[Federal Register: July 25, 2008 (Volume 73, Number 144)]
[Proposed Rules]
[Page 43394-43397]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jy08-19]
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DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 199
[DoD-2008-HA-0029; 0720-AB22]
Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS)/TRICARE: Inclusion of TRICARE Retail Pharmacy Program in
Federal Procurement of Pharmaceuticals
AGENCY: Office of the Secretary, Department of Defense (DoD).
ACTION: Proposed rule.
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SUMMARY: Section 703 of the National Defense Authorization Act for
Fiscal Year 2008 (NDAA-08) states with respect to any prescription
filled on or after the date of enactment of the NDAA, the TRICARE
retail pharmacy program (TRRx) shall be treated as an element of the
DoD for purposes of procurement of drugs by Federal agencies under
section 8126 of title 38, United States Code (U.S.C.), to the extent
necessary to ensure pharmaceuticals paid for by the DoD that are
provided by network retail pharmacies under the program to eligible
covered beneficiaries are subject to the pricing standards in such
section 8126. NDAA-08 was enacted on January 28, 2008. The statute
requires implementing regulations. This
[[Page 43395]]
proposed rule is to implement section 703 of the NDAA 2008.
DATES: Written comments received at the address indicated below by
September 23, 2008 will be considered and addressed in the final rule.
ADDRESSES: You may submit comments, identified by docket number and/or
RIN number and title, by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Federal Docket Management System Office, 1160 Defense
Pentagon, Washington, DC 20301-1160.
Instructions: All submissions received must include the agency name
and docket number or Regulatory Information Number (RIN) for this
Federal Register document. The general policy for comments and other
submissions from members of the public is to make these submissions
available for public viewing on the Internet at http://
www.regulations.gov as they are received without change, including any
personal identifiers or contact information.
FOR FURTHER INFORMATION CONTACT: Captain William Blanche, TRICARE
Management Activity, telephone (703) 681-2890.
SUPPLEMENTARY INFORMATION:
A. Background
Section 703 of the National Defense Authorization Act for Fiscal
Year 2008 (NDAA-08) (Pub. L. 110-181) enacted 10 U.S.C. 1074g(f). It
provides that with respect to any prescription filled on or after the
date of enactment of the NDAA, the TRRx shall be treated as an element
of the DoD for purposes of procurement of drugs by Federal agencies
under section 8126 of title 38, United States Code (U.S.C.), to the
extent necessary to ensure pharmaceuticals paid for by the DoD that are
provided by network retail pharmacies under the program to eligible
covered beneficiaries are subject to the pricing standards in such
section 8126. NDAA-08 was enacted on January 28, 2008. The statute
requires implementing regulations.
The Veterans Health Care Act (VHCA) of 1992, codified at 38 U.S.C.
8126, established Federal Ceiling Prices (FCPs) of covered
pharmaceuticals (requiring a minimum 24% discount off non-Federal
average manufacturing prices--``non-FAMP'') procured by the four
designated agencies covered in the Act: Department of Veterans Affairs
(VA), DoD, Coast Guard, and the Public Health Service/Indian Health
Service. The non-FAMP is the average price paid to the manufacturer by
wholesalers (or, if there are insufficient wholesale sales, others who
purchase directly from the manufacturer) for drugs distributed to non-
federal purchasers, taking into account any cash discounts or similar
reductions given to those purchasers. The VA administers the VHCA
discount program on behalf of the four specified agencies. The DoD
consulted closely with the VA in the development of this proposed rule.
The TRICARE Pharmacy Benefits Program operates under the authority
of 10 U.S.C. 1074g. It provides outpatient drugs to TRICARE
beneficiaries through Military Treatment Facility (MTF) pharmacies, the
TRICARE mail order pharmacy program (TMOP), and a TRRx consisting of
TRICARE Retail Pharmacy Network and retail non-network pharmacies. As
implemented, the new statutory requirement will only apply to
pharmaceuticals paid for by DoD and provided to eligible beneficiaries
through the TRICARE Retail Pharmacy Network.
The TRICARE Retail Pharmacy Network is managed under a single
Pharmacy Benefits Manager contract, linked to the DoD Pharmacy Benefits
Office, and enabled by a management information system to verify
beneficiary eligibility, check for potential drug interactions, and
authorize payment for the pharmaceuticals used to fill the
beneficiary's prescription. The management information system also
records data on all prescriptions filled through the Retail Pharmacy
Network, permitting an accurate accounting of all retail network
pharmaceuticals paid for by DoD under the TRICARE Pharmacy Benefits
Program. Since the beginning of the FCP program, outpatient
pharmaceuticals provided by DoD through MTF pharmacies have been
subject to FCPs, as have those under the TMOP program since it began.
Implementation of similar applicability to the TRICARE Retail Pharmacy
Network component of the Program is the subject of this proposed
regulation.
B. Provisions of the Rule
The proposed rule would add a new paragraph (q) to Sec. 199.21.
Paragraph (q)(1) repeats the new statutory requirement. Paragraph
(q)(2) provides that an agreement by a manufacturer to honor the FCPs
in the Retail Pharmacy Network component of the Pharmacy Benefits
Program is a condition of inclusion of a drug on the uniform formulary.
Further, it states that a drug not under such an agreement requires
preauthorization to be provided through the Retail Pharmacy Network. In
addition, it indicates that drugs covered by this requirement are
TRICARE Retail Pharmacy Network provided drugs that are covered by the
VA's FCP program, except any prescription for which the TRICARE
Pharmacy Benefits Program is the second payer. While DoD proposes in
this rulemaking to enter into voluntary agreements with manufacturers
that would make prescriptions filled on or after the date of enactment
of NDAA-08 subject to FCPs, the Department solicits comment regarding
any other appropriate and legally permissible implementation approach
and/or date from which to begin making prescriptions filled in the
Retail Pharmacy Network subject to FCPs. DoD is specifically interested
in the legal justification, including under section 703 of NDAA-08, for
any alternative implementation approaches and/or dates that commenters
may propose.
Paragraph (q)(3) establishes refund procedures to, in the words of
the statute, ``ensure that pharmaceuticals paid for by the DoD that are
provided by pharmacies under the program to eligible covered
beneficiaries under this section are subject to the pricing standards''
of the FCP program. The refund procedures will, to the extent
practicable, incorporate common industry practices for implementing
pricing agreements between manufacturers and large pharmacy benefit
plan sponsors. Such procedures shall provide the manufacturer at least
70 days from the date of submission by TMA to the manufacturer
(initially expected to be on a quarterly basis) of the TRICARE
pharmaceutical utilization data needed to calculate the refund before
the refund payment is due. The basis of the refund will be the
difference between the average non-federal price of the drug sold by
the manufacturer to wholesalers, as represented by the most recent
annual non-FAMP (reported to VA) and the FCP or, in the discretion of
the manufacturer, the difference between FCP and direct commercial
contract sales prices specifically attributable to TRICARE paid
pharmaceuticals, determined for each applicable National Drug Code
(NDC) listing. Further, this paragraph of the rule provides that a
refund due under the statute is subject to the overpayment recovery
procedures of Sec. 199.11 of the TRICARE regulation.
Finally, paragraph (q)(4) states that in the case of the failure of
a manufacturer of a covered drug to make or honor an agreement to
ensure that DoD pays no more than the FCP for covered drugs provided
through the TRICARE Retail Pharmacy Network component of the program,
the Director, TMA, in addition
[[Page 43396]]
to other actions referred to in the rule, may take any other action
authorized by law.
C. Regulatory Procedures
Executive Order 12866, ``Regulatory Planning and Review''
Executive Order (EO) 12866 requires that a comprehensive regulatory
impact analysis be performed on any economically significant regulatory
action, defined primarily as one that would result in an effect of $100
million or more in any one year. The DoD has examined the economic,
legal, and policy implications of this proposed rule and has concluded
that it is an economically significant regulatory action under section
3(f)(1) of the EO. The economic impact of applying Federal Ceiling
Prices to the TRICARE Retail Pharmacy Network is in the form of
reducing the prices of drugs paid for by DoD in the retail pharmacy
component of the TRICARE Pharmacy Benefits Program, making them
comparable to the prices paid by DoD in the Military Treatment Facility
and Mail Order Pharmacy components of the program.
A recent Government Accountability Office Report, ``DoD Pharmacy
Program: Continued Efforts Needed to Reduce Growth in Spending at
Retail Pharmacies,'' April 2008 (GAO-08-327), found that DoD's drug
spending ``more than tripled from $1.6 billion in fiscal year 2000 to
$6.2 billion in fiscal year 2006'' and that retail pharmacy spending
``drove most of this increase, rising almost nine-fold from $455
million to $3.9 billion and growing from 29 percent of overall drug
spending to 63 percent.'' DoD concurs in these findings. The principal
economic impact of this proposed rule is to moderate somewhat the rate
of growth in the retail pharmacy component of the program.
DoD has estimated the reduced spending associated applying Federal
Ceiling Prices to the Retail Pharmacy Network. DoD funds the Military
Health System through two separate mechanisms. One is the Defense
Health Program (DHP) appropriation, which pays for health care for all
beneficiaries except those who are also eligible for Medicare. DoD-
funded health care for DoD beneficiaries who are also eligible for
Medicare is paid for by way of an accrual fund called the Medicare-
Eligible Retiree Health Care Fund (MERHCF) under 10 U.S.C Chapter 56.
Funds are paid into the MERHCF from military personnel appropriations
and the general U.S. treasury. DoD estimated cost reductions from
applying Federal Ceiling Prices to the TRICARE Retail Pharmacy Network
in Fiscal Years 2009 through 2011 are:
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Millions
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FY-2009 DHP Reduced Spending................................ $352
FY-2009 MERHCF Reduced Spending............................. 367
FY-2010 DHP Reduced Spending................................ 388
FY-2010 MERHCF Reduced Spending............................. 404
FY-2011 DHP Reduced Spending................................ 427
FY-2011 MERHCF Reduced Spending............................. 444
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As a frame of reference, total TRICARE Pharmacy Benefits Program
spending (incorporating these spending reductions) is estimated to be
$8 billion in FY-2009, $8.4 billion in FY-2010, and $9.3 billion in FY-
2011.
Congressional Review Act, 5 U.S.C. 801, et seq.
Under the Congressional Review Act, a major rule may not take
effect until at least 60 days after submission to Congress of a report
regarding the rule. A major rule is one that would have an annual
effect on the economy of $100 million or more or have certain other
impacts. This proposed rule is a major rule under the Congressional
Review Act. As noted above, applying Federal Ceiling Prices to the
TRICARE Retail Pharmacy Network will reduce DoD spending on
pharmaceuticals by more than $100 million per year.
Sec. 202, Pub. L. 104-4, ``Unfunded Mandates Reform Act''
This rule does not contain a Federal mandate that may result in the
expenditure by State, local and tribunal governments, in aggregate, or
by the private sector, of $100 million or more (adjusted for inflation)
in any one year.
Public Law 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)
The Regulatory Flexibility Act (RFA) requires that each Federal
agency prepare and make available for public comment, a regulatory
flexibility analysis when the agency issues a regulation which would
have a significant impact on a substantial number of small entities.
DoD does not anticipate that this regulation will result in changes
that would impact small entities, including retail pharmacies, whose
reimbursements are not affected by the proposed rule. In addition,
drugs newly subject to implementation of Federal Ceiling Prices under
the proposed rule represent less than 2% of manufacturers' prescription
drug sales. Therefore, this proposed rule is not expected to result in
significant impacts on a substantial number of small entities.
Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter 35)
This proposed rule contains information collection requirements
subject to the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-
3511). This consists of responding to the periodic TMA report of the
TRICARE prescription utilization data needed to calculate the refund.
This information collection has been approved with OMB Control Number
0720-0032. No person is required to respond to, nor shall any person be
subject to a penalty for failure to comply with, a collection of
information subject to the requirements of the PRA, unless that
collection of information displays a currently valid OMB Control
Number.
Executive Order 13132, ``Federalism''
This proposed rule does not have federalism implications, as set
forth in Executive Order 13132. This rule does not have substantial
direct effects on the States; the relationship between the National
Government and the States; or the distribution of power and
responsibilities among the various levels of Government.
Public Comments Invited
This is a proposed rule. DoD invites public comments on all of its
provisions.
List of Subjects in 32 CFR Part 199
Claims, Health care, Health insurance, Military personnel, Pharmacy
benefits.
Accordingly, 32 CFR part 199 is proposed to be amended as follows:
PART 199--[AMENDED]
1. The authority citation for part 199 continues to read as
follows:
Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.
2. Section 199.21 is amended by adding a new paragraph (q), to read
as follows:
Sec. 199.21. Pharmacy Benefits Program.
* * * * *
(q) Pricing standards for retail pharmacy program.--(1) Statutory
requirement.--As required by 10 U.S.C. 1074g(f), with respect to any
prescription filled on or after the date of the enactment of the
National Defense Authorization Act for Fiscal Year 2008, the TRICARE
retail pharmacy program shall be treated as an element of the
[[Page 43397]]
DoD for purposes of the procurement of drugs by Federal agencies under
38 U.S.C. 8126 to the extent necessary to ensure pharmaceuticals paid
for by the DoD that are provided by pharmacies under the program to
eligible covered beneficiaries under this section are subject to the
pricing standards in such section 8126.
(2) Manufacturer written agreement. (i) A written agreement by a
manufacturer to honor the pricing standards required by 10 U.S.C.
1074g(f) and referred to in paragraph (q)(1) of this section for
pharmaceuticals provided through retail network pharmacies shall with
respect to a particular covered drug be a condition for:
(A) Inclusion of that drug on the uniform formulary under this
section; and
(B) Availability of that drug through retail network pharmacies
without preauthorization under paragraph (k) of this section.
(ii) A covered drug not under an agreement under paragraph
(q)(2)(i) of this section requires preauthorization under paragraph (k)
of this section to be provided through a retail network pharmacy under
the Pharmacy Benefits Program. This preauthorization requirement does
not apply to other points of service under the Pharmacy Benefits
Program.
(iii) For purposes of this paragraph (q)(2), a covered drug does
not include:
(A) A drug that is not a covered drug under 38 U.S.C. 8126;
(B) A drug provided under a prescription that is not covered by 10
U.S.C. 1074g(f);
(C) A drug that is not provided through a retail network pharmacy
under this section;
(D) Any pharmaceutical for which the TRICARE Pharmacy Benefits
Program is the second payer under paragraph (m) of this section; and
(E) Any other exception, consistent with law, established by the
Director, TMA.
(3) Refund procedures. (i) The agreement referred to in paragraph
(q)(2) of this section shall include refund procedures to ensure that
pharmaceuticals paid for by the DoD that are provided by retail network
pharmacies under the pharmacy benefits program are subject to the
pricing standards referred to in paragraph (q)(1) of this section.
(ii) The refund procedures referred to in paragraph (q)(3)(i) of
this section shall, to the extent practicable, incorporate common
industry practices for implementing pricing agreements between
manufacturers and large pharmacy benefit plan sponsors. Such procedures
shall provide the manufacturer at least 70 days from the date of the
submission of the TRICARE pharmaceutical utilization data needed to
calculate the refund before the refund payment is due. The basis of the
refund will be the difference between the average non-federal price of
the drug sold by the manufacturer to wholesalers, as represented by the
most recent annual non-Federal average manufacturing prices (non-FAMP)
(reported to the Department of Veterans Affairs (VA)) and the FCP or,
in the discretion of the manufacturer, the difference between the FCP
and direct commercial contract sales prices specifically attributable
to the reported TRICARE paid pharmaceuticals, determined for each
applicable NDC listing.
(iii) A refund due under this paragraph (q) is subject to Sec.
199.11 of this part.
(4) Remedies. In the case of the failure of a manufacturer of a
covered drug to make or honor an agreement under this paragraph (q),
the Director, TMA, in addition to other actions referred to in this
paragraph (q), may take any other action authorized by law.
* * * * *
Dated: July 18, 2008.
Patricia L. Toppings,
OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. E8-17024 Filed 7-24-08; 8:45 am]
BILLING CODE 5001-06-P