[Federal Register Volume 73, Number 195 (Tuesday, October 7, 2008)]
[Rules and Regulations]
[Pages 58491-58497]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23653]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 447
[CMS-2238-F]
RIN 0938-AP26
Medicaid Program; Multiple Source Drug Definition
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule revises the definition of ``multiple source
drug'' to better conform the regulatory definition to the provisions of
section 1927(k)(7) of the Social Security Act. It also responds to
public comments received on the March 14, 2008 interim final rule with
comment period.
DATES: Effective Date: This final rule is effective November 6, 2008.
FOR FURTHER INFORMATION CONTACT: Gail Sexton, (410) 786-4583.
SUPPLEMENTARY INFORMATION:
I. Background
In the July 17, 2007 Federal Register we published a final rule
with comment period (72 FR 39142) implementing the provisions of the
Deficit Reduction Act of 2005 (DRA) pertaining to prescription drugs
under the Medicaid Program. In that rule, we codified terms pertaining
to the calculation and reporting of average manufacturer price (AMP)
and best price and amended existing regulations regarding the
calculation of the Federal upper limits (FULs) for certain covered
outpatient drugs. The rule was effective October 1, 2007. On March 14,
2008, we issued an interim final rule with comment period (73 FR 13785)
that revised the definition of multiple source drug to conform to the
statutory provisions. As stated in that rule, the interim final rule
with comment period was not issued in response to public comments
received on the Medicaid prescription drug rule. 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
Medicaid prescription drug 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 argued that all drugs 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). Although we
continue to believe that, when an FDA-approved, therapeutically,
pharmaceutically, and bioequivalent drug is sold or marketed in the
United States, at least one therapeutically, pharmaceutically, and
bioequivalent drug is sold or marketed in every State, we issued an
interim final rule with comment period to revise the definition of
``multiple source drug.'' We stated that we expected the effect of the
revision, if any, to be minimal.
We are publishing this final rule to address comments received on
the interim final rule with comment period published on March 14, 2008
(73 FR 13785). Specifically, we are addressing comments pertaining to
the definition of ``multiple source drug'' in the March 14, 2008
interim final rule with comment period. For a full discussion of the
multiple source drug definition provisions see the March 14, 2008
interim final rule with comment period (73 FR 13785).
As noted in the interim final rule with comment period, this 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 Sec. 447.502, we defined key terms used for payment and rebates
for Medicaid covered outpatient drugs. We defined multiple source drug,
with respect to a rebate period, as a covered outpatient drug for which
there is at least one other drug product which is: (1) Rated as
therapeutically equivalent (for the list of drug products rated as
therapeutically equivalent, see the FDA's most recent publication of
``Approved Drug Products with Therapeutic Equivalence Evaluations''
which is available at http://www.fda.gov/cder/orange/default.htm or can
be viewed at the FDA's Freedom of Information Public Reading Room at
5600 Fishers Lane, rm. 12A-30, Rockville, MD 20857); (2)
pharmaceutically equivalent and bioequivalent, as determined by the
FDA; and (3) sold or marketed in the United States during the rebate
period.
[[Page 58492]]
In the March 14, 2008 interim final rule with comment period, we
revised the definition of ``multiple source drug'' at Sec. 447.502 to
state, in part, that a covered outpatient drug is a multiple source
drug when it is sold or marketed in the ``State'' during the rebate
period. In accordance with section 1927(k)(7)(C)(iii) of the Social
Security Act (``the Act'') and as discussed in the interim final rule
with comment period, we consider a 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. We also addressed our
belief, based on our experience with the FUL and the drug rebate
program that a national market exists for covered outpatient drugs. We
also provided in the interim final rule with comment period, that when
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. We further provided that where the drug does not qualify
as a multiple source drug in the State, the State should apply the
appropriate pricing methodologies as set forth in the approved State
plan.
III. Analysis of and Responses to Public Comments
We received nine items of correspondence that addressed the March
14, 2008 interim final rule with comment period. We received comments
from drug manufacturers and wholesalers, retail pharmacies, and
membership organizations. To the extent that comments were outside the
scope of the March 14, 2008 interim final rule with comment period they
are not addressed in this final rule. A summary of the major issues and
our responses are discussed below.
A. General Comments
Comment: We received several comments expressing general support
and appreciation for CMS revising the definition of ``multiple source
drug.'' One commenter specifically stated that the statutory definition
of ``multiple source drug'' has existed since 1990, and it is important
for CMS to include that definition in the regulations. One commenter
noted that States appreciate the increased flexibility to determine a
product's availability and to be able to adjust FUL prices accordingly.
Response: We appreciate these and all comments received relating to
our interim final rule with comment period revising the definition of
``multiple source drug.''
B. Adherence to the Administrative Procedures Act
Comment: Several commenters stated that the interim final rule with
comment period was not promulgated in accordance with the
Administrative Procedure Act (APA) which provides that a Federal agency
provide the public with notice of, and an opportunity to comment on,
proposed agency rulemaking before issuing a final rule, which includes
a statement of basis and purpose that responds to public comments.
Several commenters were in disagreement with CMS that a formal notice
and comment rulemaking process was not necessary because they said the
new rule was not an ``interpretive'' rule, a general statement of
policy, and/or a rule of agency procedure or practice.
Response: We disagree. We are applying the definition of ``multiple
source drug'' as specified in the statute and informing the public of
the procedures and practices the agency will follow to ensure
compliance with the statutory provisions. We do not believe that we
need to propose a rule to incorporate the words of a provision already
contained in the statute, and we therefore found good cause for waiving
the notice and comment procedures. We believe that such a proposed rule
would not be necessary because we would not be able to change the
definition in the rule in response to public comments. In addition, as
discussed in the interim final rule with comment period, we believe
that the interim final rule with comment period is exempt from notice
and comment rulemaking as an interpretative rule, general statement of
policy and/or rule of agency procedure or practice.
Furthermore, we have provided an opportunity for comment and have
now considered all comments in issuing this final rule.
Comment: One commenter stated that the fact that the Court issued a
preliminary injunction against the old rule does not, as a matter of
law, constitute good cause to eliminate notice and comment rulemaking.
Another commenter stated that CMS had time to go through the notice and
comment rulemaking, because the rule cannot be enforced due to Federal
court injunction.
Response: We issued the interim final rule with comment period
revising the definition of ``multiple source drug'' to better conform
the definition to the statutory language and to address the concerns
raised by plaintiffs in the Medicaid prescription drug rule litigation.
In that litigation, the plaintiffs contended, in part, that the
definition of ``multiple source drug'' adopted in the Medicaid
prescription drug 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.'' We
issued this rule to apply the definition specified in the statute. We
believe it is unnecessary to propose a rule to, in effect, incorporate
the words of the statute and to establish a procedure to ensure
compliance with that statutory provision.
Furthermore, we have provided an opportunity for comment and have
now considered all comments in issuing this final rule.
C. Interpretive Versus Substantive Rule
Comment: Several commenters submitted reasons why they believe that
this rule should not be considered an interpretive rule, as explained
above, but rather, a substantive rule, and thus subject to notice and
comment rulemaking. One commenter stated that this rule should be
considered a substantive rule because it will be published in the
Federal Register. Several commenters stated that this rule amends
another substantive rule subject to notice and comment rulemaking, and
thus should also be considered substantive. Other commenters stated
that rules which affect methodologies for calculating Federal funding
levels are substantive rules that are subject to notice and comment
under the APA. Several commenters stated that, because the new rule
establishes significant new burdens on pharmacies and States regarding
the State availability standard that has never been imposed by either
the statute or CMS, it must be considered a substantive rule.
Response: We disagree. We issued the March 14, 2008 interim final
rule with comment period to revise the Medicaid prescription drug rule
to better conform to the statute. The statute includes a provision that
a multiple source drug is sold or marketed in the State during the
rebate period and a separate provision that describes when a drug is
considered to be sold or marketed in a State. We revised the Medicaid
prescription drug rule to include these provisions and put forth
procedures to ensure compliance with the statute. We consider these
provisions to be exempt from notice and comment rulemaking as an
interpretive rule, general statement of policy, and/or rule of agency
procedure or practice. Moreover, to the extent that notice and comment
rulemaking might apply, we found good cause to waive
[[Page 58493]]
such requirements given that the revisions were made to revise the rule
to better comply with the statute.
Furthermore, we have provided an opportunity for comment and have
now considered all comments in issuing this final rule.
D. Definition--Regulation Text Changes
Comment: Several commenters suggested that the term ``multiple
source drug'' as it is currently defined should be revised. One
commenter stated that CMS should (1) change the introductory portion to
read, ``multiple source drug'' means, with respect to a rebate period,
a covered outpatient drug for which there ``are at least two drug
products which'', and (2) change the initial word of paragraphs (1)-(3)
of the definition from ``is'' to ``are.'' Several commenters stated
that for CMS to comply with the statute, the term ``covered outpatient
drug'' in the rule must be replaced with ``drug product'' in paragraphs
3(i) and 3(ii) of the definition of ``multiple source drug'' to assure
that FULs are applied properly.
Response: We have revised the definition of multiple source drug in
this final rule in accordance with the language in the Act. We have
retained the term ``covered outpatient drug'' in paragraph (3)(ii) of
that definition because FULs are set for ``multiple source drugs,''
which under section 1927(k)(7)(A)(i) of the Act are a subset of
``covered outpatient drugs.''
E. Drug Versus Drug Product--Compliance With the Social Security Act
Comment: Several commenters stated that the language of the rule
does not follow the language of the statute because the rule does not
properly distinguish between a ``drug'' and a ``drug product.'' Several
commenters stated that the distinction between drug and drug product is
important. Several commenters noted that a ``drug'' is a chemical
ingredient contained in one or more drug products but that a ``drug
product'' is a ``finished dosage form'' such as a tablet or capsule.
The commenters stated that a drug may be generally available to the
public through retail pharmacies in a State even though an individual
drug product is not generally available to the public through retail
pharmacies in a State.
Response: We appreciate the comment and have revised the regulation
to conform to the statute. We note, however, that the Act does not
distinguish between the terms ``drug'' and ``drug product'' in the
manner suggested in these comments.
F. National Availability
Comment: One commenter stated that drug products cannot be assumed
to have national availability because regional manufacturers,
marketers, distributors and wholesalers may sell exclusively to
entities in a specific class of trade and may not make their drug
products generally available to any or all pharmacies in a given State
or to the general public, even though they are listed in the national
compendia. Another commenter stated that there are many instances of
limited and sporadic supply of a drug product, particularly in the
first year after a new multiple source drug product is introduced to
the market, so that not all pharmacies have access to sufficient
supply.
Response: We believe, based on our experience with the FUL program
that when an FDA-approved, therapeutically, pharmaceutically, and
bioequivalent drug product is sold or marketed on a nationwide basis,
at least one therapeutically, pharmaceutically, and bioequivalent drug
product is generally sold or marketed in every State. However, we have
established a process in this rule to determine whether a listed
product is generally available through retail pharmacies in a State. If
a State concludes that a particular covered outpatient drug has no
therapeutically, pharmaceutically, and bioequivalent drug product that
is generally available in that State and, as a result, does not meet
the definition of a multiple source drug in the State, that drug would
not be subject to the FUL in that State. When at least two
therapeutically, pharmaceutically, and bioequivalent drug products are
generally available to the public through retail pharmacies within the
State, the drug will be considered a multiple source drug. In the case
where the covered outpatient drug is not a multiple source drug, that
drug would not be subject to the FUL in that State for the applicable
rebate period.
G. National Availability--Compliance With the Social Security Act
Comment: Several commenters stated that CMS' assumption that drug
products are nationally available does not ``interpret'' the statute,
but rather contradicts the statute. Other commenters stated that CMS
assumes nationwide availability of all drug products without a legal or
factual basis for that assumption. Several commenters stated that CMS
has not compiled evidence to justify its assumption of national
availability. One commenter stated that an assumption that all drug
products are available nationwide would render the statute's State
availability standard completely superfluous. Another commenter said
that the same assumption of national availability was contained in CMS'
original definition of ``multiple source drug'' which looked to whether
drug products were available ``in the United States'' rather than in
each ``State.''
Response: The State availability requirement has been in the Social
Security Act since the Omnibus Budget Reconciliation Act of 1990.
Nonetheless, we have received few complaints that drug products listed
in the national compendia are not widely available, and the few
complaints that we have received generally suggested availability
problems occurring nationwide, rather than availability problems unique
to a particular State. Therefore, in light of our experience with the
implementation of section 1927 of the Act, we believe that when an FDA-
approved, therapeutically, pharmaceutically, and bioequivalent drug
product is sold or marketed on a nationwide basis, that at least one
therapeutically, pharmaceutically, and bioequivalent drug product is
sold or marketed in every State. However, to the extent that a
particular covered outpatient drug has no therapeutically,
pharmaceutically, and bioequivalent drug product generally available to
the public through retail pharmacies within a State, this rule gives
States the flexibility to disregard the FUL for that drug and apply
alternate pricing methodologies as set forth in the State's approved
plan.
Comment: One commenter stated that a Federal court enjoined
implementation of the July 17, 2007 rule's definition of ``multiple
source drug'' because it violated the provisions of the statute's State
availability standard. Several commenters stated that despite the
court's ruling, CMS has made it clear that the agency will continue to
ignore the statute's State availability standard and continue to assume
that all drugs are available nationally, and that pharmacies and States
may enforce the statute's State availability standard, but CMS will
not.
Response: We disagree. We have revised the definition of ``multiple
source drug'' as it appeared in the Medicaid prescription drug rule to
be consistent with statutory language and fully compliant with the
court's preliminary ruling. We have not ignored the State availability
requirement; we have set forth a mechanism for determining whether a
drug is a ``multiple source drug.'' As we stated in the March 14, 2008
interim final rule, when a State confirms that a covered outpatient
drug is not a multiple source
[[Page 58494]]
drug in that State, that drug is not subject to a FUL in that State. We
have further clarified in our final rule that when at least two
therapeutically, pharmaceutically, and bioequivalent drug products,
covered under the Medicaid drug rebate program, are generally available
within the State, the drug will be considered a multiple source drug.
In the case where the covered outpatient drug is not a multiple source
drug, that drug would not be subject to the FUL in that State for the
rebate period. Thus, we have given States increased flexibility to
determine a product's availability. We believe that this is the most
effective means to ensure that drug products not available in a State
are identified and not treated as multiple source drugs.
Comment: A few commenters stated that if Congress had intended that
CMS simply assume that equivalent drug products are available
nationwide, it would not have adopted a specific process for CMS to
confirm availability in each State.
Response: Congress did not adopt a specific process for CMS to
confirm State availability but left it to the agency to set forth such
a process. We adopted the process set forth in the interim final rule
with comment period because we believe that pharmacies and States are
in a substantially better position to assess the availability of drugs
available for purchase in their areas. For example, the States have
daily updated claims files and could validate drug availability in a
more timely and efficient manner than could be done at the Federal
level. In addition, pharmacies are in the best position to know the
drug products to which they have access.
H. State Availability--Compliance With the Social Security Act
Comment: A few commenters stated that this rule does not comply
with the Act's ``State availability'' standard, which they state
requires CMS to confirm whether particular drug products are generally
available to the public through retail pharmacies in each State. A few
commenters stated that CMS must actually implement the statutory
language by not applying FULs unless it has first confirmed State
availability as mandated by the statute. The commenters further stated
that the statute does not authorize CMS to calculate and apply FULs and
then impose on pharmacies and States the burden of investigating
whether particular drug products satisfy the State availability
standard. The commenters state that the Federal statute clearly
discusses the duty of ``the Secretary'' to apply FULs to multiple
source drug products that satisfy the State availability standard.
Response: We disagree. The statute does not prohibit States from
assisting in the availability determination or, as noted previously,
otherwise set forth any mechanism for determining whether a drug is
``generally available.'' We believe the most efficient means to do so
is to have the State make the initial determination that drugs are not
generally available in that State. The Act, as amended by the DRA,
clearly contemplates the creation of a single nationwide FUL list. To
first confirm availability of each and every drug on a State-by-State
basis before setting a FUL would render the FUL provisions established
by the DRA administratively impossible to implement, and would create
an undue burden that would make the publication of a timely list
unlikely. This practice would be inconsistent with the statute which
provides that the Secretary establish a FUL for each multiple source
drug that enters the market on a timely basis.
Comment: Several commenters asserted that CMS incorrectly instructs
States that the State availability standard focuses on whether drugs
are unavailable to pharmacies, not whether drug products are generally
available to the public through retail pharmacies.
Response: We disagree. Since the statute uses the phrase
``generally available to the public through retail pharmacies,'' we
have decided that availability to retail pharmacies is a necessary
component of the State availability determination. We believe that if a
drug is available to a retail pharmacy, then it will be available to
the public.
Comment: A commenter stated that CMS has traditionally surveyed
manufacturers to determine if products are available before setting a
FUL. The commenter stated that he believes that CMS should undertake a
similar task to determine whether each dosage form and strength of a
multiple source drug is generally available to the public through
retail pharmacies in each State.
Response: As noted previously, we do not interpret the law to
require us to continually survey drug availability in the retail
pharmacies of every State. Such continuous surveys would be burdensome
and very time consuming and could likely result in an untimely and
outdated FUL list. In addition, such surveys would be inconsistent with
our understanding of other statutory amendments in the DRA where
Congress contemplated that we establish FULs on a timely basis. For
example, section 1927(f)(1) of the Act requires the Secretary's
response within 7 days after notification of availability of multiple
source products. We also note that pharmacies and States are in a
substantially better position to assess the general availability of
drugs in their areas.
I. State Availability and FUL Reimbursement
Comment: Several commenters expressed concern about the FUL
reimbursement in regard to drug availability in the State. One
commenter asked if States will receive an exemption from the FUL
retroactively because a State determination concerning the availability
of a drug will presumably be after a FUL effective date, and after CMS
confirms availability issues. Another commenter stated that FULs should
only be based on the AMPs of products that satisfy the State
availability standard.
Response: If a State can confirm that a covered outpatient drug is
not a multiple source drug in the State, for a particular rebate
period, the FUL will not apply to that drug in that State for that
rebate period. Where the drug does not qualify as a multiple source
drug in the State, the State should apply the appropriate pricing
methodologies as set forth in the approved State plan. We have further
clarified in our final rule that when at least two therapeutically,
pharmaceutically, and bioequivalent drug products, covered under the
Medicaid drug rebate program, are generally available within the State,
the drug will be considered a multiple source drug. In the case where a
covered outpatient drug is not a multiple source drug within the State,
that drug would not be subject to the FUL in that State for the rebate
period. The final comment regarding the calculation of the FUL based on
certain products is outside of the scope of this rule.
Comment: One commenter stated that the rule notes that if a
particular State could confirm that a drug is unavailable from two
sources, the FUL will be lifted for the rebate period.
Response: In the case where a State can confirm that a covered
outpatient drug is not a multiple source drug in the State, for a
particular rebate period, the FUL will not apply to that drug in that
State for that rebate period. Where the drug does not qualify as a
multiple source drug in the State, the State should apply the
appropriate pricing methodologies as set forth in the approved State
plan.
Comment: One commenter requested further information on how the
multiple source definition is to be applied in a rebate period, that
is, quarterly, when
[[Page 58495]]
the FUL process will be on a monthly schedule.
Response: We appreciate the comment, but the definition of multiple
source drug contemplates availability determinations on a rebate, as
opposed to a monthly, period.
Comment: CMS has not always assigned FULs to every group of drug
products, so one commenter assumed that CMS took this approach in
recognition of the lack of product availability in one or more States.
One commenter stated that it is apparent that CMS limited its
conclusion about at least two equivalent products being available
everywhere once a generic drug enters the market by adding the modifier
``nearly always.''
Response: Prior to the DRA revisions, we focused on applicability
of the FULs based on the number of suppliers listed in a national
published listing of average wholesale prices (such as Red Book, Blue
Book, and Medi-Span). We have no reason not to believe that virtually
all drug products are generally available in every State on a
nationwide basis. However, we recognize there is a potential that
certain drug products may not be generally available in every State
and, as a result, we have established procedures which allow States to
address such drug availability.
Comment: One commenter asserted that the States should be given an
opportunity for an appeals process to address availability issues
directly with CMS. They contend that this would support a more
effective implementation of the new FUL pricing calculation by
providing CMS with the ability to directly address unforeseen
marketplace issues and ensure drug availability in each State across
the nation.
Response: We do not believe that a formal appeals process will be
needed. We continue to believe that the States are in the best position
to determine drug availability and implement the process afforded in
this rule when a covered outpatient drug has no equivalent that is
generally available in the State. We have on going communication with
the States, and through those discussions States may bring availability
issues to our attention, or may bring availability issues to our
attention in response to a pharmacy's complaint. We do not believe more
formal appeals would be necessary as our source for setting FULs will
be manufacturer submitted AMP data. Regardless, a State may disregard a
FUL for a drug when it determines that the drug is not a multiple
source drug within the State for the rebate period.
J. State Availability and Retail Pharmacy Definition
Comment: One commenter stated that CMS does not define ``retail
pharmacies'' in the revised definition. However, CMS has included in
the definition of the ``retail pharmacy class of trade'' many entities
that do not constitute retail pharmacies. The commenter stated that
determining that multiple source drug products are generally available
in non-retail pharmacies would not be sufficient to satisfy the State
availability standard.
Response: We appreciate the comment. However, the definition of
retail pharmacies is outside the scope of this rulemaking.
K. Burden on States and Providers
Comment: Several commenters expressed concern about the burden that
may be placed upon States and providers in determining whether a drug
is a multiple source drug within the State.
Response: We believe that the effect on States and pharmacy
providers will be small given our experience with the FUL program. To
the extent a State would find, however, that a covered outpatient drug
product is not a multiple source drug in that State, the effect will be
to permit that State to disregard the FUL price for that drug, and
apply appropriate pricing methodologies as set forth in the approved
State plan.
Comment: One commenter expressed concern that there will be a
substantial and ongoing burden on States because all retail pharmacies
would have little choice but to notify the State that virtually any and
every drug product may not be available as a multiple source drug in
that State. Several commenters stated that a particular retail pharmacy
will rarely if ever know whether a particular drug product is
``generally available to the public through retail pharmacies'' in a
State. A commenter stated that, in practice, the most likely result
would be that pharmacies would investigate only if they cannot buy
enough inventory without losing more than they can afford. Another
comment inquired how a State can confirm whether or not a multiple
source drug is available from two sources.
Response: The statute provides that a drug product is considered to
be sold or marketed in a State if the drug product appears in a
published national listing of average wholesale prices, provided the
listed product is ``generally available to the public through retail
pharmacies in that State.'' In light of that standard, we see no reason
why pharmacies would report that a substantial number of drugs would be
generally unavailable; however, States have the authority to set
reasonable standards for such reporting. We fully expect that
pharmacies would report to their States information concerning any
covered outpatient drug that is subject to a FUL but for which they
cannot purchase an equivalent drug product.
Comment: One commenter stated that CMS is not only assigning States
the burden of determining whether a multiple source drug is available
in the marketplace (as listed in the Regulatory Impact Statement) but
also of determining the adequacy of the FUL rates to cover pharmacy
actual acquisition costs.
Response: We disagree. As we have previously indicated, we believe
that the effect on States and pharmacy providers will be small. This
rule does not require that States determine the adequacy of the FUL
relative to the pharmacies' actual acquisition costs.
L. State Versus Federal Responsibility
Comment: CMS has given no guidance as to what the agency believes
constitutes ``general availability to the public'' and what is
considered by CMS to be a sufficient number of retail pharmacies that
offer the drug product in sufficient quantities to be ``generally
available to the public.''
Response: At this time we have not provided a definition of general
availability to the public. The definition of multiple source drug has
been in the statute since the amendments of the Omnibus Budget
Reconciliation Act of 1990 and yet we have received very few complaints
that drug products listed in the national compendia are not generally
available, and the few complaints that we have received generally
pertained to availability problems occurring nationwide, rather than
availability problems unique to a particular State. We continue to
believe that complaints regarding general availability will be
infrequent and thus do not believe it is necessary to provide
additional instructions to States at this time. However, if, after
consultation with the States, we determine it is necessary to offer
additional guidance, we will do so. We also note that the commenter has
misconstrued this regulation which, in accordance with the statute,
provides that the listed product be generally available to the public
through retail pharmacies. General availability to the public is
determined not by considering which drug products pharmacies have
chosen to offer but by considering which drug
[[Page 58496]]
products are available for pharmacies to offer. We believe that if a
drug is available to a retail pharmacy, then it will be available to
the general public.
Comment: One commenter expressed concern that, if States cannot or
will not act when pharmacies report a lack of availability of a drug,
will CMS establish a process for pharmacies to directly petition CMS to
remove a FUL? The commenter adds that CMS has not indicated that it
will implement a timely process to remove the FUL on a product in a
State.
Response: We have not established a separate Federal process for
pharmacies to petition us for removal of a FUL and based on our
experience with the FUL program, we see no need to add such a process
at this time. We consider it the responsibility of the State to confirm
the information provided by the pharmacies.
Comment: One commenter proposed that rather than having a process
that has to be managed in 50 different States, it would be more
efficient for CMS to establish a national process for States and
providers to express their concerns.
Response: As discussed previously, we disagree. The statute and
regulation provide that the listed product be generally available to
the public through retail pharmacies in that State. We believe that
States and pharmacies in those States are in a better position to
assess the general availability of drugs in their areas.
M. Effects on Other Issues
Comment: We received an audit report entitled, Audit of Chain and
Independent Pharmacies, Mass Merchandisers, Proprietary Stores and
Foodstores with Pharmacies, March 2006, attached to a comment.
Response: We appreciate the report. However, the report did not
address the provisions of this rule.
Comment: We received several comments regarding the definitions of
AMP, wholesaler, and retail class of trade as well as comments
regarding the outlier policy applied when setting FULs.
Response: The purpose of this rule is to define ``multiple source
drug.'' The topics addressed by the commenters regarding AMP,
wholesaler, retail class of trade, and outliers are not within the
scope of this final rule.
Comment: One commenter stated that CMS must adopt a definition of
``multiple source drug'' that is based on the median or weighted AMP in
order to ensure that such drug products are available to the public
through retail pharmacies. One commenter urged CMS to clarify that when
a drug product ceases to meet either the first or second prong of the
``multiple source drug'' definition (that is, there is not at least one
other drug which is rated by the FDA as therapeutically equivalent in
the most recent publication of the Approved Drug Products with
Therapeutic Equivalence Evaluations and is pharmaceutically equivalent
and bioequivalent as determined by FDA) that CMS will take Federal
action to remove that drug from the FUL list and inform State Medicaid
agencies to cease application of the FUL. Further, the commenter
requested that CMS confirm that the State-by-State approach applies
only in situations where the third prong of the ``multiple source
drug'' definition is not satisfied--that is, where a generic equivalent
is not ``sold or marketed in the State.''
Response: To the extent that a drug does not qualify as a multiple
source drug, that drug is not subject to the FUL. Those comments
concerning the revised definition of multiple source drug and the FUL
methodology are not within the scope of the interim final rule with
comment period.
Comment: One commenter asserted that updating AMPs and AMP based
FULs monthly does not assure availability of drug products at the FUL
rates, since corrections are not made to previously issued FULs.
Another commenter stated that this proposed rule change does nothing to
address fundamental shortcomings of using the currently proposed basis
to set FULs.
Response: These comments are beyond the scope of this rulemaking
document and will not be addressed in this rulemaking document.
IV. Provisions of the Final Regulations
This final rule incorporates the provisions of the March 2008
interim final rule with comment period with two changes.
In Sec. 447.205, paragraph (3)(i) of the definition of multiple
source drug, the term ``covered outpatient drug'' is revised to read
``drug product,'' and ``listed product'' respectively to reflect the
statutory language.
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), Executive Order 13132 on Federalism, and the
Congressional Review Act (5 U.S.C. 804(2)).
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 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 the Secretary
has determined that this final rule 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
final rule are small pharmacies. We believe that the effect will be
small because we are unaware of any situation in which there are at
least two FDA-approved, therapeutically, pharmaceutically, and
bioequivalent drugs generally available in one State but not 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,
therapeutically, pharmaceutically, and bioequivalent drug product is
generally available in that State, the only effect will be to permit
that State to disregard the FUL price for a drug that no longer
qualifies as a multiple source drug in that State when determining the
aggregate limit. To the extent this final rule has an effect on small
retail pharmacies, that effect will be to increase payment rates to
those pharmacies by allowing States to disregard FULs for certain
drugs. Small pharmacies would only need to report when one drug in a
two-drug group of therapeutically, pharmaceutically, and
[[Page 58497]]
bioequivalent drugs is unavailable. However, such reporting would
clearly be in their interest. 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 the
Secretary has determined that this final rule 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, therapeutically and bioequivalent drug 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 that are not
multiple source drugs within the State, but this change is expected to
increase reimbursement.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending on State, local, or
tribal governments in the aggregate, or by the private sector, in any 1
year of $100 million in 1995, updated annually for inflation. In 2008,
that threshold is approximately $130 million. This final rule does not
contain any mandates that will impose spending costs on State, local,
or tribal governments in the aggregate, or by the private sector, of
$130 million.
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 should determine whether the pharmacy's assertion of
lack of general availability in the State is valid. The State, however,
has no obligation to make an independent assessment of drug
availability in the absence of such notification by a pharmacy. This
final rule will only revise payment rates in those rare cases in which
a particular FDA-approved therapeutically, pharmaceutically, and
bioequivalent drug is not generally available to the public through
retail pharmacies in a particular State and, as a result, only one
therapeutically, and bioequivalent drug product is generally available
to the public through those pharmacies. In this circumstance, a State
would need to confirm the information received from its pharmacies
regarding drug availability. 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, is confirming the interim rule published on March
14, 2008 (73 FR 13785) as final with the following changes:
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 the definition of ``Multiple source drug'' is
amended by revising paragraph (3)(i) to read as follows:
Sec. 447.502 Definitions.
* * * * *
Multiple source drug * * *
* * * * *
(3) * * *
(i) A drug product 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 that the listed product is
generally available to the public through retail pharmacies in that
State.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
Dated: August 20, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: August 21, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. E8-23653 Filed 10-6-08; 8:45 am]
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