42 C.F.R. Subpart C—Benefits and Beneficiary Protections
Title 42 - Public Health
As used in this part, unless otherwise specified- Actual cost means the negotiated price for a covered Part D drug when the drug is purchased at a network pharmacy, and the usual and customary price when a beneficiary purchases the drug at an out-of-network pharmacy consistent with §423.124(a). Affected enrollee means a Part D enrollee who is currently taking a covered Part D drug that is either being removed from a Part D plan's formulary, or whose preferred or tiered cost-sharing status is changing. Alternative prescription drug coverage means coverage of Part D drugs, other than standard prescription drug coverage that meets the requirements of §423.104(e). The term alternative prescription drug coverage must be either— (1) Basic alternative coverage (alternative coverage that is actuarially equivalent to defined standard coverage, as determined through processes and methods established under §423.265(d)(2)); or (2) Enhanced alternative coverage (alternative coverage that meets the requirements of §423.104(f)(1)). Basic prescription drug coverage means coverage of Part D drugs that is either standard prescription drug coverage or basic alternative coverage. Bioequivalent has the meaning given such term in section 505(j)(8) of the Food, Drug, and Cosmetic Act. Contracted pharmacy network means pharmacies, including retail, mail-order, and institutional pharmacies, under contract with a Part D sponsor to provide covered Part D drugs at negotiated prices to Part D enrollees. Covered Part D drug means a Part D drug that is included in a Part D plan's formulary, or treated as being included in a Part D plan's formulary as a result of a coverage determination or appeal under §423.566, §423.580, and §423.600, §423.610, §423,620, and §423.630, and obtained at a network pharmacy or an out-of-network pharmacy in accordance with §423.124. Dispensing fees means costs that- (1) Are incurred at the point of sale and pay for costs in excess of the ingredient cost of a covered Part D drug each time a covered Part D drug is dispensed; (2) Include only pharmacy costs associated with ensuring that possession of the appropriate covered Part D drug is transferred to a Part D enrollee. Pharmacy costs include, but are not limited to, any reasonable costs associated with a pharmacist's time in checking the computer for information about an individual's coverage, performing quality assurance activities consistent with §423.153(c)(2), measurement or mixing of the covered Part D drug, filling the container, physically providing the completed prescription to the Part D enrollee, delivery, special packaging, and overhead associated with maintaining the facility and equipment necessary to operate the pharmacy. In the case of pharmacies owned and operated by a Part D plan itself, notwithstanding number (3) of this definition, dispensing fees are understood to be the equivalent of all reasonable costs discussed in the previous sentence, including the salaries of pharmacists and other pharmacy workers as well as the costs associated with maintaining the pharmacy facility and equipment necessary to operate the pharmacy; and (3) Do not include administrative costs incurred by the Part D plan in the operation of the Part D benefit, including systems costs for interfacing with pharmacies. Government-funded health program means any program established, maintained, or funded, in whole or in part, by the Government of the United States, by the government of any State or political subdivision of a State, or by any agency or instrumentality of any of the foregoing, which uses public funds, in whole or in part, to provide to, or pay on behalf of, an individual the cost of Part D drugs, including any of the following: (1) An approved State child health plan under title XXI of the Act providing benefits for child health assistance that meets the requirements of section 2103 of the Act; (2) The Medicaid program under title XIX of the Act or a waiver under section 1115 of the Act; (3) The veterans' health care program under Chapter 17 of title 38 of the United States Code; (4) The Indian Health Service program under the Indian Health Care Improvement Act under Chapter 18 of title 25 of the United States Code; and (5) Any other government-funded program whose principal activity is the direct provision of health care to persons. Group health plan, for purposes of applying the definition of incurred costs in §423.100, has the meaning given such term in 29 U.S.C. 1167(1), but specifically excludes a personal health savings vehicle, as used in this subpart. Incurred costs means costs incurred by a Part D enrollee for covered Part D drugs— (1) That are not paid for under the Part D plan as a result of application of any annual deductible or other cost-sharing rules for covered Part D drugs prior to the Part D enrollee satisfying the out-of-pocket threshold under §423.104(d)(5)(iii), including any price differential for which the Part D enrollee is responsible under §423.124(b); and (2) That are paid for— (i) By the Part D enrollee or on behalf of the Part D enrollee by another person, and the Part D enrollee (or person paying on behalf of the Part D enrollee) is not reimbursed through insurance or otherwise, a group health plan, or other third party payment arrangement, or the person paying on behalf of the Part D enrollee is not paying under insurance or otherwise, a group health plan, or third party payment arrangement; (ii) Under a State Pharmaceutical Assistance Program (as defined in §423.454); or (iii) Under §423.782. Insurance means a health plan that provides, or pays the cost of Part D drugs, including, but not limited to, any of the following: (1) Health insurance coverage (as defined in 42 U.S.C. 300gg–91(b)(1)); (2) A Medicare Advantage plan (as described under section 1851(a)(2) of the Act); and (3) A PACE organization (as defined under sections 1894(a)(3) and 1934(a)(13) of the Act) but specifically excluding a personal health savings vehicle. I/T/U pharmacy means a pharmacy operated by the Indian Health Service, an Indian tribe or tribal organization, or an urban Indian organization, all of which are defined in section 4 of the Indian Health Care Improvement Act, 25 U.S.C. 1603. Long-term care facility means a skilled nursing facility as defined in section 1819(a) of the Act, or a medical institution or nursing facility for which payment is made for an institutionalized individual under section 1902(q)(1)(B) of the Act. Long-term care pharmacy means a pharmacy owned by or under contract with a long-term care facility to provide prescription drugs to the facility's residents. Long-term care network pharmacy means a long-term care pharmacy that is a network pharmacy. Negotiated prices means prices for covered Part D drugs that- (1) Are available to beneficiaries at the point of sale at network pharmacies; (2) Are reduced by those discounts, direct or indirect subsidies, rebates, other price concessions, and direct or indirect remunerations that the Part D sponsor has elected to pass through to Part D enrollees at the point of sale; and (3) Includes any dispensing fees. Network pharmacy means a licensed pharmacy that is under contract with a Part D sponsor to provide covered Part D drugs at negotiated prices to its Part D plan enrollees. Non-preferred pharmacy means a network pharmacy that offers covered Part D drugs at negotiated prices to Part D enrollees at higher cost-sharing levels than apply at a preferred pharmacy. Or otherwise means through a government-funded health program. Out-of-network pharmacy means a licensed pharmacy that is not under contract with a Part D sponsor to provide negotiated prices to Part D plan enrollees. Part D drug means— (1) Unless excluded under number (2) of this definition, any of the following if used for a medically accepted indication (as defined in section 1927(k)(6) of the Act)— (i) A drug that may be dispensed only upon a prescription and that is described in sections 1927(k)(2)(A)(i) through (iii) of the Act; (ii) A biological product described in sections 1927(k)(2)(B)(i) through (iii) of the Act; (iii) Insulin described in section 1927(k)(2)(C) of the Act; (iv) Medical supplies associated with the injection of insulin, including syringes, needles, alcohol swabs, and gauze; or (v) A vaccine licensed under section 351 of the Public Health Service Act. (2) Does not include— (i) Drugs for which payment as so prescribed and dispensed or administered to an individual is available for that individual under Part A or Part B (even though a deductible may apply, or even though the individual is eligible for coverage under Part A or Part B but has declined to enroll in Part A or Part B); and (ii) Drugs or classes of drugs, or their medical uses, which may be excluded from coverage or otherwise restricted under Medicaid under sections 1927(d)(2) or (d)(3) of the Act, except for smoking cessation agents. Person means a natural person, corporation, mutual company, unincorporated association, partnership, joint venture, limited liability company, trust, estate, foundation, not-for-profit corporation, unincorporated organization, government or governmental subdivision or agency. Personal health savings vehicle means a vehicle through which individuals can set aside their own funds to pay for health care expenses, including covered Part D drugs, on a tax-free basis including any of the following— (1) A Health Savings Account (as defined under section 220 of the Internal Revenue Code); (2) A Flexible Spending Account (as defined in section 106(c)(2) of the Internal Revenue Code) offered in conjunction with a cafeteria plan under section 125 of the Internal Revenue Code; and (3) An Archer Medical Savings Account (as defined under section 223 of the Internal Revenue Code); but specifically excluding a Health Reimbursement Arrangement (as described under Internal Revenue Ruling 2002–41 and Internal Revenue Notice 2002–45) Plan allowance means the amount Part D plans that offer coverage other than defined standard coverage may use to determine their payment and Part D enrollees' cost-sharing for covered Part D drugs purchased at an out-of-network pharmacy or in a physician's office in accordance with the requirements of §423.124(b). Preferred drug means a covered Part D drug on a Part D plan's formulary for which beneficiary cost-sharing is lower than for a non-preferred drug in the plan's formulary. Preferred pharmacy means a network pharmacy that offers covered Part D drugs at negotiated prices to Part D enrollees at lower levels of cost-sharing than apply at a non-preferred pharmacy under its pharmacy network contract with a Part D plan. Qualified prescription drug coverage means any standard prescription drug coverage or alternative prescription drug coverage Retail pharmacy means any licensed pharmacy that is not a mail order pharmacy from which Part D enrollees could purchase a covered Part D drug without being required to receive medical services from a provider or institution affiliated with that pharmacy. Required prescription drug coverage means coverage of Part D drugs under an MA-PD plan that consists of either— (1) Basic prescription drug coverage; or (2) Enhanced alternative coverage, provided there is no MA monthly supplemental beneficiary premium (as defined under section 1854(b)(2)(C) of the Act) applied under the plan due to the application of a credit against the premium of a rebate under §422.266(b) of this chapter. Rural means a five-digit ZIP code in which the population density is less than 1,000 individuals per square mile. Standard prescription drug coverage means coverage of Part D drugs that meets the requirements of §423.104(d). The term standard prescription drug coverage must be either— (1) Defined standard coverage (standard prescription drug coverage that provides for cost-sharing as described in §423.104(d)(2)(i)(A) and (d)(5)(i)); or (2) Actuarially equivalent standard coverage (standard prescription drug coverage that provides for cost-sharing as described in §423.104(d)(2)(i)(B) or cost-sharing as described in §423.104(d)(5)(ii), or both). Suburban means a five-digit ZIP code in which the population density is between 1,000 and 3,000 individuals per square mile. Supplemental benefits means benefits that meet the requirements of §423.104(f)(1)(ii). Therapeutically equivalent refers to drugs that are rated as therapeutic equivalents under the Food and Drug Administration's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations.” Third party payment arrangement means any contractual or similar arrangement under which a person has a legal obligation to pay for covered Part D drugs. Urban means a five-digit ZIP code in which the population density is greater than 3,000 individuals per square mile. Usual and customary (U&C) price means the price that an out-of-network pharmacy or a physician's office charges a customer who does not have any form of prescription drug coverage for a covered Part D drug. (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 §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 (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 §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 §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 §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. 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 §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 §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 §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 §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 §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 §422.2 of this chapter; or (B) Under another MA plan (including a private fee-for-service plan, as defined in §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 §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 §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 §417.440(b)(2)(ii) of this chapter may offer prescription drug coverage that is not qualified prescription drug coverage under §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 §423.4; or (iii) A qualified retiree prescription drug plan (as defined in §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 §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. (a) Service area for prescription drug plans. The service area for a prescription drug plan other than a fallback prescription drug plan consists of one or more PDP regions as established under paragraphs (b) and (c) of this section. (b) Establishment of PDP regions—(1) General. CMS establishes PDP regions in a manner consistent with the requirements for the establishment of MA regions as described at §422.455 of this chapter. (2) Relation to MA regions. To the extent practicable, PDP regions are the same as MA regions. CMS may establish PDP regions that are not the same as MA regions if CMS determines that the establishment of these regions improves access to prescription drug plan benefits for Part D eligible individuals. (c) Authority for territories. CMS establishes a PDP region or regions for States that are not within the 50 States and the District of Columbia. (d) Revision of PDP regions. CMS may revise the PDP regions established under paragraphs (b) and (c) of this section. (e) Regional or national plan. Nothing in this section prevents a prescription drug plan from being offered in two or more PDP regions in their entirety or in all PDP regions in their entirety. (a) Assuring pharmacy access—(1) Standards for convenient access to network pharmacies. Except as provided in paragraph (a)(7) of this section, a Part D plan must have a contracted pharmacy network consisting of retail pharmacies sufficient to ensure that for beneficiaries residing in each State in a prescription drug plan's service area(as defined in §423.112(a)), each State in a regional MA-PD plan's service area (as defined in §422.2 and §422.455(a) of this chapter), a local MA-PD plan's service area (as defined in §422.2 of this chapter), or a cost plan's geographic area (as defined in §417.401 of this chapter), the following requirements are satisfied: (i) At least 90 percent of Medicare beneficiaries, on average, in urban areas served by the Part D plan live within 2 miles of a network pharmacy that is a retail pharmacy or a pharmacy described under paragraph (a)(2) of this section; (ii) At least 90 percent of Medicare beneficiaries, on average, in suburban areas served by the Part D plan live within 5 miles of a network pharmacy that is a retail pharmacy or a pharmacy described under paragraph (a)(2) of this section; and (iii) At least 70 percent of Medicare beneficiaries, on average, in rural areas served by the Part D plan live within 15 miles of a network pharmacy that is a retail pharmacy or a pharmacy described under paragraph (a)(2) of this section. (2) Applicability of some non-retail pharmacies to standards for convenient access. Part D plans may count I/T/U pharmacies and pharmacies operated by Federally Qualified Health Centers and Rural Health Centers toward the standards for convenient access to network pharmacies in paragraph (a)(1) of this section. (3) Access to non-retail pharmacies. A Part D plan's contracted pharmacy network may be supplemented by non-retail pharmacies, including pharmacies offering home delivery via mail-order and institutional pharmacies, provided the requirements of paragraph (a)(1) of this section are met. (4) Access to home infusion pharmacies. A Part D plan's contracted pharmacy network must provide adequate access to home infusion pharmacies consistent with written policy guidelines and other CMS instructions. (5) Access to long-term care pharmacies. A Part D plan must offer standard contracting terms and conditions, including performance and service criteria for long-term care pharmacies that CMS specifies, to all long-term care pharmacies in its service area. The plan must provide convenient access to long-term care pharmacies consistent with written policy guidelines and other CMS instructions. (6) Access to I/T/U pharmacies. A Part D plan must offer standard contracting terms and conditions conforming to the model addendum that CMS develops, to all I/T/U pharmacies in its service area. The plan must provide convenient access to I/T/U pharmacies consistent with written policy guidelines and other CMS instructions. (7) Waiver of pharmacy access requirements. CMS waives the requirements under paragraph (a)(1) of this section in the case of— (i) An MA-PD plan or cost plan (as described in section 1876(h) of the Act) that provides its enrollees with access to covered Part D drugs through pharmacies owned and operated by the MA organization or cost plan, provided the organization's or plan's pharmacy network meets the access standard set forth under §422.112 of this chapter for an MA plan, or §417.416(e) of this chapter for a cost plan. (ii) An MA private fee-for-service plan described in §422.4 of this chapter that— (A) Offers qualified prescription drug coverage; and (B) Provides plan enrollees with access to covered Part D drugs dispensed at all pharmacies, without regard to whether they are contracted network pharmacies and without charging cost-sharing in excess of that described in §423.104(d)(2) and (d)(5). (8) Pharmacy network contracting requirements. In establishing its contracted pharmacy network, a Part D sponsor offering qualified prescription drug coverage— (i) Must contract with any pharmacy that meets the Part D plan's standard terms and conditions; and (ii) May not require a pharmacy to accept insurance risk as a condition of participation in the Part D plan's contracted pharmacy network. (9) Differential cost-sharing for preferred pharmacies. A Part D sponsor offering a Part D plan that provides coverage other than defined standard coverage may reduce copayments or coinsurance for covered Part D drugs obtained through a preferred pharmacy relative to the copayments or coinsurance applicable for such drugs when obtained through a non-preferred pharmacy. Such differentials are taken into account in determining whether the requirements under §423.104(d)(2) and (d)(5) and §423.104(e) are met. Any cost-sharing reduction under this section must not increase CMS payments to the Part D plan under §423.329. (10) Level playing field between mail-order and network pharmacies. A Part D sponsor must permit its Part D plan enrollees to receive benefits, which may include a 90-day supply of covered Part D drugs, at any of its network pharmacies that are retail pharmacies. A Part D plan may require an enrollee obtaining a covered Part D drug at a network pharmacy that is a retail pharmacy to pay any higher cost-sharing applicable to that covered Part D drug at the network pharmacy that is a retail pharmacy instead of the cost-sharing applicable to that covered Part D drug at the network pharmacy that is a mail-order pharmacy. (b) Formulary requirements. A Part D sponsor that uses a formulary under its qualified prescription drug coverage must meet the following requirements— (1) Development and revision by a pharmacy and therapeutic committee. A Part D sponsor's formulary must be developed and reviewed by a pharmacy and therapeutic committee that— (i) Includes a majority of members who are practicing physicians and/or practicing pharmacists. (ii) Includes at least one practicing physician and at least one practicing pharmacist who are independent and free of conflict relative to- (A) The Part D sponsor and Part D plan; and (B) Pharmaceutical manufacturers. (iii) Includes at least one practicing physician and one practicing pharmacist who are experts regarding care of elderly or disabled individuals. (iv) Bases clinical decisions on the strength of scientific evidence and standards of practice, including assessing peer-reviewed medical literature, pharmacoeconomic studies, outcomes research data, and other such information as it determines appropriate. (v) Considers whether the inclusion of a particular Part D drug in a formulary or formulary tier has any therapeutic advantages in terms of safety and efficacy. (vi) Reviews policies that guide exceptions and other utilization management processes, including drug utilization review, quantity limits, generic substitution, and therapeutic interchange. (vii) Evaluates and analyzes treatment protocols and procedures related to the plan's formulary at least annually consistent with written policy guidelines and other CMS instructions. (viii) Documents in writing its decisions regarding formulary development and revision and utilization management activities. (ix) Meets other requirements consistent with written policy guidelines and other CMS instructions. (2) Provision of an adequate benefit. A Part D plan's formulary must- (i) Except as provided in paragraph (b)(2)(ii) of this section, include within each therapeutic category and class of Part D drugs at least two Part D drugs that are not therapeutically equivalent and bioequivalent, with different strengths and dosage forms available for each of those drugs, except that only one Part D drug must be included in a particular category or class of covered Part D drugs if the category or class includes only one Part D drug. (ii) Include at least one Part D drug within a particular category or class of Part D drugs to the extent the Part D plan demonstrates, and CMS approves, the following- (A) That only two drugs are available in that category or class of Part D drugs; and (B) That one drug is clinically superior to the other drug in that category or class of Part D drugs. (iii) Include adequate coverage of the types of drugs most commonly needed by Part D enrollees, as recognized in national treatment guidelines. (iv) Be approved by CMS consistent with §423.272(b)(2). (3) Transition Process. A Part D sponsor must provide for an appropriate transition process for new enrollees prescribed Part D drugs that are not on its Part D plan's formulary. The transition policy must meet requirements consistent with written policy guidelines and other CMS instructions. (4) Limitation on changes in therapeutic classification. Except as CMS may permit to account for new therapeutic uses and newly approved Part D drugs, a Part D sponsor may not change the therapeutic categories and classes in a formulary other than at the beginning of each plan year. (5) Provision of notice regarding formulary changes (i) Prior to removing a covered Part D drug from its Part D plan's formulary, or making any change in the preferred or tiered cost-sharing status of a covered Part D drug, a Part D sponsor must provide at least 60 days notice to CMS, State Pharmaceutical Assistance Programs (as defined in §423.454), entities providing other prescription drug coverage (as described in §423.464(f)(1)), authorized prescribers, network pharmacies, and pharmacists prior to the date such change becomes effective, and must either— (A) Provide direct written notice to affected enrollees at least 60 days prior to the date the change becomes effective; or (B) At the time an affected enrollee requests a refill of the Part D drug, provide such enrollee with a 60 day supply of the Part D drug under the same terms as previously allowed, and written notice of the formulary change. (ii) The written notice must contain the following information- (A) The name of the affected covered Part D drug; (B) Whether the plan is removing the covered Part D drug from the formulary, or changing its preferred or tiered cost-sharing status; (C) The reason why the plan is removing such covered Part D drug from the formulary, or changing its preferred or tiered cost-sharing status; (D) Alternative drugs in the same therapeutic category or class or cost-sharing tier and expected cost-sharing for those drugs; and (E) The means by which enrollees may obtain a coverage determination under §423.566 or exception under §423.578. (iii) Part D sponsors may immediately remove from their Part D plan formularies covered Part D drugs deemed unsafe by the Food and Drug Administration or removed from the market by their manufacturer without meeting the requirements of paragraphs (b)(5)((i) of this section. Part D sponsors must provide retrospective notice of any such formulary changes to affected enrollees, CMS, State Pharmaceutical Assistance Programs (as defined in §423.454), entities providing other prescription drug coverage (as described in §423.464(f)(1)), authorized prescribers, network pharmacies, and pharmacists consistent with the requirements of paragraphs (b)(5)(ii)(A), (b)(5)(ii)(B), (b)(5)(ii)(C), and (b)(5)(ii)(D) of this section. (6) Limitation on formulary changes prior to the beginning of a contract year. Except as provided under paragraph (b)(5)(iii) of this section, a Part D sponsor may not remove a covered Part D drug from its Part D plan's formulary, or make any change in the preferred or tiered cost-sharing status of a covered Part D drug on its plan's formulary, between the beginning of the annual coordinated election period described in §423.38(b) and 60 days after the beginning of the contract year associated with that annual coordinated election period. (7) Provider and patient education. A Part D sponsor must establish policies and procedures to educate and inform health care providers and enrollees concerning its formulary. (c) Use of standardized technology. A Part D sponsor must issue and reissue, as necessary, a card or other type of technology that its enrollees may use to access negotiated prices for covered Part D drugs as provided under §423.104(g). The card or other technology must comply with standards CMS establishes. (a) Out-of-network access to covered part D drugs. (1) Out-of-network pharmacy access. A Part D sponsor must ensure that Part D enrollees have adequate access to covered Part D drugs dispensed at out-of-network pharmacies when the enrollees— (i) Cannot reasonably be expected to obtain such drugs at a network pharmacy; and (ii) Do not access covered Part D drugs at an out-of-network pharmacy on a routine basis. (2) Physician's office access. A Part D sponsor must ensure that Part D enrollees have adequate access to vaccines and other covered Part D drugs appropriately dispensed and administered by a physician in a physician's office. (b) Financial responsibility for out-of-network access to covered Part D drugs. A Part D sponsor that provides its Part D enrollees with coverage other than defined standard coverage may require its Part D enrollees accessing covered Part D drugs as provided in paragraph (a) of this section to assume financial responsibility for any differential between the out-of-network pharmacy's (or provider's) usual and customary price and the Part D sponsor's plan allowance, consistent with the requirements of §423.104(d)(2)(i)(B) and §423.104(e). (c) Limits on out-of-network access to covered Part D. A Part D sponsor must establish reasonable rules to appropriately limit out-of-network access to covered Part D drugs. (a) Detailed description. A Part D sponsor must disclose the information specified in paragraph (b) of this section in the manner specified by CMS— (1) To each enrollee of a Part D plan offered by the Part D sponsor under this part; (2) In a clear, accurate, and standardized form; and (3) At the time of enrollment and at least annually thereafter. (b) Content of Part D plan description. The Part D plan description must include the following information about the qualified prescription drug coverage offered under the Part D plan— (1) Service area. The plan's service area. (2) Benefits. The benefits offered under the plan, including- (i) Applicable conditions and limitations. (ii) Premiums. (iii) Cost-sharing (such as copayments, deductibles, and coinsurance), and cost-sharing for subsidy eligible individuals. (iv) Any other conditions associated with receipt or use of benefits. (3) Cost-sharing. A description of how a Part D eligible individual may obtain more information on cost-sharing requirements, including tiered or other copayment levels applicable to each drug (or class of drugs), in accordance with paragraph (d) of this section. (4) Formulary. Information about the plan's formulary, including- (i) A list of drugs included on the plan's formulary; (ii) The manner in which the formulary (including any tiered formulary structure and utilization management procedures used) functions; (iii) The process for obtaining an exception to a plan's formulary or tiered cost-sharing structure; and (iv) A description of how a Part D eligible individual may obtain additional information on the formulary, in accordance with paragraph (d) of this section. (5) Access. The number, mix, and distribution (addresses) of network pharmacies from which enrollees may reasonably be expected to obtain covered Part D drugs and how the Part D sponsor meets the requirements of §423.120(a)(1) for access to covered Part D drugs; (6) Out-of-network coverage. Provisions for access to covered Part D drugs at out-of-network pharmacies, consistent with §423.124(a). (7) Grievance, coverage determinations, and appeals procedures. All grievance, reconsideration, exceptions, coverage determination, reconsideration, exceptions, and appeal rights and procedures required under §423.564 et. seq. (8) Quality assurance policies and procedures. A description of the quality assurance policies and procedures required under §423.153(c), as well as the medication therapy management program required under §423.153(d). (9) Disenrollment rights and responsibilities. (10) Potential for contract termination. The fact that a Part D sponsor may terminate or refuse to renew its contract, or reduce the service area included in its contract, and the effect that any of those actions may have on individuals enrolled in a Part D plan; (c) Disclosure upon request of general coverage information, utilization, and grievance information. Upon request of a Part D eligible individual, a Part D sponsor must provide the following information— (1) General coverage information. General coverage information, including— (i) Enrollment procedures. Information and instructions on how to exercise election options under this part; (ii) Rights. A general description of procedural rights (including grievance, coverage determination, reconsideration, exceptions, and appeals procedures) under this part; (iii) Benefits. (A) Covered services under the Part D plan; (B) Any beneficiary cost-sharing, such as deductibles, coinsurance, and copayment amounts, including cost-sharing for subsidy eligible individuals; (C) Any maximum limitations on out-of-pocket expenses; (D) The extent to which an enrollee may obtain benefits from out-of-network providers; (E) The types of pharmacies that participate in the Part D plan's network and the extent to which an enrollee may select among those pharmacies; and (F) The Part D plan's out-of-network pharmacy access policy. (iv) Premiums; (v) The Part D plan's formulary; (vi) The Part D plan's service area; and (vii) Quality and performance indicators for benefits under the Part D plan as determined by CMS. (2) The procedures the Part D sponsor uses to control utilization of services and expenditures. (3) The number of disputes, and the disposition in the aggregate, in a manner and form described by CMS. These disputes are categorized as— (i) Grievances according to §423.564; (ii) Appeals according to §423.580 et. seq.; and (iii) Exceptions according to §423.578. (4) Financial condition of the Part D sponsor, including the most recently audited information regarding, at a minimum, a description of the financial condition of the Part D sponsor offering the Part D plan. (d) Provision of specific information. Each Part D sponsor offering qualified prescription drug coverage under a Part D plan must have mechanisms for providing specific information on a timely basis to current and prospective enrollees upon request. These mechanisms must include— (1) A toll-free customer call center that— (i) Is open during usual business hours. (ii) Provides customer telephone service, including to pharmacists, in accordance with standard business practices. (2) An Internet website that— (i) Includes, at a minimum, the information required in paragraph (b) of this section. (ii) Includes a current formulary for its Part D plan, updated at least monthly. (iii) Provides current and prospective Part D enrollees with at least 60 days notice regarding the removal or change in the preferred or tiered cost-sharing status of a Part D drug on its Part D plan's formulary. (3) The provision of information in writing, upon request. (e) Claims information. A Part D sponsor must furnish directly to enrollees, in the manner specified by CMS and in a form easily understandable to such enrollees, a written explanation of benefits when prescription drug benefits are provided under qualified prescription drug coverage. The explanation of benefits must— (1) List the item or service for which payment was made and the amount of the payment for each item or service. (2) Include a notice of the individual's right to request an itemized statement. (3) Include the cumulative, year-to-date total amount of benefits provided, in relation to— (i) The deductible for the current year. (ii) The initial coverage limit for the current year. (iii) The annual out-of-pocket threshold for the current year. (4) Include the cumulative, year-to-date total of incurred costs to the extent practicable. (5) Include any applicable formulary changes for which Part D plans are required to provide notice as described in §423.120(b)(5). (6) Be provided during any month when prescription drug benefits are provided under this part, including for covered Part D spending between the initial coverage limit described in §423.104(d)(3) and the out-of-pocket threshold described in §423.104(d)(5)(iii). (a) General requirements. Except as provided under paragraph (c) of this section, a Part D sponsor must require a pharmacy that dispenses a covered Part D drug to inform an enrollee of any differential between the price of that drug and the price of the lowest priced generic version of that covered Part D drug that is therapeutically equivalent and bioequivalent and available at that pharmacy, unless the particular covered Part D drug being purchased is the lowest-priced therapeutically equivalent and bioequivalent version of that drug available at that pharmacy. (b) Timing of notice. Subject to paragraph (d) of this section, the information under paragraph (a) of this section must be provided after the drug is dispensed at the point of sale or, in the case of dispensing by mail order, at the time of delivery of the drug. (c) Waiver of public disclosure requirement. CMS waives the requirement under paragraph (a) of this section in the case of— (1) An MA private fee-for-service plan described in §422.4 of this chapter that— (i) Offers qualified prescription drug coverage and provides plan enrollees with access to covered Part D drugs dispensed at all pharmacies, without regard to whether they are contracted network pharmacies; and (ii) Does not charge additional cost-sharing for access to covered Part D drugs dispensed at out-of-network pharmacies. (2) An out-of-network pharmacy; (3) An I/T/U network pharmacy; (4) A network pharmacy that is located in any of the U.S. territories; and (5) Other circumstances where CMS deems compliance with the requirements of paragraph (a) of this section to be impossible or impracticable. (d) Modification of timing requirement. CMS modifies the requirement under paragraph (b) of this section as follows— (1) For long-term care network pharmacies, which must meet the requirement in paragraph (a) of this section by providing such information to Part D plans for inclusion in the written explanations of benefits required under §423.128(e); and (2) Under other circumstances where CMS deems compliance with the requirement under paragraph (b) of this section to be impossible or impracticable. For any medical records or other health and enrollment information it maintains with respect to enrollees, a PDP sponsor must establish procedures to do the following— (a) Abide by all Federal and State laws regarding confidentiality and disclosure of medical records, or other health and enrollment information. The PDP sponsor must safeguard the privacy of any information that identifies a particular enrollee and have procedures that specify— (1) For what purposes the information is used within the organization; and (2) To whom and for what purposes it discloses the information outside the organization. (b) Ensure that medical information is released only in accordance with applicable Federal or State law, or under court orders or subpoenas. (c) Maintain the records and information in an accurate and timely manner. (d) Ensure timely access by enrollees to the records and information that pertain to them.
Title 42: Public Health
PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
Subpart C—Benefits and Beneficiary Protections
§ 423.100 Definitions.
§ 423.104 Requirements related to qualified prescription drug coverage.
§ 423.112 Establishment of prescription drug plan service areas.
§ 423.120 Access to covered Part D drugs.
§ 423.124 Special rules for out-of-network access to covered Part D drugs at out-of-network pharmacies.
§ 423.128 Dissemination of Part D plan information.
§ 423.132 Public disclosure of pharmaceutical prices for equivalent drugs.
§ 423.136 Privacy, confidentiality, and accuracy of enrollee records.
