Federal Register / Vol. 74, No. 50 / Tuesday, March 17, 2009 / Rules and Regulations 11279 

Authority: 49 U.S.C. 106(g), 40103, 40106, 

40113, 40114, 40120, 44502, 44514, 44701, 

44719, 44721–44722. 

■ 2. Part 97 is amended to read as 

follows: 

§§ 97.23, 97.25, 97.27, 97.29, 97.31, 97.33, 

and 97.35 [Amended] 

By amending: § 97.23 VOR, VOR/ 

DME, VOR or TACAN, and VOR/DME 

or TACAN; § 97.25 LOC, LOC/DME, 

LDA, LDA/DME, SDF, SDF/DME; 

§ 97.27 NDB, NDB/DME; § 97.29 ILS, 

ILS/DME, ISMLS, MLS/DME, MLS/ 

RNAV; § 97.31 RADAR SIAPs; § 97.33 

RNAV SIAPs; and § 97.35 COPTER 

SIAPs. 

FDC date State City Airport FDC No. Subject 

02/20/09 ...... SC NEWBERRY .................... NEWBERRY COUNTY ........................ 9/6480 NDB RWY 22, AMDT 6. 

02/23/09 ...... MD FREDERICK .................... FREDERICK MUNI .............................. 9/6582 ILS OR LOC RWY 23, AMDT 

5B. 

02/27/09 ...... NY BATAVIA ......................... GENESEE COUNTY ........................... 9/7308 ILS OR LOC RWY 28, AMDT 6. 

03/03/09 ...... ID CALDWELL ..................... CALDWELL INDUSTRIAL ................... 9/7641 NDB RWY 30, AMDT 1. 

03/03/09 ...... ID CALDWELL ..................... CALDWELL INDUSTRIAL ................... 9/7642 RNAV (GPS) RWY 30, AMDT 1. 

03/03/09 ...... ID CALDWELL ..................... CALDWELL INDUSTRIAL ................... 9/7643 RNAV (GPS) RWY 12, AMDT 1. 

03/03/09 ...... CA MODESTO ...................... MODESTO CITY-CO-HARRY SHAM 

FLD.

9/7694 ILS OR LOC/DME RWY 28R, 

AMDT 14. 

03/03/09 ...... KS WICHITA ......................... BEECH FACTORY .............................. 9/7696 VOR/DME RNAV RWY 36, 

ORIG. 

03/03/09 ...... KS WICHITA ......................... BEECH FACTORY .............................. 9/7697 VOR/DME RNAV RWY 18, 

ORIG. 

[FR Doc. E9–5661 Filed 3–16–09; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

32 CFR Part 199 

[DoD–2008–HA–0029; 0720–AB22] 

Civilian Health and Medical Program of 

the Uniformed Services (CHAMPUS)/ 

TRICARE: Inclusion of TRICARE Retail 

Pharmacy Program in Federal 

Procurement of Pharmaceuticals 

AGENCY: Office of the Secretary, 

Department of Defense (DoD). 

ACTION: Final rule. 

SUMMARY: Section 703 of the National 

Defense Authorization Act for Fiscal 

Year 2008 (NDAA–08) states with 

respect to any prescription filled on or 

after the date of enactment of the 

NDAA, the TRICARE Retail Pharmacy 

Program shall be treated as an element 

of the DoD for purposes of procurement 

of drugs by Federal agencies under 

section 8126 of title 38, United States 

Code (U.S.C.), to the extent necessary to 

ensure pharmaceuticals paid for by the 

DoD that are provided by network retail 

pharmacies under the program to 

eligible covered beneficiaries are subject 

to the pricing standards in such section 

8126. NDAA–08 was enacted on January 

28, 2008. The statute requires 

implementing regulations. This final 

rule is to implement section 703 of the 

NDAA–08. 

DATES: Effective Date: This final rule is 

effective May 26, 2009. 

FOR FURTHER INFORMATION CONTACT: Rear 

Admiral Thomas McGinnis, Chief, 

Pharmacy Operations Directorate, 

TRICARE Management Activity, 

telephone 703–681–2890. 

SUPPLEMENTARY INFORMATION: 

A. Background 

Section 703 of the National Defense 

Authorization Act for Fiscal Year 2008 

(NDAA–08) (Pub. L. 110–181) enacted 

10 U.S.C. 1074g(f). It provides that with 

respect to any prescription filled on or 

after the date of enactment of the 

NDAA, the TRICARE Retail Pharmacy 

Program shall be treated as an element 

of the DoD for purposes of procurement 

of drugs by Federal agencies under 

section 8126 of title 38, United States 

Code (U.S.C.), to the extent necessary to 

ensure pharmaceuticals paid for by the 

DoD that are provided by network retail 

pharmacies under the program to 

eligible covered beneficiaries are subject 

to the pricing standards in such section 

8126. NDAA–08 was enacted on January 

28, 2008. The statute requires 

implementing regulations. 

The Veterans Health Care Act (VHCA) 

of 1992, codified at 38 U.S.C. 8126, 

established Federal Ceiling Prices 

(FCPs) of covered pharmaceuticals 

(requiring a minimum 24% discount off 

non-Federal average manufacturing 

prices—‘‘non-FAMP’’) procured by the 

four designated agencies covered in the 

Act: Department of Veterans Affairs 

(VA), DoD, Coast Guard, and the Public 

Health Service/Indian Health Service. 

The non-FAMP is the average price paid 

to the manufacturer by wholesalers (or, 

if there are insufficient wholesale sales, 

others who purchase directly from the 

manufacturer) for drugs distributed to 

non-federal purchasers, taking into 

account any cash discounts or similar 

reductions given to those purchasers. 

The VA administers the VHCA discount 

program on behalf of the four specified 

agencies. The DoD consulted closely 

with the VA in the development of this 

final rule and also, consistent with 10 

U.S.C. 1073, consulted with the 

Departments of Health and Human 

Services and Homeland Security. 

The TRICARE Pharmacy Benefits 

Program operates under the authority of 

10 U.S.C. 1074g. It provides outpatient 

drugs to TRICARE beneficiaries through 

Military Treatment Facility (MTF) 

pharmacies, the TRICARE mail order 

pharmacy program (TMOP), and a 

TRICARE Retail Pharmacy program 

consisting of TRICARE Retail Pharmacy 

Network and retail non-network 

pharmacies. As implemented, the new 

statutory requirement will only apply to 

pharmaceuticals paid for by DoD and 

provided to eligible beneficiaries 

through the TRICARE Retail Pharmacy 

Network. There are approximately 

60,000 retail pharmacies in the Retail 

Pharmacy Network. Section 1074g 

requires DoD to establish a Uniform 

Formulary of pharmaceutical agents, 

selected based on clinical and cost 

effectiveness, as evaluated by the DoD 

Pharmacy and Therapeutics (P&T) 

Committee, reviewed by the Beneficiary 

Advisory Panel, and decided by the 

Director, TRICARE Management 

Activity (TMA). The Uniform Formulary 

has three tiers: Tier 1 contains generic 

drugs; Tier 2 brand name Uniform 

Formulary drugs; and Tier 3 nonFormulary drugs. Drugs in all three tiers 

are covered by the TRICARE Pharmacy 

Benefits Program, but cost sharing and 

other program differences encourage the 

use of generic drugs and Uniform 

Formulary brand name drugs. 

The TRICARE Retail Pharmacy 

Network is managed under a single 

Pharmacy Benefits Manager contract, 


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11280 Federal Register / Vol. 74, No. 50 / Tuesday, March 17, 2009 / Rules and Regulations 

linked to the DoD Pharmacy Benefits 

Office, and enabled by a management 

information system to verify beneficiary 

eligibility, check for potential drug 

interactions, and authorize payment for 

the pharmaceuticals used to fill the 

beneficiary’s prescription. The 

management information system also 

records data on all prescriptions filled 

through the Retail Pharmacy Network, 

permitting an accurate accounting of all 

retail network pharmaceuticals paid for 

by DoD under the TRICARE Pharmacy 

Benefits Program. Since the beginning of 

the Federal Ceiling Price program, 

outpatient pharmaceuticals provided by 

DoD through MTF pharmacies have 

been subject to FCPs, as have those 

under the TMOP program since it began. 

Implementation of similar applicability 

to the TRICARE Retail Pharmacy 

Network component of the Program is 

the subject of this final regulation. 

B. Provisions of the Proposed Rule 

The proposed rule, published for 

public comment July 25, 2008, proposed 

to add a new paragraph (q) to 32 CFR 

199.21. Paragraph (q)(1) repeated the 

new statutory requirement. Paragraph 

(q)(2) provided that an agreement by a 

manufacturer to honor the FCPs in the 

Retail Pharmacy Network component of 

the Pharmacy Benefits Program is a 

condition of inclusion of a drug on the 

Uniform Formulary. Further, it stated 

that a drug not under such an agreement 

would require preauthorization to be 

provided through the Retail Pharmacy 

Network. In addition, it indicated that 

drugs covered by this requirement are 

TRICARE Retail Pharmacy Network 

provided drugs that are covered by the 

VA’s FCP program, except any 

prescription for which the TRICARE 

Pharmacy Benefits Program is the 

second payer. While DoD proposed in 

this rulemaking to enter into voluntary 

agreements with manufacturers that 

would make prescriptions filled on or 

after the date of enactment of NDAA–08 

subject to FCPs, the Department 

solicited comment regarding any other 

appropriate and legally permissible 

implementation approach and/or date 

from which to begin making 

prescriptions filled in the Retail 

Pharmacy Network subject to FCPs. DoD 

was specifically interested in the legal 

justification, including under section 

703 of NDAA–08, for any alternative 

implementation approaches and/or 

dates that commenters may propose. 

Proposed paragraph (q)(3) established 

refund procedures to, in the words of 

the statute, ‘‘ensure that 

pharmaceuticals paid for by the DoD 

that are provided by pharmacies under 

the program to eligible covered 

beneficiaries under this section are 

subject to the pricing standards’’ of the 

FCP program. The refund procedures 

will, to the extent practicable, 

incorporate common industry practices 

for implementing pricing agreements 

between manufacturers and large 

pharmacy benefit plan sponsors. Such 

procedures shall provide the 

manufacturer at least 70 days from the 

date of submission by TMA to the 

manufacturer (initially expected to be 

on a quarterly basis) of the TRICARE 

pharmaceutical utilization data needed 

to calculate the refund before the refund 

payment is due. The basis of the refund 

will be the difference between the 

average non-federal price of the drug 

sold by the manufacturer to wholesalers, 

as represented by the most recent 

annual non-FAMP (reported to VA) and 

the FCP or, in the discretion of the 

manufacturer, the difference between 

FCP and direct commercial contract 

sales prices specifically attributable to 

TRICARE paid pharmaceuticals, 

determined for each applicable National 

Drug Code (NDC) listing. Further, this 

paragraph of the proposed rule provided 

that a refund due under the statute is 

subject to the overpayment recovery 

procedures of § 199.11 of the TRICARE 

regulation. 

Finally, proposed paragraph (q)(4) 

stated that in the case of the failure of 

a manufacturer of a covered drug to 

make or honor an agreement to ensure 

that DoD pays no more than the FCP for 

covered drugs provided through the 

TRICARE Retail Pharmacy Network 

component of the program, the Director, 

TMA, in addition to other actions 

referred to in the rule, may take any 

other action authorized by law. 

C. Public Comments 

The proposed rule was published in 

the Federal Register July 25, 2008, for 

a 60-day comment period. DoD received 

16 public comments. Most of these were 

from or on behalf of the pharmaceutical 

industry. Several were from or on behalf 

of the retail pharmacy sector. Significant 

comments are discussed below. 

1. Statutory Requirement (Paragraph 

(q)(1)) 

a. Statutory Interpretation 

Comments: A number of comments by 

or on behalf of the pharmaceutical 

industry expressed the view that 10 

U.S.C. 1074g(f), which was added by 

section 703(a) of NDAA–08, does not 

require that prescriptions filled in the 

TRICARE Retail Pharmacy Network are 

subject to Federal Ceiling Prices. Rather, 

they say, it authorizes DoD to use 

procedures of the TRICARE Pharmacy 

Benefits Program to encourage drug 

manufacturers to enter into agreements 

to apply FCPs to Retail Pharmacy 

Network prescriptions. Some 

commenters said the statute only 

establishes a general ‘‘goal’’ of applying 

FCPs and that the references in the 

preamble to the proposed rule to 

voluntary agreements with 

manufacturers should be taken to signal 

that the statute has no effect absent a 

manufacturer’s agreement. On the other 

hand, commenters representing retail 

pharmacies strongly supported the 

interpretation that FCPs now apply 

equally in all three TRICARE Pharmacy 

Benefits Program venues. 

Response: DoD does not agree with 

the interpretation of the statute 

recommended by the pharmaceutical 

industry representatives. 10 U.S.C 

1074g(f) provides: 

(f) Procurement of pharmaceuticals by 

TRICARE retail pharmacy program. With 

respect to any prescription filled on or after 

the date of the enactment of the National 

Defense Authorization Act for Fiscal Year 

2008, the TRICARE retail pharmacy program 

shall be treated as an element of the 

Department of Defense for purposes of the 

procurement of drugs by Federal agencies 

under section 8126 of title 38 to the extent 

necessary to ensure that pharmaceuticals 

paid for by the Department of Defense that 

are provided by pharmacies under the 

program to eligible covered beneficiaries 

under this section are subject to the pricing 

standards in such section 8126. 

Setting aside the start date issue, which 

will be discussed below, DoD interprets 

the statute as follows. First, DoD 

interprets the phrase, ‘‘the pricing 

standards in such section 8126’’ to mean 

Federal Ceiling Prices. This is based on 

the text of 38 U.S.C. 8126(a) and (b), 

which provide that ‘‘[e]ach 

manufacturer of covered drugs shall 

enter into a master agreement with the 

Secretary [of Veterans Affairs] under 

which’’ ‘‘with respect to each covered 

drug of the manufacturer procured by’’ 

the Department of Veterans Affairs, the 

Department of Defense, the Public 

Health Service, or the Coast Guard, 

‘‘that is purchased under depot 

contracting systems or listed on the 

Federal Supply Schedule, the 

manufacturer has entered into and has 

in effect a pharmaceutical pricing 

agreement with the Secretary * * * 

under which the price charged * * * 

may not exceed 76 percent of the nonFederal average manufacturer price.’’ 

The end result of the pricing 

calculations required by section 8126 is 

referred to as the Federal Ceiling Price. 

Second, DoD interprets the phrase 

‘‘treated as an element of the 

Department of Defense for purposes of 


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Federal Register / Vol. 74, No. 50 / Tuesday, March 17, 2009 / Rules and Regulations 11281 

the procurement of drugs by Federal 

agencies under section 8126’’ to mean 

treated the same as a covered drug 

directly procured by DoD. The phrase 

does not require that the retail 

pharmacy actually was involved in a 

procurement by a Federal agency under 

section 8126 or that the retail pharmacy 

was acting as an agent of a Federal 

agency. An interpretation that would 

require such an actual procurement by 

DoD is unsupportable because the 

words ‘‘shall be treated as’’ would be 

rendered meaningless, as would the 

entire section since any such actual 

procurement was undisputedly already 

covered within section 8126. In 

addition, DoD interprets this phrase as 

precluding an interpretation of the 

statute that would apply FCPs to what 

the retail pharmacy may be paid by 

DoD. In referring to the procurement of 

drugs by Federal agencies under section 

8126, the statute is addressing 

manufacturers’ prices, which are the 

focus of section 8126. Retail pharmacies 

are specifically excluded from the 

definition of ‘‘manufacturer’’ in 38 

U.S.C. 8126(h)(4). 

Third, DoD interprets the phrase 

‘‘pharmaceuticals paid for by the 

Department of Defense that are provided 

by pharmacies under the program to 

eligible covered beneficiaries under this 

section’’ to mean pharmaceuticals paid 

for through the TRICARE Retail 

Pharmacy Program. More specifically, 

DoD interprets the provision as limited 

to the TRICARE Retail Pharmacy 

Network because prescriptions filled by 

non-network retail pharmacies are not 

subject to the pre-screening and 

authorization process incorporated into 

the information systems referred to in 

10 U.S.C. 1074g and relied upon by DoD 

to document DoD payment for the 

specific prescriptions covered and 

because of legislative history on this 

point, specifically, a Conference Report 

statement (discussed below). 

Fourth, DoD interprets ‘‘any 

prescription filled’’ to mean all 

prescriptions filled, regardless of 

whether the drugs are on the TRICARE 

Uniform Formulary or are nonformulary drugs. Provisions of the rule 

making a manufacturer’s agreement to 

honor Federal Ceiling Prices in the 

Retail Pharmacy Network a condition 

for Uniform Formulary status in no way 

suggests that the statutory provision has 

such a limited scope. 

Taken together, DoD interprets 10 

U.S.C. 1074g(f) to mean that all 

TRICARE Retail Pharmacy Network 

prescriptions shall be treated the same 

as drugs procured directly by DoD for 

purposes of the Federal Ceiling Price 

program to the extent necessary to 

ensure that pharmaceuticals provided 

under those prescriptions are subject to 

Federal Ceiling Prices. Stated even more 

simply, DoD interprets 10 U.S.C. 

1074g(f) to mean that all covered drug 

TRICARE Retail Pharmacy Network 

prescriptions are subject to Federal 

Ceiling Prices. 

This interpretation is almost a 

verbatim restatement of the primary 

statement of legislative history 

concerning 10 U.S.C. 1074g(f). The 

Conference Report accompanying the 

legislation described it as a provision 

‘‘that would require that any 

prescription filled * * * through the 

TRICARE retail pharmacy network will 

be covered by the federal pricing limits 

applicable to covered drugs under 

section 8126 of title 38, United States 

Code.’’ H. Conf. Rept. 110–477, p. 938. 

This simplified restatement of the 

statutory requirement has been added to 

paragraph (q)(1). 

Comment: Some commenters 

representing the pharmaceutical 

industry recommended that instead of 

establishing regulatory requirements for 

benchmark pricing, DoD should pursue 

voluntary negotiations with 

manufacturers to reduce costs. Some 

commenters said that applying Federal 

Ceiling Prices in the Retail Pharmacy 

Program would hurt millions of other 

Americans because drug companies will 

raise prices to make up their reduced 

profits from DoD sales, and that retail 

refunds will cause DoD to push patients 

to retail pharmacies where their copayments are higher. On the other hand, 

comments from the retail pharmacy 

sector expressed approval for equalizing 

ingredient costs across all TRICARE 

Pharmacy Benefits Program venues. 

Response: While there are many 

policy arguments for and against various 

potential strategies for reducing the 

dramatically increasing costs of the 

TRICARE Pharmacy Program, the issue 

in this rule making is implementing the 

statutory requirement of section 703, 

under which all covered TRICARE 

Retail Pharmacy Network prescriptions 

are subject to Federal Ceiling Prices. 

DoD will continue voluntary 

negotiations concerning prices, but does 

not have the authority to agree to prices 

above Federal Ceiling Prices. It may be 

noteworthy that over the past 20 years, 

Congress has enacted and DoD has 

implemented through regulations (32 

CFR 199.14) a long series of payment 

reforms for TRICARE, including 

payment limits for acute care hospitals, 

psychiatric hospitals, hospital 

outpatient services, partial 

hospitalization programs, substance 

abuse treatment programs, ambulatory 

surgery centers, skilled nursing 

facilities, residential treatment centers, 

hospice programs, home health 

agencies, physicians and other 

individual health care professionals, 

durable medical equipment, and 

military treatment facility and mail 

order program pharmaceuticals. The last 

significant segment of the TRICARE 

program to be covered by payment 

reform is the $4.5 Billion Retail 

Pharmacy Network program. 

b. Relationship Between 10 U.S.C. 

1074g(f) and the Master Agreements 

Under 38 U.S.C. 8126 

Comment: A number of comments 

from or on behalf of the pharmaceutical 

industry expressed the view that section 

1074g(f) has no relationship to the VA 

Master Agreements under 38 U.S.C. 

8126 and that therefore the final rule 

would also have no relationship. Some 

of these commenters also stated that 

under section 8126(g), their Master 

Agreement rights and obligations were 

frozen as of November 4, 1992, and 

cannot be enlarged by any subsequent 

enactment, including 10 U.S.C. 1074g(f). 

Response: DoD does not agree with 

this opinion, but has endeavored to 

construct a rule that could stand on 

common ground between the view that 

the Master Agreements encompass the 

TRICARE Retail Pharmacy Network and 

the view that they utterly do not. This 

disagreement has some history. As 

noted above, section 8126 includes 

‘‘depot contracting systems’’ within the 

scope of Federal Ceiling Price coverage. 

The term ‘‘depot’’ is defined in section 

8126(h)(3) to include ‘‘a centralized 

commodity management system through 

which covered drugs procured by an 

agency’’ are ‘‘delivered directly from the 

commercial source to the entity using 

such covered drugs.’’ Pharmacy Benefits 

Program reforms adopted by DoD in 

response to 10 U.S.C. 1074g included 

restructured management of the Retail 

Pharmacy Program, including the 

establishment of a Retail Pharmacy 

Network of pharmacies linked to DoD 

through the Pharmacy Data Transaction 

Service required by section 1074g(e). 

This led to: A 2002 determination by the 

Secretary of Veterans Affairs that the 

restructuring, when completed, would 

make drugs provided by the Retail 

Pharmacy Network subject to Federal 

Ceiling Prices; a 2004 Dear 

Manufacturer letter from the 

Department of Veterans Affairs 

requiring manufacturers to refund to 

DoD costs above the FCPs; and a legal 

challenge in a case called Coalition for 

Common Sense in Government 

Procurement v. Secretary of Veterans 

Affairs, 464 F. 3d 1306 (Fed.Cir. 2006). 

In that case, the Federal Circuit Court of 


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11282 Federal Register / Vol. 74, No. 50 / Tuesday, March 17, 2009 / Rules and Regulations 

Appeals set aside the VA’s action on the 

grounds that it should have been taken 

through notice and comment 

rulemaking; the Court did not reach the 

merits of the Secretary’s interpretation 

of the ‘‘depot’’ definition as covering the 

TRICARE Retail Pharmacy Network. 

Fifteen days after the Court decision, 

the Conference Report on the National 

Defense Authorization Act for Fiscal 

Year 2007 (NDAA–07) explained that 

the House-Senate Conference 

Committee considered but did not adopt 

a Senate-passed provision, which was 

quite similar to section 703 of NDAA– 

08, to ‘‘clarify’’ the underlying issue of 

the Secretary’s interpretation of section 

8126: ‘‘The conferees concluded that 

there is no need for additional 

legislation at this time because 

prescriptions dispensed by the 

Department of Defense Retail Pharmacy 

Program qualify for discounted prices 

under section 8126.’’ H. Conf. Rept. 

109–702, p. 772. In other words, the 

conferees on NDAA–07 agreed with the 

determination of the Secretary of 

Veterans Affairs. It is a reasonable 

inference that the comparable conferees 

for NDAA–08, in again considering a 

Senate-passed provision, decided to 

enact into law an affirmation of the 

determination of the Secretary of 

Veterans Affairs and the full Congress 

agreed. 

With respect to the section 8126(g) 

argument, DoD understands the VA 

view to be that section 8126 already 

encompassed coverage of a depot 

contracting system such as the TRICARE 

Retail Pharmacy Network program, and 

that therefore it is not limited by section 

8126(g), and DoD agrees with that view. 

Thus, there is a basis to conclude that 

Congress affirmed the determination of 

the Secretary of Veterans Affairs that the 

TRICARE Retail Pharmacy Network 

program was already covered by 38 

U.S.C. 8126, and required that 

determination to be implemented as of 

the date of enactment of NDAA–08. This 

issue, however, remains a matter of 

controversy. The determination of the 

Secretary of Veterans Affairs, with 

which DoD has always strongly agreed, 

has never been withdrawn, nor has it 

been further acted upon, and there was 

no judicial resolution. 

Based on this history, DoD decided to 

propose a rule that would allow the 

agencies and pharmaceutical companies 

to ‘‘agree to disagree’’ on that issue and 

seek common ground on a regulation 

centered on incentives within the 

TRICARE Pharmacy Benefits Program 

and encouraging voluntary, separate 

agreements between manufacturers and 

DoD, independent of the Master 

Agreements, under which 

manufacturers would agree to make 

TRICARE Retail Pharmacy Network 

prescriptions subject to Federal Ceiling 

Prices. That DoD considers these to be 

voluntary agreements does not indicate 

that DoD believes there is no legal 

obligation in the background. It means 

that, as with most laws, voluntary action 

consistent with the law is far preferable 

to reliance on enforcement action. It 

also means that, if there is voluntary 

agreement, whatever uncertainties there 

are about the existence or scope of 

potential enforcement actions can be set 

aside as moot. DoD contacts with 

pharmaceutical companies led DoD to 

believe that most companies might find 

this approach acceptable. Therefore, 

both the proposed and final rule focus 

primarily on DoD program elements and 

DoD market share for implementing the 

requirement that covered TRICARE 

Retail Pharmacy Network prescriptions 

are subject to Federal Ceiling Prices. 

The only reference in the rule to any 

matter outside the scope of the 

TRICARE program is the reservation by 

DoD of rights to pursue as a remedy 

(paragraph (q)(4)) ‘‘any other action 

authorized by law.’’ The scope of any 

such other actions is a matter that need 

not and, because it potentially involves 

agencies other than DoD, cannot be 

settled in this rule making. 

c. Relationship Between the FCP 

Statutory Requirement and Other 

Statutory Requirements of 10 U.S.C. 

1074g 

Comment: Several commenters 

addressed the relationship between the 

new subsection (f) of section 1074g, 

which established the requirement that 

covered Retail Pharmacy Network 

prescriptions shall be subject to FCPs, 

and other provisions of the statute, such 

as the requirement (in subsection 

(a)(2)(A)) that the Uniform Formulary 

shall assure the availability of 

pharmaceutical agents in the complete 

range of therapeutic classes and the 

requirement (in subsection (a)(2)(D)) 

that no pharmaceutical agent may be 

excluded from the Uniform Formulary 

except upon the recommendation of the 

Pharmacy and Therapeutics Committee. 

Some commenters argued that there are 

limitations on the applicability of FCPs. 

Several comments from representatives 

of retail pharmacies expressed 

agreement with the policy of the statute 

and the proposed rule in making Retail 

Pharmacy Network prescriptions subject 

to FCPs, noting that this would equalize 

ingredient prices between retail 

pharmacies and the TRICARE Mail 

Order Pharmacy program, and thus 

eliminate any need for TRICARE 

policies that encourage use of TMOP 

over retail pharmacies. Another 

commenter noted a prior statute that 

referred to ‘‘best business practices of 

the private sector’’ and suggested this 

limited the applicability of Federal 

Ceiling Prices. 

Response: DoD interprets the 

interaction of section 1074g(f) and these 

provisions of 1074g(a) to be that costeffectiveness determinations of the P&T 

Committee are now based on both a 

relative standard and a fixed standard. 

The relative standard is the costeffectiveness of the drug relative to 

other drugs in the class. The fixed 

standard is that a drug cannot be 

considered cost effective if its price 

exceeds the maximum price allowed by 

law, the FCP. Thus, the P&T Committee 

will recommend Tier 3 (non-Formulary) 

status for any drug not covered by a 

manufacturer’s agreement to honor FCPs 

for Retail Pharmacy Network 

prescriptions. However, there is a 

potential conflict with the requirement 

to ensure that all pharmacy classes are 

represented on the Uniform Formulary 

in the event that no drug in a class is 

covered by a manufacturer’s agreement 

to honor FCPs. To deal with that 

possibility, even though remote, DoD 

has added a subparagraph to this part of 

the final rule to state that the 

requirement for Tier 2 status to be 

conditioned on a manufacturer’s 

agreement to honor FCPs for Retail 

Pharmacy Network prescriptions may, 

upon the recommendation of the P&T 

Committee, be waived to ensure that at 

least one drug in the drug class is 

included on the Uniform Formulary 

(Tier 1 or Tier 2). It must be understood, 

however, that any such waiver does not 

waive the statutory requirement that 

Retail Network Pharmacy prescriptions 

are subject to FCPs, only the usual 

regulatory requirement of exclusion 

from the Uniform Formulary of drugs 

not covered by agreements. 

Based on these interpretations of the 

statute, the TMA will ask manufacturers 

to sign agreements to honor FCPs in 

Retail Pharmacy Network prescriptions. 

On or soon after the effective date of the 

final rule, separate from the usual 

practice of individual drug class reviews 

of both clinical and cost effectiveness, 

the P&T Committee will determine 

whether drugs are or are not covered by 

such agreements. A drug that is on the 

Uniform Formulary and is covered by 

such an agreement will be continued on 

the Uniform Formulary for the time 

being, pending the next review of the 

drug class. A drug that is on the 

Uniform Formulary (Tier 2) but not 

covered by such an agreement will be 

recommended for Tier 3, subject to the 

requirement for maintaining 


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Federal Register / Vol. 74, No. 50 / Tuesday, March 17, 2009 / Rules and Regulations 11283 

representation on Tiers 1 or 2 for all 

drug classes. A drug that is on Tier 3 

that is covered by such an agreement 

will be subject to review at a later time 

to determine if it should be changed to 

Tier 2. 

Regarding the issue of preserving 

incentives for use of TMOP, as 

permitted by 10 U.S.C. 1074g, 

copayment amounts are currently lower 

in TMOP than in retail pharmacies for 

the purpose of encouraging TMOP use. 

Possible future changes to this are 

outside the scope of this rule making 

process. With respect to the comment 

about the prior statute that referred to 

‘‘best business practices of the private 

sector,’’ this reference was in section 

703 of the National Defense 

Authorization Act for Fiscal Year 1999, 

Public Law 104–261. The reference was 

in the context of a requirement for DoD 

to submit a plan to Congress for 

redesign of the military pharmacy 

system. This predates the primary 

statute that now governs the TRICARE 

Pharmacy Benefits Program, 10 U.S.C. 

1074g, as well as the 2008 amendment 

on Federal Ceiling Prices. Whatever 

might be associated with the general 

notion of best business practices of the 

private sector, it does not limit the 

applicability of the later enacted 

statutory specification that all covered 

TRICARE Retail Pharmacy Network 

prescriptions are subject to Federal 

Ceiling Prices. 

d. Start Date for FCP Coverage of 

Prescriptions Filled 

Comments: All commenters 

representing the pharmaceutical 

industry argued that the final rule 

should state that only prescriptions 

filled on or after the effective date of the 

final rule are subject to FCPs, and that 

prescriptions filled on or after the 

effective date of the statute (January 28, 

2008) and prior to the effective date of 

the final rule should not be subject to 

FCPs. In support of this position, these 

commenters cited legal precedents 

generally disfavoring retroactive 

application of regulations unless there is 

very clear legal requirement for 

retroactive application, including 

Bowen v. Georgetown Univ. Hosp., 488 

U.S. 204, 208 (1988). They argued that 

the fact that the statute required 

regulations to be issued supports the 

view that implementation of the statute 

was conditioned on the regulations; the 

fact that they could not be issued 

instantaneously, as Congress seemed to 

expect, does not obviate the need for 

regulations before the statutory 

requirement could apply. They further 

argued that because 10 U.S.C. 1074g(f) 

does not expressly address refunds, a 

refund requirement can only be 

established by regulation and by a 

contract or agreement, which cannot be 

retroactive. Also in response to the 

request in the proposed rule for legal 

justification, including under section 

703 of NDAA–08, for any alternative 

implementation dates commenters may 

propose, a number of commenters 

argued that the statutory phrase, ‘‘[w]ith 

respect to any prescription filled on or 

after the date of the enactment of the 

National Defense Authorization Act for 

Fiscal Year 2008,’’ should be construed 

as precluding any applicability to 

prescriptions filled prior to that date, 

not as requiring applicability as of that 

date. On the other hand, comments from 

representatives of retail pharmacies 

strongly supported the provision of the 

proposed rule incorporating the 

statutory date of applicability of FCPs in 

the retail network of January 28, 2008. 

Response: The legal standard 

applicable to a question regarding 

impermissible retroactivity of a 

regulation is well summarized in 

National Mining Ass’n v. Dept. of Labor, 

292 F.3d 849, 859 (D.C. Cir. 2002): 

The general legal principles governing 

retroactivity are relatively easy to state, 

although not as easy to apply. An agency may 

not promulgate retroactive rules absent 

express congressional authority. Bowen v. 

Georgetown Univ. Hosp., 488 U.S. 204, 208 

(1988). A provision operates retroactively 

when it ‘‘impairs rights a party possessed 

when he acted, increases a party’s liability 

for past conduct, or imposes new duties with 

respect to transactions already completed.’’ 

Landgraf v. USI Film Prods., 511 U.S. 244, 

280, (1994). In the administrative context, a 

rule is retroactive if it ‘‘‘takes away or 

impairs vested rights acquired under existing 

law, or creates a new obligation, imposes a 

new duty, or attaches a new disability in 

respect to transactions or considerations 

already past.’’’ Nat’l Mining Ass’n v. United 

States Dep’t of Interior, 177 F.3d 1, 8 (D.C. 

Cir. 1999) (quoting Ass’n of Accredited 

Cosmetology Sch. v. Alexander, 979 F.2d 

859, 864 (D.C. Cir. 1992)). The critical 

question is whether a challenged rule 

establishes an interpretation that ‘‘changes 

the legal landscape.’’ Id. (quoting Health Ins. 

Ass’n of Am., Inc. v. Shalala, 23 F.3d 412, 

423 (D.C. Cir. 1994)). 

The rule does not create any 

retroactive obligation on drug 

companies. Paragraph (q)(1) simply 

restates the statute. The statute applies 

according to its terms and the regulation 

cannot modify those terms. The major 

provision of the regulation that 

‘‘changes the legal landscape’’ is 

paragraph (q)(2). It requires an 

agreement from manufacturers to honor 

the statute as a condition of DoD 

Uniform Formulary status and 

unrestricted availability through the 

TRICARE Retail Pharmacy Network. 

This paragraph is prospective; a refusal 

to agree will not affect a drug’s 

formulary status prior to the effective 

date of the final rule. If a drug company 

does not want to maintain formulary 

status and refuses to sign an agreement 

to honor the statute, the regulation does 

not say anything that would affect the 

legal rights and obligations of the 

parties—i.e., ‘‘change the legal 

landscape’’—with respect to 

prescriptions filled between the dates of 

January 28, 2008, and the effective date 

of the final rule. 

The question of ‘‘retroactivity’’ of the 

regulation should not be confused with 

the effective date of the statute. The 

statute commands that ‘‘[w]ith respect 

to any prescription filled on or after the 

date of the enactment of the National 

Defense Authorization Act for Fiscal 

Year 2008,’’ which was January 28, 

2008, ‘‘the TRICARE retail pharmacy 

program shall be treated as an element 

of the Department of Defense for 

purposes of the procurement of drugs by 

Federal agencies under’’ 38 U.S.C. 8126 

‘‘to the extent necessary to ensure that 

pharmaceuticals paid for by the 

Department of Defense that are provided 

by pharmacies under the program * * * 

are subject to the pricing standards in 

such section 8126.’’ The statute changed 

the legal landscape, and did so 

prospectively. The fact that the statute 

also requires implementing regulations 

does not mean that the statute has no 

legal effect until implementing 

regulations are issued. On the contrary, 

the statute by its express terms requires 

that all prescriptions filled on or after 

the date of enactment ‘‘shall’’ be treated 

so as to ‘‘ensure’’ that they are subject 

to Federal Ceiling Prices. The 

Conference Report accompanying the 

proposed legislation reinforces that 

express statutory requirement: 

Inclusion of TRICARE retail pharmacy 

program in federal procurement of 

pharmaceuticals (sec. 703) 

* * * * * 

The Senate amendment contained a 

provision (sec. 701) that would require that 

any prescription filled on or after October 1, 

2007 through the TRICARE retail pharmacy 

network will be covered by the federal 

pricing limits applicable to covered drugs 

under section 8126 of title 38, United States 

Code. 

The House recedes with an amendment 

that would change the implementation date 

from October 1, 2007 to the date of enactment 

of this Act. 

H. Conf. Rept. 110–477, p. 938. The date 

of enactment is clearly established as 

the ‘‘implementation date’’ of the 

statutory requirement. The fact that 

conforming regulatory modifications are 

also required by section 703(b) does not 


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alter the fact that the statutory command 

to apply Federal Ceiling Prices to all 

covered drugs in Retail Pharmacy 

Network prescriptions filled on or after 

January 28, 2008 applies according to its 

explicit terms. 

Therefore, with respect to 

prescriptions filled on or after January 

28, 2008, drug companies had a right to 

payment at the Federal Ceiling Price 

and no more. The transaction of 

pharmaceuticals moving from 

manufacturer to patient, if not 

completed through the filling of a 

prescription before January 28, became 

subject to a new obligation: the 

transaction ‘‘shall be treated’’ as a DoD 

purchase under 38 U.S.C. 8126 ‘‘to the 

extent necessary to ensure’’ that the 

Federal Ceiling Price applies. With 

respect to the applicability of FCPs. the 

rule does not change that legal 

landscape, nor does it add to or subtract 

from that obligation. Under the statute, 

with respect to any covered TRICARE 

Retail Pharmacy Network prescriptions 

filled on or after January 28, 2008, if a 

manufacturer received more than the 

Federal Ceiling Price, the transaction 

produced an overpayment and an 

overpayment requires a refund. 

The fact of the overpayment is purely 

a function of the statutory effective date, 

and has nothing to do with the date the 

Department of Defense asks for the 

refund of the overpayment or of the 

Uniform Formulary status of the drug. 

Separate from mandating the 

applicability of Federal Ceiling Prices to 

all prescriptions filled on or after 

January 28, the statute also commanded 

the Secretary of Defense to ‘‘modify the 

regulations under’’ the TRICARE 

Pharmacy Benefits Program ‘‘to 

implement the requirements of’’ the 

new subsection 1074g(f). The rule, when 

it becomes effective, will implement the 

requirements through means including 

agreements between manufacturers and 

DoD. Those agreements will call on 

manufacturers to honor the statute. 

Honoring the statute includes refunding 

any overpayments that accrued on or 

after January 28. Nothing in the rule and 

nothing in the agreements will operate 

to change the legal landscape that was 

created, effective January 28, by the 

statute. 

Concerning the argument that the 

‘‘with respect to any prescription filled 

on or after the date of the enactment’’ 

clause of the statute should be 

construed as only precluding any 

applicability to prescriptions filled prior 

to that date, not as requiring 

applicability as of that date, DoD does 

not believe that is a credible 

interpretation. Had Congress intended 

that FCPs would apply only ‘‘with 

respect to any prescription filled on or 

after the date of promulgation of 

regulations under section 703(b) of the 

National Defense Authorization Act for 

Fiscal Year 2008,’’ Congress would have 

said that. The words chosen by Congress 

are quite different and cannot be 

dismissed as imprecise drafting. 

Further, as noted above, the legislative 

history, in the form of the Conference 

Report, unequivocally refers to the date 

of enactment of the statute as the 

‘‘implementation date’’ for ensuring that 

prescriptions filled through the 

TRICARE Retail Pharmacy Network 

shall be subject to Federal Ceiling 

Prices. 

DoD interprets section 703 as 

precluding any start date for applying 

FCPs to covered Retail Pharmacy 

Network prescriptions filled other than 

the date of enactment, January 28, 2008. 

The only legal authority DoD has found 

that would allow it to disregard the 

overpayment and/or waive the refund is 

the Federal Debt Collection Act and 

related statutes. In an effort to find an 

acceptable resolution, DoD has added to 

the final rule provisions to address 

requests for compromise or waiver of 

overpayment refunds under those 

authorities. These provisions are 

discussed below. 

Comment: In addition to the legal 

arguments, a number of commenters 

advanced several practical arguments 

and what they considered to be fairness 

arguments. One was the need to 

recalculate non-FAMPs if 

manufacturers’ commercial sales into 

retail distribution between the statutory 

enactment date and the regulatory 

effective date have to be reclassified as 

DoD sales. Another practical problem 

was that if refunds are required for 

prescriptions filled throughout 2008, by 

the time refund demands are made, 

manufacturers will be forced to review 

and evaluate stale utilization data to 

determine the accuracy of the data. 

Another concern expressed was that 

companies already accounted for 2008 

sales as commercial sales and reported 

profits based on regular commercial 

prices, and should not have to redo 

financial statements and accounting and 

profit reports, which would be costly 

and burdensome, especially for small 

companies. Commenters also cited a 

contemporaneous statement in the 

Congressional Record from Senator 

Nelson which they said was to the effect 

that section 703 was not intended to 

modify any existing agreements with 

drug companies, and that existing 

Uniform Formulary Voluntary 

Agreements for Retail Refunds (UF– 

VARRs) for amounts higher than FCPs, 

or other agreements pertaining to drugs 

dispensed in military hospitals and 

through TMOP, would be breached by a 

demand for an additional refund under 

the statute. In relation to this breach of 

contract argument, some commenters 

cited Winstar Corp. v. United States, 

518 U.S. 839 (1996), for the proposition 

that the government’s contract 

obligations cannot be reduced by 

subsequent legislation. Further, 

commenters argued that in the case of 

a drug that had previously been moved 

to Tier 3 because the manufacturer 

refused to offer a refund, it would be 

unfair to now require a refund for a time 

period for which the drug was on Tier 

3. 

Response: DoD does not agree with all 

of these arguments, but believes some 

may have merit in relation to particular 

drugs. First, with respect to 

recalculating non-FAMPs, DoD 

understands that the Department of 

Veterans Affairs has addressed that 

concern, as it relates to the 2008 annual 

non-FAMP reports, by advising 

manufacturers that there is no need for 

reclassification of 2008 sales data to 

redesignate commercial sales as DoD 

sales because of section 1074g(f). 

Second, DoD believes all drug 

manufacturers were promptly aware of 

the enactment of section 703 and were 

thus on notice regarding the statutory 

date for applying FCPs to prescriptions 

filled. This situation is not like the 

Winstar case. In that case, the legislation 

purported to reduce the government’s 

contract obligation after the contractors 

had already performed their part of the 

bargain. In this case, the statute changed 

nothing regarding transactions 

completed before January 28, 2008. And 

the companies were on notice as of that 

date that covered prescriptions filled on 

or after that date in the TRICARE Retail 

Pharmacy Network were subject to 

FCPs. Third, with respect to Senator 

Nelson’s statement, what he said was 

that with respect to the ‘‘section of the 

bill that would require that 

prescriptions dispensed through the 

TRICARE retail pharmacy program be 

procured at or below Federal ceiling 

prices,’’ ‘‘it is the intent of the language 

and the intent of the conferees not to 

modify the current master agreements.’’ 

(153 Cong. Rec. S–15,613–14, Dec. 14, 

2007.) DoD’s consistent position, both 

prior to and since the enactment of 

section 703, has been that the law does 

not require an amendment to the master 

agreements between the VA and drug 

manufacturers. But DoD does not 

believe there is any legislative history, 

including Senator Nelson’s statement, 

suggesting a statutory implementation 


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date other than January 28, 2008, or 

making any point regarding UF–VARRs. 

However, DoD agrees there may be 

merit to some of the other concerns that 

in particular circumstances concerning 

stale utilization data, prior incentive 

pricing agreements between DoD and 

drug manufacturers, and other 

situations, there may be a reasonable 

basis to waive or compromise a refund 

for prescriptions filled between January 

28, 2008 and the effective date of the 

final rule. The proposed rule included 

a paragraph ((q)(3)) stating that a refund 

due under paragraph (q) is subject to 

section 199.11 of the TRICARE 

regulation, which is the section of the 

regulation addressing overpayments 

recovery, including administration of 

procedures under the Federal Debt 

Collection Act and related laws for 

compromise or waiver of overpayment 

refunds. DoD has revised this provision 

of paragraph (q) to address specifically 

a request for waiver or compromise of 

a refund amount in the context of 

section 1074g(f) and the new 32 CFR 

199.21(q). It provides that a 

manufacturer may request waiver or 

compromise of a refund amount and 

that during the pendency of any request 

for waiver or compromise, a 

manufacturer’s written agreement to 

honor FCPs for covered Retail Pharmacy 

Network prescriptions shall be deemed 

to exclude the matter that is the subject 

of the request for waiver or compromise. 

Further, during the pendency of any 

such request, the matter that is the 

subject of the request shall not be 

considered a failure of a manufacturer to 

make or honor an agreement for 

purposes of the remedies paragraph of 

the regulation. In other words, a 

manufacturer can request a waiver or 

compromise of a refund DoD believes is 

owing on any grounds the manufacturer 

believes appropriate, and the matter that 

is the subject of the request will not be 

considered noncompliance with any 

provision of the regulation while the 

request is pending. This provision for 

waiver or compromise is available at 

any time, but DoD intends that it 

especially be available to address and 

resolve in a reasonable way issues 

arising from the period between the date 

of enactment of the statute and the 

effective date of the regulation. 

Thus, to give one possible example, a 

company might propose that if it agrees 

that for all of its covered drugs, all 

TRICARE retail pharmacy network 

prescriptions will prospectively be 

priced at or below Federal Ceiling 

Prices, it might further propose to 

compromise refunds for prescriptions 

filled during the period beginning 

January 28, 2008, and ending on the 

date this final rule becomes effective. 

One formulation for such a compromise 

could be to propose a date that is in 

between January 28, 2008, and the 

effective date of the final rule, proposing 

that DoD waive collection of refunds for 

prescriptions filled prior to that date, 

and for the company promptly to pay 

refunds for prescriptions filled on or 

after that date. (This example is merely 

illustrative and does not commit the 

Department of Defense to any response.) 

Comment: One commenter said that 

DoD’s failure to meet the statutory 

deadline for issuing implementing 

regulations, which was December 31, 

2007, did not give DoD the right to make 

drug manufacturers bear the cost of 

DoD’s delay. 

Response: Nothing in the final rule 

requires manufacturers to bear the cost 

of DoD’s delay in issuing final 

regulations. As noted above, section 

1074g(f) requires that all covered 

TRICARE Retail Pharmacy Network 

prescriptions are subject to Federal 

Ceiling Prices, beginning with 

prescriptions filled on or after the date 

of enactment. Drug manufacturers were 

aware of the law and were on notice of 

their obligations. It is not clear how they 

were somehow prejudiced by the delay 

in issuing regulations. In some ways 

they benefited by the delay because it 

deferred the due date of the refund 

necessary to resolve the statutory 

overpayment. Nonetheless, the final rule 

provides any company that believes it 

has been prejudiced in some way to 

apply for a waiver or compromise of the 

refund necessary for prescriptions filled 

between the date of enactment and the 

effective date of the regulation to be 

subject to FCPs. DoD will consider all 

such applications and their supporting 

rationale. 

Comment: One commenter said there 

are constitutional limitations on laws 

that alter rights under existing contracts, 

and that this reinforced the need for not 

applying FCPs to prescriptions filled 

before the effective date of the 

regulation. 

Response: The existing contract 

rights referred to by this commenter are 

not identified. If the commenter is 

referring to the Master Agreements with 

VA, DoD does not believe they are 

altered by section 703. If the commenter 

means existing UF–VARRs, DoD does 

not believe section 1074g(f) is 

dependent on such an agreement. DoD 

is unaware of any constitutional or legal 

right of a vendor to sell its goods or 

services to the Federal government at a 

price dictated by the vendor. The law 

set a ceiling price for covered 

prescriptions filled in the TRICARE 

Retail Pharmacy Network, beginning on 

the date of enactment. A company that 

thought the statute breached an existing 

contract had the ability to mitigate the 

alleged contract damages by canceling 

the agreement. Even now, a company 

that does not wish to provide its drugs 

to the TRICARE Pharmacy Benefits 

Program is not forced to do so. If a 

company believes it has incurred some 

contract damages based on the 

enactment of section 1074g(f), it can 

take action to mitigate those damages 

and apply to DoD to waive or 

compromise any refund required by that 

law. 

Comment: Several commenters 

argued that applicability of Federal 

Ceiling Prices to prescriptions filled on 

or after the date of enactment but before 

the effective date of regulations and 

agreements would violate Health and 

Human Services regulations as 42 CFR 

1001.952(h)(4), which require that in 

order to be within a safe harbor from 

anti-kickback rules, a ‘‘rebate’’ must be 

‘‘disclosed in writing to the buyer at the 

time of sale of the initial purchase to 

which the discount applies,’’ and that 

this can only be achieved after 

regulations and agreements are in effect. 

Some commenters also said 

applicability of Federal Ceiling Prices to 

prescriptions filled on or after the date 

of enactment but before the effective 

date of regulations and agreements 

would be contrary to the SarbanesOxley Act of 2002 and accounting 

principles for recording anticipated 

payment liabilities. 

Response: DoD disagrees. Under 

section 1074g(f), DoD is the buyer in a 

sales transaction that occurs when the 

prescription is filled for a covered 

beneficiary by a retail network 

pharmacy. As of the date of enactment, 

DoD and the manufacturer both had 

written notice that Federal Ceiling 

Prices apply. Further, the statute clearly 

indicated that FCPs applied to 

prescriptions filled on or after the 

effective date, giving companies and 

their accountants notice of the 

anticipated payment liability. 

Nevertheless, if there were a case in 

which a manufacturer is charged with 

an illegal kickback or some other 

violation as a result of a refund under 

section 1074g(f), DoD would welcome a 

request to waive or compromise the 

refund under paragraph (q)(3)(iii) of the 

regulation. 

Comment: Some commenters went 

further than arguing that FCPs only start 

to apply when the final rule becomes 

effective, and argued that they only start 

to apply when an agreement between 

DoD and the manufacturer becomes 

effective. In support of this position 

they stated that because the statute says 


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‘‘the TRICARE retail pharmacy program 

shall be treated as an element of the 

Department of Defense for purposes of 

the procurement of drugs by Federal 

agencies,’’ some agreement in the nature 

of a procurement contract has to be 

made before the statute has any effect. 

Response: DoD disagrees. As noted 

previously, DoD interprets 10 U.S.C. 

1074g(f) to mean that for all covered 

drugs, TRICARE Retail Pharmacy 

Network prescriptions are subject to 

Federal Ceiling Prices. DoD interprets 

the statutory phrase ‘‘treated as an 

element of the Department of Defense 

for purposes of the procurement of 

drugs by Federal agencies under section 

8126 of title 38 to the extent necessary 

to ensure that pharmaceuticals paid for 

by’’ DoD in the Retail Pharmacy 

Network ‘‘are subject to’’ FCPs to mean 

treated the same as a covered drug 

directly procured by DoD vis-a`-vis the 

applicability of FCPs; the phrase does 

not require that there be some other 

transaction comparable to a direct 

procurement by a Federal agency under 

section 8126. The transaction of a 

covered drug prescription filled in the 

Retail Pharmacy Network is all that is 

required. Further, as previously noted, 

DoD interprets the phrase, ‘‘[w]ith 

respect to any prescription filled on or 

after the date of the enactment’’ to mean 

that FCPs apply with respect to any 

prescription filled on or after the date of 

the enactment. 

2. Manufacturer Written Agreement 

(Paragraph (q)(2)) 

a. Agreement in General 

Comment: Some commenters 

expressed the view that an agreement 

between DoD and a manufacturer is 

necessary for the manufacturer to have 

any requirement to pay refunds to DoD 

for amounts received for drugs 

dispensed under prescriptions filled in 

the TRICARE Retail Pharmacy Network. 

These commenters said a 

manufacturer’s agreement to pay 

refunds must be met with contractual 

consideration from DoD in the form of 

Uniform Formulary status or something 

similar, comparable to the current 

Uniform Formulary Voluntary 

Agreements for Retail Refunds (UF– 

VARRs). They also argued that if a drug 

is not included on Tier 2, the 

manufacturer would have no obligation 

to refund to DoD any amount it received 

above the FCP for that drug dispensed 

under prescriptions filled in the 

TRICARE Retail Pharmacy Network. 

Response: DoD does not agree with 

this view. As noted above, DoD 

interprets 10 U.S.C. 1074g(f) to mean 

that all covered TRICARE Retail 

Pharmacy Network prescriptions are 

subject to Federal Ceiling Prices. This 

means that if a manufacturer was paid 

more than the FCP for a covered drug 

that was provided through the TRICARE 

Retail Pharmacy Network, the 

transaction resulted in an overpayment 

in what DoD paid the pharmacy and in 

what the manufacturer received from 

the pharmacy (directly or through an 

intermediary). To resolve the 

overpayment, the manufacturer must 

pay DoD a refund of the amount above 

the FCP. If the amount above the FCP 

was the difference between FCP and the 

average commercial price for the drug 

sold to buyers other than the Federal 

government—represented by the nonFederal Average Manufacturer’s Price 

(non-FAMP)—then the refund amount is 

the difference between the non-FAMP 

and FCP. DoD interprets the statute as 

establishing the fact of an overpayment 

and the need for a refund. These things 

are not dependent on the agreement to 

exist; they exist by operation of law 

under the statute. The purpose of the 

agreement, therefore, is simply to 

acknowledge the existence of the 

obligation and promise to meet it. This 

is a change from the UF–VARRs, which 

are not premised on a statutory 

requirement that prescriptions filled in 

the Retail Pharmacy Network are subject 

to FCPs. 

However, as noted above, DoD wishes 

to emphasize voluntary compliance by 

manufacturers. To this end, DoD has 

included in the new regulatory 

provision for waiver or compromise of 

refunds, discussed above, a waiver 

criteria (subparagraph (q)(3)(iii)(C)) 

premised on a written request by the 

manufacturer for voluntary removal of a 

drug from coverage in the TRICARE 

Pharmacy Benefits Program. Thus if 

there were ever a case in which a 

manufacturer was really involuntarily 

involved with DoD in relation to drugs 

sold into the normal commercial 

market, the manufacturer could request 

voluntary exclusion of a drug from 

coverage in the TRICARE Pharmacy 

Benefits Program and waiver of the 

refund obligation. This reinforces the 

voluntariness of drug manufacturers’ 

participation in the commercial 

transaction covered by section 1074g(f), 

a transaction that features sales by the 

company and payment by DoD through 

the TRICARE Retail Pharmacy Network. 

b. Product-by-Product Review 

Comment: A number of 

pharmaceutical industry commenters 

agreed with the proposed rule’s 

approach of product-by-product review 

of drugs for compliance with Federal 

Ceiling Prices, rather than requiring a 

manufacturer to agree to provide all 

covered drugs produced by the 

manufacturer as a condition for any of 

the manufacturer’s drugs to be included 

on the Uniform Formulary. 

Response: This is another area where 

DoD is seeking an accommodation with 

drug companies. DoD believes it has 

statutory authority to require a 

manufacturer to agree to provide all 

covered drugs produced by the 

manufacturer as a condition for any of 

the manufacturer’s drugs to be included 

on the Uniform Formulary because the 

statute applies to all covered drugs. 

However, DoD chooses in this rule at 

this time to follow a product-by-product 

approach for Uniform Formulary status. 

DoD urges pharmaceutical companies to 

honor Federal Ceiling Prices for all 

covered drugs and thereby preserve 

eligibility for each drug for the Uniform 

Formulary, as well as show their 

compliance with the law. 

c. Relationship Between Federal Ceiling 

Prices and Uniform Formulary Status 

Comment: A number of 

pharmaceutical industry representatives 

recommended that because noncompliance with Federal Ceiling Prices 

generally disqualifies a covered drug for 

Uniform Formulary status, compliance 

with Federal Ceiling Prices should 

automatically qualify a covered drug for 

Uniform Formulary status. These 

comments indicated that Uniform 

Formulary status is a necessary quidpro-quo for a company’s agreement to 

honor FCPs. 

Response: DoD does not agree. Under 

10 U.S.C. 1074g(a), Uniform Formulary 

(Tier 2) status is based on the relative 

clinical and cost effectiveness of drugs 

within a drug class. Under section 

1074g(f), all covered TRICARE Retail 

Pharmacy Network prescriptions are 

subject to Federal Ceiling Prices. Both 

requirements apply. A company’s 

obligation to honor FCPs is not 

dependent on Uniform Formulary 

placement. Further, there are drugs that 

at their particular Federal Ceiling Prices 

are not cost-effective within their 

respective drug classes. Subject to the 

judgment of the Pharmacy and 

Therapeutics Committee and the other 

steps in the statutory and regulatory 

process, such drugs are likely to be 

classified as non-Formulary drugs. 

However, during the initial period of 

implementation of this final rule, DoD 

anticipates that drugs currently on the 

Uniform Formulary that become 

covered by manufacturer agreements to 

honor FCPs in the Retail Pharmacy 

Network will remain on the Uniform 

Formulary in Tier 2, pending the next 


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periodic review of the drug class 

involved. 

Comment: A number of commenters 

asked how the requirement for an 

agreement to honor FCPs would affect 

drugs previously placed on the Uniform 

Formulary or in non-Formulary status, 

as well as newly approved drugs. 

Response: For covered drugs, 

continuation on the Uniform Formulary 

is conditioned on the manufacturer 

signing an agreement to honor Federal 

Ceiling Prices for that drug. If there is 

currently in effect a UF–VARR at a price 

above the FCP, that agreement fails to 

achieve the statutory requirement; DoD 

anticipates canceling it. For a drug 

previously placed in Tier 3, if the 

manufacturer signs an agreement to 

honor FCPs, it will be eligible for 

reclassification to Tier 2 upon the next 

review by the P&T Committee of the 

drug class involved. That will not 

necessarily occur when the initial 

adjustments to the Uniform Formulary 

are made upon the final rule becoming 

effective. For newly approved drugs, 

DoD will continue its current practice of 

scheduling P&T Committee review at 

the next practicable quarterly meeting. 

Comment: A number of commenters 

suggested that the requirement for a 

manufacturer’s agreement to honor FCPs 

for TRICARE Retail Pharmacy Network 

prescriptions as a condition for Tier 2 

status should be waived by DoD if a 

drug is more cost-effective, or if a 

weighted average of prices in all three 

venues is no higher than the FCP, or if 

otherwise in the best interests of 

beneficiaries. Also, some commenters 

suggested that the Uniform Formulary 

process should not be changed to 

leverage drug manufacturers to agree to 

honor FCPs in the retail network, and 

that the process of P&T Committee and 

Beneficiary Advisory Panel review by 

drug class should not be usurped and 

should continue unchanged. These 

commenters said the beneficiaries 

should not have to pay higher copays or 

bother with preauthorization because 

the drug company does not comply with 

the law. 

Response: DoD has modified the final 

rule to provide for a waiver if necessary 

to ensure that each drug class is 

represented on the Uniform Formulary. 

Beyond this, DoD does not see a need 

for further waiver. As noted above, DoD 

interprets the statute as now 

establishing for determining costeffectiveness a relative standard and a 

fixed standard and the fixed standard 

must be met, except as noted. With 

respect to protecting beneficiary 

interests, preauthorization procedures 

ensure that beneficiaries will continue 

to have access to whatever drugs they 

need. Also, the P&T Committee and 

Beneficiary Advisory Panel will 

continue to be involved in the process. 

With respect to the argument that 

beneficiaries should not be 

inconvenienced by the refusal of drug 

companies to honor FCPs as required by 

law, DoD believes this will very much 

be the exception to the norm. To 

minimize inconvenience to 

beneficiaries, DoD has added a new 

paragraph (q)(5) to provide beneficiary 

transition provisions. It provides that in 

cases in which a pharmaceutical is 

removed from the uniform formulary or 

designated for preauthorization, the 

Director, TMA may for transitional time 

periods determined appropriate by the 

Director or for particular circumstances 

authorize the continued availability of 

the pharmaceutical in the retail 

pharmacy network or in MTF 

pharmacies for some or all beneficiaries 

as if the pharmaceutical were still on 

the uniform formulary. 

d. Preauthorization for Retail Pharmacy 

Network Prescriptions for Drugs for 

Which the Manufacturer Refuses To 

Agree To Honor Federal Ceiling Prices 

Comment: A number of commenters 

argued that DoD should delete the 

provisions of the proposed rule that 

made a manufacturer’s agreement to 

honor FCPs in the Retail Pharmacy 

Network a precondition for the 

availability of that drug through retail 

network pharmacies without 

preauthorization under section 

199.21(k) of the current regulation. They 

argued that this preauthorization 

requirement conflicts with 10 U.S.C. 

1074g and the current scope of the 

preauthorization provisions of 

paragraph (k) of the regulation, which 

are intended to promote broad 

beneficiary access to clinically 

appropriate drugs. These comments 

noted that under the current regulation, 

non-formulary drugs are generally 

available in retail pharmacies, and the 

only statutory reference to 

preauthorization (in 10 U.S.C. 

1074g(a)(4)) is to assure clinical 

appropriateness. They also argued that 

the preauthorization requirement would 

delay beneficiary access to needed 

pharmaceutical agents, and should have 

exceptions for emergencies and other 

clinical needs. 

Response: These comments 

misunderstand the current statute and 

regulation as they apply to 

preauthorization. First, the statute does 

not require that non-Formulary (Tier 3) 

drugs be provided in the Retail 

Pharmacy Network. It requires (in 

paragraph (a)(5) of section 1074g) only 

that non-Formulary drugs are available 

through one of the three pharmacy 

venues. Non-Formulary drugs are and 

will remain available in the TRICARE 

Mail Order Pharmacy Program (TMOP). 

Second, the current paragraph (k) of the 

regulation is not limited to 

preauthorization for medical necessity, 

but rather provides that: ‘‘Selected 

pharmaceutical agents may be subject to 

prior authorization or utilization review 

requirements to assure medical 

necessity, clinical appropriateness and/ 

or cost effectiveness.’’ The new 

requirement for preauthorization for 

non-Formulary drugs for which 

manufacturers refuse to honor FCPs as 

required by law is entirely consistent 

with the current law and regulation, as 

well as with the policy of assuring 

beneficiary access to needed 

pharmaceutical agents. 

In the case of a beneficiary presenting 

a prescription in a retail network 

pharmacy for a drug that is on Tier 3 

because of the refusal of the 

manufacturer to honor Federal Ceiling 

Prices, there are several possible 

outcomes. First, the pharmacist may 

consult with the prescribing physician 

and the physician may change the 

prescription to a Uniform Formulary 

drug, which can be provided 

immediately at the Tier 2 co-payment. 

Second, if the beneficiary has a valid 

clinical need for that non-Formulary 

drug without delay, preauthorization 

will be granted. This will take care of 

emergency needs for pharmaceuticals 

and other cases of immediate clinical 

need. However, depending on the 

circumstances, the beneficiary may be 

advised that any refills will need to be 

obtained from TMOP. Third, if there is 

no urgency, the beneficiary may be 

advised to submit the prescription to 

TMOP. This approach is consistent with 

the statutory requirement that nonFormulary agents be made available in 

at least one venue, and also with the 

statutory requirement that all covered 

Retail Pharmacy Network prescriptions 

are subject to FCPs. Moreover, it 

continues DoD policy of meeting 

beneficiary needs, even in cases in 

which drug manufacturers fail to honor 

the law—a circumstance DoD expects to 

be very rare. The concern expressed by 

manufacturers for unencumbered 

beneficiary access to needed 

pharmaceuticals is admirable, and it 

should provide sufficient motivation for 

the manufacturers to accept the ceiling 

price set by law. 

Comment: Commenters on behalf of 

retail pharmacies argued forcefully that 

preauthorization requirements for drugs 

not covered by manufacturer agreements 

to honor FCPs apply equally to 

prescriptions in the Retail Pharmacy 


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Network and TMOP. The rationale for 

this is to increase the incentive on 

pharmaceutical manufacturers to honor 

FCPs and to avoid the shifting of 

prescriptions from retail pharmacies to 

TMOP. These commenters believe retail 

pharmacies better meet beneficiary 

needs and that to require 

preauthorization in retail pharmacies 

but not in TMOP would be unfair and 

contrary to the ‘‘uniform formulary’’ 

requirement of law. They argued that 

rather than adopt a procedure 

disadvantageous to retail pharmacies, 

DoD should make sure pharmaceutical 

companies comply with the legal 

requirement to honor Federal Ceiling 

Prices in the Retail Pharmacy Network. 

Response: DoD’s focus is on assuring 

that beneficiaries receive the 

pharmaceuticals they need and that the 

requirements of the law are faithfully 

executed. While there is some merit to 

this suggestion, DoD believes the best 

approach for now is to preserve the 

option of referring some prescriptions to 

TMOP when that is the most direct 

means to both provide the 

pharmaceuticals needed by the 

beneficiary and assure the applicability 

of FCPs. DoD believes it is not unfair or 

contrary to the uniform formulary 

provisions of 10 U.S.C. 1074g to have 

differences in co-payments or 

preauthorization requirements among 

the three venues while maintaining the 

same formulary listing of drugs in all 

three venues. These differences are all 

consistent with statutory purposes. DoD 

agrees with retail pharmacy 

representative commenters that the right 

outcome is for all manufacturers to 

comply with the obligation to honor 

FCPs in the Retail Pharmacy Network. 

DoD’s expectation is that there will not 

be many drugs that will be subject to 

this preauthorization requirement. 

e. Covered Drugs 

Comment: A number of commenters 

recommended that DoD exclude from 

the regulation drugs covered by section 

340B of the Public Health Service Act. 

Section 340B limits the cost of covered 

outpatient drugs to certain federal 

grantees, federally-qualified health 

center look-alikes and qualified 

disproportionate share hospitals. The 

rationale for this comment is that these 

prescriptions should not be covered by 

double discounts. A number of 

commenters also requested clarification 

on how DoD would report utilization 

data involving 340B sales or whether 

DoD would exclude all pharmacies 

eligible for the 340B program. 

Response: DoD agrees and has revised 

the rule accordingly in paragraph 

(q)(2)(iii)(E). With respect to pharmacies 

that dispense only prescriptions covered 

by the 340B program, those pharmacies 

will be excluded from DoD’s utilization 

data reported to manufacturers. 

Regarding other pharmacies that are 

eligible to participate in the 340B 

program but also fill other prescriptions, 

DoD will incorporate into the process 

appropriate procedures to identify and 

exclude 340B covered prescriptions. 

Comment: A number of commenters 

requested clarification that a covered 

drug for purposes of this regulation is a 

covered drug under 38 U.S.C. 8126. 

Response: The final rule includes 

clarifying language to this effect. 

Comment: A number of commenters 

recommended expansion of the 

exceptions for covered drugs to allow a 

broad process for drug manufacturers to 

obtain exemptions for particular drugs. 

Response: DoD does not agree. The 

statute commands that all covered 

TRICARE Retail Pharmacy Network 

prescriptions are subject to FCPs. DoD 

has established a limited waiver of the 

condition for Uniform Formulary 

placement when necessary to preserve 

representation of all drug classes on the 

Uniform Formulary, and has established 

a process under section 199.11 for 

waiver or compromise of refunds in 

appropriate circumstances. There is also 

an authority for any other exception, 

consistent with law, established by the 

Director, TMA. This is intended for 

special circumstances, analogous to the 

340B program. DoD does not see a need 

for another procedure for individual 

drug products to avoid FCPs. 

3. Refund Procedures (Paragraph (q)(3)) 

a. Refund Procedures in General 

Comment: A number of commenters 

requested further information and/or 

specification in the regulation regarding 

the details of the refund procedures 

referred to in the rule. They argued that 

much more detail needed to be included 

in the rule for manufacturers to be 

expected to decide whether they wanted 

to sign agreements. Another comment 

urged that all refund procedures be 

published in the Federal Register for 

public comment under 41 U.S.C. 418b. 

Response: The only definite 

requirement in the regulation for a 

manufacturer’s agreement to be a 

condition for Uniform Formulary 

placement and Retail Pharmacy 

Network availability without 

preauthorization is a simple agreement 

to honor Federal Ceiling Prices in the 

Retail Pharmacy Network. DoD prefers 

to also include in the agreement refund 

procedures, but has revised the final 

rule (in paragraph (q)(3)(i)) to clarify 

that these things need not be in the 

same document. Thus, if there are issues 

that need to be resolved with respect to 

refund procedure details, these need not 

interfere with a manufacturer’s ability to 

agree to follow the law and thereby 

maintain eligibility for Uniform 

Formulary status. Again, as noted above, 

DoD does not interpret 10 U.S.C. 

1074g(f) as making the applicability of 

FCPs or the collection of refunds for 

amounts above FCPs subject to the 

existence or terms of an agreement 

between DoD and the manufacturer. 

Therefore, any disputes or problems 

regarding refund procedure details can 

be resolved appropriately without 

disturbing rights or obligations under 

the law. Moreover, such details can best 

be addressed outside the formalities of 

the rulemaking process. DoD will 

continue to provide means to answer 

specific manufacturers’ questions 

regarding refund procedures, Uniform 

Formulary procedures, and the like. 

Such means include the following Web 

site: http://tricare.mil/tma/ 

Pharmacy.aspx. DoD supports 

incorporating into the manufacturer 

written agreements effective refund 

procedures consistent with best 

commercial practice. Absent such 

agreement, the standard collection 

procedures of the existing TRICARE 

Regulation (section 199.11) are 

available. 

Regarding the 41 U.S.C. 418b 

argument, DoD believes that although 

section 1074g(f) requires that the 

TRICARE Retail Pharmacy Network 

‘‘shall be treated as’’ an element of the 

Department of Defense for purposes of 

the ‘‘procurement of drugs by Federal 

agencies’’ under 38 U.S.C. 8126 ‘‘to the 

extent necessary to ensure that’’ 

pharmaceuticals dispensed are subject 

to FCPs, this does not result in any legal 

requirement, or even an inference, to 

also treat the transaction as if it were a 

procurement for purposes of various 

procurement statutes. Thus, DoD does 

not view refund procedure agreements 

as falling within the scope of a 

‘‘procurement policy, regulation, 

procedure, or form’’ subject to 41 U.S.C. 

418b. In addition, especially while DoD 

seeks to work with manufacturers on 

implementing practical and smooth 

procedures for sharing utilization data, 

resolving issues and problems, 

facilitating Uniform Formulary 

placement consistent with the law and 

regulations, and facilitating a positive 

relationship, DoD does not see the 

advantage of chiseling into regulatory 

stone a detailed set of procedures which 

will then become too hard to adapt or 

improve. 


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b. Specific Refund Procedures 

Comment: Specific refund procedure 

issues included whether the current 

Uniform Formulary Voluntary 

Agreements for Retail Refunds (UF– 

VARRs) template will be used; whether 

the non-FAMPs and FCPs that will be 

used for the refunds are those applicable 

to the year in which the prescription 

was filled or the year in which the 

refund is due or the year in which the 

agreement was signed; whether UF– 

VARRs currently in effect would be 

cancelled; whether transferred 

ownership would require a new 

agreement; whether DoD would change 

any VA determinations of non-FAMP or 

FCP; the guidance VA and the Centers 

for Medicare and Medicaid Services 

(CMS) would provide on reporting 

transactions covered by section 1074g(f) 

for purposes of non-FAMP, best price, 

and other calculations; whether DoD 

will maintain manufacturer pricing data 

in confidence; how DoD will deal with 

‘‘penny pricing’’ on an FCP or various 

data anomalies in the VA’s processes; 

whether drug companies will have the 

right to audit DoD utilization data; and 

whether in any quarterly utilization 

period there will be an exclusion of 

prescriptions filled significantly before 

that quarter. 

Response: The rule has been clarified 

to specify that the FCPs that apply are 

those in effect in the year in which the 

prescription is filled. The non-FAMP 

that applies will be the one that gave 

rise to the applicable FCP. DoD believes 

the UF–VARR process has been effective 

and intends to use that as a base line for 

refund procedures under the regulation, 

but intends to continue to work with 

industry on refinements and 

improvements. Thus, these procedures 

are not part of this regulation. DoD 

anticipates that current UF–VARRs that 

do not meet the statutory requirement 

will be canceled, but they are not 

cancelled by this regulation. In cases of 

transferred ownership of a drug, DoD 

will look to the parties to advise DoD of 

the transfer and its effect on existing 

relationships. DoD will not change any 

VA determinations of non-FAMPs or 

FCPs; DoD will accept VA 

determinations. This includes deferring 

to VA determinations on penny pricing 

and the VA procedures for resolution of 

data anomalies and relief from unfair 

calculations. DoD is already under legal 

obligation to maintain manufacturer 

pricing data in confidence and will 

comply with that obligation. DoD 

cannot speak for VA and CMS but has 

consulted with those agencies and will 

do everything possible to facilitate 

responses to manufacturers’ questions to 

those agencies. With respect to the audit 

question, the dispute resolution process 

provides the manufacturer the 

opportunity to dispute any utilization 

on which its data and DoD’s data are in 

conflict. All pertinent pricing 

information is already in the hands of 

the manufacturer. Thus, DoD sees no 

need for routine manufacturer audits of 

DoD utilization data, other than what 

might be appropriate in a dispute 

resolution context. Other details will be 

worked out consistent to the extent 

practicable with common industry 

practices for implementing pricing 

agreements between manufacturers and 

large pharmacy benefit plan sponsors. 

c. Dispute Resolution Procedures 

Comment: Several commenters 

representing the pharmaceutical 

industry urged that in cases in which 

drug companies dispute DoD utilization 

reports, the companies are not required 

to pay refunds pending the outcome of 

the dispute resolution process. At the 

conclusion of the dispute resolution 

process, refund amounts would then 

include interest charges from the 

original payment due date. These 

commenters pointed out that this would 

be a change from the current DoD 

standard procedure under the Uniform 

Formulary Voluntary Agreement for 

Retail Refunds (UF–VARRs), but would 

be consistent with the current practice 

under Medicaid rebate agreements. 

Response: DoD agrees to this proposal 

and has added a new paragraph 

(q)(3)(iv) to defer refund payments 

pending resolution of disputes over the 

accuracy of the utilization data. 

d. Overpayments Recovery 

Comment: A number of commenters 

questioned the portion of the proposed 

rule stating that a refund due under the 

new paragraph (q) is subject to section 

199.11 of the TRICARE Regulation. That 

section governs overpayments recovery. 

These commenters recommended that 

refund procedures should be negotiated 

between DoD and manufacturers, rather 

than handled under section 199.11. 

Response: As noted above, DoD 

interprets section 1074g(f) as requiring 

that all prescriptions for covered drugs 

in the Retail Pharmacy Network are 

subject to Federal Ceiling Prices. To the 

extent the ingredient costs for the 

prescriptions paid for in the Retail 

Pharmacy Network exceed the FCP, the 

prescription transaction produced an 

overpayment to the manufacturer, 

giving rise to a DoD right to a refund. 

There are existing statutes that govern 

refunds of government payments that 

exceed the legally authorized purposes, 

circumstances, or amounts. TRICARE’s 

implementing regulations under these 

statutes are at section 199.11. This does 

not preclude mutually agreeable refund 

procedures, but section 199.11 is a 

necessary baseline of authority and 

procedures. 

4. Remedies (Paragraph (q)(4)) 

Comment: A number of comments 

from or on behalf of the pharmaceutical 

industry urged revision to the proposed 

rule provision that in the case of the 

failure of a manufacturer of a covered 

drug ‘‘to make or honor an agreement’’ 

to honor FCPs in the Retail Pharmacy 

Network, the Director of TMA, in 

addition to other actions referred to in 

this paragraph (q), may take ‘‘any other 

action authorized by law.’’ These 

comments argued that agreements to 

honor FCPs in the retail network should 

be completely voluntary, so there 

should be no ‘‘remedy’’ or ‘‘penalty’’ for 

failure to make such an agreement. 

Some commenters described this 

provision as purporting to give the 

Director of TMA arbitrary power or 

unlimited discretion. 

Response: As discussed above, while 

DoD wants to emphasize voluntary 

compliance, the statute unambiguously 

commands that all covered Retail 

Pharmacy Network prescriptions are 

subject to Federal Ceiling Prices. As a 

result, DoD has no reason to and 

expressly does not waive the right to 

pursue any action authorized by law. 

This in no way is arbitrary, unlimited, 

or unreasonable because it is strictly 

limited to authorities under the law. 

Comment: A comment from the retail 

pharmacy sector urged DoD to revise the 

final rule to state that a failure of a 

manufacturer to honor FCPs in the 

Retail Pharmacy Program is a violation 

of 38 U.S.C. 8126 and bars the 

manufacturer from eligibility to sell 

pharmaceuticals to the referenced 

Federal agencies and in Medicaid. 

Response: It is DoD’s view that a 

failure of a manufacturer to comply with 

10 U.S.C. 1074g(f) does also constitute 

a failure to comply with 38 U.S.C. 8126. 

However, as noted above, there are no 

judicial rulings on this point and the 

state of the law is not settled on it. In 

any event, it is outside any regulatory 

authority of the Department of Defense 

to make rules or issue legally controlling 

interpretations regarding 38 U.S.C. 

8126. Thus, this matter is not addressed 

in this rule. This rule only addresses 

matters within the regulatory authority 

of the Department of Defense. 

D. Provisions of the Final Rule 

Like the proposed rule, the final rule 

adds to section 199.21 of the TRICARE 

regulation a new paragraph (q) regarding 


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11290 Federal Register / Vol. 74, No. 50 / Tuesday, March 17, 2009 / Rules and Regulations 

pricing standards for the retail 

pharmacy program. Paragraph (1)(i) 

repeats the statutory requirement, 

virtually verbatim. Paragraph (1)(ii) has 

been added to state in simpler terms 

DoD’s interpretation of the statute as 

requiring that all covered drug TRICARE 

Retail Pharmacy Network prescriptions 

are subject to Federal Ceiling Prices 

under 38 U.S.C. 8126. 

Paragraph (2) provides that a written 

agreement by a manufacturer to honor 

Federal Ceiling Prices in the retail 

pharmacy network as required by the 

statute is with respect to a particular 

covered drug a condition for inclusion 

of that drug on the Uniform Formulary 

(Tier 2) and for the availability of that 

drug through retail network pharmacies 

without preauthorization. A covered 

drug not under such an agreement 

requires preauthorization to be provided 

through a retail network pharmacy. This 

preauthorization requirement does not 

apply to other points of service. The 

final rule has been modified a bit to 

clarify that a covered drug for this 

purpose is a drug that is a covered drug 

under 38 U.S.C. 8126. A covered drug 

does not include a drug that is not a 

covered drug under 38 U.S.C. 8126; a 

drug provided under a prescription that 

is not covered by 10 U.S.C. 1074g(f); a 

drug that is not provided through a 

TRICARE retail network pharmacy; any 

pharmaceutical for which the TRICARE 

Pharmacy Benefits Program is the 

second payer; and any other exception, 

consistent with law, established by the 

Director, TMA. The final rule adds to 

the list of non-covered drugs for this 

purpose any drug provided under a 

prescription and dispensed by a 

pharmacy under the Section 340B 

program. 

The final rule adds a new paragraph 

(q)(2)(iv) stating that the requirement for 

a manufacturer’s agreement to honor 

FCPs in the Retail Pharmacy Network as 

a precondition to Uniform Formulary 

(Tier 2) placement may, upon the 

recommendation of the P&T Committee, 

be waived by the Director, TMA if 

necessary to ensure that at least one 

drug in the applicable drug class is 

included on the Uniform Formulary. 

Any such waiver, however, does not 

waive the statutory requirement that all 

covered TRICARE Retail Pharmacy 

Network prescriptions are subject to 

Federal Ceiling Prices; it only waives 

the exclusion from the Uniform 

Formulary of drugs not covered by 

agreements. 

Paragraph (q)(3) addresses refund 

procedures. Paragraph (q)(3)(i) states 

that refund procedures to ensure that 

pharmaceuticals paid for by DoD that 

are provided by retail network 

pharmacies under the Pharmacy 

Benefits Program are subject to Federal 

Ceiling Prices shall be established. Such 

procedures may be established as part of 

the agreement referred to above, or in a 

separate agreement, or pursuant to 

section 199.11. This paragraph of the 

final rule has been revised somewhat 

from the proposed rule. The options for 

procedures to be addressed in a separate 

agreement between the manufacturer 

and DoD or to be adopted under the 

overpayment recovery rules of section 

199.11 are added in the final rule to 

ensure that any problems regarding 

specific refund procedures need not get 

in the way of manufacturers agreeing to 

honor FCPs and thereby preserve 

eligibility for their drugs for Uniform 

Formulary Tier 2 placement. Paragraph 

(q)(3)(ii) provides that the refund 

procedures shall, to the extent 

practicable, incorporate common 

industry practices for implementing 

pricing agreements between 

manufacturers and large pharmacy 

benefit plan sponsors. The procedures 

will provide the manufacturer at least 

70 days from the date of the submission 

of the TRICARE pharmaceutical 

utilization data needed to calculate the 

refund before the refund payment is 

due. The basis of the refund will be the 

difference between the average nonfederal price of the drug sold by the 

manufacturer to wholesalers, as 

represented by the most recent annual 

non-Federal average manufacturing 

prices (non-FAMP) (reported to the 

Department of Veterans Affairs (VA)) 

and the corresponding FCP or, in the 

discretion of the manufacturer, the 

difference between the FCP and direct 

commercial contract sales prices 

specifically attributable to the reported 

TRICARE paid pharmaceuticals, 

determined for each applicable NDC 

listing. The current annual FCP and the 

non-FAMP on which it was based will 

be those applicable during the calendar 

year in which the prescription was 

filled. 

As under the proposed rule, 

paragraph (q)(3)(iii) provides that a 

refund due under the law is subject to 

section 199.11 of the TRICARE 

regulation, the section that governs 

recovery of overpayments. The final rule 

provision has been revised to clarify 

that the refund amount will be treated, 

in the vernacular of section 199.11, as 

an erroneous payment. The final rule 

has also been revised to elaborate that 

the applicability of section 199.11 

brings with it a procedure for a 

manufacturer to request waiver or 

compromise of a refund amount due 

under the statute. During the pendency 

of any request for such a waiver or 

compromise, a manufacturer’s written 

agreement to honor FCPs shall be 

deemed to exclude the matter that is the 

subject of the request for waiver or 

compromise so that the agreement, if 

otherwise sufficient, will continue to be 

sufficient for purposes of satisfying the 

precondition to Uniform Formulary Tier 

2 placement. Also, during the pendency 

of any such request, the matter that is 

the subject of the request shall not be 

considered a failure of a manufacturer to 

honor an agreement for purposes of 

remedies for noncompliance. The final 

rule is further revised to state that a 

request for waiver may also be premised 

on the voluntary removal by the 

manufacturer in writing of a drug from 

coverage in the TRICARE Pharmacy 

Benefit Program. This change further 

protects a manufacturer from 

involuntary involvement in the 

program. 

One other change to the refund 

procedures paragraph is that a new 

paragraph (q)(3)(iv) has been added to 

state that in the case of disputes by the 

manufacturer of the accuracy of TMA’s 

utilization data, a refund obligation as to 

the amount in dispute will be deferred 

pending good faith efforts to resolve the 

dispute. If the dispute is not resolved 

within 60 days, the Director, TMA will 

issue an initial administrative decision 

and provide the manufacturer with 

opportunity to request reconsideration 

or appeal consistent with procedures 

under the TRICARE regulation. When 

the dispute is ultimately resolved, any 

refund owed relating to the amount in 

dispute will be subject to an interest 

charge consistent with the normal 

regulatory practice. 

Paragraph (q)(4) provides that in the 

case of the failure of a manufacturer of 

a covered drug to make or honor an 

agreement under paragraph (q), the 

Director, TMA, in addition to other 

actions referred to in the paragraph, may 

take any other action authorized by law. 

This paragraph is unchanged from the 

proposed rule. 

Finally, a new paragraph (q)(5) has 

been added. It provides that in cases in 

which a pharmaceutical is removed 

from the Uniform Formulary or 

designated for preauthorization, the 

Director, TMA may for transitional time 

periods determined appropriate by the 

Director or for particular circumstances 

authorize the continued availability of 

the pharmaceutical in the retail 

pharmacy network or in MTF 

pharmacies for some or all beneficiaries 

as if the pharmaceutical were still on 

the Uniform Formulary. 


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Federal Register / Vol. 74, No. 50 / Tuesday, March 17, 2009 / Rules and Regulations 11291 

E. Regulatory Procedures 

Executive Order 12866, ‘‘Regulatory 

Planning and Review’’ 

Executive Order (EO) 12866 requires 

that a comprehensive regulatory impact 

analysis be performed on any 

economically significant regulatory 

action, defined primarily as one that 

would result in an effect of $100 million 

or more in any one year. The DoD has 

examined the economic, legal, and 

policy implications of this final rule and 

has concluded that it is an economically 

significant regulatory action under 

section 3(f)(1) of the EO. The economic 

impact of applying Federal Ceiling 

Prices to the TRICARE Retail Pharmacy 

Network is in the form of reducing the 

prices of drugs paid for by DoD in the 

retail pharmacy component of the 

TRICARE Pharmacy Benefits Program, 

making them comparable to the prices 

paid by DoD in the Military Treatment 

Facility and Mail Order Pharmacy 

components of the program. 

A recent Government Accountability 

Office Report, ‘‘DoD Pharmacy Program: 

Continued Efforts Needed to Reduce 

Growth in Spending at Retail 

Pharmacies,’’ April 2008 (GAO–08– 

327), found that DoD’s drug spending 

‘‘more than tripled from $1.6 billion in 

fiscal year 2000 to $6.2 billion in fiscal 

year 2006’’ and that retail pharmacy 

spending ‘‘drove most of this increase, 

rising almost nine-fold from $455 

million to $3.9 billion and growing from 

29 percent of overall drug spending to 

63 percent.’’ DoD concurs in these 

findings. The principal economic 

impact of this final rule is to moderate 

somewhat the rate of growth in the retail 

pharmacy component of the program. 

DoD has estimated the reduced 

spending associated applying Federal 

Ceiling Prices to the Retail Pharmacy 

Network. DoD funds the Military Health 

System through two separate 

mechanisms. One is the Defense Health 

Program (DHP) appropriation, which 

pays for health care for all beneficiaries 

except those who are also eligible for 

Medicare. DoD-funded health care for 

DoD beneficiaries who are also eligible 

for Medicare is paid for by way of an 

accrual fund called the MedicareEligible Retiree Health Care Fund 

(MERHCF) under 10 U.S.C. Chapter 56. 

Funds are paid into the MERHCF from 

military personnel appropriations and 

the general U.S. treasury. The FY–2009 

budget approved by the President and 

Congress incorporated savings of $352 

million in the Defense Health Program 

appropriation. DoD estimated cost 

reductions from applying Federal 

Ceiling Prices to the TRICARE Retail 

Pharmacy Network in Fiscal Years 2010 

through 2015 appear in the following 

table. It should be noted that these 

estimates have been updated from those 

available at the time the proposed rule 

was issued. The estimates included with 

the proposed rule were the standing outyear budget estimates developed several 

years ago from an FY–2003 utilization 

and cost baseline. New estimates are 

from an FY–2007 utilization and cost 

baseline. The significant increase in 

retail utilization and costs between 2003 

and 2007 results in a significant 

increase in overall budget impact of 

implementing section 1074g(f). Finally, 

it should be noted that the budget 

estimates include amounts DoD would 

have expected to receive from voluntary 

refunds under the current Uniform 

Formulary Voluntary Agreements for 

Retail Refunds (UF–VARRs). In FY– 

2010, for example, even if FCPs were 

not required by the statute, DoD would 

have expected the UF–VARR program to 

produce Defense Health Program 

refunds of $100 million to $150 million 

of the projected $761 million in reduced 

spending. 

MILLIONS OF DOLLARS

FY–2010 DHP Reduced Spending .. 761 

FY–2010 MERHCF Reduced 

Spending ....................................... 910 

FY–2011 DHP Reduced Spending .. 842 

FY–2011 MERHCF Reduced 

Spending ....................................... 1,007 

FY–2012 DHP Reduced Spending .. 919 

FY–2012 MERHCF Reduced 

Spending ....................................... 1,099 

FY–2013 DHP Reduced Spending .. 993 

FY–2013 MERHCF Reduced 

Spending ....................................... 1,188 

FY–2014 DHP Reduced Spending .. 1,072 

FY–2014 MERHCF Reduced 

Spending ....................................... 1,282 

FY–2015 DHP Reduced Spending .. 1,177 

FY–2015 MERHCF Reduced 

Spending ....................................... 1,408 

As a frame of reference, total TRICARE 

Pharmacy Benefits Program spending is 

estimated to be $8 billion in FY–2009. 

Congressional Review Act, 5 U.S.C. 801, 

et seq. 

Under the Congressional Review Act, 

a major rule may not take effect until at 

least 60 days after submission to 

Congress of a report regarding the rule. 

A major rule is one that would have an 

annual effect on the economy of $100 

million or more or have certain other 

impacts. This final rule is a major rule 

under the Congressional Review Act. As 

noted above, applying Federal Ceiling 

Prices to the TRICARE Retail Pharmacy 

Network will reduce DoD spending on 

pharmaceuticals by more than $100 

million per year. 

Section 202, Public Law 104–4, 

‘‘Unfunded Mandates Reform Act’’ 

This rule does not contain a Federal 

mandate that may result in the 

expenditure by State, local and tribunal 

governments, in aggregate, or by the 

private sector, of $100 million or more 

(adjusted for inflation) in any one year. 

The economic impact of this regulation, 

described above, is not in the form of a 

mandated expenditure by a State, local, 

or tribal government or the private 

sector, but by reduced Federal 

expenditures. 

Public Law 96–354, ‘‘Regulatory 

Flexibility Act’’ (5 U.S.C. 601) 

The Regulatory Flexibility Act (RFA) 

requires that each Federal agency 

prepare and make available for public 

comment, a regulatory flexibility 

analysis when the agency issues a 

regulation which would have a 

significant impact on a substantial 

number of small entities. DoD does not 

anticipate that this regulation will result 

in changes that would impact small 

entities, including retail pharmacies, 

whose reimbursements are not affected 

by the final rule. In addition, drugs 

newly subject to implementation of 

Federal Ceiling Prices under the final 

rule represent less than 2% of 

manufacturers’ prescription drug sales. 

Therefore, this final rule is not expected 

to result in significant impacts on a 

substantial number of small entities. 

Public Law 96–511, ‘‘Paperwork 

Reduction Act’’ (44 U.S.C. Chapter 35) 

This final rule contains information 

collection requirements subject to the 

Paperwork Reduction Act (PRA) of 1995 

(44 U.S.C. 3501–3511). This consists of 

responding to the periodic TMA report 

of the TRICARE prescription utilization 

data needed to calculate the refund. 

This information collection has been 

approved with OMB Control Number 

0720–0032. No person is required to 

respond to, nor shall any person be 

subject to a penalty for failure to comply 

with, a collection of information subject 

to the requirements of the PRA, unless 

that collection of information displays a 

currently valid OMB Control Number. 

Executive Order 13132, ‘‘Federalism’’ 

This final rule does not have 

federalism implications, as set forth in 

Executive Order 13132. This rule does 

not have substantial direct effects on the 

States; the relationship between the 

National Government and the States; or 

the distribution of power and 

responsibilities among the various 

levels of Government. 


dwashington3 on PROD1PC60 with RULES
11292 Federal Register / Vol. 74, No. 50 / Tuesday, March 17, 2009 / Rules and Regulations 

List of Subjects in 32 CFR Part 199 

Claims, Health care, Health insurance, 

Military personnel, Pharmacy benefits. 

■ Accordingly, 32 CFR part 199 is 

amended as follows: 

PART 199—[AMENDED] 

■ 1. The authority citation for part 199 

continues to read as follows: 

Authority: 5 U.S.C. 301; 10 U.S.C. chapter 

55. 

■ 2. Section 199.21 is amended by 

adding a new paragraph (q), to read as 

follows: 

§ 199.21. Pharmacy benefits program. 

* * * * * 

(q) Pricing standards for retail 

pharmacy program—(1) Statutory 

requirement. (i) As required by 10 

U.S.C. 1074g(f), with respect to any 

prescription filled on or after the date of 

the enactment of the National Defense 

Authorization Act for Fiscal Year 2008, 

the TRICARE retail pharmacy program 

shall be treated as an element of the 

DoD for purposes of the procurement of 

drugs by Federal agencies under 38 

U.S.C. 8126 to the extent necessary to 

ensure pharmaceuticals paid for by the 

DoD that are provided by pharmacies 

under the program to eligible covered 

beneficiaries under this section are 

subject to the pricing standards in such 

section 8126. 

(ii) Under subparagraph (q)(1)(i) of 

this section, all covered drug TRICARE 

retail pharmacy network prescriptions 

are subject to Federal Ceiling Prices 

under 38 U.S.C. 8126. 

(2) Manufacturer written agreement. 

(i) A written agreement by a 

manufacturer to honor the pricing 

standards required by 10 U.S.C. 1074g(f) 

and referred to in paragraph (q)(1) of 

this section for pharmaceuticals 

provided through retail network 

pharmacies shall with respect to a 

particular covered drug be a condition 

for: 

(A) Inclusion of that drug on the 

uniform formulary under this section; 

and 

(B) Availability of that drug through 

retail network pharmacies without 

preauthorization under paragraph (k) of 

this section. 

(ii) A covered drug not under an 

agreement under paragraph (q)(2)(i) of 

this section requires preauthorization 

under paragraph (k) of this section to be 

provided through a retail network 

pharmacy under the Pharmacy Benefits 

Program. This preauthorization 

requirement does not apply to other 

points of service under the Pharmacy 

Benefits Program. 

(iii) For purposes of this paragraph 

(q)(2), a covered drug is a drug that is 

a covered drug under 38 U.S.C. 8126, 

but does not include: 

(A) A drug that is not a covered drug 

under 38 U.S.C. 8126; 

(B) A drug provided under a 

prescription that is not covered by 10 

U.S.C. 1074g(f); 

(C) A drug that is not provided 

through a retail network pharmacy 

under this section; 

(D) A drug provided under a 

prescription which the TRICARE 

Pharmacy Benefits 

Program is the second payer under 

paragraph (m) of this section; 

(E) A drug provided under a 

prescription and dispensed by a 

pharmacy under section 340B of the 

Public Health Service Act; or 

(F) Any other exception for a drug, 

consistent with law, established by the 

Director, TMA. 

(iv) The requirement of this paragraph 

(q)(2) may, upon the recommendation of 

the Pharmacy and Therapeutics 

Committee, be waived by the Director, 

TMA if necessary to ensure that at least 

one drug in the drug class is included 

on the Uniform Formulary. Any such 

waiver, however, does not waive the 

statutory requirement referred to in 

paragraph (q)(1) that all covered 

TRICARE retail network pharmacy 

prescriptions are subject to Federal 

Ceiling Prices under 38 U.S.C. 8126; it 

only waives the exclusion from the 

Uniform Formulary of drugs not covered 

by agreements under this paragraph 

(q)(2). 

(3) Refund procedures. (i) Refund 

procedures to ensure that 

pharmaceuticals paid for by the DoD 

that are provided by retail network 

pharmacies under the pharmacy 

benefits program are subject to the 

pricing standards referred to in 

paragraph (q)(1) of this section shall be 

established. Such procedures may be 

established as part of the agreement 

referred to in paragraph (q)(2), or in a 

separate agreement, or pursuant to 

§ 199.11. 

(ii) The refund procedures referred to 

in paragraph (q)(3)(i) of this section 

shall, to the extent practicable, 

incorporate common industry practices 

for implementing pricing agreements 

between manufacturers and large 

pharmacy benefit plan sponsors. Such 

procedures shall provide the 

manufacturer at least 70 days from the 

date of the submission of the TRICARE 

pharmaceutical utilization data needed 

to calculate the refund before the refund 

payment is due. The basis of the refund 

will be the difference between the 

average non-Federal price of the drug 

sold by the manufacturer to wholesalers, 

as represented by the most recent 

annual non-Federal average 

manufacturing prices (non-FAMP) 

(reported to the Department of Veterans 

Affairs (VA)) and the corresponding FCP 

or, in the discretion of the manufacturer, 

the difference between the FCP and 

direct commercial contract sales prices 

specifically attributable to the reported 

TRICARE paid pharmaceuticals, 

determined for each applicable NDC 

listing. The current annual FCP and the 

annual non-FAMP from which it was 

derived will be applicable to all 

prescriptions filled during the calendar 

year. 

(iii) A refund due under this 

paragraph (q) is subject to section 

199.11 of this part and will be treated 

as an erroneous payment under that 

section. 

(A) A manufacturer may under 

§ 199.11 of this part request waiver or 

compromise of a refund amount due 

under 10 U.S.C. 1074g(f) and this 

paragraph (q). 

(B) During the pendency of any 

request for waiver or compromise under 

subparagraph (q)(3)(iii)(A) of this 

section, a manufacturer’s written 

agreement under paragraph (q)(2) shall 

be deemed to exclude the matter that is 

the subject of the request for waiver or 

compromise. In such cases the 

agreement, if otherwise sufficient for the 

purpose of the condition referred to in 

paragraph (q)(2), will continue to be 

sufficient for that purpose. Further, 

during the pendency of any such 

request, the matter that is the subject of 

the request shall not be considered a 

failure of a manufacturer to honor an 

agreement for purposes of paragraph 

(q)(4). 

(C) In addition to the criteria 

established in § 199.11 of this section, a 

request for waiver may also be premised 

on the voluntary removal by the 

manufacturer in writing of a drug from 

coverage in the TRICARE Pharmacy 

Benefit Program. 

(iv) In the case of disputes by the 

manufacturer of the accuracy of TMA’s 

utilization data, a refund obligation as to 

the amount in dispute will be deferred 

pending good faith efforts to resolve the 

dispute in accordance with procedures 

established by the Director, TMA. If the 

dispute is not resolved within 60 days, 

the Director, TMA will issue an initial 

administrative decision and provide the 

manufacturer with opportunity to 

request reconsideration or appeal 

consistent with procedures under 

§ 199.10 of this part. When the dispute 

is ultimately resolved, any refund owed 

relating to the amount in dispute will be 

subject to an interest charge from the 


dwashington3 on PROD1PC60 with RULES
Federal Register / Vol. 74, No. 50 / Tuesday, March 17, 2009 / Rules and Regulations 11293 

1Request of the United States Postal Service to 

Add Express Mail & Priority Mail Contract 4 to 

Competitive Product List and Notice of 

Establishment of Rates and Class Not of General 

Applicability, February 20, 2009 (Request). 

2Attachment A to the Request. The analysis that 

accompanies the Governors’ Decision notes, among 

other things, that the contract is not risk free, but 

concludes that the risks are manageable. 

3Attachment B to the Request. 

4Attachment C to the Request. 

5Attachment D to the Request. 

6Attachment E to the Request. 

date payment of the amount was 

initially due, consistent with § 199.11 of 

this part. 

(4) Remedies. In the case of the failure 

of a manufacturer of a covered drug to 

make or honor an agreement under this 

paragraph (q), the Director, TMA, in 

addition to other actions referred to in 

this paragraph (q), may take any other 

action authorized by law. 

(5) Beneficiary transition provisions. 

In cases in which a pharmaceutical is 

removed from the uniform formulary or 

designated for preauthorization under 

paragraph (q)(2) of this section, the 

Director, TMA may for transitional time 

periods determined appropriate by the 

Director or for particular circumstances 

authorize the continued availability of 

the pharmaceutical in the retail 

pharmacy network or in MTF 

pharmacies for some or all beneficiaries 

as if the pharmaceutical were still on 

the uniform formulary. 

Dated: March 10, 2009. 

Patricia L. Toppings, 

OSD Federal Register Liaison Officer, 

Department of Defense. 

[FR Doc. E9–5702 Filed 3–16–09; 8:45 am] 

BILLING CODE 5001–06–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 110 

[Docket No. USCG–2008–0155] 

RIN 1625–AA01 

Anchorage Regulations; Port of New 

York; Correction 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule; correction. 

SUMMARY: The Coast Guard is correcting 

the preamble to a final rule that 

appeared in the Federal Register of 

March 11, 2009 (74 FR 10484). The 

preamble incorrectly referred to 

Department of Homeland Security 

Management Directive 5100.1, instead 

of Department of Homeland Security 

Management Directive 0023.1. 

DATES: Effective April 10, 2009. 

FOR FURTHER INFORMATION CONTACT: LT 

Edward Munoz, Chief, Waterways 

Management Division, telephone 718– 

354–2353. 

SUPPLEMENTARY INFORMATION: In FR Doc. 

E9–5095 appearing on page 10484 of the 

Federal Register of Wednesday, March 

11, 2009, the following correction is 

made: 

1. On page 10486, in the second 

column, correct the ‘‘Environment’’ 

section to read: ‘‘We have analyzed this 

rule under Department of Homeland 

Security Directive 0023.1 and 

Commandant Instruction M16475.lD, 

which guide the Coast Guard in 

complying with the National 

Environmental Policy Act of 1969 

(NEPA) (42 U.S.C. 4321–4370f), and 

have concluded this action is one of a 

category of actions which do not 

individually or cumulatively have a 

significant effect on the human 

environment. This rule is categorically 

excluded, under figure 2–1, paragraph 

34(f), of the Instruction. This rule 

involves a regulation reducing the size 

of an anchorage ground. 

Under figure 2–1, paragraph (34)(f), of 

the Instruction, an environmental 

analysis checklist and a categorical 

exclusion determination are not 

required for this rule.’’ 

Dated: March 12, 2009. 

Steve G. Venckus, 

Chief, Office of Regulations and 

Administrative Law. 

[FR Doc. E9–5757 Filed 3–16–09; 8:45 am] 

BILLING CODE 4910–15–P 

POSTAL REGULATORY COMMISSION 

39 CFR Part 3020 

[Docket Nos. MC2009–17 and CP2009–24; 

Order No. 187] 

Domestic Mail Product 

AGENCY: Postal Regulatory Commission. 

ACTION: Final rule. 

SUMMARY: The Commission is adding 

Express Mail & Priority Mail Contract 4 

to the competitive product list. This 

action is consistent with changes in a 

recent law governing postal operations. 

Republication of the lists of market 

dominant and competitive products is 

also consistent with new requirements 

in the law. 

DATES: Effective March 17, 2009 and is 

applicable beginning March 10, 2009. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http:// 

www.prc.gov. 

FOR FURTHER INFORMATION CONTACT: 

Stephen L. Sharfman, General Counsel, 

202–789–6820 and 

stephen.sharfman@prc.gov. 

SUPPLEMENTARY INFORMATION: Regulatory 

History, 74 FR 9316 (March 2, 2009). 

The Postal Service seeks to add a new 

product identified as Express Mail & 

Priority Mail Contract 4 to the 

Competitive Product List. For the 

reasons discussed below, the 

Commission approves the Request. 

I. Background 

On February 20, 2009, the Postal 

Service filed a formal request pursuant 

to 39 U.S.C. 3642 and 39 CFR 3020.30 

et seq. to add Express Mail & Priority 

Mail Contract 4 to the Competitive 

Product List.1 The Postal Service asserts 

that the Express Mail & Priority Mail 

Contract 4 product is a competitive 

product ‘‘not of general applicability’’ 

within the meaning of 39 U.S.C. 

3632(b)(3). This Request has been 

assigned Docket No. MC2009–17. 

The Postal Service 

contemporaneously filed a contract 

related to the proposed new product 

pursuant to 39 U.S.C. 3632(b)(3) and 39 

CFR 3015.5. The contract has been 

assigned Docket No. CP2009–24. 

In support of its Request, the Postal 

Service filed the following materials: (1) 

A redacted version of the Governors’ 

Decision authorizing the new product 

which also includes an analysis of 

Express Mail & Priority Mail Contract 4 

and certification of the Governors’ 

vote; 2 (2) a redacted version of the 

contract which, among other things, 

provides that the contract will expire 3 

years from the effective date, which is 

proposed to be 1 day after the 

Commission issues all regulatory 

approvals; 3 (3) requested changes in the 

Mail Classification Schedule product 

list; 4 (4) a Statement of Supporting 

Justification as required by 39 CFR 

3020.32; 5 and (5) certification of 

compliance with 39 U.S.C. 3633(a).6

In the Statement of Supporting 

Justification, Kim Parks, Manager, Sales 

and Communications, Expedited 

Shipping, asserts that the service to be 

provided under the contract will cover 

its attributable costs, make a positive 

contribution to coverage of institutional 

costs, and will increase contribution 

toward the requisite 5.5 percent of the 

Postal Service’s total institutional costs. 

Request, Attachment D, at 1. W. Ashley 

Lyons, Manager, Corporate Financial 

Planning, Finance Department, certifies 

that the contract complies with 39 

U.S.C. 3633(a). See id. Attachment E. 

The Postal Service filed much of the 

supporting materials, including the 

unredacted Governors’ Decision and the 


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