# Modernizing Part D and Medicare Advantage To Lower Drug Prices and Reduce Out-of-Pocket Expenses

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2019-10521

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** May 23, 2019
- **Citation:** 84 FR 23832

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 422 and 423
[CMS-4180-F]
RIN 0938-AT92
Modernizing Part D and Medicare Advantage To Lower Drug Prices and Reduce Out-of-Pocket Expenses

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Final rule.

SUMMARY:

This final rule amends the Medicare Advantage (MA) program (Part C) regulations and Prescription Drug Benefit program (Part D) regulations to support health and drug plans' negotiation for lower drug prices and reduce out-of-pocket costs for Part C and D enrollees. These amendments will improve the regulatory framework to facilitate development of Part C and Part D products that better meet the individual beneficiary's healthcare needs and reduce out-of-pocket spending for enrollees at the pharmacy and other sites of care.

DATES:

These regulations are effective on January 1, 2020, except for the amendments to §§ 422.629, 422.631, 422.633, 423.128, and 423.160, which are effective January 1, 2021.

FOR FURTHER INFORMATION CONTACT:

Joella Roland, (410) 786-7638 or Christian Bauer, (410) 786-6043, Part D Issues.

Marty Abeln, (410) 786-1032, Jelani Murrain, (410) 786-2274, or Brandy Alston, (410) 786-1218, Part C Issues.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Background

A. Purpose

This final rule amends regulations to support Medicare health and drug plans' negotiation for lower drug prices and to reduce out-of-pocket costs for Part C and D enrollees. Although satisfaction with the MA and Part D programs remains high, these provisions are responsive to input we received from stakeholders while administering the programs, as well as through our requests for comment.

The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (May 16, 2018, 83 FR 22692) sought to find out more information about lowering drug pricing using these four strategies: Improved competition, better negotiation, incentives for lower list prices, and lowering out-of-pocket costs. We are finalizing a number of provisions that implement these four strategies in an attempt to lower out-of-pocket costs. There is also a particular focus in this final rule on strengthening negotiation leverage for MA and Part D plans and increasing competition in the market for prescription drugs. We are finalizing policies that provide more tools to MA plans that negotiate with manufacturers of Part B drugs, so these plans are equipped with similar negotiation capabilities that group health plans and issuers have in the commercial market. We sought to drive robust competition among health plans and pharmacies, so consumers can shop based on quality and value. These provisions align with the Administration's focus on the interests and needs of beneficiaries, providers, MA plans, and Part D sponsors. We are also finalizing policies that will increase transparency of drug pricing and drug price increases, giving beneficiaries and prescribers tools to help improve adherence, lower prescription drug costs, and minimize beneficiary out-of-pocket costs.

B. Summary of the Major Provisions

1. Providing Plan Flexibility To Manage Protected Classes (§ 423.120(b)(2)(vi))

Except in limited circumstances, current Part D policy requires Part D sponsors to include on their formularies all Part D drugs in six categories or classes: (1) Antidepressants; (2) antipsychotics; (3) anticonvulsants; (4) immunosuppressants for treatment of transplant rejection; (5) antiretrovirals; and (6) antineoplastics. We proposed three exceptions to this protected class policy that would allow Part D sponsors to: (1) Implement broader use of prior authorization (PA) and step therapy (ST) for protected class Part D drugs, including to determine use for protected class indications; (2) exclude a protected class Part D drug from a formulary if the drug represents only a new formulation of an existing single-source drug or biological product, regardless of whether the older formulation remains on the market; and (3) exclude a protected class Part D drug from a formulary if the price of the drug increased beyond a certain threshold over a specified lookback period. This regulatory provision finalizes one of the three proposed exceptions with modifications: The first exception related to PA and ST.

The first exception permits Part D sponsors to use PA and ST for protected class Part D drugs. We are finalizing this exception with modifications. As modified, the exception is a codification of existing policy and does not place additional limits on beneficiary access to medications. Specifically, the exception will permit PA and ST only for new starts (that is, enrollees initiating therapy), including to confirm the use is for a protected-class indication, for five of the six protected classes (that is, all protected classes except for antiretroviral medications). PA and ST will not be permitted for antiretrovirals under this exception. This exception will permit indication-based formulary design and utilization management for new starts in five of the six protected classes, allowing Part D sponsors to exclude a protected class Part D drug in these five classes from the formulary for non-protected class indications only. As is required for all other Part D drug categories or classes, these formulary design and utilization management edits will be subject to CMS review and approval as part of our annual formulary review and approval process, which includes reviews of PA and ST edits that restrict access, ST criteria, PA outliers, and PA criteria. (For an extensive description of our annual formulary checks see section II.A.1. of this final rule.)

The second exception would have permitted Part D sponsors to exclude from the formulary a protected class Part D drugs that is a new formulation of a protected class Part D drug, even if the older formulation is removed from the market. That is, Part D sponsors would have been permitted to exclude from their formularies a protected class Part D drug that is a new formulation that does not provide a unique route of administration, regardless of whether the older formulation remains on the market. Based on comments, we are not finalizing this exception.

The third exception would have permitted Part D sponsors to exclude from the formulary any protected class Part D drug whose price increases, relative to the price in a baseline month and year, beyond the rate of inflation calculated based on the Consumer Price Index for all Urban Consumers (CPI-U). Based on comments, we are not finalizing this exception.

2. E-Prescribing and the Part D Prescription Drug Program; Updating Part D E-Prescribing Standards (§ 423.160)

This final rule requires under section 1860D-4(e)(2)(D) of the Social Security Act (Act) that Part D plan sponsors implement an electronic real-time benefit tool (RTBT) capable of integrating with at least one prescriber's electronic prescribing (eRx) system or

electronic health record (EHR). We believe that this requirement is appropriate given the Act's support of interactive real-time standards whenever feasible, and for standards that improve the cost-effectiveness of the Part D benefit. RTBTs currently used in the industry have the ability to make beneficiary-specific drug coverage and cost information visible to prescribers who want to consider that information at the point-of-prescribing. Because there currently are no industry-wide electronic standards for RTBTs, we are finalizing a requirement that each Part D plan implement at least one RTBT of its choosing that is capable of integrating with at least one prescriber's eRx system or EHR to provide prescribers who care for its enrollees complete, accurate, timely and clinically appropriate patient-specific real-time formulary and benefit (F&B) information (including cost, formulary alternatives and utilization management requirements) by January 1, 2021. However, we strongly encourage plans to start implementing this provision prior to 2021.

3. Medicare Advantage and Step Therapy for Part B Drugs (§§ 422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 422.618, and 422.619)

This final rule provides requirements under which MA plans may apply step therapy as a utilization management tool for Part B drugs and adopts new adjudication timeframe requirements for organization determinations and plan reconsiderations related to requests for Part B drugs. In addition, CMS will incorporate the shorter adjudication timeframes for Part B drug requests into the contract deadlines that apply to Part C Independent Review Entity (IRE) reconsiderations under § 422.592(b). In this final rule, we reaffirm MA plans' existing authority to implement appropriate utilization management and prior authorization programs (meaning policies and procedures) for managing Part B drugs to reduce costs for both beneficiaries and the Medicare program. The use of utilization management tools, such as step therapy, for Part B drugs enhances the ability of MA plans to negotiate Part B drug costs and ensures that taxpayers and MA enrollees face lower per unit costs or pay less overall for Part B drugs while maintaining access to medically-necessary Medicare-covered services and drugs. In order to make sure enrollees maintain access to all medically necessary Part B covered drugs, we are modifying the Part C adjudication time periods for organization determinations and appeals involving Part B drugs.

C. Summary of Costs and Benefits

Table 1—Costs and Benefits for the Major Provisions

Provision
Description
Impact

Providing Plan Flexibility to Manage Protected Classes (§ 423.120(b)(2)(vi))
We allow the following exception related to protected class Part D drugs: Use of PA and ST for new starts of five of the six protected classes, including to determine use for protected class indications
We estimate neither cost nor savings from this provision.

E-Prescribing and the Part D Prescription Drug Program; Updating Part D E-Prescribing Standards (§ 423.160)
We require each Part D plan sponsor to implement one or more RTBTs of its choosing that are capable of integrating with at least one provider's e-Rx system or EHR and delivering complete, accurate, timely and clinically appropriate patient-specific real- time F&B information beginning on 01/01/2021
This provision is scored as a qualitative savings. Based on commenter response we do not believe there will be significant cost to implement RTBT since i) Based on informal conversations with plans and commenter response, 30 percent-90 percent of plans are estimated as already supporting an RTBT tool and ii) plans that do not have it are most likely to use existing intermediaries. Commenters were overwhelmingly enthusiastic on the savings potential due to reduced drug costs arising from cheaper alternatives. The Trust Fund and enrollees will save. However, this savings is classified as a transfer since a cheaper drug is being substituted for a more expensive one. Because of the complexity of prescription drug usage we are unable to meaningfully quantify this savings.

Part D Explanation of Benefits (§ 423.128)
We require the inclusion of negotiated drug pricing information and lower cost alternatives in the Part D Explanation of Benefits beginning on 01/01/2021. The intent of the provision is to provide enrollees with greater transparency, thereby encouraging lower costs
There is an estimated cost of $4.7 million in the first year of implementation for programmers to update systems. There is an annual estimated cost in all years (including the first) of $5.7 million arising from the cost of paper, printer toner, and postage for mailing one extra page in the Part D EOB with added information about alternatives.

Medicare Advantage and Step Therapy for Part B Drugs (§§ 422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 422.618, and 422.619)
We added certain new requirements for when MA plans may apply step therapy as a utilization management tool for Part B drugs
The estimated savings to enrollees due to reduced out-of-pocket costs are between $5 and $8 million for 2020-2029 resulting in an aggregate savings of $62 million over 10 years. The savings to the Trust Fund are between $145 and $240 million for 2020-2029, resulting in an aggregate savings over 10 years of 1.9 billion. There is a modest cost to the government and its contractors of $1 to $1.3 million in 2020-2029 due to a projected increased in appeals, resulting in an aggregate cost of $11.2 million cost over 10 years. These estimates reflect the impact of allowing step therapy for MA organizations in 2020 and future years.

D. Background

In the proposed rule titled “Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses” which appeared in the November 30, 2018
Federal Register
(83 FR 62152 through 62201), we proposed revisions to the Medicare Advantage program (Part C) regulations and Prescription Drug Benefit program (Part D) regulations that

will have the effect of lowering the cost of medications and reducing out-of-pocket costs for enrollees in the Part C and D programs. The changes, as finalized in this rule, will also streamline different aspects of the Part D program and reduce associated burden on the government and sponsoring organizations of MA plans and Part D plans.

In response to the proposed rule, we received 7,898 timely pieces of correspondence containing multiple comments each. Although we are not finalizing all of our proposals to provide plan flexibility to manage protected classes, we are finalizing all other provisions with changes varying from minor clarifications to more significant modifications, based on the comments received. We also sought comment on the possibility of adopting a new definition of “negotiated price” under which plan sponsors would be required to pass through all pharmacy price concessions at the point of sale. We will carefully review all input received from stakeholders on this issue as we continue our efforts to meaningfully address rising prescription drug costs for beneficiaries. We also note that some of the public comments received were outside of the scope of the proposed rule. These out-of-scope public comments are not addressed in this final rule. Summaries of the public comments that are within the scope of the proposed rule and our responses to those public comments are set forth in the various sections of this final rule under the appropriate headings.

II. Provisions of the Proposed Rule and Analysis of and Responses to Public Comments

A. Providing Plan Flexibility To Manage Protected Classes (§ 423.120(b)(2)(vi))

Section 1860D-4(b)(3)(G) of the Act requires Part D sponsors to include in their formularies all covered Part D drugs in classes and categories of clinical concern identified by the Secretary using criteria established through rulemaking. The statute specifies that until such time as the Secretary establishes the criteria to identify drug categories or classes of clinical concern through rulemaking, the following drug categories or classes shall be identified as categories or classes of clinical concern: Anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants for the treatment of transplant rejection. This policy is frequently called the “protected class” policy in the Part D program, with the drug categories or classes of clinical concern being the “protected classes.” Section 1860D-4(b)(3)(G) of the Act permits the Secretary to establish exceptions that permit a Part D sponsor to exclude from its formulary (or to otherwise limit access to such a drug, including through PA or utilization management) a particular covered Part D drug that is otherwise required to be included in the formulary. The Secretary must engage in rulemaking to establish these exceptions. Section 423.120(b)(2)(vi) currently provides three regulatory exceptions to the protected class policy that permit Part D sponsors to: (1) Exclude from their formulary therapeutically equivalent drugs, (2) apply utilization management (UM) edits for safety, and (3) exclude other drugs that CMS specifies through a medical and scientific process which also permits public notice and comment.

The protected class policy, inclusive of its current limitations on PA, is unique to the Medicare Part D program and does not appear elsewhere in other Federal programs, such as the Veterans Health Administration (VA), TRICARE, the Federal Employees Health Benefits Program (FEHBP), the Patient Protection and Affordable Care Act Essential Health Benefits (EHB) Benchmark Plans, or in commercial private health plans. We are concerned that requiring essentially open coverage of certain drug categories or classes in Part D presents both enrollee cost and welfare concerns, as well as increased costs for the Part D program as a result of overutilization (for example, antipsychotics used for sedation) and increased drug prices due to lack of competition between manufacturers to achieve inclusion on plan formularies. In our January 2014 proposed rule entitled, “Medicare Program; Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs” (79 FR 1918, hereinafter referred to as the “January 2014 proposed rule”), we detailed concerns that the policy potentially facilitates the overutilization of drugs within the protected classes (79 FR 1938). Despite some formulary flexibility and ability to use drug UM techniques for protected class Part D drugs, Part D sponsors are not able to negotiate rebates across the protected classes at levels commensurate with other Part D drugs or prescription drugs covered in the commercial market.

Consequently, although we did not propose to eliminate any of the protected classes, we proposed to use the authority under section 1860D-4(b)(3)(G) of the Act to revise § 423.120(b)(2)(vi). Specifically, we proposed to use the authority under section 1860D-4(b)(3)(G) of the Act to establish additional exceptions to the requirement that all drugs in a protected class be included in the formulary and to permit additional use of UM. We proposed to revise §  423.120(b)(2)(vi) to permit Part D sponsors to implement PA and ST requirements for protected class Part D drugs for broader purposes than allowed currently. We also proposed to allow Part D sponsors to exclude specific protected class Part D drugs from their formularies if they are a single-source drug or biological product for which the manufacturer introduces a new formulation with the same active ingredient or moiety that does not provide a unique route of administration or to exclude single-source drugs or biological products that have certain price increases beyond a certain threshold over a specified look back period. However, we noted that these exceptions will apply only to the requirement that the drug be included on the formulary because it is a protected class Part D drug. In other words, an exception from the protected class policy will not supersede our other formulary requirements in § 423.120(b)(2).

We received the following comments and our response follows:

Comment:
Many commenters stated that all three of our proposals greatly compromised access to needed therapy (that is, delays and/or interruptions in therapy) for patients taking protected class Part D drugs, which would lead to adverse health outcomes for these enrollees, and, in the case of HIV, endanger public health.

Response:
In considering whether to propose these exceptions, CMS took our other enrollee access protections into account, which have successfully protected beneficiary access to needed medications in the more than 12 years the Part D program has been operational. There are five such enrollee protections, which include formulary transparency, formulary requirements, reassignment formulary coverage notices, transition supplies and notices, and the expedited coverage determination and appeals processes.

The first protection is our requirement for formulary transparency to beneficiaries. Part D sponsors are required to provide comprehensive formulary drug listings to the public through their own websites and printed materials, as well as to CMS for access through the online interactive drug plan comparison tool, the Medicare Plan Finder (Plan Finder). Beneficiaries or

their representatives can complete a personalized search on the Plan Finder to locate and select a Part D plan that covers their drugs. Thus, beneficiaries who review plan formularies can select plans that cover their current medications.

The second type of protection is the Part D formulary requirements (§ 423.120(b)(2)). Our annual formulary review and approval process is designed to ensure that Part D formularies do not substantially discourage enrollment by certain beneficiaries and that the formularies include adequate representation of all necessary Part D drug categories or classes for the Medicare population. The formulary review and approval process includes the following:

• Category and Class Review (§  423.272(b)(2)). Distinct from our other formulary checks, CMS reviews and approves drug lists that are consistent with best practice formularies currently in widespread use today. CMS evaluates the sufficiency of a Part D sponsor's formulary drug categories or classes in conjunction with the plan's formulary drug list to ensure that the formulary provides access to an acceptable range of Part D drug choices.

• Two Drugs Requirement (§  423.120(b)(2)(i)). Each submitted formulary is reviewed for the inclusion of at least two distinct drugs from each of the submitted categories or classes, except as provided in §  423.120(b)(2)(ii).

• Formulary Tier Review (Medicare Prescription Drug Benefit Manual, Chapter 6, section 30.2.7). The tiering structure of each formulary is reviewed to ensure that each category or class generally has at least one drug in a preferred tier.

• Common Medicare Drugs Review (§  423.120(b)(2)(iii)). Formularies are reviewed for inclusion of the drugs or drug classes that are most commonly utilized by the Medicare population. We use prior years' data to identify the drugs or drug classes with the highest utilization in Medicare Part D, and use these drugs or drug classes as the basis for our review in this area.

• Treatment Guidelines
1

Review (§  423.120(b)(2)(iii)). We analyze formularies to determine whether appropriate access is afforded to drugs or drug classes included in widely accepted treatment guidelines.

1
The World Health Organization (WHO) defines a standard treatment guideline as a systematically developed statement designed to assist practitioners and patients in making decisions about appropriate health care for specific clinical circumstances (available at
http://www.who.int/medicines/technical_briefing/tbs/10-PG_Standard-Treatment-Guidelines_final-08.pdf
).

• Vaccines Review (§  423.100). Each formulary submission is reviewed to ensure the formulary includes Part D vaccines.

• Specialty Tier Review (§  423.578(a)(7)). For formularies using a specialty tier, we perform an extensive review of the composition of each specialty tier. We apply a standard outlined in the annual Call Letter to determine whether drugs placed in specialty tiers meet the relevant cost criteria.

• Quantity Limits (QL) Amount Review (§  423.153(b)). QL restrictions are reviewed for appropriateness. The standard for the review is generally based on the maximum recommended dose when such dosage limits are identified in the Food and Drug Administration (FDA)—approved labeling.

• Restricted Access Review (§  423.153(b)). Formularies are reviewed for use of PA and ST edits across drug categories or classes. We decline to approve UM for entire drug classes, other than for those categories or classes where the UM edits are considered to be consistent with best practices, for example, for erythropoietin stimulating agents (ESAs), due to the high likelihood of Part B versus Part D coverage issues, as well as a boxed warning in the FDA labeling that warns of significant adverse events when these drugs are used outside of their approved indications and therapeutic targets.

• Step Therapy Criteria Review (§  423.153(b)). The ST requirements are reviewed to ensure that the ST algorithms are consistent with best practices, including prerequisite drugs, current industry standards and appropriate treatment guidelines.

• Prior Authorization Criteria Review (§  423.153(b)). We review the criteria for drugs requiring PA on the formulary submissions. We look to existing best practices, current industry standards, and appropriate treatment guidelines to check that the Part D plans' use of PA is consistent with such best practices. Submitted criteria are also compared to recognized compendia (that is, those compendia described in section 1927(g)(1)(B)(i) of the Act: American Hospital Formulary Service Drug Information and DRUGDEX Information System) and FDA-approved indications.

• Mid-year formulary change restrictions (§  423.120(b)(5)); Chapter 6 of the Medicare Prescription Drug Benefit Manual, section 30.3.3). Except when: (1) The FDA deems a Part D drug unsafe, (2) a manufacturer removes a Part D drug from the market, or (3) in the circumstances described under § 423.120(b)(5)(iv) when a new generic drug becomes available, a Part D sponsor may not remove a covered Part D drug from its formulary, or make any adverse change in preferred or tiered cost-sharing status of a covered Part D drug, 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 the annual coordinated election period. However, prescription drug therapies are constantly evolving, and new drug availability, medical knowledge, and opportunities for improving safety and quality in prescription drug use at a lower cost will inevitably occur over the course of the year. As recognized in regulation, these new developments may require formulary changes during the year in order to provide high-quality, affordable prescription drug coverage. Moreover, CMS will not approve mid-year changes, other than the three types of changes listed here, unless the Part D sponsor grandfathers coverage for the remainder of the plan year for enrollees that are already taking the drug being removed (or subjected to an adverse change in preferred or tier cost sharing) at the time of the change.

Thus, in summary, our formulary rules both ensure that all Part D formularies contain sufficient drugs to treat all disease states in the Medicare population and protect enrollees from significant changes in formularies during the course of a coverage year.

The third type of enrollee protection is the annual notice to reassigned enrollees required under section 3305 of the Patient Protection and Affordable Care Act (PPACA, Pub. L. 111-148). Effective January 1, 2011, we provide individuals who receive the Low Income Subsidy (LIS individuals) who are reassigned to a different Part D plan with information on the differences under the new plan formulary, as well as information on the enrollee's grievance and appeal rights in the new plan. Thus, (in order to maintain access to a $0 premium) any individual who has his or her plan selection decision made through our reassignment process receives detailed coverage status information for each drug for which he or she filled a prescription between January and August of the previous year. With regard to the new plan, this notice describes for each drug whether it is on the formulary, whether the brand or generic version is covered, and whether UM may be applied. Moreover, the notice also provides a list of other available plans into which the enrollee can enroll with no premium if they

would prefer not to remain in the plan where they were reassigned. We send notices after the individual's reassignment and in time to allow for the LIS individual to make a voluntary selection of another plan effective January 1. Thus, any reassigned LIS individual receives advance notice of any change in formulary coverage of their medications in plenty of time to work with their prescribers if they wish to remain in the new plan, or to select a different Part D plan.

The fourth type of enrollee protection is our unique transition supply and notice requirements. A Part D sponsor must provide for an appropriate transition process for Part D drugs that are not on its formulary with respect to: (1) The transition of new enrollees into prescription drug plans following the annual coordinated election period; (2) the transition of newly-eligible Medicare beneficiaries from other coverage; (3) the transition of individuals who switch from one plan to another after the start of the contract year; and (4) in some cases, current enrollees affected by formulary changes from one contract year to the next (see §  423.120(b)(3) Chapter 6 of the Medicare Prescription Drug Benefit Manual, section 30.4). Within the first 90 days of an enrollee's enrollment in a new plan, plans must provide a temporary fill of at least an approved month's supply when the enrollee requests a fill of a non-formulary drug or a Part D drug that is on a plan's formulary but requires PA or ST under a plan's UM rules. This requirement applies beginning on an enrollee's first effective date of coverage, regardless of whether this is within the first 90 days of the contract year. Additionally, if a Part D sponsor cannot determine at the point of sale (POS) whether an enrollee is currently taking a drug (for example, a new enrollee filling a prescription for the first time), we instruct the Part D sponsor to provide the enrollee with a transition supply.

A successful transition process is contingent not only upon providing the transitional drug supply, but also upon informing affected enrollees, their caregivers, and their prescribers about the enrollee's options for ensuring that his or her medical needs are safely accommodated within a Part D sponsor's formulary. For this reason, when providing a temporary supply of non-formulary Part D drugs or Part D drugs that are on a plan's formulary but require PA or ST under a plan's UM rules, Part D sponsors must provide enrollees and their prescribers with written notice within three business days after adjudication of the temporary fill that they are receiving a transition supply and that they must take action. The temporary fill and written notice provide enrollees with a reasonable amount of time during which they and their prescribers can address the issue (by requesting a formulary exception or transitioning to a formulary drug) and prevents them from having to abruptly change or go without their medication (see Transition notice requirements (to enrollees and providers) [§  423.120(b)(3)(iv and v); Chapter 6 of the Medicare Prescription Drug Benefit Manual, section 30.4.10]). Thus all enrollees and their prescribers have advance notice of any issue with continued coverage of a previously initiated therapy and sufficient time to resolve those issues without any lapse in appropriate therapy. The preceding formulary review and transition requirements are described in Chapter 6 of the Medicare Prescription Drug Benefit Manual (located at
http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Chapter6.pdf
).

The fifth enrollee protection we took into account is the requirement for a robust coverage determination and appeal process, including the right of an enrollee or his or her prescriber to request an exception to the plan's UM criteria, tiered cost-sharing structure, or formulary. Part D sponsors are required to issue a coverage decision and notify the enrollee (and the prescriber, as appropriate) in writing in accordance with strict regulatory timeframes. In general, consistent with § 423.578, a plan must grant a tiering or formulary exception (for example, provide coverage for a non-formulary drug or a formulary exception to the UM criteria) when it determines that the requested drug is medically necessary, consistent with the prescriber's supporting statement indicating that preferred alternatives(s) would not be as effective and/or would have adverse effects.

We have established by regulation both an expedited adjudication timeframe if the plan or prescriber believes that applying the standard timeframe may jeopardize the enrollee's health, and a requirement that plans must issue all coverage decisions as expeditiously as the enrollee's health condition requires. The requirements at § 423.568 for coverage determinations and § 423.572 for expedited coverage determinations state that the plan must notify the enrollee “as expeditiously as the enrollee's health condition requires, but no later than [72 or 24 hours, respectively] after receiving the request, or, for an exceptions request, the physician's or other prescriber's supporting statement.” That is to say, if an enrollee's health condition requires a response in less than 24 hours, the plan is obligated to provide one.

If, based on the initial review of the request, the Part D sponsor expects to issue a partially or fully adverse decision based on medical necessity, the coverage determination must be reviewed by a physician or other appropriate health care professional with sufficient medical and other expertise, including knowledge of Medicare coverage criteria, before the Part D sponsor issues the decision on the coverage determination. If the Part D sponsor makes an adverse coverage determination, the required written notice must explain the specific reason(s) for the denial and include a description of the enrollee's right to a standard or expedited redetermination by the plan, and the rest of the five-level appeals process, including the right to request independent review. At the redetermination level of appeal, when the issue is the denial of coverage based on a lack of medical necessity, the redetermination must be made by a physician with expertise in the field of medicine that is appropriate for the services at issue. If a plan fails to make a coverage decision and notify the enrollee within the required timeframe, the request must be forwarded to the independent review entity (IRE) to be adjudicated.

Moreover, while we do not treat a claim transaction as a coverage determination, we require Part D sponsors to arrange with network pharmacies to provide enrollees with a written copy of the Office of Management and Budget (OMB)-approved standardized pharmacy notice (“Notice of Denial of Medicare Prescription Drug Coverage,” CMS-10146) when the enrollee's prescription cannot be filled under the Part D benefit and the issue cannot be resolved at the point-of-sale (POS). The notice instructs the enrollee on how to contact his or her plan and explains the enrollee's right to request a coverage determination. Thus, all enrollees immediately receive clear, concise instructions on how to pursue their right to request a coverage determination when a prescription cannot be filled at POS. For additional information on the coverage determination, appeals, and grievance process, including information about the pharmacy notice, see 42 CFR part 423, subparts M and U, and the Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance, available at

https://www.cms.gov/Medicare/Appeals-and-

Grievances/MedPrescriptDrugApplGriev/index.html.

CMS will be monitoring appeals activity to ensure Part D enrollees' requests are appropriately evaluated. Additionally, we also plan to implement a protected class-specific Complaints Tracking Module (CTM) monitoring project in 2020 to monitor access to protected class Part D drugs. Finally, as discussed elsewhere in this final rule, CMS is taking steps in 2020 and future rulemaking to include e-prescribing improvements such as real time benefit tools (RTBTs) and Part D electronic prior authorization (ePA) as required by section 6062 of the SUPPORT for Patients and Communities Act (Pub. L. 115-271), which could reduce the need for coverage determinations and appeals. Taken together, these initiatives and the five beneficiary access protections described previously will help to protect enrollees from any unnecessary or inappropriate delay in access to medically necessary drugs.

Comment:
Several commenters stated that Part D sponsors already have enough tools to manage protected class Part D drugs, including PA on new starts, formulary tiering, and generic utilization. Some commenters added that by using these tools, Medicare currently only covers two-thirds of protected class Part D drugs, and plans already use PA on nearly one half of protected class Part D drugs. However, many other comments that we received expressed support for additional formulary management tools.

Response:
It is unclear on what basis commenters are making the assertions regarding Medicare only covering two-thirds of protected class Part D drugs and plans already using PA on nearly one-half of protected class Part D drugs, as plans are required to include all protected class Part D drugs on their formularies, with limited exceptions as specified at § 423.120(b)(2)(vi), and the use of PA has been limited to new starts under our existing policy. Although we are not able to speak to the actual rebate values, our internal analyses of rebate data reported by Part D sponsors generally support the assertion that Part D sponsors obtain substantially smaller rebates for protected class Part D drugs than they do for non-protected class Part D drugs. Due to restrictions on disclosure of rebate data, CMS is not able to release this analysis to the public.

Comment:
Some commenters claimed that proposing exceptions without previously or concurrently proposing clinical criteria is out of order, and not allowed by the plain reading of the statute.

Response:
Section 1860D-4(b)(3)(G)(ii) of the Act specifies that subject to section 1860D-4(b)(3)(G)(iv) of the Act, the Secretary “shall identify, as appropriate,” categories or classes the Secretary determines are of clinical concern, using criteria the Secretary establishes. Section 1860D-4(b)(3)(G)(iv) of the Act states that until such time as the Secretary establishes the criteria, the existing protected class categories “shall be identified” under section 1860D-4(b)(3)(G)(ii) of the Act. The statute clearly contemplates that the existing protected classes—that is, those set forth in section 1860D-4(b)(3)(G)(iv) of the Act—are the identified classes for purposes of section 1860D-4(b)(3)(G)(ii)(II) of the Act, as well as section 1860D-4(b)(3)(G)(i)(I) of the Act, and therefore the Secretary need not establish criteria for identifying new or different protected classes before establishing exceptions.

Comment:
Some commenters claimed that CMS's protected class proposals violate the statutory non-discrimination provision, particularly with respect to enrollees who take high-cost drugs in the protected classes. Other commenters asserted that HIV patients, LIS enrollees, and dually-eligible enrollees (particularly children) would be disproportionately affected by our proposals.

Response:
The non-discrimination provision and the protected class provision are not at odds. Non-discrimination applies to all Part D enrollees, while the protected class provision establishes additional requirements for drugs in protected classes. Section 1860D-4(b)(3)(G) of the Act authorizes formulary exclusion and UM for protected class Part D drugs, which indicates that non-discriminatory formulary exclusion and UM are contemplated by the statute. Therefore, excluding a protected class drug from the formulary or imposing UM criteria would not be discriminatory in itself. Our approach to approving PA and ST criteria for protected class Part D drugs will be consistent with our discrimination analysis for all other categories or classes—that is, to ensure that these criteria, as applied, would not substantially discourage enrollment by certain Part D eligible individuals. As described previously, we conduct a discrimination review to ensure that plans' formulary designs are not likely to substantially discourage enrollment by certain Part D eligible individuals. We will conduct the same review with respect to the protected class drugs that plans wish to exclude from the formulary or for which they wish to impose PA or ST, in each case only as permitted under the exceptions we are finalizing in this rule. Moreover, there are other, non-protected categories and classes of drugs that consist of high-cost therapies (for example, drugs used to treat hepatitis C) for which CMS has been able to ensure a benefit design that is not likely to substantially discourage enrollment by certain Part D eligible individuals.

Comment:
Some commenters asserted that CMS's proposals are inconsistent with Congressional intent and in conflict with our regulation. Specifically, commenters pointed to the language we adopted at § 423.120(b)(2)(vi)(C) specifying that any exception to the criteria is based upon scientific evidence and medical standards of practice (and, in the case of antiretroviral medications, is consistent with the Department of Health and Human Services Guidelines for the Use of Antiretroviral Agents in HIV-1-infected Adults and Adolescents).

Response:
Section 1860D-4(b)(3)(G)(i)(II) of the Act specifically allows the Secretary to establish exceptions that permit a Part D sponsor to exclude from its formulary a particular covered Part D drug in a category or class that is otherwise required to be included in the formulary, or to otherwise limit access to such a drug, including through PA or UM. Our existing exception at § 423.120(b)(2)(vi)(C) was adopted after enactment of the Medicare Improvements for Patients and Providers Act (MIPPA) (section 176 of Pub. L. 110-275). However, the PPACA (section 3307 of Pub. L. 111-148) removed this statutory requirement. While our existing regulations at § 423.120(b)(2)(vi)(C) discuss an exception for protected class Part D drugs that is “based upon scientific evidence and medical standards of practice (and in the case of antiretroviral medications is consistent with the [HHS] Guidelines for the Use of antiretroviral Agents in HIV-1 Infected Adults and Adolescents),” this is a separate and distinct exception from the exceptions proposed in this rulemaking. In other words, these exceptions can exist contemporaneously, and are not in conflict with each other.

Comment:
Stakeholders provided alternative policies to lower drug prices, such as allowing copay assistance cards for Part D enrollees and other federal healthcare program beneficiaries, encouraging Part D plans to institute benefit designs that include “select care” tiers that would cover drugs with low or no patient cost sharing (including antineoplastic drugs), exploring new ways to encourage Part D

plans to offer supplemental benefits for enrollees, further developing demonstration models that provide supplemental benefits or reduced cost sharing for patients with specific conditions or needs, or proposing an exception that would permit Part D sponsors to exclude protected class Part D drugs when therapeutic alternatives exist.

Response:
We thank commenters for their suggestions.

We are finalizing our proposal to redesignate the existing paragraph that appears at § 423.120(b)(vi)(C) that permits CMS to exempt other drugs that CMS specifies. However, because we are not finalizing our proposed exceptions regarding new formulations and price increases, paragraph § 423.120(b)(vi)(C) will be redesignated as paragraph (D), instead of (F) as originally proposed.

1. Broader Use of Prior Authorization for Protected Class Part D Drugs

Under section 1860D-4(b)(3)(G)(i)(II) of the Act, the Secretary can establish exceptions to permit a Part D sponsor to exclude from its formulary, or otherwise limit access through PA or UM, a particular Part D drug that is otherwise required to be on the formulary because it is in a protected class. This authority is specific to Part D drugs, and moreover, applies without regard to whether an enrollee is initiating therapy (new starts) or is currently taking a drug (existing therapy).

Part D coverage is limited to those drugs that meet the definition of a Part D drug in § 423.100. Therefore, regardless of a drug's potential status as a protected class drug, Part D sponsors are responsible for ensuring that coverage is limited to Part D drugs. In order to accomplish this, Part D sponsors use PA
2

on drugs that have a high likelihood of: (1) Coverage that is available under Parts A or B (versus D) for the drug as prescribed and dispensed or administered; (2) exclusion from Part D coverage (for example, a drug or drug class or its medical use that is excluded from coverage or otherwise restricted under Part D as defined in section 1927(d)(2) of the Act); or (3) use other than for a medically accepted indication as defined in section 1860D-2(e)(4) of the Act, in the Part D sponsor's experience or as directed by CMS, consistent with sections 10.6 and 30.2.2.3 of Chapter 6 of the Medicare Prescription Drug Benefit Manual. Additionally, relative to medically accepted indications, consistent with section 10.6.1 of Chapter 6 of the Medicare Prescription Drug Benefit Manual, Part D sponsors may retrospectively identify and confirm—either as part of their retrospective review programs required under § 423.153, or incident to another UM review—that a dispensed drug, including when dispensed as a transition supply, was not prescribed for a medically accepted indication for a particular individual. CMS does not consider the use of CMS-approved PA requirements for these purposes to be subject to section 1860D-4(b)(3)(G) of the Act because section 1860D-4(b)(3)(G) of the Act is specific to Part D drugs. Consequently, consistent with current policy, CMS will continue to permit Part D sponsors to apply PA for potential protected class drugs to determine whether such drugs can be covered under Part D, for both new starts and existing therapy, for those drugs with a high likelihood of being excluded from Part D for the reasons provided previously, subject to CMS review and approval.

2
Consistent with section 10.6 of Chapter 6 of the Medicare Prescription Drug Benefit Manual, Part D sponsors should consistently use prior authorization (PA) for those drugs with the highest likelihood of non-Part D covered uses unless plans are able to reliably use tools other than PA to determine appropriate coverage for the drug.

Using the authority under section 1860D-4(b)(3)(G)(i)(II) of the Act, which applies without regard to new starts or existing therapy, we proposed to permit Part D sponsors to apply PA and ST requirements to new starts and existing therapy of protected class Part D drugs that are implemented to confirm use is intended for a protected class indication, ensure clinically appropriate use, promote utilization of preferred formulary alternatives, or a combination thereof, subject to CMS review and approval. We also solicited comment on whether PA and ST of protected class Part D drugs should be limited to new starts only.

We received the following comments and our response follows:

Comment:
A number of commenters supported the proposal to expand the use of PA and ST for protected class Part D drugs from new starts only to new starts and existing therapy to confirm use is intended for a protected class indication, ensure clinically appropriate use, promote utilization of preferred formulary alternatives, or a combination thereof, subject to CMS review and approval.

Response:
We thank the commenters for their support.

Comment:
Many commenters asserted that treatments in the protected classes are neither interchangeable nor “one-size-fits-all,” adding that patients need access to the full range of therapies in these classes, and prescribers need the autonomy to make the best decision for each patient as an individual. Several commenters asserted that while clinical practice guidelines are publicly available, they are not intended to drive policy decisions. These commenters further added that while guidelines are important to give clinicians a starting point in the care of patients, it is ultimately up to the clinician who knows the full history of the individual patient to tailor treatments that will result in the best outcomes for that patient. Some commenters added that PA and ST policies intended to restrict access to physician-directed care unnecessarily prolong ineffective treatment and prevent individuals from immediately starting the treatment their prescribers believe is best. Some commenters suggested that ST requirements should not be ironclad, but instead should be suggested clinical care pathways to provide clinical decision support. Other commenters added that the lack of autonomy damages the doctor-patient relationship.

Response:
Consistent with §  423.120(b)(2)(iii) and §  423.153(b), CMS conducts treatment guideline, ST criteria, and PA criteria reviews as part of the annual formulary review and approval process. CMS uses the FDA-approved labeling and widely accepted treatment guidelines to determine clinical appropriateness before approving PA or ST criteria. As discussed previously in this preamble, we will only approve PA and ST criteria that are clinically supported. These beneficiary protections, and specifically the limits we place on Part D sponsors' ability to apply PA and ST, differentiate Part D from other prescription drug benefits and help prevent the negative consequences (that is, prolongation of ineffective therapy and delaying accesses to appropriate therapy) suggested by the commenters and are designed to preserve the doctor-patient relationship. Moreover, ST requirements are not ironclad because, consistent with §  423.578, prescribers can request a formulary exception, and provided it meets the requirements at § 423.578, the supporting statement provided by a physician or other prescriber is given great weight when reviewing an exception request.

Comment:
Some commenters expressed concern that CMS has not provided specificity about the clinical criteria that will be applied to its formulary review or any additional oversight and monitoring that would be appropriate to ensure the well-being of Part D enrollees with chronic conditions. Commenters recommended a system whereby CMS signs off on ST

programs for protected classes based on certain defined criteria, including that the program is evidence-based, or for areas where adequate evidence is lacking, is based on accepted standards or best clinical practice. Additionally, commenters suggested CMS should create a specialty council with expertise in the fields of the various protected class indications to review formulary decisions.

Response:
As noted in response to the previous comment, consistent with §  423.120(b)(2)(iii) and §  423.153(b), CMS conducts treatment guideline, ST criteria, and PA criteria reviews as part of the annual formulary review and approval process. CMS uses the FDA-approved labeling and widely accepted treatment guidelines to determine clinical appropriateness before approving PA or ST criteria. We will only approve PA or ST criteria that are clinically supported. Please see section II.A. of the preamble to this final rule for an extensive description of our formulary review process. Consistent with §  423.578, prescribers can also request a formulary exception if a desired outcome is not met with current formulary alternatives. Additionally, the CMS formulary team reviewing Part D formularies and related PA and ST criteria is composed of pharmacists who are board-certified pharmacotherapy specialists with extensive clinical experience reviewing PA and ST criteria. These pharmacists use the FDA-approved labeling and widely accepted treatment guidelines when considering PA and ST criteria for disease states.

Comment:
A number of commenters expressed concern that PA and ST policies can lead to patients' not filling their prescriptions or underutilizing medications, which leads to non-adherence. Commenters expressed concern that non-adherence, in turn, can lead to interruptions in therapy across the six classes, and in the case of HIV, would endanger public health because it is a communicable disease which can rapidly mutate and become resistant to therapy.

Response:
CMS acknowledges that PA and ST requirements can potentially cause the issues cited when they are implemented without the protections provided under the Part D program. However, we believe such concerns have been mitigated in Part D based upon our more than 12 years of experience with the Part D program, including our existing policy that allows for PA and ST for new starts of protected class Part D drugs (except antiretrovirals), and the other unique Part D protections that are more robust than in comparable programs. For example, in all other Part D drug categories and classes, where wide use of PA and ST has been allowed since the beginning of the Part D program, subject to our other formulary requirements, we have no evidence to suggest that Part D enrollees routinely experience interruptions in therapy as a result of PA and ST requirements. Moreover, CMS is advancing improvements in price transparency, interoperability, and e-prescribing, such as RTBTs and Part D ePA as required by section 6062 of the SUPPORT for Patients and Communities Act (Pub. L. 115-271), that could help mitigate the kinds of administrative burdens sometimes associated with PA and ST that commenters claim could lead to underutilization.

Comment:
Several commenters asserted that the PA process is complicated and labor intensive, and also, given the high approval rate—particularly for protected class Part D drugs—PA requirements do not reduce medication utilization and thus simply impose unnecessary burdens on patient care. Some commenters added that this proposal is counter to CMS's Patients over Paperwork initiative.

Response:
We are concerned that the current policy potentially facilitates the overutilization of drugs within the protected classes, particularly antipsychotics.
3

4

5

By limiting the ability of Part D sponsors to implement UM tools (for example, PA or ST requirements) for an entire category or class, we also limit their ability to prevent the misuse or abuse of drugs that are not medically necessary. Inappropriate use of Part D drugs can lead to adverse effects that can harm the enrollee and require medical treatment that will otherwise not have been necessary, thus increasing overall Medicare costs.
6

We remain concerned there may be a link between the profitability of products not subject to normal price negotiations as the result of protected class status, such as antipsychotics, and overutilization, particularly off-label overutilization, of some of these drugs. Additionally, as discussed elsewhere in this final rule, CMS is advancing improvements in price transparency, interoperability, and e-prescribing, such as RTBTs, and Part D ePA as required by section 6062 of the SUPPORT for Patients and Communities Act (Pub. L. 115-271), that could help mitigate the kinds of administrative burdens sometimes associated with PA and ST and aligns this proposal with the Patients over Paperwork initiative.

3
A May 2011 Department of Health and Human Services Office of Inspector General report found that of 2.1 million elderly persons who lived in nursing homes in the first 6 months of 2007, almost 305,000 had a prescription for at least one atypical antipsychotic drug. Eighty-eight percent of these prescriptions were for off-label, medically unacceptable uses and/or were associated with a specific FDA Black Box warning against their use by elderly persons with dementia. In all, unapproved uses and improperly documented claims for these drugs cost Medicare $116 million in one 6-month period. Medicare Atypical Antipsychotic Drug Claims for Elderly Nursing Home Residents. OEI-07-08-00150.
https://oig.hhs.gov/oei/reports/oei-07-08-00150.pdf
Accessed April 17, 2019.

4
The percentage of long-term nursing home residents being given antipsychotic drugs dropped from about 24 percent in late 2011 to under 15 in the third quarter of 2018. National Partnership to Improve Dementia Care in Nursing Homes: Antipsychotic Medication Use Data Report (January 2019).
https://www.nhqualitycampaign.org/files/Antipsychotic_Medication_Use_Report.pdf.
Accessed May 10, 2019.

5
Advocates say even the lower rate of antipsychotic usage is excessive, given federal warnings that elderly people with dementia face a higher risk of death when treated with such drugs. February 5, 2018. Crary D. Associated Press. “New Report Details Misuse of Antipsychotics in Nursing Homes”
https://www.statnews.com/2018/02/05/antipsychotics-nursing-homes-elderly/
Accessed May 10, 2019.

6
Prescription Drug Workgroup; American Academy of Actuaries. Issue Brief: Prescription Drug Spending the in US Healthcare System, an Actuarial Perspective. March 2018.
https://www.actuary.org/content/prescription-drug-spending-us-health-care-system
Accessed April 12, 2019.

Comment:
Commenters were divided over whether we should continue to allow PA and ST for UM purposes for new starts only. Some commenters strongly supported the idea. Many commenters expressed concern that requiring enrollees to undergo ST requirements after they have already been stabilized on a treatment regimen can cause disruptions to the overall success of the enrollee's treatment and create negative treatment health care outcomes. However, other commenters opposed to limiting PA and ST for new starts only, as contrasted to permitting PA and ST for new starts and existing therapy, expressed concern that data limitations for PDP sponsors to discern new starts from existing therapy at the POS would create operational issues that would ultimately cause them not to use this exception, which would sufficiently undermine the exception and render it ineffective.

Some commenters suggested that rebate differences between the protected classes would yield greater cost savings for some protected classes, such as antipsychotics, antidepressants, and anticonvulsants, than the other protected classes (antiretrovirals, antineoplastics, and immunosuppressants). These commenters asserted that certain protected classes, like antiretrovirals to

treat HIV, do not have significant branded competition and therefore would not be expected to see significant rebating, even absent the protected classes policy.
7

Other commenters suggested that CMS should introduce automatic permission for a 7-day temporary supply while approval is sought.

7
See PEW Comments on Proposals to Modernize Medicare Drug Payments.
https://www.pewtrusts.org/en/research-and-analysis/speeches-and-testimony/2019/01/25/pew-comments-on-proposals-to-modernize-medicare-drug-payments
Accessed April 12, 2019.

Response:
CMS' current policy permits PA and ST for new starts only for protected class Part D drugs, except antiretroviral medications.

We proposed to broaden the permissible use of PA and ST for protected class Part D drugs by permitting PA and ST for enrollees on existing therapy. Our goal was to provide additional flexibility so that Part D sponsors could better manage the benefit from a clinical as well as a cost savings perspective. We believe that the existing beneficiary protections, including our extensive clinical formulary review and approval process, would adequately protect enrollees from the inappropriate application of PA and ST requirements. Moreover, we would effectively limit most ST criteria to new starts as best practice, except when a change in therapy is clinically supported by the recognized compendia or widely accepted treatment guidelines. When step therapy is applied, we would expect to approve PA or ST requirements with initial treatment that is comparably supported by recognized compendia or widely accepted treatment guidelines.

Nevertheless, CMS is persuaded by comments that expressed significant concern for the potential disruption of ongoing therapy of protected class Part D drugs used for protected class indications and, after considering all the comments, we conclude that the risks associated with inappropriately interrupting therapy for stabilized patients receiving protected class drugs for protected class indications by potentially subjecting them to PA or ST requirements outweighs the potential clinical benefits that some enrollees could gain from switching therapies that might be more appropriate and the potential cost savings that would accompany the additional formulary management flexibility. Therefore, we are finalizing a codification of existing policy that allows Part D sponsors to apply PA and ST requirements for protected class Part D drugs, except for antiretroviral medications, only for new starts, to determine if a drug's intended use is for a protected class indication, ensure clinically appropriate use, promote utilization of preferred formulary alternatives, or a combination thereof, subject to CMS review and approval. PA and ST will continue to be prohibited for antiretroviral medications. Because the statutory protected class provision applies only to Part D drugs, Part D sponsors may continue to use coverage determinations, including PA or other reliable tools, to determine a drug's status as a Part D drug irrespective of such drug's status as a new start or existing therapy. However, we clarify that for enrollees on existing therapy, Part D sponsors may not require PA to confirm that a drug's intended use is for a protected class indication if the drug otherwise does not have a high likelihood of use intended for a non-medically accepted indication that would not be coverable under Part D. In other words, sponsors generally will need to rely on alternative approaches, such as retrospective DUR, to confirm the intended use is for a protected class indication for enrollees on existing therapy.

CMS thanks the commenters for their suggestion about the 7-day supply. However, because of our transition policy, which requires at least a month's approved supply, a 7-day supply is not necessary.

Comment:
Some commenters expressed concern that expanded use of PA and ST will limit access to protected class Part D drugs for important uses that may not be considered a protected class indication, for example, enrollees who take various protected class Part D drugs for conditions like chronic pain or lupus. Commenters asserted that access limitations based on purported “protected” versus “non-protected” uses would be divorced from the clinical realities that exist for patients with complex and chronic conditions.

Some commenters expressed concern that expanded use of PA and ST will limit access to protected class Part D drugs that have more than one protected class indication, for example, antidepressants with dual use as anxiolytics (antianxiety medications) or antipsychotics and vice versa, or as another example, anticonvulsants with use as adjunct anxiolytics or antidepressants. Other commenters added that the proposal does not protect off-label prescribing within a protected class, for example, tacrolimus for lung transplants.

Response:
A number of protected class Part D drugs have medically accepted indications for non-protected class uses. As discussed in the proposed rule, we are clarifying that we consider medically accepted indications consistent with the identified drug categories or classes of the protected classes to be “protected class indications.” In other words, when a Part D drug is used for a protected class indication, we consider it to be a protected class Part D drug. Using the commenter's example, tacrolimus for lung transplants would still be considered to be used for a protected class indication if use in lung transplant is a medically accepted indication. In addition, Part D drugs with multiple medically accepted protected class indications are protected for each such protected class indication, even if the indications are in more than one protected class. For example, aripiprazole has an FDA-labeled indication for acute and maintenance treatment of schizophrenia, and an FDA-labeled indication for adjunctive treatment of major depressive disorder; both of these uses are considered to be protected class indications.

As discussed in the proposed rule at 83 FR 62158, CMS is concerned that unless a Part D sponsor can use PA to determine the indication for which the drug has been prescribed, there is the potential to increase Part D program costs when there may be a less expensive alternative available to treat a particular non-protected indication that would be clinically appropriate. Therefore, we will permit Part D sponsors to use PA only for new starts in the protected classes, except for antiretrovirals, to determine if such drugs' intended use is for non-protected class indications. For those drugs that have both protected class and non-protected class indications, we may permit different PA requirements or formulary inclusion for non-protected class indications than those used for protected class indications, depending upon the clinical appropriateness and consistent with the July 25, 2018 and August 29, 2018 HPMS memos about indication-specific UM and formulary design. Additionally, to the extent that treatment guidelines for non-protected class indications include drugs with both protected class and non-protected class indications, plans will still be required to meet all established Part D formulary criteria regarding access to such drugs for non-protected class uses.

For example, for an enrollee who is a new start on topiramate, an anticonvulsant, the PA criteria used for topiramate could determine coverage and establish appropriate use in the following scenarios:

• If use is for weight loss (an excluded, use under Part D), the Part D sponsor would deny coverage. (We remind Part D sponsors that they may deny coverage for excluded use under Part D irrespective of the enrollee's status as a new start or continuing existing therapy);

• If use is as an anticonvulsant (a protected class indication), the plan would cover the drug; or

• If use is for migraine prophylaxis (a non-protected class, indication), the Part D sponsor could—

++ Deny coverage (if this use is not on formulary) and require the enrollee to seek an exception to obtain coverage; or

++ Apply another set of PA or ST requirements for this indication.

We expect that all such issues or questions would be addressed during the coverage determination to avoid the possibility of enrollees needing to submit multiple coverage determination requests for the same drug.

Application of PA criteria to determine use for weight loss, as an anticonvulsant, or for migraine prophylaxis would be consistent with our July 25, 2018 Health Plan Management System (HPMS) memorandum entitled, “Indication-Based Utilization Management” and our August 29, 2018 HPMS memorandum entitled, “Indication-Based Formulary Design Beginning in Contract Year (CY) 2020.”

Finally, in their formulary materials, we would expect Part D sponsors to note differential formulary inclusion for drugs with regard to protected class versus non protected class indications.

Comment:
A few commenters suggested that, while they did not support our proposal to allow broader use of UM for protected class Part D drugs, one area in which they did support the use of such tools in the protected classes was to reduce the inappropriate prescribing of antipsychotics in the long-term care setting.

Response:
We share the commenters' concerns about inappropriate prescribing of antipsychotics in the long-term care setting. Allowing PA and ST for new starts of antipsychotics will help to limit overutilization of these drugs for non-protected class indications (for example, antipsychotic use for sedation in nursing homes).

Comment:
Some commenters expressed concern that expanded use of PA and ST will limit or delay access to more than one drug for an indicated use, asserting that individuals sometimes require more than one drug, or a specific combination of drugs, for a particular condition, and that this is particularly salient within the protected classes.

Response:
To the extent that the FDA labeling, recognized compendia, or treatment guidelines discuss the use of multiple drugs, or a particular combination of drugs, within the protected classes for a given protected class indication, consistent with our existing formulary requirements, plans will still be required to provide coverage of such drugs for those patients. Additionally, UM and retrospective drug utilization review (DUR) can be used to ensure that combinations are clinically appropriate and comport with treatment guidelines, even if such combination is not first-line therapy, for example, retrospective DUR to ensure the use of combination therapies of HIV medications comport with the HHS HIV Guidelines.

Comment:
Several commenters expressed concern that ST is not appropriate for protected class Part D drugs, particularly antineoplastics, antiretrovirals, and immunosuppressants.

Response:
We agree that in most circumstances of clinically appropriate care, ST would not be appropriate for protected class Part D drugs. However, as a general statement, we disagree with the commenters. Our more than 12 years of experience with the Part D program has provided evidence of inappropriate prescribing within the protected classes, across all of the classes, and particularly for antipsychotics. Additionally, we have recently seen evidence of fraudulent prescribing and diversion of antiretrovirals. Although we are taking a more limited approach to our application of PA and ST than we proposed and excluding antiretrovirals from the exception we are finalizing at § 423.120(b)(vi)(C), we continue to believe that PA and ST are important tools to ensure clinically appropriate use of drugs, including those in the protected classes.

Comment:
Some commenters suggested that CMS should require plans to list all drugs that require PA and ST.

Response:
Plans are required to submit this information in their bids. Additionally, this information is available when beneficiaries search for plans by inputting their drugs into the Medicare Plan Finder. This information is also required to be available in the printed formulary, on the formulary on the plan's website, and available by calling the plan.

Comment:
Some commenters noted that the Emergency Medical Treatment and Labor Act (EMTALA) requirements preclude emergency physicians from asking patients about their insurance coverage before a medical screening examination is completed, and therefore, emergency physicians do not know which type of plan and formulary the patient may have at the point of prescribing. These commenters asserted that the urgency of treatment in the emergency setting requires emergency services personnel to provide medications that may not be on a Part D plan's formulary and suggested that CMS exempt prescriptions that originate in emergency settings from this exception.

Response:
Part D enrollees may be started on non-formulary medications as inpatients or in emergency settings that are subject to PA or ST requirements if continued upon discharge. If an enrollee who presented to the pharmacy a new prescription was started on protected class drugs in such a scenario, we would expect Part D sponsors to consider such enrollee to be continuing existing therapy. Additionally, as detailed previously, our transition requirements and exceptions and appeals process provides the necessary protection for enrollees that need to remain on such medications. Although Part D enrollees and prescribers may need to avail themselves of our exceptions and appeals processes, as discussed previously in this preamble and consistent with section 30.4.7 of Chapter 6 of the Medicare Prescription Drug Benefit Manual, we remind Part D sponsors that they are required to make coverage determinations and redeterminations as expeditiously as the enrollee's health condition requires.

Comment:
A commenter requested that CMS allow MA plans, through a step therapy edit, to require the use of a Part B drug prior to the use of a protected class Part D drug starting in 2020.

Response:
We noted in the proposed rule that the combination of our proposal to specify additional exceptions to the formulary requirements for protected class Part D drugs (section II.A. of the proposed rule, “Broader Use of Prior Authorization for Protected Class Part D Drugs”) and our proposal for step therapy for Part B drugs (section II.F of the proposed rule, “Medicare Advantage and Step Therapy for Part B Drugs”) would allow MA-PD plans to require step therapy of a Part B drug before a Part D drug. However, step therapy of a Part B drug before a Part D protected class drug would be allowed only under the circumstances outlined in this regulation (for example, only for new starts of five of the six protected classes) and subject to our Part D formulary review process.

We thank stakeholders for their comments on the proposed expansion of PA and ST for protected class drugs. We are redesignating the existing paragraph at § 423.120(b)(2)(vi)(C) as paragraph (D) and adding a new exception at paragraph (C), which we are modifying in response to comments: For enrollees that are not on existing therapy on the protected class covered Part D drug, and except for antiretroviral medications, PA and ST requirements that are implemented to confirm that the intended use is for a protected class indication, to ensure clinically appropriate use, to promote utilization of preferred formulary alternatives, or a combination thereof, subject to CMS review and approval. As modified, the exception is a codification of existing policy and does not place additional limits on beneficiary access to medications.

2. New Formulations

We proposed two changes to our protected class exceptions to address new formulations. First, we proposed a change to the existing exception at § 423.120(b)(2)(vi)(A) to reflect the forthcoming introduction of interchangeable biological products to the market by specifying drug or biological products that are rated as—(1) therapeutically equivalent (under the FDA's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations,” also known as the Orange Book); or (2) interchangeable (under the FDA's most recent publication of the Purple Book: Lists of Licensed Biological Products with Reference Product Exclusivity and Biosimilarity or Interchangeability Evaluations).” Second, we proposed to add a new exception at new paragraph § 423.120(b)(2)(vi)(D) that would have specified that, in the case of a single-source drug or biological product for which the manufacturer introduces a new formulation with the same active ingredient or moiety that does not provide a unique route of administration, the new formulation may be excluded from a Part D sponsor's formulary. Under our existing policy, Part D sponsors are not required to include a new formulation of a drug on their formularies when the older formulation is still available.

We received the following comments and our response follows:

Comment:
Many commenters requested that CMS define the term “new formulation.”

Response:
We declined to propose a definition for “new formulation” because we believe Part D sponsors will be better able to make these determinations more quickly, and we saw merit and benefit in providing Part D sponsors with the flexibility to determine whether they will exclude the drug or negotiate with the manufacturer for formulary inclusion and placement.

Comment:
A few commenters asked CMS to expand the application of the proposed exception for new formulations beyond brand drugs to include generic drugs.

Response:
Multiple-source drugs that are therapeutic equivalents already can be excluded from the formulary in accordance with the existing exception at § 423.120(b)(5)(vi)(A).

Comment:
Several commenters wanted CMS and not, as we proposed, Part D sponsors, to track which drugs would be eligible for exclusion under this exception and to publish a list of applicable drugs. Manufacturers largely wanted to limit the applicability of the exception, and plans generally wanted CMS to make the determinations for them.

Response:
We did not propose that CMS publish a list of such drugs because we believed Part D sponsors will be better able to make these determinations more quickly, and we saw merit and benefit in providing Part D sponsors with the flexibility to determine whether they will exclude the drug or negotiate with the manufacturer for formulary inclusion and placement.

Comment:
Some commenters expressed concern that CMS was attempting to fix a problem that has not happened yet, as there have been no instances of new formulations that that meet the proposed criteria for an exception within the protected classes. Other commenters further suggested that, while they understood CMS's attempts to fix a potential problem, our proposal, if finalized, would leave vulnerable enrollees without access to needed drugs.

Response:
The purpose of our proposed exception was to specify that even if a new formulation of a single-source drug or biological product in the protected class became the only formulation available, Part D sponsors would have been able to exclude it from their formularies, except as required by our other formulary requirements in § 423.120(b)(2) and subject to our review and approval, as part of our annual formulary review process. Under our existing policy, which will still apply, Part D sponsors are not required to include a new formulation of a drug on their formularies when the older formulation is still available. CMS was persuaded by the commenters' argument because under our proposed policy, in a scenario where our other formulary requirements did not require Part D sponsors to have the new formulation on their formulary, a Part D enrollee who is stable on the old formulation could be left without access to the new formulation. Consequently, we decline to finalize this exception.

Comment:
Several commenters asserted that the exception for new formulations is unnecessary if the exception for PA and ST is finalized.

Response:
We thank the commenters for their suggestion. We note that we are not finalizing the new formulations exception.

Receiving no comments on the proposed change to the existing exception at § 423.120(b)(2)(vi)(A) to reflect the forthcoming introduction of interchangeable biological products to the market, we are finalizing a change to § 423.120(b)(2)(vi)(A) to allow an exception for interchangeable biological products, in addition to our existing policy of an exception for therapeutically equivalent generic drugs. We are not finalizing the proposed exception to specify that, in the case of a single-source drug or biological product for which the manufacturer introduces a new formulation with the same active ingredient or moiety that does not provide a unique route of administration, the new formulation may be excluded from a Part D sponsors' formulary.

3. Pricing Threshold for Protected Class Part D Drug Formulary Exclusions

To address Part D sponsors' assertion that they have limited ability to negotiate manufacturer rebates and achieve appreciable savings relative to drugs within the protected classes, as well as price increases for such drugs, CMS proposed, effective for plan years starting on or after January 1, 2020, to permit Part D sponsors to exclude from their formularies any single-source drug or biological product that is a protected class Part D drug whose price increases, relative to the price in a baseline month and year, beyond the rate of inflation. We proposed the rate of inflation would be calculated using the Consumer Price Index for all Urban Consumers (CPI-U), and the price would be defined as the Wholesale Acquisition Cost (WAC).

We received many comments regarding this proposal, including commenters that supported this proposed exception, and agreed with CMS that this flexibility would allow plans more negotiation power with manufacturers on protected class Part D drugs. However, we also received many

comments urging us not to finalize this proposed exception highlighting concerns with beneficiary access, and inability to adequately address rising launch prices, among other concerns. Based on the comments and responses summarized below, we are not finalizing this proposed exception.

We received the following comments and our response follows:

Comment:
Several commenters supported this exception, and agreed with CMS that this flexibility would allow plans more negotiation power with manufacturers on protected class Part D drugs.

Response:
While we are not finalizing the exception, we thank commenters for their support.

Comment:
Many commenters stated that all three of our proposals greatly compromised access to needed therapy (that is, delays and/or interruptions in therapy) for patients taking protected class Part D drugs, which would lead to adverse health outcomes for these enrollees, and, in the case of HIV, endanger public health.

Response:
In considering whether to propose these exceptions, CMS took our other enrollee access protections into account, which have successfully protected beneficiary access to needed medications in the more than 12 years the Part D program has been operational. There are five such enrollee protections, which include formulary transparency, formulary requirements, reassignment formulary coverage notices, transition supplies and notices, and the expedited coverage determination and appeals processes. While we believe our current enrollee access protects are sufficient, we appreciate commenters concerns regarding beneficiary access and protections and as a result we are not finalizing the pricing threshold exception.

Comment:
Several commenters asserted that this proposed exception, since it is based on cost considerations rather than scientific evidence, medical standards, or clinical practice, represents an unexplained departure from established policy that would create discrimination in Part D. Commenters further asserted that basing exceptions to the protected classes on cost considerations is neither supported by statute nor our existing regulations at § 423.120(b)(2)(vi)(C).

Response:
While a price increase could have triggered a formulary exclusion, the exception we proposed would not have superseded our other formulary requirements, including our annual clinically and scientifically based formulary review and approval process, which includes extensive checks to ultimately ensure adequate representation of all necessary Part D drug categories or classes for the Medicare population.

We would also like to clarify that we do not view an exception based on a pricing threshold as a departure from current policy. While our existing regulations at § 423.120(b)(2)(vi)(C) discuss an exception for protected class Part D drugs that is “based upon scientific evidence and medical standards of practice (and in the case of antiretroviral medications is consistent with the [HHS] Guidelines for the Use of Antiretroviral Agents in HIV-1-Infected Adults and Adolescents),” this is a separate and distinct exception from the exceptions we proposed in this rulemaking. In other words, these exceptions can exist contemporaneously, and are not in conflict with each other.

Finally, we remind commenters that CMS conducts a discrimination review to ensure that plans' formulary designs are not likely to substantially discourage enrollment by certain Part D eligible individuals.

Comment:
Some commenters suggested that this exception policy was based on the erroneous belief that prices of protected class Part D drugs are increasing rapidly and that plans need additional leverage to negotiate prices for protected class Part D drugs, citing evidence from MedPAC's March 2017 report
8

that shows plans' ability to adequately manage utilization of protected class Part D drugs and drive enrollees toward use of generic drugs.

8
MedPAC, Report to the Congress: Medicare Payment Policy (March 2017). p. 412.

Response:
MedPAC's finding that Part D plans “have had success at moving enrollees toward generic drugs, which helps to slow the growth in prices, even when a drug has protected status,” does not negate the unsustainable growth in protected class Part D drug prices or a Part D sponsor's limited ability to negotiate rebates for such drugs. For example, in addition to Part D sponsors' limited ability to negotiate rebates for protected class drugs, internal CMS analysis has also shown price trends for brand drugs are consistently higher for drugs in protected classes than such drugs in non-protected classes. On the whole, protected class drug prices have increased more than other, non-protected drug classes between 2012 and 2017. More recently, the allowed cost per days' supply increased by 24 percent for protected class brand drugs between 2015 and 2016 and by 14 percent between 2016 and 2017. In contrast, the allowed cost per days' supply increased by 16 percent for non-protected class brand drugs from 2015 to 2016, and showed no growth for such drugs from 2016 to 2017. In addition, in the March 2017 MedPAC report, MedPAC also stated “[the drug's protected class status] may limit the amount of rebates plan sponsors are able to obtain from manufacturers in these classes,” which supports the basis for which we proposed this exception. Although we are not finalizing the proposed exception, we remain concerned about the pricing dynamics for protected class drugs.

Comment:
Some commenters suggested that if CMS finalized the exception to broaden use of PA and ST in the protected classes, then finalizing the exception based on a pricing threshold would not be necessary.

Response:
As discussed earlier in this rule, we are only finalizing the exception that exists under current policy, related to the use of utilization management in the protected classes, which we believe will continue to provide Part D sponsors with the flexibility to use PA and ST in the protected classes and help them achieve negotiating leverage to realize cost savings for their enrollees. We agree that, at that this time, the pricing threshold exception is not a necessary addition to the exceptions we are finalizing.

Comment:
A commenter suggested this policy exception was dangerously close to price fixing.

Response:
Although we are not finalizing, this proposed policy would not have placed restrictions on how manufacturers may price their products. We also note that Part D sponsors would not have been required to exclude a protected class Part D drug from formulary under this exception, rather, we were simply proposing to provide the sponsor the flexibility to do so. However, as discussed further below, concern over whether Part D sponsors would be motivated to exercise this flexibility is one reason why we are not adopting this exception in this final rule.

Comment:
Several commenters agreed with the proposal, but noted it would not limit growth in the launch prices of new drugs, which have been found to drive spending increases among specialty drugs, and might even lead to higher launch prices moving forward. Commenters also noted the potential for gaming by manufacturers to circumvent their drug being eligible for formulary exclusion under this exception.

Response:
We agree with commenters that there may be an incentive for

manufacturers to come in at higher launch prices for protected class Part D drugs as a result of this exception. In light of this concern and others noted previously, we are not finalizing this exception.

Comment:
A commenter noted that Part D sponsors' contracts with manufacturers may include price protections, and as such, may be protected from any change in WAC during the contract year. Thus, Part D sponsors' motivation to apply this exception may be muted.

Response:
We understand that all Part D sponsors may not be motivated to use this exception, particularly considering the limited savings associated with this exception. In light of this comment, we are not finalizing this exception as proposed.

Comment:
We received many comments in response to these requests for comment on several specific technical and operational elements of the exception, some in support of the proposed operational and technical components of the exception, and others that suggested alternative approaches to those proposed.

Response:
We thank commenters for their responsiveness to the comment solicitation, but we are not finalizing this proposed exception.

Comment:
A commenter suggested that, in order to discourage potential gaming for drugs not yet on the market as of September 1, 2019, CMS establish a reference baseline price for drugs new to the market consistent with the inflation-adjusted launch prices of leading therapeutic alternatives in the class rather than allowing the manufacturer to establish its own baseline price.

Response:
CMS shares the commenter's concern over the risk of potential gaming, and, thus, we are not finalizing this exception while we continue to consider how best to align incentives to encourage manufacturers to keep drug prices low of their own volition, as was intended with the proposed exception.

Comment:
A commenter recommended that CMS apply this exception more broadly to include all National Drug Codes (NDCs) assigned to single-source brand drugs, single-source generic drugs, and generic drugs, as well as both protected class and non-protected class Part D drugs and biological products. The commenter asserted that if only protected class Part D drugs are excluded based upon price increases beyond a certain threshold, that over time, manufacturers will have the ability to apply egregious price increases to an NDC that applies to more than one drug, as well as non-protected classes in order to make up for any lost compensation.

Response:
While we are not finalizing this exception, we remind the commenter that Part D sponsors already have the flexibility to exclude non-protected class Part D drugs from their formularies or apply PA and ST requirements to such drugs, unless the drug is required to be on formulary to be compliant with our formulary requirements. As discussed earlier in the preamble, this exception—which would have applied only to the requirement that all protected class Part D drugs be included on the formulary—does not supersede our formulary requirements at § 423.120(b)(2). Regarding multiple-source generic drugs, as discussed in the proposed rule (83 FR 62160), we declined to apply this exception to such drugs given the wide use of maximum allowable cost (MAC) pricing for such drugs which yields changes in list prices such as WAC meaningless.

Regarding potential price increases for an NDC related to multiple drugs, it is unclear what the commenter means by referring to “an NDC that applies to more than one drug” because an NDC is specific to a drug, the manufacturer, strength, dosage form, and quantity. However, if the commenter simply means that manufacturers will increase prices for multiple other non-protected class Part D drugs to offset limiting price increases on a specific protected class drug or drugs to the cumulative change in CPI-U, we share those concerns. Based on the comments received, we are not finalizing this proposed exception.

4. Solicitation of Comment for Special Considerations

In considering whether exceptions to the added protections afforded by the protected class policy are appropriate, we took other enrollee protections in the Part D program into account. As detailed earlier in section II.A of this final rule, there are five such enrollee protections which include formulary transparency, formulary requirements, reassignment formulary coverage notices, transition supplies and notices, and the expedited exception, coverage determination, and appeals processes. Our formulary review and approval process includes a formulary tier review, and for PA and ST, we also conduct restricted access, ST criteria, PA outlier, and PA criteria reviews. Additionally, our formulary review and approval process takes into consideration the applicable indication, proposed applicability to new or continuing therapy, and likelihood of comorbidities when reviewing PA and ST criteria submitted to CMS by Part D sponsors. We noted that best practice UM practices do not require an enrollee who has been stabilized on an existing therapy of a protected class Part D drug for a protected class indication to change to a different drug in order to progress through ST requirements, and we would not have expected Part D sponsors to require, nor would CMS have been likely to approve such requirements, unless clinically warranted (for example, an enrollee was started on clinically inappropriate therapy or received second- or third-line therapy for initial treatment of a condition, as described by the recognized compendia). Moreover, we believe our current approach, which ensures at least one drug within the class is offered on a preferred tier and free of PA and ST, is working well and should be maintained. Currently, Part D formularies frequently have more than one protected class Part D drug at a preferred cost sharing level, especially in classes with significant generic penetration, without any PA or ST requirement, and we do not expect that this policy will prompt Part D sponsors to stop including protected class Part D drugs on tiers with preferred cost sharing.

Finally, our transition policy will continue to require Part D sponsors to provide all new enrollees with at least an approved month's supply if the Part D sponsor cannot determine at the point of sale whether the enrollee is currently taking such protected class Part D drug. (For a detailed discussion of our transition requirements, see section II.A. of this final rule and regulations at § 423.120(b)(3).)

Nonetheless, it was our intent to make certain that the three proposed exceptions to the protected class policy (that is, broader use of PA, new formulations, and pricing thresholds) would not introduce interruptions for enrollees on existing therapy of protected class Part D drugs for protected class indications.

We solicited comment on whether there are additional considerations that will be necessary to minimize: (1) Interruptions in existing therapy of protected class Part D drugs for protected class indications during PA processes; and (2) increases in overall Medicare spending from increased utilization of services secondary to adverse events from interruptions in therapy. These could include, but are not limited to, for example, special transition considerations for on-formulary protected class Part D drugs for which the Part D sponsor has

established PA requirements, or as another example, for transitioning some enrollees taking protected class Part D drugs for protected class indications to alternative Part D drugs. If so, we sought comment on why our current requirements and protections are inadequate, or could be improved. In addition, we solicited comment on what specific patient population(s), individual patient characteristic(s), specific protected class Part D drugs or individual protected drug classes will require such additional special transition or other protections and how such population(s) can be consistently identified. Finally, we solicited comment on other tools that could be used to minimize interruptions in existing therapy of protected class Part D drugs for protected class indications during PA processes, for example, wider use of diagnosis codes on prescriptions, ePA during e-prescribing, targeting protected class Part D drugs in Medication Therapy Management (MTM) programs, or, as another example, expanded use of a data-sharing tool to exchange information for enrollees transitioning from one plan to another.

We received the following comments and our response follows:

Comment:
Several commenters expressed concerns that our proposals would increase costs for Medicare Part D enrollees, the Part D program, and Medicare overall due to increased utilization of other healthcare services, for example, emergency department visits and inpatient admissions. Some commenters requested that we exempt various protected class indications or enrollees in LTC settings or served by LTC pharmacies from the application of the proposed exceptions, asserting these enrollees will have higher hospital admission and readmission rates due to complications from ineffective medications and consequent needs for additional treatment.

Response:
CMS solicited comment on whether there are additional considerations that will be necessary to minimize increases in overall Medicare spending from increased utilization of services secondary to adverse events from interruptions in therapy but did not receive suggestions, apart from exempting virtually all of the applicable enrollees from the exceptions, to abate these concerns.

We understand the importance of access and continuity of care with these as well as all classes and will take that into consideration when approving PA and ST criteria. Our annual formulary review and approval process includes extensive checks to ensure appropriate representation of drugs for all necessary Part D drug categories or classes for the Medicare population. Our process has been working well to ensure that enrollees have access to the drugs they need for their medical conditions. Formularies will still be subject to the entire CMS formulary review criteria, and our formulary review criteria look at widely accepted treatment guidelines.

As discussed previously, we are finalizing one exception to the protected classes formulary inclusion requirements. We are finalizing an exception, consistent with current policy, to allow Part D sponsors to apply PA and ST requirements for protected class Part D drugs, except antiretrovirals, for new starts only to confirm intended use is for a protected class indication, ensure clinically appropriate use, promote utilization of preferred formulary alternatives, or a combination thereof. Under this exception, PA and ST will continue to be prohibited for antiretroviral medications. Any PA or ST requirements implemented under this exception will be subject to CMS review and approval.

Comment:
Several commenters expressed support for our existing transition requirements.

Response:
We thank the commenters for their support.

Comment:
We received comments in support of our suggestions on other tools that could be used to minimize interruptions in existing therapy of protected class Part D drugs for protected class indications during PA processes, for example, wider use of diagnosis codes on prescriptions, ePA during e-prescribing, targeting protected class Part D drugs in Medication Therapy Management (MTM) programs (including mandatory MTM for Part D enrollees in nursing homes on protected class Part D drugs), or, as another example, expanded use of a data-sharing tool to exchange information for enrollees transitioning from one plan to another. Additionally, a commenter urged improvements to electronic health records and claims processing.

Response:
We thank the commenters for their support. As discussed previously, CMS is taking steps to provide e-prescribing improvements such as RTBTs, and Part D electronic prior authorization as required by section 6062 of the SUPPORT for Patients and Communities Act (Pub. L. 115-271). CMS could explore the generation of reports through data sharing platforms. Regarding electronic health records and claims processing, we thank the commenter and welcome more input on this suggestion.

Comment:
A number of commenters claimed that existing protections do not reliably ensure access to medically appropriate protected class Part D drugs. Some commenters in support of the proposals also encouraged CMS to improve enrollee protections, namely the appeals and exceptions processes. Commenters disputed our claim that our appeals and exceptions processes are mature and have proven workable, asserting that Medicare Part D enrollees afflicted with conditions addressed by protected class drugs continue to have considerable difficulty in navigating Part D, even after the improvements that CMS has recently taken to assist Medicare beneficiaries with selecting a plan and navigating the appeals and grievance processes. Commenters added that this is particularly concerning given that the proposal does not make mention of any additional CMS resources (such as additional staff or appropriations) to ensure that enrollees who need access to drugs within the protected classes are able to obtain their medications in a timely manner. Some commenters suggested that CMS should establish an expedited exceptions process that functions in less than 24 hours. Other commenters added that broader PA and ST should not be implemented without improvements to electronic health records (EHRs) and claims processing.

Response:
CMS disagrees with the assertion that existing appeals processes are inadequate to ensure access to needed to medically-appropriate protected class Part D drugs, and commenters provided no evidence to support statements that Part D enrollees with protected class indications have difficulty navigating Part D. To that end, under the exceptions we are finalizing in this rule, the appeals process will work as it does today. If the enrollee's plan will not cover a drug the enrollee needs, or it will cover the drug at a higher cost than they believe they are required to pay, the enrollee or their prescriber can request a coverage determination (for example, a PA or tiering exception) from their plan. If their plan denies their request, they have the right to appeal that decision to obtain a redetermination. Additionally, the requirements at § 423.568 for coverage determinations and § 423.572 for expedited coverage determinations state that the plan must notify the enrollee “as expeditiously as the enrollee's health condition requires, but no later than [72 or 24 hours, respectively] after receiving the request, or, for an exceptions request, the physician's or other prescriber's

supporting statement.” That is to say, if an enrollee's health condition requires a response in less than 24 hours, the plan is obligated to provide one. Therefore, our existing appeals requirements already provide for timeframes of less than 24 hours when warranted.

CMS will continue to closely monitor appeals activity through audits and our Complaints Tracking Module (CTM) to ensure enrollees' requests are appropriately evaluated and that Part D sponsors are adhering to regulations. While we have confidence in our appeals process, CMS continues to take steps to improve the Part D Appeals process. Additionally, e-prescribing improvements such as real-time benefit tools (RTBTs) and Part D electronic prior authorization as required by section 6062 of the SUPPORT for Patients and Communities Act (Pub. L. 115-271) could reduce the need for appeals. CMS will take steps to further improve and strengthen the appeals process in response to any issues that arise.

Finally, CMS does not foresee a need to augment its clinical review staff because we already review PA and ST in the protected classes for new starts.

Comment:
Some commenters claimed that the existing formulary review and approval process is inadequate to ensure non-discriminatory PA and ST requirements that would limit access to protected class Part D drugs, and the only way to ensure access to drugs in these classes is to maintain the policy as it exists today. Commenters asserted that our outlier analysis is an insufficient tool to provide oversight against potential discriminatory practices, particularly against enrollees who take high-cost drugs in these classes, HIV patients, LIS enrollees, and dually-eligible enrollees (particularly children). Commenters added that an outlier analysis is simply a test to determine if a certain plan is being more discriminatory than other plans but would not identify common discriminatory practices across plans. However, other commenters highlighted industry practices that are not currently allowed in Part D and were concerned that such practices would be allowed in Part D under our proposed modifications to the protected class policies. For example, some commenters expressed concern that we would allow PA for Truvada® which is indicated for prevention of HIV transmission. Other commenters cited commercial plans' requirements to use multi-tablet regimens for HIV, which are known to reduce medication adherence.

Response:
We conduct a discrimination review consistent with §  423.272(b)(2) to ensure that plans' formulary designs are not likely to substantially discourage enrollment by certain part D eligible individuals. Our clinical checks are intended to ensure that formularies are robust and do not substantially discourage enrollment by certain beneficiaries. Our outlier analysis is an additional step that allows us to further question why a specific formulary either has additional or fewer UM requirements than most other plans (for example, an outlier because a Part D sponsor has not imposed PA where most other Part D sponsors require PA, or an outlier because a Part D sponsor requires PA when most other Part D sponsors do not). Being an outlier in and of itself does not mean a formulary substantially discourages enrollment (it might be just the opposite), but rather ensures the plan can justify the basis for its additional or fewer UM requirements compared to other plans.

All of our formulary requirements, when taken together, have resulted in CMS' ability, in its twelve-year experience implementing the benefit, to prevent formularies that are likely to substantially discourage enrollment by certain Part D-eligible individuals under plans. This includes protected class Part D drugs, due to our existing allowance of PA and ST for new starts. We do not anticipate that adoption of this policy will change our ability to prevent formularies that are likely to substantially discourage enrollment by certain Part D-eligible individuals under plans now. We are not aware of any industry-wide practices that would result in formularies that are likely to substantially discourage enrollment by certain Part D-eligible individuals under plans that would also meet the totality of our formulary requirements.

Comment:
Some commenters expressed frustration that coverage determinations, exceptions, and appeal approvals are usually only granted for the duration of 1 plan year. Other commenters added that immunosuppressant approvals, specifically, should be extended to match the life of the transplanted organ.

Response:
Part D benefits operate on a plan year for 1 calendar year. While extended-duration (that is, longer than 1 calendar year) approvals may be possible for Part D enrollees who stay with a plan across multiple plan years, we recognize such approvals present challenges when Part D enrollees switch plans. CMS has instituted the Additional Beneficiary Information Initiatives (ABII) web portal to facilitate data sharing from Medicare Part A claims data relative to Medicare-covered transplants to aid Part D sponsors in making these determinations; plans may request access to ABII to receive this information about their enrollees. If a Part D enrollee switches plans, the transition policy would apply and plans would be required to provide the medication for at least an approved month's supply. As discussed previously, CMS could explore the generation of additional pertinent reports through secure data-sharing platforms.

Comment:
Related to the pricing threshold exception, a commenter suggested that enrollees doing well on a therapy should not lose their ability to take that therapy, and enrollees on an existing therapy should be grandfathered such that they do not lose the ability to continue on that therapy. In addition, for enrollees not eligible for grandfathering, Part D sponsors should be required to notify enrollees of their decision to exclude a therapy any time they do so pursuant to this exception.

Response:
We appreciate the concerns raised by these commenters and, as noted previously, will not be finalizing this proposal.

We are finalizing the first exception with the modification to allow Part D sponsors to apply PA and ST requirements for protected class Part D drugs, except antiretrovirals, only for new starts to confirm intended use is for a protected class indication, to ensure clinically appropriate use, to promote utilization of preferred formulary alternatives, or a combination thereof, subject to CMS review and approval. PA and ST will continue to be prohibited for antiretroviral medications under this exception. As such, we also allow indication-based formulary design and utilization management for new starts of protected class Part D drugs, which would allow Part D sponsors to exclude the protected class Part D drug from the formulary for non-protected class indications. As is required for all other Part D drug categories or classes, these formulary design and utilization management edits will be subject to CMS review and approval as part of our annual formulary review and approval process, which includes reviews of PA and ST edits that will restrict access, step therapy criteria, PA outliers, and PA criteria. (For an extensive description of our annual formulary checks see section II.A.1. of this final rule.) We also are finalizing a change to permit exclusion of interchangeable biological products. As modified, the exception is a codification of existing policy and does not place additional limits on beneficiary access to medications.

In response to comments, we are not finalizing the proposed exceptions to (1) allow Part D sponsors to exclude a protected class Part D drug from a formulary if it is a new formulation of a single-source drug or biological product with the same active ingredient of moiety that does not provide a unique route of administration, regardless of whether the other formulation is removed from the market; and (2) to permit Part D sponsors to exclude from their formularies any single-source drug or biological product that is a protected class Part D drug whose price increases, relative to the price in a baseline month and year, beyond the rate of inflation.

B. Prohibition Against Gag Clauses in Pharmacy Contracts (§ 423.120(a)(8)(iii))

In October 2018, Congress enacted the “Know the Lowest Price Act of 2018” (Pub. L. 115-262). The measure, which amends section 1860D-4 of the Act by adding a paragraph (m), prohibits Medicare Part D plan sponsors from restricting their network pharmacies from informing their Part D plan enrollees of the availability of prescription drugs at a cash price that is below what that the enrollee will be charged (either the cost sharing amount or the negotiated price when it is less than the enrollee's cost sharing amount) for the same drug under the enrollee's Part D plan. In effect, the legislation prohibits Part D sponsors from including in their contracts with their network pharmacies “gag clauses”, a term used within the prescription drug benefit industry that refers to provisions of drug plan pharmacy contracts that restrict the ability of pharmacies to discuss with plan enrollees the availability of prescriptions at a cash price that is less than the amount the enrollee will be charged when obtaining the prescription through their insurance. The measure becomes effective with the plan year starting January 1, 2020.

To make the Part D regulations consistent with the statute governing the Part D program, we proposed to incorporate the new requirement into the Part D regulations. Specifically, we proposed to amend the set of pharmacy contracting requirements at § 423.120(a)(8) by adding a paragraph (iii) that provides that a Part D sponsor may not prohibit a pharmacy from, nor penalize a pharmacy for, informing a Part D plan enrollee of the availability at that pharmacy of a prescribed medication at a cash price that is below the amount that the enrollee will be charged to obtain the same medication through the enrollee's Part D plan.

Comment:
A number of commenters expressed strong support and appreciation for our effort to incorporate into the Part D regulations the provisions of the “Know the Lowest Price Act” promptly after enactment of the legislation.

Response:
We thank the commenters for their support.

Comment:
Several commenters requested that CMS address additional issues related to beneficiaries' opting to purchase their prescriptions outside their Part D plan. Specifically, they suggested that CMS adopt policies to make it easier for plan enrollees to have their cash purchases reported electronically and automatically to their Part D plan sponsors, allowing the payment amounts to be counted toward beneficiaries' TrOOP and benefit deductible accumulations. Commenters also expressed their concern that prescriptions obtained outside the Part D benefit are not subject to plans sponsors' drug utilization review and medication therapy management tools, creating potential health and safety risks for beneficiaries who pay out of pocket for a covered medication. Some of these commenters urged CMS to take steps to ensure beneficiaries are made aware of this particular risk.

Response:
We thank the commenters for their perspectives, though their suggestions are outside the scope of this rule. We have previously advised in sub-regulatory guidance (Chapter 5, Section 30.1 of the Medicare Prescription Drug Benefit Manual) that sponsors should accept paper claims for prescriptions their enrollees obtain without using their Part D benefit so that the sponsor can make the appropriate determinations concerning reimbursement, total gross covered drug cost, and TrOOP. Also, in our guidance, we have affirmed that it is in the best interests of beneficiaries to have their claims processed through their Part D sponsor so that concurrent drug utilization review can be performed (Chapter 14, Section 50.4.3 of the Medicare Prescription Drug Benefit Manual). We will continue to evaluate the impact on the Part D program of Part D plan enrollees filling their prescriptions outside their benefit plan and may consider proposing regulatory changes to address identified concerns in the future.

Comment:
A commenter noted that the language of the proposed rule did not exactly mirror the language of the underlying statute. Specifically, the statute states that a sponsor may not restrict a pharmacy from informing a beneficiary of a “lower price the individual would pay for the drug” if obtained without using insurance while the rule refers to a “cash price” that is below the amount that would be charged to obtain the drug through insurance. The commenter states that the term “cash price” is not used in the statute and therefore, to promote uniformity in practical application of the requirement throughout the payer and provider industry, it should not be used in the corresponding rule.

Response:
We appreciate the comment, though we believe that while a rule must reflect the meaning of its underlying statute, it need not simply re-state the statutory language. The commenter has not indicated how the use of the term “cash price” changes the meaning of the statute or could create confusion in its application. We have used the term “cash price” in previous Part D guidance addressing the issue of beneficiaries obtaining drugs outside their Part D benefit plans, including manual chapters and the May 2018 memorandum issued by the Administrator advising Part D sponsors that they should not include gag clauses in their pharmacy contracts. The term “cash price” is a term understood within the industry to mean a price charged by a pharmacy to customers not using insurance to obtain a prescription drug and its use in the rule promotes clarity in the statement of the new prohibition.

For the reasons sets forth in the proposed rule and our response to the related comments, we are finalizing the proposed regulation at § 423.120(a)(8)(iii) without modification.

C. E-Prescribing and the Part D Prescription Drug Program; Updating Part D E-Prescribing Standards (§ 423.160)

1. Legislative Background

Section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) requires the adoption of Part D E-Prescribing (eRx) standards. Prescription Drug Plan (PDP) sponsors and Medicare Advantage (MA) organizations offering Medicare Advantage Prescription Drug Plans (MA-PD) are required to establish electronic prescription drug programs that comply with the e-prescribing standards that are adopted under this authority. There is no requirement that prescribers or dispensers implement eRx. However, prescribers and dispensers who electronically transmit and receive prescription and certain other information for covered drugs prescribed for Medicare Part D eligible

beneficiaries, directly or through an intermediary, are required to comply with any applicable standards that are in effect.

For a further discussion of the statutory basis for this final rule and the statutory requirements at section 1860D-4(e) of the Act, please refer to section I. of the eRx and the Prescription Drug Program February 2005 proposed rule (70 FR 6256).

2. Regulatory History

Part D eRx standards are periodically updated to take new knowledge, technology, and other considerations into account. CMS currently requires providers and dispensers to utilize the National Council for Prescription Drug Programs (NCPDP) SCRIPT standard, Implementation Guide Version 10.6, which was approved November 12, 2008, to provide for the communication of a prescription or prescription-related information for certain named transactions. However, as of January 1, 2020, prescribers and dispensers will be required to use the NCPDP SCRIPT standard, Implementation Guide Version 2017071, which was approved July 28, 2017 to provide for the communication of prescription or prescription-related information between prescribers and dispensers for the old named transactions and a handful of new transactions named at § 423.160(b)(2)(iv). We also currently require (under §  423.160(b)(5)) Medicare Part D plan sponsors and prescribers to convey electronic formulary and benefits information amongst themselves using Version 3 Release 0 (Version 3.0), from April 2012 of the NCPDP Formulary and Benefits Standard Implementation Guides. (For a detailed discussion of the regulatory history of eRx standards see the November 2017 proposed rule (82 FR 56437 and 56438)).

The NCPDP SCRIPT eRx standards (SCRIPT) and the NCPDP Formulary and Benefits standards (F&B) have become critical components of the Part D program. In the 2018 calendar year, over 66 percent of Part D prescriptions were transmitted electronically using the applicable SCRIPT s

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2019-10521. Public record. Not legal advice.