[Federal Register Volume 73, Number 51 (Friday, March 14, 2008)]
[Rules and Regulations]
[Pages 13785-13788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-1022]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 447
[CMS-2238-IFC]
RIN 0938-AP26
Medicaid Program; Multiple Source Drug Definition
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Interim final rule with comment period.
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SUMMARY: On July 17, 2007, we published a final rule with comment
period in the Federal Register that implemented provisions of the
Deficit Reduction Act of 2005 pertaining to prescription drugs under
the Medicaid program. In that rule, we finalized certain provisions of
the Medicaid drug rebate program, including definitions concerning
average manufacturer price, best price, single source drug, and
multiple source drug. In this interim final rule with comment period,
we are revising the definition of ``multiple source drug'' to better
conform with the statutory provisions. This interim final rule with
comment period solicits additional public comment on the revised
definition of ``multiple source drug.''
DATES: Effective date: These regulations are effective on April 14,
2008.
Comment date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
on April 14, 2008.
ADDRESSES: In commenting, please refer to file code CMS-2238-IFC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions for
``Comment or Submission'' and enter the filecode to find the document
accepting comments.
2. By regular mail. You may mail written comments (one original and
two copies) to the following address only: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-2238-IFC, P.O. Box 8016, Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address only: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-2238-IFC, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to either of the following addresses: a.
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop
slots located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by
stamping in and retaining an extra copy of the comments being
filed.)
b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Gail Sexton, (410) 786-4583.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any
[[Page 13786]]
personally identifiable or confidential business information that is
included in a comment. We post all comments received before the close
of the comment period on the following Web site as soon as possible
after they have been received: http://www.regulations.gov. Follow the
search instructions on that Web site to view public comments.
Comments received timely will be also available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
I. Background
On July 17, 2007, we published a final rule with comment period (72
FR 39142) in the Federal Register implementing the provisions of the
Deficit Reduction Act of 2005 (DRA) pertaining to prescription drugs
under the Medicaid Program. In that rule, we defined terms used in the
Medicaid drug rebate program. We codified requirements pertaining to
the calculation and reporting of the average manufacturer price (AMP)
and best price by pharmaceutical manufacturers and amended existing
regulations concerning Federal upper payment limits for certain covered
outpatient drugs. The final rule was effective October 1, 2007. This
interim final rule is not being issued in response to public comments
received on the July 2007 AMP final rule with comment period. We are
still considering those comments.
On November 15, 2007, the National Association of Chain Drug Stores
and the National Community Pharmacists Association filed a motion for a
preliminary injunction in the United States District Court for the
District of Columbia. They contended, in part, that the definition of
``multiple source drug'' adopted in the July 17, 2007, final rule
(``drug rebate rule'') is contrary to the statutory language in that it
defined a multiple source drug, in part, as a drug which is sold or
marketed in the United States, as opposed to the State. Plaintiffs are
concerned that all drug products are not generally available in every
State. National Association of Chain Drug Stores, et al. v. Health and
Human Services, Civil Action No. 1:07-cv-02017 (RCL). In light of these
concerns, we are issuing this interim final rule with comment period
and revising the definition of ``multiple source drug.'' We believe,
however, that when an FDA-approved equivalent generic drug is sold or
marketed in the United States, at least one generic drug product is
sold or marketed in every State. Accordingly, we expect the effect of
this revision, if any, to be small.
This interim final rule to the extent that it may affect Medicaid
reimbursement rates for retail pharmacies is subject to the injunction
issued by the United States District Court for the District of Columbia
in National Association of Chain Drug Stores, et al. v. Health and
Human Services, Civil Action No. 1:07-cv-02017 (RCL).
II. Provisions of the Interim Final Rule
In 42 CFR 447.502, we defined key terms used to calculate payment
and rebates concerning Medicaid prescription drugs. We defined multiple
source drug as a covered outpatient drug for which there is at least
one other drug product which is rated as therapeutically equivalent, is
pharmaceutically equivalent and bioequivalent, as determined by the
FDA, and is sold or marketed in the United States during the rebate
period. We are revising this definition of multiple source drug to
state that the drug product is sold or marketed in the ``State'' during
the rebate period, as opposed to sold or marketed in the ``United
States'' during the rebate period. By changing ``United States'' to
``State'' we define the term, ``multiple source drug'' in accordance
with the language in the Social Security Act (the Act). Further, in
accordance with section 1927(k)(7)(C)(iii) of the Act, we consider the
drug to be sold or marketed in a State if it appears in a published
national listing of average wholesale prices that we have selected--
currently, Red Book, Bluebook, or Medi-Span--provided the listed
product is generally available to the public through retail pharmacies
in that State.
In light of our experience with the Federal upper limit (FUL)
program, we believe that there is a national market for prescription
drug products, and that if a drug is available in a State, it will be
available in every State. From our experience, once an FDA-approved
equivalent generic drug enters the market, there are nearly always at
least two equivalent products available everywhere (the brand drug and
at least one equivalent generic drug) such that a FUL will be properly
applied. Furthermore, we do not have any record of receiving requests
to delete or modify a FUL price based on a drug not being available in
a particular State or a geographic location. Plaintiffs in the National
Association of Chain Drug Stores litigation contend, however, that
there may be situations where certain drug products are not available
to the public through retail pharmacies in every State. We do not
interpret the law to require us to continually survey drug availability
in the retail pharmacies of every State, and note that pharmacies and
States are in a substantially better position to assess the
availability of drugs in their areas. Therefore, we will consider all
covered outpatient drugs to be generally available in a State except in
those situations where there is evidence to the contrary. Such evidence
could include notification from pharmacies to the State that a drug
cannot be purchased in that State, provided the State can confirm that
to be the case. CMS will issue regulatory guidance on this issue in the
future should the need arise.
When the State confirms that a covered outpatient drug is not a
multiple source drug in the State, that drug is not subject to the FUL
in that State for the applicable rebate period. Where the drug does not
qualify as a multiple source drug in the State, the State should apply
its alternative pricing methodologies as set forth in the approved
State plan.
While this change in the definition of multiple source drug may
impact the FUL program, it should have no impact on the manufacturer's
calculation of rebates. The definition as revised is consistent with
the statutory provision, which has been in effect since the inception
of the drug rebate program. Manufacturers calculate rebates based, in
part, on whether the drug product is produced, distributed, or marketed
under a new drug application approved by the FDA. In such situations,
the rebate calculation is based on a percentage of the AMP or the
difference between AMP and best price, whichever is greater. Where a
drug is not marketed pursuant to such a new drug application, the
manufacturer calculates rebate payments based on a fixed percentage (11
percent) of the average manufacturer price. Accordingly, rebate
calculations should not be affected by the revisions in this
regulation. Thus, we are not changing our policy regarding rebates or
manufacturer reporting requirements for these drugs.
III. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and
[[Page 13787]]
time specified in the DATES section of this preamble, and, when we
proceed with a subsequent document, we will respond to the comments in
the preamble to that document.
IV. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and
substances of the proposed rule or a description of the subjects and
issues involved. This procedure can be waived, however, if an agency
finds good cause that a notice and comment procedure is impracticable,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued, or if the
agency is promulgating interpretive rules, general statements of
policy, or rules of agency procedure or practice.
We do not believe that we need to delay publication of this rule
pending completion of a notice and comment period. We are conforming
the regulation to the statutory definition of multiple source drug and
informing the public of the procedures and practices the agency will
follow to ensure compliance with those statutory provisions. However,
to the extent that notice and comment rulemaking would otherwise apply,
we find good cause to waive such requirements.
Specifically, we find it unnecessary to undertake notice and
comment rulemaking in this instance in light of the statutory language.
We are applying the definition specified in statute and we believe it
is redundant to, in effect, propose a rule to incorporate the words of
a provision already contained in the statute. We would not be able to
change the definition in this regulation in response to public comment.
We are also describing a procedure to ensure compliance with the
relevant provisions of the statute. This description is exempt from
notice and comment rulemaking as an interpretive rule, general
statement of policy, and/or rule of agency procedure or practice. As we
have previously stated, we believe that there is a national market for
prescription drugs and that a drug product available as a multiple
source drug in one State will be available as a multiple source drug in
every State. However, in light of the concerns raised in litigation, we
believe it is necessary to establish a process to ensure State
availability and consistency with the statute. Therefore, under 5
U.S.C. 553(b), we find good cause to waive notice and comment
rulemaking procedures for this revision, if such procedures are
required at all.
V. Collection of Information Requirements
This document does not impose any 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 Statement
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 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 interim
final 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 entities. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. 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, and the Secretary certifies, that this
interim final rule with comment period will not have a significant
economic impact on a substantial number of small entities.
The only small entities that will potentially be affected by this
interim final rule are small pharmacies. We believe that the effect
will be small because we have not identified any situation in which
there is at least one FDA-approved equivalent generic drug available as
a multiple source drug in one State but in which no FDA-approved
equivalent generic is available in another State. To the extent a State
would find, however, that a drug is not a multiple source drug in that
State because no FDA-approved equivalent product is available in that
State, the only effect will be to permit that State to disregard the
FUL price for the one drug that is available in that State when
determining the aggregate limit that the State can reimburse for that
drug and claim Federal financial participation. States may choose not
to change their reimbursement to pharmacies for those drugs. Should
States decide to change reimbursement, the change would usually be to
increase the price paid to pharmacies.
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, and
the Secretary certifies, that this interim final rule with comment
period will not have a significant impact on the operations of a
substantial number of small rural hospitals. Small rural hospitals
would be affected only to the extent that no FDA-approved equivalent
product is available in that State for a particular outpatient drug
provided through their outpatient pharmacies. As discussed above for
pharmacies, States may choose to change reimbursement for drugs in such
groups, but this change is expected to be to increase reimbursement.
Section 202 of the Unfunded Mandates Reform Act of 1995 also requires
that agencies assess anticipated costs and benefits before issuing any
rule whose mandates require spending in any 1 year of $100 million in
1995 dollars, updated annually for inflation. That threshold level is
currently approximately $120 million. This interim final rule will have
no consequential effect on State, local, or tribal governments 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. This regulation will impose only a very small burden, if
any, on States. When a pharmacy has notified a State that a drug on the
CMS FUL list may not be available as a multiple source drug in that
State, the State must confirm that the drug is generally not available
in the
[[Page 13788]]
State. The State, however, has no obligation to make an independent
assessment of drug availability in the absence of such notification by
a pharmacy. We believe that the vast majority of drugs of manufacturers
that participate in the Medicaid program are generally available on a
national basis. We believe that all or nearly all of the drugs are
distributed by national wholesalers and are generally available in
every State. This interim final rule will only apply in those rare
cases in which a particular FDA-approved drug product is not available
to the retail pharmacies in a particular State and, as a result, only
one FDA-approved drug product is available to those pharmacies. In this
circumstance, a State would need to verify the information received
from its pharmacies that no equivalent drug is available. This would
impose only a small burden on States. State systems are designed to
allow for payment changes as a routine matter and to change the
composition of the FUL groups or delete FUL groups. Since this
regulation does not impose any significant 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 reviewed by the Office of Management and Budget.
List of Sections in 42 CFR Part 447
Accounting, Administrative practice and procedure, Drugs, Grant
programs-health, Health facilities, Health professions, Medicaid,
Reporting and recordkeeping requirements, Rural areas.
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 447--PAYMENTS FOR SERVICES
0
1. The authority citation for part 447 continues to read as follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
0
2. Section 447.502 is amended by:
0
A. Republishing the introductory text of the definition for ``Multiple
source drug''; and
0
B. Revising paragraph (3) of the definition for ``Multiple Source
Drug'' to read as follows:
Sec. 447.502 Definitions.
* * * * *
Multiple source drug means, with respect to a rebate period, a
covered outpatient drug for which there is at least one other drug
product which--
* * * * *
(3) Is sold or marketed in the State during the rebate period as
follows:
(i) A covered outpatient drug is considered sold or marketed in a
State if it appears in a published national listing of average
wholesale prices, selected by the Secretary, provided the covered
outpatient drug is generally available to the public through retail
pharmacies in that State.
(ii) A covered outpatient drug is not subject to the FUL for a
rebate period if it is not a multiple source drug in the State for that
rebate period.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
Dated: February 21, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: February 21, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. 08-1022 Filed 3-10-08; 2:42 pm]
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