[Code of Federal Regulations]
[Title 42, Volume 3]
[Revised as of October 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR423.272]

[Page 382-383]
 
                         TITLE 42--PUBLIC HEALTH
 
                    CHAPTER IV--CENTERS FOR MEDICARE
                          & MEDICAID SERVICES,
                        DEPARTMENT OF HEALTH AND
                             HUMAN SERVICES
 
PART 423_VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT--Table of Contents
 
  Subpart F_Submission of Bids and Monthly Beneficiary Premiums; Plan 
                                Approval
 
Sec.  423.272  Review and negotiation of bid and approval of plans submitted by potential Part D sponsors.

    (a) Review and negotiation regarding information, terms and 
conditions. CMS reviews the information filed under Sec.  423.265(c) in 
order to conduct negotiations regarding the terms and conditions of the 
proposed bid and benefit plan. In addition to its general negotiating 
authority under section 1860D-11(d)(2)(A) of the Act, CMS has authority 
similar to that of the Director of the Office of Personnel Management 
for health benefit plans under Chapter 89 of title 5, U.S.C.
    (b) Approval of proposed plans. CMS approves the Part D plan only if 
the plan and the Part D sponsor offering the plan comply with all 
applicable CMS Part D requirements, including those related to the 
provision of qualified prescription drug coverage and actuarial 
determinations.
    (1) Application of revenue requirements standard. CMS approves a bid 
submitted under Sec.  423.265 only if it determines that the portions of 
the bid attributable to basic and supplemental prescription drug 
coverage are supported by the actuarial bases provided and reasonably 
and equitably reflect the revenue requirements (as used for purposes of 
section 1302(8)(C) of the Public Health Service Act) for benefits 
provided under that plan, less the sum (determined on a monthly per 
capita basis) of the actuarial value of the reinsurance payments under 
section Sec.  423.329(c).
    (2) Plan design. (i) CMS does not approve a bid if it finds that the 
design of the plan and its benefits (including any formulary and tiered 
formulary structure) or its utilization management program are likely to 
substantially discourage enrollment by certain Part D eligible 
individuals under the plan.
    (ii) If the design of the categories and classes within a formulary 
is consistent with the model guidelines (if any) established by the 
United States Pharmacopeia, the formulary categories and classes alone 
will not be found to discourage enrollment.
    (iii) A plan that adopts the categories and classes discussed in 
paragraph (b)(2)(ii) of this section may nevertheless be found to 
discourage enrollment because it excludes specific drugs from the 
formulary.
    (c) Limited risk plans. (1) Application of limited risk plans. There 
is no limit on the number of full risk plans that CMS approves under 
paragraph (b) of this section. CMS approves a limited

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risk plan in accordance with paragraphs (c)(2) and (c)(3) of this 
section only if the access requirements under Sec.  423.859 are not 
otherwise met for a PDP region.
    (2) Maximizing assumption of risk. CMS gives priority in approval 
for those limited risk plans bearing the highest level of risk, but may 
take into account the level of the bids submitted by the plans and is 
not required to accept the limited risk plan with the highest assumption 
of risk. In no case does CMS approve a limited risk plan under which the 
modification of risk level provides for no (or a minimal) level of 
financial risk.
    (3) Limited exercise of authority. CMS approves only the minimum 
number of limited risk plans needed to meet the access requirements.
    (d) Special rules for private fee-for-service (PFFS) plans that 
offer prescription drug coverage. PFFS plans (as defined at Sec.  
422.4(a)(3)) choosing to offer prescription drug coverage are subject to 
all MA-PD bid submission and approval requirements applicable to MA-PD 
plans with the following exceptions:
    (1) Exemption from negotiations. These plans are exempt from the 
review and negotiation process in paragraph (a) of this section, and are 
not held to the revenue requirements standard in paragraph (b)(1) of 
this section.
    (2) Requirements regarding negotiated prices. These plans are not 
required to provide access to negotiated prices. However, if they do, 
they must meet the applicable requirements of Sec.  423.104(h).
    (3) Modification of pharmacy access standard and disclosure 
requirement. If the plan provides coverage for drugs purchased from all 
pharmacies, without charging additional cost sharing and without regard 
to whether they are network pharmacies, Sec.  423.120(a) and Sec.  
423.132 requiring certain network access standards and the disclosure of 
the availability of lower cost bioequivalent generic drugs does not 
apply to the plan.
    (e) Special rule for plans with standardized bids sufficiently below 
the national average monthly bid to result in a negative premium. In the 
event of a negative premium, as described in Sec.  423.286(d)(1), CMS 
negotiates the incorporation of the negative premium amount into the bid 
as either a reduction in the supplemental premium if the Part D plan 
already submitted a bid with an enhanced alternative benefit, or CMS 
requires the addition of new enhanced alternative benefit of no less 
value than the amount of the negative premium.