[Federal Register: September 1, 2005 (Volume 70, Number 169)]
[Rules and Regulations]
[Page 52019-52023]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01se05-12]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 403
[CMS-4063-F]
RIN 0938-AN97
Medicare Program; Medicare Prescription Drug Discount Card;
Revision of Marketing Rules for Endorsed Drug Card Sponsors
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule will revise the current limitations
prohibiting an endorsed drug card sponsor from marketing its Part D
plans to its drug card enrollees. This revised rule will give the
current drug card sponsors the ability to market to their enrollees
Part D plans that are either offered by the same endorsed drug card
sponsor or an affiliated organization of the same endorsed drug card
sponsor. We are making these changes after considering the public
comments received regarding the need to ensure a smooth transition from
the drug card to the Medicare Prescription Drug Benefit.
DATES: Effective Date: These regulations are effective on October 1,
2005.
FOR FURTHER INFORMATION CONTACT: Jennifer Shapiro, (410) 786-7407.
SUPPLEMENTARY INFORMATION:
Availability of Final Rule
Electronic Copies: An electronic copy of this document may be
downloaded using a modem and suitable communications software. Internet
users may reach CMS's Web page at
http://www.cms.hhs.gov/regulations; http://www.regulations.gov; or
http://www.gpoaccess.gpo/nara/index.html.
Order Copies: To order copies of the Federal Register containing
this document, send your request to: New Orders, Superintendent of
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954.
Specify the date of the issue requested and enclose a check or
money order payable to the Superintendent of Documents, or enclose your
Visa or Master Card number and expiration date. Credit card orders can
also be placed by calling the order desk at (202) 512-1800 (or toll-
free at 1-888-293-6498) or by faxing to (202) 512-2250. The cost for
each copy is $10.
Photocopies: As an alternative, you can view and photocopy the
Federal Register document at most libraries designated as Federal
Depository Libraries and at many other public and academic libraries
throughout the country that receive the Federal Register.
I. Background
The Medicare drug discount card program was established by section
101, subpart 4, of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 and is codified in section 1860D-31 of the
Social Security Act (the ``Act''). On December 15, 2003, in accordance
with section 105(c)(1)(C) of the Act, we published the interim final
rule with comment period (hereafter referred to as ``interim final
rule'') for the Medicare drug discount card program on December 15,
2003 (68 FR 69840).
The interim final rule at Sec. 403.813(a) addresses marketing
limitations applicable to endorsed discount card sponsors in accordance
with section 1860D-31(h)(7)(B) of the Act. Under these marketing
limitations, an endorsed sponsor may only market those products and
services offered under its endorsed program that are inside the scope
of endorsement and permitted under the HIPAA Privacy Rule.
After considering the public comments on these issues we agree with
the commenters that this policy does not comply with the intent of the
Medicare Modernization Act which directs the Secretary to facilitate
efficient enrollment into Part D plans. This final rule allows an
endorsed card sponsor to market information to its Medicare drug card
enrollees concerning its Part D plans offered by the endorsed card
sponsor or an affiliated organization. This change will increase
Medicare beneficiaries' awareness and knowledge of Part D plans,
thereby facilitating a smooth transition from the Medicare Prescription
Drug Discount Card Program to the Medicare Prescription Drug Benefit.
Requirements for Issuance of Regulations
Section 902 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and
requires, in part, that the Secretary, in consultation with the
Director of the Office of Management and Budget establish and publish
timelines for the publication of Medicare final regulations based on
the previous
[[Page 52020]]
publication of a Medicare proposed or interim final regulation. Section
902(a)(1) of the MMA also states that the timelines for these
regulations may vary but shall not exceed 3 years after publication of
the preceding proposed or interim final regulation except under
exceptional circumstances.
Therefore, we believe that the final rule is in accordance with the
Congress's intent to ensure timely publication of final regulations.
II. Discussion of the Provisions of the Final Rule
A. Provision of the Interim Final Rule
Section 403.813(a)(1) of the December 15, 2003 interim final rule
provides that an endorsed sponsor may only market those products and
services offered under its endorsed program that are inside the scope
of endorsement as defined in Sec. 403.806(h) and permitted under Sec.
403.812(b) (pertaining to the HIPAA privacy requirements). Section
403.806(h)(2) defines products and services inside the scope of the
Medicare endorsement as products and services that are: (1) Directly
related to covered discount card drugs or discounts for over-the-
counter drugs; and (2) offered for no additional fee (other than the
enrollment fee).
Section 403.813(a) of the interim final rule provides that an
endorsed sponsor may not request that a drug card enrollee or an
individual seeking to enroll in its endorsed discount card program
authorize the endorsed sponsor to use or disclose individually
identifiable health information for marketing other products or
services not otherwise allowed under Sec. 403.813(a)(1) (Sec.
403.813(a)(2)); that an endorsed sponsor may not commingle any
materials related to the marketing of products or services allowed
under Sec. 403.813(a)(1) with other marketing materials (Sec.
403.813(a)(3)); and that following termination of an endorsed sponsor's
endorsement under Sec. 403.820(c), (d) or (e) or termination of the
Medicare Drug Discount Card and Transitional Assistance Program, a drug
card enrollee's individually identifiable health information collected
or maintained by an endorsed sponsor may not be used or disclosed for
purposes of marketing any product or service (Sec. 403.813(a)(4)).
These provisions on marketing limitations are based on section
1860D-31(h)(7)(B) of the Act, which states that an endorsed sponsor may
market a product or service under the program only if the product or
service is directly related to a covered discount card drug or a
discount price for a non-prescription drug, and on section 1860D-
31(h)(8) of the Act, which charges us with protecting and promoting the
interests of discount card eligible individuals.
In addition to the specific requirements of the Act that the
product or services be directly related to a covered discount card drug
or a discount on a non-prescription drug, Sec. 403.806(h)(2) of the
interim final regulation further requires that products and services
inside the scope of endorsement are limited to products or services
offered for no additional charge because, as we stated in the preamble,
we were concerned that beneficiaries would be unable to access
negotiated prices and transitional assistance, as intended by the
Congress, if endorsed sponsors required that they pay additional fees
for optional products and services. Further, we believed that
permitting endorsed sponsors to charge additional fees could be
confusing to beneficiaries. Also, if we were to allow endorsed sponsors
to charge additional fees, we believe beneficiaries might, in effect,
be charged annual enrollment fees higher than the $30 limit mandated by
section 1860D-31(c)(2)(B) of the Act, especially if endorsed sponsors
were to condition enrollment in their endorsed programs on
beneficiaries paying these additional fees.
III. Analysis of and Response to Public Comments
A. Overview of Comments
We received 49 public comments concerning the Medicare drug
discount card program. Of these comments, 8 timely comments were
received that addressed issues on marketing and information and
outreach in two separate areas. A summary of the major issues and our
responses are as follows:
Comment: Of the 8 comments related to marketing, 4 of the comments
expressed the need to minimize the potential for beneficiary confusion
and encouraged us to allow sponsors to provide enrollees with valuable
health education and other information. One commenter encouraged us to
ensure that the regulation reflect the intent of the conferees that
there be a seamless transition between the drug card program and the
Medicare Prescription Drug Benefit. The other commenters encouraged us
to create guidelines concerning marketing materials and fairness in
marketing. None of the comments were opposed to us issuing additional
guidelines.
Response: We agree with the commenters' concerns regarding the need
to minimize beneficiary confusion by allowing endorsed sponsors to
distribute certain important and valuable information to beneficiaries,
including information which will promote a smoother transition for drug
card enrollees from the Medicare-approved prescription drug discount
card program to the Medicare Prescription Drug Benefit. The Medicare
Prescription Drug, Improvement, and Modernization Act of 2003
Conference Report clearly articulates this intent where the report
discusses the history of the drug card program and its original purpose
as an interim step toward prescription drug coverage for Medicare
beneficiaries. Furthermore, a separate discussion appearing in the
Conference Report addressing Part D emphasizes the need to facilitate
outreach to beneficiaries to ensure participation in Medicare
prescription drug coverage and to reduce barriers associated with
marketing to minimize the potential for confusion and to facilitate
enrollment into the Medicare Prescription Drug Benefit.
We agree with the commenter that encouraged us to ensure that the
regulation reflect the intent of the conferees that there be a seamless
transition between the drug card program and the Medicare Prescription
Drug Benefit. As we move toward implementation of the Medicare
Prescription Drug Benefit, it has become evident that certain aspects
of the interim final rule are creating unintended consequences for
Medicare beneficiaries and endorsed card sponsors. Specifically the
marketing limitations at Sec. 403.813(a) contradict Congressional
intent for the Medicare prescription drug discount card program to
serve as a transitional program to the Medicare Prescription Drug
Benefit. As previously mentioned, the provisions in the interim final
rule prevent an endorsed drug card sponsor from marketing its Part D
plans to its drug card enrollees. Moreover, we agree that
clarifications and modifications to the marketing limitation rules
would reduce beneficiary confusion as the drug card program concludes
and the Medicare Prescription Drug Benefit begins. Finally, it is
crucial that Medicare beneficiaries have complete and accurate
information on the forthcoming Medicare Prescription Drug Benefit. We
agree with all comments that expressed an important aspect of ensuring
that beneficiaries receive this information is by allowing a
beneficiary's drug card sponsor, an entity with which the beneficiary
is familiar and has an existing relationship to provide educational and
related information
[[Page 52021]]
about the transition to the Medicare prescription drug benefit and the
Part D plans that will be offered by the endorsed sponsor or its
affiliated organizations. Allowing endorsed sponsors to provide
information to their members about certain Part D plans available to
them is a component of the Secretary's strategy for meeting his
obligation under sections 1851(d)(1) and 1860D-1(c) of the Act to
promote an active, informed selection by beneficiaries among their
Medicare coverage options.
As a result, this final rule amends Sec. 403.813(a)(1) to allow an
endorsed card sponsor to market to its drug card enrollees not only
items and products offered within the scope of endorsement, but also
Part D plans offered by the endorsed sponsor or an affiliated
organization of the endorsed sponsor.
Section 1860D-31(h)(7)(B) of the Act provides that endorsed
sponsors may only market products or services ``under the program'' if
they directly relate to either a covered discount card drug or discount
prices available for over-the-counter drugs. We believe products or
services marketed ``under the program'' include not only those within
the scope of endorsement, but also Part D plans. Because information
about Part D plans offered by an endorsed sponsor or its affiliated
organizations would reinforce the purpose of the Medicare prescription
drug discount card program to serve as a transitional program to the
Medicare prescription drug benefit, we believe marketing of such Part D
plans constitutes marketing of a product or service under the Medicare
prescription drug discount card program. In addition, we believe Part D
plans are directly related to covered discount card drugs, as evidenced
by the fact that the statutory definition of a covered drug under
section 1860D-31(a)(4)(a) of the Act cross-references the definition of
covered Part D drug under section 1860D-2(e) of the Act, and thus is
identical to the definition of covered Part D drug.
Therefore, we amend the marketing limitations in Sec.
403.813(a)(1) by explicitly stating that Part D plans offered by an
endorsed sponsor or its affiliated organization may be directly
marketed by the endorsed sponsor to its enrollees. We will not
otherwise change the marketing limitation provisions of the interim
final rule because we maintain that section 1860D-31(h)(8) of the Act
charges us with protecting and promoting the interests of Medicare
beneficiaries who may be unable to access negotiated prices and
transitional assistance, as intended by the Congress, if endorsed
sponsors require that they pay additional fees for optional products
and services, such as Part B supplies. Furthermore, permitting endorsed
sponsors to charge additional fees for products and services outside
the scope of the endorsement could be confusing to beneficiaries. Also,
if we were to allow endorsed sponsors to charge additional fees, we
believe beneficiaries might, in effect, be charged annual enrollment
fees higher than the $30 limit mandated by section 1860D-31(c)(2)(B) of
the Act, especially if endorsed sponsors were to condition enrollment
in their endorsed programs on beneficiaries paying these additional
fees. The amendment to allow marketing of Part D plans makes sense in
this instance because in this context it does not negate the intent or
practice of the original restriction (for example, regarding Part B
supplies). We believe that this amendment is consistent with the intent
of the Congress, which would reduce confusion and facilitate a smooth
transition to the Medicare Prescription Drug Benefit which protects and
promotes interests of all Medicare beneficiaries. Also, this exception
will not affect the enrollment fee.
We will require information and outreach (marketing) materials
discussing Part D plans that are disseminated by endorsed drug card
sponsors or their affiliated organizations to the endorsed sponsors'
drug card enrollees to be approved through the Medicare Prescription
Drug Benefit review process as described under Sec. 423.50 as opposed
to the drug card review process. This change addresses comments that
CMS should create guidelines concerning marketing materials and
fairness in marketing, and comments that we should endeavor to reduce
beneficiary confusion. Using a single review process, with consistent
guidelines specifically developed for Part D materials, is the optimal
process for ensuring adherence to guidelines and reducing beneficiary
confusion. Therefore, we are amending Sec. 403.806(g)(5) to state that
all materials related to Part D plans being offered by the same
endorsed sponsor or its affiliated organization must comply with the
requirements described in Sec. 423.50.
We are cognizant that constraints and clarifications must be made
about whose products an endorsed card sponsor may provide marketing
materials about to its drug card enrollees. An endorsed drug card
sponsor may market a Part D plan offered by it or its affiliated
organization. By allowing an endorsed card sponsor to market Part D
plans offered by an affiliated organization of the endorsed sponsor, we
are treating Part D plans offered by an affiliated organization of the
endorsed sponsor as a product or service under the program. Allowing
such treatment gives practical effect to the Congressional intent of a
smooth transition between the drug card program and the Medicare
Prescription Drug Benefit because it recognizes that rather than offer
Part D plans through the same legal entity, organizations may have
legitimate business and legal reasons for offering Part D plans through
another legal entity, or may offer Part D plans through different legal
entities based on geography (for example, Part D plans in region A
offered through legal entity A, Part D plans in region B offered
through legal entity B). We do not want to constrain an organization's
ability to offer its Part D plans through the legal entities that make
the most sense given other business and legal considerations. A Part D
Plan is not offered under the program, however, if the plan is offered
by an organization that is not the endorsed sponsor or an affiliated
organization of the endorsed sponsor.
Therefore, we are adding a definition of affiliated organization to
Sec. 403.802. This definition would allow an endorsed drug card
sponsor to market to its enrollees a Part D plan of an affiliated
organization if the organization is legally separate and at least one
of the following conditions is met:
(1) Both the affiliated organization and the endorsed drug card
sponsor are under common control (common control exists if another
entity has the power, directly or indirectly, to significantly
influence or direct the actions or policies of the affiliated
organization and the endorsed drug card sponsor);
(2) The affiliated organization is under the control of the
endorsed drug card sponsor or the affiliated organization controls the
endorsed drug card sponsor (control exists if an entity has the power,
directly or indirectly, to significantly influence or direct the
actions or policies of another entity); or
(3) The affiliated organization possesses an ownership or equity
interest of 5 percent or more in the endorsed drug card sponsor on
both: The date on which the endorsed drug card sponsor markets the
affiliated organization's Part D plan; and the date on which the
endorsed drug card sponsor signed its endorsement contract with us.
This is to ensure that the entity is currently affiliated with the
endorsed sponsor and ensures that a Part D plan does not acquire a drug
card sponsor
[[Page 52022]]
after publication of this rule in order to gain access to the sponsors'
drug card enrollees.
We will not permit endorsed sponsors to market to their drug card
enrollees Part D plans offered by unaffiliated third parties (as
described by this new section) because an endorsed sponsor's marketing
of a Part D plan offered by a third party generally is prohibited by
the HIPAA privacy rule absent authorization from the individual.
As important, information that is provided by a drug card sponsor
about its or its affiliate's Part D plan will, we believe, be more
likely to promote a smoother transition to Part D since the beneficiary
is familiar with the endorsed sponsor, and we anticipate that there
will be similarities between the Medicare drug discount card and the
Part D plan (for example, similar pharmacy network, similar formulary).
Furthermore, under certain circumstances, HIPAA may prohibit an
endorsed sponsor's marketing of Part D plans offered by certain
affiliated entities. Thus, any use or disclosure of enrollee's
protected health information by an endorsed card sponsor must comply
with all Federal laws, including the HIPAA Privacy Rule.
IV. Provisions of the Final Regulations
Except as mentioned below, this final rule incorporates the
marketing and information and outreach provisions of the interim final
rule. This rule creates a definition at section 403.802 pertaining to
the requirements that must be met before an organization will be
considered an affiliated organization to an endorsed drug card sponsor.
We are also revising Sec. 403.813 to permit an endorsed card
sponsor to market to its drug card enrollees a Part D plan offered by
the endorsed sponsor or an affiliated organization of the endorsed
sponsor.
We will require information and outreach (marketing) materials
provided by an endorsed drug card sponsor that are discussing Part D
plan offerings to be approved through the Medicare Prescription Drug
Benefit review process as described under Sec. 423.50.
V. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995 (44 U.S.C. 35).
VI. Regulatory Impact
We have examined the impact of this rule as required by Executive
Order 12866 September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4) and Executive Order 13132.
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This rule
does not reach the economic threshold and thus is not considered a
major rule.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
agencies. Most hospitals and most other providers and suppliers are
small entities, either by nonprofit status or by having revenues of $6
million to $29 million in any 1 year. Individuals and States are not
included in the definition of a small entity. We are not preparing an
analysis for the RFA because we have determined that this rule will not
have a significant economic impact on a substantial number of small
entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. We are not preparing an
analysis for section 1102(b) of the Act because we have determined that
this rule will not have a significant impact on the operations of a
substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in expenditure in any 1 year by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $110 million. This rule will have no consequential effect on
the governments mentioned or on the private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. Since this regulation does not impose any costs on State
or local governments, the requirements of E.O. 13132 are not
applicable.
In accordance with the provisions of Executive Order 12866, this
regulation was not reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 403
Grant programs--health, Health insurance, Hospitals,
Intergovernmental relations, Medicare, Reporting and recordkeeping
requirements.
0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR chapter IV, as set forth below:
PART 403--SPECIAL PROGRAMS AND PROJECTS
0
1. The authority citation for part 403 continues to read as follows:
Authority: 42 U.S.C. 1359b-3 and secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and 1395hh).
0
2. In Subpart H, Sec. 403.802 is amended by adding in alphabetical
order the definitions of ``Affiliated organization'' and ``Part D
plan'' to read as follows:
Subpart H--Medicare Prescription Drug Discount Card and
Transitional Assistance Program
Sec. 403.802 Definitions.
* * * * *
Affiliated organization means an organization that is a legally
separate entity from the endorsed drug card sponsor and meets one of
the following conditions:
(1) The organization and the endorsed drug card sponsor are under
common control. Common control exists if another entity has the power,
directly or indirectly, to significantly influence or direct the
actions or policies of the organization and the endorsed drug card
sponsor.
(2) The organization is under the control of the endorsed drug card
sponsor or the organization controls the endorsed drug card sponsor.
Control exists if an entity has the power, directly or indirectly, to
significantly influence or direct the actions or policies of another
entity.
[[Page 52023]]
(3) The organization possesses an ownership or equity interest of 5
percent or more in the endorsed drug card sponsor on both the date on
which the endorsed drug card sponsor markets the organization's Part D
plan, and the date on which the endorsed drug card sponsor signed its
endorsement contract with CMS.
* * * * *
Part D plan has the meaning given the term at Sec. 423.4.
* * * * *
0
3. Section 403.806(g)(5) is amended by--
0
A. Revising paragraph (g)(5)(i).
0
B. Revising paragraph (g)(5)(iii).
0
C. Adding paragraph (g)(5)(vi).
The revisions and addition read as follows:
Sec. 403.806 Sponsor requirements for eligibility for endorsement.
* * * * *
(g) * * *
(5) * * *
(i) Comply with the Information and Outreach Guidelines published
by CMS except as provided in paragraph (g)(5)(vi) of this section.
* * * * *
(iii) If CMS does not disapprove the initial submission of
information and outreach materials within 30 days of receipt of these
materials, the materials are deemed approved under paragraph (g)(5)(ii)
of this section.
* * * * *
(vi) All materials related to products and services that are Part D
plans must comply with the requirements specified in Sec. 423.50 of
this chapter.
* * * * *
0
4. Section 403.813 is amended by revising paragraph (a)(1) to read:
Sec. 403.813 Marketing limitations and record retention requirements.
(a) Marketing limitations. (1) An endorsed sponsor may only market
the following:
(i) Those products and services offered under the endorsed program
that are inside the scope of endorsement defined in Sec. 403.806(h)
and permitted under Sec. 403.812(b).
(ii) A Part D plan offered by the endorsed sponsor or an affiliated
organization of the endorsed sponsor.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: July 8, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Approved: August 10, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-17424 Filed 8-29-05; 11:58 am]
BILLING CODE 4120-01-P