Title 42—Public Health--Volume 1
PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
§ 423.272   Review and negotiation of bid and approval of plans submitted by potential Part D sponsors.
(a) Review and negotiation regarding information, terms and conditions. CMS reviews the information filed under § 423.265(c) in order to conduct negotiations regarding the terms and conditions of the proposed bid and benefit plan. In addition to its general negotiating authority under section 1860D-11(d)(2)(A) of the Act, CMS has authority similar to that of the Director of the Office of Personnel Management for health benefit plans under Chapter 89 of title 5, U.S.C.
(b) Approval of proposed plans. CMS approves the Part D plan only if the plan and the Part D sponsor offering the plan comply with all applicable CMS Part D requirements, including those related to the provision of qualified prescription drug coverage and actuarial determinations.
(1) Application of revenue requirements standard. CMS approves a bid submitted under § 423.265 only if it determines that the portions of the bid attributable to basic and supplemental prescription drug coverage are supported by the actuarial bases provided and reasonably and equitably reflect the revenue requirements (as used for purposes of section 1302(8)(C) of the Public Health Service Act) for benefits provided under that plan, less the sum (determined on a monthly per capita basis) of the actuarial value of the reinsurance payments under § 423.329(c).
(2) Plan design. (i) CMS does not approve a bid if it finds that the design of the plan and its benefits (including any formulary and tiered formulary structure) or its utilization management program are likely to substantially discourage enrollment by certain Part D eligible individuals under the plan.
(ii) If the design of the categories and classes within a formulary is consistent with the model guidelines (if any) established by the United States Pharmacopeia, the formulary categories and classes alone will not be found to discourage enrollment.
(iii) A plan that adopts the categories and classes discussed in paragraph (b)(2)(ii) of this section may nevertheless be found to discourage enrollment because it excludes specific drugs from the formulary.
(3) Substantial differences between bids —(i) General. CMS approves a bid only if it finds that the benefit package or plan costs represented by that bid are substantially different as provided under § 423.265(b)(2) of this subpart from the benefit package or plan costs represented by another bid submitted by the same Part D sponsor.
(ii) Transition period for PDP sponsors with new acquisitions. After a 2-year transition period, as determined by CMS, CMS approves a bid offered by a PDP sponsor (or by a parent organization to that PDP sponsor) that recently purchased (or otherwise acquired or merged with) another Part D sponsor if it finds that the benefit package or plan costs represented by that bid are substantially different from benefit packages or plan costs represented by another bid submitted by the same Part D sponsor (or parent organization to that Part D sponsor), as provided under § 423.265(b)(2).
(4) CMS may decline to approve a bid if the Part D sponsor proposes significant increases in cost sharing or decreases in benefits offered under the plan.
(c) Limited risk plans. (1) Application of limited risk plans. There is no limit on the number of full risk plans that CMS approves under paragraph (b) of this section. CMS approves a limited risk plan in accordance with paragraphs (c)(2) and (c)(3) of this section only if the access requirements under § 423.859 are not otherwise met for a PDP region.
(2) Maximizing assumption of risk. CMS gives priority in approval for those limited risk plans bearing the highest level of risk, but may take into account the level of the bids submitted by the plans and is not required to accept the limited risk plan with the highest assumption of risk. In no case does CMS approve a limited risk plan under which the modification of risk level provides for no (or a minimal) level of financial risk.
(3) Limited exercise of authority. CMS approves only the minimum number of limited risk plans needed to meet the access requirements.
(d) Special rules for private fee-for-service (PFFS) plans that offer prescription drug coverage. PFFS plans (as defined at § 422.4(a)(3)) choosing to offer prescription drug coverage are subject to all MA-PD bid submission and approval requirements applicable to MA-PD plans with the following exceptions:
(1) Exemption from negotiations. These plans are exempt from the review and negotiation process in paragraph (a) of this section, and are not held to the revenue requirements standard in paragraph (b)(1) of this section.
(2) Requirements regarding negotiated prices. These plans are not required to provide access to negotiated prices. However, if they do, they must meet the applicable requirements of § 423.104(h).
(3) Modification of pharmacy access standard and disclosure requirement. If the plan provides coverage for drugs purchased from all pharmacies, without charging additional cost sharing and without regard to whether they are network pharmacies, §§ 423.120(a) and 423.132 requiring certain network access standards and the disclosure of the availability of lower cost bioequivalent generic drugs does not apply to the plan.
(e) Special rule for plans with standardized bids sufficiently below the national average monthly bid to result in a negative premium. In the event of a negative premium, as described in § 423.286(d)(1), CMS negotiates the incorporation of the negative premium amount into the bid as either a reduction in the supplemental premium if the Part D plan already submitted a bid with an enhanced alternative benefit, or CMS requires the addition of new enhanced alternative benefit of no less value than the amount of the negative premium.
§ 423.279   National average monthly bid amount.
(a) Bids included. For each year (beginning with 2006) CMS computes a national average monthly bid amount from approved bids submitted under § 423.265 in order to calculate the base beneficiary premium, as provided in § 423.286(c). The national average monthly bid amount is equal to a weighted average of the standardized bid amounts for each prescription drug plan (not including fallbacks) and for each MA-PD plan described in section 1851(a)(2)(A)(i) of the Act. The calculation does not include bids submitted by MSA plans, MA private fee-for-service plans, specialized MA plans for special needs individuals, PACE programs under section 1894, and contracts under reasonable cost reimbursement contracts under section 1876(h) of the Act.
(b) Calculation of weighted average. (1) The national average monthly bid amount is a weighted average, with the weight for each plan equal to a percentage with the numerator equal to the number of Part D eligible individuals enrolled in the plan in the reference month (as defined in § 422.258(c)(1) of this chapter) and the denominator equal to the total number of Part D eligible individuals enrolled in a reference month in all Part D plans except MSA plans, fallbacks, MA private fee-for-service plans, specialized MA plans for special needs individuals, PACE programs under section 1894, and contracts under reasonable cost reimbursement contracts under section 1876(h) of the Act.
(2) For purposes of calculating the monthly national average monthly bid amount for 2006, CMS assigns equal weighting to PDP sponsors (other than fallback entities) and assigns MA-PD plans included in the national average bid a weight based on prior enrollment (new MA-PD plans are assigned zero weight).
(c) Geographic adjustment. (1) Upon the development of an appropriate methodology, the national average monthly bid amount for Part D plans will be adjusted to take into account differences in prices for Part D drugs among PDP regions.
(2) CMS does not apply any geographic adjustments if CMS determines that price variations among PDP regions are negligible.
(3) CMS applies any geographic adjustment in a budget neutral manner so as to not result in a change in the aggregate payments that may have been made if CMS had not applied an adjustment.
(4) CMS does not apply any geographic adjustment until an appropriate methodology is developed.
§ 423.286   Rules regarding premiums.
(a) General rule. Except as provided in paragraphs (d)(3), (d)(4), and (e) of this section, and with regard to employer group waivers, the monthly beneficiary premium for a Part D plan in a PDP region is the same for all Part D eligible individuals enrolled in the plan. The monthly beneficiary premium for a Part D plan is the base beneficiary premium, as determined in paragraph (c) of this section, adjusted as described in paragraph (d) of this section for the difference between the bid and the national average monthly bid amount, any supplemental benefits and for any late enrollment penalties.
(b) Beneficiary premium percentage. The beneficiary premium percentage for any year is a fraction, the—
(1) Numerator of which is 25.5 percent; and
(2) Denominator of which is as follows:
(i) 100 percent minus the percentage established in paragraph (b)(2)(ii) of this section.
(ii) The percentage established in this paragraph equals:
(A) The total reinsurance payments that CMS estimates will be paid under § 423.329(c) for the coverage year; divided by—
(B) The amount estimated under paragraph (b)(2)(ii)(A) of this section for the year plus total payments that CMS estimates will be paid to Part D plans that are attributable to the standardized bid amount during the year, taking into account amounts paid by both CMS and enrollees.
(c) Base beneficiary premium. The base beneficiary premium for a Part D plan for a month is equal to the product of the—
(1) Beneficiary premium percentage as specified in paragraph (b) of this section; and
(2) National average monthly bid amount (computed under § 423.279) for the month.
(d) Adjustments to base beneficiary premium. The base beneficiary premium may be adjusted to reflect any of the following scenarios, if applicable.
(1) Adjustment to reflect difference between bid and national average bid. If the amount of the standardized bid amount exceeds the adjusted national average monthly bid amount, the monthly base beneficiary premium is increased by the amount of the excess. If the amount of the adjusted national average monthly bid amount exceeds the standardized bid amount, the monthly base beneficiary premium is decreased by the amount of the excess. If the amount of the adjusted national average monthly bid amount exceeds the standardized bid amount by an amount greater than the base beneficiary premium and results in a negative premium, then the beneficiary premium is zero, and the excess amount is applied to supplemental Part D benefits as described in § 423.272(e).
(2) Increase for supplemental prescription drug benefits. The portion of the Part D plan approved bid that is attributable to supplemental prescription drug benefits increases the beneficiary premium. This supplemental portion of the bid may be adjusted to reflect the average risk of enrollees in the plan as determined based on negotiations between CMS and the Part D sponsor offering the plan.
(3) Increase for late enrollment penalty. The base beneficiary premium for a Part D enrollee subject to the late enrollment penalty is increased by the amount of any late enrollment penalty.
(i) Late enrollment penalty amount. The penalty amount for a Part D eligible individual for a continuous period of eligibility (as provided in § 423.46(a)) is the greater of—
(A) An amount that CMS determines is actuarially sound for each uncovered month in the same continuous period of eligibility; or
(B) 1 percent of the base beneficiary premium (computed under paragraph (c) of this section) for each uncovered month in the period.
(ii) Special rule for 2006 and 2007. In 2006 and 2007 the penalty amount discussed in paragraph (d)(3) of this chapter equals the amount referenced in paragraph (d)(3)(i)(B) of this section unless another amount is specified in a separate issuance based on available analysis or other information as determined by the Secretary.
(4) Increase for income-related monthly adjustment amount (Part D—IRMAA). Beginning January 1, 2011, Medicare beneficiaries enrolled in a Medicare Part D plan must pay an income-related monthly adjustment amount in addition to the Part D premium as determined under paragraph (c) of this section and adjusted under paragraph (d) of this section, if the enrollee's modified adjusted gross income exceeds the threshold amounts specified in 20 CFR 418.2115.
(i) Social Security Administration determination. (A) SSA determines which Part D enrollees are subject to the Part D—IRMAA and the amount each enrollee will have to pay.
(B) If an individual disagrees with SSA's determination that such individual is subject to the Part D—IRMAA, or about the amount the individual must pay, an individual may file an appeal or request a new initial determination consistent with 20 CFR part 418.
(ii) Calculating the income-related monthly adjustment amount. The income-related monthly adjustment is equal to the product of the standard base beneficiary premium, as determined under paragraph (c) of this section, and the ratio of the applicable premium percentage specified in 20 CFR 418.2120, reduced by 25.5 percent; divided by 25.5 percent (that is, premium percentage−25.5 percent)/25.5 percent).
(e) Decrease in monthly beneficiary premium for low-income assistance. The monthly beneficiary premium may be eliminated or decreased in the case of a subsidy-eligible individual under § 423.780.
(f) Special rules for fallback prescription drug plans. The monthly beneficiary premium charged under a fallback prescription drug plan is calculated under § 423.867(a) and not under this section, except that enrollees in fallback prescription drug plans are subject to late enrollment penalties under paragraph (d)(3) of this section and fallback prescription drug plan premiums are reduced or eliminated in the case of a subsidy-eligible individual, as described in paragraph (e) of this section.
§ 423.293   Collection of monthly beneficiary premium.
(a) General rules. Part D sponsors must—
(1) Charge enrollees a consolidated monthly Part D premium equal to the sum of the Part D monthly premium for basic prescription drug coverage (if any) and the premium for supplemental coverage (if any and if the beneficiary has enrolled in such supplemental coverage).
(2) Permit payment of monthly Part D premiums (if any) under the timing of payments established in § 422.262(e) of this chapter; and
(3) Permit each enrollee, at the enrollee's option, to make payment of premiums (if any) under this part to the sponsor using any of the methods listed in § 422.262(f) of this chapter.
(4) Retroactive collection of premiums. In circumstances where retroactive collection of premium amounts is necessary and the enrollee is without fault in creating the premium arrearage, the Part D sponsor shall offer the enrollee the option of payment by lump sum, by equal monthly installment spread out over at least the same period for which the premiums were due, or through other arrangements mutually acceptable to the enrollee and the Part D sponsor. For monthly installments, for example, if 7 months of premiums are due, the member would have at least 7 months to repay.
(b) Crediting of late enrollment penalty. CMS estimates and specifies the portion of the late enrollment penalty imposed under § 423.286(d)(3) attributable to increased actuarial costs assumed by the Part D sponsor and not taken into account through risk adjustment provided under § 423.329(b)(1) or through reinsurance payments under § 423.329(c)) as a result of the late enrollment.
(c) Collection of late enrollment penalty —(1) Collection through withholding. In the case of a late enrollment penalty that is collected by the government from a Part D eligible individual in the manner described in § 422.262(f)(1) of this chapter, CMS pays only the portion of the late enrollment penalty described in paragraph (b) of this section to the Part D sponsor offering the Part D plan in which the individual is enrolled.
(2) Collection by plan. In the case of a late enrollment penalty collected from a Part D eligible individual in a manner other than the manner described in § 422.262(f)(1) of this chapter, CMS reduces payments otherwise made to the Part D plan by an amount equal to the portion of the late enrollment penalty.
(d) Collection of the income-related monthly adjustment amount (Part D—IRMAA). (1) Collection through withholding. Where the Social Security Administration has determined the income-related monthly adjustment amount for an individual whose income exceeds the income threshold amounts specified at 20 CFR 418.2115, the Part D—IRMAA must be paid through withholding from the enrollee's Social Security benefit payments, or benefit payments by the Railroad Retirement Board (RRB) or the Office of Personnel Management (OPM) in the manner that the Part B premium is withheld.
(2) Collection through direct billing. In cases where an enrollee's benefit payment check is not sufficient to have the Part D—IRMAA withheld, or if an enrollee is not receiving such benefits, the beneficiary must be billed directly for the Part D—IRMAA. The beneficiary will have the option of paying the amount through an electronic funds transfer mechanism (such as automatic charges of an account at a financial institution or a credit or debit card account) or according to other means that CMS may specify.
(3) Failure to pay the income-related monthly adjustment amount: General rule. CMS will terminate Part D coverage for any individual who fails to pay the Part D—IRMAA as determined by the Social Security Administration. CMS will terminate an enrollee's Part D coverage as specified in § 423.44(e).
(e) Special rule for fallback plans. This section does not apply to fallback prescription drug plans. The fallback plans follow the requirements set forth in § 423.867(b).
(f) Prohibition on improper billing of premiums. Part D plan sponsors shall not bill an enrollee for a premium payment period if the enrollee has had the premium for that period withheld from his or her Social Security, Railroad Retirement Board or Office of Personnel Management check.
§ 423.294   Failure to collect and incorrect collections of premiums and cost sharing.
(a) Requirement to collect premiums and cost sharing. A Part D sponsor violates the uniform benefit provisions at § 423.104(b) if it fails to collect or incorrectly collects applicable cost sharing, or fails to collect or incorrectly collects premiums as required by § 422.262(e) of this chapter—
(1) In accordance with the timing of premium payments;
(2) At the time a drug is dispensed; or
(3) By billing the enrollee or another appropriate party after the fact.
(b) Refunds of incorrect collections—(1) Definitions. As used in this section the following definitions are applicable:
Amounts incorrectly collected. (A) Means amounts that exceed the monthly Part D enrollee premium limits under § 423.286 or exceed permissible cost-sharing or copayment amounts as specified in § 423.104(d) through (f), whether paid by or on behalf of the enrollee;
(B) Includes amounts collected with respect to an enrollee who was believed to be entitled to Medicare benefits but was later found not to be entitled; and
(C) Excludes de minimis amounts, as calculated per PDE transaction or per monthly premium billing.
De minimis amounts means an amount per PDE transaction for claims adjustments and per month for premium adjustments that does not exceed the de minimis amount determined for purposes of § 423.34(c)(2).
Other amounts due means amounts due to affected enrollees or others on their behalf (other than de minimis amounts) for covered Part D drugs that were—
(A) Accessed at an out-of-network pharmacy in accordance with the requirements at § 423.124; or
(B) Initially denied but, upon appeal, found to be covered Part D drugs the enrollee was entitled to have provided by the Part D plan.
(2) General rule. A Part D sponsor must make a reasonable effort to identify all amounts incorrectly collected and to pay any other amounts due during the timeframe for coordination of benefits as established at § 423.466(b). A Part D sponsor must issue a refund for an identified enrollee overpayment within the timeframe specified at § 423.466(a).
(3) Refund methods —(i) Lump-sum payment. The Part D sponsor must use lump-sum payments for the following:
(A) Amounts incorrectly collected as cost-sharing.
(B) Other amounts due.
(C) All amounts due if the Part D plan is going out of business or terminating its Part D contract for a prescription drug plan(s).
(ii) Premium adjustment, lump-sum payment, or both. If the amounts incorrectly collected were in the form of premiums, or included premiums as well as other charges, the Part D sponsor may refund by adjustment of future premiums or by a combination of premium adjustment and lump-sum payments.
(iii) Refund when enrollee has died or cannot be located. If an enrollee has died or cannot be located after reasonable effort, the Part D sponsor must make the refund in accordance with State law.
(4) Premium reduction and compliance. (i) If the Part D sponsor does not issue the refund as required under this section within the timeframe specified at § 423.466(a), CMS reduces the premium the Part D sponsor is allowed to charge a Part D enrollee by the amounts incorrectly collected or otherwise due.
(ii) The Part D plan may receive compliance notices from CMS or, depending on the extent of the non-compliance, be the subject of an intermediate sanction (for example, suspension of marketing and enrollment activities) in accordance with subpart O of this part.
(c) Collections of cost-sharing and premium amounts —(1) General rule. A Part D sponsor must make a reasonable effort to attempt to collect cost sharing from a beneficiary or to bill cost sharing or premiums to another appropriate party for all amounts other than de minimis amounts.
(2) Timeframe. Recovery notices must be processed and issued in accordance with the timeframe specified at § 423.466(a). A Part D sponsor must make a reasonable effort to attempt to collect these amounts during the timeframe for coordination of benefits as established at § 423.466(b).
(3) Retroactive collection of premiums. Nothing in this section alters the requirements of § 423.293(a)(4) of this part with respect to retroactive collection of premiums.
§ 423.301   Scope.
This subpart sets forth rules for the calculation and payment of CMS direct and reinsurance subsidies for Part D plans; the application of risk corridors and risk-sharing adjustments to payments; and retroactive adjustments and reconciliations to actual enrollment and interim payments. This subpart does not apply to fallback entities or fallback prescription drug plans.
§ 423.308   Definitions and terminology.
For the purposes of this subpart, the following definitions apply—
Actually paid means that the costs must be actually incurred by the Part D sponsor and must be net of any direct or indirect remuneration (including discounts, charge backs or rebates, cash discounts, free goods contingent on a purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price services, grants, or other price concessions or similar benefits offered to some or all purchasers) from any source (including manufacturers, pharmacies, enrollees, or any other person) that would serve to decrease the costs incurred under the Part D plan. Direct and indirect remuneration includes discounts, chargebacks or rebates, cash discounts, free goods contingent on a purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price services, grants, or other price concessions or similar benefits from manufacturers, pharmacies or similar entities obtained by an intermediary contracting organization with which the Part D plan sponsor has contracted, regardless of whether the intermediary contracting organization retains all or a portion of the direct and indirect remuneration or passes the entire direct and indirect remuneration to the Part D plan sponsor and regardless of the terms of the contract between the plan sponsor and the intermediary contracting organization.
Administrative costs means costs incurred by a Part D sponsor in complying with the requirements of this Part for a coverage year and that are not drug costs incurred to purchase or reimburse the purchase of Part D drugs. Administrative costs include amounts paid by the Part D sponsor to an intermediary contracting organization for covered Part D drugs dispensed to enrollees in the sponsor's Part D plan that differ from the amount paid by the intermediary contracting organization to a pharmacy or other entity that is the final dispenser of the covered Part D drugs. For example, any profit or loss retained by an intermediary contracting organization (through discounts, rebates, or other direct or indirect price concessions) when negotiating prices with dispensing entities is considered an administrative cost.
Allowable reinsurance costs means the subset of gross covered prescription drug costs actually paid that are attributable to basic prescription drug coverage for covered Part D drugs only and that are actually paid by the Part D sponsor or by (or on behalf of) an enrollee under the Part D plan. The costs for any Part D plan offering enhanced alternative coverage must be adjusted not only to exclude any costs attributable to benefits beyond basic prescription drug coverage, but also to exclude any costs determined to be attributable to increased utilization over the standard prescription drug coverage as the result of the insurance effect of enhanced alternative coverage in accordance with CMS guidelines on actuarial valuation.
Allowable risk corridor costs means—
(1) The subset of costs incurred under a Part D plan (not including administrative costs, but including dispensing fees) that are attributable to basic prescription drug coverage only and that are incurred and actually paid by the Part D sponsor to—
(i) A dispensing pharmacy or other dispensing provider (whether directly or through an intermediary contracting organization) under the Part D plan;
(ii) The parties listed in § 423.464(f)(1) of this part with which the Part D sponsor must coordinate benefits, including other Part D plans, as the result of any reconciliation process developed by CMS under § 423.464 of this part; or
(iii) An enrollee (or third party paying on behalf of the enrollee) to indemnify the enrollee when the reimbursement is associated with obtaining drugs under the Part D plan; and
(2) These costs must be based upon imposition of the maximum amount of copayments permitted under § 423.782 of this part. The costs for any Part D plan offering enhanced alternative coverage must be adjusted not only to exclude any costs attributable to benefits beyond basic prescription drug coverage, but also to exclude any prescription drug coverage costs determined to be attributable to increased utilization over standard prescription drug coverage as the result of the insurance effect of enhanced alternative coverage in accordance with CMS guidelines on actuarial valuation.
Coverage year means a calendar year in which covered Part D drugs are dispensed if the claim for those drugs (and payment on the claim) is made not later than 3 months after the end of the year
Gross covered prescription drug costs means those costs incurred under a Part D plan, excluding administrative costs, but including dispensing fees, during the coverage year. They equal the sum of the following:
(1) The share of actual costs (as defined by § 423.100 of this part) paid by the Part D plan that is received as reimbursement by the pharmacy, or other dispensing entity, reimbursement paid to indemnify an enrollee when the reimbursement is associated with an enrollee obtaining covered Part D drugs under the Part D plan, or payments made by the Part D sponsor to other parties listed in § 423.464(f)(1) of this part with which the Part D sponsor must coordinate benefits, including other Part D plans, or as the result of any reconciliation process developed by CMS under § 423.464 of this part.
(2) Nominal cost-sharing paid by or on behalf of an enrollee which is associated with drugs that would otherwise be covered Part D drugs, as defined in § 423.100 of this part, but are instead paid for, with the exception of said nominal cost-sharing, by a patient assistance program providing assistance outside the Part D benefit, provided that documentation of such nominal cost-sharing has been submitted to the Part D plan consistent with the plan processes and instructions for the submission of such information.
(3) All amounts paid under the Part D plan by or on behalf of an enrollee (such as the deductible, coinsurance, cost sharing, or amounts between the initial coverage limit and the out-of-pocket threshold) in order to obtain Part D drugs that are covered under the Part D plan. If an enrollee who is paying 100 percent cost sharing (as a result of paying a deductible or because the enrollee is between the initial coverage limit and the out-of-pocket threshold) obtains a covered Part D drug at a lower cost than is available under the Part D plan, such cost-sharing will be considered an amount paid under the plan by or on behalf of an enrollee under the previous sentence of this definition, if the enrollee's costs are incurred costs as defined under § 423.100 of this part and documentation of the incurred costs has been submitted to the Part D plan consistent with plan processes and instructions for the submission of such information. These costs are determined regardless of whether the coverage under the plan exceeds basic prescription drug coverage.
Reopening —(1) Global reopening means a reopening under § 423.346 in which CMS includes all Part D sponsor contracts that meet the inclusion criteria at § 423.346(g).
(2) Targeted reopening means a reopening under § 423.346 in which CMS includes one or more (but not all) Part D sponsor contracts that meet the inclusion criteria at § 423.346(g).
Target amount means the total amount of payments (from both CMS and by or on behalf of enrollees) to a Part D plan for the coverage year for all standardized bid amounts as risk adjusted under § 423.329(b)(1) of this part, less the administrative expenses (including return on investment) assumed in the standardized bids.
§ 423.315   General payment provisions.
(a) Source of payments. CMS payments under this section are made from the Medicare Prescription Drug Account.
(b) Monthly payments. CMS provides a direct subsidy in the form of advance monthly payments equal to the Part D plan's standardized bid, risk adjusted for health status as provided in § 423.329(b), minus the monthly beneficiary premium as determined in § 423.286.
(c) Reinsurance subsidies. CMS provides reinsurance subsidy payments described in § 423.329(c) on a monthly basis during a year based on either estimated or incurred allowable reinsurance costs as provided under § 423.329(c)(2)(i), and final reconciliation to actual allowable reinsurance costs as provided in § 423.343(c).
(d) Low-income subsidies. CMS makes payments for premium and cost sharing subsidies, including additional coverage above the initial coverage limit, on behalf of certain subsidy-eligible individuals as provided in §§ 423.780 and 423.782. CMS provides low-income cost-sharing subsidy payments described in § 423.782 through interim payments of amounts as provided under § 423.329(d)(2)(i) and reconciliation to actual allowable reinsurance costs as provided in § 423.343(d).
(e) Risk-sharing arrangements. CMS may issue lump-sum payments or adjust monthly payments in the following payment year based on the relationship of the Part D plan's adjusted allowable risk corridor costs to predetermined risk corridor thresholds in the coverage year as provided in § 423.336.
(f) Retroactive adjustments and reconciliations. CMS reconciles payment year disbursements with updated enrollment and health status data, actual low-income cost-sharing costs and actual allowable reinsurance costs as provided in § 423.343.
(g) Special rules for private fee-for-service plans —(1) Application of reinsurance. For private fee-for-service plans (as defined by § 422.4(a)(3) of this chapter) offering qualified prescription drug coverage, CMS determines the amount of reinsurance payments as provided under § 423.329(c)(3).
(2) Exemption from risk corridor provisions. The provisions of § 423.336 regarding risk sharing do not apply.
§ 423.322   Requirement for disclosure of information.
(a) Payment conditional upon provision of information. Payments to a Part D sponsor are conditioned upon provision of information to CMS that is necessary to carry out this subpart, or as required by law.
(b) Restrictions on use of information. (1) Officers, employees, and contractors of the Department of Health and Human Services may use the information disclosed or obtained in accordance with the provisions of this subpart for the purposes of, and to the extent necessary—
(i) In carrying out this subpart, including, but not limited to, determination of payments, and payment-related oversight and program integrity activities.
(ii) In conducting oversight, evaluation, and enforcement under Title XVIII of the Act.
(2) The United States Attorney General and the Comptroller General of the United States may use the information disclosed or obtained in accordance with the provisions of this subpart for purposes of, and to the extent necessary in, carrying out health oversight activities.
(3) The restrictions described in paragraphs (b)(1) and (2) of this section do not limit either of the following:
(i) OIG's authority to fulfill the Inspector General's responsibilities in accordance with applicable Federal law.
(ii) CMS' ability to use data regarding drug claims in accordance with section 1848(m) of the Act.
§ 423.325   PDE submission timeliness requirements.
(a) General PDE submission timeliness requirements. Unless paragraph (b) of this section applies, a Part D sponsor must submit PDE records to CMS as follows:
(1) Initial PDE records within 30 calendar days from the date the Part D sponsor (or its contracted first tier, downstream, or related entity) receives the claim.
(2) Adjustment or deletion PDE records within 90 calendar days of the Part D sponsor (or its contracted first tier, downstream, or related entity) discovering or receiving notification of an issue that requires a change to the previously submitted PDE record.
(3) Revised PDE records to resolve CMS rejected records within 90 calendar days of the rejection.
(b) Selected Drugs PDE submission timeliness requirement. A Part D sponsor must submit initial PDE records for selected drugs (as described at section 1192(c) of the Act) within 7 calendar days from the date the Part D sponsor (or its contracted first tier, downstream, or related entity) receives the claim.
§ 423.329   Determination of payments.
(a) Subsidy payments —(1) Direct subsidy. CMS makes a direct subsidy payment for each Part D eligible beneficiary enrolled in a Part D plan for a month equal to the amount of the plan's approved standardized bid, adjusted for health status (as determined under § 423.329(b)(1)), and reduced by the base beneficiary premium for the plan (as determined under § 423.286(c) and adjusted in § 423.286(d)(1)). The direct subsidy payment may be increased by the excess amount of a negative premium as described in § 423.286(d)(1), if applicable.
(2) Subsidy through reinsurance. CMS makes reinsurance subsidy payments as provided under paragraph (c) of this section.
(3) Low-income cost-sharing subsidy. CMS makes low-income cost-sharing subsidy payments as provided under paragraph (d) of this section.
(b) Health status risk adjustment —(1) Establishment of risk factors. CMS establishes an appropriate methodology for adjusting the standardized bid amount to take into account variation in costs for basic prescription drug coverage among Part D plans based on the differences in actuarial risk of different enrollees being served. Any risk adjustment is designed in a manner so as to be budget neutral in the aggregate to the risk of the Part D eligible individuals who enroll in Part D plans.
(2) Considerations. In establishing the methodology under paragraph (b)(1) of this section, CMS takes into account the similar methodologies used under § 422.308(c) of this chapter to adjust payments to MA organizations for benefits under the original Medicare fee-for-service program option.
(3) Data collection. In order to carry out this paragraph, CMS requires—
(i) PDP sponsors to submit data regarding drug claims that can be linked at the individual level to Part A and Part B data in a form and manner similar to the process provided under § 422.310 of this chapter and other information as CMS determines necessary; and
(ii) MA organizations that offer MA-PD plans to submit data regarding drug claims that can be linked at the individual level to other data that the organizations are required to submit to CMS in a form and manner similar to the process provided under § 422.310 of this chapter and other information as CMS determines necessary.
(4) Publication. CMS publishes the risk adjustment factors established under paragraph (b)(1) of this section for the upcoming calendar year in the Advance Notice and Rate Announcement publications specified under § 422.312 of this chapter.
(c) Reinsurance payment amount —(1) General rule. The reinsurance payment amount for a Part D eligible individual enrolled in a Part D plan for a coverage year is an amount equal to 80 percent of the allowable reinsurance costs attributable to that portion of gross covered prescription drug costs incurred in the coverage year after the individual has incurred true out-of-pocket costs that exceed the annual out-of-pocket threshold specified in § 423.104(d)(5)(iii).
(2) Payment method. Payments under this section are based on a method that CMS determines.
(i) Payments during the coverage year. CMS establishes a payment method by which payments of amounts under this section are made on a monthly basis during a year based on either estimated or incurred allowable reinsurance costs.
(ii) Final payments. CMS reconciles the payments made during the coverage year to final actual allowable reinsurance costs as provided in § 423.343(c).
(3) Special rules for private fee-for-service Plans offering prescription drug coverage. CMS determines the amount of reinsurance payments for private fee-for-service plans as defined by § 422.4(a)(3) of this chapter offering qualified prescription drug coverage using a methodology that—
(i) Bases the amount on CMS' estimate of the amount of the payments that are payable if the plan were an MA-PD plan described in section 1851(a)(2)(A)(i) of the Act; and
(ii) Takes into account the average reinsurance payments made under § 423.329(c) for populations of similar risk under MA-PD plans described in section 1851(a)(2)(A)(i) of the Act.
(d) Low-income cost sharing subsidy payment amount —(1) General rule. The low-income cost-sharing subsidy payment amount on behalf of a low-income subsidy eligible individual enrolled in a Part D plan for a coverage year is the difference between the cost sharing for a non-low-income subsidy eligible beneficiary under the Part D plan and the statutory cost sharing for a low-income subsidy eligible beneficiary.
(2) Payment method. Payments under this section are based on a method that CMS determines.
(i) Interim payments. CMS establishes a payment method by which interim payments of amounts under this section are made during a year based on the low-income cost-sharing assumptions submitted with plan bids under § 423.265(d)(2)(iv) of this part and negotiated and approved under § 423.272 of this part, or by an alternative method that CMS determines.
(ii) Final payments. CMS reconciles the interim payments to actual incurred low-income cost-sharing costs as provided in § 423.343(d).
§ 423.336   Risk-sharing arrangements.
(a) Portion of total payments to a Part D sponsor subject to risk —(1) Adjusted allowable risk corridor costs. For purposes of this paragraph, the term adjusted allowable risk corridor costs means—
(i) The allowable risk corridor costs for the Part D plan for the coverage year, reduced by—
(ii) The sum of—
(A) The total reinsurance payments made under § 423.329(c) to the Part D sponsor of the Part D plan for the year; and
(B) The total non-premium subsidy payments made under § 423.782 to the Part D sponsor of the Part D plan for the coverage year.
(2) Establishment of risk corridors. (i) Risk corridors. For each year, CMS establishes a risk corridor for each Part D plan. The risk corridor for a plan for a coverage year is equal to a range as follows:
(A) First threshold lower limit. The first threshold lower limit of the corridor is equal to—
( 1 ) The target amount for the plan; minus
( 2 ) An amount equal to the first threshold risk percentage for the plan (as determined under paragraph (a)(2)(ii)(A) of this section) of the target amount.
(B) Second threshold lower limit. The second threshold lower limit of the corridor is equal to—
( 1 ) The target amount for the plan; minus
( 2 ) An amount equal to the second threshold risk percentage for the plan (as determined under paragraph (a)(2)(ii)(B) of this section) of the target amount.
(C) First threshold upper limit. The first threshold upper limit of the corridor is equal to the sum of—
( 1 ) The target amount; and
( 2 ) An amount equal to the first threshold risk percentage for the plan (as determined under paragraph (a)(2)(ii)(A) of this section) of the target amount.
(D) Second threshold upper limit. The second threshold upper limit of the corridor is equal to the sum of—
( 1 ) The target amount; and
( 2 ) An amount equal to the second threshold risk percentage for the plan (as determined under paragraph (a)(2)(ii)(B) of this section) of the target amount.
(ii) First and second threshold risk percentage defined. (A) First threshold risk percentage. Subject to paragraph (a)(2)(iii) of this section, the first threshold risk percentage is for—
( 1 ) 2006 and 2007, 2.5 percent;
( 2 ) 2008 through 2011, 5 percent; and
( 3 ) 2012 and subsequent years, a percentage CMS establishes, but in no case less than 5 percent.
(B) Second threshold risk percentage. Subject to paragraph (a)(2)(iii) of this section, the second threshold risk percentage is for—
(1) 2006 and 2007, 5.0 percent;
(2) 2008 through 2011, 10 percent
(3) 2012 and subsequent years, a percentage CMS establishes that is greater than the percent established for the year under paragraph (a)(2)(ii)(A)(3) of this section, but in no case less than 10 percent.
(iii) Reduction of risk percentage to ensure two Plans in an area. In accordance with § 423.265(e), a PDP sponsor may submit a bid that requests a decrease in the applicable first or second threshold risk percentages or an increase in the percents applied under paragraph (b) of this section. Only a PDP sponsor may request a reduction of risk under this paragraph. An MA organization offering an MA-PD plan, a PACE program offering qualified prescription drug coverage, and a cost-based HMO or CMP offering qualified prescription drug coverage may not request a reduction of risk under this paragraph.
(3) Plans at risk for entire amount of supplemental prescription drug coverage. A Part D sponsor that offers a Part D plan that provides supplemental prescription drug benefits is at full financial risk for the provision of the supplemental benefits.
(b) Payment adjustments —(1) No adjustment if adjusted allowable risk corridor costs within risk corridor. If the adjusted allowable risk corridor costs for the Part D plan for the coverage year are at least equal to the first threshold lower limit of the risk corridor (specified in paragraph (a)(2)(i)(A) of this section) but not greater than the first threshold upper limit of the risk corridor (specified in paragraph (a)(2)(i)(C) of this section) for the Part D plan for the coverage year, CMS makes no payment adjustment.
(2) Increase in payment if adjusted allowable risk corridor costs above upper limit of risk corridor —(i) Costs between first and second threshold upper limits. If the adjusted allowable risk corridor costs for the Part D plan for the year are greater than the first threshold upper limit, but not greater than the second threshold upper limit, of the risk corridor for the Part D plan for the year, CMS increases the total of the payments made to the Part D sponsor offering the Part D plan for the year under this section by an amount equal to 50 percent (or, for 2006 and 2007, 75 percent or 90 percent if the conditions described in paragraph (b)(2)(iii) of this section are met for the year) of the difference between the adjusted allowable risk corridor costs and the first threshold upper limit of the risk corridor.
(ii) Costs above second threshold upper limits. If the adjusted allowable risk corridor costs for the Part D plan for the year are greater than the second threshold upper limit of the risk corridor for the Part D plan for the year, CMS increases the total of the payments made to the Part D sponsor offering the Part D plan for the year under this section by an amount equal to the sum of—
(A) 50 percent (or, for 2006 and 2007, 75 percent or 90 percent if the conditions specified in paragraph (b)(2)(iii) of this section are met for the year) of the difference between the second threshold upper limit and the first threshold upper limit; and
(B) 80 percent of the difference between the adjusted allowable risk corridor costs and the second threshold upper limit of the risk corridor.
(iii) Conditions for application of higher percentage for 2006 and 2007. The conditions specified in this paragraph are met for 2006 or 2007 if CMS determines for the year that—
(A) At least 60 percent of Part D plans to which this paragraph applies have adjusted allowable risk corridor costs for the Part D plan for the year that are more than the first threshold upper limit of the risk corridor for the Part D plan for the year; and
(B) Such plans represent at least 60 percent of Part D eligible individuals enrolled in any Part D plan.
(3) Reduction in payment if adjusted allowable risk corridor costs below lower limit of risk corridor —(i) Costs between first and second threshold lower limits. If the adjusted allowable risk corridor costs for the Part D plan for the coverage year are less than the first threshold lower limit, but not less than the second threshold lower limit, of the risk corridor for the Part D plan for the coverage year, CMS reduces the total of the payments made to the Part D plan for the coverage year under this section by an amount (or otherwise recovers from the Part D sponsor an amount) equal to 50 percent (or, for 2006 and 2007, 75 percent) of the difference between the first threshold lower limit of the risk corridor and the adjusted allowable risk corridor costs.
(ii) Costs below second threshold lower limit. If the adjusted allowable risk corridor costs for the Part D plan for the coverage year are less the second threshold lower limit of the risk corridor for the Part D plan for the coverage year, CMS reduces the total of the payments made to the Part D sponsor for the coverage year under this section by an amount (or otherwise recovers from the Part D sponsor an amount) equal to the sum of—
(A) 50 percent (or, for 2006 and 2007, 75 percent) of the difference between the first threshold lower limit and the second threshold lower limit; and
(B) 80 percent of the difference between the second threshold upper limit of the risk corridor and the adjusted allowable risk corridor costs.
(c) Payment methods. CMS makes payments after a coverage year after obtaining all of the cost data information in paragraph (c)(1) of this section necessary to determine the amount of payment. CMS will not make payments under this section if the Part D sponsor fails to provide the cost data information in paragraph (c)(1) of this section.
(1) Submission of cost data. Within 6 months of the end of a coverage year, the Part D sponsor must provide the information that CMS requires.
(2) Lump sum and adjusted monthly payments. CMS at its discretion makes either lump-sum payments or adjusts monthly payments in the following payment year based on the relationship of the plan's adjusted allowable risk corridor costs to the predetermined risk corridor thresholds in the coverage year, as determined under this section.
(d) No effect on monthly premium. No adjustment in payments made by reason of this section may affect the monthly beneficiary premium for qualified prescription drug coverage.
§ 423.343   Retroactive adjustments and reconciliations.
(a) Application of enrollee adjustment. The provisions of § 422.308(f) of this chapter apply to payments to Part D sponsors under this section in the same manner as they apply to payments to MA organizations under section 1853(a) of the Act.
(b) Health status. CMS makes adjustments to payments made under § 423.329(a)(1) to account for updated health status risk adjustment data as provided under § 422.310(g)(2) of this chapter. CMS may recover payments associated with health status adjustments if the Part D sponsor fails to provide the information described in § 423.329(b)(3).
(c) Reinsurance. CMS makes final payment for reinsurance after a coverage year after obtaining all of the information necessary to determine the amount of payment.
(1) Submission of cost data. Within 6 months of the end of a coverage year, the Part D sponsor must provide the information that CMS requires.
(2) Payments. CMS at its discretion either makes lump-sum payments or adjusts monthly payments throughout the remainder of the payment year following the coverage year based on the difference between monthly reinsurance payments made during the coverage year and the amount payable in § 423.329(c) for the coverage year. CMS may recover payments made through a lump sum recovery or by adjusting monthly payments throughout the remainder of the coverage year if the monthly reinsurance payments made during the coverage year exceed the amount payable under § 423.329(c) or if the Part D sponsor does not provide the data in paragraph (c)(1) of this section.
(d) Low-income cost-sharing subsidy. CMS makes final payment for low-income cost-sharing subsidies after a coverage year after obtaining all of the information necessary to determine the amount of payment.
(1) Submission of cost data. Within 6 months of the end of a coverage year, the Part D sponsor must provide the information that CMS requires.
(2) Payments. CMS at its discretion either makes lump-sum payments or adjusts monthly payments throughout the remainder of the payment year following the coverage year based on the difference between interim low-income cost-sharing subsidy payments and total low-income cost-sharing subsidy costs eligible for subsidy under § 423.782 submitted by the plan for the coverage year. CMS may recover payments made through a lump sum recovery or by adjusting monthly payments throughout the remainder of the coverage year if interim low-income cost-sharing subsidy payments exceed the amount payable under § 423.782 or if the Part D sponsor does not provide the data in paragraph (d)(1) of this section. In the event adequate data is not provided for risk corridor costs, CMS assumes that the Part D plan's adjusted allowable risk corridor costs are 50 percent of the target amount.
§ 423.346   Reopening.
(a) CMS may conduct a global or targeted reopening to reopen and revise an initial or reconsidered final payment determination (including a determination on the final amount of direct subsidy described in § 423.329(a)(1), final reinsurance payments described in § 423.329(c), the final amount of the low income subsidy described in § 423.329(d), or final risk corridor payments as described in § 423.336) or the Coverage Gap Discount Reconciliation (as described at § 423.2320(b))—
(1) For any reason, within 12 months from the date of the notice of the final determination to the Part D sponsor
(2) After that 12-month period, but within 6 years after the date of the notice of the initial or reconsidered determination to the Part D sponsor, upon establishment of good cause for reopening; or
(3) At any time, in instances of fraud or similar fault of the Part D sponsor or any subcontractor of the Part D sponsor.
(b) For purposes of this section, CMS will find good cause if—
(1) New and material evidence that was not readily available at the time the final determination was made is furnished;
(2) A clerical error in the computation of payments was made; or
(3) The evidence that was considered in making the determination clearly shows on its face that an error was made.
(c) For purposes of this section, CMS will not find good cause if the only reason for reopening is a change of legal interpretation or administrative ruling upon which the final determination was made.
(d) A decision not to reopen under this section is final and is not subject to review.
(e) CMS notifies the sponsor(s) that will be included in the reopening of its intention to conduct a global or targeted reopening when it is necessary for the sponsor(s) to submit prescription drug event (PDE) data or direct and indirect remuneration (DIR) for the reopening. The notification to sponsor(s) must include the following:
(1) The date by which PDE or DIR data must be accepted by CMS to be included in the reopening, which is at least 90 calendar days after the date of the notification.
(2) A statement indicating the Part D contracts or types of contracts that are included in the reopening.
(f) CMS announces when it has completed a reopening and provide the sponsor(s) with all of the following information:
(1) A description of the data used in the reopening.
(2) A statement indicating the Part D contracts or types of contracts that were included in the reopening.
(3) The date by which reports describing the reopening results is available to the sponsor.
(4) The date by which a sponsor must submit an appeal, in accordance with § 423.350, if the sponsor disagrees with the reopening results.
(g) Inclusion criteria—
(1) For a global reopening, CMS includes only those Part D sponsor contracts that were in effect for the contract year being reopened and for whom CMS has not sent the “Notice of final settlement,” as described at § 423.521(a), as of the date CMS announces the completion of the reopening in accordance with paragraph (f) of this section.
(2) For a target reopening, CMS includes only Part D sponsor contracts that meet the criteria for inclusion in a global reopening as specified in paragraph (1) of this section and that CMS specifies for inclusion in the reopening as provided in paragraph (e)(2) or (f)(2) of this section.
§ 423.350   Payment appeals.
(a) Payment determinations —(1) Payment methods subject to appeal. If CMS did not apply its stated payment methodology correctly, a Part D sponsor may appeal the following:
(i) The reconciled health status risk adjustment of the direct subsidy as provided in § 423.343(b).
(ii) The reconciled reinsurance payments under § 423.343(c).
(iii) The reconciled final payments made for low-income cost sharing subsidies provided in § 423.343(d).
(iv) Final risk-sharing payments made under § 423.336.
(v) The reconciled coverage gap discount payment under § 423.2320(b).
(2) Payment information not subject to appeal. Payment information submitted to CMS under § 423.322 and reconciled under § 423.343 or submitted and reconciled under § 423.2320(b) is final and may not be appealed nor may the appeals process be used to submit new information after the submission of information necessary to determine retroactive adjustments and reconciliations.
(b) Request for reconsideration —(1) Time for filing a request. The request for reconsideration must be filed within 15 days from the date of the final payment. For purposes of this paragraph, the date of final payment is one of the following:
(i) For risk adjustment, the date of the final reconciled payment under § 423.343(b) of this subpart.
(ii) For reinsurance, the date of the final reconciled payment under § 423.343(c) of this subpart; for low-income cost sharing subsidies, the date of the final reconciled payment under § 423.343(d) of this subpart.
(iii) For risk-sharing payments, the date of the final payments under § 423.336 of this subpart.
(iv) For the Coverage Gap Discount Program, the date of the final reconciled payment under § 423.2320(b).
(2) Content of request. The request for reconsideration must specify the findings or issues with which the Part D sponsor disagrees and the reasons for the disagreements. Excluding new payment information, the request for reconsideration may include additional documentary evidence the sponsor wishes CMS to consider.
(3) Conduct of informal written reconsideration. In conducting the reconsideration, CMS reviews the payment determination, the evidence and findings upon which it was based, and any other written evidence submitted by the Part D sponsor or by CMS before notice of the reconsidered determination is made.
(4) Decision of the informal written reconsideration. CMS informs the sponsor of the decision orally or through electronic mail. CMS sends a written decision to the Part D sponsor on the sponsor's request.
(5) Effect of CMS informal written reconsideration. A reconsideration decision, whether delivered orally or in writing, is final and binding unless a request for hearing is filed in accordance with paragraph (c) of this section, or it is revised in accordance with § 423.346.
(c) Right to informal hearing. A Part D sponsor dissatisfied with the CMS reconsideration decision is entitled to an informal hearing as provided in this section.
(1) Manner and timing for request. A request for a hearing must be made in writing and filed with CMS within 15 days of the date the Part D sponsor receives the CMS reconsideration decision.
(2) Content of request. The request for informal hearing must include a copy of the CMS reconsideration decision (if any) and must specify the findings or issues in the decision with which the Part D sponsor disagrees and the reasons for the disagreements.
(3) Informal hearing procedures. (i) CMS provides written notice of the time and place of the informal hearing at least 10 days before the scheduled date.
(ii) The hearing are conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not presented with the reconsideration request. The CMS hearing officer is limited to the review of the record that was before CMS when CMS made both its initial and reconsideration determinations.
(iii) If CMS did not issue a written reconsideration decision, the hearing officer may request, but not require, a written statement from CMS or its contractors explaining CMS' determination, or CMS or its contractors may, on their own, submit the written statement to the hearing officer. Failure of CMS to submit a written statement does not result in any adverse findings against CMS and may not in any way be taken into account by the hearing officer in reaching a decision.
(4) Decision of the CMS hearing officer. The CMS hearing officer decides the case and sends a written decision to the Part D sponsor, explaining the basis for the decision.
(5) Effecting of hearing officer decision. The hearing officer decision is final and binding, unless the decision is reversed or modified by the Administrator in accordance with paragraph (d) of this section.
(d) Review by the Administrator. (1) A Part D sponsor that has received a hearing officer decision upholding a CMS initial or reconsidered determination may request review by the Administrator within 15 days of receipt of the hearing officer's decision.
(2) The Administrator may review the hearing officer's decision, any written documents submitted to CMS or to the hearing officer, as well as any other information included in the record of the hearing officer's decision and determine whether to uphold, reverse or modify the hearing officer's decision.
(3) The Administrator's determination is final and binding.
§ 423.352   CMS-identified overpayments associated with payment data submitted by Part D sponsors.
(a) Definitions. For purposes of this section—
Applicable reconciliation date occurs on the later of either the annual deadline for submitting—
(1) Prescription drug event (PDE) data for the annual Part D payment reconciliations referred to in § 423.343(c) and (d); or
(2) Direct and indirect remuneration data.
Erroneous payment data means payment data that should not have been submitted either because the data submitted are inaccurate or because the data are inconsistent with Medicare Part D requirements.
Payment data means data submitted by a Part D sponsor to CMS and used for payment purposes, including enrollment data and data submitted under § 423.329(b)(3), § 423.336(c)(1), and § 423.343, and data provided for purposes of supporting allowable reinsurance costs and allowable risk corridor costs as defined in § 423.308, including data submitted to CMS regarding direct and indirect remuneration.
(b) Request to correct payment data. (1) When CMS identifies erroneous payment data submitted by a Part D sponsor, CMS may send a data correction notice to the Part D sponsor requesting that the Part D sponsor correct the payment data.
(2) The notice will include or make reference to the specific payment data that need to be corrected, the reason why CMS believes that the payment data are erroneous, and the timeframe for correcting the payment data.
(c) Payment offset. (1) If the Part D sponsor fails to submit the corrected payment data within the timeframe as requested in accordance with paragraph (b) of this section, CMS will conduct a payment offset against payments made to the Part D sponsor if—
(i) The payment error affects payments for any of the 6 most recently completed payment years; and
(ii) The payment error for a particular payment year is identified after the applicable reconciliation date for that payment year.
(2) CMS will calculate the payment offset amount using the correct payment data and a payment algorithm that applies the payment rules for the applicable year.
(d) Payment offset notification. CMS will issue a payment offset notice to the Part D sponsor that includes at least the following:
(1) The dollar amount of the offset from plan payments.
(2) An explanation of how the erroneous data were identified and used to calculate the payment offset amount.
(3) An explanation that, if the Part D sponsor disagrees with the payment offset, it may request an appeal within 30 days of issuance of the payment offset notification.
(e) Appeals process. If a Part D sponsor does not agree with the payment offset described in paragraph (c) of this section, it may appeal under the following three-level appeal process:
(1) Reconsideration. A Part D sponsor may request reconsideration of the payment offset described in paragraph (c) of this section, according to the following process:
(i) Manner and timing of request. A written request for reconsideration must be filed within 30 days from the date that CMS issued the payment offset notice to the Part D sponsor.
(ii) Content of request. The written request for reconsideration must specify the findings or issues with which the Part D sponsor disagrees and the reasons for its disagreement. As part of its request for reconsideration, the Part D sponsor may include any additional documentary evidence in support of its position. Any additional evidence must be submitted with the request for reconsideration. Additional information submitted after this time will be rejected as untimely.
(iii) Conduct of reconsideration. In conducting the reconsideration, the CMS reconsideration official reviews the underlying data that were used to determine the amount of the payment offset and any additional documentary evidence timely submitted by the Part D sponsor.
(iv) Reconsideration decision. The CMS reconsideration official informs the Part D sponsor of its decision on the reconsideration request.
(v) Effect of reconsideration decision. The decision of the CMS reconsideration official is final and binding unless a timely request for an informal hearing is filed in accordance with paragraph (e)(2) of this section.
(2) Informal hearing. A Part D sponsor dissatisfied with CMS' reconsideration decision made under paragraph (e)(1) of this section is entitled to an informal hearing as provided for under paragraphs (e)(2)(i) through (e)(2)(v) of this section.
(i) Manner and timing for request. A request for an informal hearing must be made in writing and filed with CMS within 30 days of the date of CMS' reconsideration decision.
(ii) Content of request. The request for an informal hearing must include a copy of the reconsideration decision and must specify the findings or issues in the decision with which the Part D sponsor disagrees and the reasons for its disagreement.
(iii) Informal hearing procedures. The informal hearing will be conducted in accordance with the following:
(A) CMS provides written notice of the time and place of the informal hearing at least 30 days before the scheduled date.
(B) The informal hearing is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not timely presented with the reconsideration request. The CMS hearing officer is limited to the review of the record that was before the CMS reconsideration official when CMS made its reconsideration determination.
(C) The CMS hearing officer will review the proceeding before the CMS reconsideration official on the record made before the CMS reconsideration official using the clearly erroneous standard of review.
(iv) Decision of the CMS hearing officer. The CMS hearing officer decides the case and sends a written decision to the Part D sponsor explaining the basis for the decision.
(v) Effect of hearing officer's decision. The hearing officer's decision is final and binding, unless the decision is reversed or modified by the Administrator in accordance with paragraph (e)(3) of this section.
(3) Review by the Administrator. The Administrator review will be conducted in the following manner:
(i) A Part D sponsor that has received a hearing officer's decision may request review by the Administrator within 30 days of the date of issuance of the hearing officer's decision under paragraph (e)(2)(iv) of this section. The Part D sponsor may submit written arguments to the Administrator for review.
(ii) After receiving a request for review, the Administrator has the discretion to elect to review the hearing officer's determination in accordance with paragraph (e)(3)(iv) of this section or to decline to review the hearing officer's decision.
(iii) If the Administrator declines to review the hearing officer's decision, the hearing officer's decision is final and binding.
(iv) If the Administrator elects to review the hearing officer's decision, the Administrator will review the hearing officer's decision, as well as any information included in the record of the hearing officer's decision and any written argument submitted by the Part D sponsor, and determine whether to uphold, reverse, or modify the hearing officer's decision.
(v) The Administrator's determination is final and binding.
(f) Matters subject to appeal and burden of proof. (1) The Part D sponsor's appeal is limited to CMS' finding that the payment data submitted by the Part D sponsor are erroneous.
(2) The Part D sponsor bears the burden of proof by a preponderance of the evidence in demonstrating that CMS' finding that the payment data were erroneous was incorrect or otherwise inconsistent with applicable program requirements.
(g) Applicability of appeals process. The appeals process under paragraph (e) of this section applies only to payment offsets under paragraph (c) of this section.
§ 423.360   Reporting and returning of overpayments.
(a) Definitions. For the purposes of this section the following definitions are applicable:
Applicable reconciliation means the later of either the annual deadline for submitting—
(i) PDE data for the annual Part D payment reconciliations referred to in § 423.343(c) and (d); or
(ii) Direct and indirect remuneration data.
Funds for purposes of this section, means any payment that a Part D sponsor has received that is based on data submitted by the Part D sponsor to CMS for payment purposes, including data submitted under § 423.329(b)(3), § 423.336(c)(1), § 423.343, and data provided for purposes of supporting allowable costs as defined in § 423.308 which includes data submitted to CMS regarding direct or indirect remuneration.
Overpayment means funds that a Part D sponsor has received or retained under title XVIII of the Act to which the Part D sponsor, after applicable reconciliation, is not entitled under such title.
(b) General rule. If a Part D sponsor has identified that it has received an overpayment, the Part D sponsor must report and return that overpayment in the form and manner set forth in this section.
(c) Identified overpayment. The Part D sponsor has identified an overpayment when the Part D sponsor knowingly receives or retains an overpayment. The term “knowingly” has the meaning set forth in 31 U.S.C. 3729(b)(1)(A).
(d) Reporting and returning of an overpayment. A Part D sponsor must report and return any overpayment it received no later than 60 days after the date on which it identified it received an overpayment.
(1) Reporting. A Part D sponsor must notify CMS of the amount and reason for the overpayment, using the notification process determined by CMS.
(2) Returning. A Part D sponsor must return identified overpayments in a manner specified by CMS.
(e) Enforcement. Any overpayment retained by a Part D sponsor is an obligation under 31 U.S.C. 3729(b)(3) if not reported and returned in accordance with paragraph (d) of this section.
(f) Look-back period. A Part D sponsor must report and return any overpayment identified within the 6 most recent completed payment years.
§ 423.401   General requirements for PDP sponsors.
(a) General requirements. Each PDP sponsor of a prescription drug plan must meet the following requirements:
(1) Licensure. Except in cases where there is a waiver as specified at § 423.410 or § 423.415, the sponsor is organized and licensed under State law as a risk bearing entity eligible to offer health insurance or health benefits coverage in each State in which it offers a prescription drug plan. If not otherwise licensed, the sponsor obtains certification from the State that the organization meets a level of financial solvency and other standards as the State may require for it to operate as a PDP sponsor.
(2) Assumption of financial risk for unsubsidized coverage. The PDP sponsor assumes financial risk on a prospective basis for benefits that it offers under a prescription drug plan and that is not covered under section 1860D-15(b) of the Act.
(b) Reinsurance permitted. The PDP sponsor may obtain insurance or make other arrangements for the cost of coverage provided to any enrollee to the extent that the sponsor is at risk for providing the coverage.
(c) Solvency for unlicensed sponsors. In the case of a PDP sponsor that is not described in § 423.401(a)(1) and for which a waiver is approved under § 423.410 or § 423.415, the sponsor must meet the requirements in § 423.420.
§ 423.410   Waiver of certain requirements to expand choice.
(a) Authorizing waiver. In the case of an entity that seeks to offer a prescription drug plan in a State, CMS waives the licensure requirement at § 423.401(a)(1), which requires that the etity be licensed in that State if CMS determines, based on the application and other evidence presented, that any of the grounds for approval of the application described in paragraphs (b), (c), or (d) of this section are met.
(b) Grounds for approval of waivers. Subject to the waiver requirements specified in § 423.410(e), waivers may be granted under any of the following conditions:
(1) Failure to act on licensure application on a timely basis. The State failed to complete action on the licensing application within 90 days of the date that the State received a substantially complete application.
(2) Denial of application based on discriminatory treatment. The State denied the license application on either of the following bases—-
(i) The State imposed material requirements, procedures, or standards (other than solvency requirements) not generally applied by the State to other entities engaged in a substantially similar business; or
(ii) The State required, as a condition of licensure, that the organization offer any product or plan other than a prescription drug plan.
(3) Denial of application based on application of solvency requirements. The State denied the licensure application, in whole or in part, on the basis of the PDP sponsor's failure to meet solvency requirements and
(i) The solvency requirements are different from the solvency standards CMS establishes in accordance with § 423.420; or
(ii) CMS determines that the State imposed, as a condition of licensing, any documentation or information requirements relating to solvency that are different from the standards CMS establishes in accordance with § 423.420.
(4) Grounds other than those required by Federal Law. The application by a State of any grounds other than those required under Federal law.
(c) Waiver when licensing process not in effect. The grounds for approval specified in paragraph (b)(1) of this section are deemed met if CMS determines that the State does not have a licensing process in effect for PDP sponsors.
(d) Special waiver for plan years beginning before January 1, 2008. For plan years beginning before January 1, 2008, if the State has a prescription drug plan or PDP sponsor licensing process in effect, CMS grants a waiver upon a demonstration that an applicant to become a PDP sponsor has submitted a substantially completed application for licensure to the State.
(e) Waiver requirements. The following rules apply to waiver applications or waivers granted under this section.
(1) Treatment of waiver. The waiver applies only to that State, is effective for 36 months, and cannot be renewed.
(2) Prompt action on application. CMS grants or denies a waiver application under this section within 60 days after CMS determines that a substantially complete waiver application is received by CMS.
(3) A State that does not have a PDP sponsor. In the case of a State that does not have a PDP sponsor licensing process, the 36 month limitation on the waiver discussed in paragraph (e)(1) of this section does not apply, and the waiver may continue in effect for a given State as long as CMS determines that the State does not have a PDP sponsor licensing process in effect, and the PDP sponsor meets the solvency standards of § 423.420(a).
§ 423.415   Temporary waivers for entities seeking to offer a prescription drug plan in more than one State in a region.
(a) General rule. Subject to paragraphs (b) and (c) of this section, if an applicant seeking to become a PDP sponsor wishes to operate in more than one State in a region, and is licensed as a risk bearing entity in at least one State in the region, then the applicant may receive a temporary regional plan waiver for the States in which it is not licensed.
(b) Filing of application. The applicant must demonstrate to the satisfaction of CMS that it filed the necessary licensure applications with each State in the region for which it does not already have State licensure, except that no application is necessary if CMS determines that the State does not have a licensing process for potential PDP sponsors.
(c) Processing of application for temporary waiver. The Secretary determines the time period appropriate for the timely processing of the application for temporary waiver.
(d) Time limit for temporary waiver. The temporary waiver expires at the end of time period that the Secretary determines is appropriate for timely processing of the application by the State or States, but in no case is a waiver extend beyond the end of the calendar year.
§ 423.420   Solvency standards for non-licensed entities.
(a) Establishment and publication. CMS establishes and publishes reasonable financial solvency and capital adequacy standards for entities specified in paragraph (b) of this section.
(b) Compliance with standards. A PDP sponsor that is not licensed by a State and for which a waiver application is approved by CMS under § 423.410 or § 423.415 must maintain reasonable financial solvency and capital adequacy in accordance with the standards established by CMS under paragraph (a) of this section.
§ 423.425   Licensure does not substitute for or constitute certification.
The fact that a Part D sponsor is State licensed or has a waiver application approved under § 423.410 or § 423.415 does not deem the sponsor to meet other requirements imposed under this part for a Part D sponsor.
§ 423.440   Prohibition of State imposition of premium taxes; relation to State laws.
(a) Federal preemption of State law. The standards established under this part supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) for Part D plans offered by Part D plan sponsors.
(b) State premium taxes prohibited —(1) Basic rule. No premium tax, fee, or other similar assessment may be imposed by any State, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa, the Mariana Islands or any of their political subdivisions or other governmental authorities for any payment CMS makes on behalf of Part D plan or enrollees under this part (including the direct subsidy, reinsurance payments, and risk corridor payments); or for any payment made to Part D plans by a beneficiary or by a third party on behalf of a beneficiary.
(2) Construction. Nothing in this section may be construed to exempt any Part D plan sponsor from taxes, fees, or other monetary assessments related to the net income or profit that accrues to, or is realized by, the organization from business conducted under this part, if that tax, fee, or payment is applicable to a broad range of business activity.
§ 423.452   Scope.
This section sets forth the application of Part D rules to Part C plans; establishes waivers for MA-PD plans, employer-sponsored group prescription drug plans, cost plans, and PACE organizations; and establishes requirements for coordination of benefits with State Pharmaceutical Assistance Programs and other providers of prescription drug coverage.
§ 423.454   Definitions.
For purposes of this part, the following definitions apply—
Employer-sponsored group prescription drug plan means, prescription drug coverage offered to retirees who are Part D eligible individuals under employment-based retiree health coverage. For purposes of this subpart, employment-based retiree health coverage is such coverage (as defined in § 423.882) provided through a Medicare Part D plan, or for which a plan sponsor could qualify for payments under subpart R of this part.
State Pharmaceutical Assistance Program (SPAP) means a State program that meets the requirements described under § 423.464(e)(1).
§ 423.458   Application of Part D rules to certain Part D plans on and after January 1, 2006.
(a) Relationship to Part C. Except as otherwise provided in this part, the requirements of this part apply to prescription drug coverage provided by MA-PD plans offered by MA organizations beginning on or after January 1, 2006.
(b) MA waiver. CMS waives any provision of this Part otherwise applicable to MA-PD plans or MA organizations under paragraph (a) of this section to the extent CMS determines that the provision duplicates, or is in conflict with, provisions otherwise applicable to the MA organizations or MA-PD plans under Part C of Medicare, or as may be necessary in order to improve coordination of this part with the benefits under Part C.
(1) Application of waiver. Any waiver or modification granted by CMS under this section applies to any other similarly situated organization offering or seeking to offer a MA-PD plan that meets the conditions of the waiver.
(2) Request for waivers. Organizations offering or seeking to offer a MA-PD plan may request from CMS in writing—
(i) A waiver of those requirements under this part otherwise applicable to the MA-PD plan or MA organization under paragraph (a) of this section that are duplicative of, or that are in conflict with, provisions otherwise applicable to the MA-PD plan, proposed MA-PD plan, or a MA organization under Part C of Medicare.
(ii) A waiver of a requirement under this part otherwise applicable to the MA-PD plan or MA organization under paragraph (a) of this section, if such waiver improves coordination of benefits provided under Part C of Medicare with benefits under this Part.
(c) Employer group waiver —(1) General rule for employer-sponsored group prescription drug plans that are Medicare Part D plans. CMS may waive or modify any requirement under this part that hinders the design of, the offering of, or the enrollment in an employer-sponsored group prescription drug plan, including authorizing the establishment of separate premium amounts for enrollees of the employer-sponsored group prescription drug plan and limitations on enrollment in such plan to Part D eligible individuals participating in the sponsor's employment-based retiree health coverage. Any entity seeking to offer, sponsor, or administer an employer-sponsored group prescription drug plan may request, in writing, a waiver or modification of additional requirements under this part that hinder its design of, the offering of, or the enrollment in, such employer-sponsored group prescription drug plan.
(2) General rule for employer-sponsored group prescription drug plans for which a sponsor could qualify for payments under subpart R of this part. CMS may waive or modify any requirement under this part that hinders the design of, the offering of, or the enrollment in an employer-sponsored group prescription drug plan.
(3) Use of waiver. Waivers or modifications approved by CMS under this section apply to any similarly situated entity seeking to offer, sponsor, or administer an employer-sponsored group prescription drug plan, meeting the conditions of the waiver or modification.
(4) Employer-sponsored group prescription drug plans must comply with all applicable requirements under this part that are not specifically waived or modified in accordance with in paragraph (c)(3) of this section.
(d) Other waivers. CMS waives any provision of this Part as applied to a cost plan (as defined in § 417.401 of this chapter) or PACE organization (as defined in § 460.6 of this chapter) that offers qualified prescription drug coverage under Part D to the extent CMS determines that the provision duplicates, or is in conflict with, provisions otherwise applicable to the cost plan under section 1876 of the Act or provisions applicable to PACE organizations under sections 1894 and 1934 of the Act, or as necessary in order to improve coordination of this Part with the benefits offered by cost plans or PACE organizations.
(1) Application of waiver. Any waiver or modification granted by CMS under this paragraph applies to any other similarly situated organization offering or seeking to offer qualified prescription drug coverage as a cost plan under section 1876 of the Act or as a PACE organization under sections 1894 and 1934 of the Act.
(2) Request for waivers. Cost plans or PACE organizations seeking to offer qualified prescription drug coverage may request from CMS in writing-
(i) A waiver of those requirements under this part otherwise applicable to cost plans or PACE organizations that are duplicative of, or that are in conflict with, provisions otherwise applicable to cost plans or PACE organizations.
(ii) A waiver of a requirement under this part otherwise applicable to cost plans or PACE organizations, if such waiver improves coordination of benefits provided by the cost plan under section 1876 of the Act, or by the PACE organization under sections 1894 and 1934 of the Act, with the benefits under Part D.
§ 423.462   Medicare secondary payer procedures.
(a) General rule. The provisions of § 422.108 of this chapter regarding Medicare secondary payer procedures apply to Part D sponsors and Part D plans (with respect to the offering of qualified prescription drug coverage) in the same way as they apply to MA organizations and MA plans under Part C of title XVIII of the Act, except all references to MA organizations and MA plans are considered references to Part D sponsors and Part D plans.
(b) Reporting requirements. A Part D sponsor must report credible new or changed primary payer information to the CMS Coordination of Benefits Contractor in accordance with the processes and timeframes specified by CMS.
§ 423.464   Coordination of benefits with other providers of prescription drug coverage.
(a) General rule. A Part D plan must permit SPAPs (described in paragraph (e)(1) of this section) and entities providing other prescription drug coverage (described in paragraph (f)(1) of this section) to coordinate benefits with such plan. A Part D plan must comply with all administrative processes and requirements established by CMS to ensure effective exchange of information and coordination between such plan and SPAPs and entities providing other prescription drug coverage for—
(1) Payment of premiums and coverage; and
(2) Payment for supplemental prescription drug benefits as described in § 423.104(f)(1)(ii)(including payment to a Part D plan on a lump sum per capita basis) for Part D eligible individuals enrolled in the Part D plan and the SPAP or entity providing other prescription drug coverage.
(3) Retroactive claims adjustments, underpayment reimbursements, and overpayment recoveries as described in paragraph (g) of this section and § 423.466(a) of this subpart.
(b) Medicare as primary payer. The requirements of this subpart do not change or affect the primary or secondary payer status of a Part D plan and a SPAP or other prescription drug coverage. A Part D plan is always the primary payer relative to a State Pharmaceutical Assistance Program.
(c) User fees. CMS may impose user fees on Part D plans for the transmittal of information necessary for benefit coordination in accordance with administrative processes and requirements established by CMS to ensure effective exchange of information and coordination between a Part D plan and SPAPs and entities providing other prescription drug coverage in a manner similar to the manner in which user fees are imposed under section 1842(h)(3)(B) of the Act, except that CMS may retain a portion of user fees to defray its costs in carrying out such procedures. CMS will not impose user fees under this subpart on a SPAP or entities providing other prescription drug coverage.
(d) Cost management tools. The requirements of this subpart do not prevent a Part D sponsor from using cost management tools (including differential payments) under all methods of operation.
(e) Coordination with State Pharmaceutical Assistance Programs —(1) Requirements to be a State Pharmaceutical Assistance Program (SPAP). A State program is considered to be a State Pharmaceutical Assistance Program for purposes of this part if it-
(i) Provides financial assistance for the purchase or provision of supplemental prescription drug coverage or benefits on behalf of Part D eligible individuals;
(ii) Provides assistance to Part D eligible individuals in all Part D plans without discriminating based upon the Part D plan in which an individual enrolls;
(iii) Meets the benefit coordination requirements specified in this subpart;
(iv) Does not follow or adopt rules that change or affect the primary payer status of a Part D plan.
The definition of SPAP excludes State Medicaid programs, section 1115 demonstration programs, and any other program where program funding is from Federal grants, awards, contracts, entitlement programs, or other Federal sources of funding; and
(v) Provides supplemental drug coverage to individuals based on financial need, age, or medical condition, and not based on current or former employment status.
(vi) Does not engage in midyear plan or noncalendar year plan enrollment changes on behalf of a substantial number of its members when authorized to do so on the beneficiary's behalf.
(2) Use of a single card. A card that is issued under § 423.120(c) for use under a Part D plan may also be used in connection with coverage of benefits provided under a SPAP and, in such a case, may contain an emblem or symbol indicating such connection.
(3) Construction. Nothing in this subpart requires a SPAP to coordinate with, or provide financial assistance to enrollees in, any Part D plan.
(f) Coordination with other prescription drug coverage —(1) Definition of other prescription drug coverage. Entities that provide other prescription drug coverage include any of the following:
(i) Medicaid programs. A State plan under title XIX of the Act, including such a plan operating under a waiver under section 1115 of the Act, if it meets the requirements of paragraph (e)(1)(ii) of this section.
(ii) Group health plans.
(iii) FEHBP. The Federal Employee Health Benefits Program under chapter 89 of title 5, United States Code.
(iv) Military coverage (including TRICARE). Coverage under chapter 55 of title 10, United States Code.
(v) Indian Health Service. Coverage under Chapter 18 of title 28 of the United States Code.
(vi) Federally qualified health centers. Federally qualified health centers as defined under section 1861(aa)(4) of the Act.
(vii) Rural health clinics. Rural health clinics as defined under section 1861(aa)(2) of the Act.
(viii) Other Part D plans.
(ix) Other prescription drug coverage. Other health benefit plans or programs that provide coverage or financial assistance for the purchase or provision of Part D drugs on behalf of Part D eligible individuals as CMS may specify.
(2) Treatment under out-of-pocket rule. (i) For purposes of determining whether a Part D plan enrollee has satisfied the out-of-pocket threshold provided under § 423.104(d)(5)(iii), a Part D plan must do all of the following:
(A) Include the enrollee's incurred costs (as defined in § 423.100).
(B) Report, accept and apply benefit accumulator data in a timeframe and manner determined by CMS.
(C) Exclude expenditures for covered Part D drugs made by insurance or otherwise, a group health plan, or other third party payment arrangements, including expenditures by plans offering other prescription drug coverage.
(ii) A Part D enrollee must disclose all these expenditures to a Part D plan in accordance with requirements under § 423.32(b)(ii).
(3) Imposition of fees. A Part D sponsor may not impose fees on SPAPs and entities offering other prescription drug coverage that are unrelated to the cost of the coordination of benefits.
(4) Authority to recover expenditures due to incorrect information on true out-of-pocket costs. In the event that a Part D plan learns that it has made an erroneous payment due to inaccurate or incomplete information on the satisfaction of the out-of-pocket threshold under § 423.104(d)(5)(iii), that plan is authorized to recover such costs directly from the Part D enrollee on whose behalf the costs were incurred. A Part D enrollee must reimburse the Part D plan for payment made for these costs.
(5) Plan-to-plan liability. In the process of coordinating benefits between Part D plans when a Part D plan from which a beneficiary has transferred has incorrectly made payment for covered prescription drug costs incurred after the effective date of the Part D enrollee's enrollment in the new Part D plan of record, the new Part D plan of record must make the reconciling payments based on amounts reported to it by CMS without regard to the Part D plan's own formulary or drug utilization review edits.
(6) Use of other reconciliation processes. In the process of coordinating benefits between the correct Part D plan of record and another entity providing prescription drug coverage when that entity has incorrectly paid as primary payer for a covered Part D drug on behalf of a Part D enrollee, the correct Part D plan of record must achieve timely reconciliation through working directly with the other entity that incorrectly paid as primary payer, unless CMS has established reconciliation processes for payment reconciliation, rather than requesting pharmacy claims reversal and re-adjudication.
(g) Responsibility to account for other providers of prescription drug coverage when a retroactive claims adjustment creates an overpayment or underpayment. When a Part D sponsor makes a retroactive claims adjustment, the sponsor has the responsibility to account for SPAPs and other entities providing prescription drug coverage in reconciling the claims adjustments that create overpayments or underpayments. In carrying out these reimbursements and recoveries, Part D sponsors must also account for payments made and for amounts being held for payment by other individuals or entities. Part D sponsors must have systems to track and report adjustment transactions and to support all of the following:
(1) Adjustments involving payments by other plans and programs providing prescription drug coverage have been made.
(2) Reimbursements for excess cost-sharing and premiums for low-income subsidy eligible individuals have been processed in accordance with the requirements in § 423.800(c).
(3) Recoveries of erroneous payments for enrollees as specified in § 423.464(f)(4) have been sought.
(h) Reporting requirements. A Part D sponsor must report credible new or changed supplemental prescription drug coverage information to the CMS Coordination of Benefits Contractor in accordance with the processes and timeframes specified by CMS.
§ 423.466   Timeframes for coordination of benefits and claims adjustments.
(a) Retroactive claims adjustments, underpayment refunds, and overpayment recoveries. Whenever a sponsor receives information that necessitates a retroactive claims adjustment, the sponsor must process the adjustment and issue refunds or recovery notices within 45 days of the sponsor's receipt of complete information regarding claims adjustment.
(b) Coordination of benefits. Part D sponsors must coordinate benefits with SPAPs, other entities providing prescription drug coverage, beneficiaries, and others paying on the beneficiaries' behalf for a period of 3 years from the date on which the prescription for a covered Part D drug was filled.
§ 423.500   Scope.
This subpart sets forth application procedures and contracts with Part D plans: application procedures and requirements; contract terms; procedures for termination of contracts; reporting by Part D plans. For purposes of this subpart, Medicare Advantage (MA) organizations offering Part D plans follow the requirements of part 422 of this chapter for MA organizations, except in cases where the requirements for the qualified prescription drug coverage involve additional requirements.
§ 423.501   Definitions
For purposes of this subpart, the following definitions apply:
Bona fide service fees means fees paid by a manufacturer to an entity that represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement, and that are not passed on in whole or in part to a client or customer of an entity, whether or not the entity takes title to the drug.
Business transaction means any of the following kinds of transactions:
(1) Sale, exchange, or lease of property.
(2) Loan of money or extension of credit.
(3) Goods, services, or facilities furnished for a monetary consideration, including management services, but not including—
(i) Salaries paid to employees for services performed in the normal course of their employment; or
(ii) Health services furnished to the Part D plan sponsor's enrollees by pharmacies and other providers, by Part D plan sponsor staff, medical groups, or independent practice associations, or by any combination of those entities.
Downstream entity means any party that enters into a written arrangement, acceptable to CMS, below the level of the arrangement between a Part D plan sponsor (or applicant) and a first tier entity. These written arrangements continue down to the level of the ultimate provider of both health and administrative services.
Final settlement adjustment period means the period of time between when the contract terminates and the date the Part D sponsor is issued a notice of the final settlement amount.
Final settlement amount means the final payment amount that CMS owes and ultimately pays to a Part D sponsor, or that a Part D sponsor owes and ultimately pays to CMS, with respect to a Part D contract that has consolidated, nonrenewed, or terminated. The final settlement amount is calculated by summing final retroactive payment adjustments for a specific contract that accumulated after that contract ceases operation but before the calculation of the final settlement amount and all of the following applicable reconciliation amounts that have been completed as of the date the notice of final settlement has been issued, without accounting for any data submitted after the data submission deadlines for calculating these reconciliation amounts:
(1) Risk adjustment reconciliation, as applicable (described in § 422.310 of this chapter).
(2) Part D annual reconciliation (described in § 423.343).
(3) Coverage Gap Discount Program annual reconciliation (described in § 423.2320).
(4) MLR remittances (described in §§ 422.2470 of this chapter and 423.2470).
Final settlement process means for a contract that has been consolidated, nonrenewed, or terminated, the process by which CMS does all of the following:
(1) Calculates the final settlement amount.
(2) Issues the final settlement amount along with supporting documentation in the notice of final settlement to the Part D sponsor.
(3) Receives responses from the Part D sponsor requesting an appeal of the final settlement amount.
(4) Takes action to adjudicate an appeal (if requested) and make payments to or receive payments from the Part D sponsor. The final settlement amount is calculated after all applicable reconciliations have occurred after a contract has been consolidated, nonrenewed, or terminated.
First tier entity means any party that enters into a written arrangement, acceptable to CMS, with a Part D plan sponsor or applicant to provide administrative services or health care services for a Medicare eligible individual under Part D.
Party in interest means the following:
(1) Any director, officer, partner, or employee responsible for management or administration of a Part D plan sponsor.
(2) Any person who is directly or indirectly the beneficial owner of more than 5 percent of the organization's equity; or the beneficial owner of a mortgage, deed of trust, note, or other interest secured by and valuing more than 5 percent of the organization.
(3) In the case of a PDP sponsor organized as a nonprofit corporation, an incorporator or member of the corporation under applicable State corporation law.
(4) Any entity in which a person specified in paragraphs (1), (2), or (3) of this definition—
(i) Is an officer, director, or partner; or
(ii) Has the kind of interest described in paragraphs (1), (2), or (3) of this definition.
(5) Any person that directly or indirectly controls, is controlled by, or is under common control with the Part D plan sponsor.
(6) Any spouse, child, or parent of an individual specified in paragraphs (1), (2), or (3) of this definition.
Prescription drug pricing standard means any methodology or formula for varying the pricing of a drug or drugs during the term of a pharmacy reimbursement contract that is based on the cost of a drug, which includes, but is not limited to, drug pricing references and amounts based on any of the following:
(1) Average wholesale price.
(2) Wholesale acquisition cost.
(3) Average manufacturer price.
(4) Average sales price.
(5) Maximum allowable cost.
(6) Other cost, whether publicly available or not.
Related entity means any entity that is related to the PDP sponsor by common ownership or control and—
(1) Performs some of the Part D plan sponsor's management functions under contract or delegation;
(2) Furnishes services to Medicare enrollees under an oral or written agreement; or
(3) Leases real property or sells materials to the Part D plan sponsor at a cost of more than $2,500 during a contract period.
Significant business transaction means any business transaction or series of transactions of the kind specified in the above definition of business transaction that, during any fiscal year of the Part D plan sponsor, have a total value that exceeds $25,000 or 5 percent of the PDP sponsor's total operating expenses, whichever is less.
§ 423.502   Application requirements.
(a) Scope. This section sets forth application requirements for an entity that seeks a determination from CMS that it is qualified to contract as a sponsor of a Part D plan.
(b) Completion of a notice of intent to apply. (1) An organization submitting an application under this section for a particular contract year must first submit a completed Notice of Intent to Apply by the date established by CMS. CMS will not accept applications from organizations that do not submit a timely Notice of Intent to Apply.
(2) Submitting a Notice of Intent to Apply does not bind that organization to submit an application for the applicable contract year.
(3) An organization's decision not to submit an application after submitting an Notice of Intent to Apply will not form the basis of any action taken against the organization by CMS.
(c) Completion of an application. (1) In order to obtain a determination on whether it meets the requirements to become a Part D plan sponsor, an entity, or an individual authorized to act for the entity (the applicant), must fully complete all parts of a certified application in the form and manner required by CMS, including the following:
(i) Documentation of appropriate State licensure or State certification that the entity is able to offer health insurance or health benefits coverage that meets State-specified standards as specified in subpart I of this part; or
(ii) A Federal waiver as specified in subpart I of this part.
(2) The authorized individual must describe thoroughly how the entity is qualified to meet the all requirements described in this part.
(d) Responsibility for making determinations. (1) CMS is responsible for determining whether an entity is qualified to contract as a Part D plan sponsor and meets the requirements of this part.
(2) A CMS determination that an entity is qualified to act as a Part D plan sponsor is distinct from the bid negotiations that occur under subpart F of part 423 and such negotiations are not subject to the appeals provisions included in subpart N of this part.
(e) Disclosure of application information under the Freedom of Information Act. An applicant submitting material that he or she believes is protected from disclosure under 5 USC 552, the Freedom of Information Act, or because of exemptions provided in 45 CFR part 5 (the Department's regulations providing exemptions to disclosure), must label the material “privileged” and include an explanation of the applicability of an exemption specified in 45 CFR part 5.
§ 423.503   Evaluation and determination procedures.
(a) Basis for evaluation and determination. (1) Information used to evaluate applications. With the exception of evaluations conducted under paragraph (b) of this section, CMS evaluates an entity's application solely on the basis of information contained in the application itself and any additional information that CMS obtains through on-site visits and any essential operations test.
(2) Issuing application determination. After evaluating all relevant information, CMS determines whether the application meets all the requirements described in this part.
(3) Limitation on PDP contracts under a single parent organization CMS does not approve an application when it would result in the applicant's parent organization, directly or through its subsidiaries, holding more than one PDP sponsor contract in the PDP Region for which the applicant is seeking qualification as a PDP sponsor.
(4) Substantially incomplete applications. (i) CMS does not evaluate or issue a notice of determination described in § 423.503(c) when an organization submits a substantially incomplete application.
(ii) An application is substantially incomplete when the submission as of the deadline for applications established by CMS is missing content or responsive materials for one or more sections of the application form required by CMS.
(iii) A determination that an application is substantially incomplete is not a contract determination as defined in § 423.641 and a determination that an organization submitted a substantially incomplete application is not subject to the appeals provisions of subpart N of this part.
(b) Use of information from a current or prior contract. (1) Except as provided in paragraphs (b)(2) through (4) of this section, if a Part D plan sponsor fails during the 12 months preceding the deadline established by CMS for the submission of contract qualification applications to comply with the requirements of the Part D program under any current or prior contract with CMS under title XVIII of the Act CMS may deny an application based on the applicant's failure to comply with the requirements of the Part D program under any current or prior contract with CMS even if the applicant currently meets all of the requirements of this part.
(i) An applicant may be considered to have failed to comply with a contract for purposes of an application denial under paragraph (b)(1) of this section if during the applicable review period the applicant:
(A) Was under an intermediate sanction under subpart O of this part, or a determination by CMS to prohibit the enrollment of new enrollees under § 423.2410(c).
(B) Failed to maintain a fiscally sound operation consistent with the requirements of § 423.505(b)(23).
(C) Filed for or is currently in federal or state bankruptcy proceedings.
(D) Received any combination of Part C or Part D summary ratings of 2.5 or less in both of the two most recent Star Rating periods, as identified in § 423.186.
(E) Met or exceeded 13 points for compliance actions on any one contract.
( 1 ) CMS determines the number of points each Part D plan sponsor accumulated during the performance period for compliance actions based on the following point values:
( i ) Each corrective action plan issued during the performance period under § 423.505(n) counts for 6 points.
( ii ) Each warning letter issued during the performance period under § 423.505(n) counts for 3 points.
( iii ) Each notice of noncompliance issued during the performance period under § 423.505(n) counts for 1 point.
( 2 ) CMS adds all the point values for each Part D plan sponsor to determine if any organization meets CMS' identified threshold.
(ii) CMS may deny an application submitted by an organization that does not hold a Part D contract at the time of the submission when the applicant's parent organization or another subsidiary of the parent organization meets the criteria for denial stated in paragraph (b)(1)(i) of this section. This paragraph does not apply when the parent completed the acquisition of the subsidiary that meets the criteria within the 24 months preceding the application submission deadline.
(2) In the absence of 12 months of performance history, CMS may deny an application based on a lack of information available to determine an applicant's capacity to comply with the requirements of the Part D program.
(3) If CMS has terminated, under § 423.509, or non-renewed, under § 423.507(b), a Part D plan sponsor's contract, effective within the 38 months preceding the deadline established by CMS for the submission of contract qualification applications, CMS may deny an application based on the applicant's substantial failure to comply with the requirements of the Part D program even if the applicant currently meets all of the requirements of this part.
(4) During the same 38-month period as specified in (b)(3) of this section, CMS may deny an application where the applicant's covered persons also served as covered persons for the terminated or non-renewed contract. A “covered person” as used in this paragraph means one of the following:
(i) All owners of terminated organizations who are natural persons, other than shareholders who have an ownership interest of less than 5 percent.
(ii) An owner in whole or part interest in any mortgage, deed of trust, note or other obligation secured (in whole or in part) by the organization, or any of the property or assets thereof, which whole or part interest is equal to or exceeds 5 percent of the total property, and assets of the organization.
(iii) A member of the board of directors or board of trustees of the entity, if the organization is organized as a corporation.
(c) Notice of determination. Except for fallback entities, which are governed under subpart Q of this part, CMS notifies each applicant that applies to be determined qualified to contract as a Part D plan sponsor, under this part, of its determination on the application and the basis for the determination. The determination may be one of the following:
(1) Approval of application. If CMS approves the application, it gives written notice to the applicant, indicating that it qualifies to contract as Part D plan sponsor.
(2) Intent to deny. (i) If CMS finds that the applicant does not appear qualified to contract as a Part D sponsor, it gives the applicant notice of intent to deny the application and a summary of the basis for this preliminary finding.
(ii) Within 10 days from the date of the notice, the applicant may respond in writing to the issues or other matters that were the basis for CMS's preliminary finding and may revise its application to remedy any defects CMS identified.
(iii) If CMS does not receive a revised application within 10 days from the date of the notice, or if after timely submission of a revised application, CMS still finds the applicant does not appear qualified to contract as a Part D plan sponsor or has not provided enough information to allow CMS to evaluate the application, CMS denies the application.
(3) Denial of application. If CMS denies the application, it gives written notice to the applicant indicating—
(i) That the applicant is not qualified to contract as a Part D sponsor under Part D of title XVIII of the Act;
(ii) The reasons why the applicant does is not so qualified; and
(iii) The applicant's right to request a hearing in accordance with the procedures specified in subpart N of this part.
(4) Nullification of approval of application. If CMS discovers through any means that an applicant is not qualified to contract based on information gained subsequent to application approval (for example, failure of an essential operations test, absence of required employees, etc.), CMS gives the applicant written notice indicating that the approval issued under paragraph (c)(1) of this section is nullified and the applicant no longer qualifies to contract as a Part D plan sponsor.
(i) This determination is not subject to the appeals provisions in subpart N of this part.
(ii) This provision only applies to applicants that have not previously entered into a Part D contract with CMS and neither it, nor another subsidiary of the applicant's parent organization, is offering Part D benefits during the current year.
(d) Withdrawal of application and bid in a previous year. An applicant that withdraws its application and corresponding bid after the release of the low-income subsidy benchmark is not eligible to be approved as a Part D plan sponsor for the 2 succeeding annual contracting cycles.
§ 423.504   General provisions.
(a) General rule. Subject to the provisions at § 423.265 of this part concerning submission of bids, to enroll beneficiaries in any Part D drug plan it offers and be paid on behalf of Part D eligible individuals enrolled in those plans, a Part D plan sponsor must enter into a contract with CMS. The contract may cover more than one Part D plan.
(b) Conditions necessary to contract as a Part D plan sponsor. Any entity seeking to contract as a Part D plan sponsor must—
(1) Complete an application as described in § 423.502 demonstrating that the entity has the capability to meet the requirements of this part, including those listed in § 423.505.
(2) Be organized and licensed under State law as a risk bearing entity eligible to offer health insurance or health benefits coverage in each State in which it offers a Part D plan, or have secured a Federal waiver, as described in subpart I of this part. (Fallback entity applicants need not be licensed as risk-bearing entities, nor are they required to obtain State licensure demonstrating that the applicant is eligible to offer health insurance or health benefits coverage in each State in which it applies to operate.)
(3) Meet the minimum enrollment requirements of § 423.512(a) unless waived under § 423.512(b).
(4) Have administrative and management arrangements satisfactory to CMS, as demonstrated by at least the following:
(i) A policy making body that exercises oversight and control over the Part D plan sponsor's policies and personnel to ensure that management actions are in the best interest of the organization and its enrollees.
(ii) Personnel and systems sufficient for the Part D plan sponsor to organize, implement, control, and evaluate financial and communication activities, the furnishing of prescription drug services, the quality assurance, medical therapy management, and drug and or utilization management programs, and the administrative and management aspects of the organization.
(iii) At a minimum, an executive manager whose appointment and removal are under the control of the policy making body.
(iv) A fidelity bond or bonds, procured and maintained by the Part D sponsor, in an amount fixed by its policymaking body but not less than $100,000 per individual, covering each officer and employee entrusted with the handling of its funds. The bond may have reasonable deductibles, based upon the financial strength of the Part D plan sponsor.
(v) Insurance policies or other arrangements, secured and maintained by the Part D plan sponsor and approved by CMS to insure the Part D plan sponsor against losses arising from professional liability claims, fire, theft, fraud, embezzlement, and other casualty risks.
(vi) Adopt and implement an effective compliance program, which must include measures that prevent, detect, and correct noncompliance with CMS' program requirements as well as measures that prevent, detect, and correct fraud, waste, and abuse. The compliance program must, at a minimum, include the following core requirements:
(A) Written policies, procedures, and standards of conduct that—
( 1 ) Articulate the Part D plan sponsor's commitment to comply with all applicable Federal and State standards;
( 2 ) Describe compliance expectations as embodied in the standards of conduct;
( 3 ) Implement the operation of the compliance program;
( 4 ) Provide guidance to employees and others on dealing with potential compliance issues;
( 5 ) Identify how to communicate compliance issues to appropriate compliance personnel;
( 6 ) Describe how potential compliance issues are investigated and resolved by the Part D plan sponsor; and
( 7 ) Include a policy of non-intimidation and non-retaliation for good faith participation in the compliance program, including but not limited to reporting potential issues, investigating issues, conducting self-evaluations, audits and remedial actions, and reporting to appropriate officials.
(B) The designation of a compliance officer and a compliance committee who report directly and are accountable to the Part D plan sponsor's chief executive or other senior management.
( 1 ) The compliance officer, vested with the day-to-day operations of the compliance program, must be an employee of the Part D plan sponsor, parent organization or corporate affiliate. The compliance officer may not be an employee of the Part D plan sponsor's first tier, downstream or related entity.
( 2 ) The compliance officer and the compliance committee must periodically report directly to the governing body of the Part D plan sponsor on the activities and status of the compliance program, including issues identified, investigated, and resolved by the compliance program.
( 3 ) The governing body of the Part D plan sponsor must be knowledgeable about the content and operation of the compliance program and must exercise reasonable oversight with respect to the implementation and effectiveness of the compliance programs.
(C)( 1 ) Each Part D plan sponsor must establish and implement effective training and education for its compliance officer and organization employees, the Part D sponsor's chief executive and other senior administrators, managers and governing body members.
( 2 ) Such training and education must occur at a minimum annually and must be made a part of the orientation for a new employee, and new appointment to a chief executive, manager, or governing body member.
(D) Establishment and implementation of effective lines of communication, ensuring confidentiality, between the compliance officer, members of the compliance committee, the Part D plan sponsor's employees, managers and governing body, and the Part D plan sponsor's first tier, downstream, and related entities. Such lines of communication must be accessible to all and allow compliance issues to be reported including a method for anonymous and confidential good faith reporting of potential compliance issues as they are identified.
(E) Well-publicized disciplinary standards through the implementation of procedures which encourage good faith participation in the compliance program by all affected individuals. These standards must include policies that—
( 1 ) Articulate expectations for reporting compliance issues and assist in their resolution;
( 2 ) Identify non-compliance or unethical behavior; and
( 3 ) Provide for timely, consistent, and effective enforcement of the standards when non-compliance or unethical behavior is determined.
(F) Establishment and implementation of an effective system for routine monitoring and identification of compliance risks. The system should include internal monitoring and audits and, as appropriate, external audits, to evaluate the Part D plan sponsors, including first tier entities', compliance with CMS requirements and the overall effectiveness of the compliance program.
(G) Establishment and implementation of procedures and a system for promptly responding to compliance issues as they are raised, investigating potential compliance problems as identified in the course of self-evaluations and audits, correcting such problems promptly and thoroughly to reduce the potential for recurrence, and ensure ongoing compliance with CMS requirements.
( 1 ) If the Part D sponsor discovers evidence of misconduct related to payment or delivery of prescription drug items or services under the contract, it must conduct a timely, reasonable inquiry into that conduct;
( 2 ) The Part D sponsor must conduct appropriate corrective actions (for example, repayment of overpayments and disciplinary actions against responsible individuals) in response to the potential violation referenced above.
( 3 ) The Part D plan sponsor should have procedures to voluntarily self-report potential fraud or misconduct related to the Part D program to CMS or its designee.
( 4 ) The Part D plan sponsor must have procedures to identify, and must report to CMS or its designee either of the following, in the manner described in paragraphs (b)(4)(vi)(G)( 4 ) through ( 6 ) of this section:
( i ) Any payment suspension implemented by a plan, pending investigation of credible allegations of fraud by a pharmacy, which must be implemented in the same manner as the Secretary does under section 1862(o)(1) of the Act.
( ii ) Any information concerning investigations, credible evidence of suspicious activities of a provider of services (including a prescriber) or supplier, and other actions taken by the plan related to the inappropriate prescribing of opioids.
( 5 ) The Part D plan sponsor must submit data, as specified in this section, in the program integrity portal when reporting payment suspensions pending investigations of credible allegations of fraud by pharmacies; information related to the inappropriate prescribing of opioids and concerning investigations and credible evidence of suspicious activities of a provider of services (including a prescriber) or supplier, and other actions taken by the plan sponsor; or if the plan reports a referral, through the portal, of substantiated or suspicious activities of a provider of services (including a prescriber) or a supplier related to fraud, waste or abuse to initiate or assist with investigations conducted by CMS, or its designee, a Medicare program integrity contractor, or law enforcement partners. The data categories, as applicable, include referral information and actions taken by the Part D plan sponsor on the referral. ( 6 )( i ) The plan sponsor is required to notify the Secretary, or its designee, of a payment suspension described in paragraph (b)(4)(vi)(G)( 4 ) of this section 7 days prior to implementation of the payment suspension. The MA organization may request an exception to the 7day prior notification to the Secretary, or its designee, if circumstances warrant a reduced reporting time frame, such as potential beneficiary harm.
( ii ) The plan sponsor is required to submit the information described in paragraph (b)(4)(vi)(G)( 4 )( ii ) of this section no later than January 30, April 30, July 30, and October 30 of each year for the preceding periods, respectively, of October 1 through December 31, January 1 through March 31, April 1 through June 30, and July 1 through September 30. For the first reporting period (January 30, 2022), the reporting will reflect the data gathered and analyzed for the previous quarter in the calendar year (October 1-December 31).
( 7 )( i ) CMS provides plan sponsors with data report(s) or links to the information described in paragraphs (b)(4)(vi)(G)( 4 )( i ) and ( ii ) of this section no later than April 15, July 15, October 15, and January 15 of each year based on the information in the portal, respectively, as of the preceding October 1 through December 31, January 1 through March 31, April 1 through June 30, and July 1 through September 30.
( ii ) Include administrative actions, pertinent information related to opioid overprescribing, and other data determined appropriate by the Secretary in consultation with stakeholders.
( iii ) Are anonymized information submitted by plans without identifying the source of such information.
( iv ) For the first quarterly report (April 15, 2022), that the report reflect the data gathered and analyzed for the previous quarter submitted by the plan sponsors on January 30, 2022.
(5) Not have non-renewed a contract under § 423.507 within the past 2 years unless—
(i) During the 6-month period, beginning on the date the entity notified CMS of the intention to non-renew the most recent previous contract, there was a change in the statute or regulations that had the effect of increasing Part D sponsor payments in the payment area or areas at issue; or
(ii) CMS has otherwise determined that circumstances warrant special consideration.
(6) Not have terminated a contract by mutual consent under which, as a condition of the consent, the Part D plan sponsor agreed that it was not eligible to apply for new contracts or service area expansions for a period up to 2 years per § 423.508(e) of this subpart.
(7) For a full risk or limited risk PDP applicant, not submitted a bid or offered a fallback prescription drug plan in accordance with the following rules.
(i) CMS does not contract with a potential PDP sponsor for the offering of a full risk or limited risk prescription drug plan in a PDP region for a year if the applicant—
(A) Submitted a bid under § 423.863 for the year (as the first year of a contract period under § 423.863 to offer a fallback prescription drug plan in any PDP region;
(B) Offers a fallback prescription drug plan in any PDP region during the year; or
(C) Offered a fallback prescription drug plan in that PDP region during the previous year.
(ii) Construction. For purposes of this paragraph (b)(6), an entity is treated as submitting an application to become qualified to contract as a full risk or limited risk PDP sponsor, if the entity is acting as a subcontractor for an integral part of the drug benefit management activities of a full risk or limited risk PDP sponsor or applicant. The previous sentence does not apply to entities that are subcontractors of an MA organization except insofar as the MA organization is applying to act as a full risk or limited risk PDP sponsor.
(8) If neither the applicant, nor its parent or another subsidiary of the same parent, holds a Part D sponsor contract that has been in effect for at least 1 year at the time it submits an application, the applicant must have arrangements in place such that the applicant and its contracted first tier, downstream, or related entities, in combination, have at least 1 full-benefit year of experience within the 2 years preceding the application submission performing at a minimum all of the following functions in support of the operation of another Part D contract:
(i) Authorization, adjudication, and processing of prescription drug claims at the point of sale.
(ii) Administration and tracking of enrollees' drug benefits in real time, including automated coordination of benefits with other payers.
(iii) Operation of an enrollee appeals and grievance process.
(9) For organizations applying to offer stand-alone prescription drug plans, the organization, its parent, or a subsidiary of the organization or its parent, must have either of the following:
(i) For 2 continuous years immediately prior to submitting an application, actively offered health insurance or health benefits coverage, including prescription drug coverage, as a risk-bearing entity in at least one State.
(ii) For 5 continuous years immediately prior to submitting an application, actively managed prescription drug benefits for an organization that offers health insurance or health benefits coverage, including at a minimum, all of the services listed in paragraph (b)(8) of this section.
(10) Pass an essential operations test prior to the start of the benefit year. This provision only applies to new sponsors that have not previously entered into a Part D contract with CMS when neither it, nor another subsidiary of the applicant's parent organization, is offering Part D benefits during the current year.
(c) Contracting authority. CMS may enter into contracts under this part, or in order to carry out this part, without regard to Federal and Departmental acquisition regulations set forth in Title 48 of the CFR and provisions of law or other regulations relating to the making, performance, amendment, or modification of contracts of the United States if CMS determines that those provisions are inconsistent with the efficient and effective administration of the Medicare program.
(d) Protection against fraud and beneficiary protections. (1) CMS annually audits the financial records (including, but not limited to, data relating to Medicare utilization and costs, including allowable reinsurance and risk corridor costs as well as low income subsidies and other costs) under this part of at least one-third of the Part D sponsors offering Part D drug plans.
(2) Each contract under this section must provide that CMS, or any person or organization designated by CMS, has the right to—
(i) Inspect or otherwise evaluate the quality, appropriateness, and timeliness of services performed under the Part D plan sponsor's contract;
(ii) Inspect or otherwise evaluate the facilities of the Part D sponsor when there is reasonable evidence of some need for the inspection; and
(iii) Audit and inspect any books, contracts, and records of the Part D plan sponsor that pertain to—
(A) The ability of the organization or its first tier or downstream providers to bear the risk of potential financial losses; or
(B) Services performed or determinations of amounts payable under the contract.
(iv) CMS may require that the Part D Plan sponsor hire an independent auditor to provide CMS with additional information to determine if deficiencies found during an audit or inspection have been corrected and are not likely to recur. The independent auditor must work in accordance with CMS specifications and must be willing to attest that a complete and full independent review has been performed.
(e) Severability of contracts. The contract must provide that, upon CMS' request—
(1) The contract could be amended to exclude any State-licensed entity, or a Part D plan specified by CMS; and
(2) A separate contract for any excluded plan or entity must be deemed to be in place when a request is made.
§ 423.505   Contract provisions.
(a) General rule. The contract between the Part D plan sponsor and CMS must contain the provisions specified in paragraph (b) of this section.
(b) Requirements for contracts. The Part D plan sponsor agrees to—
(1) All the applicable requirements and conditions set forth in this part and in general instructions.
(2) Accept new enrollments, make enrollments effective, process voluntary disenrollments, and limit involuntary disenrollments, as provided in subpart B of this part.
(3) Comply with the prohibition in § 423.34(a) on discrimination in beneficiary enrollment.
(4) Provide the basic prescription drug coverage as defined under § 423.100 and, to the extent applicable, supplemental benefits as defined in § 423.100. (Fallback entities may offer only standard prescription drug coverage as specified in § 423.855.)
(5) Disclose information to beneficiaries in the manner and the form specified by CMS under § 423.128.
(6) Operate quality assurance, cost and utilization management, medication therapy management, and support e-prescribing as required under subpart D of this part.
(7) Comply with all requirements in subpart M of this part governing coverage determinations, grievances, and appeals, and formulary exceptions.
(8) Comply with the disclosure and reporting requirements in § 423.505(f), § 423.514, and the requirements in § 423.329(b) of this part for submitting current and prior drug claims and related information to CMS for its use in risk adjustment calculations and for the purposes of implementing § 423.505(f), (l), and (m) and § 423.329(b) of this part.
(9) Provide CMS with the information CMS determines is necessary to carry out payment provisions in subpart G of this part (or for fallback entities, the information necessary to carry out the payment provisions in subpart Q of this part).
(10) Allow CMS to inspect and audit any books and records of a Part D plan sponsor and its delegated first tier, downstream and related entities, that pertain to the information regarding costs provided to CMS under paragraph (b)(9) of this section, or, if a fallback entity, the information submitted under subpart Q of this part.
(11) Be paid under the contract in accordance with the payment rules in subpart G of this part, or, if a fallback entity, in accordance with the payment rules of subpart Q of this part.
(12) Except for fallback entities, submit a future year's bid, including all required information on premiums, benefits, and cost-sharing, by any applicable due date, as provided in subpart F so that CMS and the Part D plan sponsor may conduct negotiations regarding the terms and conditions of the proposed bid and benefit plan renewal.
(13) Permit CMS to determine that it is not qualified to renew its contract or that its contract may be terminated in accordance with this subpart and subpart N of this part. (Subpart N applies to fallback entities only to the extent a fallback contract is terminated.)
(14) Comply with the confidentiality and enrollee record accuracy specified in § 423.136.
(15) Comply with State law and preemption by Federal law requirements described in subpart I of this part.
(16) Comply with the coordination requirements with SPAPs and plans that provide other prescription drug coverage as described in subpart J of this part.
(17) Provide benefits by means of point of service systems to adjudicate in a drug claims in a timely and efficient manner in compliance with CMS standards, except when necessary to provide access in underserved areas, I/T/U pharmacies (as defined in § 423.100), and long-term care pharmacies (as defined in § 423.100).
(18) To agree to have a standard contract with reasonable and relevant terms and conditions of participation whereby any willing pharmacy may access the standard contract and participate as a network pharmacy including all of the following:
(i) Making standard contracts available upon request from interested pharmacies no later than September 15 of each year for contracts effective January 1 of the following year.
(ii) Providing a copy of a standard contract to a requesting pharmacy within 7 business days after receiving such a request from the pharmacy.
(19) Effective contract year 2010, include the prompt payment provisions described in § 423.520.
(20) Effective contract year 2010, provide that pharmacies located in, or having a contract with, a long-term care facility (as defined in § 423.100) must have not less than 30 days, nor more than 90 days, to submit to the Part D sponsor claims for reimbursement under the plan.
(21)(i) Update any prescription drug pricing standard (as defined in § 423.501) based on the cost of the drug used for reimbursement of network pharmacies by the Part D sponsor on January 1 of each contract year and not less frequently than once every 7 days thereafter;
(ii) Indicate the source used for making any such updates; and
(iii) Disclose all individual drug prices to be updated to the applicable pharmacies in advance of their use for reimbursement of claims, if the source for any prescription drug pricing standard is not publicly available.
(22) As described in § 423.129, address and resolve complaints received by CMS against the Part D sponsor in the Complaints Tracking Module.
(23) Maintain a fiscally sound operation by at least maintaining a positive net worth (total assets exceed total liabilities).
(24) Provide applicable beneficiaries with applicable discounts on applicable drugs in accordance with the requirements in subpart W of part 423.
(25) Maintain administrative and management capabilities sufficient for the organization to organize, implement, and control the financial, communication, benefit administration, and quality assurance activities related to the delivery of Part D services.
(26) Maintain a Part D summary plan rating score of at least 3 stars under the 5-star rating system specified in subpart 186 of this part 423. A Part D summary plan rating is calculated as provided in § 423.186.
(27) Pass an essential operations test prior to the start of the benefit year. This provision only applies to new sponsors that have not previously entered into a Part D contract with CMS and neither it, nor another subsidiary of the applicant's parent organization, is offering Part D benefits during the current year.
(c) Communication with CMS. The Part D plan sponsor must have the capacity to communicate with CMS electronically in accordance with CMS requirements.
(d) Maintenance of records. The Part D plan sponsor agrees to maintain, for 10 years, books, records, documents, and other evidence of accounting procedures and practices that-
(1) Are sufficient to do the following:
(i) Accommodate periodic auditing of the financial records (including data related to Medicare utilization, costs, and computation of the bid of part D plan sponsors).
(ii) Enable CMS to inspect or otherwise evaluate the quality, appropriateness, and timeliness of services performed under the contract and the facilities of the organization.
(iii) Enable CMS to audit and inspect any books and records of the Part D plan sponsor that pertain to the ability of the organization to bear the risk of potential financial losses, or to services performed or determinations of amounts payable under the contract.
(iv) Except for fallback entities, properly reflect all direct and indirect costs claimed to have been incurred and used in the preparation of the Part D plan sponsor's bid and necessary for the calculation of gross covered prescription drug costs, allowable reinsurance costs, and allowable risk corridor costs (as defined in § 423.308).
(v) Except for fallback entities, establish the basis for the components, assumptions, and analysis used by the Part D plan in determining the actuarial valuation of standard, basic alternative, or enhanced alternative coverage offered in accordance with the CMS guidelines specified in § 423.265(c)(3).
(2) Include records of the following:
(i) Ownership and operation of the Part D sponsor's financial, medical, and other record keeping systems.
(ii) Financial statements for the current contract period and 10 prior periods.
(iii) Federal income tax or informational returns for the current contract period and 10 prior periods.
(iv) Asset acquisition, lease, sale, or other actions.
(v) Agreements, contracts, and subcontracts.
(vi) Franchise, marketing, and management agreements.
(vii) Matters pertaining to costs of operations.
(viii) Amounts of income received by source and payment.
(ix) Cash flow statements.
(x) Any financial reports filed with other Federal programs or State authorities.
(xi) All prescription drug claims for the current contract period and 10 prior periods.
(xii) All price concessions (including concessions offered by manufacturers) for the current contract period and 10 prior periods accounted for separately from other administrative fees.
(e) Access to facilities and records. The Part D plan sponsor agrees to the following:
(1) HHS, the Comptroller General, or their designee may evaluate, through audit, inspection, or other means—
(i) The quality, appropriateness, and timeliness of services furnished to Medicare enrollees under the contract;
(ii) Compliance with CMS requirements for maintaining the privacy and security of protected health information and other personally identifiable information of Medicare enrollees;
(iii) The facilities of the Part D sponsor to include computer and other electronic systems; and
(iv) The enrollment and disenrollment records for the current contract period and 10 prior periods.
(2) The Part D plan sponsor agrees to make available to HHS, the Comptroller General, or their designees, for the purposes specified in paragraph (d) of this section, its premises, physical facilities and equipment, records relating to its Medicare enrollees, and any additional relevant information that CMS may require. The Part D plan sponsor also agrees to make available any books, contracts, records and documentation of the Part D plan sponsor, first tier, downstream and related entity(s), or its transferee that pertain to any aspect of services performed, reconciliation of benefit liabilities, and determination of amounts payable under the contract, or as the Secretary may deem necessary to enforce the contract.
(3) The Part D plan sponsor agrees to make available, for the purposes specified in paragraph (d) of this section, its premises, physical facilities and equipment, records relating to its Medicare enrollees, and any additional relevant information that CMS may require.
(4) HHS, the Comptroller General, or their designee's right to inspect, evaluate, and audit extends through 10 years from the end of the final contract period or completion of audit, whichever is later unless—
(i) CMS determines there is a special need to retain a particular record or group of records for a longer period and notifies the Part D plan sponsor at least 30 days before the normal disposition date;
(ii) There is a termination, dispute, or allegation of fraud or similar fault by the Part D plan sponsor, in which case the retention may be extended to 6 years from the date of any resulting final resolution of the termination, dispute, or fraud or similar fault; or
(iii) CMS determines that there is a reasonable possibility of fraud or similar fault, in which case CMS may inspect, evaluate, and audit the Part D plan sponsor at any time.
(f) Disclosure of information. The Part D plan sponsor agrees to submit to CMS—
(1) Certified financial information that must include the following:
(i) Information as CMS may require demonstrating that the organization has a fiscally sound operation.
(ii) Information as CMS may require pertaining to the disclosure of ownership and control of the Part D plan sponsor.
(2) All information to CMS that is necessary for CMS to administer and evaluate the program and to simultaneously establish and facilitate a process for current and prospective beneficiaries to exercise choice in obtaining prescription drug coverage. This information includes, but is not limited to:
(i) The benefits covered under a Part D plan.
(ii) The Part D plan monthly basic beneficiary premium and Part D plan monthly supplemental beneficiary premium, if any, for the plan. Fallback entities submit the monthly beneficiary premium for standard prescription drug coverage.
(iii) The service area of each plan.
(iv) Plan quality and performance indicators for the benefits under the plan including—
(A) Disenrollment rates for Medicare enrollees electing to receive benefits through the plan for the previous 2 years;
(B) Information on Medicare enrollee satisfaction;
(C) The recent records regarding compliance of the plan with requirements of this part, as determined by CMS; and
(D) Other information determined by CMS to be necessary to assist beneficiaries in making an informed choice regarding Part D plans.
(v) Information about beneficiary appeals and their disposition, and formulary exceptions.
(vi) Information regarding all formal actions, reviews, findings, or other similar actions by States, other regulatory bodies, or any other certifying or accrediting organization.
(vii) Information on other matters that CMS may require, including, but not limited to, program monitoring and oversight, performance measures, quality assessment, research and evaluation, CMS outreach activities, payment-related oversight*, and fraud, abuse, and waste*, as specified in CMS guidelines.
(viii) Any other information deemed necessary to CMS for the administration or evaluation of the Medicare program.
(3) All data elements included in all its drug claims for purposes deemed necessary and appropriate by the Secretary, including, but not limited to the following:
(i) Reporting to Congress and the public on overall statistics associated with the operation of the Medicare prescription drug program.
(ii) Conducting evaluations of the overall Medicare program, including the interaction between prescription drug coverage under Part D of Title XVIII of the Social Security Act and the services and utilization under Parts A, B, and C of title XVIII of the Act and under titles XIX and XXI of the Act, as well as other studies addressing public health questions.
(iii) Making legislative proposals to the Congress regarding Federal health care programs and related programs.
(iv) Conducting demonstration and pilot projects and making recommendations for improving the economy, efficiency, or effectiveness of the Medicare program.
(v) Supporting care coordination and disease management programs.
(vi) Supporting quality improvement and performance measurement activities.
(vii) Populating personal health care records.
(viii) Supporting program integrity purposes, including coordination with the States.
(4) To its enrollees, all informational requirements under § 423.128 and, upon an enrollee's request, the financial disclosure information required under § 423.128(c)(4).
(g) Beneficiary financial protections. The Part D plan sponsor agrees to comply with the following requirements:
(1) Each Part D plan sponsor must adopt and maintain arrangements satisfactory to CMS to protect its enrollees from incurring liability for payment of any fees that are the legal obligation of the Part D sponsor. To meet this requirement, the Part D plan sponsor must—
(i) Ensure that all contractual or other written arrangements prohibit the sponsor's contracting agents from holding any beneficiary enrollee liable for payment of any such fees; and
(ii) Indemnify the beneficiary enrollee for payment of any fees that are the legal obligation of the Part D plan sponsor for covered prescription drugs furnished by non-contracting pharmacists, or that have not otherwise entered into an agreement with the Part D plan sponsor, to provide services to the organization's beneficiary enrollees.
(2) In meeting the requirements of this paragraph, other than the provider contract requirements specified in paragraph (g)(1)(i) of this section, the Part D plan sponsor may use—
(i) Contractual arrangements;
(ii) Insurance acceptable to CMS;
(iii) Financial reserves acceptable to CMS; or
(iv) Any other arrangement acceptable to CMS.
(h) Requirements of other laws and regulations. The Part D plan sponsor agrees to comply with—
(1) Federal laws and regulations designed to prevent fraud, waste, and abuse, including, but not limited to applicable provisions of Federal criminal law, the False Claims Act (31 U.S.C. 3729 et seq. ), and the anti-kickback statute (section 1128B(b) of the Act).
(2) HIPAA Administrative Simplification rules at 45 CFR parts 160, 162, and 164.
(i) Relationship with first tier, downstream, and related entities. (1) Notwithstanding any relationship(s) that the Part D plan sponsor may have with first tier, downstream, and related entities, the Part D sponsor maintains ultimate responsibility for adhering to and otherwise fully complying with all terms and conditions of its contract with CMS.
(2) The Part D sponsor agrees to require all first tier, downstream, and related entities to agree that—
(i) HHS, the Comptroller General, or their designees have the right to audit, evaluate, collect, and inspect any books, contracts, computer or other electronic systems, including medical records and documentation of the first tier, downstream, and related entities related to CMS' contract with the Part D sponsor.
(ii) HHS, the Comptroller General or their designees have the right to audit, evaluate, collect, and inspect any records under paragraph (i)(2)(i) of this section directly from any first tier, downstream, or related entity.
(iii) For records subject to review under paragraph (i)(2)(ii) of this section, except in exceptional circumstances, CMS will provide notification to the Part D sponsor that a direct request for information has been initiated.
(iv) HHS', the Comptroller General's, or their designee's right to inspect, evaluate, and audit any pertinent information for any particular contract period exists through 10 years from the final date of the contract period or from the date of completion of any audit, whichever is later.
(3) Each and every contract governing Part D sponsors and first tier, downstream, and related entities, must contain the following:
(i) Enrollee protection provisions that provide, consistent with paragraph (g)(1) of this section, arrangements that prohibit pharmacies or other providers from holding an enrollee liable for payment of any fees that are the obligation of the Part D plan sponsor.
(ii) Accountability provisions that indicate that the Part D sponsor may delegate activities or functions to a first tier, downstream, or related entity only in a manner consistent with requirements set forth at paragraph (i)(4) of this section.
(iii) A provision requiring that any services or other activity performed by a first tier, downstream, and related entity in accordance with a contract are consistent and comply with the Part D sponsor's contractual obligations.
(iv) Each and every contract must specify that first tier, downstream, and related entities must comply with all applicable Federal laws, regulations, and CMS instructions.
(v) A provision requiring prompt payment of clean claims by the Part D sponsor, consistent with § 423.520.
(vi) A provision that establishes timeframes, consistent with § 423.505(b)(20), for long-term care pharmacies to submit claims to the Part D sponsor for reimbursement under the plan.
(vii) If applicable, provisions addressing the drug pricing standard requirements of § 423.505(b)(21).
(4) If any of the Part D plan sponsors' activities or responsibilities under its contract with CMS is delegated to other parties, the following requirements apply to any first tier, downstream, and related entity:
(i) Each and every contract must specify delegated activities and reporting responsibilities.
(ii) Each and every contract must either provide for revocation of the delegation activities and reporting responsibilities described in paragraph (i)(4)(i) of this section or specify other remedies in instances when CMS or the Part D plan sponsor determine that the parties have not performed satisfactorily.
(iii) Each and every contract must specify that the Part D plan sponsor on an ongoing basis monitors the performance of the parties.
(iv) Each and every contract must specify that the related entity, contractor, or subcontractor must comply with all applicable Federal laws, regulations, and CMS instructions.
(5) If the Part D plan sponsor delegates selection of its prescription drug providers to another organization, the Part D sponsor's written arrangements with that organization must state that the CMS-contracting Part D plan sponsor retains the right to approve, suspend, or terminate any such arrangement.
(6) If the Part D plan sponsor delegates any of the following functions to a first tier, downstream, or related entity, the Part D sponsor's written arrangements must state that a termination initiated by such entity must provide, at minimum, 60-days' prior notice and have an effective termination date that coincides with the end of a calendar month:
(i) Authorization, adjudication, and processing of prescription drug claims at the point of sale.
(ii) Administration and tracking of enrollees' drug benefits in real time, including automated coordination of benefits with other payers.
(iii) Operation of an enrollee appeals and grievance process.
(iv) Contracting with or selection of prescription drug providers for inclusion in the Part D sponsor's network.
(j) Additional contract terms. The Part D plan sponsor agrees to include in the contract other terms and conditions as CMS may find necessary and appropriate in order to implement requirements in this part.
(k) Certification of data that determine payment —(1) General rule. As a condition for receiving a monthly payment under subpart G of this part (or for fallback entities, payment under subpart Q of this part),, the Part D plan sponsor agrees that its chief executive officer (CEO), chief financial officer (CFO), or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to the officer, must request payment under the contract on a document that certifies (based on best knowledge, information, and belief) the accuracy, completeness, and truthfulness of all data related to payment. The data may include specified enrollment information, claims data, bid submission data, and other data that CMS specifies.
(2) Certification of enrollment and payment information. The CEO, CFO, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that each enrollee for whom the organization is requesting payment is validly enrolled in a program offered by the organization and the information CMS relies on in determining payment is accurate, complete, and truthful and acknowledge that this information will be used for the purposes of obtaining Federal reimbursement.
(3) Certification of claims data. The CEO, CFO, or an individual delegated with the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that the claims data it submits under § 423.329(b)(3) (or for fallback entities, under § 423.871(f)) are accurate, complete, and truthful and acknowledge that the claims data will be used for the purpose of obtaining Federal reimbursement. If the claims data are generated by a related entity, contractor, or subcontractor of a Part D plan sponsor, the entity, contractor, or subcontractor must similarly certify (based on best knowledge, information, and belief) the accuracy, completeness, and truthfulness of the data and acknowledge that the claims data will be used for the purposes of obtaining Federal reimbursement.
(4) Certification of bid submission information. The CEO, CFO, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that the information in its bid submission and assumptions related to projected reinsurance and low income cost sharing subsidies is accurate, complete, and truthful and fully conforms to the requirements in § 423.265.
(5) Certification of allowable costs for risk corridor and reinsurance information. The Chief Executive Officer, Chief Financial Officer, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that the information provided for purposes of supporting allowable costs as defined in § 423.308 of this part, including data submitted to CMS regarding direct or indirect remuneration (DIR) that serves to reduce the costs incurred by the Part D sponsor for Part D drugs, is accurate, complete, and truthful and fully conforms to the requirements in § 423.336 and § 423.343 of this part and acknowledge that this information will be used for the purposes of obtaining Federal reimbursement.
(6) Certification of accuracy of data for price comparison. The CEO, CFO, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that the information provided for purposes of price comparison is accurate, complete, and truthful.
(7) Certification of accuracy of data for overpayments. The CEO, CFO, or COO must certify (based on best knowledge, information, and belief) that the information provided for purposes of reporting and returning of overpayments under § 423.360 is accurate, complete, and truthful.
(l) CMS may use the information collected under paragraph (f)(3) of this section. Any restriction set forth by § 423.322(b) of this part must not be construed to limit the Secretary's authority to use the information collected under paragraph (f)(3).
(m) Release of data. (1) CMS may release the minimum data necessary for a given purpose from the data collected under paragraph (f)(3) of this section to Federal executive branch agencies, States, and external entities in accordance with the following:
(i) Applicable Federal laws.
(ii) CMS data sharing procedures.
(iii) Subject, in certain cases, to encryption of beneficiary identifiers and aggregation of cost data to protect beneficiary confidentiality and commercially sensitive data of Part D sponsors, in accordance with all of the following principles:
(A) Subject to the restrictions in this paragraph, all elements on the claim are available to HHS, other executive branch agencies, and the States.
(B) Cost data elements on the claim generally are aggregated for releases to other executive branch agencies, States, and external entities. Upon request, CMS excludes sales tax from the aggregation at the individual level if necessary for the project.
(C) Beneficiary identifier elements on the claim generally are encrypted for release, except in limited circumstances, such as the following:
( 1 ) If needed, in the case of release to other HHS entities, Congressional oversight agencies, non-HHS executive agencies and the States.
( 2 ) If needed to link to another dataset, in the case of release to external entities. Public disclosure of research results will not include beneficiary identifying information.
(iv) For purposes of paragraph (m)(1)(iii) of this section, States and executive-branch Federal agencies are not considered to be external entities.
(2) Any restriction set forth by § 423.322(b) of this part must not be construed to limit the Secretary's authority to release the information collected under paragraph (f)(3) of this section.
(3)(i) CMS must make available to Congressional support agencies (the Congressional Budget Office, the Government Accountability Office, the Medicare Payment Advisory Commission, and the Congressional Research Service when it is acting on behalf of a Congressional committee in accordance with 2 U.S.C. 166(d)(1)) all information collected under paragraph (f)(3) of this section for the purposes of conducting congressional oversight, monitoring, making recommendations, and analysis of the Medicare program.
(ii) The Congressional Research Service is considered an external entity when it is not acting on behalf of a Congressional committee in accordance with 2 U.S.C. 166(d)(1) for the purposes of paragraph (m)(1) of this section.
(n) Issuance of compliance actions for failure to comply with the terms of the contract. The Part D plan sponsor acknowledges that CMS may take compliance actions as described in this section or intermediate sanctions as defined in subpart O of this part.
(1) CMS may take compliance actions as described in paragraph (n)(3) of this section if it determines that the Part D plan sponsor has not complied with the terms of a current or prior Part D contract with CMS.
(i) CMS may determine that a Part D plans sponsor is out of compliance with a Part D requirement when the organization fails to meet performance standards articulated in the Part D statutes, regulations in this chapter, or guidance.
(ii) If CMS has not already articulated a measure for determining noncompliance, CMS may determine that a Part D plan sponsor is out of compliance when its performance in fulfilling Part D requirements represents an outlier relative to the performance of other Part D plan sponsors.
(2) CMS bases its decision on whether to issue a compliance action and what level of compliance action to take on an assessment of the circumstances surrounding the noncompliance, including all of the following:
(i) The nature of the conduct.
(ii) The degree of culpability of the Part D plan sponsor.
(iii) The adverse effect to beneficiaries which resulted or could have resulted from the conduct of the Part D plan sponsor.
(iv) The history of prior offenses by the Part D plan sponsor or its related entities.
(v) Whether the noncompliance was self-reported.
(vi) Other factors which relate to the impact of the underlying noncompliance or the lack of the Part D plan sponsor's oversight of its operations that contributed to the noncompliance.
(3) CMS may take one of three types of compliance actions based on the nature of the noncompliance.
(i) Notice of noncompliance. A notice of noncompliance may be issued for any failure to comply with the requirements of the Part D plan sponsor's current or prior Part D contract with CMS, as described in paragraph (n)(1) of this section.
(ii) Warning letter. A warning letter may be issued for serious and/or continued noncompliance with the requirements of the Part D plan sponsor's current or prior Part D contract with CMS, as described in paragraph (n)(1) of this section and as assessed in accordance with paragraph (n)(2) of this section.
(iii) Corrective action plan. (A) Corrective action plans are issued for particularly serious and/or continued noncompliance with the requirements of the Part D plan sponsors' current or prior Part D contract with CMS, as described in paragraph (n)(1) of this section and as assessed in accordance with paragraph (n)(2) of this section.
(B) CMS issues a corrective action plan if CMS determines that the Part D plan sponsor has repeated or not corrected noncompliance identified in prior compliance actions, has substantially impacted beneficiaries or the program with its noncompliance, and/or must implement a detailed plan to correct the underlying causes of the noncompliance.
(o) Acknowledgements of CMS release of data —(1) Summary CMS payment data. The contract must provide that the Part D sponsor acknowledges that CMS releases to the public summary reconciled Part D payment data after the reconciliation of Part D payments for the contract year as follows:
(i) The average per member per month Part D direct subsidy standardized to the 1.0 (average risk score) beneficiary for each Part D plan offered.
(ii) The average Part D risk score for each Part D plan offered.
(iii) The average per member per month Part D plan low-income cost sharing subsidy for each Part D plan offered.
(iv) The average per member per month Part D Federal reinsurance subsidy for each Part D plan offered.
(v) The actual Part D reconciliation payment data summarized at the Parent Organization level including breakouts of risk sharing, reinsurance, and low income cost sharing reconciliation amounts.
(2) Part D MLR data. The contract must provide that the Part D sponsor acknowledges that CMS releases to the public data as described at § 423.2490.
(p) Business continuity. (1) The Part D sponsor agrees to develop, maintain, and implement a business continuity plan containing policies and procedures to ensure the restoration of business operations following disruptions to business operations during disruptions to business operations which would include natural or man-made disasters, system failures, emergencies, and other similar circumstances and the threat of such occurrences. To meet the requirement, the business continuity plan must, at a minimum, include the following:
(i) Risk assessment. Identify threats and vulnerabilities that might affect business operations.
(ii) Mitigation strategy. Design strategies to mitigate hazards. Identify essential functions in addition to those specified in paragraph (p)(2) of this section and prioritize the order in which to restore all other functions to normal operations. At a minimum, each Part D sponsor must do the following:
(A) Identify specific events that will activate the business continuity plan.
(B) Develop a contingency plan to maintain, during any business disruption, the availability and, as applicable, confidentiality of communication systems and essential records in all forms (including electronic and paper copies). The contingency plan must do the following:
( 1 ) Ensure that during any business disruption the following systems will operate continuously or, should they fail, be restored to operational capacity on a timely basis:
( i ) Information technology (IT) systems including those supporting claims processing at point of service.
( ii ) Provider and enrollee communication systems including telephone, Web site, and email.
( 2 ) With respect to electronic protected health information, comply with the contingency plan requirements of the Health Insurance Portability and Accountability Act of 1996 Security Regulations at 45 CFR parts 160 and 164, subparts A and C.
(C) Establish a chain of command.
(D) Establish a business communication plan that includes emergency capabilities and procedures to contact and communicate with the following:
( 1 ) Employees.
( 2 ) First tier, downstream, and related entities.
( 3 ) Other third parties (including pharmacies, providers, suppliers, and government and emergency management officials).
(E) Establish employee and facility management plans to ensure that essential operations and job responsibilities can be assumed by other employees or moved to alternate sites as necessary or both.
(F) Establish a restoration plan including procedures to transition to normal operations.
(G) Comply with all applicable Federal, State, and local laws.
(iii) Testing and revision. On at least an annual basis, test and update the business operations continuity plan to ensure the following:
(A) That it can be implemented in emergency situations.
(B) That employees understand how it is to be executed.
(iv) Training. On at least an annual basis, educate appropriate employees about the business continuity plan and their own respective roles.
(v) Records. (A) Develop and maintain records documenting the elements of the business continuity plan described in paragraph (p)(1)(i) through (iv) of this section.
(B) Make the information specified in paragraph (p)(1)(v)(A) of this section available to CMS upon request.
(2) Restoration of essential functions. Every Part D sponsor must plan to restore essential functions within 72 hours after any of the essential functions fail or otherwise stop functioning as usual. In addition to any essential functions that the Part D sponsor identifies under paragraph (p)(1)(ii) of this section, for purposes of this paragraph (p)(2) of this section essential functions include at a minimum, the following:
(i) Benefit authorization (if not waived), adjudication, and processing of prescription drug claims at the point of sale.
(ii) Administration and tracking of enrollees' drug benefits in real time, including automated coordination of benefits with other payers.
(iii) Provision of pharmacy technical assistance.
(iv) Operation of an enrollee exceptions and appeals process including coverage determinations.
(v) Operation of call center customer services.
(q) Enrollment in the Medicare Transaction Facilitator Data Module for the Medicare Drug Price Negotiation Program. For contract year 2026 and all subsequent years, any contract between the sponsor and a pharmacy, or between a first tier, downstream, or related entity and a pharmacy on the sponsor's behalf, for participation in one or more of the Part D sponsor's networks must include a provision requiring the pharmacy to be enrolled in the Medicare Transaction Facilitator Data Module (MTF DM) (or any successor to the MTF DM) in a form and manner determined by CMS. Such provision must also require the pharmacy to maintain and certify up-to-date, complete, and accurate enrollment information with the MTF DM, in accordance with applicable terms and conditions of participation with the MTF DM, including but not limited to contact, third-party support entity or entities, and banking information, in a form and manner determined by CMS.
§ 423.506   Effective date and term of contract.
(a) Effective date. The contract is effective on the date specified in the contract between the Part D plan sponsor and CMS.
(b) Term of contract. Each contract is for a period of 12 months.
(c) Qualification to renew a contract. In accordance with 423.507, an entity is determined qualified to renew its contract annually only if the Part D plan sponsor has not provided CMS with a notice of intention not to renew and CMS has not provided the Part D organization with a notice of intention not to renew.
(d) Renewal of contract contingent on reaching agreement on the bid. Although a Part D plan sponsor may be determined qualified to renew its contract under this section, if the sponsor and CMS cannot reach agreement on the bid under subpart F, no renewal takes place, and the failure to reach agreement is not subject to the appeals provisions in subpart N of this part.
(e) The provisions of this section do not apply to fallback entities.
§ 423.507   Nonrenewal of contract.
(a) Nonrenewal by a Part D plan sponsor. (1) Except for fallback entities, a Part D plan sponsor may elect not to renew its contract with CMS, effective at the end of the term of the contract for any reason provided it meets the timeframes for doing so set forth in paragraphs (a)(2) and (a)(3) of this section.
(2) If a Part D plan sponsor does not intend to renew its contract, it must notify—
(i) CMS in writing by the first Monday of June in the year in which the contract ends;
(ii) Each Medicare enrollee by mail at least 90 calendar days before the date on which the nonrenewal is effective. The sponsor must also provide information about alternative enrollment options by doing one or more of the following:
(A) Provide a CMS approved written description of alternative MA plan and PDP options available for obtaining qualified prescription drug coverage within the beneficiaries' region.
(B) Place outbound calls to all affected enrollees to ensure beneficiaries know who to contact to learn about their enrollment options.
(3)(i) If a Part D plan sponsor does not renew a contract under this paragraph (a), CMS cannot enter into a contract with the organization for 2 years in the PDP region or regions served by the contract unless there are circumstances that warrant special consideration, as determined by CMS.
(ii) If a PDP sponsor does not renew any of its PBPs in a PDP region, CMS does not approve plan bids submitted by the organization in that PDP region for 2 years unless there are circumstances that warrant special consideration, as determined by CMS.
(iii) The provisions of this paragraph do not apply to employer group waiver plans offered by a Part D plan sponsor.
(4) During the same 2-year period specified under paragraph (a)(3) of this section, CMS will not contract with an organization whose covered persons also served as covered persons for the non-renewing sponsor. A “covered person” as used in this paragraph means one of the following:
(i) All owners of nonrenewed or terminated organizations who are natural persons, other than shareholders who have an ownership interest of less than 5 percent.
(ii) An owner of a whole or part interest in a mortgage, deed of trust, note or other obligation secured (in whole or in part) by the organization, or by any of the property or assets thereof, which whole or part interest is equal to or exceeds 5 percent of the total property and assets of the organization.
(iii) A member of the board of directors or board of trustees of the entity, if the organization is organized as a corporation.
(5) If a Part D plan sponsor does not renew a contract under this paragraph (a), it must ensure the timely transfer of any data or files.
(b) [Reserved]
§ 423.508   Modification or termination of contract by mutual consent.
(a) General rule. A contract may be modified or terminated at any time by written mutual consent. If the PDP sponsor submits a request to end the term of its contract after the deadline provided in § 423.507(a)(2)(i), the contract may be terminated by mutual consent in accordance with paragraphs (b) through (f) of this section. CMS may mutually consent to the contract termination if the contract termination does not negatively affect the administration of the Medicare Part D program.
(b) Notification of termination. If the contract is terminated by mutual consent, the Part D plan sponsor must provide notice to its Medicare enrollees and the general public as provided in paragraph (c) of this section.
(c) Notification of modification. If the contract is modified by mutual consent, the Part D plan sponsor must notify its Medicare enrollees of any changes that CMS determines are appropriate for notification within timeframes specified by CMS.
(d) Timely transfer of data and files. If a contract is terminated under paragraph (a) of this section, the Part D plan sponsor must ensure the timely transfer of any data or files.
(e) Agreement to limit new Part D applications. (1) As a condition of the consent to a mutual termination, CMS requires, as a provision of the termination agreement, language prohibiting the Part D plan sponsor from applying for new contracts or service area expansions in the PDP region or regions served by the contract for a period up to 2 years unless there are circumstances that warrant special consideration, as determined by CMS.
(2) A PDP sponsor that agrees to terminate its offering of PBPs in a PDP region also agrees that it is not eligible to apply to resume offering plans in that region for 2 years.
(3) The provisions of this paragraph do not apply to employer group waiver plans offered by a Part D plan sponsor.
(f) Prohibition against Part D program participation by organizations whose owners, directors, or management employees served in a similar capacity with another organization that mutually terminated its Medicare contract within the previous 2 years. During the 2-year period specified in paragraph (e) of this section, CMS will not contract with an organization whose covered persons also served as covered persons for the mutually terminating sponsor. A “covered person” as used in this paragraph means one of the following:
(1) All owners of nonrenewed or terminated organizations who are natural persons, other than shareholders who have an ownership interest of less than 5 percent.
(2) An owner of a whole or part interest in a mortgage, deed of trust, note or other obligation secured (in whole or in part) by the organization, or any of the property or assets thereof, which whole or part interest is equal to or exceeds 5 percent of the total property, and assets of the organization.
(3) A member of the board of directors or board of trustees of the entity, if the organization is organized as a corporation.
§ 423.509   Termination of contract by CMS.
(a) Termination by CMS. CMS may at any time terminate a contract if CMS determines that the Part D plan sponsor meets any of the following:
(1) Has failed substantially to carry out the contract.
(2) Is carrying out the contract in a manner that is inconsistent with the efficient and effective administration of this part.
(3) No longer substantially meets the applicable conditions of this part.
(4) CMS may make a determination under paragraph (a)(1), (2) or (3) of this section if the Part D Plan sponsor has had one or more of the following occur:
(i) Based on credible evidence, has committed or participated in false, fraudulent, or abusive activities affecting the Medicare, Medicaid, or other State or Federal health care programs, including submission of false or fraudulent data.
(ii) Substantially failed to comply with the requirements in subpart M of this part relating to grievances and appeals.
(iii) Failed to provide CMS with valid risk adjustment, reinsurance and risk corridor related data as required under §§ 423.322 and 423.329 (or, for fallback entities, failed to provide the information in § 423.871(f)).
(iv) Substantially failed to comply with the service access requirements in § 423.120.
(v) Substantially failed to comply with either of the following:
(A) Requirements in subpart V of this part.
(B) Information dissemination requirements of § 423.128 of this part.
(vi) Substantially failed to comply with the coordination with plans and programs that provide prescription drug coverage as described in subpart J of this part.
(vii) Substantially failed to comply with the cost and utilization management, quality improvement, medication therapy management and fraud, abuse and waste program requirements as specified in subparts D and K of this part.
(viii) Failed to comply with the regulatory requirements contained in this part.
(ix) Failed to meet CMS performance requirements in carrying out the regulatory requirements contained in this part.
(x) Achieves a Part D summary plan rating of less than 3 stars for 3 consecutive contract years. Plan ratings issued by CMS before September 1, 2012 are not included in the calculation of the 3-year period.
(xi)(A) Has failed to report MLR data in a timely and accurate manner in accordance with § 423.2460; or
(B) That any MLR data required by this subpart is found to be materially incorrect or fraudulent.
(xii) Failure of an essential operations test before the start of the benefit year by an organization that has entered into a Part D contract with CMS when neither it, nor another subsidiary of the organization's parent organization, is offering Part D benefits during the current year.
(xiii) The Part D plan sponsor has committed any of the acts in § 423.752 that support the imposition of intermediate sanctions or civil money penalties under § 423.750.
(xiv) Following the issuance of a notice to the sponsor no later than August 1, CMS must terminate, effective December 31 of the same year, an individual PDP if that plan does not have a sufficient number of enrollees to establish that it is a viable independent plan option.
(b) Notice. If CMS decides to terminate a contract it gives notice of the termination as follows:
(1) Termination of contract by CMS. (i) CMS notifies the Part D plan sponsor in writing at least 45 calendar days before the intended date of the termination.
(ii) The Part D plan sponsor notifies its Medicare enrollees of the termination by mail at least 30 calendar days before the effective date of the termination.
(iii) The Part D plan sponsor notifies the general public of the termination at least 30 calendar days before the effective date of the termination by releasing a press statement to news media serving the affected community or county and posting the press statement prominently on the organization's Web site.
(iv) CMS notifies the general public of the termination no later than 30 calendar days after notifying the plan of CMS's decision to terminate the Part D plan sponsor's contract by releasing a press statement.
(v) In the event that CMS issues a termination notice to a Part D plan sponsor on or before August 1 with an effective date of the following December 31, the Part D plan sponsor must issue notification to its Medicare enrollees at least 90 days prior to the effective date of the termination.
(2) Immediate termination of contract by CMS. (i) The procedures specified in (b)(1) of this section do not apply if—
(A) CMS determines that a delay in termination, resulting from compliance with the procedures provided in this part prior to termination, would pose an imminent and serious risk to the health of the individuals enrolled with the Part D plan sponsor;
(B) The Part D plan sponsor experiences financial difficulties so severe that its ability to make necessary health services available is impaired to the point of posing an imminent and serious risk to the health of its enrollees, or otherwise fails to make services available to the extent that such a risk to health exists; or
(C) The contract is being terminated based on the grounds specified in paragraphs (a)(4)(i) and (xii) of this section.
(ii) CMS notifies the Part D plan sponsor in writing that its contract will be terminated on a date specified by CMS. If a termination in is effective in the middle of a month, CMS has the right to recover the prorated share of the capitation payments made to the Part D plan sponsor covering the period of the month following the contract termination.
(iii) CMS notifies the Part D plan sponsor's Medicare enrollees in writing of CMS's decision to terminate the Part D plan sponsor's contract. This notice occurs no later than 30 days after CMS notifies the plan of its decision to terminate the Part D plan sponsor's contract. CMS simultaneously informs the Medicare enrollees of alternative options for obtaining qualified prescription drug coverage, including alternative PDP sponsors and MA-PDs in a similar geographic area.
(iv) CMS notifies the general public of the termination no later than 30 days after notifying the plan of CMS's decision to terminate the Part D plan sponsor's contract. This notice is published in one or more newspapers of general circulation in each community or county located in the Part D plan sponsor's service area.
(c) Opportunity to develop and implement a corrective action plan —(1) General. (i) Before providing a notice of intent to terminate the contract, CMS will provide the Part D plan sponsor with notice specifying the Part D plan sponsor's deficiencies and a reasonable opportunity of at least 30 calendar days to develop and implement a corrective action plan to correct the deficiencies.
(ii) The Part D plan sponsor is solely responsible for the identification, development, and implementation of its corrective action plan and for demonstrating to CMS that the underlying deficiencies have been corrected within the time period specified by CMS in the notice requesting corrective action.
(2) Exceptions. The Part D plan sponsor will not be provided with an opportunity to develop and implement a corrective action plan prior to termination if—
(i) CMS determines that a delay in termination, resulting from compliance with the procedures provided in this part prior to termination, would pose an imminent and serious risk to the health of the individuals enrolled with the Part D plan sponsor;
(ii) The Part D plan sponsor experiences financial difficulties so severe that its ability to make necessary health services available is impaired to the point of posing an imminent and serious risk to the health of its enrollees, or otherwise fails to make services available to the extent that such a risk to health exists; or
(iii) The contract is being terminated based on the violation specified in (a)(4)(i) of this section.
(d) Appeal rights. If CMS decides to terminate a contract, it sends written notice to the Part D plan sponsor informing it of its termination appeal rights in accordance with subpart N of this part.
(e) Timely transfer of data and files. If a contract is terminated under paragraph (a) of this section, the Part D plan sponsor must ensure the timely transfer of any data or files.
(f) If CMS makes a determination to terminate a Part D sponsor's contract under § 423.509(a), CMS also imposes the intermediate sanctions at § 423.750(a)(1) and (3) in accordance with the following procedures:
(1) The sanction will go into effect 15 days after the termination notice is sent.
(2) The Part D sponsor will have a right to appeal the intermediate sanction in the same proceeding as the termination appeal specified in paragraph (d) of this section.
(3) A request for a hearing does not delay the date specified by CMS when the sanction becomes effective.
(4) The sanction will remain in effect—
(i) Until the effective date of the termination; or
(ii) If the termination decision is overturned on appeal, when a final decision is made by the hearing officer or Administrator.
§ 423.510   Termination of contract by the Part D sponsor.
(a) Cause for termination. The Part D plan sponsor may terminate its contract if CMS fails to substantially carry out the terms of the contract.
(b) Notice of termination. The Part D plan sponsor must give advance notice as follows:
(1) To CMS, at least 90 days before the intended date of termination. This notice must specify the reasons why the Part D sponsor is requesting contract termination.
(2) To its Medicare enrollees, at least 60 days before the termination effective date. This notice must include a written description of alternatives available for obtaining qualified prescription drug coverage within the services area, including alternative PDPs, MA-PDPs, and original Medicare and must receive CMS approval.
(3) To the general public, at least 60 days before the termination effective date by publishing a CMS-approved notice in one or more newspapers of general circulation in each community or county located in the Part D plan sponsor's geographic area.
(c) Effective date of termination. The effective date of the termination is determined by CMS and is at least 90 days after the date CMS receives the Part D plan sponsor's notice of intent to terminate.
(d) CMS's liability. CMS's liability for payment to the Part D plan sponsor ends as of the first day of the month after the last month for which the contract is in effect.
(e) Effect of termination by the organization. (1) CMS does not enter into an agreement with an organization that has terminated its contract within the preceding 2 years unless there are circumstances that warrant special consideration, as determined by CMS.
(2) During the same 2-year period specified in (e)(1) of this section, CMS will not contract with an organization whose covered persons also served as covered persons for the terminating sponsor. A “covered person” as used in this paragraph means one of the following:
(i) All owners of nonrenewed or terminated organizations who are natural persons, other than shareholders who have an ownership interest of less than 5 percent.
(ii) An owner of a whole or part interest in a mortgage, deed of trust, note or other obligation secured (in whole or in part) by the organization, or any of the property or assets thereof, which whole or part interest is equal to or exceeds 5 percent of the total property and assets of the organization.
(iii) A member of the board of directors or board of trustees of the entity, if the organization is organized as a corporation.
(f) Timely transfer of data and files. If a contract is terminated under paragraph (a) of this section, the Part D plan sponsor must ensure the timely transfer of any data or files.
§ 423.512   Minimum enrollment requirements.
(a) Basic rule. Except as provided in paragraph (b) of this section, CMS does not enter into a contract under this subpart unless the organization meets the following minimum enrollment requirement:
(1) At least 5,000 individuals are enrolled for the purpose of receiving prescription drug benefits from the organization; or
(2) At least 1,500 individuals are enrolled for purposes of receiving prescription drug benefits from the organization and the organization primarily serves individuals residing outside of urbanized areas as defined in § 412.62(f) of this chapter;
(3) Except as provided for in paragraph (b) of this section, a Part D plan sponsor must maintain a minimum enrollment as defined in paragraphs (a)(1) and (a)(2) of this section for the duration of its contract.
(b) Minimum enrollment waiver. CMS waives the requirement of paragraphs (a)(1) and (a)(2) of this section during the first contract year for a sponsor in a region.
§ 423.514   Validation of Part D reporting requirements.
(a) Required information. Each Part D plan sponsor must have an effective procedure to develop, compile, evaluate, and report to CMS, to its enrollees, and to the general public, at the times and in the manner that CMS requires, information indicating the following—
(1) The cost of its operations.
(2) The procedures related to and utilization of its services and items.
(3) The availability, accessibility, and acceptability of its services.
(4) Information demonstrating that the Part D plan sponsor has a fiscally sound operation.
(5) Pharmacy performance measures.
(6) Other matters that CMS may require.
(b) Significant business transactions. Each Part D plan sponsor must report to CMS annually, within 120 days of the end of its fiscal year (unless, for good cause shown, CMS authorizes an extension of time), the following:
(1) A description of significant business transactions, as defined in § 423.501, between the Part D plan sponsor and a party in interest, including the following:
(i) Indication that the costs of the transactions listed in paragraph (c) of this section do not exceed the costs that would be incurred if these transactions were with someone who is not a party in interest; or
(ii) If they do exceed, a justification that the higher costs are consistent with prudent management and fiscal soundness requirements.
(2) A combined financial statement for the Part D plan sponsor and a party in interest if either of the following conditions is met:
(i) Thirty five percent or more of the costs of operation of the Part D sponsor go to a party in interest.
(ii) Thirty five percent or more of the revenue of a party in interest is from the Part D plan sponsor.
(c) Requirements for combined financial statements. (1) The combined financial statements required by paragraph (b)(2) of this section must display in separate columns the financial information for the Part D plan sponsor and each of the parties in interest.
(2) Inter-entity transactions must be eliminated in the consolidated column.
(3) The statements must be examined by an independent auditor in accordance with generally accepted accounting principles and must include appropriate opinions and notes.
(4) Upon written request from a Part D plan sponsor showing good cause, CMS may waive the requirement that the organization's combined financial statement include the financial information required in this paragraph (c) of this section for a particular entity.
(d) Reporting requirements for pharmacy benefits manager data. Each entity that provides pharmacy benefits management services must provide to the Part D sponsor, and each Part D sponsor must provide to CMS, in a manner specified by CMS, the following:
(1) The total number of prescriptions that were dispensed.
(2) The percentage of all prescriptions that were provided through retail pharmacies compared to mail order pharmacies.
(3) The percentage of prescriptions for which a generic drug was available and dispensed (generic dispensing rate), by pharmacy type (which includes an independent pharmacy, chain pharmacy, supermarket pharmacy, or mass merchandiser pharmacy that is licensed as a pharmacy by the State and that dispenses medication to the general public), that is paid by the Part D sponsor or PBM under the contract.
(4) The aggregate amount and type of rebates, discounts, or price concessions (excluding bona fide service fees as defined in § 423.501) that the PBM negotiates that are attributable to patient utilization under the plan.
(5) The aggregate amount of the rebates, discounts, or price concessions that are passed through to the plan sponsor, and the total number of prescriptions that were dispensed.
(6) The aggregate amount of the difference between the amount the Part D sponsor pays the PBM and the amount that the PBM pays retail pharmacies, and mail order pharmacies.
(e) Confidentiality of pharmacy benefits manager data. Information disclosed by a Part D sponsor or PBM as specified in paragraph (d) of this section is confidential and must not be disclosed by the Secretary or by a plan receiving the information, except that the Secretary may disclose the information in a form which does not disclose the identity of a specific PBM, plan, or prices charged for drugs, for the following purposes:
(1) As the Secretary determines necessary to carry out section 1150A of the Act or Part D of Title XVIII.
(2) To permit the Comptroller General to review the information provided.
(3) To permit the Director of the Congressional Budget Office to review the information provided.
(f) Penalties for failure to provide pharmacy benefits manager data. The provisions of section 1927(b)(3)(C) of the Act are applicable to a Part D sponsor or PBM that fails to provide the required information on a timely basis or knowingly provides false information in the same manner as such provisions apply to a manufacturer with an agreement under section 1927 of the Act.
(g) Reporting and disclosure under Employee Retirement Income Security Act of 1974 (ERISA). (1) For any employees' health benefits plan that includes a Part D plan sponsor in its offerings, the PDP sponsor must furnish, upon request, the information the plan needs to fulfill its reporting and disclosure obligations (for the particular PDP sponsor) under the Employee Retirement Income Security Act of 1974 (ERISA).
(2) The PDP sponsor must furnish the information to the employer or the employer's designee, or to the plan administrator, as the term “administrator” is defined in ERISA.
(h) Loan information. Each Part D plan sponsor must notify CMS of any loans or other special financial arrangements it makes with contractors, subcontractors and related entities.
(i) Enrollee access to information. Each Part D plan sponsor must make the information reported to CMS under this section available to its enrollees upon reasonable request.
(j) Data validation. Each Part D sponsor must subject information collected under paragraph (a) of this section to a yearly independent audit to determine its reliability, validity, completeness, and comparability in accordance with specifications developed by CMS.
§ 423.516   Prohibition of midyear implementation of significant new regulatory requirements.
CMS may not implement, other than at the beginning of a calendar year, regulations under this section that impose new, significant regulatory requirements on a PDP sponsor or a prescription drug plan.