Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100763 

TABLE 3 TO PARAGRAPH (d)—Continued 

Category CAS No. Special exemptions Effective date Sunset date 

*******

[FR Doc. 2024–29406 Filed 12–12–24; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of the Secretary 

45 CFR Parts 162 

[CMS–0056–F] 

RIN 0938–AU19 

Administrative Simplification: 

Modifications of Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) National Council for 

Prescription Drug Programs (NCPDP) 

Retail Pharmacy Standards; and 

Modification of the Medicaid Pharmacy 

Subrogation Standard 

AGENCY: Office of the Secretary, 

Department of Health and Human 

Services (HHS). 

ACTION: Final rule. 

SUMMARY: This final rule adopts updated 

versions of the retail pharmacy 

standards for electronic transactions 

adopted under the Administrative 

Simplification subtitle of the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA). 

These updated versions are 

modifications to the currently adopted 

standards for the following retail 

pharmacy transactions: health care 

claims or equivalent encounter 

information; eligibility for a health plan; 

referral certification and authorization; 

and coordination of benefits. This final 

rule also adopts a modification to the 

standard for the Medicaid pharmacy 

subrogation transaction. 

DATES: 

Effective Date: This final rule is 

effective on February 11, 2025. The 

incorporation by reference of certain 

publications listed in the rule is 

approved by the Director of the Federal 

Register beginning February 11, 2025. 

The incorporation by reference of 

certain other publications listed in the 

rule was approved by the Director as of 

March 17, 2009. 

Compliance Date: Compliance with 

this final rule is required beginning 

February 11, 2028. 

FOR FURTHER INFORMATION CONTACT: 

Geanelle G. Herring, (410) 786–4466. 

Christopher S. Wilson, (410) 786– 

3178. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary and Severability 

A. Purpose 

We published a proposed rule titled 

‘‘Administrative Simplification: 

Modifications of Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) National Council for 

Prescription Drug Programs (NCPDP) 

Retail Pharmacy Standards; and 

Adoption of Pharmacy Subrogation 

Standard’’ (hereafter referred to as the 

November 2022 proposed rule) that 

appeared in the November 9, 2022, 

Federal Register (87 FR 67634). In that 

rule, we proposed to adopt 

modifications to the retail pharmacy 

and Medicaid subrogation standards. 

This final rule adopts modifications to 

standards for electronic retail pharmacy 

transactions and the Medicaid 

pharmacy subrogation transaction 

adopted under the Administrative 

Simplification subtitle of the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA). 

1. Need for the Regulatory Action 

The modified standards adopted in 

this rule will benefit the health care 

industry by offering more robust data 

exchange and workflow automation, 

enhanced patient safety, improved 

coordination of benefits, and expanded 

financial fields, so that entities may not 

have to manually enter free text, split 

claims, or prepare and submit a paper 

Universal Claim Form. The current 

retail pharmacy standards adopted in 

2009 remain unchanged. In 2018, the 

National Committee on Vital and Health 

Statistics (NCVHS) recommended that 

HHS adopt more recent standards to 

address evolving industry business 

needs. Consistent with the NCVHS 

recommendations and collaborative 

industry and stakeholder input, we 

believe the updated retail pharmacy 

standards we are adopting are 

sufficiently mature for adoption and 

that covered entities are ready to 

implement them. 

2. Legal Authority for the Regulatory 

Action 

Through subtitle F of title II of 

HIPAA, Congress added to title XI of the 

Social Security Act (the Act) a new Part 

C, titled ‘‘Administrative 

Simplification,’’ which requires the 

Secretary of the Department of Health 

and Human Services (the Secretary) to 

adopt standards for certain transactions 

to enable health information to be 

exchanged more efficiently and to 

achieve greater uniformity in the 

transmission of health information. 

More specifically, section 1174 of the 

Act requires the Secretary to review the 

adopted standards and adopt 

modifications to them, including 

additions to the standards, as 

appropriate, but not more frequently 

than once every 12 months, unless the 

Secretary determines that the 

modification is necessary in order to 

permit compliance with the standard, 

thus providing the legal authority for 

this regulatory action. 

B. Summary of the Major Provisions 

The provisions in this final rule adopt 

the following modifications: the NCPDP 

Telecommunication Standard 

Implementation Guide, Version F6 

(Version F6) and equivalent NCPDP 

Batch Standard Implementation Guide, 

Version 15 (Version 15) and NCPDP 

Batch Standard Subrogation 

Implementation Guide, Version 10 

(Version 10). These updated standards 

will replace the currently adopted 

NCPDP Telecommunication Standard 

Implementation Guide, Version D, 

Release 0 (Version D.0) and the 

equivalent NCPDP Batch Standard 

Implementation Guide, Version 1, 

Release 2 (Version 1.2), and NCPDP 

Batch Standard Medicaid Subrogation 

Implementation Guide, Version 3, 

Release 0 (Version 3.0). 

Version 3.0 was adopted to support 

Federal and State requirements for State 

Medicaid agencies to seek 

reimbursement from the health plan 

responsible for paying the pharmacy 

claim after the State Medicaid agency 

has paid the claim on behalf of the 

Medicaid recipient. 

In the November 2022 proposed rule, 

we proposed to broaden the scope of the 

subrogation transaction to apply not 

only to State Medicaid agencies but to 


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all health plans, such as Medicare Part 

D, State assistance programs, and 

commercial health plans, attempting to 

recover reimbursement from the 

responsible payer, and to rename the 

transaction the Pharmacy subrogation 

transaction. At § 162.1902(b), we 

proposed to adopt Version 10 to replace 

Version 3.0 as the standard for the 

subrogation transaction. This would 

have been a modification for State 

Medicaid agencies, and for nonMedicaid health plans this would have 

been the adoption of an initial standard. 

However, compelling comments to 

the November 2022 proposed rule 

persuaded us to adopt Version 10 solely 

for State Medicaid agencies. While we 

are not adopting Version 10 for nonMedicaid health plans in this final rule, 

they are permitted to use the standard 

C. Summary of Effective and 

Compliance Dates 

The policies adopted in this final rule 

are effective 60 days after publication of 

the final rule in the Federal Register. 

In the November 2022, proposed rule, 

we proposed that all covered entities 

would need to comply with Version F6, 

Version 15, and Version 10 beginning 24 

months after the effective date of the 

final rule. For Version F6 and Version 

15, we are adopting a later compliance 

date than we had proposed, and are 

including an 8-month transition period: 

• Starting August 11, 2027, all 

covered entities, as agreed to by trading 

partners, may use either Version D.0 

and Version 1.2 or Version F6 and 

Version 15 for 8 months as a transition 

period prior to full compliance, which 

begins 36 months after the effective date 

of the final rule. 

• All covered entities must be in 

compliance with Version F6 and 

Version 15 beginning February 11, 2028. 

As noted previously and discussed in 

section III. of this final rule, we are 

adopting Version 10 to apply solely to 

State Medicaid agencies. This final rule 

adopts a compliance date for State 

Medicaid agencies to comply with 

Version 10 that aligns with the 

compliance date for Version F6 and 

Version 15: 

• Starting August 11, 2027, State 

Medicaid agencies, as agreed to by 

trading partners, may use Version 3.0 or 

Version 10 for 8 months as a transition 

period prior to full compliance, which 

begins 36 months after the effective date 

of the final rule. 

• State Medicaid agencies must be in 

compliance with Version 10 beginning 

February 11, 2028. 

D. Summary of Costs and Benefits 

The overall cost for affected HIPAA 

covered entities—independent and nonindependent pharmacies, pharmacy 

benefit plans, and State Medicaid 

agencies—to move to the updated 

versions of the retail pharmacy 

transaction standards and the Medicaid 

pharmacy subrogation transaction 

standard will be approximately $386.3 

million. The cost is based on the need 

for such entities to engage in technical 

development, implementation, testing, 

and initial training to be prepared to 

meet a compliance date beginning 

February 11, 2028. As discussed in the 

November 2022, proposed rule, we 

believe that HIPAA covered entities, or 

their contracted vendors, have already 

largely invested in the hardware, 

software, and connectivity necessary to 

conduct the transactions with the 

updated versions of the retail pharmacy 

standards and the Medicaid pharmacy 

subrogation standard. 

E. Severability 

This final rule adopts updated 

versions of currently adopted standards 

for numerous provisions under aspects 

of the Administrative Simplification 

subtitle of the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA). Subtitle F of Title II of 

HIPAA added a new Part C to Title XI 

of the Social Security Act (sections 1171 

through 1179 of the Act, 42 U.S.C. 

1320d through 1320d–8). These updated 

versions are modifications to the 

currently adopted standards for the 

following retail pharmacy transactions: 

health care claims or equivalent 

encounter information; eligibility for a 

health plan; referral certification and 

authorization; and coordination of 

benefits. This final rule also adopts a 

modification to the standard for the 

Medicaid pharmacy subrogation 

transaction. The provisions adopted 

would be distinct provisions. We 

believe these distinct processes may 

function independently of each other. 

To the extent a court may enjoin any 

part of a final rule, the Department of 

Health and Human Services (HHS) 

intends that other provisions or parts of 

provisions should remain in effect, 

ensuring the continuity of the 

regulations. We intend that any 

provision of the requirements described 

in this section or in another section held 

to be invalid or unenforceable by its 

terms or as applied to any person or 

circumstance would be construed so as 

to continue to give maximum effect to 

the provision permitted by law unless 

such holding is one of utter invalidity 

or unenforceability, in which event we 

intend that the provision would be 

severable from the other finalized 

provisions described in this section and 

in other sections and would not affect 

the remainder thereof or the application 

of the provision to persons not similarly 

situated or to dissimilar circumstances. 

II. Background 

A. Legislative Authority for 

Administrative Simplification 

This background discussion presents 

a history of statutory and regulatory 

provisions that are relevant for the 

purposes of this final rule. 

Congress addressed the need for a 

consistent framework for electronic 

transactions and other administrative 

simplification issues in HIPAA (Pub. L. 

104–191, enacted on August 21, 1996). 

Through subtitle F of title II of HIPAA, 

Congress added to title XI of the Act a 

new Part C, titled ‘‘Administrative 

Simplification,’’ which required the 

Secretary of the Department of Health 

and Human Services (the Secretary) to 

adopt standards for certain transactions 

to enable health information to be 

exchanged more efficiently and to 

achieve greater uniformity in the 

transmission of health information. For 

purposes of this and later discussion in 

this final rule, we sometimes refer to 

this statute as the ‘‘original’’ HIPAA. 

Section 1172(a) of the Act states that 

‘‘[a]ny standard adopted under [HIPAA] 

shall apply, in whole or in part, to . . . 

(1) A health plan. (2) A health care 

clearinghouse. (3) A health care 

provider who transmits any health 

information in electronic form in 

connection with a [HIPAA 

transaction],’’ which are collectively 

referred to as ‘‘covered entities.’’ 

Generally, section 1172 of the Act 

requires any standard adopted under 

HIPAA to be developed, adopted, or 

modified by a standard setting 

organization (SSO). In adopting a 

standard, the Secretary must rely upon 

recommendations of the NCVHS, in 

consultation with the organizations 

referred to in section 1172(c)(3)(B) of the 

Act, and appropriate Federal and State 

agencies and private organizations. 

Section 1172(b) of the Act requires 

that a standard adopted under HIPAA 

be consistent with the objective of 

reducing the administrative costs of 

providing and paying for health care. 

The transaction standards adopted 

under HIPAA enable financial and 

administrative electronic data 

interchange (EDI) using a common 

structure, as opposed to the many 

varied, often proprietary, transaction 

formats on which industry had 

previously relied and that, due to lack 


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of uniformity, engendered 

administrative burden. 

Section 1173(g)(1) of the Act, which 

was added by section 1104(b) of the 

Patient Protection and Affordable Care 

Act (Affordable Care Act), Pub. L. 111– 

148), further addresses the goal of 

uniformity by requiring the Secretary to 

adopt a single set of operating rules for 

each HIPAA transaction. Section 

1171(9) of the Act defines operating 

rules as ‘‘the necessary business rules 

and guidelines for the electronic 

exchange of information that are not 

defined by a standard or its 

implementation specifications.’’ Section 

1173(g)(1) of the Act requires operating 

rules to be consensus-based and reflect 

the necessary business rules that affect 

health plans and health care providers 

and the manner in which they operate 

in accordance with HIPAA standards. 

Section 1173(a) of the Act requires 

that the Secretary adopt standards for 

financial and administrative 

transactions, and data elements for 

those transactions, to enable health 

information to be exchanged 

electronically. The original HIPAA 

provisions require the Secretary to 

adopt standards for the following 

transactions: health claims or equivalent 

encounter information; health claims 

attachments; enrollment and 

disenrollment in a health plan; 

eligibility for a health plan; health care 

payment and remittance advice; health 

plan premium payments; first report of 

injury; health claim status; and referral 

certification and authorization. The 

Affordable Care Act additionally 

required the Secretary to adopt 

standards for electronic funds transfers 

transactions. Section 1173(a)(1)(B) of the 

Act requires the Secretary to adopt 

standards for any other financial and 

administrative transactions the 

Secretary determines appropriate. 

Section 1173(a)(4) of the Act requires 

that the standards and operating rules, 

to the extent feasible and appropriate: 

enable determination of an individual’s 

eligibility and financial responsibility 

for specific services prior to or at the 

point of care; be comprehensive, 

requiring minimal augmentation by 

paper or other communications; provide 

for timely acknowledgment, response, 

and status reporting that supports a 

transparent claims and denial 

management process; describe all data 

elements in unambiguous terms, require 

that such data elements be required or 

conditioned upon set terms in other 

fields, and generally prohibit additional 

conditions; and reduce clerical burden 

on patients and providers. 

Section 1174 of the Act requires the 

Secretary to review the adopted 

standards and adopt modifications to 

them, including additions to the 

standards, as appropriate, but not more 

frequently than once every 12 months, 

unless the Secretary determines that the 

modification is necessary in order to 

permit compliance with the standard. 

Section 1175(a)(1)(A) of the Act 

prohibits health plans from refusing to 

conduct a transaction as a standard 

transaction. Section 1175(a)(1)(B) of the 

Act also prohibits health plans from 

delaying the transaction or adversely 

affecting or attempting to adversely 

affect a person or the transaction itself 

on the grounds that the transaction is in 

standard format. Section 1175(b) of the 

Act provides for a compliance date not 

later than 24 months after the date on 

which an initial standard or 

implementation specification is adopted 

for all covered entities except small 

health plans, which must comply not 

later than 36 months after such 

adoption. If the Secretary adopts a 

modification to a HIPAA standard or 

implementation specification, the 

compliance date for the modification 

may not be earlier than 180 days 

following the date of the adoption of the 

modification. The Secretary must 

consider the time needed to comply due 

to the nature and extent of the 

modification when determining 

compliance dates and may extend the 

time for compliance for small health 

plans if he deems it appropriate. 

Sections 1176 and 1177 of the Act 

establish civil money penalties (CMPs) 

and criminal penalties to which covered 

entities may be subject for violations of 

HIPAA Administrative Simplification 

provisions. HHS administers the CMPs 

under section 1176 of the Act and the 

U.S. Department of Justice administers 

the criminal penalties under section 

1177 of the Act. Section 1176(b) of the 

Act sets out limitations on the 

Secretary’s authority and provides the 

Secretary certain discretion with respect 

to imposing CMPs. This section 

provides that no CMPs may be imposed 

with respect to an act if a penalty has 

been imposed under section 1177 of the 

Act with respect to such act. This 

section also generally precludes the 

Secretary from imposing a CMP for a 

violation corrected during the 30-day 

period beginning when an individual 

knew or, by exercising reasonable 

diligence would have known, that the 

failure to comply occurred. 

B. Prior Rulemaking 

We published a final rule entitled 

‘‘Health Insurance Reform: Standards 

for Electronic Transactions’’ that 

appeared in the August 17, 2000, 

Federal Register (65 FR 50312) 

(hereinafter referred to as the 

Transactions and Code Sets final rule). 

That rule implemented some of the 

HIPAA Administrative Simplification 

requirements by adopting standards for 

electronic health care transactions 

developed by SSOs, and medical code 

sets to be used in those transactions. We 

adopted X12 Version 4010 standards for 

administrative transactions, and the 

National Council for Prescription Drug 

Programs (NCPDP) Telecommunication 

Standard Version 5.1 for retail 

pharmacy transactions at 45 CFR part 

162, subparts K through R. 

Since initially adopting the HIPAA 

standards in the Transactions and Code 

Sets final rule, we have adopted a 

number of modifications to them. The 

most extensive modifications were 

adopted in a final rule titled ‘‘Health 

Insurance Reform; Modifications to the 

Health Insurance Portability and 

Accountability Act (HIPAA) Electronic 

Transaction Standards’’ that appeared in 

the January 16, 2009, Federal Register 

(74 FR 3296) (hereinafter referred to as 

the 2009 Modifications final rule). 

Among other things, that rule adopted 

updated X12 and NCPDP standards, 

moving from X12 Version 4010 to X12 

Version 5010, and Telecommunication 

Standard Version 5.1 and equivalent 

Batch Standard Implementation Guide 

Version 1, Release 1, to 

Telecommunication Standard Version 

D.0 and Version 1.2. In that rule, we 

also adopted Version 3.0 for the 

Medicaid pharmacy subrogation 

transaction. Covered entities were 

required to comply with these standards 

beginning on and after January 1, 2012, 

with the exception of small health 

plans, which were required to comply 

on and after January 1, 2013. 

In the Transactions and Code Sets 

final rule, we defined the terms 

‘‘modification’’ and ‘‘maintenance.’’ We 

explained that when a change is 

substantial enough to justify publication 

of a new version of an implementation 

specification, such change is considered 

a modification and must be adopted by 

the Secretary through regulation (65 FR 

50322). Conversely, maintenance 

describes the activities necessary to 

support the use of a standard, including 

technical corrections to an 

implementation specification (65 FR 

50322). Maintenance changes are 

typically corrections that are obvious to 

readers of the implementation guides, 

not controversial, and essential to 

implementation as such, in the February 

20, 2003 final rule (68 FR 8334) titled, 

‘‘Health Insurance Reform: Security 

Standards’’. 

Maintenance changes to 

Telecommunication Standard Version 


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100766 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 

D.0 were identified by the industry, 

balloted and approved through the 

NCPDP, and are contained in a 

document titled ‘‘Telecommunication 

Version D and Above Questions, 

Answers and Editorial Updates,’’ that 

can be accessed free of charge from the 

NCPDP website’s HIPAA Information 

Section, at https://member.ncpdp.org/ 

Member/media/pdf/VersionD

Questions.pdf. In an October 13, 2010, 

Federal Register notice titled ‘‘Health 

Insurance Reform; Announcement of 

Maintenance Changes to Electronic Data 

Transaction Standards Adopted Under 

the Health Insurance Portability and 

Accountability Act of 1996’’ (75 FR 

62684), the Secretary announced the 

maintenance changes and the 

availability of the Telecommunication 

Standard Version D.0 Editorial and how 

it then could be obtained. The 

document is a consolidated reference for 

questions that have been posed based on 

the review and implementation of 

Version D.0. 

In a final rule titled ‘‘Administrative 

Simplification: Modification of the 

Requirements for the Use of Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

National Council for Prescription Drug 

Programs (NCPDP) D.0 Standard,’’ that 

appeared in the January 24, 2020 

Federal Register (85 FR 4236) (hereafter 

referred to as the Modification of 

Version D.0 Requirements final rule), 

the Secretary adopted a modification of 

the requirements for the use of the 

Quantity Prescribed (460–ET) field 

Version D.0. The modification required 

covered entities to treat the Quantity 

Prescribed (460–ET) field as required 

where a transmission uses Version D.0 

for a Schedule II drug for the following 

transactions: (1) health care claims or 

equivalent encounter information; (2) 

referral certification and authorization; 

and (3) coordination of benefits. 

In that rulemaking, the Secretary 

noted that the NCPDP had published an 

updated telecommunication standard 

implementation guide, the October 2017 

Telecommunication Standard 

Implementation Guide, Version F2 

(Version F2), that, among other changes, 

revised the situational use of a not used 

field to specify an even broader use of 

the Quantity Prescribed (460–ET) field. 

The change described the Quantity 

Prescribed (460–ET) field as ‘‘required 

only if the claim is for a controlled 

substance or for other products as 

required by law; otherwise, not 

available for use.’’ We explained that we 

chose not to adopt Version F2 at that 

time because, given the public health 

emergency caused by the opioid crisis 

and the urgent need to find ways to 

yield data and information to help 

combat it, we believed it was more 

appropriate to take a narrow, targeted 

approach while taking additional time 

to evaluate the impact of a new version 

on covered entities. 

C. Standards Adoption and 

Modification 

The law generally requires at section 

1172(c) of the Act that any standard 

adopted under HIPAA be developed, 

adopted, or modified by an SSO. 

Section 1171 of the Act defines an SSO 

as an SSO accredited by the American 

National Standards Institute (ANSI), and 

specifically mentions the NCPDP (the 

SSO associated with this final rule), that 

develops standards for information 

transactions, data, or any standard that 

is necessary to, or will facilitate the 

implementation of, Administrative 

Simplification. Information about the 

NCPDP’s balloting process, the process 

by which it vets and approves the 

standards it develops and any changes 

thereto, is available on its website, 

http://www.ncpdp.org. 

1. Designated Standards Maintenance 

Organizations (DSMOs) 

In the Transactions and Code Sets 

final rule, the Secretary adopted 

procedures to maintain and modify 

existing, and adopt new, HIPAA 

standards and established a new 

organization type called the ‘‘Designated 

Standard Maintenance Organization’’ 

(DSMO). Regulations at 45 CFR 162.910 

provide that the Secretary may 

designate as a DSMO an organization 

that agrees to conduct, to the 

satisfaction of the Secretary, the 

functions of maintaining the adopted 

standard, and receiving and processing 

requests for adopting a new standard or 

modifying an adopted standard. In a 

notice titled ‘‘Health Insurance Reform: 

Announcement of Designated Standard 

Maintenance Organizations’’ (65 FR 

50373), which appeared in the August 

17, 2000 Federal Register concurrently 

with the Transactions and Code sets 

final rule, the Secretary designated the 

following six DSMOs: X12, NCPDP, 

Health Level Seven, the National 

Uniform Billing Committee (NUBC), the 

National Uniform Claim Committee 

(NUCC), and the Dental Content 

Committee (DCC) of the American 

Dental Association. 

2. Process for Adopting Initial 

Standards, Maintenance to Standards, 

and Modifications to Standards 

As noted previously, in general, 

HIPAA requires the Secretary to adopt 

standards that have been developed by 

an SSO. The process for adopting a new 

standard or a modification to an existing 

standard is described in the 

Transactions and Code Sets final rule 

(65 FR 50344) and implemented at 

§ 162.910. Under § 162.910, the 

Secretary considers recommendations 

for proposed modifications to existing 

standards, or a proposed new standard, 

if the recommendations are developed 

through a process that provides for: 

open public access; coordination with 

other DSMOs; an appeals process for the 

requestor of the proposal or the DSMO 

that participated in the review and 

analysis if either of the preceding were 

dissatisfied with the decision on the 

request; an expedited process to address 

HIPAA content needs identified within 

the industry; and submission of the 

recommendation to the NCVHS. 

Any entity may submit change 

requests with a documented business 

case to support its recommendation to 

the DSMO. The DSMO receives and 

manages those change requests, 

including reviewing them and notifying 

the SSO of its recommendation for 

approval or rejection. If the changes are 

recommended for approval, the DSMO 

also notifies the NCVHS and suggests 

that a recommendation for adoption be 

made to the Secretary. 

The foregoing processes were 

followed with respect to the standards 

modifications finalized in this rule, 

which stemmed from the following 

change requests the NCPDP submitted 

to NCVHS: (1) DSMO request 1201 that 

requested replacing Version D.0 and 

Version 1.2 with the Version F2 and 

Version 15; (2) DSMO request 1202 that 

requested replacing Version 3.0 with 

Version 10 to be used by Medicaid plans 

only; and (3) DSMO request 1208 that 

updated DSMO request 1201, and 

requested adopting Version F6, instead 

of Version F2. 

3. NCVHS Recommendations 

The NCVHS, which was established 

by statute in 1949, serves as an advisory 

committee to the Secretary and is 

statutorily conferred a significant role in 

the Secretary’s adoption and 

modification of HIPAA standards. In 

2018, the NCVHS conducted 2 days of 

hearings seeking the input of health care 

providers, health plans, clearinghouses, 

vendors, and interested stakeholders 

regarding Version F2 as a potential 

replacement for Version D.0, and 

Version 15 as a potential replacement 

for Version 1.2. Testimony was also 

presented in support of replacing 

Version 3.0 with Version 10. In addition 

to the NCPDP, organizations submitting 

testimony included the Centers for 

Medicare & Medicaid Services on behalf 

of the Medicare Part D program, the 


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1https://ncvhs.hhs.gov/meetings/agenda-of-themarch-26-2018-hearing-on-ncpdp-standardsupdates/. 

2https://ncvhs.hhs.gov/wp-content/uploads/ 

2018/08/Letter-to-Secretary-NCVHSRecommendations-on-NCPDP-PharmacyStandards-Update.pdf. 

3https://ncvhs.hhs.gov/wp-content/uploads/ 

2020/04/Recommendation-Letter-Adoption-of-NewPharmacy-Standard-Under-HIPAA-April-22-2020- 

508.pdf. 

4The Telecommunication Standard 

Implementation Guide Version F6 (Version F6), 

January 2020 and equivalent Batch Standard 

Implementation Guide, Version 15 (Version 15) 

October 2017, National Council for Prescription 

Drug Programs. 

National Association of Chain Drug 

Stores (NACDS), Ohio Medicaid, 

Pharmerica, CVS Health, and an 

independent pharmacy, Sam’s Health 

Mart.1

In a letter dated May 17, 2018, the 

NCVHS recommended that the 

Secretary adopt Version F2 to replace 

Version D.0, Version 15 to replace 

Version 1.2, and Version 10 to replace 

Version 3.0.2 As discussed in section 

III.B. of this final rule, we did not 

propose to adopt Version F2 based on 

that NCVHS recommendation in our 

proposed rule titled ‘‘Administrative 

Simplification: Modification of the 

Requirements for the Use of Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

National Council for Prescription Drug 

Programs (NCPDP) D.0 Standard’’ that 

appeared in the Federal Register on 

January 31, 2019 (84 FR 633) because 

we believed that proposing a 

modification to the retail pharmacy 

standards required further evaluation, 

including an assessment of the impact 

of implementing the modification, given 

the many significant changes a version 

change would require covered entities 

to undertake. 

The NCVHS held a later hearing, on 

March 24, 2020, to discuss Change 

Request 1208 that recommended that 

Version F6 supplant Version F2, in 

regard to the NCVHS’s prior 

recommendation that the Secretary 

adopt Version F2. During the hearing, 

the NCPDP noted that Version F6 had 

resolved several key limitations of 

Version F2. Significantly, with respect 

to the number of digits in the dollar 

field, Version F2 did not support dollar 

fields of $1 million or more. Since the 

NCVHS’s May 17, 2018, 

recommendation, several new drugs 

priced at, or in excess of, $1 million 

have entered the market, and 

researchers and analysts anticipate that 

over the next several years, dozens of 

new drugs priced similarly or higher 

may enter the market, while hundreds 

of likely high-priced therapies, 

including gene therapies that target 

certain cancers and rare diseases, are 

under development. To meet emerging 

business needs, the NCPDP updated the 

Telecommunication Standard to support 

dollar fields equal to, or more than, $1 

million and made other updates 

including enhancements to improve 

coordination of benefits processes, 

prescriber validation fields, plan benefit 

transparency, codification of clinical 

and patient data, harmonization with 

related standards, and controlled 

substance reporting, that necessitated 

the new Version F6. The March 24, 

2020, NCVHS meeting transcript and 

testimony is available at https://

ncvhs.hhs.gov/meetings/full-committeemeeting-4/. 

In a letter dated April 22, 2020,3 the 

NCVHS recommended that the 

Secretary adopt Version F6 to replace 

Version D.0, provide a 3-year preimplementation window allowing, but 

not requiring, covered entities to use 

Version F6 beginning at the end of the 

3 years, and allowing both Versions F6 

and D.0 to be used for an 8-month 

period until a compliance date of May 

1, 2025, when only Version F6 and 

Version 15 could be used. The 

recommendation letter stated that 

allowing the industry to use either 

Version D.0 or Version F6 would enable 

an effective live-testing and transition 

period. The NCVHS recommended that 

the Secretary adopt Batch Standard 

Versions 15 and 10, as it had previously 

recommended in May 2018. The 

NCVHS has not, as of publication of this 

final rule, recommended that the 

Secretary adopt any other version of the 

NCPDP Telecommunication Standard, 

such as Version F7, which is discussed 

in section III. A. of this final rule. 

III. Provisions of the Final Rule and the 

Analysis of and Responses to Public 

Comments 

In response to the November 2022 

proposed rule, we received 25 timely 

pieces of correspondence, which 

resulted in over 47 unique comments 

from a variety of commenters, including 

a pharmacy standards development 

organization, data content committees, 

health plans, health care companies, 

professional associations, technology 

companies, and individuals. 

In this section of this final rule, we 

present our proposals, a summary of the 

comments received, and our responses 

to the comments. Some of the public 

comments received in response to the 

November 2022 proposed rule were 

outside of the scope of the proposed 

rule and are not addressed in this final 

rule. 

A. Adoption of the NCPDP 

Telecommunication Standard 

Implementation Guide Version F6 

(Version F6) and Equivalent Batch 

Standard Implementation Guide, 

Version 15 (Version 15) for Retail 

Pharmacy Transactions 

In the November 2022 proposed rule, 

we proposed to adopt a modification to 

the current HIPAA retail pharmacy 

standards for the following transactions: 

(1) health care claims or equivalent 

encounter information; (2) eligibility for 

a health plan; (3) referral certification 

and authorization; and (4) coordination 

of benefits. We indicated that moving to 

Version F6 and Version 15 would: allow 

for the accommodation of drug therapies 

priced at or in excess of $1 million; 

include information needed for prior 

authorizations and enhancements to the 

drug utilization review (DUR) fields; 

include new coordination of benefits 

segment fields that would improve the 

identification of the previous payer and 

its program type, such as Medicare, 

Medicaid, workers compensation, or 

self-pay programs, which would 

eliminate the need to use manual 

processes to identify this information; 

and accommodate business needs to 

comply with other industry 

requirements, among other benefits. For 

the full discussion, we refer readers to 

the November 2022 proposed rule (87 

FR 67638 and 67639). 

We proposed that covered entities 

conducting the following HIPAA 

transactions would be required to use 

Version F6: 

• Health care claims or equivalent 

encounter information (§ 162.1101). 

++ Retail pharmacy drug claims. 

++ Retail pharmacy supplies and 

professional claims. 

• Eligibility for a health plan 

(§ 162.1201)—Retail pharmacy drugs. 

• Referral certification and 

authorization (§ 162.1301)—Retail 

pharmacy drugs. 

• Coordination of benefits 

(§ 162.1801)—Retail pharmacy drugs. 

We note that, as is the case with 

Version D.0, Version F6 is specifically 

designed for communication between 

retail pharmacies and health plans, as 

described in the NCPDP Version F6 

Telecommunication Standard 

Implementation Guide 4 and equivalent 

NCPDP Version 15 Batch Standard 

Implementation Guide. Specifically, the 

implementation guides for Version F6 


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and Version 15 specify that those 

standards support transmissions to and 

from ‘‘providers’’ and indicate that a 

provider ‘‘may be a retail pharmacy, 

mail order pharmacy, doctor’s office, 

clinic, hospital, long-term care facility, 

or any other entity, which dispenses 

prescription drugs.’’ This means the use 

cases for the retail pharmacy drugs 

transactions addressed in this Final 

Rule, including the HIPAA 

requirements for the use of Version F6 

and Version 15 we are finalizing here, 

apply only to providers that dispense 

prescription drugs. That is, they do not 

apply to providers that do not dispense 

prescription drugs. 

Comment: A number of commenters 

supported HHS’s proposal to modify the 

currently adopted retail pharmacy 

standards from Version D.0 and Version 

1.2 to Version F6 and Version 15. 

Commenters remarked that it has been 

over 10 years since Version D.0 was 

adopted for retail pharmacy transactions 

and agreed that the enhancements in the 

updated standards will better meet the 

present business needs of pharmacies 

and payers, thereby reducing 

administrative burden. While most 

commenters agreed that adopting 

Version F6 is appropriate, several 

suggested that HHS instead adopt an 

even more recently updated NCPDP 

Telecommunication Standard, Version 

F7 (Version F7). Commenters remarked 

that the only difference between Version 

F6 and Version F7 is the addition of a 

field that distinguishes between 

administrative gender (used to indicate 

the sex a person has listed with their 

insurance company) and clinical sex at 

birth. Commenters noted that the 

Patient Gender Code field (305–C5) in 

Version F6 includes ‘‘Non-Binary’’ as an 

optional value. While the ‘‘Non-Binary’’ 

value can be used to support various 

eligibility and enrollment business 

functions, it does not support genderspecific coverage rules or clinical 

patient safety functions. To address this 

clinical concern, the NCPDP updated 

Version F6 to Version F7 by adding a 

new field called Sex Assigned at Birth 

(F32–W8). Commenters urged HHS to 

consider the need for this field and 

adopt Version F7 in this final rule. 

Response: We thank the commenters 

for their support of our proposal to 

adopt Version F6. While we appreciate 

comments urging us to adopt Version F7 

instead of Version F6, as of the 

publication date of this final rule there 

is no DSMO recommendation to adopt 

Version F7 in accordance with the 

processes specified in § 162.910(c), nor 

has the NCVHS been asked to consider 

updating its prior recommendation to 

adopt Version F6. While we did not 

discuss adopting Version F7 in the 

November 2022 proposed rule, we may 

address it in future rulemaking. 

therefore, covered entities will be 

required to use Version F6 only. 

Comment: A commenter 

acknowledged that adoption of Version 

F6 would reduce industry burden by 

replacing several free text fields with 

discrete data fields, thus allowing the 

industry to automate additional 

pharmacy workflows. However, another 

commenter expressed concern that the 

replacement of free text fields with 

discrete data fields in Version F6 would 

result in the permitted information 

being too limited or not well-defined. 

The commenter noted that poorly 

designed discrete data fields potentially 

lead to unclear communication and 

confusion, which has patient-safety 

implications. The commenter said that 

before deploying the discrete data fields, 

the standard should be broadly tested by 

both physicians and pharmacists to 

ensure clear communication. 

Response: HHS consulted with the 

NCPDP, the SSO associated with this 

rulemaking, and was advised that the 

free text fields were not removed from 

Version F6. Rather, the free text fields 

still exist in Version F6 and can be used 

when additional text is needed for 

clarification or detail or when a discrete 

data field does not exist. But, Version F6 

provides a format to convey situational 

plan benefit information, previously 

sent using free text fields, in discrete 

data fields. The discrete data fields, 

which are on the claim response from 

the payer or PBM to the pharmacy, 

enable the plan benefit information to 

be better communicated to the 

pharmacy, which in turn enables the 

pharmacy to better communicate to the 

patient and the prescriber. The use of 

discrete data fields improves 

communication of the plan benefit 

information because it does not rely on 

the pharmacist reading and interpreting 

free text. The types of plan benefit 

information that are communicated via 

free text fields in Version D.0 and that 

will be sent in discrete data fields in 

Version F6 are dates (for example, next 

available fill date and prior 

authorization date), minimum/ 

maximum ages, minimum/maximum 

quantity, minimum/maximum day 

supply, minimum/maximum dollar 

amounts, and maximum or remaining 

fills. Additional detail about formulary 

alternatives, if applicable, will be 

communicated via the new discrete data 

fields rather than via free text. Such 

detail includes the required duration of 

therapy and plan benefit tiers. 

It is also important to note that since 

the new discrete data fields are not 

codified, the information conveyed is 

not limited to, or defined by, a set of 

values. A codified field is one that that 

requires a value that is defined either in 

NCPDP’s External Code List (ECL) or a 

code set maintained by a non-NCPDP 

organization (for example SNOMED CT 

values or ICD–10 code values), where 

only those values may be included in 

the data field. The new discrete data 

fields do not require a defined set of 

values—they are date fields or fields for 

a number representing, for example, an 

age, quantity, or dollar amount. 

In light of these updates, we continue 

to agree with the NCPDP’s assessment 

that replacing free text fields with 

discrete data fields for clinical and nonclinical information will enhance 

patient safety processes because there 

will be less room for interpretation, and, 

therefore, likely less room for the error 

and confusion that can occur with free 

text fields. By ensuring standardization 

and enabling pharmacy and prescriber 

system automation and interoperability 

of clinical information, critical 

pharmacy information will thus be more 

readily identifiable and actionable. 

Lastly, we believe that adopting a later 

compliance date, including an 8-month 

transition period, than what we had 

proposed, will allow for the standard to 

be broadly tested by health plans, 

pharmacies, and pharmacy benefit 

managers (PBM) to ensure clear 

communication. We discuss the 

compliance dates in section III.C. of this 

final rule. 

B. Modification of the Pharmacy 

Subrogation Transaction Standard for 

State Medicaid Agencies 

In the November 2022 proposed rule 

(87 FR 67640), we discussed that the 

2009 Modifications final rule adopted 

Version 3.0 as the standard for the 

Medicaid pharmacy subrogation 

transactions. We discussed how State 

Medicaid agencies sometimes pay 

claims for which a third party may be 

legally responsible, and where the State 

is required to seek recovery. For the full 

2009 Modifications final rule 

discussion, please refer to 74 FR 3296. 

1. Modification to the Definition of the 

Medicaid Pharmacy Subrogation 

Transaction 

The November 2022 proposed rule (87 

FR 67640) proposed to broaden the 

scope of the pharmacy subrogation 

transaction to apply to all health plans, 

not just State Medicaid agencies. In 

doing so, we proposed to modify the 

name and definition of the transaction 

to reflect the proposed amended 

requirements. The transaction at 45 CFR 

162.1901 is presently known as the 


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Medicaid pharmacy subrogation 

transaction and is described as the 

transmission of a claim from a Medicaid 

agency to a payer for the purpose of 

seeking reimbursement from the 

responsible health plan for a pharmacy 

claim the State has paid on behalf of a 

Medicaid recipient. The proposal would 

have changed the name of the 

transaction to the Pharmacy subrogation 

transaction and defined it as the 

transmission of a request for 

reimbursement of a pharmacy claim 

from a health plan that paid the claim, 

for which it did not have payment 

responsibility, to the health plan 

responsible for the claim. 

Comment: Several commenters 

responded to our proposal to require all 

health plans, not just State Medicaid 

agencies to use the HIPAA standard for 

pharmacy subrogation transactions. 

Most of those commenters disagreed 

with the proposal, but a few supported 

it and specifically expressed support for 

our proposal to change the name and 

definition of the transaction. 

Response: We appreciate the 

commenters’ input. As discussed in 

section III. B.2. of this final rule, we are 

not finalizing our proposal to require all 

health plans to use the HIPAA standard 

for pharmacy subrogation transactions, 

and, therefore, we are not finalizing our 

proposal to change the name and 

definition of the transaction at 

§ 162.1901. 

2. Application of NCPDP Batch 

Standard Subrogation Implementation 

Guide, Version 10 to Non-Medicaid 

Health Plans 

As discussed previously, the current 

HIPAA standard, Version 3.0, only 

applies to State Medicaid agencies 

seeking reimbursement from health 

plans responsible for paying pharmacy 

claims. In the November 2022 proposed 

rule (87 FR 67640), we stated that 

Version 3.0 does not address business 

needs for other payers and that adopting 

a more broadly applicable subrogation 

transaction standard would facilitate the 

efficiency and effectiveness of data 

exchange and transaction processes for 

all payers involved in post-payment of 

pharmacy claims and support greater 

payment accuracy across the industry. 

Comment: The majority of those who 

commented on our proposal to adopt 

Version 10 for all health plans 

expressed support for the adoption of 

Version 10 to replace Version 3.0 for 

State Medicaid agencies but opposed 

our proposal to adopt the standard to 

apply to all health plans. Commenters 

believe there are differences between 

Medicaid subrogation and nonMedicaid subrogation that Version 10 

does not address, such as the different 

payer order rules that are required for 

non-Medicaid subrogation. They 

asserted that making Version 10 

available, but not required, for nonMedicaid subrogation transactions 

would allow the pharmacy industry to 

determine if there are additional data 

elements, use cases, payer order rules, 

and other guidance needed for different 

subrogation transactions. 

Response: We thank the commenters 

for their input. As noted in the 

November 2022 proposed rule (87 FR 

67640 and 67641), during the March 

2018 NCVHS hearing, several testifiers 

noted that there was a need to expand 

the use of the subrogation transaction 

beyond State Medicaid agencies based 

on other payers’—such as Medicare Part 

D, State assistance programs, or private 

health plans—business needs to seek 

similar reimbursement that could not be 

accommodated by Version 3.0. A 

testifier noted that a subrogation 

standard that addresses all payers 

would allow the industry to have a 

standardized approach to subrogation, 

which ultimately would reduce the 

manual processes that health plans and 

pharmacies currently use. The testifier 

added that requiring use of a 

subrogation standard by all health plans 

would allow for better tracking of 

subrogation efforts, which would 

improve payment accuracy and support 

cost containment efforts. Another 

testifier advised that expanding the 

requirement for non-Medicaid health 

plans to use the transaction standard 

would allow for any PBM to use the 

standard. For these reasons, we 

proposed that all health plans would be 

required to use Version 10 for pharmacy 

subrogation transactions. 

Nonetheless, we have decided to 

adopt Version 10 for State Medicaid 

agencies only and are not requiring nonMedicaid health plans to use a 

subrogation standard for pharmacy 

subrogation transactions. While 

reviewing commenters’ concerns and 

suggestions, we consulted with the 

NCPDP, the SSO associated with the 

rulemaking, and found that Version 10 

does not address requirements for all 

non-Medicaid subrogation situations, 

especially when these situations involve 

multiple commercial health plans. In 

the ‘‘Health Insurance Reform; 

Modifications to the Health Insurance 

Portability and Accountability Act 

(HIPAA) Electronic Transaction 

Standards’’ August 2008 proposed rule 

(73 FR 49751), we explained that 

Federal law requires, with some 

exceptions, that Medicaid be the payer 

of last resort, which means that health 

plans that are legally required to pay for 

health care services received by 

Medicaid recipients are required to pay 

for services primary to Medicaid. 

However, Medicaid agencies will 

sometimes pay claims for which a third 

party is legally responsible. This occurs 

when the Medicaid agency is not aware 

of the existence of another coverage, and 

there are also specific circumstances for 

which State Medicaid agencies are 

required by Federal law to pay claims 

and then seek reimbursement afterward. 

Payer order rules are critical in 

subrogation transactions since they 

determine the primary or secondary 

insurer, and, in the case of subrogation, 

a payer needs to know which insurer to 

bill for the payment it incorrectly made. 

In retrospect, since payer order rules 

aside from Medicaid are not well 

developed, we believe that Version 10 is 

not ready for adoption beyond State 

Medicaid agency subrogation 

transactions. Although we are not 

adopting Version 10 for all health plans 

in this rule, we note that the standard 

is available for use, meaning covered 

entities may use it for non-Medicaid 

subrogation transactions between 

willing trading partners. 

3. Modification of the NCPDP Batch 

Standard Subrogation Implementation 

Guide, Version 10 Transaction Standard 

for State Medicaid Agencies 

In the November 2022 proposed rule 

(87 FR 67641), we proposed to replace 

Version 3.0 with Version 10 as the 

standard for Pharmacy subrogation 

transactions at § 162.1902(b). 

Comment: As noted previously, 

commenters agreed that Version 10 

should replace Version 3.0 for Medicaid 

subrogation transactions but opposed 

requiring its use by non-Medicaid 

health plans. 

Response: We thank commenters for 

their input and suggestions. As 

previously discussed, we are adopting 

the NCPDP Batch Standard Subrogation 

Implementation Guide, Version 10 as 

the standard for Medicaid pharmacy 

subrogation transactions at 

§ 162.1902(b) to apply only to Medicaid 

pharmacy subrogation transactions. 

C. Compliance and Effective Dates 

1. Compliance Date for Version F6 and 

Version 15 

Section 1175(b)(2) of the Act 

addresses the timeframe for compliance 

with modified standards. The section 

provides that the Secretary must set the 

compliance date for a modification at 

such time as the Secretary determines 

appropriate, taking into account the 

time needed to comply due to the nature 

and extent of the modification, though 


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508.pdf. 

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the compliance date may not be sooner 

than 180 days after the effective date of 

the final rule. In the November 2022 

proposed rule, we proposed that 

covered entities would need to be in 

compliance with Version F6 and 

Version 15 for retail pharmacy 

transactions 24 months after the 

effective date of the final rule, which we 

would reflect in §§ 162.1102, 162.1202, 

162.1302, and 162.1802. 

In the November 2022 proposed rule 

(87 FR 67641), we acknowledged that in 

its April 22, 2020, recommendation 

letter to the Secretary, the NCVHS 

recommended the following 

implementation timelines and dates for 

Version F6 and Version 15: 5

• A 3-year pre-implementation 

window following publication of the 

final rule, allowing (but not requiring) 

industry use beginning at the end of the 

3 years (or 36 months). 

• Allow both Versions D.0 and F6 

and their equivalent batch standards, 

Version 1.2 and Version 15, to be used 

for an 8-month period after the 36- 

month pre-implementation window, 

which the NCVHS suggested would 

enable an effective live-testing and 

transition period. 

• Require full compliance, that is, 

exclusive use of Version F6, after the 8- 

month transition period, following the 

36-month pre-implementation window. 

The NCVHS also recommended a 

compliance date in May, as opposed to 

January, due to: seasonal organizational 

burdens associated with the end-of-year 

timeframe, such as processing burden 

for annual benefit plan changes, which 

are typically effective January 1; 

unavailability of full staff during the 

holiday season preceding January 1; 

competing administrative obligations 

requiring information technology (IT)/ 

operations and corporate resources such 

as closing out annual books and 

compiling reports; and annual flu 

season peaks affecting both providers 

and IT/operations staff. 

After carefully considering the 

NCVHS’s recommendation and industry 

testimony on implementation timelines 

and dates, as well as the potential 

benefits that would be derived from 

implementing Version F6 and Version 

15 (discussed in section III.A.1. of the 

November 2022 proposed rule and 

section III. of this final rule) as soon as 

possible, we chose not to propose a 3- 

year pre-implementation compliance 

window or an 8-month transition 

period. Instead, we proposed a 24- 

month compliance date. We believed 

that the industry was capable of 

implementing the changes necessary to 

comply with the updated standards by 

24 months from the effective date of the 

final rule, in light of: (1) limited 

industry testimony on any barriers 

specific to the implementation of 

Version F6; (2) industry testimony on 

the similarities between the level of 

effort necessary to implement Version 

F2 and Version F6, as discussed in the 

NCVHS’s 2018 recommendation; (3) and 

the limited scope of the modification to 

only retail pharmacy transactions. 

Comment: The majority of 

commenters opposed the proposed 24- 

month compliance date requirement for 

Version F6 and Version 15. In response 

to our solicitation for information on 

barriers the industry may face that 

would require additional time for 

implementation, commenters noted that 

there were fewer than 100 data element 

changes between Version 5.1 and 

Version D.0, but more than 300 data 

element changes between Version D.0 

and Version F6 and their equivalent 

batch standards, a greater than 300- 

percent increase when comparing the 

two standards. Commenters described 

that the volume of changes affect 

multiple business functions, including, 

for example, transaction routing, 

pricing, controlled substance billing, 

Medicare Part D long term care 

dispensing frequencies, coordination of 

benefits, Medicare eligibility response, 

and reversals, which require expansion 

of internal databases and system 

updates to build the new data elements 

into automated claims adjudication 

processes. Commenters noted the 

updates will require extensive internal 

IT development and testing and external 

trading partner testing across multiple 

databases and systems before covered 

entities can conduct real-time exchanges 

in compliance with the requirements. 

In addition to the volume of required 

data element changes, several 

commenters provided detailed 

information about the complexity of the 

changes. For example, as discussed in 

section III. of the November 2022 

proposed rule, Version F6 supports 

drugs priced at and in excess of $1 

million. This change is specific to 

Version F6 and, therefore, was not 

accounted for in any of the earlier 

industry testimony regarding 

appropriate timeframes for moving from 

Version D.0 to Version F2. Commenters 

noted that, to accommodate drugs 

priced at $1 million and up, Version F6 

includes 31 expanded pricing fields. To 

comply with these changes, covered 

entities must ensure that their own 

systems and/or their business 

associates’ systems increase database 

capacity to store the expanded field 

length and have the ability to recognize 

when a ninth digit may be missing 

across all 31 expanded pricing fields. 

Additionally, Version F6 eliminated 

13 distinct patient pay fields in Version 

D.0 and combined them into one 

qualified, repeating field. Commenters 

suggested that changes necessary to 

move 13 distinct patient pay fields into 

one pose complex implementation 

challenges. As a result of these financial 

field changes, commenters believe that 

the coding tasks required to ensure that 

accurate pricing data is included within 

Version F6 and Version 15-compliant 

transactions will require additional 

time. Further, commenters noted that 

should pricing fields associated with 

coordination of benefits transactions not 

be coded correctly as a result of rushed 

attempts to comply with Version F6 and 

Version 15, it could result in 

communicating incorrect patient coinsurance and out-of-pocket 

calculations to pharmacy providers. 

Some commenters also raised 

concerns regarding the required changes 

necessary for moving from Version 3.0 

to Version 10. Version 10 uses an 8-digit 

Issuer Identifier Number (IIN) in place 

of the 6-digit Bank Identification 

Number (BIN) required by Version 3.0.6

As discussed in section III. of the 

November 2022 proposed rule (87 FR 

67639), within a pharmacy transaction 

the BIN is a field in the 

Telecommunication Standard that is 

used for the routing and identification 

in pharmacy claims. These commenters 

believed that there will need to be 

system updates in order to recognize 

and process 8-digit IINs, and systems 

will also need to be updated to map all 

8-digit IINs to the former 6-digit BINs. 

At one time, both Version 5.1 and 

Version D.0 required the use of the BIN 

in a 6-digit, mandatory, fixed-length 

field located in the header section of the 

transaction. However, since the 

adoption of Version D.0, the 

International Organization for 

Standardization (ISO) created the IIN, 

which was expanded to 8 digits (as 

opposed to the 6-digit BIN) to increase 

the pool of possible identifiers. Version 

F6 includes an 8-digit, mandatory, 

fixed-length field to accommodate 8- 

digit IINs and represents the first change 

to the header section of the NCPDP 

Telecommunication standard since the 

adoption of Version 5.1 in 2002. 

However, commenters were concerned 

that, should system changes to 

accommodate the new header 


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information not be implemented 

properly, it could result in transactions 

being routed to the wrong PBMs, 

delaying patient access to care. 

Several commenters also suggested 

that additional time to comply with 

Version F6 and Version 15 is needed to 

accommodate competing regulatory 

demands on stakeholder resources. 

Specifically, commenters identified the 

need to implement updated electronic 

prescribing standards as proposed in the 

Medicare Program; Contract Year 2024 

Policy and Technical Changes proposed 

rule,7 to develop Application 

Programming Interfaces to support prior 

authorization transactions as proposed 

in CMS’s Advancing Interoperability 

and Improving Prior Authorization 

Processes proposed rule,8 and to 

implement pharmacy changes required 

under the Inflation Reduction Act of 

2022. 

Finally, most commenters suggested 

that the Secretary re-consider and adopt 

the NCVHS’s recommended 

implementation timeline, which 

included an additional 8-month period 

after a 36-month compliance timeframe, 

during which use of both Version D.0 

and Version F6 and their equivalent 

batch standards would be allowed. 

Ultimately, this suggestion would result 

in a 44-month compliance timeframe. 

Commenters explained that this type of 

flexibility would allow trading partners 

to revert to Version D.0 should initial 

attempts to comply with Version F6 

reveal gaps within specific use cases 

that require recoding and testing efforts 

prior to a final compliance date. A 

commenter stated that before finalizing 

the modification, HHS should consider 

permitting more testing time between 

physicians and pharmacists to ensure 

clear communication. Another 

commenter identified that the 

additional 8-month period would be 

especially beneficial to small, 

independent pharmacies and State 

health programs, which have 

traditionally had the most difficulty in 

achieving compliance with new 

standards. 

Response: We continue to believe that 

it is prudent to expedite compliance 

with the updated standards to ensure 

that the industry can realize value as 

soon as possible. However, commenters’ 

detailed explanation of the increased 

level of complexity in moving from 

Version D.0 and Version 1.2 to Version 

F6 and Version 15, as compared to 

moving from Version 5.1 and Version 

1.1 to Version to D.0 and Version 1.2, 

offered in response to the compliance 

timeframe proposals, persuaded us to 

reconsider whether we were allowing 

sufficient time for covered entities to 

make system and process updates to 

accommodate the changes in the 

standards. 

After carefully considering the public 

comments and reconsidering the 

NCVHS’s recommended 

implementation timelines and dates, we 

are attempting to strike a balance by 

finalizing a longer compliance timeline 

than we proposed, though not as long as 

that advocated by some commenters, 

and also including a transition period. 

We are finalizing a 36-month 

compliance date, which includes an 8- 

month transition period during which 

covered entities may use both Version 

D.0 and Version F6. We premised our 

decision on the fact that most 

commenters echoed the NCVHS’s 

recommendations and suggested that 

HHS should provide a 3-year preimplementation window following 

publication of the final rule, allowing 

(but not requiring) industry use 

beginning at the end of the 3 years and 

allowing both Versions D.0 and F6 to be 

used for an 8-month period after the 3- 

year pre-implementation window, 

which would enable an effective live 

testing and transition period. We 

anticipate that, in order to enable 

covered entities to use both standards 

during the permitted 8-month transition 

period, trading partner agreements will 

have to be implemented so health plans, 

processors, PBMs and pharmacies, and 

software vendors can set up the 

appropriate editing and formatting of 

the transactions. With the exception of 

the requirements set forth in § 162.915, 

regarding certain specifics that may not 

be included in them, we do not dictate 

the terms of trading partner agreements 

but expect that health plans and 

pharmacies will continue to collaborate 

on processes to adjudicate these claims 

during the permitted 8-month 

transition. 

Finally, it is important to note that 

HHS received comments stressing the 

importance of covered entities taking 

steps as soon as possible to become 

prepared to move to the updated 

versions of the Telecommunication and 

Batch Standards so as to be ready soon 

to take advantage of their significant 

improvements. 

The 2009 Modifications final rule 

provided covered entities approximately 

36 months from the final rule’s effective 

date to comply with Version D.0 and 

Version 1.2, though the proposed rule 

had proposed a 24-month compliance 

date. In support of the increased 

compliance timeframe that we finalized, 

we stated that the competition for 

resources to make system and business 

process changes necessary to comply 

with both the modified pharmacy 

transactions standard and Version 5010 

at the same time necessitated the 

additional 12 months. While we 

acknowledge that the level of 

complexity and volume of changes 

between Version D.0 and Version F6 

and their equivalent batch standards far 

exceed those between Version 5.1 and 

Version D.0 and their equivalent batch 

standards, they do not far exceed the 

volume and complexity of changes 

necessary to concurrently comply with 

updated pharmacy and X12 standards. 

As such, we do not believe these 

changes necessitate a compliance 

timeframe exceeding 36 months. 

Therefore, we disagree with commenters 

that a total of 44 months is necessary to 

comply with the modified pharmacy 

transaction standards finalized in this 

rule. Additionally, we are persuaded by 

commenters, and now agree with the 

April 22, 2020, NCVHS 

recommendation letter, which was 

based on consideration of industry 

feedback, that advised the Secretary to 

consider an 8-month transition period. 

The NCVHS suggested that an 8-month 

transition period is necessary and 

sufficient to support a successful and 

timely transition, stating in its 

recommendation letter that, should 

covered entities identify errors in their 

systems and processes after moving 

Version F6 and Version 15 into 

production, the transition period would 

allow them, if needed, to revert to 

Version D.0 and Version 1.2 to avoid 

stops in business functions and delays 

in patient access to care. 

As stated at the beginning of this 

preamble, this final rule is effective 60 

days after publication in the Federal 

Register. The effective date is the date 

on which the policies set forth in this 

final rule take effect. The compliance 

date is the date on which covered 

entities are required to implement the 

policies adopted in this rule. The final 

transition and compliance dates for 

Version F6 and Version 15 at 

§§ 162.1102, 162.1202, 162.1302 and 

162.1802 are as follows: 

• All covered entities may, as agreed 

to by trading partners, use either 

Version D.0 and Version 1.2 or Version 

F6 and Version 15 beginning August 11, 

2027. 

• All covered entities must comply 

with only Version F6 and Version 15 

beginning February 11, 2028. 


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9The September 2019 version is a republication 

to correct a field name—433–DX Patient Paid 

Amount Reported field name corrected to Patient 

Pay Amount Reported. We will make a reference to 

this information in the ‘‘incorporate by reference’’ 

section. 

2. Compliance Dates for Version 10 

As discussed in section III.B. of this 

final rule, we are not finalizing our 

proposal to broaden the scope of the 

Medicaid pharmacy subrogation 

transaction to apply to all health plans. 

Therefore, we discuss here only the 

compliance date for State Medicaid 

agencies to comply with Version 10. 

As previously noted, with respect to 

State Medicaid agencies, Version 10 is 

a modification of the currently adopted 

standard, Version 3.0. Section 

1175(b)(2) of the Act requires the 

Secretary to set the compliance date for 

a modification to a standard at such 

time as the Secretary determines 

appropriate, but no sooner than 180 

days after the effective date of the final 

rule in which we adopt that 

modification. We proposed to align the 

compliance date for Version 10 with the 

compliance date for Version F6 and 

Version 15 to reduce confusion and 

administrative burden. Therefore, we 

proposed to reflect at § 162.1902(b) that 

State Medicaid agencies would be 

required to comply with Version 10 

beginning 24 months after the effective 

date of the final rule. 

Comment: A majority of commenters 

agreed that the implementation timeline 

for Version 10 needs to align with the 

implementation timeline for the NCPDP 

Telecommunication Standard. 

Commenters suggested a longer 

implementation timeframe for Version 

F6 and Version 15 (described earlier), 

they suggested the Secretary implement 

a 36-month compliance timeframe, 

followed by an 8-month period where 

both Version 3.0 and Version 10 could 

be used as agreed to by trading partners. 

Response: HHS agrees that it is 

important to align the transition period 

and compliance date for Version 10 and 

for the NCPDP Telecommunication 

standard. We understand that without 

employing burdensome workarounds it 

would be difficult for State Medicaid 

agencies to comply with Version 10 for 

Medicaid subrogation transactions prior 

to complying with F6 and Version 15. 

As such, we believe that aligning the 

compliance timeframes will reduce 

confusion for, and burden on, State 

Medicaid agencies. This includes 

establishing an 8-month transition 

period where State Medicaid agencies 

may, as agreed to by trading partners, 

use either Version 3.0 or Version 10. 

The changes required for State Medicaid 

agencies to comply with Version 10 are 

minimal, as discussed in section III.B.3. 

of the November 2022 proposed rule. 

After careful consideration of the 

comments received, at § 162.1902, we 

are finalizing the compliance date for 

Version 10 as beginning February 11, 

2028, which aligns with the timeline we 

are adopting for Version F6 and Version 

15. In addition, at § 162.1902, we are 

finalizing that beginning August 11, 

2027, which is 8 months before the 

compliance date, State Medicaid 

agencies may, as agreed to by trading 

partners, use either Version 3.0 or 

Version 10 for Medicaid pharmacy 

subrogation transactions. 

D. Incorporation by Reference 

This final rule incorporates by 

reference the following implementation 

guides at 45 CFR 162.920: (1) the 

Telecommunication Standard 

Implementation Guide Version F6, 

January 2020, National Council for 

Prescription Drug Programs; (2) the 

Batch Standard Implementation Guide, 

Version 15, October 2017, National 

Council for Prescription Drug Programs; 

and (3) the Batch Standard Subrogation 

Implementation Guide, Version 10, 

September 2019, National Council for 

Prescription Drug Programs. 

The Telecommunication Standard 

Implementation Guide Version F6 

provides a standard format that 

addresses data format and content, 

transmission protocol, and other 

applicable requirements, for the 

electronic submission between 

pharmacy providers, insurance carriers, 

third-party administrators, and other 

responsible parties of the following 

transactions, eligibility verification, 

claim and service billing, prior 

authorization, predetermination of 

benefits, and information reporting (the 

latter two categories are not HIPAA 

transactions). 

The Batch Standard Implementation 

Guide Version 15 provides practical 

guidelines and ensures consistent 

implementation throughout the industry 

of a file submission standard to be used 

between pharmacies and processors, or 

pharmacies, switches, and processors, 

when using the Telecommunication 

Standard framework. 

The Batch Standard Subrogation 

Implementation Guide Version 10 

provides the guidelines and process for 

payers and PBMs to communicate to 

other payers’ reimbursement requests 

for covered services paid to pharmacy 

providers for which the other payers are 

responsible.9 This implementation 

guide uses the Telecommunication 

Standard and the Batch Standard as 

frameworks for exchange. 

The materials we incorporate by 

reference are available to interested 

parties and can be inspected at the CMS 

Information Resource Center, 7500 

Security Boulevard, Baltimore, MD 

21244–1850. The implementation 

specifications for the retail pharmacy 

standards, and for the batch standard for 

the Medicaid pharmacy subrogation 

transaction, may be obtained from the 

NCPDP, 9240 East Raintree Drive, 

Scottsdale, AZ 85260. Telephone (480) 

477–1000; FAX (480) 767–1042. They 

are also available through the internet at 

http://www.ncpdp.org. NCPDP charges a 

fee for all of its Implementation Guides. 

Charging for such publications is 

consistent with the policies of other 

publishers of standards. 

IV. Out of Scope Comments 

We received several comments on 

subjects that were outside the scope of 

the November 2022 proposed rule. We 

do not directly respond to those types 

of comments, but we acknowledge 

them. They are summarized in the 

following list: 

• A commenter suggested that HHS 

consider expanding the Referral 

Certification and Authorization 

transaction (§ 162.1301) in order to 

provide a clear breakdown of the 

contractual cost of medication before a 

rebate or the patient cost (copay or 

deductible) is paid by the health plan. 

Another commenter expressed that, in 

order to address these costs, pharmacies 

should be able to disclose to the patient 

the lowest cost option for the prescribed 

medication at the pharmacy, which 

should include available discounted 

prescription drug programs resulting in 

reduced patient cost that is sometimes 

lower than when using the consumer’s 

health insurance prescription drug 

benefit. Another comment suggested 

that HHS should review drug costs first 

and then consider streamlining drug 

dispensing. 

• A commenter encouraged HHS to 

work with Congress to allow Medicare 

beneficiaries to use pharmaceutical 

discount cards and coupons the same 

way commercially insured consumers 

may. 

• A few commenters expressed 

concern that retail pharmacies and 

health plans may pass the cost of 

implementing Version F6 to consumers 

by increasing the costs consumers pay 

for prescription drugs, thereby 

increasing the cost of health insurance 

premiums. 

• A commenter was concerned that 

the costs associated with the proposals 


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will raise taxes at a time when inflation 

is at an all-time high. 

• A commenter requested that the 

cost to update electronic health records 

and e-prescribing platforms to reflect 

these changes not be passed on to 

physicians. 

• A commenter expressed concern 

that if the updated pharmacy standards 

are adopted, it will limit the use of 

paper that some retail pharmacies 

continue to utilize. The commenter 

explained that pharmacies that do not 

have access to ample technology, or 

those that are unfamiliar with the use of 

technology, would be disadvantaged by 

these proposals. Therefore, the 

commenter recommended that the best 

solution would be to allow pharmacies 

the flexibility to choose whether to use 

Version F6 or paper-based claims based 

on their business practice or customer 

base. 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 required that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

A. Submission of Paperwork Reduction 

Act (PRA)-Related Comments 

In this rule, we are finalizing the 

sections that contain proposed 

‘‘collection of information’’ 

requirements as defined under 5 CFR 

1320.3(c) of the PRA’s implementing 

regulations. If regulations impose 

administrative costs on reviewers, such 

as the time needed to read and interpret 

this final rule, then we should estimate 

the cost associated with regulatory 

review. We estimate there are currently 

104 affected entities (which also 

includes PBMs and vendors). In the 

November 2022 proposed rule, we 

assumed each entity will have four 

designated staff members who will 

review the entire final rule, meaning 

there would be 416 total reviewers. The 

particular staff members involved in 

this review will vary from entity to 

entity but will generally consist of 

lawyers responsible for compliance 

activities and individuals familiar with 

the NCPDP standards at the level of a 

computer and information systems 

manager. We did not receive any 

comments and are finalizing this rule 

based on our assumptions. 

Using the wage information from the 

Bureau of Labor Statistics (BLS) for 

computer and information systems 

managers (code 11–3021), we estimate 

that the labor cost of having two 

computer and information systems 

managers reviewing this final rule is 

$99.93 per hour, including fringe 

benefits and overhead costs (https://

www.bls.gov/oes/current/oes_nat.htm). 

Assuming an average reading speed, we 

estimate that it would take each such 

individual approximately 4 hours to 

review this final rule. The estimated 

cost per entity would therefore be 

$799.44 (4 hours × $99.93 × 2 staff), 

and), and the total cost borne by the 104 

affected entities would be $83,142 

($799.44 × 104 entities). 

We are also assuming that an entity 

would have two lawyers reviewing this 

final rule. Using the wage information 

from the BLS for lawyers (code 23– 

1011), we estimate that their cost of 

reviewing this final rule would be 

$100.47 per hour per lawyer, including 

fringe benefits and overhead costs 

(https://www.bls.gov/oes/current/oes_

nat.htm). Assuming an average reading 

speed, we estimate that it will take 

approximately 4 hours each for two 

lawyers to review this final rule. The 

estimated cost per entity would 

therefore be $803.76 (4 hours × $100.47 

× 2 staff), and the total cost borne by the 

104 affected entities would be $83,592 

($803.76 × 104 entities). 

B. Modification to Retail Pharmacy 

Standards (Information Collection 

Requirement (ICR)) 

The following requirements and 

burden associated with the information 

collection requirements contained in 

§§ 162.1102, 162.1202, 162.1302, 

162.1802, and 162.1902 of this final rule 

are subject to the PRA. However, this 

one-time burden was previously 

approved and accounted for in the 

information collection request 

previously approved under OMB 

control number 0938–0866 and titled 

‘‘CMS–R–218: HIPAA Standards for 

Coding Electronic Transactions.’’ 

OMB has determined that the 

establishment of standards for electronic 

transactions under HIPAA (which 

mandate that the private sector disclose 

information and do so in a particular 

format) constitutes an agency-sponsored 

third-party disclosure as defined under 

the PRA (44 U.S.C. 3501 et seq.) (see 65 

FR 50350 (August 17, 2000)). With 

respect to the scope of its review under 

the PRA, however, OMB has concluded 

that its review will be limited to the 

review and approval of initial standards 

and to changes in industry standards 

that will substantially reduce 

administrative costs (see 65 FR 50350 

(August 17, 2000)). This document, 

which finalizes updates to adopted 

electronic transaction standards that are 

being used, will constitute an 

information collection requirement 

because it will require third-party 

disclosures. However, because of OMB’s 

determination, as previously noted, 

there is no need for OMB review under 

the PRA. 

Should our assumptions be incorrect, 

this information collection request will 

be revised and reinstated to incorporate 

any additional transaction standards 

and modifications to transaction 

standards that were previously covered 

in the PRA package associated with 

OMB approval number 0938–0866. 

VI. Regulatory Impact Analysis 

A. Statement of Need 

This rule finalizes modifications to 

standards for electronic retail pharmacy 

transactions and the Medicaid 

pharmacy subrogation transaction 

adopted under the Administrative 

Simplification subtitle of HIPAA. Under 

HIPAA, the NCVHS recommends 

standards to the Secretary following 

review and approval of standards or 

updates to standards from the 

applicable SSO—in this case, the 

NCPDP. The Secretary must generally 

promulgate notice-and-comment 

rulemaking to adopt new or updated 

standards before they can be utilized to 

improve industry processes. On May 17, 

2018, the NCVHS recommended that the 

Secretary adopt Version F2 to replace 

Version D.0, Version 15 to replace 

Version 1.2, and Version 10 to replace 

Version 3.0. On April 22, 2020, the 

NCVHS recommended that the 

Secretary adopt Version F6 in lieu of 

Version F2, as well as the two batch 

standard recommendations set forth in 

the May 2018 letter. These standards 

have been developed through 

consensus-based processes and 

subjected to public comment which 

indicated, without opposition, that the 

updates are required for current and 

future business processes. Based on 

informal communication with industry, 

should the updates to the standards not 


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be adopted, industry will need to 

continue using Version D.0 and 

associated workarounds, including 

manual claims processing and claims 

splitting for drugs priced at, or in excess 

of, $1 million. 

B. Overall Impact 

We have examined the financial 

impacts of this rule as required by 

Executive Order 12866 on Regulatory 

Planning and Review (September 30, 

1993), Executive Order 14094 on 

Modernizing Regulatory Review (April 

6, 2023), Executive Order 13563 on 

Improving Regulation and Regulatory 

Review (January 18, 2011), the 

Regulatory Flexibility Act (September 

19, 1980; Pub. L. 96–354), section 

1102(b) of the Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(March 22, 1995; Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999), and the Congressional 

Review Act (CRA) (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 14094 amends 

section 3(f) of Executive Order 12866 to 

define a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

rule: (1) that may have an annual effect 

on the economy of $200 million or more 

in any one year, or adversely affecting 

in a material way the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local, territorial, or tribal 

governments or communities; (2) 

creating a serious inconsistency or 

otherwise interfering with an action 

taken or planned by another agency; (3) 

materially altering the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising legal or policy issues for which 

centralized review would meaningfully 

further the President’s priorities or the 

principles set forth in the Executive 

order. 

Based on our estimates, OMB’s Office 

of Information and Regulatory Affairs 

(OIRA) has determined this rulemaking 

is 3(f)(1) significant as measured by the 

$200 million or more in any 1 year and 

meets the criteria under 5 U.S.C. 804(2) 

(Subtitle E of the Small Business 

Regulatory Enforcement Fairness Act of 

1996, also known as the Congressional 

Review Act). Accordingly, we have 

prepared an RIA and Regulatory 

Flexibility Analysis (RFA) that, to the 

best of our ability, presents the revised 

costs and benefits from the November 

2022 proposed rule and the impact it 

will have on small entities. 

We did not receive any comments on 

the RIA or RFA presented in the 

proposed rule. We adjusted our 

previous calculations to accommodate a 

3-year implementation timeframe and 

updated our summary of the RFA using 

updated business data. OMB has 

reviewed these final regulations and 

provided an assessment of their impact. 

For details, we refer readers to the 

discussion provided as follows. 

C. Detailed Economic Analysis 

While significant efforts were taken to 

ensure that the cost and benefits 

captured for this rule were accurate, 

there are a few key uncertainty factors 

that should be considered in reviewing 

the regulatory impact analysis: 

1. Data Sources 

The analysis is based in part on 

industry research conducted in 2019 

and 2020 by the CMS Alliance to 

Modernize Healthcare (CAMH), a 

Federally Funded Research and 

Development Center, to assess the costs 

and benefits associated with the 

potential adoption of Versions F2 and 

F6. As part of this effort, CAMH did the 

following: identified the relevant 

stakeholders that will be affected by the 

adoption of a new HIPAA standard for 

retail pharmacy drug transactions; 

obtained expert opinion, expressed 

qualitatively and quantitatively, on 

impacts on affected stakeholders of 

moving from the current version to the 

updated standards; and developed a 

high-level aggregate estimate of 

stakeholder impacts, based on available 

information from public sources and 

interviews. References to conversations 

with industry stakeholders in the RFA 

and RIA are based on the interviews 

conducted by CAMH, unless otherwise 

noted. 

Because the industry has not 

conducted entity-specific financial 

impact analyses for the adoption of the 

modified standards in this rulemaking, 

the analysis relies on preliminary 

assessments from industry stakeholders 

that the conversion to Version F6 will 

entail between two to four times the 

level of effort as the previous HIPAA 

pharmacy standard conversion from 

Version 5.1 to Version D.0. Moreover, as 

discussed in connection with comments 

received on the 2009 Modifications 

proposed rule generally, many 

commenters mentioned underestimated 

costs or overestimated benefits of 

transitioning to the new versions, but 

few provided substantive data to 

improve the regulatory estimates. In 

addition, we did not receive any 

comments on assumptions in the 

November 2022 proposed rule. We are 

finalizing this RIA using the estimates 

provided in public comments reported 

in the 2009 Modifications final rule to 

develop estimates of the true baseline 

Version D.0 conversion costs applying a 

Version F6 multiplier. 

With respect to benefits, we are not 

aware of any available information or 

testimony specifically quantifying cost 

savings or other benefits, although there 

is ample testimony supporting the 

business need and benefits of the 

modified standards subject to this 

rulemaking. 

2. Interpreting Cost 

To implement Version F6, pharmacies 

and vendors will likely hire coders, 

software development and testing 

specialists, and/or consultants to modify 

their production code and will likely 

conduct employee training to facilitate 

the use of the new version. These onetime, out-of-pocket expenditures 

constitute a cost attributable to the final 

rule. Costs to transmit transactions 

using the Version F6 standard after 

business systems have been modified to 

implement the adopted standard, as 

well as costs to maintain those systems 

for compliance with the standard, were 

not factored into the RIA. These ongoing 

costs are currently incurred by affected 

entities that are required to use the 

current standard and are attributable to 

conducting electronic transactions in 

general. Therefore, we do not anticipate 

any costs attributable to this final rule 

after the completion of the final 3-year 

compliance timeframe. 

Based on oral and written NCVHS 

testimony by the retail pharmacy 

industry and pharmacy management 

system vendors, it was suggested that 

their software development process for 

a HIPAA standard conversion would 

represent an opportunity cost. We 

believe Version F6 implementation will 

shift the priorities of technical staff at 

large pharmacy firms, potentially 

delaying other improvements or 

projects. In this scenario, the 

opportunity cost consists of the timevalue of delayed projects. Other 

pharmacies have an ongoing 

relationship with their pharmacy 

management software vendors. The 

purchaser generally obtains a hardware 

and software package with an ongoing 

agreement that includes periodic 

payments for maintenance, updates, 

upgrades, training, installation, 

financing, etc. Thus, the software is 

expected to evolve, rather than being 


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Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100775 

10 2021 ‘‘U.S. National Pharmacy Market 

Summary.’’ IQVIA. https://www.iqvia.com/-/media/ 

iqvia/pdfs/us/publication/us-pharmacy-marketreport-2021.pdf. 

11 2021 ‘‘U.S. National Pharmacy Market 

Summary.’’ IQVIA. https://www.iqvia.com/-/media/ 

iqvia/pdfs/us/publication/us-pharmacy-marketreport-2021.pdf. 

just a one-time installation. The balance 

between upfront charges and monthly 

maintenance fees more closely 

resembles a multiyear lease than the 

one-time sale of an off-the-shelf 

application to a consumer. Thus, the 

parties often contemplate an ongoing 

supplier relationship in which 

maintenance and upgrades represent an 

opportunity cost. 

Further, the RIA in the November 

2022 proposed rule used average costs 

to assess costs to each industry 

stakeholder because of their availability 

and verifiability. We did not receive any 

responses to our solicitation for 

comments related to these assumptions 

and cost interpretations. 

3. Anticipated Effects 

The RIA summarizes the costs and 

benefits of adopting the following 

standards: 

• Telecommunications Standard 

Version F6, replacing Version D.0, 

including equivalent Batch Standard 

Version 15 for health care claims or 

equivalent encounter information; 

eligibility for a health plan; referral 

certification and authorization; and 

coordination of benefits transactions. 

• Batch Standard Subrogation 

Implementation Guide, Version 10 

replacing Batch Standard Medicaid 

Subrogation Implementation Guide, 

Version 3, for Medicaid Pharmacy 

Subrogation Transactions. 

This RIA amends the RIA from the 

November 2022 proposed rule, while 

acknowledging any changes made in 

this final rule, to reflect a 3-year 

compliance date following the effective 

date of this final rule. All other 

information regarding the details 

supporting the cost-benefit analysis for 

each of the standards listed previously 

remains unchanged. 

Table 1 is the compilation of the 

estimated costs for all of the standards 

adopted in this final rule. To allocate 

costs over the 3-year implementation 

period, we use a 30–40–20–10 percent 

allocation of IT upgrades and training 

expenses across the 3-year 

implementation period. We believe that 

since the effective date of this final rule 

will be in the latter part of 2024, costs 

will start at that time and go into 2027. 

TABLE 1—ESTIMATED COSTS ($ MILLIONS) FOR YEARS 2024 THROUGH 2033 FOR IMPLEMENTATION OF VERSIONS F6 AND

VERSION 10 (V10) 

Cost type Industry 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Total 

F6 ............. Non-Independent Pharmacy ........... 2,828.68 3,838.24 1,919.12 9.56 ............ ............ ............ ............ ............ ............ 95.6 

Independent Pharmacy .................. 18.3 24.4 1,212.2 6.1 ............ ............ ............ ............ ............ ............ 61.0 

Health Plan ..................................... ................ ................ ................ ............ ............ ............ ............ ............ ............ ............ ............

PBM ................................................ 3,838.4 5,151.2 2,525.6 12.8 ............ ............ ............ ............ ............ ............ 128.0 

Vendors * ........................................ 2,929.91 3,939.88 1,919.94 9.97 ............ ............ ............ ............ ............ ............ 99.7 

SV10 ........ Health Plan ..................................... ................ ................ ................ ............ ............ ............ ............ ............ ............ ............ ............

Medicaid Agency ............................ ................ ................ ................ ............ ............ ............ ............ ............ ............ ............ ............

PBM ................................................ ................ ................ ................ ............ ............ ............ ............ ............ ............ ............ ............

Vendors .......................................... 0.66 0.8 0.4 0.2 ............ ............ ............ ............ ............ ............ 2.0 

Annual Total ............................ 115.89 154.52 77.26 38.63 ............ ............ ............ ............ ............ ............ 386.3 

* Vendors’’ as used in Table 1 refers to pharmacy management system and telecommunication system vendors. 

4. Adoption of Version F6 (Including 

Equivalent Batch Standard Version 15) 

The objective of this portion of the 

RIA is to summarize the costs and 

benefits of implementing Version F6. 

a. Affected Entities 

Almost all pharmacies and all 

intermediaries that transfer and process 

pharmacy claim-related information 

already use Version D.0 for eligibility 

verification, claim and service billing, 

prior authorization, predetermination of 

benefits, and information reporting 

transaction exchanges (the latter two 

categories are not HIPAA-standard 

transactions). Pharmacies utilize 

technology referred to as pharmacy 

management systems that encode 

Version D.0 to submit these transactions 

for reimbursement on behalf of patients 

who have prescription drug benefits 

through health and/or drug plan 

insurance coverage (health plans). These 

submissions are generally routed 

through two intermediaries: a 

telecommunication switching vendor 

(switch) and a specialized third-party 

administrator for the health plan, 

generally a PBM. 

Based on the business data from the 

CAMH, pharmacies have a bimodal size 

distribution. About 99 percent of firms 

have a single location, predominantly 

the traditional independent, owneroperated storefront, and the remainder 

of fewer than 200 large firms operate an 

average of approximately 150 

establishments (locations) each. 

According to other industry data, the 

largest five pharmacy corporations 

represent over 28,000 locations, and the 

two largest corporations each exceed 

9,000 locations.10 However, the 

business data from the Pharmacy and 

Drug Store segment (NAICS code 

456110) may not capture all pharmacy 

firms affected by this final rule. 

Pharmacies are typically classified by 

ownership as either not-independent or 

independents. Health data analytics 

company IQVIA estimated 11 in 2021 

that there were 66,083 pharmacies, of 

which 70 percent (46,964) were notindependent and 30 percent (19,119) 

were independents. Retail pharmacies, 

which provide access to the general 

public, comprised the clear majority of 

pharmacy facility types at 91 percent 

(59,395). The five largest pharmacy 

corporations owned about 40 percent 

(close to 29,000) of retail locations. The 

remaining 8 percent of facility types 

included closed-door pharmacies, 

which provide pharmaceutical care to a 

defined or exclusive group of patients 

because they are treated or have an 

affiliation with a special entity such as 

a long-term care facility, as well as 

central fill, compounding, internet, mail 

service, hospital-based nuclear, and 

outpatient pharmacies. Most of these 

pharmacy types may be included in 

Medicare Part D sponsor networks. We 

are aware that the largest pharmacy 

corporations are increasingly likely to 

operate multiple pharmacy business 

segments (channels), such as retail, 

mail, specialty, and long-term care. We 

did not receive any responses to our 

solicitation for comments on whether 

there are meaningful distinctions in cost 

structures or data sources to assist in 

quantifying entities in these segments. 


khammond on DSK9W7S144PROD with RULES
100776 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 

12NCVHS Hearing on NCPDP Standards and 

Updates—March 26, 2018 Virtual Meeting. https:// 

ncvhs.hhs.gov/transcripts-minutes/transcript-ofthe-march-26-2018-hearing-on-ncpdp-standardsand-updates/. 

13The Pharmacist Is Out: Supermarkets Close 

Pharmacy Counters: Regional grocery chains get 

squeezed by consolidation, shrinking profits in 

prescription drugs. By Sharon Terlep and Jaewon 

Kang. Wall Street Journal. Updated Jan. 27, 2020 

6:18 p.m. ET. Accessed 10/13/2020 at: https://

www.wsj.com/articles/the-pharmacist-is-outsupermarkets-close-pharmacy-. 

As noted, pharmacies utilize 

pharmacy management systems to 

encode Version D.0 for claim-related 

data exchanges via telecommunication 

switches. Pharmacies that do not 

internally develop and maintain their 

pharmacy management systems will 

contract with technology vendors for 

these services. Based in part on 

communications with industry 

representatives, such as the American 

Society for Automation in Pharmacy, we 

identified approximately 30 technology 

firms providing computer system 

design, hosting, and maintenance 

services in this market. Based on 

testimony provided to the NCVHS, in 

2018 this market represented 

approximately 180 different software 

products.12

Pharmacies also contract with 

telecommunication switches for 

transaction routing. In addition to 

routing, switches validate the format of 

pharmacy transactions prior to 

transmission to the payer and then 

check the payer response to make sure 

it is formatted correctly for the 

pharmacy to interpret. Based on 

conversations with industry 

representatives, we identified three 

telecommunication switches in this 

segment of the market for consideration 

in the RIA. 

Some healthcare providers that 

dispense medications directly to their 

patients, known as dispensing 

physicians, may use Version D.0 to 

submit these outpatient prescription 

drug claims on behalf of their patients 

to health plans via health plans’ PBMs. 

However, we do not believe this 

practice to be widespread, and, 

therefore, do not account for it in the 

RIA. 

Health plans generally provide some 

coverage for outpatient prescription 

drugs, but do not generally contract and 

transact with pharmacies directly. 

Instead, health plans typically contract 

with PBM firms to receive and process 

pharmacy claim transactions for their 

enrollees. We believe even the relatively 

few health plans that directly purchase 

prescription drugs for their own 

pharmacies utilize PBMs, either owned 

or contracted, to manage billing for 

drugs and pharmacy supplies. Likewise, 

the Department of Veterans Affairs (VA) 

Pharmacy Benefits Management 

Services (VA PBM) runs its own PBM 

unit for VA prescription drug 

operations. 

In the CAMH report, there were 745 

Direct Health and Medical Insurance 

Carriers and 27 HMO Medical Centers— 

a total of 772 health plan firms. 

Comparable data limited specifically to 

PBMs is not available, but, based on Part 

D experience, we estimated that 

approximately 40 firms conduct some 

PBM functions involved with 

processing some pharmacy claim 

transactions. For the RIA, we assumed 

that the VA PBM is in addition to these 

numbers, but that Medicaid claim 

processing PBMs are included in the 40 

firms. Industry trends include 

significant consolidation of firms in 

these sectors and vertical integration 

among health plans, PBMs, and 

pharmacies. 

b. Costs 

(1) Not-Independent Pharmacies 

Pharmacies either internally develop 

or externally purchase pharmacy 

management information systems to bill 

and communicate with PBMs. 

Generally, the largest chain pharmacy 

firms internally develop and manage 

their own pharmacy management 

system upgrades and transaction 

standard conversion development, 

implementation, testing, and training. 

However, based on public comments 

related to Version F6 submitted to the 

NCHVS, available at https://

ncvhs.hhs.gov/wp-content/uploads/ 

2020/03/Public-Comments-NCPDPChange-Request-March-2020.pdf, we are 

aware that some chain pharmacy firms 

(with as many as 1,800 pharmacies) 

utilize systems managed by third-party 

technology vendors. The RIA identified 

the top 25 firms, based on 2021 IQVIA 

data, as well as the VA and the Indian 

Health Service (IHS), as financing and 

managing their pharmacy system 

conversion requirements internally, and 

the remainder of chain pharmacy firms 

relying on their technology vendor for 

technical development, implementation, 

testing, and initial training. 

Although they are not legally 

considered ‘‘not-independent 

pharmacies,’’ we grouped IHS, tribal, 

and urban facilities with them based on 

conversations with representatives from 

IHS that suggested their costs would be 

roughly similar to those of notindependent pharmacies. IHS manages a 

significant Federal health information 

technology (HIT) system with a suite of 

modules, including pharmacy 

dispensing and billing, that supports 

IHS pharmacies, as well as at least 16 

urban entities and 114 tribal entities. 

However, not all of these entities 

include pharmacies. In contrast to other 

pharmacy entities treated as chain 

pharmacies, we understand that 

additional budget funding may be 

required for IHS to implement Version 

F6 within the 3-year implementation 

timeframe. We estimated that IHS 

would incur implementation costs at a 

level roughly equivalent to the VA 

system, and that this expense will be a 

marginal cost for the IHS. We also 

understand that approximately another 

60 tribal entities and another 25 urban 

entities do not utilize the Federal 

system, but, rather, contract with 

commercial vendors for HIT; although 

again, not all of these entities operate 

their own pharmacies. As a result, we 

believe that about 60 percent of these 

smaller IHS, tribal, and urban entities 

(51) will rely on existing maintenance 

agreements with commercial vendors 

for implementation and, like smaller 

not-independent pharmacies, will incur 

direct implementation costs to support 

user training costs. We solicited 

comments on our assumptions and did 

not receive any to the contrary. 

Based on the data from the CAMH 

report, there were 190 firms classified as 

Pharmacies and Drug Stores with more 

than 500 employees, representing 

27,123 establishments. This 

classification does not include grocery 

store pharmacies, which were elsewhere 

reported to number 9,026 in 2017, and 

to be decreasingly offered by smaller 

grocery chains in 2020.13 The business 

data from the CAMH report includes 72 

firms classified as Supermarkets and 

Other Grocery (except Convenience) 

Stores with more than 5,000 employees, 

which we assumed is a proxy for the 

number of such firms still offering 

grocery store pharmacies in 2020. (The 

Census Bureau and Bureau of Labor 

Statistics [BLS] include ‘‘big box’’ 

department stores in this category.) 

Thus, the RIA assumed a total of 262 

(190+72) chain pharmacy firms based 

on this data. Since we assume 25 firms 

would manage their Version F6 

conversion costs internally, we 

estimated the remainder of 237 (262–25) 

would rely upon their technology 

vendor. 

Based on conversations with a variety 

of industry representatives, we 

understand that these larger firms retain 

the technical staff and/or contractors 

that will undertake the Version F6 

conversion efforts as an ongoing 

business expense. Consequently, in 


khammond on DSK9W7S144PROD with RULES
Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100777 

14NCVHS Full Committee Hearing, March 24–25, 

2020. https://ncvhs.hhs.gov/meetings/fullcommittee-meeting-4/p. 15 74 FR 3319 (January 16, 2009). 

16Based on inflation from January 2010 to 

September 2020: https://www.bls.gov/data/ 

inflation_calculator.htm. 

practice, the cost estimates developed in 

this section do not represent new 

additional expenditures for these firms, 

but, rather, opportunity costs for these 

resources that would otherwise be 

deployed on other maintenance or 

enhancement projects. 

As previously noted, industry 

estimates of the costs of conversion from 

current Version D.0 to Version F6 have 

been in the form of multiples of the 

costs for the Version 5.1 to Version D.0 

conversion. As a technical matter, we 

assumed these informal multiples 

account for inflation. In a presentation 

to the NCVHS,14 the NCPDP indicated 

that stakeholders’ input indicated the 

level of effort and cost for Version F6 to 

be at least double that of implementing 

NCPDP D.0. In public comments to the 

NCVHS, a retail pharmacy association 

stated that implementation costs would 

vary significantly among different 

pharmacy corporations based on size, 

scope of services provided, and business 

models, and that hardware, software, 

and maintenance costs allocated 

specifically to Version F6 are estimated 

to be in the tens of millions of dollars. 

One of the largest pharmacy 

corporations estimated costs associated 

with Version F6 implementation to be 

three to four times higher than the 

implementation of Version D.0, also in 

the tens of millions of dollars. This 

commenter explained that much of 

these higher costs is related to the 

expanded dollar fields, the structure of 

new fields that require database 

expansion, and updates to many 

integrated systems. Another of the 

largest pharmacy corporations with 

integrated PBM functions offered 

preliminary estimates in the range of 

two to three times greater than the 

Version D.0 conversion and noted that 

the expanded dollar fields would 

impact all of the following systems: 

point of service claim adjudication, all 

associated financial systems, internal 

and external reporting programs, help 

desk programs, member/client portals, 

and integrated data feeds. This same 

stakeholder stated that the size of the 

transactions has also increased 

considerably due to the inclusion of 

new segments and repeating fields and 

would require new database storage 

hardware. 

The 2009 Modifications final rule 

discussed receiving estimates of $1.5 

million and $2 million from two large 

national pharmacy corporations and 

elected to use an estimate of $1 million 

for large pharmacy corporations and 

$100,000 for small pharmacy 

corporations in the first implementation 

year. That rule also discussed a few 

public comments disputing these large 

chain estimates,15 suggesting in one case 

an alternative $2 million estimate 

inclusive of Version 5010 costs, and, in 

another, a 2-year cost of $4.9 million 

without specification of which costs 

were included. Another retail pharmacy 

commenter that self-identified as 

neither a not-independent nor an 

independent estimated a cost of 

implementation of both standards of 

$250,000, with 90 percent of the cost 

attributable to Version 5010 and, thus, 

$25,000 attributable to Version D.0. 

Using these estimates, we developed a 

rough estimate of the true baseline 

Version D.0 conversion costs and then 

applied a Version F6 multiplier. 

Comments were not received on our 

approach. 

We believe that Version F6 

conversion costs for pharmacies 

corporations will be differentiated in 

three general categories: (1) the largest 

retail pharmacies operating in multiple 

pharmacy channels; (2) other midsize 

retail pharmacies operating primarily in 

either the open-door retail and/or 

another single pharmacy channel; and 

(3) smaller retail pharmacies. Starting 

with the point estimates discussed in 

the Version D.0 rulemaking and making 

some upward adjustments to address 

potential underestimation, we estimate 

that— 

• The two largest retail pharmacy 

corporations incurred a baseline 

(Version D.0) cost of $2 million; 

• The 23 midsize retail pharmacy 

corporations, the VA, and IHS pharmacy 

operations incurred a baseline cost of $1 

million; and 

• The 237 smaller retail pharmacy 

corporations incurred a baseline cost of 

$25,000. 

Based on the 2x–4x multiplier 

estimates described previously, we 

assumed a midpoint 3x multiplier for 

the estimated 25 larger retail pharmacies 

corporations and the VA that will 

finance and manage their system 

conversion requirements internally; 

consequently, we estimate that over the 

3-year implementation period— 

• Two retail pharmacy corporations 

will incur all internal Version F6 

conversion costs of (3*$2 million), or $6 

million each; and 

• The 25 retail pharmacycorporations (23 midsized chains, the 

VA, and IHS) will incur all internal 

Version F6 conversion costs of (3*$1 

million), or $3 million each. 

Based on a CAMH environmental 

scan conducted with industry 

representatives, we understand that 

most pharmacy firms rely on their 

pharmacy management system vendor 

for conversion planning, development, 

implementation, testing, and initial 

(primary) training. CAMH’s 

environmental scan suggested that 

pharmacies would likely need to make 

some investments in staff training but 

will likely not have an increase in direct 

upfront software costs because system 

software updates are usually factored 

into the ongoing contractual fees for 

operating and maintenance costs of their 

pharmacy systems. Thus, we 

understand that HIPAA modification 

efforts are generally already priced into 

vendor maintenance agreements and fee 

structures, and we assume there will be 

no increases specifically due to the 

Version F6 conversion in these ongoing 

costs to pharmacies. We believe that 

primary training is developed or 

purchased at the firm level and may be 

deployed at the establishment level in 

secondary employee in-service training 

slots. We believe that this training does 

not scale along with the conversion 

costs, but, rather, with the size of the 

organization in terms of locations and 

employees. As summarized in Table 2, 

using the generally uncontested 

estimates from the Version D.0 

rulemaking adjusted for inflation,16 we 

estimate that: 237 smaller retail 

pharmacies and 51 urban and tribal 

entity pharmacies (a total of 288 

pharmacies) would incur Version F6 

conversion training costs of ($25,000 × 

1.20) or $30,000 each on average, 

generally in the second year of the 3- 

year implementation period. 


khammond on DSK9W7S144PROD with RULES
100778 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 

17 74 FR 3317 (January 16, 2009). 18Based on inflation from January 2010 to 

September 2020 https://www.bls.gov/data/ 

inflation_calculator.htm. 

TABLE 2—PHARMACY CORPORATIONS’ COSTS OF CONVERSION TO VERSION F6 

Version F6 conversion cost category 

by chain size 

D.0 Cost 

baseline 

($ in millions) 

Inflation 

adjustment 

to baseline 

Adjusted 

D.0 baseline 

($ in millions) 

D.0 Cost 

multiplier for 

Version F6 

Conversion 

cost per 

entity 

($ in millions) 

Number of 

affected 

entities 

Total F6 

conversion 

costs 

($ in millions) 

All (largest) ........................................ 2.0 N/A 2.0 3 6.0 2 12.0 

All (midsize) ....................................... 1.0 N/A 1.0 3 3.0 25 75.0 

User Training (smaller) ..................... 0.025 1.2 0.03 N/A 0.03 288 8.6 

Total ........................................... ............................ .................... ............................ ............................ ............................ 315 95.6 

(2) Independent Pharmacies 

As noted previously, the 2021 IQVIA 

data included 66,083 pharmacies, of 

which 30 percent (19,119) were 

independently owned. We recognize 

that this classification is not identical to 

the use of the term independent 

community pharmacy; however, we are 

not aware of publicly available data to 

help us segment this market further. We 

know from the data in the CAMH 

environmental scan there were 19,044 

pharmacy firms with fewer than 500 

employees, representing 20,901 

establishments. Since we did not 

receive any comments on our 

assumptions, for the purposes of this 

final rule, firms with more than 500 

employees represent chains, and those 

with fewer than 500 employees 

represent independently owned openor closed-door pharmacies. 

We understand that these smaller 

pharmacies predominantly rely on their 

pharmacy system vendors for upgrades, 

including HIPAA standard version 

conversion planning, development, 

implementation, testing, and primary 

training. In return, they pay ongoing 

maintenance and transaction fees. As 

discussed previously with respect to 

some chain pharmacies, we understand 

that Version F6 conversion efforts will 

already be priced into existing 

maintenance agreements and fee 

structures. Therefore, we do not believe 

there will be increases in these ongoing 

costs to independent pharmacies as the 

result of the Version F6 conversion, and 

we believe pharmacy direct costs would 

generally be comprised of training and 

other miscellaneous expenses. As with 

retail pharmacies, we believe that 

primary training is developed or 

purchased at the firm level and 

deployed at the establishment level in 

secondary employee in-service training 

slots. We further assumed that this 

training does not scale along with the 

conversion costs, but, rather, with the 

size of the organization in terms of 

locations and employees. For this 

reason, we believe that the few system 

users in very small pharmacies would 

be trained directly by the pharmacy 

management system vendor, and no 

secondary training costs will be 

required for such small firms. 

As noted previously, a commenter on 

the 2009 Modification proposed rule 17

that self-identified as neither a chain 

nor an independent pharmacy estimated 

implementation costs of both Version 

5010 and Version D.0 standards of 

$250,000, with 90 percent of the costs 

attributable to Version 5010. Thus, one 

non-chain pharmacy estimated 

conversion costs for Version D.0 of 

about $25,000. Although we do not 

know the size or complexity of this 

organization, this level would not be 

inconsistent with our understanding 

that the costs of an NCPDP 

Telecommunication Standard 

conversion will be borne by the 

pharmacy management system vendors 

and that smaller pharmacy conversion 

costs will consist primarily of user 

training expense. Referring to the 2017 

Census business data, almost 90 percent 

(17,016 out of 19,044) of these pharmacy 

firms had fewer than 20 employees, 

while the remainder (2,028) had 

between 20 and 499. Therefore, we 

believe that 17,016 small pharmacy 

firms will incur opportunity costs for 

employee time spent in training and 

2,028 pharmacy firms will incur 

secondary training expenses. As 

summarized in Table 3, assuming 

baseline training costs per independent 

pharmacy with 20 or more employees of 

$25,000, and a cumulative inflation 

adjustment of 20 percent,18 we estimate 

that 2,028 independently owned 

pharmacies will incur Version F6 

conversion training costs of ($25,000 × 

1.20) or $30,000 each on average, in the 

first and second year of the 3-year 

implementation period. 

TABLE 3—INDEPENDENT PHARMACY COSTS OF CONVERSION TO VERSION F6 

Version F6 conversion cost category 

D.0 Cost 

baseline 

($ in millions) 

Inflation 

adjustment 

to baseline 

Adjusted 

D.0 baseline 

($ in millions) 

D.0 Cost 

multiplier for 

Version F6 

Conversion 

cost per 

entity 

($ in millions) 

Number of 

affected 

entities 

Total F6 

conversion 

costs 

($ in millions) 

User Training ..................................... 0.025 1.2 0.03 N/A 0.03 2,028 61 

(3) Health Plans and PBMs 

We believe that health plans should 

see minimal changes in their operations 

and workflows between Version D.0 and 

Version F6. Health plans contract with 

processors/PBMs for conducting online 

eligibility verification, claim and service 

billing, predetermination of benefits, 

prior authorization, and information 

reporting transaction exchange types 

and transaction record storage. While 

health plans (or their other vendors) 

supply PBMs with eligibility records 

and receive data from PBMs containing 

data derived from claims, they are not 

typically parties to the exchange of the 

HIPAA pharmacy transactions. Based on 

NCVHS testimony with stakeholders 

and in the development of an 

environmental scan on the impact of 

this update to the pharmacy standards, 

we understand that HIPAA standard 

conversion costs are already priced into 

ongoing contractual payment 

arrangements between health plans and 

PBMs and will not be increased 

specifically in response to the Version 

F6 conversion. 


khammond on DSK9W7S144PROD with RULES
Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100779 

19Pharmacy Benefit Managers (PBMs): Generating 

Savings for Plan Sponsors and Consumers. Prepared 

for the Pharmaceutical Care Management 

Association (PCMA). February 2020. https://

www.pcmanet.org/wp-content/uploads/2020/02/ 

Pharmacy-Benefit-Managers-Generating-Savingsfor-Plan-Sponsors-and-Consumers-2020-1.pdf. 20CVS, Express Scripts, and the Evolution of the 

PBM Business Model. Drug Channels. May 29, 

2019. https://www.drugchannels.net/2019/05/cvsexpress-scripts-and-evolution-of.html. 21 74 FR 3320 (January 16, 2009). 

All PBMs will experience some 

impacts from the Version F6 conversion, 

involving IT systems planning and 

analysis, development, and external 

testing with switches and trading 

partners. A PBM commented to the 

NCVHS that the most significant impact 

will be the expansion of the financial 

fields to accommodate very expensive 

drug products with charges greater than 

$999,999.99. Another PBM processor 

representative indicated in a 

conversation that the impact on payers/ 

processors would depend on the lines of 

business they support—that entities 

supporting Medicare Part D processing 

will have the most work to do but will 

also get the most value from the 

transition. The extent to which these 

activities will be handled by in-house 

resources or contracted out may vary by 

organization. Based on other 

conversations, we understand that, from 

the PBM perspective, the Version F6 

conversion adds fields that increase 

precision and machine readability; 

rearranges some things to make 

processing more efficient and flexible in 

the long run; implements more efficient 

ways to accomplish workarounds that 

payers already have in place (so the 

changes in the transactions would map 

to back-end system fields and logic 

already in place); and involves 

relatively few structural changes. 

PBMs may manage prescription drug 

coverage for a variety of lines of 

business, including commercial health 

plans, self-insured employer plans, 

union plans, Medicare Part D plans, the 

Federal Employees Health Benefits 

Program, State government employee 

plans, State Medicaid agencies, and 

other 19 fee-for-service entities. While 

details on internal operating systems are 

proprietary, we believe that the three 

largest PBMs that controlled 75 percent 

of 2018 market share 20 (not including 

the VA) have contractual agreements 

supporting all or most drug coverage 

lines of business and host the most 

variants in legacy operating platforms, 

customer-specific processing 

requirements, and scope of customer 

service requirements—involving all the 

information exchange types supported 

by the NCPDP Telecommunications 

Standard. In the November 2022 

proposed rule, we assumed that the 

remaining three of the top six PBMs, 

responsible for another 20 percent of 

market share, have lesser operating 

system complexity, but also provide 

services for multiple lines of business 

and a full scope of information 

exchange types. We also assumed that 

the VA PBM is comparable to these 

midsize PBMs. We assumed that the 

remainder of the PBM market is 

comprised of approximately 33 (40–7) 

smaller PBMs supporting one or more 

lines of business and information 

exchange types. Since we did not 

receive comments, we are moving 

forward with our assumptions. 

Public commenters to the 2009 

Modifications proposed rule regarding 

the D.0 conversion, self-identifying as 

large PBMs, estimated that costs for 

their upgrades would be more than $10 

million and $11 million, respectively. 

As a result of these comments, we 

revised our estimates up to $10.5 

million for each large PBM company 

and maintained the original assumption 

of $100,000 in conversion costs for 

smaller specialty PBMs,21 as we 

received no comments critical of that 

estimate. Based on updated data on 

market share, we believe more segments 

in the PBM industry will account for the 

consolidation and growth of midsize 

entities that comprise the second tier of 

market share and assume their costs to 

be less than half those of the largest 

PBMs due to lesser complexity of 

structure and operations. Therefore, 

using the Version D.0 revised estimates 

as anchors, we believe the following: 

• The largest three PBMs incurred 

baseline (Version D.0) conversion costs 

of $10.5 million. 

• The 3 next-largest PBMs and the VA 

PBM incurred baseline conversion costs 

of $4 million. 

• The remaining 33 PBMs incurred 

baseline costs of $500,000. 

As previously noted, industry 

estimates of the costs of conversion from 

Version D.0 to Version F6 have been 

expressed as multiples of two to four 

times the costs for the Version 5.1 to 

Version D.0 conversion. However, 

several PBM commenters to the NCVHS 

suggested the lower end of this range. 

This would be consistent with our 

understanding that many of the changes 

involve mapping current back-end 

work-around systems to newly codified 

data, as opposed to building substantial 

new functionality from scratch. 

However, expansion of all existing 

financial fields to accommodate larger 

numbers will involve changes to many 

interrelated systems. As summarized in 

Table 4, using a 2x multiplier, we 

estimate that over the 3-year 

implementation period— 

• The largest 3 PBMs would incur 

Version F6 conversion costs of (2*$10.5 

mil), or $21 million each; 

• The next 3 midsize PBMs and the 

VA PBM or four firms, would incur 

Version F6 conversion costs of (2*$4 

mil), or $8 million each; and 

• The remaining 33 PBMs would 

incur Version F6 conversion costs of 

(2*$500,000), or $1 million each. 

The following comments were 

received on the subject, followed by our 

responses to those comments. 

Comment: A commenter noted that 

the assumption about lesser operating 

system complexity is not valid for all 

smaller PBMs. The commenter noted 

that many mid-sized and smaller PBMs 

support multiple lines of business— 

commercial, health plan, Medicare Part 

D, Medicaid, labor, etc. and have 

complexity on par with larger PBMs, 

such that the assumptions that mid-size 

PBMs’ cost would be 38 percent less 

than that of a large PBM and that 

smaller PBMs’ cost would be only 4.7 

percent of the cost of the largest PBMs 

is not valid. These changes represent a 

similar burden for midsize and smaller 

PBMs and, the commenter noted, was 

the main rationale for its requesting that 

HHS consider an extended 

implementation timeframe. 

Response: We recognize that some 

mid-size and smaller PBMs do support 

multiple lines of business and may 

incur costs above those estimated in the 

RIA. As the commenter recommends, 

we have finalized a compliance date 

beyond the proposed compliance 

timeline. However, the commenter did 

not provide cost estimates that would 

justify amending the estimates within 

the RIA. 

Comment: A commenter asserted that 

the assumption that HIPAA standard 

conversion costs are already priced into 

ongoing contractual arrangements 

between health plans and PBMs and 

SaaS vendors is also not valid. The 

commenter indicated that a set of 

changes as significant as Version F6 

presents is not a business-as-usual 

change that can easily be absorbed into 

mid-size or small PBM or SaaS routine 

operations. 

Response: While we recognize that, 

outside of pre-existing contract rates, 

nothing prevents a mid-size or small 

PBM from charging pharmacies for 

conversion to Version F6, this does not 

contradict information that CAMH 

gathered from industry representatives 

confirming that generally these costs are 

factored into ongoing contractual fees 

and will likely not result in an increase 


khammond on DSK9W7S144PROD with RULES
100780 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 

22 74 FR 3320 (January 16, 2009). 23Bureau of Labor Statistics. May 2019 National 

Occupational Employment and Wage Estimates 

United States. Mean hourly rates for Computer 

Network Architects, Software Developers and 

Software Quality Assurance Analysts and Testers, 

and Computer Support Specialists. https://

www.bls.gov/oes/current/oes_nat.htm#15-0000. 

in direct, upfront software costs to 

pharmacies. 

TABLE 4—PBM COSTS OF CONVERSION TO VERSION F6 

Version F6 conversion cost category 

by PBM size 

D.0 Cost 

baseline 

($ in millions) 

Inflation 

adjustment 

to baseline 

Adjusted 

D.0 baseline 

($ in millions) 

D.0 Cost 

multiplier for 

Version F6 

Conversion 

cost per 

entity 

($ in millions) 

Number of 

affected 

entities 

Total F6 

conversion 

costs 

($ in millions) 

All (largest) ........................................ 10.5 N/A 10.5 2 21 3 63 

All (midsize) ....................................... 4.0 N/A 4.0 2 8 4 32 

All (smaller) ....................................... 0.5 N/A 0.5 2 1 33 33 

Totals ......................................... ............................ .................... ............................ ............................ ............................ 40 128 

(4) Vendors 

As previously discussed, pharmacies 

that do not internally develop and 

maintain their pharmacy management 

systems contract with technology 

vendors for these services. We believe 

there are approximately 30 technology 

firms providing computer system 

design, hosting, and maintenance 

services in this market, with different 

companies serving one or more market 

segments, such as retail, mail, long-term 

care, or specialty pharmacy. Software 

vendors often have commitments to 

their clients to maintain compliance 

with the latest adopted pharmacy 

transaction standards. They must 

incorporate these standards into their 

software systems; otherwise, they would 

not be able to sell their products 

competitively in the marketplace. These 

systems cannot properly support their 

users using outdated standards or 

missing key functionalities which the 

industry has identified as essential to 

business operations. We understand that 

vendors anticipate upgrades to these 

standards, and the cost of updating the 

software is incorporated into the 

vendor’s routine cost of doing business 

and product support pricing. As 

discussed in the context of independent 

pharmacies, based on conversations 

with a variety of industry 

representatives, we understand that 

future HIPAA standard conversion 

efforts are often already priced into 

existing maintenance agreements and 

fee structures for their customers. 

However, the marginal costs of the 

conversion will be borne by these 

vendor entities. 

We understand from conversations 

with industry representatives that 

system update costs are usually 

embedded into operating costs, where 

they represent opportunity costs for 

vendors that offset the resources to add 

new features (system enhancements) 

that their clients may request. Updating 

systems will take some, but not all, 

resources currently doing system 

enhancements and improvements and 

move them over to ensuring compliance 

with the new standards. In the 2009 

Modifications final rule,22 we explained 

that we received no comments from 

pharmacy software vendors in response 

to the solicitation of comments on 

expected Version D.0 conversion costs, 

actual costs for vendor software 

upgrades, and any downstream impact 

on covered entities. In addition, we did 

not receive comments on the November 

2022 proposed rule. Therefore, we 

believe it is likely that firms will 

continue to decline to share this type of 

proprietary and market-sensitive data. 

Thus, we continue to not have 

comparable anchors from prior impact 

analyses for cost estimates. However, in 

the public comments submitted to the 

NCVHS, one pharmacy software vendor 

with multiple product lines provided a 

preliminary estimate of approximately 

50,000 man-hours to make the Version 

F6 changes. We are not aware of 

publicly available data segmenting this 

industry, so we assume this one 

estimate is representative of the 

industry on average. Using this estimate 

and a mean hourly wage rate of $54 

from BLS data 23 and rounding to the 

nearest million, we estimate that over 

the 3-year implementation period: 30 

pharmacy management system firms 

will incur Version F6 conversion costs 

of approximately $3 million each for 

software planning, development, and 

testing. 

We further believe that these 

pharmacy system vendor firms will 

incur 80 hours of training costs for each 

pharmacy client firm at a mean hourly 

wage rate of $28.51 (also from the BLS 

data), the product rounded to $2,300. 

Thus, we believe that in the fourth year 

of the 3-year implementation period: 30 

pharmacy management system firms 

will incur Version F6 training costs of 

$2,300 for 2,265 clients (237 small 

pharmacies and 2,028 independent 

pharmacy corporations), or $5,210,000 

in total for this industry segment. 

In addition, both pharmacies and 

PBMs contract with telecommunication 

switches for transaction validation and 

routing. Based on conversations with 

industry representatives, we believe 

there are three switches in this segment 

of the market. We are not aware of any 

data to help us estimate their costs of 

system upgrades, but believe their costs 

are less than those of chain pharmacies 

and PBMs. We estimate that over the 3- 

year implementation period, three 

telecommunication switching vendors 

would incur Version F6 conversion 

costs of $1.5 million each. These other 

vendor costs are summarized in table 5. 

TABLE 5—OTHER VENDOR COSTS OF CONVERSION TO VERSION F6 

Version F6 conversion cost category 

Conversion 

cost per 

entity 

($ in millions) 

Number of 

affected 

entities 

or sites 

Total F6 

conversion 

costs 

($ in millions) 

Pharmacy Management System IT Implementation ............................................................... 3.0 30 90.0 

Pharmacy Management System User Training ...................................................................... 0.0023 2,265 5.2 


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24 74 FR 3320 (January 16, 2009). 

25S. Gruttadauria. (March 26, 2018). ‘‘NCPDP 

Telecommunications Standard vF2 Written 

Testimony.’’ Available: https://ncvhs.hhs.gov/wpcontent/uploads/2018/05/Session-A-GruttadauriaWritten.pdf. 

TABLE 5—OTHER VENDOR COSTS OF CONVERSION TO VERSION F6—Continued 

Version F6 conversion cost category 

Conversion 

cost per 

entity 

($ in millions) 

Number of 

affected 

entities 

or sites 

Total F6 

conversion 

costs 

($ in millions) 

Subtotal ............................................................................................................................. ............................ .................... 95.2 

Telecommunication Switches .................................................................................................. 1.5 3 4.5 

Total .................................................................................................................................. ............................ .................... 99.7 

In summary, total estimated Version 

F6 conversion costs are summarized in 

Table 6. 

TABLE 6—TOTAL INDUSTRY COSTS FOR CONVERSION TO VERSION F6 

Conversion cost category 

Number of 

affected entity 

(firms) 

Total F6 

conversion costs 

($ in millions) 

Chain Pharmacies ................................................................................................................................. 315 95.6 

Independent Pharmacies ....................................................................................................................... 19,044 61.0 

Health Plans .......................................................................................................................................... 772 ....................................

PBMs ..................................................................................................................................................... 40 128.0 

Pharmacy Management System Vendors ............................................................................................. 30 95.2 

Telecommunication Switches ................................................................................................................ 3 4.5 

Total ................................................................................................................................................ .............................. 384.3 

c. Benefits 

Industry commentary on benefits 

related to the Version F6 conversion is 

available in two segments: first, the 

2018 NCVHS testimony and industry 

representative interviews related to the 

then-proposed Version D.0 to Version 

F2 conversion, and second, the 2020 

NCVHS testimony and public comments 

related to the revised Version F6 

proposal. Both sets of evidence portray 

industry consensus that updating the 

HIPAA pharmacy standards is necessary 

for current and future business needs at 

a significant, but unavoidable, cost. 

Commentaries describe numerous nonquantifiable benefits, such as enabling 

compliance with regulatory 

requirements, facilitating the transmittal 

of additional codified and interoperable 

information between stakeholders that 

would benefit patient care and care 

coordination, and powering advanced 

data analytics and transparency. Some 

changes will result in operational 

efficiencies over manual processes, but 

will also entail greater manual effort to 

collect information and input data at an 

offsetting cost. We are not aware of any 

assertions or estimates of industry cost 

savings attributable to the Version F6 

conversion and did not receive any 

comments on our assumptions. For 

pharmacy management system vendors 

and switches, we believe upgrading 

existing systems for the Version F6 

conversion is a cost of doing business 

and retaining customers and does not 

involve cost savings. 

(1) Pharmacies 

Initial automation of pharmacy 

coordination of benefits transactions 

was a large part of the previous Version 

5.1 to Version D.0 conversion. Further 

refinement of this type of information is 

included in the Version F6 conversion. 

Additional fields are expected to 

improve the flow of information 

between pharmacies and payers and 

allow for more accurate billing to the 

correct entity. However, better 

information does not translate into 

savings as directly as the initial 

transition from manual to fully 

electronic processes. Moreover, 

commenters to the 2009 Modifications 

final rule suggested that even those 

minor levels of savings (1.1 percent of 

pharmacist time) may have been 

overestimated.24 Some of the less 

quantifiable benefits include enabling 

more integration with back-office 

systems, more informative data 

analytics, better forecasting, and 

stronger internal controls over both 

proper payments and compliance with 

contractual requirements. For instance, 

better information on adjudicated payer 

types allows pharmacies to identify and 

apply insurance program-specific 

coverage requirements more accurately. 

Other changes, such as more 

structured communication between 

pharmacies and payers to resolve 

prescriber-identifier validation activities 

at the point of sale, or to better enable 

compliance with Federal and State 

limitations on filling and refilling 

controlled substance prescriptions, 

would enable better compliance with 

Drug Enforcement Administration and 

CMS rules without PBMs having to 

resort to claim rejections. In general, 

many of these changes are expected to 

support pharmacy efficiency 

improvements, reduce some manual 

workflow processes related to Food and 

Drug Administration-mandated Risk 

Evaluation and Mitigation Strategy 

(REMS) data collection and use, reduce 

the time required to resolve claim 

rejections and transaction attempts, and 

reduce recoupment risk on audits.25

However, these efficiencies may not 

necessarily translate directly to cost 

savings for pharmacies, as other changes 

require more data collection, greater 

pharmacy staff communication with 

prescribers, and inputting more coding 

than required previously. We did not 

receive any comments on our estimates 


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100782 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 

26National Committee on Vital and Health 

Statistics Transcript March 24, 2020, 10:00 a.m.– 

5:30 p.m. ET. https://ncvhs.hhs.gov/wp-content/ 

uploads/2020/05/Transcript-Full-CommitteeMeeting-March-24-2020.pdf. 

27NCVHS Hearing on NCPDP Standards and 

Updates—March 26, 2018 Virtual Meeting. https:// 

ncvhs.hhs.gov/transcripts-minutes/transcript-ofthe-march-26-2018-hearing-on-ncpdp-standardsand-updates/. 

of quantifiable savings related to these 

efficiencies. Improvements like the 

expanded financial fields would avoid 

future manual processes needed to enter 

free text, split claims, or prepare and 

submit a paper Universal Claim Form; 

however, million-dollar claims are quite 

rare today, and, thus, it seems this 

change may not represent significant 

cost savings over current processes. But, 

as noted earlier, their numbers are 

expected to increase, and, without this 

functionality, the risk of billing errors 

could potentially increase. Moreover, 

these types of drugs will likely be 

dispensed by a small percentage of 

pharmacies, so the benefits will likely 

not be generally applicable to all 

pharmacies. 

Pharmacy and pharmacy vendor 

commenters to the NCVHS noted that 

other types of changes will benefit 

patients by enhancing pharmacy and 

payer patient care workflows through 

the replacement of many clinical free 

text fields with discrete codified fields. 

This will enable automation that can 

trigger real-time workflows that could 

aid in goals such as combatting the 

opioid crisis or communicating relevant 

therapy-related information for at-risk 

patients. Improvements will support 

better patient care and safety through 

more accurate patient identification and 

enhanced availability and routing of 

benefit and DUR information. For 

instance, new response fields for DUR 

messaging and Formulary Benefit Detail 

help to convey clinical information such 

as disease, medical condition, and 

formulary information on covered 

drugs. This will enable pharmacists to 

have more informative discussions with 

patients and provide valuable 

information about alternative drug or 

therapy solutions. We believe that some 

of this data exchange will eliminate 

manual processes and interruptions and 

will also enable additional required 

pharmacist interventions to be added 

contractually, which could not occur 

previously. Thus, we conclude that the 

changes available through the Version 

F6 conversion will allow pharmacies to 

improve the accuracy and quality of 

their services but may not generate 

significant cost savings from a budgeting 

perspective. 

(2) Health Plans and PBMs 

The benefits that could accrue to 

health plans and PBMs mirror the 

improvements that could accrue to 

pharmacy efficiencies discussed 

previously. Better information flows and 

interoperability could enable more 

efficient benefit adjudication, enhanced 

communications with trading partners 

and patients, and better data. Better data 

could improve payment accuracy, 

regulatory compliance, and advanced 

analytics for forecasting, coordination of 

care, and patient safety. For instance, 

better information on adjudicated payer 

types could support more accurately 

identifying other payers involved in the 

transaction. Improved information on 

other payers could result in cost 

avoidance by avoiding duplication of 

payment and by preventing Medicare 

from paying primary when it is the 

secondary payer. However, improved 

patient and alternative payer 

identification could also increase the 

transparency of the identification of 

payers secondary to Medicare and 

increase costs from other payers’ 

subrogation in some circumstances. The 

ability to automate the processing of 

very expensive drug claims would avoid 

more cumbersome processes, but the 

absolute volume of such claims may not 

be enough to generate significant 

savings. We are not aware of any studies 

or estimates of cost savings for health 

plans or PBMs attributable to the 

Version F6 conversion, nor are we 

aware of public comments describing 

any such cost savings. Furthermore, in 

testimony to the NCVHS, the NCPDP 

noted the importance of Version F6 for 

achieving broader (but difficult to 

quantify) healthcare transformation 

goals: it improves the structure to 

support the clinical evaluation of 

prescription products and planned 

benefit transparency, which are key 

components for achieving expected 

healthcare outcomes related to valuebased care, digital therapeutics, social 

determinants of health, and other areas 

of health innovation.26 Thus, we 

conclude that while the benefits of 

adopting Version F6 are necessary for 

meeting current and future business 

needs and policy goals, we are unable 

to monetize these benefits in the form of 

cost savings. We solicited comments on 

whether there were significant 

quantifiable benefits or cost savings that 

should be included in our analysis and 

did not receive any feedback on our 

assumptions. 

5. Adoption of Batch Standard 

Subrogation Implementation Guide, 

Version 10 

a. Introduction 

As mentioned earlier, Version 3.0 was 

adopted to support Federal and State 

requirements for State Medicaid 

agencies to seek reimbursement, when 

they had made payment first, from the 

correct responsible health plan. We 

proposed to replace Version 3.0 with 

Version 10 as the standard for Pharmacy 

subrogation transactions at 

§ 162.1902(b). We indicated that, for 

State Medicaid agencies, adopting 

Version 10 would be a modification 

from Version 3.0. We proposed to adopt 

Version 10 for all health plans based on 

industry stakeholders’ reports that there 

was a need to expand the use of the 

subrogation transaction because the 

adopted standard only applied to State 

Medicaid agencies and did not address 

the business needs for non-Medicaid 

agencies such as Medicare Part D, State 

assistance programs, or private health 

plans that would seek similar 

reimbursement. Stakeholders also stated 

that a broader subrogation transaction 

would facilitate the efficiency and 

effectiveness of data exchange and 

transaction processes for all payers 

involved in post-payment of pharmacy 

claims and would support greater 

payment accuracy across the industry. 

However, in this final rule we have 

decided that we will adopt Version 10 

but will only require State Medicaid 

agencies, not all health plans, to use it. 

b. Affected Entities 

Medicare Part D requires real-time 

coordination of benefits, and we 

understand that these processes, as well 

as responsibility for managing 

subrogation (primarily for Medicaid 

retroactivity), are generally contracted 

through PBMs. Other payers, such as 

State Medicaid agencies and 

commercial insurers, are more likely to 

contract with payment integrity/ 

financial recovery vendors. As of March 

2018, there was evidence that some state 

Medicaid agencies managed this activity 

directly,27 but we are not aware of 

publicly available information on 

whether this is, or would still be, the 

case for the Version 10 implementation 

timeframe. Likewise, we understand the 

VA PBM does not coordinate benefits in 

real time, but contracts with a payment 

integrity/financial recovery firm for 

retrospective subrogation in some 

circumstances. We believe there are four 

firms in the specialized pharmacy 

benefit payment integrity/financial 

recovery industry, with most of the 

business volume concentrated in one 

firm. 

Based on a CAMH environmental 

scan conducted with industry 

representatives, we understand that the 


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demand for subrogation today differs by 

third-party line of business. Third-party 

commercial payer contracts are less 

likely to have a comparable 

retroactivity-of-coverage issue and, due 

to the rising cost of health insurance, are 

increasingly less likely to have enrollees 

covered under more than one insurance 

program or policy. For these reasons, we 

understand that third-party commercial 

payers are more likely to subrogate with 

workers’ compensation, auto insurance, 

or other non-healthcare insurancerelated parties, rather than with other 

healthcare payers. 

While pharmacies are not users of the 

subrogation standard, they are 

potentially affected by any further 

expansion of the standard from 

Medicaid to all third-party payers. This 

is because one alternative to subrogation 

involves the payer that paid in error 

recouping funds from pharmacies and 

transferring the effort and risk of 

rebilling the appropriate payer to the 

pharmacy. 

c. Costs 

(1) Third-Party Payers (Includes Plan 

Sponsors and PBMs) 

The bulk of the work to implement 

Version 10 for many third-party payers 

has been previously addressed in costs 

associated with implementing Version 

F6, specifically its equivalent batch 

standard, Version 15. Based on 

conversations with industry 

representatives familiar with the 

subrogation standards, we understand 

that the changes in Batch Standard 

Subrogation Version 10 have been 

undertaken to preserve the integrity of 

the standard for Medicaid purposes 

while allowing for the collection of a 

limited number of new data elements to 

assist with other payer subrogation, 

particularly for Part D sponsors. The 

changes between Version 3.0 and 

Version 10 are not extensive, so we 

believe this change will not have 

significant effects on State Medicaid 

agencies or their vendors. 

We also believe that health plans that 

desire to pursue prescription drug claim 

subrogation have already contracted 

with PBMs or other contractors that 

have implemented Version 3.0, or some 

variation on this standard, on a 

voluntary basis. However, testimony 

provided at the March 2018 NCVHS 

hearing indicated that some payers had 

not yet implemented the batch 

processing software, and would have 

additional IT system, administrative, 

and training costs to convert to Version 

10. We are not aware of the specific 

payers to which this remark referred, 

and, thus, several years later, we have 

no basis on which to estimate the 

number of additional payers or State 

Medicaid agencies that could 

potentially adopt the standard for the 

first time with Version 10, nor do we 

know if any such payers might instead 

contract with a vendor to manage this 

function on their behalf while 

implementing Version 10. As with PBM 

and vendor contractual arrangements 

discussed previously, we assume that 

HIPAA standard conversions have been 

priced into ongoing contractual 

payment arrangements and will not 

increase costs to third-party payers as a 

result of converting to Version 10. We 

solicited comments to help us 

understand the impacts of converting to 

Version 10 on State Medicaid agencies 

or any health plans that have not 

previously implemented NCPDP batch 

standards and/or Subrogation Version 

3.0. We also solicited comments on our 

assumptions on the impacts on State 

Medicaid agency vendors in general, as 

well as data with which to quantify any 

additional impacts beyond the Version 

F6 conversion estimates provided 

previously and did not receive any 

comments. 

Based on conversations with industry 

representatives, we further understand 

that health plans already engaged in 

subrogation, particularly Part D PBMs. 

Version 10 provides more requirements 

for use of the standard and how to 

populate the fields to increase 

standardization. 

(2) Vendors 

As noted previously, State Medicaid 

agencies, commercial third-party payers, 

and the VA generally contract with four 

payment integrity/financial recovery 

firms for subrogation. We believe, based 

on conversations with industry 

representatives, that these firms 

generally utilize Version 3.0 today, and 

will have to invest in Version F6 batch 

standard upgrades to implement 

Version 10 and prepare to potentially 

accept subrogation from other thirdparty payers. These firms were not 

included in the previous vendor 

estimates. We are not aware of studies 

or public comments that describe costs 

related to their activities and 

requirements. We believe these vendors 

will incur a minority of the costs 

associated with the Version F6 

conversion and some internal data 

remapping expense. Table 7 summarizes 

the other vendor costs of conversion 

over the 3-year implementation period. 

In the November 2022 proposed rule, 

we estimated that four payment 

integrity/financial recovery vendors 

would incur Version F6, equivalent 

Batch Standard, Version 15, and other 

Version 10 conversion costs of $500,000 

each. We did not receive any comments 

based on our assumptions; and 

therefore, we are finalizing the other 

vendor costs. 

TABLE 7—OTHER VENDOR COSTS OF CONVERSION TO VERSION 10 

Conversion cost category 

Conversion cost 

per entity 

($ millions) 

Number of 

affected 

entities 

Total F6 

conversion 

costs 

($ millions) 

Payment Integrity/Financial Recovery Vendors ........................................................................ 0.5 4 2.0 

d. Benefits 

(1) Third-Party Payers 

The primary benefits for third-party 

payers are the opportunity to reduce 

claims costs when another party is also 

responsible for the claims, and the 

avoidance of cumbersome manual 

processes. However, we are not aware of 

studies or public comments that help us 

estimate the frequency and size of this 

benefit. Prescription drug claims tend, 

on average, to be for much smaller 

amounts than medical claims, such as 

those for hospital admissions, and we 

believe many payers may pursue 

subrogation only on the more expensive 

claims. Discussion at the March 2018 

NCVHS hearing indicated that about 5 

percent of health care memberships 

across the country have multiple 

insurance coverage. By using national 

drug expenditures, the volume of claim 

reconciliation and savings opportunities 

could easily exceed a billion dollars and 

the need for this subrogation standard is 

critical for effective processing (as the 

subrogation transaction standard 

proposal was not revised in 2020, we do 

not have more recent testimony 


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100784 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 

28Transcript-Standards Subcommittee HearingNCPDP Standards Updates-March 26, 2018. 

Accessed 05/14/2021 at: https://ncvhs.hhs.gov/ 

transcripts-minutes/transcript-of-the-march-26- 

2018-hearing-on-ncpdp-standards-and-updates/. 

29Bureau of Labor Statistics. May 2022 National 

Occupational Employment and Wage Estimates 

United States. Mean hourly rates for Computer 

Network Architects, Software Developers and 

Software Quality Assurance Analysts and Testers, 

and Computer Support Specialists. Accessed 9/12/ 

2023 at: https://www.bls.gov/oes/current/ 

oes113021.htm#top. 

updating this estimate). However, 

additional testimony at that same 

hearing 28 suggested there is not a huge 

cost savings opportunity left for 

commercial subrogation but, instead, an 

occasional need that will be facilitated 

by a standardized approach. We did not 

receive comments to quantify the 

incremental benefits of extending 

Version 10. 

(2) Pharmacies 

As noted previously, while 

pharmacies are not users of the 

subrogation transactions standard, they 

could potentially benefit from further 

expansion of the standard from State 

Medicaid agencies to all third-party 

payers if additional payers that are 

currently recouping overpayments from 

pharmacies instead were to transition to 

a subrogation approach. However, we 

are not aware of any studies or public 

comments that would help us estimate 

the likelihood or size of a potential 

change of this nature. We solicited but 

did not receive any comments to help us 

understand the extent to which the 

adoption of Version 10 may affect 

pharmacies. 

E. Regulatory Review Cost Estimate 

One of the costs of compliance with 

a final rule is the necessity for affected 

entities to review the rule in order to 

understand what it requires and what 

changes the entity will have to make to 

come into compliance. We believe that 

104 affected entities will incur these 

costs, as they are the entities that will 

have to implement the adopted changes, 

that is, those entities that are pharmacy 

organizations that manage their own 

systems (27), pharmacy management 

system vendors (30), PBMs (40), 

telecommunication switch vendors (3), 

and payment integrity/financial 

recovery vendors (4). The staff involved 

in such a review will vary from entity 

to entity but will generally consist of 

lawyers responsible for compliance 

activities and individuals familiar with 

the NCPDP standards. Using the 

Occupational Employment and Wages 

for May 2022 from the BLS for lawyers 

(Code 23–1011) and computer and 

information system managers (Code 11– 

3021),29 we believe that the national 

average labor costs of reviewing this 

rule are $100.47 and $99.93 per hour, 

respectively, including other indirect 

costs and fringe benefits. We believe 

that it will take approximately 4 hours 

to review this rule. The estimated costs 

per entity would therefore be $1,603.20 

(4 hours each × 2 staff × $100.47 plus 

4 hours × 2 staff × $99.93), and the total 

cost borne by the 104 affected entities 

would be $166,733 ($1,603.20 × 104 

affected entities), which sums to $1 

different from the identical math at 

section V.A. because the two 

calculations are rounded separately. 

F. Accounting Statement and Tables 

As required by OMB Circular A–4 

(available at https://

www.whitehouse.gov/wp-content/ 

uploads/2023/11/CircularA-4.pdf), in 

Table 8 we present an accounting 

statement showing the classification of 

the annualized costs associated with the 

provisions of this final rule. Monetary 

annualized non-budgetary costs are 

presented at the 2 percent discount rate. 

TABLE 8—ACCOUNTING STATEMENT

[Classification of estimate costs and benefits from FY 2024 to FY 2033 ($ in millions)] 

Category Primary estimate Source 

Qualitative (un-quantified benefits) ............... Wider adoption of standards; increased productivity due to decrease in manual processing; reduced delays in patient care.RIA. 

Annualized monetized costs: * 2% Discount $97 ................................................................................................................................... RIA. 

* Opportunity costs will be borne by the entities that will have to implement the proposed changes, that is, those entities that are pharmacy organizations that manage their own systems, pharmacy management system vendors, PBMs, telecommunication switch vendors, and payment integrity/financial recovery vendors. Some marginal user training costs will be borne by other pharmacies. 

G. Regulatory Flexibility Analysis (RFA) 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Individuals 

and States are not included in the 

definition of a small entity. 

Furthermore, the economic impact 

assessment of small entities is based on 

HHS’s practice in interpreting the RFA 

to consider effects economically 

‘‘significant’’ only if greater than 5 

percent of providers reach a threshold of 

3 to 5 percent or more of total revenue 

or total costs. 

The North American Industry 

Classification System (NAICS) was 

adopted in 1997 and is the current 

standard used by the Federal statistical 

agencies related to the U.S. business 

economy. Using the 2022 SBA small 

business size regulations and Small 

Business Size Standards by NAICS 

Industry tables at 13 CFR 121.201, we 

have presented in Table 9 the covered 

entities and their vendors affected by 

this final rule. 

TABLE 9—SBA SIZE STANDARDS FOR APPLICABLE NAICS INDUSTRY CODES

NAICS code NAICS U.S. industry title SBA size standard 

($ in millions) 

456110 ............. Pharmacies and Drug Stores ..................................................................................................................... 37.5 

524114 ............. Direct Health and Medical Insurance Carriers (Health Plans) ................................................................... 47.0 

621491 ............. HMO Medical Centers (Health Plans) ........................................................................................................ 44.5 

524292 ............. Third Party Administration of Insurance and Pension Funds (PBMs) ....................................................... 45.5 

541512 ............. Computer Systems Design Services (Pharmacy Management System Vendors) .................................... 34.0 


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30www.bls.gov/opub/mlr/2016/article/ 

establishment-firm-or-enterprise.htm. 

31www.census.gov/programs-surveys/susb/ 

technical-documentation/methodology.html. 

TABLE 9—SBA SIZE STANDARDS FOR APPLICABLE NAICS INDUSTRY CODES—Continued 

NAICS code NAICS U.S. industry title SBA size standard 

($ in millions) 

518210 ............. Data Processing, Hosting, and Related Services (Telecommunication Switches) .................................... 40.0 

524298 ............. All Other Insurance Related Activities (Payment Integrity/Financial Recovery) ........................................ 30.5 

This change in retail pharmacy 

transaction standards will apply to 

many small, covered entities in the 

Pharmacy and Drug Store segment 

(NAICS code 456110). However, based 

on information obtained by CAMH 

during its conversations with industry 

experts, we understand that small 

pharmacies generally rely on ongoing 

arrangements with certain specialized 

computer system design services 

vendors (a subset of NAICS code 

541512) to integrate the standards into 

their pharmacy management software 

and systems as a routine cost of doing 

business. Therefore, these covered 

entities may not bear the bulk of the 

costs attributable to the adopted 

changes. Instead, as detailed later in this 

RIA, generally the costs applicable to 

small pharmacies are expected to be a 

portion of the costs for user training for 

some firms. The pharmacy management 

system vendors are not covered entities, 

and we are not aware of publicly 

available data to comprehensively 

identify these entities and, where 

applicable, parent firm size. Other types 

of covered entities providing pharmacy 

services, such as the subset of grocery 

stores with pharmacies, cannot be 

clearly identified within NAICS data, as 

such data are not collected in this detail, 

but are included in our estimates for 

larger entities. Conversely, institutions 

with outpatient pharmacies (for 

example, hospitals) also cannot be 

clearly identified by NAICS data but are 

not included in our analysis, since we 

believe such institutions are generally 

part of larger organizations that do not 

meet the SBA definition. One exception 

to this belief is the IHS, urban, and 

tribal facilities with pharmacies that bill 

prescription drug plans, which we 

address later in this analysis. 

For purposes of this RIA, the 

definition of an entity most closely 

resembles the Federal statistical 

agencies’ concept of a firm.30 A firm 

consists of one or more establishments 

under common ownership. An 

establishment consists of a single 

physical location or permanent 

structure.31 Thus, a chain drug store or 

chain grocery store constitutes a single 

firm operating multiple establishments. 

Using the 2017 Census Bureau Annual 

Business Survey estimates of firms, 

sales, and receipts by NAICS sector 

(available at https://www.census.gov/ 

programs-surveys/abs.html, and 

hereafter referred to as Census business 

data), we have attempted to estimate the 

number of small pharmacy entity firms 

and provide a general discussion of the 

effects of the proposed regulation. We 

solicited industry comments on these 

assumptions and did not receive any. 

1. Number of Small Entities 

Based on the CAMH environmental 

scan that found a total of 19,234 total 

pharmacy firms, we believe that just 

over 19,000 pharmacy firms qualify as 

small entities, though communications 

with industry representatives suggest 

that figure may overestimate the current 

industry small entity landscape. 

Available data do not permit us to 

clearly distinguish small pharmacy 

firms from firms that are part of larger 

parent organizations, but we use 

employee size as a proxy for the firm 

size subject to the SBA size standard. 

For purposes of this analysis, we believe 

the firms with more than 500 employees 

(190) represent chain pharmacies, and 

those with fewer than 500 (19,044) 

employees represent independently 

owned open- or closed-door 

pharmacies. The 19,044 firms with 

fewer than 500 employees represented 

20,901 establishments and accounted 

for total annual receipts of $70.69 

billion and average annual receipts of 

$3.7 million per firm. This is well below 

the SBA standard of $37.5 million. By 

contrast, the 190 firms with 500 or more 

employees represented 27,123 

establishments and accounted for over 

$210.97 billion in annual receipts, and 

thus, average annual receipts of $1.1 

billion. Therefore, we believe 19,044 

pharmacy firms qualify as small entities 

for this analysis. 

In 2017, the Census Bureau counts 

745 entities designated as Direct Health 

and Medical Insurance Carriers and 27 

as Health Maintenance Organization 

(HMO) Medical Centers. We believe that 

these 772 firms represent health plans 

that sponsor prescription drug benefits. 

Of the 745 Carriers, those with fewer 

than 500 employees (564) accounted for 

$35 billion in total and over $62 million 

in average annual receipts, exceeding 

the SBA size standard of $44.5 million. 

Comparable data on the eight smaller 

HMO Medical Centers is not available 

due to small cell size suppression. 

Although health plan firms may not 

qualify as small entities under the SBA 

receipts size standard, they may under 

non-profit status. However, we are not 

aware of data that would help us 

understand the relationship between 

health plan firm and ownership tax 

status to quantify the number of such 

firms. In any case, as explained in more 

detail later in this RIA, we do not 

estimate that health plans will generally 

bear costs associated with the changes 

in this final rule, as their contracted 

transaction processing vendors 

(generally PBMs) will be responsible for 

implementing the changes, and, 

generally, based on conversations with 

the industry, we do not believe their 

contractual terms will change as the 

result. Therefore, although we cannot 

estimate the number of health plan 

firms that may meet the small entity 

definition using non-profit status, 

generally we do not believe such 

entities will bear costs attributable to 

the changes. 

In addition to the covered entities, we 

estimate 30 pharmacy management 

system vendors, 40 PBM vendors, three 

telecommunications switching vendors, 

and four payment integrity/financial 

recovery firms would be affected by the 

proposed changes to their clients. We 

are not aware of comprehensive 

publicly available data detailed enough 

to quantify the size of these remaining 

entities, but we believe that the affected 

firms are, generally, part of larger 

organizations. We solicited comments 

with respect to our assumptions and did 

not receive any feedback. 

2. Cost to Small Entities 

To determine the impact on small 

pharmacies, we used data obtained in 

the development of the CAMH 

environmental scan on the number of 

firms with fewer than 500 employees 

and user training cost estimates 

developed using public comments on 

prior rulemaking and updated for 

inflation. As discussed earlier in this 

RIA, we assumed that the clear majority 

of pharmacy firms are small entities that 


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rely on their contracted pharmacy 

management system vendors to absorb 

HIPAA standard version conversion 

costs in return for ongoing maintenance 

and transaction fees. We believe that 

pharmacy firms will have direct costs 

related to Version F6 user training and 

that it will vary in relation to employee 

size; that the vast majority (89 percent) 

of small pharmacy firms with fewer 

than 20 employees will receive all 

necessary user training from vendors; 

and that the remaining 10 percent of 

small pharmacy firms (2,028) with 20 or 

more employees will have additional 

staff user training expense totaling 

$30,000 on average in the second year 

of the implementation period. As shown 

in Table 10, the overall impact on small 

covered entity pharmacies and 

drugstores (NAICS 446110) with less 

than 500 employees reflects an 

estimated cost percentage of revenue per 

firm of 0.81 percent. Pharmacies and 

drug stores with less than 500 

employees represent approximately 99 

percent of all pharmacies and drug 

stores, including large pharmacies and 

drug stores with greater than 500 

employees. Further analysis shows that 

pharmacies and drugstores with less 

than 100 employees represent 98 

percent of all pharmacies and 

drugstores. These pharmacies and 

drugstores, with less than 100 

employees, are estimated to have a cost 

percentage of revenue per firm of 0.86 

percent. Also, pharmacies and 

drugstores with less than 20 employees 

represent 89 percent of all pharmacies 

and drugstores. These pharmacies and 

drugstores, with less than 20 employees, 

are estimated to have a cost percentage 

of revenue per firm of 1.10 percent. The 

highest cost percentage of revenue per 

firm of 2.25 percent is estimated to 

impact pharmacies and drugstores with 

less than 5 employees, which represents 

36 percent of all pharmacies and 

drugstores. All other small entity 

pharmacy and drugstore enterprise sizes 

show a cost percentage of revenue per 

firm below 1 percent. Therefore, as 

shown in Table 10, the implementation 

cost of this final rule on small, covered 

entity pharmacies and drugstores falls 

below HHS’s practice in interpreting the 

RFA to be economically ‘‘significant,’’ 

since it does not reach the threshold of 

3 to 5 percent or more of total revenues. 

TABLE 10—ANALYSIS OF THE IMPLEMENTATION COST ON SMALL COVERED ENTITY PHARMACIES AND DRUG STORES

[NAICS 446110] 

Enterprise size Firms Receipts 

($1,000) 

Cost percentage 

of revenue 

per firm 

<5 employees ........................................................................................................................ 6,940 9,232,985 2.25 

5–9 employees ...................................................................................................................... 5,776 16,700,443 1.04 

10–14 employees .................................................................................................................. 2,963 12,978,849 0.68 

15–19 employees .................................................................................................................. 1,337 7,599,680 0.53 

<20 employees (separate category) ...................................................................................... 17,016 46,511,957 1.10 

20–24 employees .................................................................................................................. 661 4,673,350 0.42 

25–29 employees .................................................................................................................. 380 3,464,669 0.33 

30–34 employees .................................................................................................................. 224 2,324,169 0.29 

35–39 employees .................................................................................................................. 151 1,759,613 0.26 

40–49 employees .................................................................................................................. 204 2,610,831 0.23 

50–74 employees .................................................................................................................. 185 2,942,040 0.19 

75–99 employees .................................................................................................................. 77 1,509,958 0.15 

<100 employees (separate category) .................................................................................... 18,898 65,796,587 0.86 

100–149 employees .............................................................................................................. 59 2,060,372 0.09 

150–199 employees .............................................................................................................. 28 806,821 0.10 

200–299 employees .............................................................................................................. 33 1,190,264 0.08 

300–399 employees .............................................................................................................. 15 480,045 0.09 

400–499 employees .............................................................................................................. 11 353,254 0.09 

<500 employees (separate category) .................................................................................... 19,044 70,687,343 0.81 

Source: Census Bureau. 2017 Economic Census. 

As stated in section V.F. of the 

November 2022, proposed rule, we 

outlined the various alternative policy 

considerations to adopting Version F6. 

Specific to reducing costs to small 

entities, we considered staggering the 

implementation dates for Version F6 

among the affected entities that utilize 

the NCPDP transaction standard. But we 

chose not to propose that alternative 

because pharmacies, PBMs, and health 

plans all rely on the information 

transmitted through the retail pharmacy 

transactions, and if any one of these 

three entities will not be using the same 

standard version at the same time, the 

information needed to process claims 

and check eligibility would be deficient. 

Pharmacies need the most current 

eligibility data from the plans to 

determine correct coverage and payment 

information. Plans and PBMs would 

suffer because they would not have the 

most current information reflected 

through the claims data to maintain the 

beneficiaries’ most current benefits. 

3. Conclusion 

As referenced earlier in this section, 

the RFA is considered economically 

significant only if greater than 5 percent 

of providers reach a threshold of 3 to 5 

percent or more of total revenue or total 

costs. We conclude that the cost impact 

from this final rule on small pharmacy 

entities does not exceed this threshold. 

In Table 10, we illustrate that small 

covered entity pharmacies and 

drugstores with less than 500 employees 

may experience a cost percentage of 

revenue per firm of 0.81 percent, 

pharmacies and drugstores with less 

than 100 employees may experience a 

cost percentage of revenue per firm of 

0.86 percent, pharmacies and drugstores 

with less than 20 employees may 

experience a cost percentage of revenue 

per firm of 1.10 percent, and finally 

pharmacies and drugstores with less 

than 5 employees may experience a cost 

percentage of 2.25 percent. Based on the 

foregoing analysis, we invited public 

comments on the analysis and requested 

any additional data that would help us 

determine more accurately the impact 

on the various categories of entities 

affected by this final rule but did not 

receive any. Therefore, the Secretary has 

certified that this final rule will not 


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have a significant economic impact on 

a substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare an RIA if a rule 

will have a significant impact on the 

operations of a substantial number of 

small rural hospitals. This analysis must 

conform to the provisions of section 604 

of the RFA. For purposes of section 

1102(b) of the Act, we define a small 

rural hospital as a hospital that is 

located outside of a metropolitan 

statistical area and has fewer than 100 

beds. This final rule will not affect the 

operations of a substantial number of 

small rural hospitals because these 

entities are not involved in the exchange 

of retail pharmacy transactions. 

Therefore, the Secretary has certified 

that this final rule will not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

H. Unfunded Mandates Reform Act of 

1995 (UMRA) 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates would 

require spending more in any 1 year 

than threshold amounts in 1995 dollars, 

updated annually for inflation. In 2024, 

that threshold is approximately $183 

million. This final rule does not contain 

unfunded mandates that will impose 

spending costs on State, local, or tribal 

governments in the aggregate, or by the 

private sector, in excess of more than 

$183 million in any 1 year. In general, 

each State Medicaid agency and other 

government entity that is considered a 

covered entity will be required to ensure 

that its contracted claim processors and 

payment integrity/financial recovery 

contractors update software and 

conduct testing and training to 

implement the adoption of the modified 

versions of the previously adopted 

standards. However, information 

obtained by CAMH during its 

conversations with industry experts 

supports that the costs for these services 

will not increase as a result of the 

proposed changes. Our understanding is 

that HIPAA standard conversion costs 

are already priced into ongoing 

contractual payment arrangements 

between health plans, contracted claim 

processors, and payment integrity/ 

financial recovery contractors. 

I. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

This final rule will not have a 

substantial direct effect on State or local 

governments, preempt State law, or 

otherwise have a Federalism 

implication because, even though State 

Medicaid agency contractors will be 

converting to a modified version of an 

existing standard with which they are 

already familiar, we believe that any 

conversion costs, will, generally, be 

priced into the current level of ongoing 

contractual payments. State Medicaid 

agencies, in accordance with this final 

rule, will have to ensure that their 

contracted claim processors or PBMs 

successfully convert to Version F6 and 

that their payment integrity/financial 

recovery contractors make relatively 

minor updates to subrogation systems to 

collect and convey some new fields to 

conduct subrogation initiated by other 

payers using Version 10. With respect to 

subrogation for pharmacy claims, this 

final rule will not add a new business 

requirement for States, but rather will 

update a version of the standard to use 

for this purpose that will be used 

consistently by all health plans. 

J. Alternatives Considered 

As stated in the November 2022 

proposed rule (87 FR 67643), we 

considered a number of alternatives to 

adopting Version F6 and Version 10 and 

chose to proceed with the provisions in 

this rule after identifying significant 

shortcomings with each of the 

alternatives. 

One alternative we considered was to 

not propose to adopt Version F6 and 

continue to require the use of Version 

D.0. We also considered waiting to 

adopt Version F6 at a later date since we 

recently published a final rule in 2020 

modifying the requirements for the use 

of Version D.0 by requiring covered 

entities to use the 460–ET field for retail 

pharmacy transactions denoting partial 

fill of Schedule II drugs. We did not 

proceed with either alternative because 

we believe that, were we to do so, the 

industry would continue to use a 

number of workarounds that increase 

burden and are contrary to 

standardization. We also believe that the 

number of, and use of, these 

workarounds will continue to increase if 

we do not adopt Version F6. Therefore, 

we choose not to proceed with these 

alternatives because we believe the 

adoption of Version F6 would support 

interoperability and improve patient 

outcomes. 

In the November 2022 proposed rule, 

we considered proposing a compliance 

date longer than 24 months for covered 

entities to comply with Version F6. 

However, we chose to propose a 24- 

month compliance date with an 8- 

month transition period based on 

industry suggestions for implementing 

Version F6 as soon as possible in a 

manner that would be more feasible. We 

also considered proposing staggered 

implementation dates for Version F6, 

whereby covered entities using the retail 

pharmacy transactions would have 

different compliance dates. 

We believe this alternative would not 

support standardization since 

pharmacies, PBMs, and health plans all 

rely on the information transmitted in 

the retail pic in pharmacy subrogation 

transactions to continue using the 

proprietary electronic and paper formats 

currently in use. We chose not to 

proceed with this alternative due to 

industry concerns regarding uniformity 

among all payers. 

Finally, based on industry feedback, 

in this final rule, we decided to adopt 

the standards proposed in the November 

2022 proposed rule with a compliance 

date of 3 years after the effective date. 

The compliance timeframe will include 

an 8-month transition. However, we are 

not requiring the use of Version 10 

(Medicaid subrogation) for all health 

plans. 

Chiquita Brooks-LaSure, 

Administrator of the Centers for 

Medicare & Medicaid Services, 

approved this document on November 

7, 2024. 

List of Subjects in 45 CFR Part 162 

Administrative practice and 

procedures, Electronic transactions, 

Health facilities, Health insurance, 

Hospitals, Incorporation by reference, 

Medicaid, Medicare, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services amends 45 CFR part 

162 as set forth below: 

PART 162—ADMINISTRATIVE 

REQUIREMENTS 

■ 1. The authority citation for part 162 

continues to read as follows: 

Authority: 42 U.S.C. 1320d—1320d–9 and 

secs. 1104 and 10109 of Pub. L. 111–148, 124 

Stat. 146–154 and 915–917. 

■ 2. Section 162.920 is amended by— 

■ a. Revising the introductory text and 

paragraph (b) introductory text; and 

■ b. Adding paragraphs (b)(7) through 

(b)(9). 

The revision and additions read as 

follows: 


khammond on DSK9W7S144PROD with RULES
100788 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 

§ 162.920 Availability of implementation 

specifications and operating rules. 

Certain material is incorporated by 

reference into this subpart with the 

approval of the Director of the Federal 

Register under 5 U.S.C. 552(a) and 1 

CFR part 51. To enforce any edition 

other than that specified in this section, 

the Department of Health and Human 

Services (the Department) must publish 

a document in the Federal Register and 

the material must be available to the 

public. All approved incorporation by 

reference (IBR) material is available for 

inspection at the Centers for Medicare & 

Medicaid Services (CMS) and at the 

National Archives and Records 

Administration (NARA). Contact CMS 

at: 7500 Security Boulevard, Baltimore, 

Maryland 21244; phone: (410) 786– 

6597; email: 

administrativesimplification@

cms.hhs.gov. For information on the 

availability of this material at NARA, 

visit www.archives.gov/federal-register/ 

cfr/ibr-locations or email fr.inspection@

nara.gov. The material may be obtained 

from the following sources: 

* * * * * 

(b) Retail pharmacy specifications 

and Medicaid pharmacy subrogation 

implementation guides. The 

implementation specifications for the 

retail pharmacy standards and the 

implementation specifications for the 

batch standard for the Medicaid 

pharmacy subrogation transaction may 

be obtained from the National Council 

for Prescription Drug Programs, 9240 

East Raintree Drive, Scottsdale, AZ 

85260. Telephone (480) 477–1000; FAX 

(480) 767–1042. They are also available 

through the internet at www.ncpdp.org. 

A fee is charged for all NCPDP 

Implementation Guides. Charging for 

such publications is consistent with the 

policies of other publishers of 

standards. The transaction 

implementation specifications are as 

follows: 

* * * * * 

(7) The Telecommunication Standard 

Implementation Guide Version F6 

published January 2020; as referenced 

in §§ 162.1102; 162.1202; 162.1302; 

162.1802. 

(8) The Batch Standard 

Implementation Guide, Version 15, 

published October 2017; as referenced 

in §§ 162.1102; 162.1202; 162.1302; 

162.1802. 

(9) The Subrogation Implementation 

Guide for Batch Standard, Version 10, 

republished September 2019; as 

referenced in § 162.1902. 

■ 3. Section 162.1102 is amended by— 

■ a. In paragraph (c), by removing the 

phrase ‘‘For the period on and after the 

January 1, 2012,’’ and adding in its 

place the phrase ‘‘For the period from 

January 1, 2012 through August 11, 

2027,’’; 

■ b. In paragraph (d), by removing the 

phrase ‘‘For the period on and after 

September 21, 2020,’’ and adding in its 

place the phrase, ‘‘For the period on and 

after September 21, 2020 through 

August 11, 2027,’’; and 

■ c. Adding paragraphs (e) and (f). 

The additions read as follows: 

§ 162.1102 Standards for health care 

claims or equivalent encounter information 

transaction. 

* * * * * 

(e) For the period from August 11, 

2027 through February 11, 2028, both of 

the following: 

(1) The standards identified in 

paragraphs (c) and (d) of this section. 

(2) The following standards: 

(i) Retail pharmacy drug claims. The 

NCPDP Telecommunication Standard 

Implementation Guide Version F6, 

January 2020 and equivalent NCPDP 

Batch Standard Implementation Guide, 

Version 15, October 2017 (both 

incorporated by reference in § 162.920). 

(ii) Dental health care claims. The 

ASC X12 Standards for Electronic Data 

Interchange Technical Report Type 3— 

Health Care Claim: Dental (837), May 

2006, ASC X12N/005010X224, and 

Type 1 Errata to Health Care Claim: 

Dental (837) ASC X12 Standards for 

Electronic Data Interchange Technical 

Report Type 3, October 2007, ASC 

X12N/005010X224A1 (both 

incorporated by reference in § 162.920). 

(iii) Professional health care claims. 

The ASC X12 Standards for Electronic 

Data Interchange Technical Report Type 

3—Health Care Claim: Professional 

(837), May 2006, ASC X12N/ 

005010X222 (incorporated by reference 

in § 162.920). 

(iv) Institutional health care claims. 

The ASC X12 Standards for Electronic 

Data Interchange Technical Report Type 

3—Health Care Claim: Institutional 

(837), May 2006, ASC X12N/ 

005010X223, and Type 1 Errata to 

Health Care Claim: Institutional (837) 

ASC X12 Standards for Electronic Data 

Interchange Technical Report Type 3, 

October 2007, ASC X12N/ 

005010X223A1 (both incorporated by 

reference in § 162.920). 

(3) Retail pharmacy supplies and 

professional services claims. (i) The 

NCPDP Telecommunication Standard 

Implementation Guide Version F6, 

January 2020 and equivalent NCPDP 

Batch Standard Implementation Guide, 

Version 15, October 2017 (both 

incorporated by reference in § 162.920). 

(ii) The ASC X12 Standards for 

Electronic Data Interchange Technical 

Report Type 3-Health Care Claim: 

Professional (837), May 2006, ASC 

X12N/005010X222 (incorporated by 

reference in § 162.920). 

(f) For the period on and after 

February 11, 2028, the standards 

identified in paragraph (e)(2) of this 

section. 

■ 4. Section 162.1202 is amended by— 

■ a. In paragraph (c), by removing the 

phrase ‘‘For the period on and after the 

January 1, 2012,’’ and adding in its 

place the phrase ‘‘For the period from 

January 1, 2012 through August 11, 

2027,’’; and 

■ b. Adding paragraphs (d) and (e). 

The additions read as follows: 

§ 162.1202 Standards for eligibility for a 

health plan transaction. 

* * * * * 

(d) For the period from August 11, 

2027 through February 11, 2028, both of 

the following: 

(1) The standards identified in 

paragraph (c) of this section. 

(2) The following standards: 

(i) Retail pharmacy drugs. The 

NCPDP Telecommunication Standard 

Implementation Guide Version F6, 

January 2020 and equivalent NCPDP 

Batch Standard Implementation Guide, 

Version 15, October 2017 (both 

incorporated by reference in § 162.920). 

(ii) Dental, professional, and 

institutional health care eligibility 

benefit inquiry and response. The ASC 

X12 Standards for Electronic Data 

Interchange Technical Report Type 3— 

Health Care Eligibility Benefit Inquiry 

and Response (270/271), April 2008, 

ASC X12N/005010X279 (incorporated 

by reference in § 162.920). 

(e) For the period on and after 

February 11, 2028, the standards 

identified in paragraph (d)(2) of this 

section. 

■ 5. Section 162.1302 is amended by— 

■ a. In paragraph (c), by removing the 

phrase ‘‘For the period on and after the 

January 1, 2012,’’ and adding in its 

place the phrase ‘‘For the period from 

January 1, 2012 through August 11, 

2027,’’; 

■ b. In paragraph (d), by removing the 

phrase ‘‘For the period on and after 

September 21, 2020, ‘‘and adding in its 

place the phrase, ‘‘For the period on and 

after September 21, 2020 through 

August 11, 2027’’; and 

■ c. Adding paragraphs (e) and (f). 

The additions read as follows: 

§ 162.1302 Standards for referral 

certification and authorization transaction. 

* * * * * 

(e) For the period from August 11, 

2027 through February 11, 2028, both of 

the following: 


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Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100789 

(1) The standards identified in 

paragraph (c) and (d) of this section. 

(2) The following standards: 

(i) Retail pharmacy drugs. The 

NCPDP Telecommunication Standard 

Implementation Guide Version F6, 

January 2020 and equivalent NCPDP 

Batch Standard Implementation Guide, 

Version 15, October 2017 (both 

incorporated by reference in § 162.920). 

(ii) Dental, professional, and 

institutional request for review and 

response. The ASC X12 Standards for 

Electronic Data Interchange Technical 

Report Type 3—Health Care Services 

Review—Request for Review and 

Response (278), May 2006, ASC X12N/ 

005010X217, and Errata to Health Care 

Services Review—Request for Review 

and Response (278), ASC X12 Standards 

for Electronic Data Interchange 

Technical Report Type 3, April 2008, 

ASC X12N/005010X217E1 (both 

incorporated by reference in § 162.920). 

(f) For the period on and after 

February 11, 2028, the standards 

identified in paragraph (e)(2) of this 

section. 

■ 6. Section 162.1802 is amended by— 

■ a. In paragraph (c), by removing the 

phrase ‘‘For the period on and after the 

January 1, 2012,’’ and adding in its 

place the phrase ‘‘For the period from 

January 1, 2012 through August 11, 

2027’’; 

■ b. In paragraph (d), by removing the 

phrase ‘‘For the period on and after 

September 21, 2020,’’ and adding in its 

place the phrase ‘‘For the period on and 

after September 21, 2020 through 

August 11, 2027’’; and 

■ c. Adding paragraphs (e) and (f). 

The additions read as follows: 

§ 162.1802 Standards for coordination of 

benefits information transaction. 

* * * * * 

(e) For the period from August 11, 

2027 through February 11, 2028, both of 

the following: 

(1) The standards identified in 

paragraphs (c) and (d) of this section. 

(2) The following standards: 

(i) Retail pharmacy drug claims. The 

NCPDP Telecommunication Standard 

Implementation Guide Version F6, 

January 2020 and equivalent NCPDP 

Batch Standard Implementation Guide, 

Version 15, October 2017 (both 

incorporated by reference in § 162.920). 

(ii) Dental health care claims. The 

ASC X12 Standards for Electronic Data 

Interchange Technical Report Type 3— 

Health Care Claim: Dental (837), May 

2006, ASC X12N/005010X224, and 

Type 1 Errata to Health Care Claim: 

Dental (837) ASC X12 Standards for 

Electronic Data Interchange Technical 

Report Type 3, October 2007, ASC 

X12N/005010X224A1 (both 

incorporated by reference in § 162.920). 

(3) Professional health care claims. 

The ASC X12 Standards for Electronic 

Data Interchange Technical Report Type 

3—Health Care Claim: Professional 

(837), May 2006, ASC X12N/ 

005010X222 (incorporated by reference 

in § 162.920). 

(4) Institutional health care claims. 

The ASC X12 Standards for Electronic 

Data Interchange Technical Report Type 

3—Health Care Claim: Institutional 

(837), May 2006, ASC X12N/ 

005010X223, and Type 1 Errata to 

Health Care Claim: Institutional (837) 

ASC X12 Standards for Electronic Data 

Interchange Technical Report Type 3, 

October 2007, ASC X12N/ 

005010X223A1 (incorporated by 

reference in § 162.920). 

(f) For the period on and after 

February 11, 2028, the standards 

identified in paragraph (e)(2) of this 

section. 

■ 7. Section 162.1902 is revised to read 

as follows: 

§ 162.1902 Standard for Medicaid 

pharmacy subrogation transaction. 

The Secretary adopts the following 

standards for the Medicaid pharmacy 

subrogation transaction: 

(a) For the period from January 1, 

2012 through August 11, 2027—The 

NCPDP Batch Standard Medicaid 

Subrogation Implementation Guide, 

Version 3.0, July 2007 (incorporated by 

reference at § 162.920). 

(b) For the period from August 11, 

2027 through February 11, 2028— 

(1) The standards identified in 

paragraph (a) of this section; and 

(2) The NCPDP Subrogation 

Implementation Guide for Batch 

Standard, Version 10, September 2019 

(incorporated by reference at § 162.920). 

(c) For the period on and after 

February 11, 2028, the standard 

identified in paragraph (b) of this 

section. 

Xavier Becerra, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2024–29138 Filed 12–12–24; 8:45 am] 

BILLING CODE 4150–28–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Administration for Children and 

Families 

45 CFR Parts 302, 303, 304, and 309 

RIN 0970–AD00 

Employment and Training Services for 

Noncustodial Parents in the Child 

Support Program 

AGENCY: Office of Child Support 

Services (OCSS), Administration for 

Children and Families (ACF), 

Department of Health and Human 

Services (HHS or the Department). 

ACTION: Final rule. 

SUMMARY: In an effort to make the child 

support program more effective, OCSS 

(or the Office) issues this final rule to 

allow State and Tribal child support 

agencies the option to use Federal 

financial participation (FFP) available 

under title IV–D of the Social Security 

Act to provide the following 

employment and training services to 

eligible noncustodial parents: job search 

assistance; job readiness training; job 

development and job placement 

services; skills assessments; job 

retention services; work supports; and 

occupational training and other skills 

training directly related to employment. 

DATES: This rule is effective on January 

13, 2025. 

FOR FURTHER INFORMATION CONTACT: 

Chad Edinger, Program Specialist, OCSS 

Division of Regional Operations, at mail 

to: ocss.dpt@acf.hhs.gov or (303) 844– 

1213. Telecommunications Relay users 

may dial 711 first. 

SUPPLEMENTARY INFORMATION: 

Statutory Authority 

This rule is published under the 

authority granted to the Secretary of 

Health and Human Services by section 

1102 of the Social Security Act (the Act) 

(42 U.S.C. 1302). Section 1102 of the 

Act authorizes the Secretary to publish 

regulations, not inconsistent with the 

Act, as may be necessary to the efficient 

administration of the functions with 

which the Secretary is responsible 

under the Act. 

This rule is also authorized by 

sections 452(a)(1) and 454(13) of the Act 

(42 U.S.C. 652(a)(1) and 654(13)). 

Section 452(a)(1) of the Act expressly 

delegates authority to the Secretary’s 

designee requiring the designee to 

‘‘establish such standards for State 

programs for locating noncustodial 

parents, establishing paternity, and 

obtaining child support . . . as he 


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