[Code of Federal Regulations] [Title 42, Volume 3] [Revised as of October 1, 2007] From the U.S. Government Printing Office via GPO Access [CITE: 42CFR423.104] [Page 390-393] TITLE 42--PUBLIC HEALTH HUMAN SERVICES PART 423_VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT--Table of Contents Subpart C_Benefits and Beneficiary Protections Sec. 423.104 Requirements related to qualified prescription drug coverage. (a) General. Subject to the conditions and limitations set forth in this subpart, a Part D sponsor must provide enrollees with coverage of the benefits described in paragraph (c) of this section. The benefits may be provided directly by the Part D sponsor or through arrangements with other entities. CMS reviews and approves these benefits consistent with Sec. 423.272, and using written policy guidelines and requirements in this part and other CMS instructions. (b) Availability of prescription drug plans. A PDP sponsor offering a prescription drug plan must offer that plan to all Part D eligible beneficiaries residing in the plan's service area. (c) Types of benefits. The coverage provided by a Part D plan must be qualified prescription drug coverage. (d) Standard prescription drug coverage. Standard prescription drug coverage includes access to negotiated prices as described under paragraph (g)(1) of this section, provides coverage of Part D drugs, and must meet the following requirements (1) Deductible. An annual deductible equal to-- (i) For 2006. $250; or [[Page 391]] (ii) For years subsequent to 2006. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $5. (2) Cost-sharing under the initial coverage limit--(i) 25 Percent coinsurance. Coinsurance for actual costs for covered Part D drugs covered under the Part D plan above the annual deductible specified in paragraph (d)(1) of this section, and up to the initial coverage limit under paragraph (d)(3) of this section, that is-- (A) Equal to 25 percent of actual cost; or (B) Actuarially equivalent to an average expected coinsurance of no more than 25 percent of actual cost, as determined through processes and methods established under Sec. 423.265(c) and (d). (ii) Tiered copayments. A Part D plan providing actuarially equivalent standard coverage may apply tiered copayments, provided that any tiered copayments are consistent with paragraph (d)(2)(i)(B) of this section and are approved as described in Sec. 423.272(b)(2). (3) Initial coverage limit. The initial coverage limit is equal to-- (i) For 2006. $2,250. (ii) For years subsequent to 2006. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $10. (4) Cost-sharing between the initial coverage limit and the annual out-of-pocket threshold. Coinsurance for costs for covered Part D drugs above the initial coverage limit described in paragraph (d)(3) of this section and annual out-of-pocket threshold described in paragraph (d)(5)(iii) of this section that is equal to 100 percent of actual costs. (5) Protection against high out-of-pocket expenditures. (i) After an enrollee's incurred costs exceed the annual out-of-pocket threshold described in paragraph (d)(5)(iii) of this section, cost-sharing equal to the greater of-- (A) Copayments. (1) In 2006, $2 for a generic drug or preferred drug that is a multiple source drug (as defined in section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug; and (2) For subsequent years, the copayment amounts specified in this paragraph for the previous year increased by the annual percentage increase described in paragraph (d)(5)(iv) of this section and rounded to the nearest multiple of 5 cents; or (B) Coinsurance. Coinsurance of five percent of actual cost. (ii) As determined through processes and methods established under Sec. 423.265(c) and (d), a Part D plan may substitute for cost-sharing under paragraph (d)(5)(i) of this section an amount that is actuarially equivalent to expected cost-sharing under paragraph (d)(5)(i) of this section. (iii) Annual out-of-pocket threshold. For purposes of this part, the annual out-of-pocket threshold equals-- (A) For 2006. $3,600. (B) For years subsequent to 2006. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $50. (iv) Annual percentage increase. The annual percentage increase for each year is equal to the annual percentage increase in average per capita aggregate expenditures for Part D drugs in the United States for Part D eligible individuals and is based on data for the 12-month period ending in July of the previous year. (e) Alternative prescription drug coverage. Alternative prescription drug coverage includes access to negotiated prices as described under paragraph (g)(1) of this section, provides coverage of Part D drugs, and must meet the following requirements-- (1) Has an annual deductible that does not exceed the annual deductible specified in paragraph (d)(1) of this section; (2) Imposes cost-sharing no greater than that specified in paragraphs (d)(5)(i) or (ii) of this section once the annual out-of- pocket threshold described in paragraph (d)(5)(iii) of this section is met; (3) Has a total or gross value that is at least equal to the total or gross value of defined standard coverage. (4) Has an unsubsidized value that is at least equal to the unsubsidized value of standard prescription drug coverage. [[Page 392]] For purposes of this subparagraph, the unsubsidized value of coverage is the amount by which the actuarial value of the coverage exceeds the actuarial value of the subsidy payments under Sec. 423.782 for the coverage; and (5) Provides coverage that is designed, based upon an actuarially representative pattern of utilization, to provide for the payment, for costs incurred for covered Part D drugs, that are equal to the initial coverage limit under paragraph (d)(3) of this section, of an amount equal to at least the product of - (i) The amount by which the initial coverage limit described in paragraph (d)(3) of this section for the year exceeds the deductible described in paragraph (d)(1) of this section; and (ii) 100 percent minus the coinsurance percentage specified in paragraph (d)(2)(i) of this section. (f) Enhanced alternative coverage. (1) Enhanced alternative coverage must meet the requirements under paragraph (e) of this section and includes- (i) Basic prescription drug coverage, as defined in Sec. 423.100; and (ii) Supplemental benefits, which include- (A) Coverage of drugs that are specifically excluded as Part D drugs under paragraph (2)(ii) of the definition of Part D drug under Sec. 423.100; or (B) Any of the following changes or combination of changes that increase the actuarial value of benefits under the Part D plan above the actuarial value of defined standard prescription drug coverage, as determined through processes and methods established under Sec. 423.265-- (1) A reduction in the annual deductible described in paragraph (d)(1) of this section; (2) A reduction in the cost-sharing described in paragraphs (d)(2) or (d)(5) of this section, or (3) An increase in the initial coverage limit described in paragraph (d)(3) of this section. (C) Both the coverage described in paragraph (f)(1)(ii)(A) of this section and the changes or combination of changes described in paragraph (f)(1)(ii)(B) of this section. (2) Restrictions on the offering of enhanced alternative coverage by PDP sponsors. A PDP sponsor may not offer enhanced alternative coverage in a service area unless the PDP sponsor also offers a prescription drug plan in that service area that provides basic prescription drug coverage. (3) Restrictions on the offering of enhanced alternative coverage by MA organizations. Effective January 1, 2006, an MA organization-- (i) May not offer an MA coordinated care plan, as defined in Sec. 422.4 of this chapter, in an area unless either that plan (or another MA plan offered by the MA organization in that same service area) includes required prescription drug coverage; and (ii) May not offer prescription drug coverage (other than that required under Parts A and B of title XVIII of the Act) to an enrollee-- (A) Under an MSA plan, as defined in Sec. 422.2 of this chapter; or (B) Under another MA plan (including a private fee-for-service plan, as defined in Sec. 422.4 of this chapter) unless the drug coverage under the other plan provides qualified prescription drug coverage and unless the requirements of paragraph (f)(3)(i) of this section are met. (4) Restrictions on the offering of enhanced alternative coverage by cost plans. (i) A cost plan that elects to offer qualified prescription drug coverage may offer enhanced alternative coverage as an optional supplemental benefit under Sec. 417.440(b)(2)(ii) of this chapter only if the cost plan also offers basic prescription drug coverage. An enrollee in the cost plan may, at the individual's option, elect whether to receive qualified prescription drug coverage under the cost plan and, if so, whether to receive basic prescription drug coverage or, if offered by the cost plan, enhanced alternative coverage. (ii) A cost plan that offers qualified prescription drug coverage as an optional supplemental benefit under Sec. 417.440(b)(2)(ii) of this chapter may not offer prescription drug coverage that is not qualified prescription drug coverage. A cost plan that does not offer qualified prescription drug coverage under Sec. 417.440(b)(2)(ii) of this chapter may offer prescription drug [[Page 393]] coverage that is not qualified prescription drug coverage under Sec. 417.440(b)(2)(i) of this chapter. (g) Negotiated prices--(1) Access to negotiated prices. A Part D sponsor is required to provide its Part D enrollees with access to negotiated prices for covered Part D drugs included in its Part D plan's formulary. Negotiated prices must be provided even if no benefits are payable to the beneficiary for covered Part D drugs because of the application of any deductible or 100 percent coinsurance requirement following satisfaction of any initial coverage limit. (2) Interaction with Medicaid best price. Prices negotiated with a pharmaceutical manufacturer, including discounts, subsidies, rebates, and other price concessions, for covered Part D drugs by the following entities are not taken into account in establishing Medicaid's best price under section 1927(c)(1)(C) of the Act-- (i) A Part D plan, as defined in Sec. 423.4; or (iii) A qualified retiree prescription drug plan (as defined in Sec. 423.882) for Part D eligible individuals. (3) Disclosure. (i) A Part D sponsor is required to disclose to CMS data on aggregate negotiated price concessions obtained from pharmaceutical manufacturers, as well as data on aggregate negotiated price concessions obtained from pharmaceutical manufacturers that are passed through to beneficiaries, via pharmacies and other dispensers, in the form of lower subsidies paid by CMS on behalf of low-income individuals described in Sec. 423.782, or in the form of lower monthly beneficiary premiums or lower covered Part D drug prices at the point of sale. (ii) Information on negotiated prices disclosed to CMS under paragraph (g)(3) of this section is protected under the confidentiality provisions applicable under section 1927(b)(3)(D) of the Act. (4) Audits. CMS and the Office of the Inspector General may conduct periodic audits of the financial statements and all records of Part D sponsors pertaining to any qualified prescription drug coverage they may offer under a Part D plan.