion pharmacies for
home delivery costs via the dispensing fee, this would not be the case
for retail pharmacies (where the term ``delivery'' would be limited to
the transfer of a covered Part D drug from the pharmacist to the
patient at the point of sale) because the typical retail customer does
not require home delivery. While retail pharmacies may offer home
delivery services, Part D plans may not reimburse those pharmacies for
these costs, and the delivery cost must be borne by the beneficiary.
As concerns patient counseling, dispensing fees for covered Part D
drugs may include pharmacy costs associated with quality assurance
activities consistent with Sec. 423.153(c)(2) of our final rule.
Section 423.153(c)(1) of our final rule requires Part D plans to
represent that pharmacists in their network pharmacies comply with
minimum standards for pharmacy practice established by the States.
Since almost all States have established requirements for pharmacy
practice
[[Page 4236]]
related to counseling, we believe that the offer of counseling that
pharmacists currently provide their customers will continue consistent
with current pharmacy practice in compliance with State requirements.
.Any pharmacist counseling activities in addition to those established
by the States will have to be negotiated and paid for separately under
Part D plans' medication therapy management programs (discussed in
greater detail elsewhere in this preamble).
As provided in section 1860D-11(i) of the Act, we cannot intervene
in negotiations between pharmacies and Part D plans. Thus, the extent
to which Part D plans reimburse pharmacies for their entire dispensing
costs (or even in excess of their dispensing costs) will depend on the
outcome of those negotiations. In addition, we clarify that we expect
Part D plans and pharmacies to account for pharmacy profit as part of
negotiated prices--either as part of overhead costs accounted for in
dispensing fees or in the reimbursement rates for ingredient costs
negotiated with pharmacies.
We clarify that we interpret the term ``mixing'' as used in our
definition of the term ``dispensing fees'' to encompass reconstituting
and compounding of covered Part D drugs. Further, we note that Part D
plans have the flexibility to pay differential dispensing fees to
pharmacies based on higher labor costs--for example, for a compounded
product relative to a non-compounded covered Part D drug. Plans could
also used differential dispensing fees to encourage the use of generics
over brand-name drugs as appropriate.
Comment: Another commenter wanted dispensing fees for non-profit
entities to reflect their preferred acquisition costs, arguing that
without this, Part D would be assisting tax-exempt non-profit
competitors of small business pharmacies.
Response: As mentioned previously, we have defined the term
``dispensing fees'' in Sec. 423.100 of our final rule to include
pharmacy costs associated with ensuring that possession of the
appropriate covered Part D drug is transferred to a Part D enrollee.
Plans may wish to consider non-profit entities' preferred acquisition
costs in the ingredient cost reimbursement negotiated with those
entities as part of negotiated prices on covered Part D drugs. However,
it is unclear to us why dispensing fees should vary among non-profit
and for-profit pharmacies based on differences in acquisition costs.
Comment: Several commenters emphasized the need to provide
dispensing fees tailored to long term care pharmacies. They focused on
the need to reimburse long-term care pharmacists for 24-hour care, the
specialized packaging that is required, emergency preparation and
delivery of medications, and the distinct type of medications typically
prepared and delivered.
Response: The definition of dispensing fee in Sec. 423.100 of our
final rule encompasses some of the services--for example, specialized
packaging, delivery, and preparation of medications (not including the
actual administration of those medications)--typically provided by
long-term care pharmacies. Additional long-term care pharmacy services
could be reimbursed via medication therapy management programs
established by Part D plans for institutionalized Part D enrollees.
Comment: Some commenters emphasized the need for the dispensing fee
to cover all of the costs involved in providing a medication.
Response: As provided in section 1860D-11(i) of the Act, we cannot
intervene in negotiations between pharmacies and Part D plans. Thus,
the extent to which Part D plans reimburse pharmacies for their entire
dispensing costs will depend on the outcome of those negotiations.
Given Part D plans' need to secure a network of providers that meets
our access standards, we believe that Part D plans will have every
incentive to adequately reimburse pharmacies via dispensing fees for
the costs involved with providing covered Part D drugs to Part D
enrollees.
c. Long-Term Care Facility
We requested comments regarding the definition of the term long-
term care facility in Sec. 423.100 of our proposed rule, which we
interpreted to mean a skilled nursing facility (as defined in section
1819(a) of the Act), or a nursing facility (as defined in section
1919(a) of the Act). We were particularly interested to explore whether
we should include in the definition facilities other than skilled
nursing and nursing facilities--particularly intermediate care
facilities for the mentally retarded (ICFs/MR), described in Sec.
440.150, and other types of facilities in which full-benefit dual
eligible individuals may reside and which may exclusively contract with
long-term care pharmacies in a manner similar to current practice in
skilled nursing and nursing facilities.
Comment: We received a number of comments urging us to expand the
definition of the term ``long-term care facility'' in the proposed
rule. Some of the suggested additions include ICFs/MR; assisted living
facilities; other facilities recognized by State law as eligible for
payment under Sections 1915(c) (Home and Community Based waivers),
1616(e), and 1115 of the Act; group homes for the developmentally
disabled; and other forms of congregate living arrangements regulated
by the States. Some commenters suggested that many of these facilities
operate under exclusive contracts with long-term care pharmacies. Other
commenters urged us not to make the presence of exclusive contracts
with long-term care pharmacies the only criterion for defining
congregate living arrangements as long-term care facilities, as these
beneficiaries could benefit significantly from subsidies for low-income
institutionalized Part D enrollees.
Response: We have expanded the definition of the term ``long-term
care facility'' in Sec. 423.100 of our final rule to encompass not
only skilled nursing facilities, as defined in section 1819(a) of the
Act, but also any medical institution or nursing facility for which
payment is made for institutionalized individuals under Medicaid, as
defined in section 1902(q)(1)(B) of the Act. We note that we have
eliminated the reference to nursing facilities as defined in section
1919(a) of the Act, as such facilities are captured as nursing
facilities for which payment is made for institutionalized individuals
under Medicaid. Such an expansion would include ICFs/MR and inpatient
psychiatric hospitals along with skilled nursing and nursing facilities
in the definition of a long-term care facility, provided those
facilities meet the requirements of a medical institution that receives
Medicaid payments for institutionalized individuals under section
1902(q)(1)(B) of the Act. We do not believe that the definition of term
long-term care facility should be expanded to include other facilities
recognized by State law but not by Medicare or Medicaid, regardless of
whether some of these facilities contract on an exclusive basis with
long-term care pharmacies. Furthermore, we do not believe that our
definitions of terms associated with institutionalized Part D enrollees
should conflict. Our revised definition of the term ``long-term care
facility'' is consistent with the definition of ``institutionalized''
in subpart P of this rule and will allow for residents of a number of
institutional settings to benefit from the special rules for access to
covered Part D drugs established for residents of long-term care
facilities. 2. Requirements Related to Qualified Prescription Drug
Coverage (Sec. 423.104)
Under section 1860D-11(e)(2)(A) of the Act, we may approve as Part
D sponsors only those entities proposing to offer qualified
prescription drug
[[Page 4237]]
coverage in accordance with our requirements. As provided in section
1860D-2(a)(1) of the Act, qualified prescription drug coverage may
consist of either standard prescription drug coverage or alternative
prescription drug coverage.
a. Standard Prescription Drug Coverage
As provided under section 1860D-2(b) of the Act, ``standard
prescription drug coverage'' consists of coverage of covered Part D
drugs subject to an annual deductible; 25 percent coinsurance (or an
actuarially equivalent structure) up to an initial coverage limit; and
catastrophic coverage after an individual incurs out-of-pocket expenses
above a certain threshold. In 2006, the annual deductible will be $250,
the initial coverage limit will be $2,250, and the out-of-pocket
threshold will be $3,600.
Once a Part D enrollee reached the annual out-of-pocket threshold,
in 2006, his or her nominal cost-sharing will be equal to the greater
of: (1) 5 percent coinsurance; or (2) a copayment of $2 for a generic
drug or a preferred multiple source drug and $5 for any other drug, or
an actuarially equivalent structure. (See Table C-1 for a summary
version of standard prescription drug coverage benefits for 2006.)
Section 1860D-2(b) of the Act provides that, beginning in 2007, the
annual deductible, initial coverage limit, out-of-pocket threshold, and
beneficiary cost-sharing after the out-of-pocket threshold is met are
to be adjusted annually. In accordance with section 1860D-2(b)(6) of
the Act, these amounts will be increased over the previous year's
amounts by the annual percentage increase in average per capita
aggregate expenditures for Part D drugs for the 12-month period ending
in July of the previous year. We requested comments regarding the
methods and data sources we might use to determine the annual
percentage increase in the first several years of the Part D program.
Table C-1
Standard Prescription Drug Coverage Benefits for 2006
----------------------------------------------------------------------------------------------------------------
Cost-Sharing Beneficiary Out- Plan Payment
Percentage of-Pocket Costs Percentage Plan Payment
----------------------------------------------------------------------------------------------------------------
Annual Deductible ($0-$250 in 100 percent $250 0 percent $0
spending on covered Part D drugs)
----------------------------------------------------------------------------------------------------------------
Initial Benefit ($250.01-$2,250 in 25 percent\1\ $500\2\ 75 percent\1\ $1,500
spending on covered Part D drugs)
----------------------------------------------------------------------------------------------------------------
No coverage of costs ($2,250.01- 100 percent $2,850\3\ 0 percent $0
$5,100\3\ in spending on covered
Part D drugs)
----------------------------------------------------------------------------------------------------------------
Catastrophic Coverage (after the The greater of: -- 95 percent --
enrollee has incurred out-of-pocket (1) 5 percent; or
costs on covered Part D drugs (2) $2 for a
greater than $3,600; this is generic or
generally equivalent to $5100\3\ in preferred
covered Part D drug spending) multiple source
drug/$5 for other
drugs.\1\
----------------------------------------------------------------------------------------------------------------
\1\ Entities have the option of substituting a cost-sharing structure that is actuarially equivalent.
\2\ $500 is the maximum out-of-pocket costs if coverage is based on 25 percent coinsurance. Under an actuarially
equivalent cost-sharing structure, the maximum out-of-pocket costs and the maximum plan payment for any Part D
enrollee could be higher or lower.
\3\ This figure may, in fact, be higher to the extent that a Part D enrollee is reimbursed for out-of-pocket
costs for covered Part D drugs covered under his or her plan by a group health plan, insurance or otherwise,
or other third party arrangement.
In our proposed rule, we interpreted the provisions of section
1860D 2(b) of the Act to provide for two distinct types of standard
prescription drug coverage-``defined standard coverage'' and
``actuarially equivalent standard coverage.'' Section 1860D-
2(b)(2)(A)(ii) of the Act provides that Part D sponsors offering
actuarially equivalent standard prescription drug coverage will be
permitted to substitute cost-sharing requirements (including tiered
structures tied to Part D plan formularies and particular pharmacies in
a Part D plan's network) for costs above the annual deductible and up
to the initial coverage limit, provided that those alternative cost-
sharing requirements are actuarially equivalent to an average expected
coinsurance of 25 percent for costs above the annual deductible and up
to the initial coverage limit. Alternative cost-sharing arrangements
under actuarially equivalent standard coverage could include reducing
cost-sharing to $0 for generic or preferred covered Part D drugs, as
provided under section 1860D-2(b)(5) of the Act, as long as the cost-
sharing structure is actuarially equivalent to an average expected
coinsurance of 25 percent for costs above the annual deductible and up
to the initial coverage limit.
Based on our interpretation of section 1860D-2(b)(5) of the Act, we
also proposed allowing Part D plans offering actuarially equivalent
standard coverage to establish cost-sharing of an amount that is
actuarially equivalent to the expected cost-sharing above the out-of-
pocket threshold. We proposed requiring that any alternative cost-
sharing structure for costs in the catastrophic range (whether under
actuarially equivalent standard coverage or enhanced alternative
coverage) be actuarially equivalent to standard prescription drug
coverage's structure of the greater of 5 percent coinsurance or $2/$5
copayments. We noted that any such alternative cost-sharing
arrangements would be reviewed, along with the rest of a Part D plan's
benefit design, to ensure that they do not discourage enrollment by
certain Part D eligible individuals.
Except as otherwise provided below, the final rule adopts the
criteria for standard prescription drug coverage set
[[Page 4238]]
forth in Sec. 423.104(e) of the proposed rule.
Comment: Several commenters felt that the benefit structure
established in our proposed regulations was too complex and should be
simplified to minimize beneficiary confusion.
Response: We do not have the statutory authority to simplify the
benefit further, as suggested by this commenter. The MMA provides
private plans with a great deal of flexibility to vary their benefit
structures consistent with Congressional intent to ensure that Medicare
beneficiaries have choices regarding outpatient prescription drug
coverage under Part D that fit their particular needs and minimize
beneficiary and Medicare costs.
Comment: One commenter asked how cross-licensed drugs will be
classified as generics or as brands for the purpose of cost-sharing.
The commenter also asks what the co-payments would be for multiple
source drugs that are ordered ``dispensed as written.''
Response: The amount of cost-sharing, and any variations in cost-
sharing based on brands, generics, or other classifications will be
determined by Part D plans.
Comment: Two commenters suggested alternative data sources to use
in determining the annual percentage increase in the first several
years of the Part D program. The first commenter recommended two data
sources to use for years 2007 and 2008--the annual estimates of
prescription drug expenditures in the CMS National Health Accounts data
(based on census data and sample surveys of private retail pharmacy
sales) and employer retiree health plan data (released by Pharmacy
Benefit Managers and benefit consulting firms). Either of these sources
of data could be used as a starting point, but should be adjusted to
account for any difference in trend for Medicare-eligible individuals
compared to the overall prescription trend. In addition, the trend in
Part D will likely differ from the overall prescription drug trend due
to the large volume negotiating power which could control the trend or
allow manufacturers leeway to raise drug prices. FEHBP experience may
be useful in accounting for such large volume influences in Part D.
This commenter also suggested using our Office of the Actuary (OACT)
procedure in place for Medicare Advantage to make coverage limit
adjustments the following year for over- or under-stated trends. The
commenter also noted that the Medicare Current Beneficiary Survey
(MCBS) and the Medicare 5 percent sample are not available in a timely
enough fashion to be useful data sources.
Another commenter recommended that we use the OACT spending growth
projections that will underlie the Fiscal Year (FY) 2007 President's
Budget Medicare baseline that will be published in February 2006. We
could use the March 2006 OACT Medicare baseline estimates as a
reference check on the OACT projections. OACT and the Congressional
Budget Office (CBO) are preferred because they use the latest available
empirical data based on MCBS, these data are the basis for the Medicare
Trustees' Reports, and the data are widely accepted. In addition, this
commenter recommended that OACT use the Consumer Price Index for
Prescription Drugs and Medical Supplies (CPI-PD), issued in a timely
fashion by the Bureau of Labor Statistics (BLS), as the basis for
projecting the price inflation component of per capita Part D spending
growth. This commenter thought that utilization growth should be based
primarily on the analysis of the latest available MCBS data.
Response: We appreciate the ideas suggested by the commenters and
will take these recommendations into consideration as we develop our
strategy for determining the annual percentage increase in the first
several years of the Part D drug benefit program. We will provide
further detail regarding the sources of data to be used and how the
annual percentage increase will be determined via operational guidance
to Part D sponsors prior to the deadline for bid submissions.
b. Incurred Costs/TrOOP Limit
According to section 1860D-2(b)(4)(C) of the Act, beneficiary costs
for Part D drugs are only considered incurred (for purposes of
applicability toward beneficiary spending against the annual out-of-
pocket limit) if they are incurred--
(1) Against any annual deductible, any applicable cost-sharing for
costs above the annual deductible and up to the initial coverage limit,
and any applicable cost-sharing for costs above the initial coverage
limit and up to the out-of-pocket threshold;
(2) By the Part D enrollee (or by another person on behalf of that
individual); paid on behalf of a low-income individual under the Part D
subsidy provisions described in Sec. 423.782 of the proposed rule; or
paid on behalf of the enrollee under a SPAP defined in Sec. 423.454 of
the proposed rule; and
(3) On covered Part D drugs (in other words, Part D drugs that are
either included in a Part D plan's formulary or treated as being
included in a Part D plan's formulary as a result of a coverage
determination, redetermination, or appeal under Sec. 423.566, Sec.
423.580, Sec. 423.600, Sec. 423.610, Sec. 423.620, and Sec. 423.630
of our final rule).
We also proposed that beneficiary costs incurred under the
following circumstances count as incurred costs (with Part D plans
explicitly accounting for such price differentials in the actuarial
valuation of their coinsurance in their bids): (1) any differential
between a network retail pharmacy's negotiated price and a network
mail-order pharmacy's negotiated price for an extended (for example,
90-day) supply of a covered Part D drug purchased at a retail pharmacy;
and (2) any differential between an out-of-network pharmacy's usual and
customary price for a covered Part D drug purchased in accordance with
the out-of-network access rules and the plan allowance for that covered
Part D drug. As further explained below, because we have clarified that
the differential for a 90-day supply dispensed at a retail network
pharmacy will generally be a differential in cost-sharing and not
negotiated price (in other words, the difference in cost sharing for
the 90-day supply between the retail and mail-order network
pharmacies), we have modified the definition of incurred costs in Sec.
423.100.
Section 1860D-2(b)(4)(C)(ii) of the Act provides that any costs for
which a Part D individual is reimbursed by insurance or otherwise, a
group health plan, or another third-party payment arrangement do not
count toward incurred costs; only costs paid by a Part D enrollee, or
on behalf of a Part D enrollee by another person, will count as
incurred, or TrOOP costs. This provision thus creates a distinction
between all enrollee out-of-pocket expenditures and those that are
counted as TrOOP expenditures.
Except as otherwise provided below, the final rule adopts the rules
applicable to incurred costs set forth in Sec. 423.100 of our proposed
rule.
Comment: Several commenters urged us to count all beneficiary
spending on Part D drugs whether on a Part D plan's formulary or not
toward TrOOP.
Response: Section 1860D-2(b)(4)(C)(i) of the Act specifically
excludes from the definition of the term ``incurred costs'' those costs
incurred for Part D drugs that are not included (or treated as being
included on a formulary as a result of a coverage determination,
redetermination, appeal, or exception) on a Part D plan's formulary.
Therefore, we do not have the statutory authority to permit the
payments to count toward a Part D enrollees' TrOOP limit.
[[Page 4239]]
Comment: Many commenters supported our proposal that beneficiary
costs incurred as a result of any differential between a network retail
pharmacy's negotiated price and a network mail-order pharmacy's
negotiated price for an extended (for example, 90-day) supply of a
covered Part D drug purchased at a retail pharmacy count as an incurred
costs for the purposes of TrOOP. Only one commenter opposed allowing
such differentials to count toward TrOOP.
Many commenters supported our proposal that beneficiary costs
incurred as a result of any differential between an out-of-network
pharmacy's usual and customary price for a covered Part D drug
purchased in accordance with the out-of-network access rules and the
plan allowance for that covered Part D drug count as an incurred costs
for the purposes of TrOOP. Only one commenter specifically opposed our
proposal, stating that if the differential were allowed to count toward
TrOOP, the use of retail pharmacies would not be cost-neutral to Part D
plans because individuals who use retail pharmacies would reach the
out-of-pocket limit sooner.
Response: We agree with the majority of commenters that it is
appropriate to allow beneficiary payment differentials to count toward
TrOOP in cases in which a beneficiary accesses a covered Part D drug
consistent with the out-of-network policy in Sec. 423.124(a) of our
final rule.
Section 423.120(a)(6) of our proposed rule provided that a Part D
enrollee who obtained a 90-day supply of a covered Part D drug at a
network pharmacy that is a retail pharmacy rather than a network mail-
order pharmacy would be required to pay for any differential in the
negotiated price for the covered Part D drug. However, consistent with
section 1860D-4(b)(1)(D) of the Act, which requires that the Part D
enrollee pay for ``any differential in charge'' when accessing a 90-day
supply of a covered Part D drug at a network retail pharmacy instead of
a network mail-order pharmacy, we have clarified in Sec.
423.120(b)(10) of our final rule that the beneficiary is not
responsible for the difference in negotiated price but, rather, for any
higher cost-sharing associated with purchasing the drug at a retail
pharmacy rather that a mail-order pharmacy. Any such difference in
cost-sharing would therefore automatically count toward a beneficiary's
TrOOP expenditures, since the covered Part D drug in question is being
purchased at a network pharmacy.
Comment: Several commenters asked us to define the term ``person''
such that a family member can pay for enrollees' cost-sharing on their
behalf.
Response: Section 1860D-2(B)(4)(C)(ii) of the Act specifically
mentions a family member as an example of a person who may pay cost-
sharing on behalf of a beneficiary. We clarify that our proposed rule
defined the term ``person'' to include a ``natural person.'' Such a
definition of the term ``person'' thus permits other individuals, such
as family members, to pay for covered Part D drug cost-sharing on
behalf of Part D enrollees. We have therefore retained this definition
of the term ``person'' in Sec. 423.100 of our final rule.
Comments: Several commenters supported our proposed definition of
the term ``person,'' which would allow financial assistance for
beneficiary cost-sharing rendered by ``bona fide'' charities to count
toward enrollee's out-of-pocket threshold. Some commenters requested
that we clarify what constitutes a ``bona fide'' charity. Another
commenter objected to Part D plan member financial assistance programs
being treated differently from third-party charities for purposes of
TrOOP.
Response: Our broad definition of the term ``person'' captures not
only ``bona fide'' charities, but other charitable organizations as
well. We note that any arrangement in accordance to which a charitable
organization pays a Medicare beneficiary's cost-sharing obligations
must comply with all applicable fraud and abuse laws, including, where
applicable, the anti-kickback statute at section 1128B(b) of the Act,
as well as the civil monetary penalty provision prohibiting inducements
to beneficiaries at section 1128A(a)(5) of the Act. Thus, even if a
charity is not a bona fide charity for purposes of Federal fraud and
abuse law, any drug payments it makes on behalf of Part D enrollees
would count toward TrOOP unless otherwise excluded as payments by a
group health plan, insurance or otherwise, or similar third party
arrangement. Charities that are established, maintained, or otherwise
controlled by an employer or union will likely fall under our
definition of ``group health plan,'' and any benefits supplementing
Part D benefits that they provide will therefore be excluded from TrOOP
on this basis.
Comment: We noted in the proposed rule that we were considering
whether assistance in paying enrollees' out-of-pocket cost-sharing
obligations provided through prescription drug patient assistance
programs sponsored by pharmaceutical manufacturers would be allowed
under Federal fraud and abuse laws, including the anti-kickback
statute, section 1128B(b) of the Act, as well as the civil monetary
penalty provision at Section 1128A(a)(5) of the Act.
We received a number of comments requesting clarification regarding
whether assistance in paying enrollees' out-of-pocket cost-sharing
obligations provided through pharmaceutical manufacturer-sponsored
patient assistance programs (PAPs) would be permissible under Federal
fraud and abuse laws and request that we work with the OIG to develop
guidelines. Some commenters believe that financial assistance and
product donations provided by PAPs should be allowed to count toward
beneficiaries' TrOOP expenditures. Some of these commenters recommended
that product donations be counted as incurred costs and valued at the
price beneficiaries would have paid at a network pharmacy (the
negotiated price). One commenter recommended that we allow
manufacturers to provide funds to Part D plans so that Part D plans can
apply appropriate criteria and make payments on behalf of
manufacturers. Another commenter cautions us that without a change in
the current interpretation of Federal fraud and abuse laws preventing
PAPs from providing cost-sharing assistance, many low-income
beneficiaries may avoid filling scripts, resort to splitting pills, and
interrupt critical drug therapy.
Response: Regardless of whether a manufacturer patient assistance
program is a bona fide charity for the purpose of Federal fraud and
abuse laws, any drug payments it makes on behalf of Part D enrollees
would count toward TrOOP unless these organizations qualify as group
health plans, insurance or otherwise, or similar third-party payment
arrangements. However, any arrangements pursuant to which a charitable
organization pays a Medicare beneficiary's cost-sharing obligations
must comply with Federal fraud and abuse laws, where applicable,
including the anti-kickback statute at section 1128(b) of the Act, as
well as the civil monetary penalty provision prohibiting inducements to
beneficiaries at section 1128A(a)(5) of the Act.
A related issue although it is not mentioned in the proposed rule
is whether pharmacies can waive or reduce Part D cost-sharing
obligations given Federal fraud and abuse laws and, if they can,
whether such waived or reduced cost-sharing should count toward a
beneficiary's TrOOP limit. Although we did not receive comments on this
matter, we would like to clarify our policy. Under the new exception to
[[Page 4240]]
the anti-kickback statute added by section 101(e) of the MMA,
pharmacies are permitted to waive or reduce cost-sharing amounts
provided they do so in an unadvertised, non-routine manner after
determining that the beneficiary is financially needy or after failing
to collect the cost-sharing amount despite reasonable efforts, as set
forth in section 1128A(i)(6)(a) of the Act. In addition, a pharmacy may
waive or reduce a beneficiary's Part D cost-sharing without regard to
these standards for beneficiaries enrolled in a Part D plan eligible
for the low-income subsidy under section 1860D-14 of the Act, provided
the pharmacy has not advertised that the waivers or reductions of cost-
sharing are available. Depending on the circumstances, pharmacies that
waive or reduce cost-sharing amounts for covered Part D drugs without
following the requirements of the pharmacy waiver safe harbor could be
subject to civil monetary penalties and exclusion from participating in
Federal health care programs, as well as criminal fines and
imprisonment under the anti-kickback statute.
We will allow waivers or reductions of Part D cost-sharing by
pharmacies to count toward TrOOP. Not allowing such waived or reduced
cost-sharing to count toward TrOOP would make it more burdensome for
Part D plans given the need to track down whether cost-sharing was
actually incurred by a beneficiary rather than a pharmacy. Moreover, we
believe this option is consistent both with the definition of
``person'' in the proposed rule (making waiver or reduction of cost-
sharing applicable toward an enrollee's incurred costs), and with
Congressional intent in amending the anti-kickback statute to provide
for a pharmacy waiver safe harbor.
Comment: Several commenters asked that coverage supplementing the
benefits available under Part D coverage provided by various government
programs be allowed to count as incurred costs for purposes of TrOOP.
These government insurers and programs included Medicaid (using State-
only funds), Medicaid Section 1115 ``Pharmacy Plus'' waiver programs,
Federally qualified health centers (FQHCs), the Department of Veterans
Affairs health care program, and local or State indigent drug programs.
In addition, a substantial number of commenters urged us to allow
coverage that supplements the benefits available under Part D coverage
that is provided by AIDS Drug Assistance Programs (ADAPs) funded under
the Ryan White CARE Act to count as incurred costs. These commenters
argued that ADAPs are an integral component of the safety net for HIV/
AIDS patients because they fill coverage gaps in public and private
insurance for critical HIV/AIDS drug treatments. They argue that if
ADAP supplemental coverage payments do not count as incurred costs,
ADAPs will have little incentive to coordinate coverage with Part D
plans, particularly if Part D plans impose user fees on ADAPs. Many of
these commenters also urged us to define ADAPs as SPAPs so that their
supplemental coverage will be considered incurred costs for the
purposes of TrOOP.
Several commenters also objected to the inclusion of IHS and Indian
Tribes and Tribal organizations, and urban Indian organizations
(collectively I/T/U) facilities in the definition of ``insurance or
otherwise'' in Sec. 423.100 of our proposed rule. Since IHS
beneficiaries--by custom and regulation--may not be charged any cost-
sharing, I/T/U facilities must provide supplemental coverage for all
cost-sharing that would have been assessed by a Part D plan. For this
reason, the commenters argue, our proposed regulations essentially
ensure that most IHS beneficiaries will never incur costs above the
out-of-pocket threshold and thus subject AI/AN enrollees and the I/T/U
pharmacies that serve them to severe financial penalties in comparison
to non-AI/ANs and non-I/T/U pharmacies. I/T/U facilities will have to
continue to use their limited appropriated funds to pay the
prescription drug costs of AI/AN beneficiaries. Commenters further
argue that the proposed exclusion of financial assistance for cost-
sharing provided by I/T/U facilities is not required by the statute and
is simply an interpretation of the term ``insurance or otherwise.''
Given the Federal government's obligation to provide health services to
AI-ANs based on the government-to-government relationship between the
United States and Tribes, these commenters argue that IHS and tribal
health programs are not ``insurance or otherwise,'' but instead
``persons'' given that I/T/U facilities are the functional equivalent
of ``family members.'' We were also asked to clarify why supplemental
coverage of deductible costs counts toward a beneficiary's deductible
limit, but supplemental coverage of cost sharing above the deductible
and initial coverage limit, does not count toward TrOOP.
Response: Section 1860D-24(a)(1) of the Act extends the
coordination of benefits provisions required for SPAPs to entities
providing other prescription drug coverage--including Medicaid
programs, Section 1115 waiver demonstrations, group health plans,
Federal Employee Health Benefits Program (FEHBP), military coverage
(including TRICARE), and ``such other health benefit plans or programs
that provide coverage or financial assistance for the purchase or
provision of prescription drug coverage on behalf of Part D eligible
individuals as the Secretary may specify.'' Section 1860D-24(b) of the
Act defines includes among these entities providing other prescription
drug coverage some government payers, which when coupled with section
1860D-24(a)(2) of the Act, which specifically applies the TrOOP
provisions at 1860D-2(b)(4)(D) of the Act to Rx plans suggests that the
Congress intended for the term ``insurance or otherwise'' to include
government benefit plans or programs that provide health care or pay
the cost of covered Part D drugs. Although section 1860D-24(b) of the
Act does not list all the government health care programs we consider
to be ``insurance or otherwise,'' in the absence of a meaningful
distinction between those entities specifically listed in section
1860D-24(b)--Medicaid, SPAPs, TRICARE, and FEHBP--and other government
health care programs, allowing payments from such other programs to
count toward TrOOP would be arbitrary. Further, in giving the Secretary
the authority to identify other entities providing other prescription
drug coverage under section 1860D-24(b)(5) of the Act, the Congress
contemplated that its list of entities providing other prescription
drug coverage was not exhaustive.
For additional clarification of this issue, we have split the
definition of ``insurance or otherwise,'' in our proposed rule into two
separate definitions--``insurance'' and ``or otherwise''--in our final
rule. The term insurance (at Sec. 423.100 of our final rule) refers to
a health plan that provides, or pays the cost of covered Part D drugs,
including, but not limited to health insurance coverage, a MA plan, and
a PACE organization. We note that our definition of ``insurance'' does
not modify the definition of ``health plan'' at 45 CFR 160.103 of the
HIPAA Administrative Simplification Regulations, or any interpretation
thereof issued by the Department of Health and Human Services.
We believe that the phrase ``or otherwise'' refers to government-
funded health programs. We have defined the term ``government-funded
health programs'' at Sec. 423.100 of our final rule to mean any
program established, maintained, or funded--in whole or in part--by the
Federal government, the
[[Page 4241]]
governments of States or political subdivisions of States, or any
agency or instrumentality of these governments which uses public funds
in whole or in part to provide to, or pay on behalf of, an individual
the cost of Part D drugs. Thus, insurance or otherwise encompasses not
just traditional health insurance coverage that is not considered a
group health plan, but also government programs and entities (including
the Department of Veterans Affairs (VA), IHS, Federally Qualified
Health Centers (FQHCs), Department of Labor (DOL) Federal Workers'
Compensation Program), government insurers (including Medicaid,
Medicaid 1115 demonstrations, and the State Children's Health Insurance
Program (SCHIP)), and government-sponsored funds (including black lung
benefits, Ryan White CARE Act funds, and State special funds that
assist certain individuals with their medical costs, such as a special
fund for AIDS patients).
We believe we have defined these terms consistent with the
Congress's intent of reducing incentives for current employers, other
insurers, and government programs to reduce their current levels of
coverage. Because costs for covered Part D drugs paid by insurance or
otherwise on behalf of a Part D enrollee do not, as previously
discussed, count as incurred costs, any coverage that supplements the
benefits available under Part D coverage that are provided to
beneficiaries by Medicaid, Medicaid Section 1115 ``Pharmacy Plus''
waiver programs, the VA health care program, the IHS, ADAP programs,
and local or State indigent drug programs would not count as an
incurred cost for purposes of TrOOP. We note, however, that to the
extent that a State provides assistance with covered Part D costs to
Part D enrollees with State-only funds and meets the requirements of a
State Pharmaceutical Assistance Program as specified in Sec.
423.464(e)(1), such assistance does count as an incurred cost as
provided by section 1860D-2(b)(4)(C)(ii) of the Act. However, if an
entity providing for or paying the cost of drugs receives a government
grant none of which is used to pay for drugs (for example, a low-income
housing grant)--such an entity is not considered a government-funded
program. On the other hand, if an entity pays for drugs using a mix of
private and public funds, the entity is considered a government-funded
health program, and all of its drug spending is excluded from TrOOP.
As mentioned above, Pharmacy Plus program costs, including State
spending, cannot be counted towards TrOOP because Pharmacy Plus
programs are funded under Medicaid and therefore do not qualify as
SPAPs. For this reason, we believe that, generally, States will be
better off and will realize savings if they restructure their
prescription drug programs as SPAPs, rather than continuing their
Pharmacy Plus programs. Their savings could be used in a variety of
ways, such as directly paying for their enrollees' Part D premiums,
wrapping around the Part D benefit by paying for the required cost-
sharing, or paying Part D plans for supplemental benefits.
According to IHS estimates, we anticipate that a large proportion
of AI/ANs will be eligible for low-income subsidies under Part D, which
should significantly limit the financial impact on I/T/U facilities.
For those AI/ANs not eligible for the low-income subsidies and enrolled
in a Part D plan, the IHS will still obtain some benefit from Part D
coverage because I/T/U facilities participating in Part D plan networks
will be reimbursed for 75 percent of spending (on average) between the
deductible and the initial coverage limit. Moreover, AI/AN enrollees
will experience no difference in the way they obtain their prescription
drugs to the extent that they use I/T/U pharmacies or IHS-contracted
pharmacies.
ADAPs cannot be considered SPAPs because these programs receive
Federal funding. As discussed in subpart J, we have interpreted section
1860D-23(b) of the Act, which requires SPAPs to be State programs that
provide financial assistance for the purchase of provision of
prescription drugs, to mean that an SPAP must provide such assistance
with State funds. Therefore, the definition of the term SPAP excludes
any program in which program funding is from Federal grants, awards,
contracts, entitlement programs, or other Federal sources of funding
(though we clarify that this does not exclude some Federal
administrative funding or incidental Federal monies). Since ADAPs
receive Federal funding, they cannot be defined as SPAPs under Sec.
423.454 of our final rule. However, according to HRSA estimates, we
anticipate that a substantial majority of ADAP enrollees will qualify
for low-income subsidies. For those ADAP enrollees who do not receive a
full or partial subsidy, we estimate that the Part D benefit would pay
75 percent, on average, of an enrollee's covered Part D drug
expenditures between the deductible and initial coverage limit. To
ensure coordination of benefits for the HIV/AIDS and population, as
well as to eliminate any barriers to enrolling in Part D benefits, the
ADAP program may wish to pay for their beneficiaries' premiums to
eliminate any barriers to Part D benefits.
Per several commenters' request, we also wish to clarify that
section 1860D-2(b)(4)(C) of the Act defines the term ``incurred costs''
only for the out-of-pocket threshold. Thus, the fact that coverage that
supplements the benefits available under Part D coverage that is
provided by certain entities is excluded from the definition of
incurred costs for purposes of TrOOP has no bearing on counting that
supplemental coverage against the deductible. In other words, ADAPs,
IHS, and other programs providing coverage that supplements the
benefits provided under Part D may subsidize costs incurred against a
Part D enrollee's deductible for those patients unable to afford these
costs. The provision of the supplemental coverage will not affect an
enrollee's ability to satisfy the deductible and therefore qualify for
reduced cost-sharing between the deductible and the initial coverage
limit. In addition, these entities are not precluded from paying for a
Part D enrollee's cost-sharing above the out-of-pocket threshold once a
beneficiary has accumulated incurred costs in excess of the out-of-
pocket threshold.
Comment: We requested comments regarding the treatment of health
savings account (HSAs), flexible savings arrangements (FSAs), health
reimbursement arrangements (HRAs), and medical savings accounts (MSAs)
vis-[agrave]-vis our definitions of ``group health plan,'' ``insurance
or otherwise,'' and ``third party payment arrangements.'' Many
commenters suggested that HSAs, FSAs, MSAs, and HRAs be excluded from
our proposed definition of ``group health plan'' such that any
distributions used by Part D enrollees to pay out-of-pocket costs
associated with cost-sharing for covered Part D drugs are allowed to
count as incurred costs. These commenters agreed that these funds are
analogous to beneficiaries' bank accounts. Some of these commenters
asked that we specify that payment of out-of-pocket expenses via these
accounts count toward TrOOP only when such accounts are bona fide
arrangements set up in accordance with IRS rules and guidance, such
funds are not limited to paying prescription drug expenses, and
individuals have control over how the funds from these accounts are
utilized. One commenter notes that any exemption of HSAs, FSAs, MSAs,
and HRAs from our definition of ``group health plan'' should be written
carefully to avoid circumvention of Medicare Secondary Payer (MSP)
laws. Another
[[Page 4242]]
commenter noted that from Part D plans' perspective, it makes the most
sense administratively and operationally to allow funds from these
accounts to count toward incurred costs because it will be difficult
for them to identify and differentiate between different sources of
enrollee funds and carve out the payments from TrOOP calculations. One
commenter noted that HRAs present a more difficult case, since they are
by definition employer-funded only. However, this commenter noted that,
from an administrative perspective, it may be difficult to distinguish
between HRAs and other types of personal health savings vehicles.
In contrast, several commenters disagreed that HSAs and similar
accounts should be exempted from our definition of ``group health
plan.'' Some of these commenters believed that contributions from one
type of employer-sponsored benefit should not receive differential
treatment than other types, particularly when contributions from
employer-sponsored group health coverage are not being counted as
incurred costs. One commenter thought that we had no statutory
authority to create a special rule to exempt HSAs from our definition
of ``group health plan.'' This commenter was concerned about non-
employer sponsored HSAs, that these funds are not like bank accounts
given the tax breaks associated with them, that allowing these funds to
count toward TrOOP discriminates against retirees with employer-
sponsored drug coverage, and that we would create a substantial
windfall and unjustified double taxpayer subsidy.
Response: We agree with the majority of the commenters that HSAs,
FSAs, and MSAs are essentially analogous to a beneficiary's bank
account, and that distributions from these personal health savings
vehicles should count as incurred costs for the purposes of the out-of-
pocket threshold. However, as one commenter noted, we believe that HRAs
are fundamentally different from these personal health saving vehicles
because they are required to be solely employer-funded. Although
employers are permitted to contribute funds to HSAs, FSA, and MSAs and
may administer the benefits associated with these accounts, employees
are not foreclosed from contributing to these vehicles as they are
under HRAs. Excluding FSAs, MSAs, and HSAs from the definitions of
``insurance'' and ``group health plan'' for purposes of calculation of
TrOOP expenditures will further our objective of encouraging
beneficiaries to set aside their own money for drug expenses by
allowing those funds to count toward enrollees' TrOOP expenditures. In
order to clarify that distributions from HSAs, FSAs, and MSAs can be
counted toward a Part D enrollee's incurred costs, we have revised the
definitions in Sec. 423.100 of our final rule accordingly and added a
definition of ``personal health savings vehicles'' that is limited to
HSAs, FSAs, and Archer MSAs.
We note that the term ``group health plan'' is used in reference to
TrOOP, creditable coverage, and the retiree subsidy in our final rule,
but that we do not define the term uniformly in our final rule. Section
1860D-22(c) of the Act explicitly defines ``group health plan'' to
include ERISA plans, which may include an FSA, MSA, and, in limited
circumstances, an HSA. The reference to ``group health plan'' under the
creditable coverage provisions in section 1860D-13(b)(4)(C) of the Act
states that a group health plan includes a qualified retiree
prescription drug plan as defined under section 1860D-22 of the Act,
which is in turn based on the definition of ``group health plan'' under
section 1860D-22(C) of the Act and thus may include an MSA or, in
limited circumstances, an FSA or HSA. In contrast, the TrOOP provisions
simply refer to a ``group health plan,'' without specifying what this
term may include. Given that the statutory references to ``group health
plan'' under the TrOOP and creditable coverage provisions use different
language, and that the policies underlying these issues are different,
we have adopted two different definitions of the term ``group health
plan'': one with regard to the TrOOP provisions, and another with
regard to the remaining provisions of Part D, including the creditable
coverage and the retiree subsidy provisions. While the Congress
specifically enumerated two types of coverage to be considered group
health plans with regard to creditable coverage, the TrOOP provisions
do not.
We also note that the definition of a ``group health plan'' used to
implement the Part D drug benefit will differ from the definition of
``group health plan'' used by the Medicare Secondary Payer (MSP)
program for recovery of Medicare payments. While both of our Part D
definitions of ``group health plan'' are based on the ``ERISA''
definition set forth at 29 U.S.C. 1167(1), the MSP definition is taken
from the Internal Revenue Service (IRS) definition of ``group health
plan'' at 26 U.S.C. 5000(b)(1). Therefore, the definitions of ``group
health plan'' in Sec. 423.100 and Sec. 423.4 of our final rule do not
permit circumvention of the MSP laws since they will not apply in the
MSP context.
b. Alternative Prescription Drug Coverage
Section 1860D-2(c) of the Act provides that a Part D sponsor may
offer an alternative prescription drug benefit design, provided that
the Part D sponsor applies for and receives our approval for the
proposed alternative. In order to receive approval to offer an
alternative prescription drug benefit design, a Part D sponsor will
have to meet the requirements related to actuarial equivalence
described in section 1860D-2(c)(1) of the Act, and must use defined
standard coverage (and not actuarially equivalent standard coverage) as
a fixed point of comparison.
Basic Alternative Coverage
Beyond the required parameters for alternative coverage discussed
above, we interpreted the provisions of section 1860D-2(c) of the Act,
together with section 1860D-2(a)(1) of the Act, as providing for two
forms of alternative coverage--either ``basic alternative coverage'' or
``enhanced alternative coverage.'' Basic alternative coverage refers to
alternative coverage that is actuarially equivalent to defined standard
prescription drug coverage. Enhanced alternative coverage refers to
alternative coverage that exceeds defined standard coverage by offering
supplemental benefits.
Within the parameters for alternative prescription drug coverage
described above, a Part D sponsor with a basic alternative prescription
drug benefit design can theoretically--by combining features such as a
reduction in the deductible, changes in cost-sharing, and a
modification of the initial coverage limit--still maintain an actuarial
value of coverage equal to defined standard prescription drug coverage.
Enhanced Alternative Coverage
Section 423.104(f) of our proposed rule permitted Part D sponsors
to provide qualified prescription drug coverage that includes
supplemental benefits. We referred to any Part D benefit package that
includes supplemental benefits as ``enhanced alternative coverage.''
Enhanced alternative coverage includes basic prescription drug
coverage and supplemental benefits. The requirements for the
supplemental benefits that may be included in enhanced alternative
coverage are found in section 1860D-2(a)(2) of the Act. These
supplemental benefits will supplement basic prescription drug coverage,
providing for a package of benefits that exceeds the actuarial value of
defined standard coverage. Supplemental benefits can consist of:
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[[Continued from page 4242]]
[[Page 4243]]
+ Reductions in cost-sharing that increase the actuarial value of
the coverage beyond that of defined standard coverage; or
+ Coverage of drugs that are specifically excluded from the
definition of Part D drugs under section 1860D-2(e)(2)(A) of the Act
and Sec. 423.100 of our proposed rule.
Under section 1860D-2(a)(2)(B) of the Act, a PDP sponsor would not
be permitted to offer a prescription drug plan that provided enhanced
alternative coverage in a particular service area unless it also offers
a prescription drug plan that provides only basic prescription drug
coverage (which we defined as either standard prescription drug
coverage or basic alternative coverage, with access to negotiated
prices) in that same area.
Similarly, as provided under section 1860D-21(a)(1)(A) of the Act,
beginning on January 1, 2006, an MA organization cannot offer an MA
coordinated care plan in a service area unless that plan, or another MA
plan offered by the same organization in the same service area,
includes required prescription drug coverage. As defined in Sec.
423.100 of our proposed rule, required prescription drug coverage, for
the purposes of an MA organization offering an MA-PD plan, included
either: (1) basic prescription drug coverage; or (2) enhanced
alternative coverage, provided there is no MA monthly supplemental
beneficiary premium applied under the MA-PD plan. The enhanced
alternative coverage could be provided without a monthly supplemental
beneficiary premium only if a MA-PD plan applied a credit against the
otherwise applicable premium of rebate dollars available under section
1854(b)(1)(C) of the Act.
Rebate dollars represent the dollars available for supplemental
(and other) benefits when an MA plan's risk-adjusted non-drug bid is
under the risk-adjusted non-drug monthly benchmark amount. In other
words, to the extent that an MA-PD plan chooses to provide enhanced
alternative coverage for no additional premium through the application
of rebate dollars, the enhanced alternative coverage would constitute
required coverage for the purposes of meeting the requirement in
section 1860D-21(a)(1)(A) of the Act.
As provided under section 1860D-21(a)(1)(B)(i) of the Act, an MA
organization could not offer prescription drug coverage (other than
that required under Parts A and B of Medicare) to enrollees of a
medical savings account (MSA) plan. Under section 1860D-21(a)(1)(B)(ii)
of the Act, an MA organization also could not offer prescription drug
coverage (other than that required under Parts A and B of Medicare)
under another type of MA plan--including a private fee-for-service
plan--unless the drug coverage it provided under that MA plan consisted
of qualified prescription drug coverage and met our requirements
regarding required prescription drug coverage.
Given changes in Sec. 417.440(b) of our final rule (described in
subpart T), we clarify in our final rule the requirements associated
with the offering of enhanced alternative coverage by cost plans. As
provided in Sec. 423.104(f)(4)(i) of our final rule, a cost plan that
elects to offer qualified prescription drug coverage under Part D may
offer enhanced alternative coverage only as an optional supplemental
benefit (under Sec. 417.440(b)(2)(ii)), and only if the cost plan also
offers basic prescription drug coverage.
As provided in Sec. 423.104(f)(4)(ii) of our final rule, a cost
plan that elects to offer Part D coverage as an optional supplemental
benefit (under Sec. 417.440(b)(2)(ii)) may only do so if the coverage
it offers consists of qualified prescription drug coverage. However, a
cost plan that does not offer qualified prescription drug coverage may
provide prescription drug coverage that is not qualified prescription
drug coverage, and the requirements of Part D do not apply to the
coverage.
Except as otherwise provided below, the final rule adopts the rules
of alternative coverage set forth in Sec. 423.104(f) and Sec.
423.104(g) of our proposed rule.
Comment: One commenter recommended that we issue regulations
encouraging basic alternative coverage including optional drugs because
it will offer beneficiaries a more comprehensive benefit package.
Response: We do not have the statutory authority to allow basic
alternative coverage to include drugs that are statutorily excluded
from the definition of Part D drugs. Coverage of drugs otherwise
excluded from the definition of Part D drug under section 1860D-
2(e)(2)(A) of the Act is considered a supplemental benefit as provided
under section 1860D-2(a)(2) of the Act. As specified in Sec. 423.100
of our proposed and final rules, basic alternative coverage must be
actuarially equivalent to defined standard coverage and cannot include
any supplemental benefits. The only way that Part D plans may provide
supplemental benefits, to include coverage of drugs excluded from the
definition of Part D drugs under section 1860-D(2)(e)(2)(A) of the Act,
is by providing enhanced alternative coverage.
Comment: One commenter sought clarification as to whether
alternative coverage would be subject to the same kind of out-of-pocket
cost limits and coverage thresholds instituted under standard
prescription drug coverage.
Response: In accordance with section 1860D-2(b)(A)(i)(I) of the
Act, Part D plans offering enhanced alternative coverage may only
reduce certain cost-sharing specifically, a reduction in the
deductible, a reduction in the coinsurance percentage or copayments
applicable to covered Part D drugs obtained between the annual
deductible, and the initial coverage limit, or an increase in the
initial coverage limit. Section 1860D-2(A)(i) does not permit Part D
plans to offer enhanced alternative drug coverage consisting of a
reduction of the out-of-pocket threshold under Sec. 423.104(d)(5)(iii)
of our final rule. Section 1860D-2(c)(3) of the Act also requires that
Part D plans offering alternative prescription drug coverage provide
the same protection against high out-of-pocket expenditures as defined
standard coverage. Thus, enhanced alternative coverage may fill in some
of the coverage gaps in defined standard coverage, but it cannot affect
the true out-of-pocket threshold described in Sec.
423.104(d)(5)(B)(iii) of our final rule, which will be $3,600 in 2006.
In other words, beneficiaries must still incur $3,600 (in 2006) in true
out-of-pocket expenses before they can benefit from the Medicare
catastrophic coverage cost-sharing amounts (the greater of 5 percent
coinsurance or $2/$5 copayments), and before Part D plans are eligible
to receive reinsurance subsidies from Medicare. As with actuarially
equivalent standard coverage, Part D plans can provide an actuarially
equivalent version of the coverage provided after the true out-of-
pocket threshold is met. In addition, enhanced alternative coverage can
improve this coverage.
Comment: Several commenters opposed the provisions of Sec.
423.104(f) of our proposed rule and recommended that the final rule
exclude provisions for enhanced alternative coverage. These commenters
argue that this section exceeds the statutory authority supplied to the
Secretary under the MMA and that allowing such Part D plans to be
offered would make it impossible to make a valid comparison between
Part D plans, thus making it more difficult for beneficiaries to choose
a Part D plan.
Response: We disagree with these commenters. Section 1860D-2(a)(2)
of the Act provides that qualified prescription drug coverage may
include supplemental prescription drug
[[Page 4244]]
coverage consisting of: (1) reductions in cost-sharing (for example, a
reduction in the deductible, a reduction in the coinsurance percentage
or copayments applicable to covered Part D drugs obtained between the
annual deductible and the initial coverage limit, or an increase in the
initial coverage limit), provided these reductions in cost-sharing
increase the actuarial value of the benefits provided above the
actuarial value of basic prescription drug coverage; or (2) coverage of
drugs that are specifically excluded as Part D drugs under section
1860D-2(e)(2)(A) of the Act. ``Enhanced alternative coverage'' is
simply our term for qualified prescription drug coverage that includes
these supplemental benefits specifically permitted by the statute. We
understand commenters' concerns about beneficiaries' ability to compare
Part D plan features given the benefit flexibility design accorded to
Part D plans under the MMA and will work to ensure that our comparative
information is as standardized and user friendly as possible.
c. Negotiated Prices
Section 1860D-2(d)(1) of the Act requires that a Part D sponsor
provide beneficiaries with access to negotiated prices for covered Part
D drugs. As required by section 1860D-2(d)(1)(B) of the Act, negotiated
prices will have to take into account negotiated price concessions for
covered Part D drugs such as discounts, direct or indirect subsidies,
rebates, and direct or indirect remunerations, and would include any
applicable dispensing fees. Access to negotiated prices will be
provided even when no benefits would otherwise be payable on behalf of
an enrollee due to the application of a deductible, the initial
coverage limit, or other cost-sharing.
As required under section 1860D-2(d)(1)(C) of the Act, prices
negotiated with manufacturers for covered Part D drugs by either (1) a
Part D plan, or (2) a qualified retiree prescription drug plan for
covered Part D drugs provided on behalf of Part D eligible individuals
will not be taken into account in making best price determinations
under the Medicaid program.
Section Sec. 423.104(h)(3) of our proposed rule required that Part
D sponsors disclose to us all aggregate negotiated price concessions
including discounts, direct or indirect subsidies, and direct or
indirect remunerations, they obtain from each pharmaceutical
manufacturer that are passed through to the Medicare program in the
form of lower subsidies or to beneficiaries in the form of: (1) lower
monthly beneficiary premiums; or (2) lower covered Part D drug prices
at the point of sale.
As provided under section 1860D-2(d)(2) of the Act, information on
negotiated prices reported to us for the purposes of ascertaining the
level of pass-through will be protected under the confidentiality
provisions applicable to Medicaid pricing data under section
1927(b)(3)(D) of the Act. However, that these confidentiality
protections did not preclude audit and evaluation of negotiated price
concession information by the HHS OIG.
As provided under section 1860D-2(d)(3) of the Act and codified in
Sec. 423.104(h)(4) of our proposed rule, we are authorized to conduct
periodic audits either directly or through contracts with other
organizations of the financial statements and records of Part D
sponsors pertaining to the Part D plans they offer. As required in
section 1860D-2(d)(3) of the Act, this auditing will be performed with
the ultimate goal of protecting the Medicare program against fraud and
abuse, as well as ensuring proper disclosures and accounting under Part
D.
Except as otherwise provided below, the final rule adopts the rules
for negotiated prices set forth in Sec. 423.104(h) of our proposed
rule.
Comment: Some commenters believed that the phrase ``take into
account'' in our definition of negotiated prices is not strong enough,
and that we should establish minimum requirements for the proportion of
total negotiated price concessions passed through to beneficiaries.
Suggestions ranged from a majority (75 to 80 percent) to 100 percent of
negotiated price concessions.
Response: Section 1860D-2(d)(1)(B) of the Act specifically requires
that negotiated prices ``shall take into account negotiated price
concessions, such as discounts, direct or indirect subsidies, rebates,
and direct or indirect remunerations.'' Had the Congress intended that
all negotiated price concessions be passed through to beneficiaries,
they would have used a phrase other than ``take into account'' in the
definition of the term ``negotiated prices.''
In addition, section 1860D-2(d)(2) of the Act specifically requires
that Part D plans disclose to us aggregate negotiated price concessions
that are passed through to enrollees and to us through lower subsidies,
lower monthly premiums, and lower prices through pharmacies and other
dispensers. In requiring Part D plans to disclose to us the extent to
which they pass through negotiated price concessions to enrollees and
to us, section 1860D-2(d)(2) of the Act anticipates that Part D plans
might not pass through all negotiated price concessions. Therefore, we
interpret the definition of the term negotiated prices in section
1860D-2(d)(1)(B) of the Act as requiring Part D plans to pass on to
enrollees some, but not necessarily all, of these price concessions and
have clarified this interpretation in our definition of the term
``negotiated prices'' in Sec. 423.100 of our final rule. We believe
that market competition will encourage Part D plans to pass through to
enrollees a high percentage of the negotiated price concessions they
obtain in the form of negotiated prices at the point of sale.
Establishing minimum threshold levels for the pass-through of
negotiated price concessions would have the effect of undercutting
market competition, as Part D plans might cluster their negotiated
prices around that threshold.
Comment: Some commenters recommended that we clarify how price
concessions will be passed through to the pharmacy and to the
beneficiaries. Some of these commenters specifically asked us to ensure
that Part D plans, not pharmacists, bear the costs of discounts.
Response: The Part D benefit was established by the MMA as a
market-based model under which marketplace competition ensures that
enrollees receive low prices for prescription drugs. Given this market-
based approach envisioned by the Congress, we are wary of regulating
negotiations between private parties particularly regarding the
specifics of price negotiations so as to ensure that enrollees receive
competitive prices on their covered Part D drugs. We note, as well,
that pharmacies are not required to contract with Part D plans. To the
extent that pharmacies believe that the discounts they are being asked
to offer are too high, they can refuse to participate in Part D plan
pharmacy networks. Given our pharmacy access standards at Sec.
423.120(a)(1), we expect that pharmacies will have some leverage vis-
[agrave]-vis the payment provisions in Part D plan contracts.
Comment: Two commenters stated that they considered our requirement
that pharmacies pass through negotiated prices during coverage gaps and
for non-covered formulary drugs to be price controls.
Response: Section 1860D-2(d)(1) of the Act requires, as implemented
under Sec. 423.104(g)(1) of our final rule, that a Part D sponsor
provide enrollees with access to negotiated prices for covered Part D
drugs even when no benefits would otherwise be payable on behalf of an
enrollee due to the application of a deductible, the initial coverage
limit, or other cost-sharing. We interpret the
[[Page 4245]]
reference to the lack of payable benefits due to the application of the
initial coverage limit as referring to that portion of covered Part D
drug expenditures between the initial coverage limit and the threshold
for catastrophic coverage. In that expenditure range, a beneficiary
enrolled in standard prescription drug coverage would be responsible
for 100 percent cost-sharing. These are still covered Part D drugs, and
enrollees should be able to benefit from negotiated prices during the
coverage gap.
We clarify that negotiated prices do not have to be made available
for non-covered Part D drugs. However, as we stated in the preamble to
our proposed rule, we are interpreting the phrase ``or other cost-
sharing'' as a reference to Part D plan designs that include, as part
of their formulary design, access to negotiated prices on certain drugs
but at a tier within their formulary in which the Part D plan would pay
no benefits and the enrollee would be responsible for 100 percent cost-
sharing (in other words, a negotiated price would be available and the
drug would be on the Part D plan's formulary, but the beneficiary would
always be responsible for 100 percent of the drug's negotiated price).
These drugs would therefore be formulary drugs and would have to be
offered at negotiated prices. As stated elsewhere in this preamble,
however, we note that we will review formulary design as part of our
benefit package review to ensure that Part D plans do not establish
formulary structures (including tiered cost-sharing) that substantially
discourage enrollment by certain beneficiaries. To the extent that Part
D plans propose using certain cost-sharing tiers (including, but not
limited to, 100 percent cost-sharing tiers) in a discriminatory
fashion, they would not be allowed.
In addition, we clarify that we interpret the requirement that
negotiated prices always be provided to mean that uniform negotiated
prices must be available to beneficiaries for a particular drug when
purchased from the same pharmacy. In other words, the negotiated price
for a particular drug will be the same, at a particular pharmacy,
regardless of whether a beneficiary's drug spending is between $0 and
the deductible, between the deductible and initial coverage limit,
between the initial coverage limit and the out-of-pocket threshold, or
in excess of the out-of-pocket threshold. We believe that non-uniform
negotiated prices would discourage enrollment by certain Part D
eligible individuals in violation of section 1860D-11(e)(2)(D)(i) of
the Act and, therefore, plans will not be able to apply differential
negotiated prices to any drug purchased from a given pharmacy.
Comment: Other commenters recommended that the definition of the
term ``negotiated price'' reflect the price to the Part D plan net of
any rebates, discounts, or other price concessions paid to the Part D
plan for a covered Part D drug prescription obtained from either a
retail or mail-order pharmacy. Some commenters asked that price
concessions not be allowed to artificially lower the cost of mail order
prescriptions.
Response: Part D sponsors will negotiate prices with pharmacies and
manufacturers, and we assume based on current market practices that
negotiated prices will vary within a retail pharmacy network, as well
as between retail and mail-order pharmacies. How a Part D sponsor nets
out negotiated price concessions in its negotiated prices is at the
discretion of the Part D sponsor, but we expect that competition will
create incentives for Part D sponsors to offer reasonable negotiated
prices. Ultimately, however, these pricing issues are between a Part D
sponsor and the network pharmacies and manufacturers with whom the Part
D plan negotiates price concessions.
Comment: Some commenters recommended that Part D plans be required
to reimburse pharmacies to recover costs of purchasing, handling, and
dispensing products to beneficiaries.
Response: As provided elsewhere in this preamble, negotiated prices
will include any dispensing fees for covered Part D drugs related to
the transfer of possession of the covered Part D drug from the pharmacy
to the beneficiary, including charges associated with mixing drugs,
delivery, and overhead. As provided in section 1860D-11(i) of the Act,
we cannot intervene in negotiations between pharmacies and Part D
plans. Thus, the extent to which Part D plans reimburse pharmacies for
their entire dispensing costs will depend on the outcome of those
negotiations.
Comment: Two commenters noted that our definition of the term
``negotiated prices'' appears to envision network model Part D plans,
but that MA organizations and cost plans that own and operate their own
pharmacies do not negotiate reimbursement rates with contract
pharmacies. One commenter recommended that negotiated prices for such
MA organizations and cost plans be defined as the prescription charge
established by the organization, and that such charge include the
acquisition cost of the drug, dispensing, operational, capital,
overhead, and margin costs. The commenter suggested that, in
determining whether Part D plans' negotiated prices meet the standard
of section 1860D-2(d)(1)(B) of the Act, we could either compare an MA
organization's negotiated prices to negotiated prices of network model
Part D plans in the same market or, alternatively, require the MA
organization to demonstrate how it takes price discounts it receives
from manufacturers into account in its pricing methodology or formula.
Another commenter suggested that we permit such MA organizations to
establish a pricing methodology that reflects a good faith effort to
reflect prices analogous to those that would be negotiated by an MA
organization with third party pharmacy providers, and that we consult
with affected MA organizations in establishing this policy.
Response: We clarify that our definition of the term ``negotiated
prices'' in Sec. 423.100 of the final rule requires that ``discounts,
direct or indirect subsidies, rebates, other price concessions, and
direct or indirect remunerations'' be taken into account in
establishing covered Part D drug negotiated prices. Plans do not have
to take into account pharmacy discounts to the extent that no such
discounts exist. Moreover, we note that our definition of the term
``dispensing fees'' in Sec. 423.100 of the final rule indicates that,
in the case of pharmacies owned and operated by a health plan,
dispensing fees are understood to be the equivalent of all reasonable
pharmacy costs included in the definition (those related to the
transfer of possession of a covered Part D drug to a Part D plan
enrollee), including the salaries of pharmacists and other pharmacy
workers as well of the costs associated with maintaining the pharmacy
facility and equipment necessary to operate the pharmacy. For purposes
of evaluating the validity of a Part D plan's bid, including its
negotiated prices for covered Part D drugs, we will request and
evaluate disaggregated negotiated price concession data only to the
extent that such detail is necessary in order to justify actuarial
assumptions or as part of an audit.
Comment: One commenter asked that we define the meaning of the
terms ``direct or indirect subsidies'' and ``direct or indirect
remunerations.'' Another commenter suggested that negotiated price
concessions reported to us should include formulary placement
incentives, market share movement incentives, administrative fees paid
to
[[Page 4246]]
Part D plans, and direct and indirect forms of remuneration. One
commenter asked that we provide clarification on how rebates will be
calculated, reflected in negotiated prices, and reported to us.
Response: We note that Part D plans may fulfill the requirements of
section 1860D-2(d)(2) of the Act through the data submission
requirements discussed in further detail in subpart G. In other words,
we should be able to determine the proportion of total aggregate price
concessions passed through to either the Medicare program or to
enrollees based on the cost data Part D plans will be required to
submit to us. Although all negotiated price concessions be they direct
or indirect subsidies, direct or indirect remunerations, rebates, or
discounts must be reported to us, as provided in Sec. 423.104(g)(3) of
our final rule, we will require that Part D plans break out any fair
market value administrative fees pharmaceutical manufacturers may pay
Part D sponsors. The use of the term indirect with direct is meant to
be all-inclusive. In other words, we clarify that this means any and
all subsidies or remunerations. We will specify in operational guidance
the format and frequency of these reports, as well as what constitutes
direct or direct subsidies, direct or indirect remunerations, rebates,
and discounts.
Comment: We received a number of comments regarding our aggregate
negotiated price concession disclosure requirements. Several commenters
asked us to clarify that only aggregate price concessions passed
through to us and to enrollees will be reported to us, rather than the
amount or proportion of total price concessions obtained by a Part D
plan. Other commenters thought that Part D plans should be required to
disclose all price concessions, not just the proportion passed through
to Part D enrollees. A number of other commenters asked that we require
the disclosure of negotiated price concession by drug.
Response: We clarify that, as provided under section 1860D-2(d)(2)
of the Act, and specified in Sec. 423.104(g)(3) of our final rule, we
will require that all aggregate negotiated price concession data and
not just the proportion passed through to beneficiaries be reported to
us for purposes of Part D plan bids. However, as explained in subpart
G, it may be necessary for us to receive disaggregated negotiated price
concession data from Part D plans in order to ensure accurate payment
to Part D plans. We will provide further information regarding
negotiated price concession reporting in separate guidance.
Comment: Several commenters recommended that Part D plans share all
negotiated price concession data reporting with SPAPs.
Response: Since nothing in the MMA addresses disclosure of
negotiated price information to SPAPs, FOIA rules apply. FOIA applies
to requests for data from States. FOIA Exemption 4 protects certain
confidential commercial information that is submitted to a Federal
agency. Determinations about the applicability of FOIA Exemption 4 to a
Part D plan's pricing data would be made on a case-by-case basis
depending on whether the submitter of the data could demonstrate that
disclosure of this information would likely cause substantial
competitive harm to the submitter's competitive position. If FOIA
Exemption 4 is found to protect submitted price information, we cannot
disclose this information to States because to do so would violate the
Trade Secrets Act (18 U.S.C. 1905).
Comment: One commenter stated the ``best price'' provision
undermined the original intent of section 1927 (c)(1)(C) of the Act and
would have a negative financial impact on the Medicaid prescription
drug program.
Response: We believe the Congress intended that there be no Federal
barriers to Part D sponsors negotiating the lowest prices possible for
their plan members. If negotiated prices counted towards ``best
price,'' this could create a disincentive for manufacturers to offer
discounts. Further, the purpose of ``best price'' exemptions in section
1927(c)(1)(C) of the Act is to ensure that manufacturers offer Medicaid
programs strong rebates that are market-driven, without penalizing the
manufacturers indirectly for the discounts they offer by law under
other Federal drug programs. Exempting negotiated prices under the new
Medicare prescription drug benefit is consistent with that purpose. The
issue of effects on Medicaid best price is discussed in the impact
analysis.
Comment: One commenter asked for further guidance regarding the
``best price'' exemption, stating that Part D providers should be able
to negotiate simultaneously for commercial prices, which would count
toward ``best price,'' and for Medicare/qualified retiree prices, which
would not count toward ``Best Price.''
Response: Under section 1860D-11(i) of the Act, we have no
authority to regulate price concessions between manufacturers and Part
D plans. Consequently, we cannot prohibit or require Part D plans from
negotiating simultaneously for commercial prices, which would be
included in the calculation of the Medicaid drug rebate best price, and
Medicare prices, which would not be included in the calculation of the
Medicaid drug rebate best price. If Part D plans wish to simultaneously
negotiate their commercial and Medicare prices, they are free to do so.
Comment: One commenter suggested that we recommend to the Congress
alternatives to the existing ``best price'' rebate formula. The
commenter recommended a flat rebate formula to generate savings for
State Medicaid programs, while eliminating the negative impact of the
``best price'' formula on the prescription drug market generally.
Response: This regulation does not address the best price
provisions of the Medicaid drug rebate statute as we do not have the
statutory authority under Title I of the MMA to modify the Medicaid
rebate program.
3. Establishment of Prescription Drug Plan Service Areas (Sec.
423.112)
Section 1860D-11(a)(2) of the Act provides us with the authority to
establish PDP regions, and such PDP regions must be established in a
manner that is consistent with the establishment of MA regions. Section
1860D-11(a)(2)(B) of the Act stipulates that PDP regions must be, to
the extent practicable, consistent with MA regions as established under
section 1858(a)(2) the Act. However, we may establish PDP regions that
vary from MA regions if we determine that access to Part D benefits
would be improved by establishing different regions. Section 1860D-
11(a)(2)(C) of the Act stipulates that we designate a separate PDP
region (or regions) for the U.S. territories.
Except as otherwise provided below, the final rule adopts the
requirements related to the establishment of prescription drug plan
service areas set forth in Sec. 423.112 of the proposed rule.
Comment: We received a number of comments on the establishment of
PDP regions both in response to the provisions of our proposed rule and
as follow-up to a public meeting held in Chicago on July 21, 2004. The
majority of commenters favored establishing 50 State-based regions or,
more generally, a larger number of smaller regions--close to that of
State-level regions. Issues identified in support of 50 State-based
regions included the large assumption of risk associated with the
establishment of larger regions; insufficient time for Part D plans to
negotiate and develop networks, or to renegotiate providers' contracts
and form partnerships; potential difficulties in meeting State
licensure and solvency requirements; and greater ease in terms of
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coordination between Part D plans and SPAPs in providing coverage that
supplements the benefits available under Part D coverage. Several
commenters recommended an intermediate number of regions between the 10
and 50 regions authorized by the MMA. One commenter cautioned us to
develop an appropriate number of regions in order to ensure that
beneficiaries particularly those in rural areas have meaningful access
to Part D choices. Yet another commenter recommended that we align PDP
and MA regions in order to preclude beneficiary confusion by MA
enrollees as they try to understand their options during the initial
enrollment period for Part D coverage.
Several other commenters specifically recommended that a standalone
region be created for Puerto Rico separate from the 50 States and any
of the other U.S. territories. These commenters believe it is necessary
for Puerto Rico to be placed in its own PDP region because a multi-
state PDP region for Puerto Rico would compromise the viability of Part
D on the island. They argue that Puerto Rico-based plans have years of
experience working with the local Medicare population and its distinct
linguistic and cultural traditions and will be disadvantaged when
competing with U.S. companies to build provider networks outside Puerto
Rico. Some commenters also thought that combining Puerto Rico and
another State or States (for example, Florida or New York) will drive
up premiums for Puerto Rican enrollees. On the other hand, one
commenter argued that a standalone region for Puerto Rico would isolate
it, and preferred to stay in the New York region under the MA and PDP
programs.
Response: We conducted a market survey and analysis, including an
examination of current insurance markets as required in the MMA. Key
factors in the survey and analysis included payment rates; eligible
population size per region; PPO market penetration; current existence
of PPOs, MA plans, or other commercial plans; and presence of PPO
providers and primary care providers. Additional factors were also
considered, including solvency and licensing requirements, as well as
capacity issues. In response to the lack of specificity regarding the
PDP regions in our proposed rule, we conducted extensive outreach in
order to obtain public input prior to the publication of our final
rule. On December 6, 2004, we announced the establishment of 26 MA
regions and 34 PDP regions. For maps and fact sheets on the on the
regions, please see http://www.cms.hhs.gov/medicarereform/mmaregions/.
4. Access to Covered Part D Drugs (Sec. 423.120)
a. Pharmacy Access Standards
As required by section 1860D-4(b)(1)(C) of the Act, Part D plans
must secure the participation in their pharmacy networks of a
sufficient number of pharmacies that dispense drugs directly to
patients (other than by mail order) to ensure convenient access to
covered Part D drugs by Part D plan enrollees. To achieve that goal, we
are authorized to establish access rules that are no less favorable to
enrollees than rules for convenient access established in the statement
of work solicitation (MDA906-03-R-0002) by the Department of
Defense (DOD) on March 13, 2003, for purposes of the TRICARE Retail
Pharmacy program. Consistent with the TRICARE standards, our proposed
rule required that Part D plans establish pharmacy networks in which:
In urban areas, at least 90 percent of Medicare
beneficiaries in the Part D plan's service area, on average, live
within 2 miles of a retail pharmacy participating in the plan's
network;
In suburban areas, at least 90 percent of Medicare
beneficiaries in the Part D plan's service areas, on average, live
within 5 miles of a retail pharmacy participating in the prescription
drug plan's or MA-PD plan's network; and
In rural areas, at least 70 percent of Medicare
beneficiaries in the Part D plan's service area, on average, live
within 15 miles of a retail pharmacy participating in the plan's
network.
As provided under section 1860D-21(c)(3) of the Act and codified in
Sec. 423.120(a)(3)(i) of our proposed rule, we are authorized to waive
the pharmacy access standards in Sec. 423.120(a)(1) in the case of an
MA-PD plan or cost plan that provides access (other than via mail
order) to qualified prescription drug coverage through pharmacies owned
and operated by the MA organization that offers the plan or the cost
plan. However, in order for the pharmacy access standards to be waived,
the MA-PD plan or cost plan in question is required to have a pharmacy
network that, per our determination, provides comparable pharmacy
access to its enrollees as provided under Sec. 422.112.
Similarly, section 1860D 21(d)(2) of the Act provides that if a
private fee-for-service MA plan offering qualified prescription drug
coverage provides coverage for drugs, including covered Part D drugs,
purchased from all pharmacies regardless of whether they are network
pharmacies under contract with the MA plan, and provided that
beneficiaries are not charged any cost-sharing above and beyond what
they will be charged under standard prescription drug coverage--the
pharmacy access requirements will also be waived.
As provided under section 1860D-4(b)(1)(A) of the Act, Part D
sponsors will be required to permit the participation in their Part D
plan networks of any pharmacy that was willing to accept the plan's
terms and conditions. Based on section 1860D-4(b)(1)(B) of the Act, our
proposed rule clarified that a Part D sponsor will have the option of
reducing cost-sharing for its enrolled beneficiaries below the level
that would otherwise apply for covered Part D drugs dispensed through
network pharmacies. We interpreted this provision as permitting Part D
sponsors from varying cost-sharing not only based on type of drug or
formulary tier, but also on a particular pharmacy's status within the
Part D plan's pharmacy network-in essence authorizing distinctions
between ``preferred'' and ``non-preferred'' pharmacies.
As stipulated under section 1860D-4(b)(1)(E) of the Act and Sec.
423.120(a)(4)(ii) of our proposed rule, pharmacies could not be
required to accept insurance risk as a condition of participation in a
Part D sponsor's pharmacy network. We defined ``insurance risk'' in
relation to a network pharmacy as referring to risk of the type
commonly assumed only by insurers licensed by a State, but not
including payment variations designed to reflect performance-based
measures of activities within the control of a pharmacy, such as
formulary compliance and generic drug substitutions, or elements
potentially in the control of the pharmacy (for example, labor costs,
and productivity).
Section 1860D-4(b)(1)(D) of the Act requires Part D sponsors to
allow their enrollees to receive benefits at a network retail pharmacy
instead of a network mail-order pharmacy, if they so choose. Consistent
with the statute, our proposed rule allowed Part D plan enrollees who
choose to obtain an extended supply of a covered Part D drug through a
network retail pharmacy to be responsible for any differential between
the network retail pharmacy's and the network mail-order pharmacy's
negotiated price for that covered Part D drug. We sought comments on
our proposal that this price differential be counted as an incurred
cost against the annual out-of-pocket threshold and note that, as
discussed elsewhere in this preamble, we have modified the level
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playing field provision at Sec. 423.120(b)(10) of our final rule to
clarify that an enrollee will be responsible for any higher cost-
sharing (and not a differential in negotiated price) associated with
purchasing a 90-day supply of a covered Part D drug at a network retail
pharmacy, as well as our definition of incurred costs at Sec. 423.100
of the final rule.
Except as otherwise provided below, the final rule adopts the
access standards set forth in Sec. 423.120(a) of the proposed rule.
Comment: In our proposed rule, we interpreted the TRICARE access
standards such that a prescription drug plan or regional MA-PD plan
would have been required to meet or exceed the access standards across
each region in which it operates, and a local MA-PD plan would have to
meet or exceed the access standards in its local service area.
Some commenters supported this application of the TRICARE access
standards in our proposed rules (regional for prescription drug plans
and MA-PD plans). A number of commenters expressed concerns about the
adequacy of our proposed application of the access standards and urged
us to apply the standards at the local (zip-code) level. A number of
other commenters urged us to apply the TRICARE standards at the State
level. Several other commenters recommended that Part D plans meet the
access standards at the broadest geographic area served by the plan
(for example, regional, multi-regional, or national).
Response: Although section 1860D-4(b)(1)(C)(ii) of the Act directs
us to adopt access standards no less favorable to enrollees than those
set forth in the March 13, 2003, statement of work solicitation
(MDA906-03-R-0002) of the Department of Defense under the
TRICARE Retail Pharmacy Program, we note that the statement of work
does not specify the geographic level at which to apply the TRICARE
standard. We therefore believe that we have discretion to apply the
TRICARE standards at the geographic level we believe to be most
appropriate.
Although we considered applying the TRICARE standard at the local
(zip code or county) level for Part D plans, we believe such
application would make it impossible for Part D plans to meet the
standards particularly the rural standard--in some parts of the
country. On the other hand, we believe that application of the access
standards at the broader, regional level would not adequately ensure
convenient access for beneficiaries given the potential for Part D
plans to ``average out'' the access standards across many urban,
suburban, and rural areas in a region--thus meeting the access
standards in the aggregate but potentially leaving certain parts of a
region without convenient access to retail pharmacies.
We agree with commenters who proposed a State-level application of
the TRICARE pharmacy access standards for regional MA-PD plans and
prescription drug plans, and have made changes to Sec. 423.120(a)(1)
accordingly such that a prescription drug plan or regional MA-PD plan
will have to meet or exceed the access standards across urban,
suburban, and rural areas, respectively, in each State in which it
operates, a local-MA-PD plan would have to meet or exceed the access
standards across urban, suburban, and rural areas, respectively, in
each service area (including multi-county service areas) in which it
operates, and a cost plan would have to meet or exceed the access
standards across urban, suburban, and rural areas, respectively, in
each geographic area in which it operates. In other words, a
prescription drug plan or regional MA-PD that operates in a multi-
region or national service area could not meet the access standards
proposed in Sec. 423.120(a)(1) by applying them across the entire
geographic area serviced by the plan; instead, it would have to meet
the standards in each State of its multi-region or national service
area. We believe that such an interpretation is a reasonable compromise
between application at the local level and application at the regional
or national level, and maximizes Part D plan flexibility while ensuring
convenient access to network pharmacies for Part D enrollees.
Comment: Some commenters expressed concern that TRICARE's rural
access standard was insufficient to provide convenient access to
network pharmacies in rural areas and urged us to adopt a more adequate
definition of rural. Others argued for an exceptions process for
remote, isolated areas in which it is simply not feasible to establish
pharmacy networks that comply with our requirements.
Response: We are aware of the difficulties faced by rural
beneficiaries in accessing medical care. We believe that TRICARE's
definition of ``rural'' is adequate and have not modified it in our
final rule (though we will monitor the access standards over time to
ensure they continue to provide convenient access to all
beneficiaries). Furthermore, we believe access in rural areas will be
improved given our revised interpretation of the access standards,
whereby we will evaluate access at the State (and not the regional)
level. However, we are aware--based on our experience implementing the
Medicare Prescription Drug Discount Card and Transitional Assistance
Program--that there are likely to be several States in which meeting
the rural access standard will be impossible or impracticable given the
lack of infrastructure. We expect to establish an exceptions process,
which we will outline in operational guidance to Part D plans that will
account for any problem areas and mitigate any disincentives plans may
have to avoid doing business in parts of the country in which meeting
the pharmacy access standards would be a challenge.
In addition, and as explained elsewhere in this preamble, and
codified in Sec. 423.120(a)(2) of our final rule, we will allow Part D
plans to count certain non-retail pharmacies--specifically, I/T/U,
Federally Qualified Health Center (FQHC), and Rural Health Center (RHC)
pharmacies--toward the pharmacy access requirements in Sec.
423.120(a)(1) of our final rule. We believe this policy will help
ensure convenient access in rural areas.
Comment: Several commenters asked that we ensure that national Part
D plans are created. These commenters thought that national Part D
plans would be of benefit to beneficiaries who travel regularly or who
reside in more than one State in a given year (for example,
``snowbirds''), and urged that the ramifications of choosing a local
MA-PD plan or a regional Part D plan be made clear to beneficiaries who
may not realize the implications of such limited geographic access when
they select Part D plan coverage.
Response: Although a Part D sponsor may offer a Part D plan in more
than one PDP or MA region, it is not required to do so. Therefore, we
cannot require national Part D plans, though we certainly recognize the
benefits of such plans for some beneficiaries given the limited
applicability of our out-of-network access policy. We note that our
pharmacy access standards would not in any way preclude Part D sponsors
from contracting with pharmacies outside their Part D plans' service
areas, provided that the plans meet the pharmacy access requirements
within their service areas. Such a feature would be of particular use
to beneficiaries who spend significant amounts of time outside their
Part D plan's service area (for example, snowbirds) and could make a
particular Part D plan that offered such benefits more attractive to
beneficiaries who travel regularly. National Part D plans are also of
interest to employers who have retirees living throughout the country,
and the
[[Page 4249]]
employer group waiver authority discussed in subpart J could facilitate
these employer-only national Part D plans. We also note that, as part
of our information dissemination requirements in Sec. 423.128(b) of
the final rule, Part D plans will be required to inform beneficiaries
about the plan's service area, as well as the locations of network
pharmacies.
Comment: Several commenters asked us to make allowances for
``snowbirds,'' stating that our regulations should allow Part D
sponsors to offer ``visitor/traveler'' benefits available under the MA
program. One commenter specifically suggested the application of the MA
requirements, which allow an organization to provide such benefits to
an individual who is temporarily out of the area for up to 12 months. A
few commenters stated that we should require prescription drug Part D
plans to offer visitor/traveler benefits. One commenter suggested,
however, that we allow exceptions for regional Part D plans and those
with out-of-network services. One commenter suggested that we consider
allowing Part D plans to offer ``travel'' networks without requiring
them to contract in those regions, suggesting that this could be an
interim approach pending evaluation of the cost/payment experience for
both Part D plans and us.
Response: We appreciate the feedback provided by the commenters on
applying a visitor/traveler benefit to prescription drug plans as has
been provided to the MA program. We do not have the authority to
establish a visitor/traveler benefit. However, as noted above, our
pharmacy access standards would not in any way preclude Part D sponsors
from contracting with pharmacies outside their plans' service areas,
provided that plans meet the pharmacy access requirements within their
service areas, and such access is not provided outside the United
States.
Comment: We interpreted the access requirements in section 1860D-
4(b)(1)(C) of the Act as requiring Part D plans to count only retail
pharmacies as part of their networks for the purpose of meeting the
access standards, and we proposed defining a retail pharmacy as any
licensed pharmacy from which covered Part D enrollees could purchase a
covered Part D drug without being required to receive medical services
from a provider or institution affiliated with that pharmacy. We also
requested comment regarding whether we should allow Part D plans to
count pharmacies that are operated by the Indian Health Service, Indian
tribes and tribal organizations, and urban Indian organizations (I/T/U
pharmacies) toward their network access requirements when the
pharmacies are under contract with the Part D plan, and it would be
impossible or impracticable for the plan to meet the access standard in
rural areas of its service area without the inclusion of some or all of
these pharmacies. In addition, we solicited comments on permissible
ways to ensure enrollee access to FQHC and rural pharmacies, since
these pharmacies could potentially provide access to covered Part D
drugs in remote, rural areas.
Several commenters support counting only retail pharmacies towards
Part D plans' access requirements. Other commenters supported allowing
I/T/U pharmacies to count toward Part D plans' pharmacy access
requirements to the extent that we do not require Part D plans to offer
I/T/U pharmacies a standard contract, at a minimum.
Response: We agree that, in most cases, only retail pharmacies,
which we define in Sec. 423.100 of our final rule as any licensed
pharmacy from which covered Part D enrollees could purchase a covered
Part D drug without being required to receive medical services from a
provider or institution affiliated with that pharmacy, should count
toward our pharmacy access standards. Examples of non-retail pharmacies
include I/T/U, FQHC, Rural Health Center (RHC), and hospital and other
provider-based pharmacies, as well as Part D-owned and operated
pharmacies that serve only plan members.
However, as explained elsewhere in this preamble, we are concerned
about access to pharmacies in rural and underserved areas. As one way
of addressing this concern, Sec. 423.120(a)(2) of our final rule
allows Part D plans to count certain non-retail pharmacies--
specifically, I/T/U, FQHC, and RHC pharmacies toward the pharmacy
access requirements in Sec. 423.120(a)(1) of our final rule.
FQHCs and RHCs face many of the same barriers to inclusion in
commercial plan networks as do I/T/U pharmacies, which we discuss in
greater detail elsewhere in this preamble. Beneficiaries served by
FQHCs and RHCs are often served in those settings because of their
financial and geographic circumstances. We believe that allowing Part D
plans to count these pharmacies toward their access requirements will
incentivize plans to make an extra effort to solicit and include these
pharmacies in their networks. As the number of these pharmacies is
limited and, with the exception of I/T/U pharmacies, can generally
offer services to a broad-based population, we do not believe that this
exception will have a significant impact on convenient access to
pharmacies in rural areas for the general population. However, we
intend to review Part D plans' proposed pharmacy networks to ensure
that their inclusion of I/T/U, FQHC, and RHC pharmacies does not
substitute for the inclusion in Part D plan networks of retail
pharmacies. We also note that this policy should not be interpreted as
requiring broader access to I/T/U, FQHC, and RHC pharmacies than is
currently permissible.
Comment: Several commenters expressed concern about the inclusion
of rural and FQHC pharmacies in Part D plan networks, with some
advocating for requiring plans to contract in some cases, under
preferential contracting terms and conditions with these pharmacies.
Other commenters opposed requiring Part D plans to contract with
specific kinds of pharmacies, asserting that the any willing pharmacy
and pharmacy network access requirements are sufficient to ensure an
adequate pharmacy network for all beneficiaries. One commenter asked
that, to the extent we require Part D plans to contract with certain
pharmacies, plans would only be required to offer standard terms and
conditions.
Response: With the exception of I/T/U pharmacies, we will not
require Part D plans to contract with non-retail pharmacies including
FQHC or rural pharmacies. We believe our access standards for rural
areas and the Statewide application of access rules generally will
ensure adequate access in rural areas. However, as discussed elsewhere
in this preamble, we will allow Part D plans to count I/T/U, FQHC, and
RHC pharmacies toward their access requirements as an incentive for
Part D plans to contract with these pharmacies, which are critical
providers in underserved areas.
Comment: One commenter believes we should mandate that Part D plans
solicit inner city and rural pharmacies that meet the Small Business
Administration's small business standard for participation in their
pharmacy networks and should give them access to any terms that the
Part D plan offers to a subset of pharmacies.
Response: We believe the pharmacy access standards, as well as
their application at the State level, in Sec. 423.120(a)(1) of our
final rule, will ensure adequate access to covered Part D drugs for all
Part D enrollees in urban, suburban, and rural areas. Given the
standards, pharmacies' bargaining power will be strengthened in
underserved areas. Ultimately, however, it is at Part D plans'
discretion how they will establish pharmacy networks--
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including the offering of contracting terms and conditions that are
different than standard contracting terms and conditions and the
establishment of preferred pharmacies provided they meet our pharmacy
access standards, non-discrimination provisions, and other applicable
requirements under Part D. We believe that the type of market
intervention requested by the commenter is contrary to the Congress's
intent that we not interfere in the private negotiations between Part D
plans and pharmacies. We will therefore not mandate that Part D plans
solicit inner city and rural retail pharmacies or that they
automatically deem them preferred pharmacies within their networks.
Comment: We sought public comments regarding whether we should
consider using the authority in section 1860D-4(b)(1)(C) of the Act to
require that Part D plans contract with a sufficient number of home
infusion pharmacies in their service area to provide reasonable access
for Part D enrollees.
Several commenters supported requiring Part D plans to contract
with a sufficient number of home infusion pharmacies in their service
areas to ensure adequate access for beneficiaries. One commenter noted
that this requirement would result in savings for the Medicare program
by reducing expenditures under Parts A and B. In addition, these
pharmacies allow beneficiaries to safely receive their medications at
home by providing training and skilled support so beneficiaries can
avoid the inconvenience of hospitals, clinics, and doctor visits. One
commenter urged us to expand our proposed requirement to include all
specialty pharmacies, not just home infusion pharmacies.
Other commenters recommended not mandating Part D plans to contract
with these non-retail pharmacies but rather encourage participation
because it would reduce negotiating leverage of plans with these
pharmacies.
One commenter urged that home infusion pharmacies should not be
counted toward network TRICARE standards.
Response: We agree with commenters who believe that we should use
our authority under section 1860D-4(b)(1)(C) of the Act to require Part
D plans to provide adequate access to home infusion pharmacies. Given
coverage of home infusion drugs under Part D, we do not believe it is
an option for Part D plans not to include at least some home infusion
pharmacies in their networks in order to provide enrollees with
meaningful access to those drugs. This is particularly a concern with
regard to prescription drug plans which, unlike other Part D plans, do
not benefit from reduced medical costs associated with home infusion
and may therefore have little incentive to contract with home infusion
pharmacies. Therefore, we have added a new provision to our final
regulations at Sec. 423.120(a)(4) which requires Part D plans to
demonstrate to us that they provide adequate access to home infusion
pharmacies consistent with CMS operational guidance to Part D plans. We
expect that Part D plans will demonstrate adequate access based in part
on the number of enrollees in their service areas and the geographic
distribution and capacity of home infusion pharmacies in those service
areas. We have not included specialty pharmacies that do not provide
home infusion services in this requirement however, as it is unclear
whether beneficiaries will need routine access to such pharmacies or
would not be adequately served through our out-of-network access rules.
We clarify, that we have made a distinction between specialty
pharmacies and long-term care pharmacies. We note that home infusion
pharmacies will not count toward Part D plans' pharmacy access
requirements because they are not retail pharmacies.
Comment: We requested comments regarding the advantages and
disadvantages of using the authority provided under section 1860D-
4(b)(1)(C)(iv) of the Act to require Part D plans to approach some or
all long-term care pharmacies in their service areas with at least the
same terms available under their standard pharmacy contracts, or,
alternatively, to not require (but strongly encourage) Part D sponsors
to negotiate with and include long-term care pharmacies in their Part D
plans' pharmacy networks. In addition, we requested comments regarding
how to balance convenient access to long-term care pharmacies with
appropriate payment to long-term care pharmacies under the provisions
of the MMA.
Some commenters were adamant that the current one-to-one
relationship between the long-term care pharmacies and nursing homes be
preserved, as it is critical to ensuring safety and convenient access
to drugs for Medicare beneficiaries residing in nursing homes. One
commenter suggested that Part D plans should also provide standardized
long-term care pharmacy contracts that recognize long-term care
pharmacies' essential role.
Some commenters recommended that the final regulation require Part
D plans to contract with any willing long-term care pharmacy. A number
of commenters would prefer that we do not require Part D plans to
contract with any particular non-retail pharmacies (including long-term
care pharmacies) because both our access standards and the any willing
pharmacy requirement adequately address our objective of ensuring
access to Part D drugs for all enrollees. One commenter notes that Part
D plans will need to include long-term care pharmacies in their
networks to meet access standards, and that this will encourage Part D
plans to contract with long-term care pharmacies. Another believes that
we struck a balance with the option for long-term care pharmacies to
provide benefits in- or out-of-network because it gives long-term care
pharmacies and Part D plans the appropriate negotiating flexibility to
reach mutually satisfactory arrangements for providing services to
long-term care residents. Also, one commenter points out that some
long-term care pharmacies would not be able to meet all the operational
standards necessary to participate in Part D, and Part D plans would
have to negotiate special reimbursement rates with these pharmacies.
Some commenters believe that we should promote appropriate payment
methodologies (for example, via dispensing fees or separate fee
schedules to pay for specialized services) that would enable all long-
term care pharmacies to join networks and provide a meaningful benefit.
Another variation suggested was that a Part D plan should be required
to include at least one long-term care pharmacy in its network and to
contract with any long-term care pharmacy that agrees to the Part D
plan's standard contract.
One commenter reasoned that there should be a balance in the
contracting requirement; for example, long-term care pharmacies that
service X percent of beneficiaries should also be required to contract
with at least one Part D plan. But, without this balance, the commenter
felt the Part D plans and long-term care pharmacies should be strongly
encouraged to contract with each other. A few commenters believed that
we should encourage, but not require, Part D plans to contract with
long-term care pharmacies and that we should explicitly state in
regulation that long-term care residents can access long-term care
pharmacies as out-of-network providers when those pharmacies do not
contract with particular Part D plans. Other commenters believe that it
is sufficient to require that long-term care pharmacies be offered
standard
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contracting terms and conditions by Part D plans.
Response: Section 1860D-4(b)(1)(C)(iv) of the Act provides that, in
establishing rules for convenient access to network pharmacies, we may
include standards with respect to access to long-term care pharmacies
for Part D enrollees who reside in long-term care facilities. For a
variety of reasons, including the quality aspects of Federal nursing
home regulations, it is generally the case that long-term care
facilities have chosen to contract with a single long-term care
pharmacy. Given this state of affairs, our proposed rule assumed that
Part D enrollees residing in a long-term care facility could not
reasonably be expected to access their Part D drugs at another pharmacy
if their facility's long-term care pharmacy is not part of their Part D
plan's network. In the proposed rule, we proposed that enrollees
residing in long-term care facilities whose contracted long-term care
pharmacies did not participate in their Part D plans' networks could
continue to use those long-term care pharmacies consistent with our
proposed out-of-network access policy. However, given the narrow
statutory authority to establish out-of-network access rules provided
by section 1860D-4(b)(1)(C)(iii) of the Act, we do not believe as
discussed in greater detail elsewhere in this preamble that access to
out-of-network pharmacies on a routine basis can be justified. Thus,
beneficiaries residing in long-term care facilities that do not
contract with a pharmacy included in their Part D plan network will not
be able to access covered Part D drugs at the out-of-network long-term
care pharmacy through the out-of-network access rules in Sec. 423.124
of our final rule.
However, it is important to note that we will provide a SEP for
prescription drug plan enrollment and disenrollment for beneficiaries
entering in, living in, or leaving an institution. In addition,
individuals enrolled in an MA-PD plan have an unlimited open enrollment
period for institutionalized individuals (OEPI). While MA organizations
may choose individually, at the plan level, whether or not to be open
for enrollments during this period, they must always accept
disenrollments.
Given the risk associated with institutionalized beneficiaries,
relying on the market alone to ensure that Part D plans include a
sufficient number of long-term care pharmacies in their networks may
not be sufficient. We note that relying on the pharmacy access
standards in Sec. 423.120(a)(1) of our final rule will also not ensure
sufficient access to long-term care pharmacies, since many of these
pharmacies are not retail pharmacies and therefore would not count
toward those requirements. Absent a contracting mandate, Part D plans
may view contracting with long-term care pharmacies given the risk
associated with institutionalized beneficiaries as too risky. To the
extent that we require Part D plans to solicit long-term care
pharmacies in their service areas to join their networks, plans may be
forced to negotiate preferential contracting terms and conditions
(relative to the terms they would offer any other pharmacy willing to
participate in its network) for long-term care pharmacy-specific
specialized packaging and services with a number of long-term care
pharmacies in order to meet our requirement. In addition, although the
statute includes an ``any willing pharmacy'' requirement, even if we
require Part D plans to contract with any long-term care pharmacy in a
service area, we cannot compel long-term care pharmacies to accept the
plans' terms and conditions.
We believe it is essential to inject competition into the long-term
care pharmacy market while preserving the relationships and levels of
service that long-term care facilities now enjoy vis-[agrave]-vis their
contracted long-term care pharmacies. To that end, we have used our
authority under section 1860D-4(b)(1)(C)(iv) of the Act to require, in
Sec. 423.120(a)(5) of our final rule, that Part D plans offer standard
contracting terms and conditions, including performance and service
criteria for long-term care pharmacies that we will specify in
operational guidance to all long-term care pharmacies in their service
areas. In other words, we are establishing an ``any willing pharmacy''
requirement specifically for long-term care pharmacies, coupled with a
requirement that Part D plans develop standard contracting terms and
conditions for long-term care pharmacies, such that any pharmacy in a
service area could become an eligible long-term care pharmacy by
certifying that it meets certain performance and service criteria for
providing pharmacy services to long-term care facilities. These
criteria would be incorporated into a Part D plan's standard
contracting terms and conditions for long-term care pharmacies. We will
provide further detail regarding these criteria in operational
guidance, but we expect that they will address access to urgent and
emergency medications on a 24/7 basis, standardized prescribing
systems, and the availability of one of several standard delivery
packaging and delivery systems for routine medications. We expect to
review the reasonableness of Part D plans' standard contracting terms
and conditions for long-term care pharmacies. We note that entities
other than current long-term care pharmacies (for example, retail
pharmacies) could become an eligible long-term care pharmacy by meeting
these standards of practice, so long as they also meet specific State
law requirements, if any, for such entities. Plans in a region would be
required to contract with any willing long-term care pharmacy in that
region, provided those pharmacies were able to reach agreement with
Part D plans on all standard contract terms and conditions including
payment rates.
As provided in Sec. 423.120(a)(5) of our final rule, we will
require Part D plans to demonstrate that they have contracts with a
sufficient number of long-term care pharmacies to ensure convenient
access to prescription drugs for institutionalized beneficiaries within
the service area. We will provide more detailed information in CMS
guidance regarding what constitutes convenient access, but we expect
that Part D plans will demonstrate convenient access based in part on
the number of enrollees in their service areas and the geographic
distribution, capacity, and contracting relationships with long-term
care facilities of long-term care pharmacies in those service areas.
We expect that each long-term care facility will select one or more
eligible network pharmacies to provide a Part D plan's long-term care
drug benefits to all of its residents enrolled in a Part D plan. In
order to minimize the number of pharmacy suppliers and maintain patient
safety, long-term care facilities will likely select long-term care
pharmacies that meet Part D standards and participate in the largest
number of Part D plan long-term care networks. To maintain convenient
access and minimize out-of-pocket expenses, Part D plan enrollees would
obtain Part D benefits from the eligible long-term care pharmacy
selected by the facility. The SEP and OEPI available to
institutionalized beneficiaries, which will provide beneficiaries with
the ability to change Part D plans to the extent that their current
Part D plan does not include their facility's long-term care pharmacy
in its network, will further incentivize long-term care pharmacies to
participate in as many Part D plan long-term care networks as possible.
All long-term care pharmacies in a region will have to negotiate
terms and conditions with as many Part D plans as possible or risk
losing this business to
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another more competitive long-term care pharmacy. This competition will
preserve the one-to-one long-term care pharmacy long-term care facility
relationship favored by so many commenters, but will require a
negotiation between the long-term care pharmacy and the Part D plan to
maintain that relationship. Given our rules for access to Part D drugs
for institutionalized Part D enrollees, all Part D products and
services would be removed from existing long-term care pharmacy
contracts because payments for drugs for dual eligible individuals
under Medicaid will become obsolete. This will likely necessitate the
renegotiation of existing long-term care facility/long-term care
pharmacy contracts. Separating the cost of the drug and dispensing fee
from other long-term care pharmacy specialized services (for example,
drug administration) may provide for more appropriate negotiation of
these services and costs between long-term care facilities and
pharmacies. We note that Part D plan payments under medication therapy
management programs, described in further detail elsewhere in this
preamble, may represent an additional revenue stream to long-term care
pharmacy services for some of the special services provided by these
pharmacies but not reimbursed through dispensing fees.
We believe that our long-term care pharmacy access rules will align
incentives to accomplish several goals, including ensuring that long-
term care pharmacies come to the table in good faith; negotiation of
more competitive pricing than currently exists in the long-term care
pharmacy market; and allowing for the one long-term care facility-one
long-term care pharmacy relationship to remain intact, to the extent
that long-term care facilities would like to keep it that way.
Comment: Two commenters favored the carve-out of beneficiaries in
long-term care facilities through the establishment of a separate PDP
region in which plans could bid, at risk, to serve this population.
Response: We understand that, given the institutionalized
population's special needs, a carve-out of this population may seem
logical. However, given the risk associated with institutionalized
beneficiaries, we believe that carving out such a high-risk population
would result in significant adverse selection and could result in
unsustainable beneficiary premiums for the institutionalized
population. In addition, our research related to risk adjustment is
still in progress, and until that research is completed, we cannot be
certain as to whether our risk adjustment model could adequately
mitigate the risk inherent in this population under the highly unique
circumstances of a plan serving only a carved-out institutionalized
population. Consequently, particularly in the first few years after the
implementation of the Part D program, we wonder whether potential Part
D sponsors would be willing to serve a carved-out institutionalized
population and therefore ensure access to Part D drugs for Part D
enrollees residing in long-term care facilities. We are also concerned
that beneficiaries entering and leaving long-term care facilities will
be forced to change Part D plans to the extent that institutionalized
beneficiaries are carved out into a separate PDP region. For these
reasons, we will not create a separate PDP region for institutionalized
beneficiaries and, as discussed above, will ensure convenient access to
covered Part D drug in long-term care facilities as provided in Sec.
423.120(a)(5) of our final rule.
Comment: We requested comments regarding whether we should use our
authority under section 1860D-4(b)(1)(C)(iv) of the Act to require-or,
instead, strongly encourage-that Part D sponsors approach any I/T/U
pharmacies in their Part D plan service areas with at least the same
terms available under the plan's standard pharmacy contracting terms
and conditions.
Some commenters believe that we must use our authority under
section 1860D-4(b)(1)(iv) of the Act to require Part D plans to
contract with I/T/U pharmacies because, without this requirement,
private plans will have little or no financial incentive to contract
given the uniqueness of both the AI/AN population and I/T/U pharmacies.
Simply encouraging contracts will not work because of the uniqueness
and remoteness of I/T/U facilities and the perceived cost and time to
contract with these pharmacies. These commenters urge us to require, in
regulation, that Part D plans contract with I/T/U pharmacies using
specific contract provisions. They urge us to consider one of several
approaches to ensuring that I/T/U pharmacies experience no reduction in
revenue as a result of the transition from Medicaid to Medicare Part D:
supplemental payments from Part D plans or the Federal government to
supplement the difference between the amount paid by the Part D plan
and the amount the I/T/U pharmacy would have received under Medicaid, a
carve-out of AI/AN enrollees for Part D plans willing to serve only
those beneficiaries through I/T/U pharmacies, and an exemption of dual
eligibles from Part D (with continued prescription drug coverage under
Medicaid).
Response: There are currently 235 I/T/U pharmacies serving 107,000
senior and disabled AI/ANs in 27 States. In some areas, I/T/U
pharmacies may be the only facilities capable of providing medication
therapy management services to certain AI/AN beneficiaries due to
language and cultural barriers. It is our understanding that I/T/U
pharmacies are not currently well integrated in commercial pharmacy
networks. We agree with the commenters who believe that--in the absence
of a contracting requirement--Part D plans may make assumptions
regarding the administrative costs (whether real or perceived) of
contracting with I/T/U pharmacies and may not actively solicit the
inclusion of these pharmacies in their networks. The lack of I/T/U
pharmacies in Part D plan networks would render enrollment in Part D of
little use to AI/AN beneficiaries who rely primarily on I/T/U
facilities for their health care. For this reason, we have added a
provision to our final regulations, at Sec. 423.120(a)(6), requiring
that Part D plans offer contracts to all I/T/U pharmacies in their
service areas.
However, we recognize that contracting with I/T/U pharmacies is
potentially more complex than contracting with retail pharmacies given
that there are a number of provisions in the standard contracts of
commercial health plans that would likely need to be modified or
deleted given statutory or regulatory restrictions to which I/T/U
pharmacies are subject, as well as the particular circumstances of I/T/
U pharmacies (for example, I/T/U pharmacies purchase drugs off the
Federal Supply Schedule (FSS) or through the 340B program; can only
serve AI/ANs; may have less experience than retail pharmacies, or none
at all, with point-of-sale technology; are not typically well
integrated into commercial pharmacy networks; generally stock a more
limited range of drugs than would be required under a Part D formulary;
and always waive co-pays). Thus, standard contracting terms and
conditions will not be sufficient for Part D plans to obtain the
participation of I/T/U pharmacies in their networks. We are therefore
requiring Part D plans to include a special addendum to their standard
contracting terms and conditions in order to account for these
differences. We will work with major stakeholders to develop a model
special addendum that will take the special
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circumstances of I/T/U pharmacies into account. As provided in Sec.
423.120(a)(6) of our final rule, we will require Part D plans to
demonstrate that they have contracts with a sufficient number of I/T/U
pharmacies to ensure convenient access to prescription drugs for AI/AN
enrollees within the service area. We expect to review the
reasonableness of Part D plans' standard contracting terms and
conditions for I/T/U pharmacies.
While we understand the Indian Health Service's concerns regarding
reductions in revenue resulting from the transition of drug coverage
from Medicaid to Medicare, we clarify that we do not have the statutory
authority to require supplemental payments from Part D plans or the
Federal government to supplement the difference between the amount paid
by the Part D plan and the amount the I/T/U pharmacy would have
received under Medicaid; a carve-out of AI/AN enrollees for Part D
plans willing to serve only those beneficiaries through I/T/U
pharmacies; or an exemption of dual eligibles from Part D (with
continued prescription drug coverage under Medicaid). As we develop the
model special addendum for I/T/U contracts, we will consider how,
within our statutory authority, we might ensure that I/T/U pharmacies
do not experience significant revenue losses as a result of the
transitioning of drug coverage from Medicaid to Part D for dual
eligible AI/ANs.
Comment: Several commenters noted that many small I/T/U pharmacies
and dispensaries carry a limited stock of drugs, and that an exemption
from formulary requirements (and the ability to use permissible
substitutes) is necessary in order to accommodate the fact. In
addition, these commenters note that another factor in whether I/T/U
pharmacies will stock a particular drug is whether it is available from
the Federal Supply Schedule or 340B program, which are the principal
sources of drugs purchased by I/T/U pharmacies. Thus, a Part D plan may
choose one particular cholesterol-lowering agent on its formulary
because it is able to negotiate a greater discount for that particular
Part D drug. However, I/T/U pharmacies may be able to access a
different medication for a similar, or perhaps lower, price and
therefore include that drug on its formulary.
Response: We are aware that most Tribes and Tribal Organizations
(operating under health programs pursuant to contracts under the Indian
Self-Determination Education and Assistance Act, Public Law 93-638) and
all IHS facilities use the Department of Veterans Affairs
Pharmaceutical Prime Vendor (PPV) for purchasing their pharmaceuticals.
By ordering through the PPV, IHS and Tribes (but not Urban programs)
are able to access FSS Contract, National Standardization Contract, and
Blanket Purchasing Agreement pricing for pharmaceuticals. In addition
to FSS pricing, Tribes and Urban programs that have been designated as
Federally Qualified Health Centers (FQHCs) and have been approved by
the Health Resources and Services Administration (HRSA) are eligible
for HRSA 340B drug pricing. Since I/T/U facilities have access to
different pricing than commercial health plans, their formulary
selections reflect the drugs for which this pricing is available. As
previously mentioned, we are requiring Part D plans to include a
special addendum to their standard contracting terms and conditions in
order to account for the differences between retail and I/T/U
pharmacies and therefore facilitate contracting with these pharmacies.
We will work with major stakeholders to develop a model special
addendum that will take the special circumstances of I/T/U pharmacies
into account, including the limited stocking of drugs at these
facilities.
Comment: Several commenters said that the any willing pharmacy rule
should apply to mail order as well as retail pharmacies, and that Part
D plans should not be able to exclusively use a plan-owned mail order
facility.
Response: We agree that the any willing pharmacy requirement at
section 1860D-4(b)(1)(A) of the Act applies to all pharmacies--
including non-retail pharmacies such as mail-order pharmacies--
notwithstanding a Part D plan's ability to designate certain of its
network pharmacies as preferred pharmacies with lower cost-sharing, or
to negotiate terms better than those in its standard terms and
conditions with certain pharmacies. We clarify that a Part D plan could
have standard terms and conditions for retail pharmacies and a second,
separate set of standard terms and conditions for mail order pharmacies
in light of those pharmacies' different characteristics. For example, a
plan's contracting terms and conditions for mail-order pharmacies could
reflect the full cost of adding another mail-order vendor, as well as
the differential costs of strong data controls involved with having
multiple network mail-order pharmacies.
Comment: One commenter said it was not clear how the any willing
pharmacy rule applies to facilities that are owned and operated by a
Part D plan. The commenter said such plans should be permitted to
maintain a limited network of contract pharmacies for purposes of
meeting the access standard in order to maximize cost savings.
Response: We agree with this commenter that the any willing
pharmacy requirement makes little sense in the context of Part D plans
that own and operate their own pharmacies particularly since the
pharmacy access rules in Sec. 423.120(a)(1) of our final rule will be
waived for MA-PD plans and cost plans that can demonstrate comparable
pharmacy access under Sec. 422.112. As provided in Sec. 423.458(b) of
our final rule, we may waive any Part D provision as applied to an MA-
PD plan if it duplicates, or is in conflict with, provisions otherwise
applicable to the MA organization or MA-PD plan under Part C of
Medicare, or if waiver of a Part D provision is necessary in order to
improve coordination of benefits under Part D with those offered under
Part C. Similarly, Sec. 423.458(d) provides that we may waive any Part
D provision as applied to a cost plan if it duplicates, or is in
conflict with, provisions otherwise applicable to the cost plan under
section 1876 of the Act, or if waiver of a Part D provision is
necessary in order to improve coordination of benefits under Part D
with those offered by the cost plans. We will consider waiving this
requirement for Part D plans that own and operate their own pharmacies
to the extent that they request such waiver as provided in Sec.
423.458(b)(2) and Sec. 423.458(d) of our final rule.
Comment: We sought comment on whether, in order to guarantee that
any pharmacy willing to meet a Part D sponsor's contracting terms and
conditions could participate in a Part D plan's pharmacy network, we
should require that a Part D sponsor make available to all pharmacies a
standard contract for participation in their Part D plans' networks.
A number of commenters thought that Part D plans should be required
to have a standard or model contract for use with all pharmacies. Other
comments said that we should not require a standard contract.
Alternatively, several commenters said that even with a standard
contract, Part D plans should have maximum flexibility to vary their
contracting terms and conditions in order to reflect local conditions.
Some questioned whether we should try to evaluate whether pharmacy
contract terms are ``reasonable and relevant,'' as proposed in subpart
K of our proposed rule.
Response: We concur with the majority of commenters on this issue
and will require, under Sec. 423.505(b)(18) of our final rule that
Part D plans offer pharmacies reasonable and relevant
[[Page 4254]]
standard terms and conditions for network participation. We do not
intend to define ``reasonable and relevant'' in order to provide Part D
plans with maximum flexibility to structure their standard terms and
conditions.
However, it is unreasonable to assume--the any willing pharmacist
requirement notwithstanding--that a Part D plan could establish a
network using a uniform set of terms and conditions throughout a
service area because it will likely need to modify contracting terms
and conditions to ensure access to certain pharmacies (for example,
rural and long-term care pharmacies). We clarify that standard terms
and conditions particularly for payment terms may vary to accommodate
geographic areas or types of pharmacies) and that this is acceptable,
provided that all similarly situated pharmacies are offered the same
standard terms and conditions. Thus, for example, provided Part D plans
offer all mail-order pharmacies in a particular area with the same
standard terms and conditions, they may offer separate standard terms
and conditions to mail-order pharmacies. With standard terms and
conditions as a ``floor'' of minimum requirements that all similarly
situated pharmacies must abide by, Part D plans may modify some of
their standard terms and conditions to encourage participation by
particular pharmacies.
Comment: Many commenters disagreed with our interpretation of the
``any willing pharmacy'' provision, specifically with allowing Part D
plans to construct networks of preferred and non-preferred pharmacies
that have different requirements for beneficiary cost sharing. These
commenters argued that allowing preferred networks undermines the any
willing pharmacy rule and runs counter to Congressional intent. Many
said that allowing Part D plans to steer beneficiaries to preferred
pharmacies would impede pharmacy access and disrupt existing
relationships between pharmacists and patients. Some argued that our
interpretation would disadvantage small, independent, and rural
pharmacies. Others said that a designation of ``non-preferred'' would
carry a negative connotation about the pharmacy's quality of service.
Several other commenters concurred with the any willing pharmacy
policy in our proposed rule. One commenter said that State any willing
pharmacy laws should be expressly preempted, while another commenter
said we should clarify that State any willing provider laws continue to
apply to Part D plans' non-Medicare business. One commenter asked us to
clarify the extent to which we will allow Part D plans to vary their
cost sharing for preferred networks.
Response: We believe that we have correctly interpreted the two
related provisions in sections 1860D-4(b)(1)(A) and (B) of the Act,
which require Part D plans to allow any willing pharmacy to participate
in their pharmacy networks, while also allowing Part D plans to reduce
cost-sharing differentially for network pharmacies. General principles
of statutory interpretation require us to reconcile two seemingly
conflicting statutory provisions whenever possible, rather than
allowing one provision to effectively nullify the other provision.
Consequently, when a statutory provision may reasonably be interpreted
in two ways, we have an obligation to adopt the interpretation that
gives full effect to competing provisions of the statute. We believe
that our policy of permitting cost-sharing discounts for preferred
pharmacies, as codified in Sec. 423.120(a)(9), strikes an appropriate
balance between the need for broad pharmacy access and the need for
Part D plans to have appropriate contracting tools to lower costs.
We note, however, that while these within network distinctions are
allowed, the statute also requires that such tiered cost-sharing
arrangements in no way increase our payments to Part D sponsors.
Therefore, tiered cost-sharing arrangements based on within-network
distinctions could be included in Part D plans' benefits subject to the
same actuarial tests that apply to formulary-based tiered cost-sharing
structures. Thus, a reduction in cost sharing for preferred pharmacies
in a Part D plan network could be offered through higher cost sharing
for non-preferred pharmacies (or as alternative prescription drug
coverage). We also note that differential cost-sharing in the context
of preferred and non-preferred pharmacies does not raise the cost-
sharing obligation of low-income subsidy eligible enrollees above the
levels specified in sections 1860D-14(a)(1) and (2) of the Act.
We recognize the possibility that Part D plans could effectively
limit access in portions of their service areas by using the
flexibility provided in Sec. 423.120(a)(9) of our final rule to create
a within-network subset of preferred pharmacies. In other words, in
designing its network, a Part D plan could establish a differential
between cost-sharing at preferred versus non-preferred pharmacies--
while still meeting the access standards in Sec. 423.120(a)(1) of our
proposed rule--that is so significant as to discourage enrollees in
certain areas (rural areas or inner cities, for example) from enrolling
in that Part D plan. We emphasize that such a network design has the
potential to substantially discourage enrollment by certain Part D
enrollees, and that we have the authority under section 1860D-
11(e)(2)(D) of the Act to disallow benefit designs that are
discriminatory. We clarify that State any willing pharmacist laws would
be preempted as applicable to plans' Part D business. This is
consistent with section 1860D-12(g) of the Act, which extends the State
preemption provisions under section 1856(b)(3) of the Act to Part D
plans.
Comment: Several commenters thought that Part D plans should only
be allowed to have differential cost sharing for preferred pharmacies
if they exceed the TRICARE access standard.
Response: We see no statutory basis for such a rule. Moreover, it
would be difficult to construct and operationalize such a policy.
Comment: Several commenters wrote that special needs enrollees
should be exempted from higher cost sharing at non-preferred
pharmacies.
Response: We see no statutory basis for such a rule, and we believe
that Part D plans will provide sufficient access for all Part D
enrollees under our access standards in Sec. 423.120(a)(1). As noted
in our proposed rule, we will use the authority provided under section
1860D-11(e)(2)(D) of the Act to review, as part of the bid negotiation
process, how Part D plan networks make preferred and non-preferred
distinctions among their network pharmacies and disallow them if such
proposed network designs would substantially discourage enrollment by
certain beneficiaries in any part of a Part D plan's service area. We
believe that special needs enrollees will be sufficiently protected by
this review. To the extent that special needs enrollees are also
eligible for low-income subsidies, as indicated above, differential
cost-sharing based on preferred pharmacy status does not raise the
cost-sharing obligation of low-income subsidy eligible enrollees above
the levels specified in the Act.
Comment: Several commenters suggested that the TRICARE access
standards be applied to Part D plans' ``preferred'' networks rather
than its general network. Several other commenters concurred with the
regulation as drafted in the proposed rule.
Response: Section 1860D-4(b)(1)(B) of the Act clarifies that a Part
D sponsor has the option of reducing cost-sharing for covered Part D
drugs dispensed through network pharmacies below the level that would
have otherwise applied. Because the statute provides
[[Page 4255]]
that such distinctions can be made within a network, we do not believe
that only preferred pharmacies constitute a Part D plan's network for
the purposes of meeting the access standards in Sec. 423.120(a)(1) of
our final rule. Rather, both preferred and non-preferred pharmacies
form part of a Part D plan network, and plans may count both of these
types of network pharmacies toward their access standards.
Comment: Several commenters recommended that beneficiaries be able
to get an extended supply of drugs, greater than a 30-day supply, from
network retail pharmacies and mail-order pharmacies.
Response: We clarify that section 1860D-4(b)(1)(D) of the Act, and
Sec. 423.120(a)(10) of our final rule, require Part D plans to permit
enrollees to receive extended supplies (for example, 90-day supplies)
of covered Part D drugs through a network retail pharmacy.
Comment: Some commenters noted that our proposed regulations would
unfairly allow Part D plans to charge beneficiaries more when they
obtain their prescriptions at a community pharmacy than when they use
mail order. One commenter notes that seniors benefit from face-to-face
interaction with a pharmacist more than other age groups, which would
be precluded under mail order and would limit enrollees' ability to use
the pharmacy and pharmacist of their choice.
Many commenters recommended that we specifically prohibit Part D
plans from using economic incentives for beneficiaries to use mail
order that could create significant differences in cost sharing for
mail order versus retail pharmacy prescription, or that plans make such
difference minimal. One commenter recommended that Part D plans use the
same average wholesale price (AWP) basis to determine the reimbursement
rate for mail order and retail pharmacies. Another commenter noted that
there is substantial evidence that seniors, particularly low-income
seniors, are victims of theft from their mailboxes, undermining the
financial incentive of mail order. This commenter recommended that we
allow beneficiaries to pay the mail order price at a retail pharmacy
when they can demonstrate their mailbox is not secure.
Response: As provided in section 1860D-11(i) of the Act, we have no
authority to interfere with the negotiations between Part D plans and
pharmacies and therefore cannot mandate that Part D plans negotiate the
same, or similar, reimbursement rates with all pharmacies. Provided
Part D plans offer all pharmacies standard terms and conditions, they
may modify their contracting terms--including payment provisions as
necessary, as long as all similarly situated pharmacies are subject to
the same minimum terms and conditions. Moreover, section 1860D-
4(b)(1)(B) of the Act provides Part D plans with the authority to
designate some network pharmacies, including mail-order pharmacies, as
preferred pharmacies offering plan enrollees lower cost sharing.
Comment: One commenter noted that MA organizations that own and
operate their own pharmacies usually have internal systems for
providing prescription services by mail that are fully integrated with
the overall pharmacy operation. As a result, it is difficult to provide
an incentive to beneficiaries to use less costly mail services. The
commenter said we should permit these organizations to establish
differential benefit levels for mail delivery as opposed to in-facility
pickup.
Response: As noted above, Part D plans have the flexibility to
establish different cost-sharing requirements for the pharmacies in
their networks consistent with section 1860D-4(b)(1)(B) of the Act.
Accordingly, Part D plans have the flexibility to establish
differential cost-sharing requirements for mail delivery and in-
facility pickup.
Comment: One commenter recommended that we require Part D plans to
contract with pharmacies that offer home delivery service, noting that
same-day or next day need for medications makes mail-order an
impracticable option.
Response: We do not believe there is a compelling rationale to
require Part D plans to contract with pharmacies that offer home
delivery service. As discussed elsewhere in this preamble, we have
defined the term ``dispensing fees'' in Sec. 423.100 of our final rule
to include reasonable pharmacy costs, including delivery costs,
associated with ensuring that possession of the appropriate covered
Part D drug is transferred to a Part D enrollee. We clarify that
reasonable delivery costs include only those costs appropriate for the
typical beneficiary in a particular pharmacy setting. Thus, while it
would be appropriate for Part D plans to reimburse long-term care,
mail-order, and home infusion pharmacies for home delivery costs via
the dispensing fee, this would not be the case for retail pharmacies
(where the term ``delivery'' would be limited to the transfer of a
covered Part D drug from the pharmacist to the patient at the point of
sale) because the typical retail customer does not require home
delivery. While retail pharmacies may offer home delivery services,
Part D plans may not reimburse those pharmacies for these costs, and
the delivery cost must be borne by the beneficiary.
Comment: Two commenters expressed their support for our
interpretation of the term ``insurance risk'' and asked that we include
in our regulations a statement that the prohibition against the
assumption of risk by Part D plans' network pharmacies not preclude
performance-based measures of activities within the control of a
pharmacy (for example, formulary compliance and generic drug
substitution).
Response: We clarify that our definition of the term ``insurance
risk'' in Sec. 423.4 of the final rule specifically excludes ``payment
variations designed to reflect performance-based measures of activities
within the control of a pharmacy, such as formulary compliance and
generic drug substitutions.''
b. Formulary Requirements
1. P&T Committee Requirements
To the extent that a Part D sponsor uses a formulary to provide
qualified prescription drug coverage to Part D enrollees, it will be
required to meet the requirements of section 1860D-4(b)(3)(A) of the
Act to use a pharmaceutical and therapeutic (P&T) committee to develop
and review that formulary.
The majority of members comprising the P&T committee will be
required to be practicing physicians or practicing pharmacists. In
addition, at least one practicing pharmacist and one practicing
physician member will have to be experts in the care of elderly and
disabled individuals. Section Sec. 423.120(b)(1)(ii) of the proposed
rule also provided that at least one practicing pharmacist and one
practicing physician members on a Part D plan's P&T committee be
independent experts.
When developing and reviewing the formulary, the P&T committee will
be required, in accordance with section 1860D-4(b)(3)(B) of the Act, to
base clinical decisions on the strength of scientific evidence and
standards of practice, including assessing peer-reviewed medical
literature. Section Sec. 423.120(b)(1)(viii) of our proposed rule
required that any decisions made by the P&T committee regarding
development or revision of a Part D plan's formulary be documented in
writing.
Except as otherwise provided below, the final rule adopts the
requirements related to P&T committees set forth in Sec. 423.120(b)(1)
of our proposed rule.
Comment: Many commenters thought that P&T committee decisions
regarding
[[Page 4256]]
a Part D plan's formulary should be binding on a plan. Other commenters
thought that P&T committee recommendations should be advisory, and not
binding. Several others believed that only clinical decisions should be
binding on the Part D plan and that the ultimate responsibility for
overall formulary design should reside with the plan and ultimately
involved business leaders and technical experts. One commenter stated
that it was not likely that a P&T committee comprised of non-employee
clinicians would be able to make coverage determination in the Part D
plan's and enrollees' best interests, particularly since many benefit
design decisions have a financial, as well as a clinical, component.
Response: We agree with commenters who sought to draw a distinction
between clinical and overall formulary design issues. We believe that
the function of a P&T committee is to provide expertise on clinical
issues, and not financial or benefit design issues. We interpret the
requirement in section 1860D-4(b)(3)(A) of the Act and Sec.
423.120(b)(1) of our final rule that Part D plan formularies be
developed and reviewed by a P&T committee to mean that committee
recommendations regarding which drugs are placed on a plan's formulary
be binding on the Part D plan. Although Sec. 423.120(b)(vi) and
(b)(vii) of our final rule envision a role for the P&T committee in
reviewing policies that guide exceptions and other utilization
management processes including drug utilization review, generic
substitution, quantity limits, and therapeutic interchange and in
evaluating and analyzing treatment protocols and procedures related to
the Part D plan's formulary at least annually, P&T committee
recommendations in these areas should be considered advisory and not
binding. We clarify, for example, that while the P&T committee may be
involved in providing clinical recommendations regarding the placement
of a particular Part D drug on a formulary cost-sharing tier, the
ultimate decision on such formulary design issues is the Part D plan's,
and that decision weighs both clinical and non-clinical factors. Thus,
a P&T committee's role in formulary cost-sharing tiers, while
important, would be advisory and not binding.
Comment: Many commenters recommended that we strengthen the
statutory requirement in section 1860D-4(b)(3)(A)(ii) of the Act and
require that more than just one practicing physician and one practicing
pharmacist are independent and free of conflict. Suggestions for new
requirements included that all, a majority, two-thirds, one-half, 40
percent, and at least four (at least two practicing physicians and two
practicing pharmacists) members of a Part D plan's P&T committee be
independent and free of conflict in order to ensure that formulary
development is in line with beneficiary and not plan or pharmaceutical
manufacturer interests. One commenter supported our current requirement
requiring that at least one practicing physician and one practicing
pharmacist on the committee be independent and free of conflict
Response: We appreciate commenters' suggestions and agree that
maintaining the impartiality and objectivity of P&T committee members
is an important goal. We have retained the proposed rule requirement
that at least one practicing pharmacist and one practicing physician on
the P&T committee be independent and free of conflict--in Sec.
423.120(b)(1)(ii) of our final rule, though Part D plans should view
this requirement as a floor which we encourage them to exceed. To
balance concerns about conflicts of interest with regard to P&T
committee members, and as proposed in the draft benefit design review
criteria we recently issued for public comment, we would require all
P&T committee members to sign a conflict of interest statement
revealing economic or other relationships with entities that could
influence pharmaceutical decisions, and to disclose such conflicts to
other committee members. If P&T committee discussions center around a
drug that presents a conflict of interest issue for a particular
committee member, he or she would recuse himself or herself from any
discussions or votes associated with that drug. We believe this
requirement is necessary to ensure that the P&T committee's clinical
decisions regarding development and review of the formulary are based
on the strength of scientific evidence and standards of practice,
safety and efficacy considerations, and other such appropriate
information and considerations in accordance with section 1860D-
4(b)(3)(B) of the Act. In addition, this requirement is consistent with
best practices in pharmacy benefit management, and we expect that Part
D plans will implement disclosure of conflicts and recusal procedures
consistent with standard industry practice.
Comment: Many commenters requested clarification regarding our
definition of the term ``independent and free of conflict'' with
respect to a Part D sponsor and a Part D plan. Several commenters asked
to clarify that our regulations regarding independence and freedom from
conflict not preclude individuals from serving on a P&T committee
simply because they are members of a Part D plan's provider network.
Response: In our proposed rule, we interpreted the language at
section 1860D-4(b)(3)(A)(ii) of the Act requiring certain members of
the P&T committee to be ``independent and free of conflict'' to mean
that such P&T committee members could have no stake, financial or
otherwise, in formulary determinations. We believe this interpretation
is still appropriate, but clarify that we believe a P&T committee
member not to be free of conflict of interest if he or she has any
direct or indirect financial interest in any entity--including Part D
plans and pharmaceutical manufacturers--that would benefit from
decisions regarding plan formularies.
Thus, Part D plan network providers may be considered to be
independent and free of conflict, provided they are not plan employees
or contract workers and do not otherwise have any conflicts of
interests that would compromise their independence. In cases of staff
model HMOs, panel providers may be determined to be independent and
free of conflict to the extent that any remuneration received from a
Part D plan is limited to his or her clinical responsibilities for the
care of plan enrollees.
Comment: In our proposed rule, we interpreted the language at
section 1860D-4(b)(3)(A)(ii) of the Act requiring certain members of
the P&T committee to be ``independent and free of conflict'' to mean
that such P&T committee members would be required to be independent and
free of conflict not only with respect to a Part D sponsor and its Part
D plan, but also for pharmaceutical manufacturers. Some commenters
supported such a requirement. A few commenters opposed such a
requirement, however, claiming that our interpretation imposes a more
stringent requirement than is permitted under the MMA. A number of
other commenters cautioned us that our interpretation could exclude a
significant number of individuals who are engaged in pharmaceutical and
clinical research funded by pharmaceutical manufacturers.
Response: Section 1860D-4(b)(3)(A)(ii)(I) of the Act requires that
at least one practicing physician and at least one practicing
pharmacist on a Part D plan's P&T committee be independent and free of
conflict only with respect to a Part D sponsor and its Part D plan.
However, given the requirement in section 1860D-4(b)(3)(B) of the Act
that
[[Page 4257]]
the P&T committee base clinical decisions on the strength of scientific
evidence and standards of practice, and taking into account therapeutic
advantages in terms of safety and efficacy, we believe it is necessary
for those committee members who are ``independent and free of
conflict'' to be so with respect to pharmaceutical manufacturers as
well. We agree that P&T committee members could have certain non-
employee relationships with pharmaceutical manufacturers (for example,
consulting, advisory, or research relationships) and still be
considered independent and free of conflict, provided those
relationships do not constitute significant sources of their income and
they do not otherwise have any conflicts of interests that would
compromise their independence. As already mentioned, our draft benefit
review criteria (recently issued for public comment) would require all
P&T committee members to sign a conflict of interest statement
revealing economic or other relationships with entities that could
influence pharmaceutical decisions. This requirement is consistent with
best practices in pharmacy benefit management, and we expect that it
will be met consistent with industry standards for conflict of interest
disclosures.
Comment: Several commenters supported requiring that a plurality of
P&T committee members be experts in the care of elderly and disabled
patients. Some commenters recommended that use of the certified
geriatric pharmacist credential would be an appropriate way to ensure
that at least one pharmacist on the P&T committee has expertise in care
of the elderly. One commenter opposed requiring that at least one
practicing physician and one practicing pharmacist be experts in the
care of elderly and disabled patients. Another commenter thought that
at least one member of Part D plans' P&T committees should be a State
Medicaid representative.
Response: As provided in Sec. 423.120(b)(1)(iii) of our final
rule, we are retaining the requirement that at least one practicing
physician and one practicing pharmacist on a P&T committee have
expertise in the care of elderly or disabled persons, though plans
should view this requirement as a floor which they can certainly
exceed. As proposed in the draft benefit design review criteria we
recently issued for public comment, we would require P&T committee
members to represent various clinical specialties. This requirement is
consistent with best practices in pharmacy benefit management and will
ensure that appropriate expertise--including in the areas of care of
disabled and elderly populations--is included on Part D plans' P&T
committees and that their clinical decisions are based on the strength
of scientific evidence and standards of practice, and safety and
efficacy considerations. We expect that P&T committee members will
represent a mix of clinical specialties in order to ensure that P&T
committees have the breadth of expertise necessary to adequately
evaluate scientific evidence, standards of practice, and other
information.
Comment: A number of commenters suggested that we should require
that P&T committees include experts in certain clinical specialties
(for example, nephrology, oncology, rheumatology, dermatology, mental
health, long-term care, and many others) or, at the very least, that
such experts serve as consultants to P&T committees.
Response: We agree that P&T committee members should represent
various clinical specialties in order to provide the depth of expertise
needed to develop an adequate formulary and utilization management
processes for the Medicare population. As proposed in the draft benefit
design review criteria we recently issued for public comment, we would
require P&T committee members to represent various clinical
specialties. This requirement is consistent with best practices in
pharmacy benefit management. In addition, we note that, since committee
members must base clinical decisions on the strength of scientific
evidence and standards of practice, it is not essential that every
specialty be represented--either as a P&T committee member or as a
consultant. For some issues, the use of peer-reviewed medical
literature--including randomized clinical trials, pharmacoeconomic
studies, outcomes research data, and other such information--may be
sufficient.
Comment: We received a number of comments regarding our
requirements for the basis of clinical decisions by Part D plan P&T
committees. One commenter supported our characterization of the
appropriate role of quality and cost considerations in Part D plan
formulary development. Some commenters emphasized that cost
considerations should be secondary to clinical issues in formulary
development and review. One commenter suggested segregating cost and
clinical reviews to preserve objectivity. Several commenters
specifically suggested that we require Part D plan P&T committees to
use classes of data that are included in the Academy of Managed Care
Pharmacy (AMCP) format for Formulary Submissions--including clinical
trials, health outcomes studies, and economic and budget impact
models--as well as clinical guidelines issued by medical specialty
societies. Several other commenters encouraged us to require Part D
plans to consider data addressing total health care costs, if
available, rather than pharmacy costs, in any cost considerations used
for clinical decision-making.
Response: As required in section 1860D-4(b)(3)(B) of the Act, P&T
committees will be required to base clinical decisions on the strength
of scientific evidence and standards of practice, including assessing
peer-reviewed medical literature (for example, randomized clinical
trials, pharmacoeconomic studies, outcomes research data, and other
such information as the committee determines appropriate). In addition,
a P&T committee must take into account whether including a particular
Part D drug on the Part D plan's formulary (or on a particular
formulary tier) has any therapeutic advantages in terms of safety and
efficacy. Where applicable, therapeutic advantage should be considered
in relation to the interaction of a drug therapy regimen and the use of
other health care services.
We agree with commenters who urged that Part D plans consider data
addressing total health care costs, if available, rather than pharmacy
costs, in any cost considerations used for clinical decision-making.
Since Part D sponsors have discretion with regard to the actual
information their P&T committees use, we cannot mandate that all Part D
plans use pharmacoeconomic studies, for example. However, in our
subsequent guidance we intend to make clear that to the extent that the
Part D plan considers costs in making its decision, it will take into
account total health care costs rather than just drug costs. For
example, to the extent that a particular drug has been shown to be more
effective in preventing the need for hospital care or better at
controlling acute flare-ups requiring the use of other services, we
expect P&T committees to take these things into account in their
determinations of drug efficacy. Given these requirements for evidence-
based decision-making, it is our expectation that committee members
will balance any relevant cost considerations with clinical
considerations.
Comment: Some commenters supported a role for P&T committees in
designing formulary tiers and any other clinical program implemented to
encourage the use of preferred drugs. One commenter supported such a
role,
[[Page 4258]]
provided that P&T committees are not required to be engaged in other
benefit design issues.
However, several commenters believed that P&T committees should
have no involvement in the development of utilization management
programs including development of cost-containment tools, medication
therapy management programs, and quality assurance programs, as well as
more specific benefit design issues such as the development of cost-
sharing tiers and should instead be limited to providing Part D plans
with clinical recommendations on formularies. Other commenters thought
that we should provide Part D plans with flexibility to determine how
utilization management programs are designed and administered.
Response: We believe that the requirement in section 1860D-3(c)(1)
of the Act that Part D sponsors establish an appropriate cost-effective
drug utilization management program supports a role for P&T committees
in the development of formulary management practices and policies--
including prior authorization, step therapy, generic substitution,
quantity limits, and other drug utilization management activities that
affect access to covered Part D drugs. Furthermore, section 1860D-
4(b)(3)(F) of the Act and Sec. 423.120(b)(1)(vii) of our final rule
require Part D plans to periodically evaluate and analyze treatment
protocols and procedures. Clinical input is critical in the development
of these policies in order to ensure that formulary management
decisions balance economic and clinical factors to achieve appropriate,
safe, and cost-effective policies. The review by P&T committees of Part
D plan policies that guide exceptions and other utilization management
processes is not only an important component in ensuring that plans
adopt appropriate utilization management activities consistent with the
statutory requirements, but also is consistent with best practices in
pharmacy management policy. However, as previously stated, we believe
that the primary function of a P&T committee is to provide clinical and
not financial or benefit design--expertise.
Comment: Some commenters suggested that P&T committees review
formularies regularly, with some suggesting a quarterly review and
others an annual review
Response: As proposed in the draft benefit design review criteria
we recently issued for public comment, we expect that P&T committees
will meet on a regular basis, but not less frequently than on a
quarterly basis. This standard is consistent with best practices in
pharmacy management policy.
Comment: One commenter urged us to specify minimum timeframes for
periodic evaluation of Part D plan treatment protocols and formulary-
related procedures under Sec. 423.120(b)(4) of our proposed rule. A
number of commenters recommended that protocol reviews be conducted on
an ongoing basis at least quarterly, whereas some specified that such
reviews be conducted at least annually.
Response: As specified in Sec. 423.120(b)(1)(vii) of our final
rule, Part D plan P&T committees will be required to evaluate and
analyze treatment protocols and procedures related to the plan's
formulary at least annually.
Comment: A number of commenters also asked us to require that P&T
committees have processes for making formulary revisions between
regularly scheduled meetings when new clinical information becomes
available or the FDA approves new medications.
Response: As proposed in the draft benefit design review criteria
we recently issued for public comment, we expect that P&T committees
will review new Part D drugs, or drugs for which new clinical
information is made available by the Food and Drug Administration,
within 90 days of the availability of new information. This will allow
for appropriate formulary changes to be made with all due speed and
ensure that a Part D plan's formulary is based on the most recently
available scientific evidence, standards of practice, and drugs'
relative therapeutic advantages in terms of safety and efficacy.
However, we expect that drugs pulled from the market by the FDA or
manufacturers will be removed from Part D plan formularies immediately.
Comment: Many commenters suggested additional requirements for
ensuring P&T committee accountability, including requiring Part D plans
to have a P&T committee regardless of whether they have a formulary or
not; including a patient advocate on the committee to represent
interests of patients; developing an oversight mechanism similar to
local Medicare carrier advisory committees; requiring P&T committee
meetings to be held publicly in order for consumers and stakeholders to
have an opportunity to hear committee deliberations; requiring Part D
plans to include a charge ensuring that the interests of beneficiaries
are protected by their benefit design decisions; requiring thorough
documentation of the rationale for P&T committee decisions; and
requiring P&T committee decisions to be issued to the public upon
request within a reasonable period of time.
Response: These requirements are not consistent with standard
practice in pharmacy benefit management. We believe that our
requirements in Sec. 423.120(b)(1) of the final rule, as well as our
formulary review which will consider the structure and utilization of
an organizations P&T committee will sufficiently ensure that P&T
committees function as a forum for evidence-based formulary review. As
an added safeguard, and as provided in Sec. 423.120(b)(1)(viii) of our
final rule, we will require Part D plan P&T committees to document in
writing the basis of their decisions regarding formulary development
and revision and utilization management activities.
2. Plan Formularies
As provided under section 1860D-4(b)(3)(C)(ii) of the Act, we
requested that the U.S. Pharmacopoeia (USP) develop a model set of
guidelines that consists of a list of drug categories and classes that
may be used by Part D sponsors to develop formularies for their
qualified prescription drug coverage, including their therapeutic
categories and classes. For more information about the USP model
guidelines and the model guidelines themselves, please consult http://www.usp.org/drugInformation/mmg/
.
Section 1860D-4(b)(3)(C) of the Act provides, and Sec.
423.120(b)(2) of our proposed rule required, the inclusion of drugs in
each therapeutic category and class of Part D drugs in a Part D plan's
formulary, although not necessarily all drugs within such categories
and classes. As discussed in the proposed rule, we interpreted this
provision to require coverage of at least two Part D drugs within each
therapeutic category and class of Part D drugs, unless only one Part D
drug existed in a particular therapeutic category and class of Part D
drugs.
We sought comments on ways to balance Part D plans' flexibility to
use utilization management mechanisms to maximize covered Part D drug
discounts and lower enrollee premiums with the needs of certain special
populations of Part D enrollees, including Part D enrollees residing in
long-term care facilities.
In accordance with section 1860D-4(b)(3)(C)(iii) of the Act, Part D
sponsors cannot change therapeutic categories and classes in a
formulary other than at the beginning of a Part D plan year, except as
we would permit to take into account new therapeutic uses and
[[Page 4259]]
newly approved Part D drugs. Section 423.120(b)(4) of our proposed rule
specified that, in accordance with section 1860D-4(b)(3)(F) of the Act,
Part D sponsors will periodically be required to evaluate and analyze
treatment protocols and procedures related to their formularies to
ensure that their Part D plan members were receiving the best possible
care for conditions related to their use of covered Part D drugs.
In addition, section 1860D-4(b)(3)(E) of the Act requires that Part
D sponsors provide ``appropriate notice'' to us, affected enrollees,
authorized prescribers, pharmacists, and pharmacies regarding any
decision to either: (1) remove a drug from its formulary; or (2) make
any change in the preferred or tiered cost-sharing status of a drug.
Section 423.120(b)(5) of our proposed rule implemented this requirement
by defining appropriate notice as at least 30 days prior to such change
taking effect during a given contract year.
As provided under Sec. 423.120(b)(6) of our proposed rule, we
proposed that Part D sponsors be prohibited from removing a covered
Part D drug or from changing the preferred or tiered cost-sharing
status of a covered Part D drug between the beginning of the annual
coordinated election period described in Sec. 423.38(b) and 30 days
subsequent to the beginning of the contract year associated with that
annual coordinated election period.
Each Part D sponsor will also be required to establish policies and
procedures to educate and inform health care providers and enrollees
about its formulary, according to the provisions of section 1860D-
4(b)(3)(D) of the Act. As required under section 1860D-4(b)(3) of the
Act, the requirements regarding the development and application of
formularies discussed in this preamble section may be met by a Part D
sponsor directly, or through contracts or other arrangements between a
Part D sponsor and another entity or entities.
Except as otherwise provided below, the final rule adopts the rules
for Part D plan formularies set forth in Sec. 423.120(b) of the
proposed rule.
Comment: We received a significant number of comments that directly
and indirectly relate to the USP draft model guidelines issued for
public comment in August 2004. In general, the USP related comments can
be grouped into two categories. On one side, many comments claim that
the current draft model guidelines lack the necessary detail to ensure
that beneficiaries will have access to a comprehensive drug benefit,
often citing specific examples of medications that are necessary for
the treatment of the most frail and vulnerable populations and could be
excluded from Part D plan formularies that comply with the model
guidelines.
On the other hand, many comments recommended that the USP model
guidelines allow Part D plans the flexibility they need to develop
clinically sound formularies that offer a prescription drug benefit at
the lowest possible cost. Most of these commenters believe that the
draft model guidelines, while in need of some specific modifications,
are closer to reasonable than unreasonable. However, these commenters
claim that the minimum ``drugs'' requirements for each category and
class could significantly increase benefit costs if the categories and
classes increase to a level of detail that interferes with Part D
plans' ability to negotiate with manufacturers.
Response: We believe that the USP model guidelines identify a
reasonable number of categories and classes that balance the need for a
comprehensive Part D benefit with the need to allow Part D plans
flexibility to develop their own formularies and manage costs. These
model guidelines will provide us with a useful, standard format as a
starting point for our review of Part D plan benefit packages, since we
expect many plans will adopt the model guidelines as the basis for
their formulary classifications and submissions.
The model guidelines, while important in creating a template for a
formulary classification system, are not the only determinant of an
adequate formulary. Plans will be required to include the types of
drugs most commonly needed by Part D enrollees, as recognized in
national treatment guidelines, in their formularies. Regardless of
whether a Part D plan chooses to use the model guidelines or not, we
will review the drugs chosen to populate plan formularies under our
authority in section 1860D-11(e)(2)(D) of the Act to ensure that plan
benefit design does not discourage enrollment by certain classes of
Part D eligible individuals. However, formulary structure--including
tiered cost-sharing structures -utilization management processes, P&T
committee utilization and structure, and exceptions and appeals
processes are just as important in ensuring a comprehensive benefit,
and we intend to review these benefit design features as part of our
comprehensive benefit package review. We discuss our benefit design
review criteria in greater detail elsewhere in this preamble.
Comment: Several commenters disagreed with our interpretation of
the statutory term ``drugs'' as requiring coverage of at least two Part
D drugs within each therapeutic category and class of Part D drugs
(unless only one Part D drug existed in a particular therapeutic
category and class of Part D drugs), arguing that such an
interpretation was too expansive, and requiring coverage of too many
drugs in too many categories would diminish Part D plans' negotiating
leverage. These commenters provided examples of drug categories for
which a blanket requirement of two drugs is not appropriate, and an
exception should be granted. One commenter recommended that we should
allow an exception from this rule for categories and classes that only
include two drugs, and allow enrollees to obtain the non-formulary drug
in such categories via the exceptions process only.
In contrast, several commenters believed that requiring Part D
plans to include two drugs in each therapeutic category and class of
Part D drugs was not sufficient to ensure enrollee access to necessary
medications. They were concerned that for some categories--including
cancer treatments, rare diseases, mental illness, chronic pain, and
other conditions--requiring only two drugs per drug category and class
would be inadequate for Part D plans in terms of the statutory
requirement that plan design not discourage enrollment.
Several commenters urged us to clarify that this minimum two-drug
requirement must be met through drugs or biologicals offered on an
unrestricted basis (for example, not subject to utilization management
processes, such as prior authorization or step therapy, non-preferred
cost-sharing tiers, or other such restrictions on access to necessary
therapies), with some specifically urging us to impose restrictions on
step therapy by Part D plans. Some asked us to specify that the two
drugs must be distinct chemical entities. One commenter recommended
that we do not allow any Part B-covered drugs to count toward the two-
drug-per-category requirement.
Response: Section 1860D-4(b)(3)(C) of the Act requires that Part D
plans' formularies include ``drugs within each therapeutic category and
class of Part D drugs, although not necessarily all drugs within such
categories and classes.'' We believe that our interpretation of
``drugs'' as ``at least two drugs'' is consistent with Congressional
intent, and that it strikes an appropriate balance between providing
Part D plans with the necessary leverage to negotiate with
manufacturers for significant
[[Page 4260]]
discounts on covered Part D drugs and ensuring sufficient drug choice
for beneficiaries. We have therefore retained the two-drug minimum
requirement in Sec. 423.120(b)(2)(i) of our final rule.
However, we recognize that Part D categories and classes may exist
for which there are only two Part D drugs, and that including both of
those drugs on a formulary may be problematic if the two drugs are
vastly different in their clinical effectiveness. Given that section
1860D-4(b)(3)(C) of the Act requires that Part D plan formularies
include ``drugs within each therapeutic category and class of Part D
drugs, although not necessarily all drugs within such categories and
classes,'' we will allow plans to request exceptions to the requirement
in Sec. 423.120(b)(2)(i) of our final rule to the extent they can
demonstrate that there are only two Part D drugs available for a
particular Part D drug category or class and that one of those drugs is
clinically superior to the other. We have incorporated this provision
at Sec. 423.120(b)(2)(ii) of our final rule.
In response to comments that our proposed requirement is
insufficient to provide adequate access to medically necessary
treatments for Part D enrollees, we clarify that we will require Part D
plans to adopt policies that ensure that beneficiaries have reasonable
access to medically necessary drugs. Although Part D plans will not be
required to include every Part D drug on their formularies, we will--as
codified in Sec. 423.120(b)(2)(iii) of our final rule--require that
plans include adequate access to the types of drugs most commonly
needed by Part D enrollees, as recognized in national treatment
guidelines, on plan formularies. We are establishing this requirement
consistent with section 1860D-11(d)(2)(B) of the Act, which provides us
with authority similar to that provided to the Director of the Office
of Personnel Management for setting ``reasonable minimum standards''
for health benefits plans. We are looking to existing national
standards to inform our review at the drug level, and Part D plans will
be expected to accommodate national guidelines and offer complete
treatment options for a variety of medical conditions, including (but
not limited to) asthma, diabetes, depression, lipid disorders,
hypertension, and HIV. This is necessary in order to ensure that Part D
plans do not substantially discourage enrollment by certain Part D
eligible individuals based on exclusions of certain classes of drugs
from their formularies. In addition to examining specific drugs on Part
D plan formularies, and as discussed in greater detail elsewhere in
this preamble, we will review other aspects of plan benefit designs--
including tiered cost-sharing formulary structures, P&T committee
structure and utilization, utilization management policies and
processes, and exceptions and appeals processes--to ensure that Part D
plans generally meet the requirements under Part D, including the
provision of an adequate benefit.
We do not agree with comments asking that the two-drug requirement
be met through drugs offered on an unrestricted basis. We recognize
that Part D plans may establish utilization management processes in
such a way as to substantially discourage enrollment by certain
beneficiaries. On the other hand, utilization management restrictions
may be entirely appropriate for specific drugs or categories of drugs.
Furthermore, the statute specifically allows plans to utilize tiered
cost-sharing structures provided they meet certain actuarial
equivalence tests. As previously mentioned, part of our benefit design
review will focus not only on the specific drugs included on a Part D
plan's formulary, but also on a plan's utilization management policies
and procedures, to ensure that plans do not discriminate against
certain enrollees.
In addition, while drugs covered under Part B cannot be covered
under Part D, as provided in section 1860D-2(e)(2)(B) of the Act, this
exception to Part D coverage is limited to the drugs ``as so prescribed
and administered'' under Part B. Thus, the fact that a beneficiary can
have a particular drug covered under Part B ``incident to'' a physician
service or as part of a hospital outpatient procedure does not mean
that a prescription for the same drug should be denied by a Part D
plan. We will provide more guidance on this issue, but we clarify that
the number of drugs that may be denied coverage under Part D on the
basis of the drug itself is limited. One category of drugs that can
clearly never be covered under Part D is the list of oral cancer drugs
covered under Part B. Such drugs and limited number of others may not
be counted toward the two-drug minimum.
Finally, we clarify that our two-drug minimum requirement must be
met through the provision of two chemically distinct drugs. In other
words, Part D plans may not include two dosage forms or strengths of
the same drug, or a brand-name drug and a generic equivalent, in a
particular category or class and meet the requirement in Sec.
423.120(b)(2)(i) of our final rule.
Comment: One commenter recommended that Part D plans' formularies
include a wide variety of available dosage forms to the extent that was
feasible. Another commenter asked us to clarify that we would not allow
Part D plans to count different dosages of the same active ingredient
as two separate drugs for the purposes of our two drug requirement. A
third commenter asked us to clarify that it is acceptable for Part D
plans to favor some dosages over others on their formularies.
Response: We stated in our proposed rule that it was our
expectation that the drugs included in each therapeutic category or
class would include a variety of strengths and dosage forms, and we
stand by that expectation in our final rule. However, we clarify that
Part D plans will not have to provide equal access to all strengths and
dosage forms of a particular Part D drug, although beneficiaries will
have the right to pursue coverage of additional strengths and dosage
forms through the appeals process. We have clarified in Sec.
423.120(b)(2)(i) of our final rule that Part D plans must include two
chemically distinct Part D drugs in each therapeutic category and class
of drugs, with different strengths and doses available for each of
those drugs. Thus, Part D plans may not meet this requirement by only
including two or more different dosages of the same Part D drug in a
particular drug category or class.
Comment: Many commenters were concerned that our regulations will
create barriers to physicians prescribing the best medication for their
patients, including off-label uses of medications, which are common for
many conditions and are the norm for some conditions. In actuality,
off-label use is critically important and may be the mainstay of
medical practice for successfully managing certain conditions, such as
mental illnesses, chronic pain, chronic heart failure, arthritis,
Parkinson's, HIV/AIDS and dementia. The FDA recognizes that ``off-label
use of drugs by prescribers is often appropriate and may represent the
standard of practice.'' A number of commenters opposed our position
that the USP model guidelines should not be required to include classes
of drugs if there is no FDA approved drug with an on-label indication
for each class, even though there are FDA-approved drugs with commonly
accepted off-label uses that would fall within a class. One commenter
noted that any action taken by us regarding off-label use of
medications would have a ripple effect on other public and private
programs.
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Some commenters requested that we clarify the formulary
requirements in our final rule to require Part D plans to cover
medically accepted off-label use of prescription drugs. They believe
this is consistent with Congressional intent and past practice under
the Medicare and Medicaid programs. In addition, one commenter is
concerned that by assigning a drug to a specific class for formulary
purposes, a Part D plan may not cover it for other medically accepted
indications. One commenter suggested formularies should be required to
include off-label uses for drugs for the prevention and treatment
recommended in clinical guidelines issued by government agencies and
medical societies, whether on-label or off-label. Another commenter
said that off-label use must be accessible through a Part D plan's
exceptions process for non-formulary drugs.
Response: We recognize the value of off label prescribing,
particularly with regard to certain medical conditions. As mentioned in
the proposed rule, we expect that the model categories and classes
developed by USP will be defined so that each includes at least one
drug that is approved by the FDA for the indication(s) in the category
or class. That is, no category or class will be created for which there
is no FDA approved drug and which would therefore have to include a
drug based on its ``off label'' indication. We expect Part D plans
using alternative drug classification systems to include at least one
drug that is approved by the FDA for the indication(s) in each drug
category or class. However, this would not preclude physicians and
other prescribers from prescribing drugs for off label indications,
provided the drug is prescribed for a ``medically accepted
indication,'' as defined in section 1927(k)(6) of the Act. Further, we
clarify that the USP model guidelines would not preclude Part D
sponsors from assigning an FDA approved drug to a category or class
based on an off label use for that drug, provided the FDA has not made
a determination that the drug is unsafe for that use.
We do not have the authority to require that Part D plans cover the
off-label use of certain Part D drugs. However, as discussed in greater
detail elsewhere in this preamble, we will thoroughly evaluate plan
benefit design to ensure that Part D plans provide an adequate benefit
and do not discriminate against certain classes of Part D enrollees--
including a review of plan utilization ma