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Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 2881

(B) For subsequent Round bids. CMShas 90 days after the covered documentreview date to provide notify suppliersof any missing covered documents.

(iii) Submission of missing covereddocuments. Suppliers notified by CMSof missing covered documents have 10

business days after the date of such

notice to submit the missing documents.CMS does not reject the suppliers bidon the basis that the covered documentsare late or missing if all the applicablemissing covered documents identifiedin the notice are submitted to CMS notlater than 10 business days after the dateof such notice.

* * * * *

7. Section 414.422 is amended by A. Redesignating paragraph (f) asparagraph (g).

B. Adding a new paragraph (f).The addition reads as follows:

414.422 Terms of contracts.

* * * * *

(f) Disclosure of subcontractingarrangements.

(1) Initial disclosure. Not later than 10days after the date a supplier enters intoa contract under this section thesupplier must disclose information on

both of the following:

(i) Each subcontracting arrangementthat the supplier has in furnishing itemsand services under the contract.

(ii) Whether each subcontractor meetsthe requirement of section1834(a)(20)(F)(i) of the Act if applicableto such subcontractor.

(2) Subsequent disclosure. Not laterthan 10 days after the date a supplierenters into a subcontractingarrangement subsequent to contractaward with CMS, the supplier mustdisclose information on both of thefollowing:

(i) The subcontracting arrangementthat the supplier has in furnishing itemsand services under the contract.

(ii) Whether the subcontractor meetsthe requirement of section1834(a)(20)(F)(i) of the Act, if applicableto such subcontractor.

* * * * * (Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program)

(Catalog of Federal Domestic AssistanceProgram No. 93.773, MedicareHospitalInsurance; and Program No. 93.774,MedicareSupplementary MedicalInsurance Program)

Dated: November 13, 2008.

Kerry Weems,

Acting Administrator, Centers for Medicare& Medicaid Services.

Approved: December 5, 2008.

Michael O. Leavitt,

Secretary.

[FR Doc. E9863 Filed 11509; 8:45 am]

BILLING CODE 412001P

DEPARTMENT OF HEALTH ANDHUMAN SERVICES

Centers for Medicare & MedicaidServices

42 CFR Parts 423

[CMS 4138IFC4]

RIN 0938AP24

Medicare Program: MedicareAdvantage and Prescription Drug

Programs MIPPA Drug Formulary &Protected Classes Policies

AGENCY: Centers for Medicare &Medicaid Services (CMS), HHS. ACTION: Interim final rule with comment period.

SUMMARY: This interim final rule withcomment period revises the regulationsgoverning the Medicare prescriptiondrug benefit program (Part D). Thisregulation makes conforming changes toreflect revisions to the rules governingPart D that were made as a result ofprovisions in the Medicare

Improvements for Patients andProviders Act (MIPPA), which becamelaw on July 15, 2008. These MIPPAprovisions change the definition of acovered Part D drug, and add newrequirements that apply to Part Dformularies.

DATES: Effective date:These regulationsare effective January 16, 2009.

Comment date:To be assuredconsideration, comments must bereceived at one of the addressesprovided below, no later than 5 p.m. onMarch 17, 2009.ADDRESSES: In commenting, please refer

to file code CMS4138IFC4. Because ofstaff and resource limitations, we cannotaccept comments by facsimile (FAX)transmission.

You may submit comments in one offour ways (please choose only one of theways listed)

1. Electronically. You may submitelectronic comments on specific issuesin this regulation to http://www.regulations.gov. Follow theinstructions for Comment orSubmission and enter the file code tofind the document accepting comments.

2. By regular mail. You may mailwritten comments (one original and twocopies) to the following address ONLY:Centers for Medicare & MedicaidServices, Department of Health andHuman Services, Attention: CMS4138IFC4, P.O. Box 8016, Baltimore, MD212448016.

Please allow sufficient time for mailed

comments to be received before theclose of the comment period.

3. By express or overnight mail. Youmay send written comments (oneoriginal and two copies) to the followingaddress ONLY: Centers for Medicare &Medicaid Services, Department ofHealth and Human Services, Attention:CMS4138IFC4, Mail Stop C42605,7500 Security Boulevard, Baltimore, MD212441850.

4. By hand or courier. If you prefer,you may deliver (by hand or courier)your written comments (one originaland two copies) before the close of the

comment period to either of thefollowing addresses:a. Room 445G, Hubert H. Humphrey

Building, 200 Independence Avenue,SW., Washington, DC 20201;

(Because access to the interior of theHHH Building is not readily available topersons without Federal Governmentidentification, commenters areencouraged to leave their comments inthe CMS drop slots located in the mainlobby of the building. A stamp-in clockis available for persons wishing to retaina proof of filing by stamping in andretaining an extra copy of the comments

being filed.)b. 7500 Security Boulevard,

Baltimore, MD 212441850.If you intend to deliver your

comments to the Baltimore address,please call telephone number (410) 7867195 in advance to schedule yourarrival with one of our staff members.

Comments mailed to the addressesindicated as appropriate for hand orcourier delivery may be delayed andreceived after the comment period.

For information on viewing publiccomments, see the beginning of theSUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

Alissa DeBoy at (410) 7866041)orVanessa Duran at (410)7868697.

SUPPLEMENTARY INFORMATION:Inspection of Public Comments:All

comments received before the close ofthe comment period are available forviewing by the public, including anypersonally identifiable or confidential

business information that is included ina comment. We post all commentsreceived before the close of thecomment period on the following Website as soon as possible after they have
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2882 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations

been received: http://regulations.gov.Follow the search instructions on thatWeb site to view public comments.

Comments received timely will bealso available for public inspection asthey are received, generally beginningapproximately 3 weeks after publicationof a document, at the headquarters of

the Centers for Medicare & MedicaidServices, 7500 Security Boulevard,Baltimore, Maryland 21244, Mondaythrough Friday of each week from 8:30a.m. to 4 p.m. To schedule anappointment to view public comments,phone 18007433951.

I. Background

The Medicare Prescription Drug,Improvement, and Modernization Act of2003 (MMA) (Pub. L. 108173) wasenacted on December 8, 2003. Section101 of title I of the MMA added a newPart D to title XVIII of the Social

Security Act (the Act), creating theMedicare prescription drug benefitprogram. The prescription drug benefitprogram is one of the most significantchanges to the Medicare program sinceits inception in 1965. The MMA alsomade revisions to the provisions inMedicare Part C, governing what is nowcalled the Medicare Advantage (MA)program (formerly Medicare+Choice).The MMA directed that importantaspects of the new Medicareprescription drug benefit program underPart D be similar to and coordinatedwith regulations for the MA program.

A final rule implementing the Part Dprescription drug program appeared inthe Federal Register on January 28,2005 (70 FR 4194). The provisions ofthat rule became effective on March 22,2005.

The Medicare Improvements forPatients and Providers Act (MIPPA)(Pub. L. 110275) was enacted on July15, 2008. MIPPA made a number ofchanges to the statutory provisionsgoverning both the MA program underPart C and the prescription drugprogram under Part D. On September18, 2008, we published an interim finalrule with comment period that made awide array of revisions to regulationsgoverning the Part C and Part Dprograms to reflect changes in thestatutory provisions governing theseprograms made in MIPPA [see 73 FR54226]. This interim final rule withcomment period similarly makesconforming changes to the Part Dregulations to reflect certain statutorychanges made in MIPPA that were notaddressed in the September 18, 2008interim final rule.

II. Provisions of the Interim Final Rule

A. Medically Accepted Indication( 423.100 Definitions)

Section 182 of MIPPA amends section1860D2(e)(1) of the Act to add a newdefinition for medically acceptedindication, effective January 1, 2009,for Part D drugs used in anticancer

chemotherapeutic regimens,specifically, and all other Part D drugs.Under new section 1860D2(e)(4) of theAct, a medically accepted indicationfor Part D drugs used in anticancerchemotherapeutic regimens has themeaning given in section 1861(t)(2)(B)of the Act, except that in applying the1861(t)(2)(B) definition, the termsprescription drug plan or MAPDplan are substituted for carrier, andthe compendia described in section1927(g)(1)(B)(i)(III) of the Act are addedto those listed in section1861(t)(2)(B)(ii)(I) of the Act. Also, onand after January 1, 2010, this lastrequirement shall not apply unless thecompendia described in section1927(g)(1)(B)(i)(III) of the Act meets therequirement in the third sentence ofsection 1861(t)(2)(B) of the Act.

Also under section 182 of MIPPA, forall Part D drugs not used in anticancerchemotherapeutic regimens, medicallyaccepted indication has the meaninggiven in section 1927(k)(6) of the Act,except that in applying this provision,the Secretary shall revise the list ofcompendia described in section1927(g)(1)(B)(i) of the Act as appropriatefor identifying medically accepted

indications for drugs, in a mannerconsistent with the process for revisingcompendia under section 1861(t)(2)(B)of the Act.

Consistent with these new statutoryrequirements, we have amended 423.100 by revising the definition of aPart D drug at 423.100 to incorporatethe new definition of medicallyaccepted indication in section 1860D2(e)(4) of the Act.

B. Access to Covered Part D Drugs( 423.120)

Section 176 of MIPPA added a newsection 1860D4(b)(3)(G)(i) to the Actrequiring, effective for plan year 2010,that CMS identify, as appropriate,certain categories or classes of drugswhich meet the following two prongedtest: (1) Restricted access to the drugs inthe category or class would have majoror life threatening clinical consequencesfor individuals who have a disease ordisorder treated by drugs in suchcategory or class; and (2) there is asignificant need for such individuals tohave access to multiple drugs within acategory or class due to unique chemical

actions and pharmacological effects ofthe drugs within the category or class,such as drugs used in the treatment ofcancer.

Under a new section 1860D4(b)(3)(G)(ii) of the Act, subject to theauthority in section 1860D4(b)(3)(G)(iii) of the Act to provide forexceptions, Part D formularies must

include all covered Part D drugs in eachclass identified under section 1860D4(b)(3)(G)(i) of the Act. Section 1860D4(b)(3)(G)(iii), in turn, provides CMS thediscretion to establish exceptionspermitting sponsors of a prescriptiondrug plan to exclude from theirformularies, or to otherwise limit accessto (including through priorauthorization or other utilizationmanagement restrictions), certain Part Ddrugs from the protected categories andclasses established consistent withsection 1860D4(b)(3)(G)(i) of the Act.As provided in section 1860D

4(b)(3)(G)(iii)(I) of the Act, any suchexception must be based on scientificevidence and medical standards ofpractice (and, in the case ofantitretroviral medications, beconsistent with the Department ofHealth and Human Services Guidelinesfor the Use of Antitretroviral Agents inHIV1Infected Adults andAdolescents). In addition, as providedin section 1860D4(b)(3)(G)(iii)(II) of theAct, such exceptions must be providedunder a process that includes anopportunity for public notice andcomment. We have added 423.120(b)(2)(v) to reflect the new

formulary requirements in section1860D4(b)(3)(G) of the Act.

Based on our program experience, andconsistent with our formulary reviewprocess, we plan to conduct anexamination, described below, of widelyused treatment guidelines in order toestablish protected categories andclasses for Part D sponsors that meet therequirements established by section1860D4(b)(3)(G) of the Act.Additionally, consistent with section1860D4(b)(3)(G)(iii) of the Act and 423.120(b)(2)(v) of this interim finalrule, we may establish exceptions to the

requirement that Part D sponsorsinclude all Part D drugs in the protectedcategories and classes. Given thecomplexity involved in modernmedicine and changes in drug therapieswith availability of new informationreaching providers almost daily, weanticipate that exceptions to ourregulatory requirements will benecessary. For example, we believe thatin certain circumstances the applicationof prior authorization may beappropriate to ensure use of Part Ddrugs in line with medically necessary
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indications. As described below, wewill therefore establish exceptions to theprotected categories and classes throughnotice-and-comment rulemaking toensure that they are established in amanner that provides for meaningfulpublic input, in a fully transparentmanner (in which we will formallyrespond to the public comments), that

also enables us to meet operationaltimeframes.

We note that Part D sponsors mayapply edits to make appropriatecoverage determinations for drugsincluded in the protected classes thatmay be covered under Medicare Part B.Until the Part D sponsor is able to affirmthere is no Part B reimbursement, we donot consider the definition of a Part Ddrug to be satisfied. Furthermore, thelimitation of drug utilizationmanagement relating to drugs in theprotected classes does not extend to theapplication of safety edits. Part D

sponsors and their subcontractednetwork pharmacies must applyestablished safety edits to drugs fromthe protected classes to ensure theirenrollees are not harmed by inadvertentmedication errors.

We also note that, as stated in ourJanuary 28, 2005 Part D final rule (70 FR4194, 4260), inclusion of all coveredPart D drugs from a protected class orcategory does not extend to inclusion ofall brand-name drugs and genericversions of the covered drug inquestion. Under our longstandinginterpretation of the term covered PartD drug, Part D sponsors will only be

required to include on their formulariesall chemically distinct drugs from theprotected classes or categories in orderto the meet the provisions of 423.120(b)(2)(v). We have consistentlyheld that two drug products that aredetermined to be therapeuticequivalents by the Food and DrugAdministration (FDA) and identified assuch in the FDAs Orange Book areconsidered to be the same Part Ddrug. (According to the Orange Book:Drug products are considered to betherapeutic equivalents only if they arepharmaceutical equivalents and if they

can be expected to have the sameclinical effect and safety profile whenadministered to patients under theconditions specified in the labeling.)Thus, therapeutic equivalents are notcounted twice for purposes of satisfyingthe CMS minimum formularyrequirements.

In planning for the implementation ofsection 1860D4(b)(3)(G) of the Act, wenote that we have gained valuableexperience since 2006 in evaluatingvarious drug classification systems andensuring that Medicare beneficiaries

reliant on drugs contained in certaincategories or classes are neithersubstantially discouraged from enrollingin a Part D plan nor experienceunnecessary complications related toaccessing these drugs. Our experiencehas provided insight into the type ofevaluation process that will be requiredto ensure that the classes and categories

of drugs we are protecting areappropriate. In this rule, below, wedescribe our current thinking on theprocess we believe will allow us to mostappropriately identify the classes andcategories of drugs that should beprotected. We would welcomecomments on this process.

We believe that it is necessary toestablish a multi-level review process toensure that we are appropriatelyidentifying classes or categories thatmeet the criteria set forth in section1860D4(b)(3)(G)(i) of the Act. Underthis multi-level process, we are

planning on conducting an initialanalysis that is predominantly researchand data driven, followed by asecondary clinical analysis that willserve as a validation review. Bothprocesses will involve the identificationof potential exceptions to the protectedcategories or classes provision.

We plan on initiating the first-levelreview by selecting a contractor familiarwith our CMS Part D formulary process.This contractor will review all thewidely used treatment guidelines andgenerate a list highlighting thosecategories or classes in which multipledrugs within classes or categories are

typically used to treat a specificdisorder. Simultaneously, CMS willprovide information to the contractor on

beneficiary utilization of multiple drugswithin categories and classes based onanalysis of prescription drug event(PDE) data. The contractor will relatethese findings to the informationobtained from the examination ofwidely used treatment guidelines.

For the second level validation, anexpert panel of physicians andpharmacists will be organized to reviewthe initial data developed from thecontractor and offer recommendations

based on a consensus opinion on theidentification of protected categoriesand classes under the statute.Information regarding theindependence, potential conflicts ofinterest, expertise, and balance of theindividuals chosen to participate in thisexpert panel will be made publiclyavailable.

We firmly believe an expert panel canassist us in appropriately weighing thedata derived from the initial analysisagainst the statutory requirements toidentify protected categories or classes

of drugs in which access to multipledrugs within a category or class isneeded and in which major or lifethreatening clinical consequences mayarise if access is restricted. Furthermore,we believe the expert panel will be wellpositioned to consider the datasuggesting possible exceptions andoverlay this with the protected

categories or classes in order to identifyexceptions that are based upon availablescientific evidence and medicalstandards of practice. These exceptionswill be subject to notice and commentas previously described.

The results from the panel on theprotected classes and exceptions willthen be published in the FederalRegister in a notice of proposedrulemaking seeking public comment, to

be followed by the issuance of a finalrule that responds to the publicscomments. We believe that reliance onthe rulemaking process will better

facilitate openness and transparency ofthe process for identifying, asappropriate, classes and categories ofdrugs that meet the MIPPA criteria.

Given the contracting activities andsubsequent extensive analysis necessaryfor reviewing all widely used treatmentguidelines relative to the requirementsof section 1860D4(b)(3)(G)(i) of the Act,as well as commonly-used drugclassification systems, we havedetermined that we will be unable tocomplete a full evaluation of whatconstitutes a protected category or classunder the criteria set forth in section1860D4(b)(3)(G)(i) of the Act in time

for the 2010 plan year, as this wouldrequire that we hire a contractor,convene an expert panel, and gothrough notice of proposed and finalrulemaking prior to April 2009, whenPart D sponsors are required to submittheir formularies. Therefore, althoughthe new regulation text at 42 CFR423.120(b)(2)(v) states that Effectivecontract year 2010, formularies mustinclude all Part D drugs in the categoriesor classes CMS has identified as meetingthe MIPPA criteria, in practice, CMSwill not have identified any suchcategories or classes for the contract

year 2010.Rather, for 2010, given the timeframesdiscussed above, as well as the need toensure consistency in formularycoverage as we complete our analysis toimplement the requirements of section1860D4(b)(3)(G)(i) of the Act, in themeantime we will retain our existing sixclasses of clinical concern contained inChapter 6 of the Medicare PrescriptionDrug Benefit Manual (section 30.2.5),which were incorporated into theManual under the statutory authority setout in section 1860D11(e)(2)(D)(i) of

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the Act. Accordingly, Part D sponsorswill continue to be expected to includeall or substantially all drugs in theantidepressant, antipsychotic, andanticonvulsant classes,immunosuppressant (for prophylaxis oforgan transplant rejection),antiretroviral, and antineoplastic (thosenot generally covered under Part B)

drugs for coverage year 2010. We areretaining the policy providing forcoverage of all or substantially all drugsin these six classes under our existingauthority in section 1860D11(e)(2)(D)(i)of the Act in order to ensure that PartD sponsors do not discriminate againstany class of beneficiary by substantiallydiscouraging enrollment.

For contract years 2011 and beyond,any modifications we make to theprotected categories and classes,whether under the existing MMA non-discrimination authority or newauthority under MIPPA, will be made

through notice-and-commentrulemaking. Specifically, prior toestablishing the protected categories andclasses under the new MIPPA authority,CMS will (i) engage in an identificationand validation process, such as theprocess described above and (ii) engagein a process of notice and commentrulemaking for any modifications(including any additions, subtractions,or exceptions) to the protectedcategories and classes under the MIPPAauthority. In such rulemaking, or aseparate rulemaking, we may furtherarticulate our interpretation of the newstatutory criteria. We believe that asking

for (and responding to) public commenton results from the contractor andexpert panel will better facilitateopenness and transparency of theprocess for identifying, as appropriate,classes and categories of drugs that meetthe MIPPA criteria.

Similarly, if CMS makesmodifications to the existing protectedcategories and classes under the MMAauthority (i.e., the existing six classes ofclinical concern), we will (i) engage inan identification and validation process,such as the process described above and(ii) engage in notice and comment

rulemaking for any such modifications(including any additions, subtractions,or exceptions). Any such rulemakingmay also further articulate ourinterpretation of the statutory languageat section 1860D11(e)(2)(D)(i) of theAct. This process will mirror theprocess for establishing the protectedcategories and classes under the newMIPPA authority. Soliciting, andresponding to, public comment onresults from the contractor and expertpanel will increase the openness andtransparency of the process for

protecting classes and categories ofdrugs under the MMA non-discrimination authority.

In the past, we have used annual CallLetters and other guidancememorandums to announce the policyof expecting plan sponsors to cover allor substantially all drugs in the sixclasses of clinical concern. We

announced the policy to ensure thatenrollees had as smooth of a transitionas possible into the Part D program. Wealso wanted to minimize potential

beneficiary concern about access todrugs in the six protected classes andcategories.

However, we now have much moreexperience with Part D since theprogram started in January 2006. Thus,we are in a better position to considerdrug categories and classes that shouldreceive protection either under MIPPAor the MMA. Further, the public nowhas greater experience with a fullyimplemented Part D program and canprovide more comprehensive commentson our continuing considerations aboutthe program.

Hence, CMS has decided that anymodifications to the current sixcategories and classes, whether underMIPPA or the MMA authority, will gothrough the process described abovethat includes notice of proposed andfinal rulemaking. The rulemakingprocess will provide for moretransparency in the process ofidentifying protected categories andclasses, enabling the public to commenton how modifications to the current six

classes will impact variousstakeholders, including beneficiaries,

beneficiary advocates, plan sponsors,contractors of plan sponsors, andgovernmental entities, among others.

In addition, CMS believes thatidentifying protected classes andcategories in the Code of FederalRegulations will provide greater clarityand transparency about those drugclasses that are protected.

III. Waiver of Proposed Rulemakingand Delay in Effective Date

We ordinarily publish a notice of

proposed rulemaking in the FederalRegister and invite public comment onthe proposed rule. The notice ofproposed rulemaking includes areference to the legal authority underwhich the rule is proposed, and theterms and substances of the proposedrule or a description of the subjects andissues involved. This procedure can bewaived; however, if an agency findsgood cause that a notice and commentprocedure is impracticable,unnecessary, or contrary to the publicinterest and incorporates a statement of

the finding and its reasons in the ruleissued. We also usually provide for adelay in effective date under section553(d) of the APA (5 U.S.C. 553(d), aswell as section 801(a)(3) of theCongressional Review Act (5 U.S.C.801(a)(3)) (when applicable). However,such delay in effective date may bewaived for good cause, when such delay

is impracticable, unnecessary, orcontrary to the public interest, and theagency incorporates a statement of thefinding and a brief statement of thereasons therefore in the notice. 5 U.S.C.553(d)(3), 808(2). Because this interimfinal rule simply makes conformingchanges to the Code of FederalRegulations to reflect changes in thestatute, we find it would be unnecessaryand contrary to the public interest toseek public comment on theseprovisions. For the same reasons, wealso find that it would be unnecessaryand contrary to the public interest to

delay the effective date of suchprovisions beyond January 16, 2009.

IV. Collection of InformationRequirements

This document does not impose anynew information collection andrecordkeeping requirements. Currentlyapproved and forthcoming controlsaccount for any collection ofinformation burden relative to theprovisions of this interim final rule, asoutlined below.

Section 423.120 FormularyRequirements

Section 423.120(b)(2)(v) requires PartD sponsors to include in their contractyear 2010 formularies all drugs incertain protected categories of classes ofdrugs specified by CMS, with certainexceptions that CMS establishes.

The burden associated with thisrequirement is the time and effort putforth by Part D sponsors to submit theirformularies to CMS. These collection ofinformation requirements are currentlyapproved under the Office ofManagement and Budget (OMB) ControlNo. 09380763.

V. Regulatory Impact AnalysisA. Overall Impact

We have examined the impacts of thisrule as required by Executive Order12866 on Regulatory Planning andReview (September 30, 1993, as furtheramended), the Regulatory FlexibilityAct (RFA) (September 19, 1980, Pub. L.96354), section 1102(b) of the SocialSecurity Act, section 202 of theUnfunded Mandates Reform Act of 1995(Pub. L. 1044), Executive Order 13132on Federalism (August 4, 1999), and the

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Congressional Review Act (5 U.S.C.804(2)).

Executive Order 12866, as amended,directs agencies to assess all costs and

benefits of available regulatoryalternatives and, if regulation isnecessary, to select regulatoryapproaches that maximize net benefits(including potential economic,

environmental, public health and safetyeffects, distributive impacts, andequity). A regulatory impact analysis(RIA) must be prepared for major ruleswith economically significant effects($100 million or more in any 1 year). Weestimate that this interim final rule withcomment is economically significantunder the Executive Order 12866, as itcontains impacts of $100 million ormore in any one year, and hence also a

major rule under the CongressionalReview Act.

The RFA requires agencies to analyzeoptions for regulatory relief of small

businesses, if a rule has a significantimpact on a substantial number of smallentities. For purposes of the RFA, smallentities include small businesses,nonprofit organizations, and small

governmental jurisdictions. Mosthospitals and most other providers andsupplies are small entities, either bynonprofit status or by having revenuesof $7 million or less to $34.5 million inany 1 year. Individuals and States arenot included in the definition of a smallentity.

We estimate that the coverage of alldrugs by Part D sponsors from the CMS-established protected classes or

categories to have a cost impact to thefederal budget in an amount exceeding$100 million for any given calendar year(CY). Table 1 provides the costsassociated with these provisions for CY2010 through CY 2018. The assumptionsunderlying these cost estimates areexplained later in this section.

With respect to economic benefits, wehave no reliable basis for estimating theeffects of the proposals contained in thisIFC. Accordingly, we estimate thatwhile there could be economic benefitsassociated with these proposals, theyare difficult to gauge at this time.

The economically significant costs arereflected below in table 1.

TABLE 1PROJECTED PART D COSTS FOR CY 2010CY 2018[Amounts in $ millions]

CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018CY 2010

2018

Formulary require-ments with respectto certain cat-egories or classesof drugs ................ . 0 160 340 460 520 570 640 710 800 4200

We note that the change in thedefinition of a Part D drug to revise themeaning of the term medicallyaccepted indication, as provided undersection 1860D2(e)(4) of the Act, wasscored at zero additional cost to the

program. Most of the anticancerchemotherapeutic regimens utilized byMedicare beneficiaries are coveredunder Part B, and while this newprovision may extend coverage foranticancer therapeutic regimens underPart D, we believe the number of Part Ddrugs claims impacted by this changewill be minimal. Therefore, we do notexpect that this provision willsignificantly impact program costs.

a. Regulatory Flexibility Analysis

Under the RFA, we are not requiredto conduct an initial regulatoryflexibility analysis for interim finalrules. However, it is our longstandingpolicy to provide an analysis wheneverwe believe it would aid in theunderstanding of the effects of theinterim final rule with comment.

The RFA requires agencies todetermine whether a rule will have asignificant economic impact on asubstantial number of small entities.Under the RFA, a small entity isdefined as a small business (asdetermined by the Small BusinessAdministration (SBA)), a non-profit

entity of any size that is not dominantin its field, or a small governmentjurisdiction. HHS uses its measure of asignificant economic impact on asubstantial number of small entities to

be a change in revenues of more than 3

to 5 percent.With respect to the provisionscontained in this interim final rule, we

believe only retail pharmacies which aresmall businesses will be impacted.Other small businesses, such asphysicians in private practice or small

businesses that deliver prescriptions tobeneficiaries, will be unaffected by thisinterim final rule since there is no directimpact to their operations orprofitability. For example, privatephysicians will generally continue tofollow current prescribing practicesregardless of Part D formularies. Smalldelivery businesses will continue todeliver the same number ofprescriptions regardless of the drugname or formulary inclusion.

The Small Business Administration(SBA) considers pharmacies with firmrevenues less than $7 million to besmall businesses. The 2004 BusinessCensus (the latest available detaileddata) indicated that there wereapproximately 19,443 firms operatingabout 40,115 retail pharmacies and drugstore establishments (NAICS code44611). Of these firms, 17,835 had

revenues under $7 million and operateda total of 17,835 establishments. As aresult, we estimate that more than 90percent of retail pharmacy firms aresmall businesses (as defined by the SBAsize standards).

We do not believe that retailpharmacies would be significantlyimpacted by the requirement for Part Dsponsors to include all drugs inprotected classes or categories specified

by CMS. While the number of brandname drugs dispensed in thesecategories may increase, we do not thinkthere will be a substantial increase inoverall retail pharmacy profits. Retailpharmacies may incur some limitedcosts relative to this provision, sincethey may need to inventory more drugswithin these classes given that Part Dsponsors may not be able to concentratevolume on lower cost salts, esters andactive moieties.

As previously discussed, the otherchange contained in this interim finalrule is not expected to affect small

businesses in a significant manner, if atall. For example, section 182 of theMIPPA requires modification to thedefinition of a medically acceptedindication for purposes of a Part D drug.While Part D sponsors will be expectedto implement this new definitionthrough their drug utilizationmanagement programs, small

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businesses, such as retail pharmacies orphysicians, will not require any changesto their existing operations. Theapplication of drug utilizationmanagement is common in thecommercial market, and small

businesses already have processes (thatis, administrative staff or pharmacytechnicians) to supply the necessary

information to address drug utilizationmanagement requirements. As a result,we do not anticipate any additionalcosts or burdens to be placed on othersmall businesses.

Section 1102(b) of the Social SecurityAct requires us to prepare a regulatoryflexibility impact analysis if a rule mayhave a significant impact on theoperations of a substantial number ofsmall rural hospitals. This analysis mustconform to the provisions of section 604of the RFA. For purposes of section1102(b) of the Act, we define a smallrural hospital as a hospital that is

located outside of a MetropolitanStatistical Area and has fewer than 100

beds. This interim final rule will notaffect small rural hospitals since theprogram will be directed at outpatientprescription drugs, not drugs providedduring a hospital stay. As required bylaw, prescription drugs provided duringhospital stays are covered under aseparate Medicare payment system.Therefore, we are not providing ananalysis in this rule.

Section 202 of the UnfundedMandates Reform Act of 1995 (UMRA)requires that agencies assess anticipated

costs and benefits and take certain otheractions before issuing a final rule thatincludes any Federal mandate that mayresult in expenditure in any one year byState, local, or tribal governments, in theaggregate, or by the private sector, of$100 million. That threshold, updatedfor inflation, is currently approximately$130 million. We anticipate that thisinterim final rule will not impose costsabove the $130 million UMRA thresholdon State, local, tribal governments, inthe aggregate, or by the private sector.

Executive Order 13132 establishescertain requirements that an agencymust meet when it issues a final rulethat imposes substantial directrequirement costs on State and localgovernments, preempts State law, orotherwise has Federalism implications.The changes and additions contained inthis interim final rule do not imposenew costs on states or localgovernments.

There are no anticipated Federalismimplications because none of theprovisions contained in this interimfinal rule place any requirements onStates.

B. Anticipated Effects on Health Plansand Pharmacy Benefit Managers (PBMs)

Part D sponsors will be significantlyimpacted by this IFC rule. For example,we believe that the new provisionrelative to the establishment of certainprotected classes and categories of PartD drugs will have a significant impacton Part D sponsors, a class of

beneficiaries and the FederalGovernment. This new provisionrequires that Part D sponsors include alldrugs in protected classes and categoriesof drugs that CMS specifies as meeting

both of the following conditions:1. Restricted access to drugs in the

category or class would have a major orlife threatening clinical consequence.

2. A significant clinical need exists forindividuals to have access to multipledrugs within a category or class due tounique chemical actions andpharmacological effects.

We expect these conditions will likely

expand access to drugs for certainclasses or categories and provide greaterinclusion of manufacturers drugsassociated with those classes orcategories in the Part D program. Ifadditional drug classes and categoriesare required to be included on Part Dsponsor formularies, Part D sponsorscosts could increase, since more drugscould need to be covered. Conversely, iffewer classes and categories are requiredto be included on Part D sponsorsformularies, Part D sponsors costscould decrease, since less drugs couldrequire coverage. Since we are only now

beginning our examination of widelyused treatment guidelines in order toestablish the protected classes orcategories that meet the aforementionedrequirements, we estimate that thisprovision will add an additional $160million to the cost of the Part D programin CY 2011. We believe this willincrease to $800 million in CY 2018,with total costs of approximately $4.2

billion dollars for the period CY 2010through CY 2018.

To arrive at the cost estimate for theimplementation of the protectedcategories and classes, we began byputting drug spending into 3 groupings:(1) Drugs that were already included inthe six classes of clinical concern; (2)drugs with a greater likelihood of beingaffected by this statutory change; and (3)drugs with a lesser likelihood of beingaffected by this statutory change. Foreach of these categories, we estimatedthe likelihood that they wouldultimately be included in the protectedcategories and classes. A verypreliminary review of commonly usedclassification systems revealed thatadditional categories and classes of

drugs may be included in the protectedcategories and classes based upon thestatutory requirements in section1860D4(b)(3)(G)(i) of the Act. Weassumed that it would take several yearsfor the full impact of this policy to takeeffect as new formulary requirementsare fully implemented andmanufacturers discover their new

negotiating positions. Finally, weestimated the impact on drugexpenditures for those drugs that couldpotentially be moved into protectedcategories or classes of drugs based onthe statutory requirements. Theseimpacts reflect our best estimates of arange of possibilities that cannot bemore accurately projected until actualdecisions are made.

There is a large amount of uncertaintyin the cost impact presented above. Asdescribed above, the cost impact iscalculated based on making a series ofassumptions regarding potential classes

that may become protected. It ispossible that the actual number ofclasses that would be protected will bedifferent than weve estimated. Forexample, if no classes beyond thecurrent six become protected, therewould be no cost impact at all.Alternatively, if a greater number ofclasses than we estimate becomeprotected, the actual cost impact will begreater than presented above. Moreover,if this process only resulted in theelimination of the existing six classes,savings could accrue.

If additional categories and classes areincluded on Part D sponsor formularies

as a result of the new statutoryprovisions, we expect sponsorsnegotiating power to be diminished. Ifthis were to occur, Part D sponsorscould incur higher drug costs and could

be forced to raise their bids, whichcould result in higher premiums and co-pays to offset these increases. We alsoanticipate that Part D sponsors couldhave additional costs associated withmanaging a larger overall formularyforexample, increased Pharmacy andTherapeutics Committee oversight andincreased expenses in marketing moreproducts on comprehensive formularies.

Alternatively, however, the number ofprotected classes and categories meetingthe MIPPA requirement could declinerelative to the current six protectedunder the MMA authority. If this werethe case, we expect Part D sponsorsnegotiating power to increase. As aresult, Part D sponsors could incurlower drug costs and could lower their

bids, which could result in lowerpremiums and co-pays.

We are also uncertain at this timewhat exceptions to the requirement thatPart D sponsor formularies include all

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drugs in the protected categories andclasses of drugs will be established byCMS. We anticipate establishingexceptions similar to those availableunder our existing six classes of clinicalconcern policy. It is possible we willestablish fewer exceptions, and Part Dsponsors may have to include moredrugs on their formularies than current

policy. However, it is also possible thatwe may establish more exceptions thancurrent policy. We are also uncertainhow Part D sponsors will be permittedto apply drug utilization management todrugs in the protected classes until wefinalize the exceptions to the protectedcategories and classes requirement. We

believe that if we are unable to permitPart D sponsors to apply meaningfulutilization management to these drugseven if only for beneficiaries initiatingtherapy in these categories or classesthe result could be an increased use of

brand-name or higher cost drugs and an

increase in costs overall. These costscould be reflected in bids submitted toCMS by Part D sponsors and couldresult in increased premiums forMedicare beneficiaries. We plan onworking closely with all of our Part Dsponsors as our guidance in this areadevelops to ensure they have theinformation they need to negotiate asefficiently as possible and continue toprovide high quality prescription drugcoverage at the most economical price.

Except for the potential impact ofincreased or decreased costs (that is,

increased or decreased copayments andpremiums) on beneficiaries, we do not

believe that the implementation of theprotected classes and categoriesrequirement will negatively impactenrollment in Part D plans. We also donot believe that the provisions of thisrule will lead to greater beneficiaryconfusion or any increased difficulty in

making enrollment decisions. Whileincreased copayments and premiumsmay dissuade some beneficiaries fromenrolling in particular Part D plans, wecontinue to believe that overallenrollment will increase givendemographic trends and the increasingcash prices for drugs. Accordingly, we

believe Medicare beneficiaries willcontinue to find Part D to be a costefficient method of obtaining robustdrug coverage at a range of acceptablecosts.

We also believe that PBMs couldexperience higher administrative costs

as a result of the provisions containedin this rule. The protected classesprovision may increase a number offormulary maintenance expensesranging from managing a largerformulary to increased support oftechnical call centers to addressrequests for assistance in processing awider range of covered drugs. As aresult, PBMs may increase their fees toPart D sponsors to offset these increasedcosts. We do not believe theseadditional costs will negatively impactthe PBM industry given its ability to

pass these onto the Part D sponsors.Similar to our ongoing communicationswith our Part D sponsors, we intend towork closely with the PBM industry toensure as much efficiency as possibleand minimize any resulting increases in

beneficiary costs.

C. Alternatives Considered

All of the provisions in this interimfinal rule are a result of the recentpassage of the MIPPA and are largelyself-implementing. With the publicationof this interim final rule, we desire tomake our implementing regulationsavailable to industry and the public assoon as possible to facilitate continued,efficient operation of the Parts C and Dprograms.

D. Accounting Statement

As required by OMB Circular A4(available at http://

www.whitehouse.gov/omb/circulars/index.html), Table 2 below provides anaccounting statement showing theclassification of the expendituresassociated with the provisions of thisIFC rule. This table provides our bestestimate of the increase in costs as aresult of the changes presented in thisfinal rule. All costs, including increasesand reductions, are classified astransfers by the Federal Government toPart D plans or MAOs.

TABLE 2ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES

Category

Formulary requirements with respect to certain categories or classes of drugs, CYs 20102018: Undiscounted Annualized Monetized Transfers ....................................................................................Annualized Monetized Transfers Using 7% Discount Rate ..................................................................Annualized Monetized Transfers Using 3% Discount Rate ..................................................................From Whom to Whom? .........................................................................................................................

Transfers($ millions)

466.7.424.5.448.3. Federal Government to Part D Plans.

D. Conclusion

Given that we expect the cost ofimplementing a number of theprovisions contained in this IFC rule, as

specified in Table 1, will exceed the$100 million threshold within a singleyear between CY 2010 and CY 2018, weconducted an economic impact analysiswith regard to those entities potentiallyimpacted by these provisions. As westated previously in this preamble, weexpect that entities such as pharmacieswill benefit from these changes, whereasother entities, such as Part D sponsors,will experience additional costs whichthey will pass on to CMS through directsubsidy payments and to beneficiariesthrough additional premiums as

reflected in their bids. In accordancewith the provisions of Executive Order12866, this final rule was reviewed bythe Office of Management and Budget.

List of Subjects in 42 CFR Part 423Administrative practice and

procedure, Emergency medical services,Health facilities, Health maintenanceorganizations (HMO), Medicare,Penalties, Privacy, Reporting andrecordkeeping.

For the reasons set forth in thepreamble, the Centers for Medicare &Medicaid Services amends 42 CFRchapter IV as set forth below:

PART 423VOLUNTARY MEDICAREPRESCRIPTION DRUG BENEFIT

Subpart CBenefits and BeneficiaryProtections

1. The authority citation for part 423continues to read as follows:

Authority: Secs. 1102, 1106, 1860D1through 1860D42, and 1871 of the SocialSecurity Act (42 U.S.C. 1302, 1306, 1395w101 through 1395w152, and 1395hh).

2. Amend 423.100 by revising theintroductory text of paragraph (1) underthe definition of Part D drug to readas follows:
http://www.whitehouse.gov/omb/circularshttp://www.whitehouse.gov/omb/circulars

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423.100 Definitions.

* * * * *

Part D drug means

(1) Unless excluded under paragraph(2) of this definition, any of thefollowing if used for a medicallyaccepted indication (as defined insection 1860D2(e)(4) of the Act)

* * * * * 3. Amend 423.120 by A. Revising (b)(2) introductory text. B. Revising (b)(2)(i). C. Adding (b)(2)(v).

The revisions and additions to read asfollows:

423.120 Access to covered Part D drugs.

* * * * *

(b) * * *

(2) Provision of an AdequateFormulary. A Part D plans formulary

must(i) Except as provided in paragraphs(b)(2)(ii) and (v) of this section, includewithin each therapeutic category andclass of Part D drugs at least two Part Ddrugs that are not therapeuticallyequivalent and bioequivalent, withdifferent strengths and dosage formsavailable for each of those drugs, exceptthat only one Part D drug must beincluded in a particular category orclass of covered Part D drugs if thecategory or class includes only one PartD drug.

* * * * *

(v) Effective contract year 2010, a PartD Sponsors formulary will include allPart D drugs in a category or class thatCMS has identified as meeting the twoconditions set forth in section 1860D4(b)(3)(G)(i) of the Act. CMS mayestablish certain exceptions, which mayinclude the application of drugutilization management under certaincircumstances, through a process thatprovides for public notice andcomment, and ensures that anyexception to such requirements is basedupon scientific evidence and medicalstandards of practice (and, in the case of

antiretroviral medications, is consistentwith the Department of Health andHuman Services Guidelines for the Useof Antiretroviral Agents in HIV1Infected Adults and Adolescents).

* * * * * (Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program)

(Catalog of Federal Domestic AssistanceProgram No. 93.773, MedicareHospitalInsurance; and Program No. 93.774,MedicareSupplementary MedicalInsurance Program)

Dated: September 12, 2008.

Kerry Weems,

Acting Administrator, Centers for Medicare& Medicaid Services.

Approved: January 9, 2009.

Michael O. Leavitt,

Secretary.

[FR Doc. E9783 Filed 11509; 8:45 am]

BILLING CODE 412001P

DEPARTMENT OF HEALTH ANDHUMAN SERVICES

45 CFR Parts 88 and 89

RIN 0991AB46

Office of Global Health Affairs:Regulation on the OrganizationalIntegrity of Entities That AreImplementing Programs and ActivitiesUnder the Leadership Act; Correction

OFFICE: Office of Global Health Affairs,

HHS. ACTION: Rule; Correction.

SUMMARY: This document correctstechnical errors that appeared in thefinal rule published in the FederalRegister on December 24, 2008, entitledRegulation on the OrganizationalIntegrity of Entities That AreImplementing Programs and ActivitiesUnder the Leadership Act (73 FR78997).

DATES: Effective January 20, 2009.FOR FURTHER INFORMATION CONTACT:

Jeanne Monahan, Office of Global

Health Affairs, Hubert H. HumphreyBuilding, Room 639H, 200Independence Avenue, SW.,Washington, DC 20201, Tel: 2026906174, e-mail:[email protected] INFORMATION:

I. Background

In FR Doc. E830686, published onDecember 24, 2008 (73 FR 78997), therewere technical errors that are identifiedand corrected in the Correction of Errorssection below. The correction of errorsidentified in this correction notice donot change any policies contained in the

final rule published December 24, 2008,and thus are effective as if they hadbeen included in the final rule.

II. Summary of Errors

HHS published a final rule entitledRegulation on the OrganizationalIntegrity of Entities That AreImplementing Programs and ActivitiesUnder the Leadership Act. This finalrule provided for creation of a new Part88 of 45 CFR. A final rule published onDecember 19, 2008 (73 FR 78071),entitled Ensuring That Department of

Health and Human Services Funds DoNot Support Coercive or DiscriminatoryPolicies or Practices in Violation ofFederal Law, however, also purportedto create a new Part 88. We arecorrecting this error by creating a newPart 89 and moving the regulatory textfrom the final rule published onDecember 24, 2008 (73 FR 78997) to Part

89. We are correcting text throughoutthe preamble and regulatory text toreflect this move.

III. Correction of Errors

In FR Doc. E830686, published onDecember 24, 2008 (73 FR 78997), makethe following corrections:

[Corrections to the preamble]1. On page 78997, in the heading,

third line, 45 CFR Part 88 is correctedto read 45 CFR Part 89.

2. On page 78998, in the first column,following the sixth full paragraph, theheading Section 88.1 Definitions is

corrected to Section 89.1 Definitions.3. On page 78998, in the secondcolumn, following the fifth paragraph,the heading Section 88.2 ObjectiveIntegrity of Recipients is corrected toSection 89.2 Objective Integrity ofRecipients.

4. On page 78998, in the thirdcolumn, in the first full paragraph, line6, section 88.3 is corrected to section89.3.

5. On page 78998, in the thirdcolumn, following the first fullparagraph, the heading Section 88.3Certifications is corrected to Section89.3 Certifications.

6. On page 78998, in the thirdcolumn, third full paragraph, line 3,section 88.3(d)(1) is corrected tosection 89.3(d)(1).

7. On page 78998, in the thirdcolumn, fourth full paragraph, lines 34, section 88.3(d)(2) and (3) iscorrected to section 89.3(d)(2) and (3).

8. On page 79001, in the first column,following the second full paragraph, theheading List of Subjects in the 45 CFRPart 88 is corrected to List of Subjectsin the 45 CFR Part 89.

[Corrections to the regulatory text]9. On page 79001, in the first column,

in the words of issuance, immediatelyfollowing paragraph captionedEditorial Note, revise the paragraph toread For the reasons stated in thepreamble, the Office of Global HealthAffairs amends 45 CFR subtitle A to addPart 89 as follows:

10. On page 79001, in the firstcolumn, in the part heading, Part 88is corrected to Part 89.

11. On page 79001, in the firstcolumn, in the table of contents, 88.1Definitions is corrected to 89.1Definitions.
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