42 C.F.R. § 423.504 General provisions.
Title 42 - Public Health
(a) General rule. Subject to the provisions at §423.265(a)(1) concerning submission of bids, to enroll beneficiaries in any Part D drug plan it offers and be paid on behalf of Part D eligible individuals enrolled in those plans, a Part D plan sponsor must enter into a contract with CMS. The contract may cover more than one Part D plan. (b) Conditions necessary to contract as a Part D plan sponsor. Any entity seeking to contract as a Part D plan sponsor must— (1) Complete an application as described in §423.502 demonstrating that the entity has the capability to meet the requirements of this Part, including those listed in §423.505. (2) Be organized and licensed under State law as a risk bearing entity eligible to offer health insurance or health benefits coverage in each State in which it offers a Part D plan, or have secured a Federal waiver, as described in subpart I of this part. (Fallback entity applicants need not be licensed as risk-bearing entities, nor are they required to obtain State licensure demonstrating that the applicant is eligible to offer health insurance or health benefits coverage in each State in which it applies to operate.) (3) Meet the minimum enrollment requirements of §423.512(a) unless waived under §423.512(b). (4) Have administrative and management arrangements satisfactory to CMS, as demonstrated by at least the following: (i) A policy making body that exercises oversight and control over the Part D plan sponsor's policies and personnel to ensure that management actions are in the best interest of the organization and its enrollees. (ii) Personnel and systems sufficient for the Part D plan sponsor to organize, implement, control, and evaluate financial and marketing activities, the furnishing of prescription drug services, the quality assurance, medical therapy management, and drug and or utilization management programs, and the administrative and management aspects of the organization. (iii) At a minimum, an executive manager whose appointment and removal are under the control of the policy making body. (iv) A fidelity bond or bonds, procured and maintained by the Part D sponsor, in an amount fixed by its policymaking body but not less than $100,000 per individual, covering each officer and employee entrusted with the handling of its funds. The bond may have reasonable deductibles, based upon the financial strength of the Part D plan sponsor. (v)Insurance policies or other arrangements, secured and maintained by the Part D plan sponsor and approved by CMS to insure the Part D plan sponsor against losses arising from professional liability claims, fire, theft, fraud, embezzlement, and other casualty risks. (vi) A compliance plan that consists of the following— (A)Written policies, procedures, and standards of conduct articulating the organization's commitment to comply with all applicable Federal and State standards. (B)The designation of a compliance officer and compliance committee accountable to senior management. (C)Effective training and education between the compliance officer and organization employees, contractors, agents, and directors. (D)Effective lines of communication between the compliance officer and the organization's employees, contractors, agents, directors, and members of the compliance committee. (E)Enforcement of standards through well-publicized disciplinary guidelines. (F) Procedures for effective internal monitoring and auditing. (G) Procedures for ensuring prompt responses to detected offenses and development of corrective action initiatives relating to the organization's contract as a Part D plan sponsor. (1) If the Part D sponsor discovers evidence of misconduct related to payment or delivery of prescription drug items or services under the contract, it must conduct a timely, reasonable inquiry into that conduct; (2) The Part D sponsor must conduct appropriate corrective actions (for example, repayment of overpayments and disciplinary actions against responsible individuals) in response to the potential violation referenced above. (H) A comprehensive fraud and abuse plan to detect, correct, and prevent fraud, waste, and abuse. This fraud and abuse plan should include procedures to voluntarily self-report potential fraud or misconduct related to the Part D program to the appropriate government authority. (5) Not have non-renewed a contract under §423.507 within the past 2 years unless— (i) During the 6-month period, beginning on the date the entity notified CMS of the intention to non-renew the most recent previous contract, there was a change in the statute or regulations that had the effect of increasing Part D sponsor payments in the payment area or areas at issue; or (ii) CMS has otherwise determined that circumstances warrant special consideration. (6) For a full risk or limited risk PDP applicant, not submitted a bid or offered a fallback prescription drug plan in accordance with the following rules. (i) CMS does not contract with a potential PDP sponsor for the offering of a full risk or limited risk prescription drug plan in a PDP region for a year if the applicant— (A) Submitted a bid under §423.863 for the year (as the first year of a contract period under §423.863 to offer a fallback prescription drug plan in any PDP region; (B) Offers a fallback prescription drug plan in any PDP region during the year; or (C) Offered a fallback prescription drug plan in that PDP region during the previous year. (ii) Construction. For purposes of this paragraph (b)(6), an entity is treated as submitting an application to become qualified to contract as a full risk or limited risk PDP sponsor, if the entity is acting as a subcontractor for an integral part of the drug benefit management activities of a full risk or limited risk PDP sponsor or applicant. The previous sentence does not apply to entities that are subcontractors of an MA organization except insofar as the MA organization is applying to act as a full risk or limited risk PDP sponsor. (c) Contracting authority. CMS may enter into contracts under this part, or in order to carry out this part, without regard to Federal and Departmental acquisition regulations set forth in Title 48 of the CFR and provisions of law or other regulations relating to the making, performance, amendment, or modification of contracts of the United States if CMS determines that those provisions are inconsistent with the efficient and effective administration of the Medicare program. (d) Protection against fraud and beneficiary protections. (1) CMS annually audits the financial records (including, but not limited to, data relating to Medicare utilization and costs, including allowable reinsurance and risk corridor costs as well as low income subsidies and other costs) under this part of at least one-third of the Part D sponsors offering Part D drug plans. (2) Each contract under this section must provide that CMS, or any person or organization designated by CMS, has the right to— (i) Inspect or otherwise evaluate the quality, appropriateness, and timeliness of services performed under the Part D plan sponsor's contract; (ii) Inspect or otherwise evaluate the facilities of the Part D sponsor when there is reasonable evidence of some need for the inspection; and (iii) Audit and inspect any books, contracts, and records of the Part D plan sponsor that pertain to— (A) The ability of the organization or its first tier or downstream providers to bear the risk of potential financial losses; or (B) Services performed or determinations of amounts payable under the contract. (e) Severability of contracts. The contract must provide that, upon CMS' request— (1) The contract could be amended to exclude any State-licensed entity, or a Part D plan specified by CMS; and (2) A separate contract for any excluded plan or entity must be deemed to be in place when a request is made.
Title 42: Public Health
PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
Subpart K—Application Procedures and Contracts with Part D plan sponsors
§ 423.504 General provisions.
