67568 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 423 

[CMS–0011–F] 

RIN 0938–AN49 

Medicare Program; E-Prescribing and 

the Prescription Drug Program 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule adopts 

standards for an electronic prescription 

drug program under Title I of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA). These standards will be 

the foundation standards or the first set 

of final uniform standards for an 

electronic prescription drug program 

under the MMA, and represent the first 

step in our incremental approach to 

adopting final foundation standards that 

are consistent with the MMA objectives 

of patient safety, quality of care, and 

efficiencies and cost savings in the 

delivery of care. 

DATES: These regulations are effective 

on January 1, 2006. The incorporation 

by reference of certain publications 

listed in this final rule is approved by 

the Director of the Federal Register as of 

January 1, 2006. 

FOR FURTHER INFORMATION CONTACT: 

Gladys Wheeler, (410) 786–0273. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Statutory Basis 

Section 101 of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173) amended Title XVIII of the 

Social Security Act (the Act) to establish 

the Voluntary Prescription Drug Benefit 

Program. Included in the provisions at 

section 1860D–4(e) of the Act is the 

requirement that the electronic 

transmission of prescriptions and 

certain other information for covered 

Part D drugs prescribed for Part D 

eligible individuals comply with final 

uniform standards adopted by the 

Secretary. 

Section 1860D–4(e) of the Act 

specifies that initial standards, which 

are to be used in a pilot project that is 

to be conducted in calendar year (CY) 

2006, must be developed, adopted, 

recognized, or modified by the Secretary 

not later than September 1, 2005. These 

were publicized in a Request for 

Application for the pilot project 

announced on September 14, 2005 

(Available through grants.nih.gov/ 

grants/guide/rfa-files/RFA-HS-06- 

001.html). Not later than April 1, 2008, 

the Secretary must promulgate final 

uniform standards, which must become 

effective not later than 1 year after the 

date of their promulgation. In addition, 

the Secretary is required to provide a 

report to the Congress by April 1, 2007 

on his evaluation of the pilot project. 

On January 28, 2005, we published 

the Medicare Prescription Drug Benefit 

final rule (70 FR 4193–4585) that 

established the Prescription Drug 

Benefit Program and cost control and 

quality improvement requirements for 

prescription drug benefit plans. One of 

the provisions in that final rule requires 

Prescription Drug Plan (PDP) sponsors, 

Medicare Advantage (MA) 

Organizations offering Medicare 

Advantage-Prescription Drug (MA-PD) 

plans, and other Part D sponsors to 

support and comply with electronic 

prescribing standards once final 

standards are in effect, including any 

standards that are in effect before the 

drug benefit begins in 2006. 

Although there is no requirement that 

providers write prescriptions 

electronically, providers that prescribe 

or dispense Part D drugs would be 

required to comply with any applicable 

final standards that are in effect when 

they conduct electronic prescription 

transactions, or seek or transmit 

prescription information or certain other 

related information electronically. 

For a complete discussion of the 

statutory basis for this final rule and the 

statutory requirements at section 

1860D–4 of the Act, please refer to 

section I. (Background) of the EPrescribing and the Prescription Drug 

Program proposed rule, published 

February 4, 2005 (70 FR 6256–6264). We 

requested and received comments on 

the statutory requirement for industry 

consultation, adequate industry 

experience for certain standards, and 

pilot testing, among other things. Those 

comments and our responses are 

addressed in section III. of this final 

rule. 

1. Initial Standards Versus Final 

Standards 

In the proposed rule, we discussed 

the provisions of section 1860D–4(e) of 

the Act that distinguish initial standards 

from final standards. Final standards 

must be adopted by the Secretary based 

upon the evaluation of pilot testing or 

without pilot testing if the Secretary 

determines there is adequate industry 

experience for the final standards. The 

final standards adopted in this rule have 

not been subject to pilot testing under 

MMA, due to the determination by the 

Secretary that there is adequate industry 

experience with these standards. We 

refer to them as ‘‘foundation standards’’ 

because they provide a foundation for eprescribing implementation. Based on 

industry consensus and 

recommendations from the National 

Committee on Vital and Health 

Statistics (NCVHS), these standards 

were likely candidates for establishing a 

foundation for future standards and 

interoperability. A more detailed 

discussion of this distinction is 

available in the E-Prescribing and 

Prescription Drug Program proposed 

rule, published February 4, 2005 

proposed rule (70 FR 6259). 

2. State Preemption 

In section I of the proposed rule, we 

discussed State preemption and the 

meaning of the statutory language in 

section 1860D–4(e)(5) of the Act. A 

more detailed discussion is available in 

the proposed rule at 70 FR 6258–6259. 

We solicited and received comments on 

our proposed interpretation. Those 

comments and our responses are 

addressed in section III. of this final 

rule. 

3. Anti-Kickback Statute Safe Harbor 

and Stark Exception 

In the proposed rule, we indicated 

that we would be proposing a new 

electronic prescribing (e-prescribing) 

exception under the physician selfreferral law (also known as the Stark 

law) and a new e-prescribing safe harbor 

under the anti-kickback statute. We also 

indicated that, in the meantime, 

compliance with existing State and 

Federal laws is required. We solicited 

comments on the nature and extent of 

incentives being offered to encourage 

prescribers to conduct e-prescribing or 

incentives likely to be offered after 

rulemaking for the Stark exception and 

anti-kickback statute. For a more 

detailed discussion of the Stark 

exceptions and violation of the antikickback statute for e-prescribing please 

refer to 70 FR 6259. 

B. The NCVHS Process 

In the proposed rule, we discussed 

HHS’s requirement to consider 

recommendations of the NCVHS 

according to section 1860D–4(e)(4)(A) of 

the Act, and the role of the NCVHS in 

recommending standards relating to the 

requirements for an electronic 

prescription drug program, as outlined 

in section 1860D–4(e)(4)(B) of the Act. 

Section 1860D–4(e)(4)(A) of the Act 

requires the Secretary to develop, adopt, 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67569 

recognize or modify initial uniform 

standards relating to the requirements 

for an electronic prescription drug 

program, taking into consideration the 

recommendations from the NCVHS. It 

requires that in developing the 

recommendations, the NCVHS consult 

with the following: 

• Standard setting organizations (as 

defined in section 1171(8) of the Act). 

• Practicing physicians. 

• Hospitals. 

• Pharmacies. 

• Practicing Pharmacists. 

• Pharmacy Benefit Managers. 

• State Boards of Pharmacy. 

• State Boards of Medicine. 

• Experts on e-prescribing. 

• Other appropriate Federal agencies. 

In order to fulfill its responsibilities, 

the NCVHS’s Subcommittee on 

Standards and Security held public 

hearings on issues related to eprescribing on March 30 and 31, 2004; 

May 25, 26, and 27, 2004; July 28, 29, 

and 30, 2004; and August 17, 18, and 

19, 2004. These hearings included 

testimony from e-prescribing networks, 

providers, software vendors, and 

industry experts on patient safety, drug 

knowledge data bases, and standards 

currently in use by the industry. 

Industry experts involved in eprescribing studies and initiatives also 

presented information on the progress 

and findings of these studies. Following 

the hearings by the NCVHS 

Subcommittee on Standards and 

Security, the Subcommittee developed 

observations and associated 

recommended actions and presented 

them to the full NCVHS Committee for 

consideration. On September 2, 2004, 

the NCVHS sent a letter to the Secretary 

containing the observations and 

associated recommended actions for an 

electronic prescription drug program. 

The document included 

recommendations for the foundation 

standards that we are adopting and 

other long-term recommendations 

regarding pilot testing of other 

standards. For specific details, refer to 

the letter available at http:// 

www.ncvhs.hhs.gov/040902lt2.htm. 

For a more complete discussion of the 

NCVHS Process for e-prescribing 

standards, please refer to the proposed 

rule (70 FR 6259–6260). 

C. Standards Design Criteria 

In the proposed rule, we discussed 

the design criteria for electronic 

prescription drug program standards 

specified in section 1860D–4(e)(3)(C) of 

the Act. The design criteria for 

electronic prescription drug program 

standards require that—

• The standards be designed so that, 

to the extent practicable, they do not 

impose an undue administrative burden 

on prescribing healthcare professionals 

and dispensing pharmacies and 

pharmacists; 

• The standards be compatible with 

standards established under Part C of 

Title XI, standards established under 

section 1860D–4(b)(2)(B)(i) of the Act, 

and with general health information 

technology standards; and 

• The standards be designed so that 

they permit the electronic exchange of 

drug labeling and drug listing 

information maintained by the Food and 

Drug Administration (FDA) and the 

National Library of Medicine (NLM). 

D. Current Prescribing Environment 

The proposed rule described the 

processes currently used for writing 

prescriptions based upon statistical data 

that is available and information 

presented in testimony to the NCVHS. 

For a more detailed discussion of the 

current process and the reported 

workflow and administrative 

inefficiencies that affect costs and 

quality of care, please refer to section I. 

of the proposed rule at 70 FR 6260. 

E. Current E-Prescribing Environment 

In the proposed rule, we discussed 

the values of e-prescribing in preventing 

medication errors, statistics concerning 

certain usage of e-prescribing, and 

barriers to expanded use of eprescribing. 

The value of e-prescribing in 

preventing medication errors is that 

each prescription can be electronically 

checked at the time of prescribing for 

dosage, interactions with other 

medications, and therapeutic 

duplication. E-prescribing could 

potentially improve quality, efficiency, 

and reduce costs by—

• Actively promoting appropriate 

drug usage, such as following a 

medication regimen for a specific 

condition; 

• Providing information about 

formulary-based drug coverage, 

including formulary alternatives and copay information; 

• Speeding up the process of 

renewing medications; and 

• Providing instant connectivity 

between the health care provider, the 

pharmacy, health plans/PBMs, and 

other entities, improving the speed and 

accuracy of prescription dispensing, 

pharmacy callbacks, renewal requests, 

eligibility checks, and medication 

history. 

E-prescribing rates vary somewhere 

between 5 percent and 18 percent for 

physicians, although usage is slowly 

increasing. Some of the barriers to 

increased usage of e-prescribing by 

physicians are the costs of buying and 

installing a system, the training 

involved, time and workflow impact, 

lack of reimbursement for costs and 

resources, and lack of knowledge about 

the benefits related to quality of care. 

For more details of this discussion, 

please refer to the proposed rule (70 FR 

6260–6261). 

F. Evolution and Implementation of an 

Electronic Prescription Drug Program 

In the proposed rule, we discussed 

our proposal to adopt foundation 

standards, which are standards that do 

not need pilot testing because adequate 

industry experience already exists for 

these standards. We also proposed 

criteria that standards must meet to be 

considered as having ‘‘adequate 

industry experience.’’ For a more 

detailed discussion, please refer to the 

proposed rule (70 FR 6261). We invited 

and received public comments on 

‘‘adequate industry experience’’, the 

roles of Standards Development 

Organizations (SDOs) and the NCVHS in 

the adoption of e-prescribing standards, 

and a process for updating existing 

standards and adopting new standards. 

Those comments and our responses are 

addressed in section III. of this final 

rule. 

G. Electronic Prescription Drug Program 

In the proposed rule, we discussed 

the standards that are required for an 

electronic prescription drug program as 

required by section 1860D–4(e)(2) of the 

Act and the standards that we were 

proposing. We also discussed which 

standards would be subject to pilot 

testing, and which standards would be 

proposed as future standards. For a 

more detailed discussion of those 

standards and the table that summarizes 

the NCVHS recommendations, please 

refer to the proposed rule (70 FR 6261–

6262). We invited and received public 

comments on the proposed standards as 

well as on standards that are currently 

being used in the industry. Those 

comments and our responses to those 

comments are addressed in section III. 

of this final rule. 

H. Summary of Status of Standards for 

an Electronic Prescription Drug Program 

In the proposed rule, we 

acknowledged that the foundation 

standards we proposed did not address 

all of the functions required under 

section 1860D–4(e)(2) of the Act. For a 

more detailed discussion, please refer to 

section I. of the proposed rule (70 FR 

6264). We requested comments on the 

proposed standards, as well as our 

67570 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

proposed phased implementation for 

electronic prescription drug program 

requirements. We also requested 

comments on considerations for 

interoperability and industry-adopted 

standards for electronic health records 

(EHRs). The comments, on both these 

issues, and our responses to those 

comments are addressed in section III. 

of this final rule. 

II. General Overview of the Provisions 

of the Proposed Rule 

As stated earlier, on February 4, 2005, 

we published the E-Prescribing and the 

Prescription Drug Program proposed 

rule (70 FR 6256–6274), which 

discussed our proposal to adopt the first 

set of final uniform standards (or 

foundation standards) for an electronic 

prescription drug program under the 

MMA. In the proposed rule, we stated 

that these proposed foundation 

standards would not be subject to pilot 

testing because they meet the criteria for 

adequate industry experience. These 

standards included the National Council 

for Prescription Drug Programs (NCPDP) 

SCRIPT version 5.0 for transactions for 

new prescriptions, prescription 

renewals, cancellations, changes 

between prescribers and dispensers, 

ancillary messages and administrative 

transactions; the Accredited Standards 

Committee (ASC) X12N 270/271, 

version 4010 and version 4010 A1, for 

eligibility queries between prescribers 

and Part D sponsors; and the NCPDP 

Telecommunications Standard, version 

5.1, and the NCPDP Batch Standard 

Batch Implementation Guide version 1.1 

supporting the telecommunications 

standard implementation guide for 

eligibility inquiries between dispensers 

and Part D sponsors. 

Also, in the proposed rule, we 

discussed the need for formulary and 

medication history standards, and that 

we were not aware of any standards for 

these transactions that clearly met the 

criteria for adequate industry 

experience. Standards for formulary and 

medication history will be tested in the 

2006 pilot project. 

In the proposed rule, we proposed to 

broaden the scope of 42 CFR Part 423, 

Subpart D for requirements that relate to 

electronic prescription drug programs 

for prescribers, dispensers, and Part D 

sponsors. We also proposed a number of 

definitions that are pertinent to the eprescribing process. We also proposed a 

compliance date of January 1, 2006 for 

the foundation standards. 

III. Analysis of, and Responses to, 

Public Comments on the Proposed Rule 

We received approximately 84 timely 

items of correspondence containing 

multiple comments on the proposed 

rule. Some of the major issues we 

received comments on included 

preemption of State laws, the 

foundation standards, the 

appropriateness of the implementation 

date for the foundation standards, and a 

process for modifying and updating the 

foundation standards. We also received 

unsolicited comments, comments not 

submitted timely, and comments 

outside the scope of the proposed rule. 

The relevant and timely comments 

within the scope of the proposed rule 

that we received are discussed in the 

following sections. 

Comments and Responses on Provisions 

of Proposed Rule 

As we state in section II. of this final 

rule, in the February 4, 2005 proposed 

rule, we discussed—

• Our proposal to adopt foundation 

standards for an electronic prescription 

drug program under the MMA; 

• Our proposal to broaden the scope 

of Subpart D, part 423 of the MMA to 

set forth requirements relating to 

electronic prescription drug programs 

for prescribers, dispensers, and Part D 

sponsors; and 

• Our proposal to adopt a number of 

definitions that are pertinent to the eprescribing process. 

The comments that we received on 

those proposed provisions and our 

responses to those comments are 

outlined in the following sections. 

A. Proposed Modification of the Title to 

Subpart D in 42 CFR Part 423 

In the February 4, 2005 proposed rule, 

we proposed modifying the title of 

subpart D in 42 CFR Part 423 to read 

‘‘Cost Control and Quality Improvement 

Requirements’’ and revising the 

description of the scope at § 423.150(c). 

We received no comments on this 

proposed modification and, therefore, 

are changing the title of Subpart D of 

part 423 to read, ‘‘Cost Control and 

Quality Improvement Requirements’’ in 

this final rule. 

B. Proposed Revision to § 423.150 

(Scope) 

In the February 4, 2005 proposed rule, 

we also discussed our proposed revision 

to the description of the scope at 

§ 423.150(c) to state expressly that this 

subpart sets forth requirements relating 

to electronic prescription drug programs 

for prescribers, dispensers, and Part D 

sponsors. We did not receive any 

comments regarding this proposed 

change and, therefore, we are making 

this revision in this final rule. 

C. Proposed Amendment of § 423.159(a) 

(Definitions) 

In the February 4, 2005 proposed rule, 

we proposed to amend § 423.159 to add 

definitions pertinent to the e-prescribing 

process and to amend the title of the 

section to be consistent with the term 

‘‘Electronic Prescription Drug Program’’

which we proposed to define below. 

The proposed definitions and the 

comments we received are as follows: 

• Dispenser Definition Proposal—In 

the proposed rule, we defined a 

‘‘dispenser’’ as a person, or other legal 

entity, licensed, registered, or otherwise 

permitted by the jurisdiction in which 

the person practices or the entity is 

located, to provide drug products for 

human use by prescription in the course 

of professional practice. 

Comment: Most of the commenters 

supported our proposed definition of 

‘‘dispenser,’’ but some wanted it 

modified to address explicitly nondispensing pharmacy activities involved 

in providing services, such as 

medication therapy management 

services required by MMA. 

Response: We believe that our 

definition of ‘‘dispenser’’ adequately 

encompasses dispensing and nondispensing activities and that it is not 

necessary to add language to distinguish 

pharmacist roles within the scope of an 

e-prescribing environment. Therefore, in 

this final rule, we are adopting the 

proposed definition as final. 

• Electronic Media Definition 

Proposal—In the proposed rule, we 

defined ‘‘electronic media’’ as having 

the same meaning as this term is 

defined for purposes of the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA). In 

45 CFR 160.103, electronic media 

means—

• Electronic storage media including 

memory devices in computers (hard 

drives), and any removable/ 

transportable digital memory medium, 

such as magnetic tape or disk, optical 

disk, or digital memory card; or 

• Transmission media used to 

exchange information already in 

electronic storage media. Transmission 

media include, for example, the internet 

(wide open), extranet (using internet 

technology to link a business with 

information only accessible to 

collaborating parties), leased lines, dialup lines, private networks, and the 

physical movement of removable/ 

transportable electronic storage media. 

Certain transmissions, including of 

paper, via facsimile, and of voice, via 

telephone, are not considered to be 

transmissions via electronic media, 

because the information being 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67571 

exchanged did not exist in electronic 

form before the transmission. 

Comment: The majority of 

commenters supported the proposed 

definition of ‘‘electronic media’’. Some 

of the commenters recommended that 

the definition be broadened to include 

secure wireless communications 

technologies and other technologies 

implementing current best practices. 

Response: We believe that the term 

‘‘electronic media,’’ as defined in 45 

CFR 160.103, is sufficiently broad to 

encompass a range of technology 

advances, including secure wireless 

technologies. Moreover, our definition 

is not intended to establish a 

comprehensive list of, nor intended to 

identify best practices for, transmission 

media. Therefore, we do not intend to 

change our definition to reflect these 

additions. 

Comment: One commenter requested 

clarification as to whether the term 

electronic media, for purposes of the 

proposed rule, includes prescriptions 

sent by ‘‘electronic facsimile’’ to a 

pharmacy. The commenter believed that 

including them in the definition would 

establish uniformity and would make 

electronic facsimiles subject to the same 

standards as other electronic 

prescription transmissions. In addition, 

several commenters proposed adding a 

new definition of ‘‘non-EDI message,’’

which they defined as being a message 

that leaves or enters a system (including 

long-term care facilities and/or 

pharmacies) as an image, either via fax 

or e-mail, that is not included in the 

electronic prescribing standards. 

Response: The proposed definition of 

electronic media for an e-prescribing 

program is the same definition set forth 

in 45 CFR 160.103 for HIPAA’s 

transactions and code sets. We have 

already clarified, by means of HIPAA 

guidance in a Frequently Asked 

Question (FAQ) on the CMS Web site 

(http://www.cms.hhs.gov/hipaa/ 

hipaa2), that paper faxes are not 

considered ‘‘electronic media,’’ while 

computer-generated faxes constitute use 

of ‘‘electronic media.’’ As a result, faxes 

that are generated by one computer and 

electronically transmitted to another 

computer (commonly referred to as 

computer-generated faxes) would be 

included under the definition of 

electronic media for e-prescribing that 

we proposed. 

While we have determined that the 

NCPDP SCRIPT standard meets the test 

of adequate industry experience in 

many e-prescribing applications, in light 

of the comments received, we now 

recognize that prescribers using 

computer-generated faxes to transmit 

prescriptions to a dispenser’s fax 

machine that prints a hard copy of the 

original computer-generated fax merits 

separate consideration. Because this 

computer-generated transmission 

started as an electronic version, it would 

constitute a transmission using 

electronic media as defined in the 

proposed rule, and, as a result, would be 

required to comply with adopted eprescribing standards. 

In some cases, the prescriber’s 

software can generate SCRIPT 

transactions, but the ability is ‘‘turned 

off’’ because electronic communication 

with the pharmacy has not yet been 

established. In other cases, the 

prescriber uses software (such as a word 

processing program) that creates and 

faxes the prescription document, but 

does not have true e-prescribing 

capabilities. 

In the first case, the prescriber is 

already conducting e-prescribing, and 

should do so after the compliance date 

using the foundation standards. We 

would expect that the prescriber will 

establish electronic communication and 

begin to use the SCRIPT standard with 

little difficulty. 

However, the prescriber in the second 

case is not actually capable of 

conducting e-prescribing using the 

standards being adopted by this rule. 

That prescriber is merely using word 

processing software and the computer’s 

fax capabilities in lieu of faxing paper. 

Requiring these prescribers to convert to 

e-prescribing using the foundation 

standards would likely result in their 

simply reverting to faxing paper. 

Consequently, requiring these entities to 

comply with the NCPDP SCRIPT 

Standard would force the vast majority 

of them to revert to paper faxes, and, 

thus, it would impose a significant 

burden on those entities presently using 

computer-generated faxing, and would 

be counterproductive to achieving 

standardized use of non-fax electronic 

data interchange for prescribing. 

Moreover, we believe prescribers using 

computer fax capabilities will migrate to 

e-prescribing in time, possibly at the 

same time as they implement electronic 

health record systems. Therefore, we 

adopt an exemption which exempts 

those using computer-generated faxes 

from using the NCPDP SCRIPT Standard 

for transmitting prescriptions and 

prescription-related information. 

We believe this approach is consistent 

with the statutory direction that the 

Secretary has to issue uniform standards 

with the specific objective of improving 

efficiencies, including cost savings, in 

the delivery of care, and designed so 

that the standards, to the extent 

practicable, do not impose an undue 

administrative burden on prescribing 

health care professionals and dispensing 

pharmacies and pharmacists. We 

interpret these statutory objectives as 

enabling us to ensure that existing 

functionalities and workflow are not 

disrupted for a large number of 

prescribers and dispensers. We believe 

this interpretation is appropriate given 

the burden that adherence to the 

statutory requirements would create and 

based on the requests in comments 

received in response to the proposed eprescribing rule. As indicated above, we 

anticipate that many prescribers and 

dispensers would revert to handwritten 

paper prescriptions or computergenerated prescriptions that are printed 

in hard copy and manually faxed to the 

dispenser. This practice would stand as 

a significant obstacle to the broader 

statutory goals of the electronic 

prescription drug program provisions, 

as well as limit the ability of Medicare 

beneficiaries and the Medicare program 

to benefit from the patient safety and 

cost savings anticipated from eprescribing drugs under Part D of Title 

XVIII of the Act. However, we 

encourage all prescribers using fax 

technology to move as quickly as 

possible to the use of electronic data 

interchange via the SCRIPT standard. 

• E-prescribing Definition Proposal—

In the proposed rule, we defined ‘‘eprescribing’’ to mean the transmission, 

using electronic media, of prescription 

or prescription-related information, 

between a prescriber, dispenser, PBM, 

or health plan, either directly or through 

an intermediary, including an eprescribing network. 

Comment: Most commenters 

supported the proposed ‘‘e-prescribing’’

definition. One commenter 

recommended that the definition of eprescribing specifically cite ‘‘nursing 

facility.’’ Some commenters 

recommended the definition be 

amended to distinguish between the 

direct entry of prescribers and the direct 

entry of non-prescribers, such as clerical 

staff. Concerns were expressed that the 

definition does not include activities 

related to electronic claims 

adjudication. One commenter suggested 

that the definition for e-prescribing also 

be clarified to include two-way 

transmissions between the point-of-care 

(POC) and the dispenser. 

Response: We believe that the term 

‘‘e-prescribing’’ is broad enough in its 

scope to effectively encompass multiple 

transaction processes and participants, 

which exchange prescription or 

prescription-related transmissions, 

whether or not the transmission is 

conducted directly or through an 

intermediary. We realize that the 

business model that is typical in the 

67572 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

Long-Term Care (LTC) environment, 

where both the prescriber and the 

facility personnel are customarily 

involved in the prescribing process, is 

atypical of e-prescribing in the 

ambulatory setting. During the pilot 

project, we are planning to review the 

business process for e-prescribing in the 

LTC setting. For further discussion 

about e-prescribing and LTC and the 

comments we received, please refer to 

section F.1. of this final rule. 

Electronic claims adjudication and 

other related administrative functions 

are outside the scope of e-prescribing as 

specified in section 1860D–4(e) of the 

Act. Moreover, a number of transactions 

standards for these administrative 

functions have already been adopted in 

the August 17, 2000 HIPAA Standards 

for Electronic Transactions and Code 

Sets Final Rule (HIPAA final rule) (65 

FR 50312–50372) and modified in the 

February 20, 2003 Health Insurance 

Reform: Modifications to Electronic 

Data Transactions Standards and Code 

Sets (68 FR 8381–8399). 

• Electronic Prescription Drug 

Program Definition Proposal—In the 

proposed rule, we defined ‘‘electronic 

prescription drug program’’ to mean a 

program that provides for e-prescribing 

for covered Part D drugs prescribed for 

Part D eligible individuals who are 

enrolled in Part D plans. 

Comment: The commenters generally 

supported the proposed electronic 

prescription drug program definition, 

but recommended the definition be 

written in more generic terms without 

the reference to Part D. 

Response: Based on these comments 

and our interpretation of our statutory 

authority, we have decided to expand 

the scope of our definition of electronic 

prescription drug program to include all 

Part D eligible individuals, whether or 

not they are enrolled in a Part D plan. 

This group is identical to the universe 

of persons who participate in Medicare 

(Parts A or B or both). We revised the 

definition for the electronic prescription 

drug program at § 423.159 to broaden 

the scope of an electronic prescription 

drug program to include Part D eligible 

individuals, not just Part D enrolled 

individuals. This is consistent with our 

interpretation of the statute to expand 

the scope of preemption of State laws to 

include, at a minimum, all Part D 

eligible individuals, as described in 

section E.1. of this final rule. Therefore, 

we are adopting the revised definition 

in this final rule. 

• Prescriber Definition Proposal—In 

the proposed rule, we defined 

‘‘prescriber’’ to mean a physician, 

dentist, or other person licensed, 

registered, or otherwise permitted by the 

U.S. or the jurisdiction in which he or 

she practices, to issue prescriptions for 

drugs for human use. 

Comment: Commenters generally 

supported the proposed definition. One 

commenter recommended the definition 

of prescriber remain as defined in the 

proposed rule so long as the final 

definition encompasses providers, 

including Certified Registered Nurse 

Anesthetists (CRNAs) and others who 

are not physician providers, but who are 

granted prescriptive authority through 

the State in which he/she practices. One 

commenter recommended that the 

definition of ‘‘prescriber’’ specifically 

require prescriber order entry, including 

electronic signature by the actual 

prescriber. Several commenters 

recommended that the definition of 

‘‘prescriber’’ be expanded to include 

those who prescribe drugs for animal 

use. 

Response: The proposed definition 

does encompass individuals who are 

non-physicians, but who are permitted 

to issue prescriptions for drugs for 

human use. These non-physician 

providers could include CRNAs, nurse 

practitioners, and others. We also 

believe that it is inappropriate to 

include specific references to 

prescribing functions, such as electronic 

signatures, within this basic definition. 

We do not believe that there is statutory 

basis in the MMA to include prescribers 

of drugs for animal use, as the 

requirements specified section 1860D–

4(e) of the Act, as amended by section 

101 of the MMA, expressly provide for 

e-prescribing for covered Part D drugs 

for Part D eligible beneficiaries. We are 

not aware of any authority under which 

a prescriber of drugs for animal use 

would be writing prescriptions for part 

D drugs for Part D eligible beneficiaries, 

or under which animals were Part D 

eligible beneficiaries. Therefore, in this 

final rule, we are adopting the proposed 

definition as final. 

• Prescription-related information 

Definition Proposal—We proposed that 

‘‘prescription-related information’’

would mean information regarding 

eligibility for drug benefits, medication 

history, or related health or drug 

information for a Part D eligible 

individual enrolled in a Part D plan. 

Comment: Several commenters 

recommended amendments to the 

proposed definition. One commenter 

recommended that non-dispensing 

pharmacists (for example, those 

providing medication therapy 

management program services) be 

identified in the e-prescribing program. 

Several commenters recommended that 

the definition be written in more generic 

terms without the reference to Part D, 

which they felt could be addressed in 

the definition for electronic prescription 

drug program. According to these 

commenters, the additional language 

would capture Medicaid and other 

plans that would voluntarily implement 

e-prescribing efforts based on the 

proposed regulations. One commenter 

recommended the ‘‘prescription-related 

information’’ definition be expanded to 

include drug allergies and personal 

allergies. 

Response: We believe that the 

proposed definition of ‘‘prescriptionrelated information’’ adequately defines 

different types of information within the 

scope of the e-prescribing environment 

intended by the MMA statute. We also 

believe that the e-prescribing provisions 

of section 1860D–4(e) of the Act, as 

amended by section 101 of the MMA 

apply to pharmacists, both dispensing 

and non-dispensing, who electronically 

transmit prescription and certain other 

information for covered drugs 

prescribed for Medicare Part D eligible 

individuals. The statute broadly 

includes medication history, eligibility, 

related health or drug information. 

Furthermore, we believe that 

‘‘medication history or related health or 

drug information’’ is sufficient to 

include drug allergies and personal 

allergies. 

Comment: Some commenters 

suggested expanding the definition of 

prescription-related information as 

discussed in our proposed rule, which 

limits the scope of prescription 

information regarding eligibility for 

drug benefits, medication history or 

related health or drug information to a 

Part D eligible individual enrolled in a 

Part D plan. Some commenters 

proposed expanding the definition to 

include all Medicare beneficiaries. 

Other commenters suggested dropping 

the reference to Part D to expand the 

definition to all e-prescribing. 

Response: As indicated previously in 

this final rule, based on the comments 

we received and our interpretation of 

our statutory authority, we have decided 

to expand the scope of our definition to 

include all Part D eligible individuals, 

whether or not they are enrolled in a 

Part D plan. Accordingly, we are 

revising our definition of prescriptionrelated information to mean information 

regarding eligibility for drug benefits, 

medication history or related health or 

drug information for Part D eligible 

individuals. 

D. Revision to § 423.160 (Standards) 

1. General Rules 

In the February 4, 2005 proposed rule, 

we proposed that Part D sponsors would 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67573 

be required to establish and maintain an 

electronic prescription drug program 

that complies with the applicable 

standards in § 423.160(b) when 

transmitting, directly or through an 

intermediary, prescriptions and 

prescription-related information using 

electronic media for covered Part D 

drugs for Part D eligible individuals 

enrolled in a Part D Plan. 

Although we did not receive specific 

comments on this general rule for Part 

D sponsors, we did receive many 

comments related to its scope. In 

particular, many commenters wanted to 

expand the scope of e-prescribing in this 

final rule to include all Medicare 

beneficiaries and all payers. As 

indicated previously in this final rule, 

based on the comments we received and 

our interpretation of our statutory 

authority, we have decided to expand 

the scope of e-prescribing in this final 

rule to include all Part D eligible 

individuals, whether or not they are 

enrolled in a Part D plan. Accordingly, 

we are revising our general rule for Part 

D sponsors to state that Part D sponsors 

must establish and maintain an 

electronic prescription drug program 

that complies with the applicable 

standards in § 423.160(b) when 

transmitting, directly or through an 

intermediary, prescriptions and 

prescription-related information using 

electronic media for covered Part D 

drugs for Part D eligible individuals. 

In the February 4, 2005 proposed rule, 

we also proposed a general rule for 

prescribers and dispensers. We 

proposed that prescribers and 

dispensers that transmit, directly or 

through an intermediary, prescriptions 

and prescription-related information 

using electronic media must comply 

with the applicable standards in 

§ 423.160(b) when e-prescribing for 

covered Part D drugs for Part D eligible 

individuals enrolled in a Part D plan. 

Although we did not receive specific 

comments on this general rule for 

prescribers and dispensers, we did 

receive many comments related to its 

scope. In particular, many commenters 

wanted to expand the scope of eprescribing in this final rule to all 

Medicare beneficiaries and beyond the 

Part D program. As indicated previously 

in this final rule, based on the 

comments we received and our 

interpretation of our statutory authority, 

we have decided to expand the scope of 

e-prescribing in this final rule to include 

all Part D eligible individuals, whether 

or not they are enrolled in a Part D plan. 

Accordingly, we are revising our general 

rule for prescribers and dispensers to 

state that prescribers and dispensers 

that transmit, directly or through an 

intermediary, prescriptions and 

prescription-related information using 

electronic media must comply with the 

applicable standards in paragraph (b) of 

this section when e-prescribing for 

covered Part D drugs for Part D eligible 

individuals. 

2. Standards 

As stated in the February 4, 2005 

proposed rule, the Secretary had 

tentatively concluded that the proposed 

foundation standards are not subject to 

pilot testing because adequate industry 

experience with those proposed 

foundation standards already exists. We 

received numerous comments on the 

proposed foundation standards. Those 

comments and our responses are 

discussed below. 

a. Prescription Proposal 

In the proposed rule, we proposed to 

adopt, as a foundation standard, the 

transactions and administrative 

messages included in the National 

Council for Prescription Drug Programs 

(NCPDP) SCRIPT Standard, Version 5, 

Release 0 (except for the Prescription 

Fill Status Notification Transaction), to 

provide for communication of a 

prescription or prescription-related 

information between prescribers and 

dispensers. 

Comment: Many commenters 

supported the adoption of NCPDP 

SCRIPT as a foundation standard in 

2006. NCPDP SCRIPT is the current 

industry standard for electronically 

transmitting prescription information 

from the prescriber to the dispenser. 

Although the majority of commenters 

supported adoption of the NCPDP 

SCRIPT Standard, some commenters 

suggested that the foundation standards 

be included in the pilot project and 

some recommended a delay in 

implementation until pilot testing was 

completed. 

Response: We agree that the following 

transactions of the NCPDP SCRIPT 

should be one of the foundation 

standards: 

• Get message transaction. 

• Status response transaction. 

• Error response transaction. 

• New prescription transaction. 

• Prescription change request and 

response transactions. 

• Prescription refill request and 

response transactions. 

• Verification transaction. 

• Password change transaction. 

• Cancel prescription request and 

response transactions. 

We are adopting this standard for 

these specified transactions to be 

effective on January 1, 2006. We also 

plan to include it in the pilot project in 

order to ensure interoperability with the 

standards being pilot tested. 

b. Eligibility Proposal (ASC X12N 270/ 

271 Transaction Version 4010, 4010A1) 

In the February 4, 2005 proposed rule, 

we proposed to adopt, as part of the 

proposed foundation standards, the ASC 

X12N 270/271 Transaction Version 

4010, 4010A1 (the 270/271 standards) 

for conducting eligibility and benefits 

inquiries between prescribers and Part D 

sponsors. 

Comment: The majority of 

commenters supported the adoption of 

the ASC X12N 270/271 transaction 

standard for eligibility inquiries where 

appropriate. Commenters agreed that 

the version adopted should be 

consistent with the version adopted 

under HIPAA. 

A number of commenters suggested 

pilot testing this standard and delaying 

implementation of the 270/271 

standards to evaluate and test the 

impact of this transaction on the eprescribing environment. Comments 

that supported adoption of the 270/271 

standards also stressed the need to 

provide complete responses on the 271 

response. 

A few of the commenters opposed 

adoption of the 270/271 standards 

because they believe it currently does 

not accommodate enough of the kinds of 

information that would be necessary to 

complete the transaction, such as 

patient enrollment information that may 

be required for Part D beneficiaries. 

Response: We agree that the 270/271 

standards should be one of the 

foundation standards and we are 

adopting it in this final rule to be 

effective on January 1, 2006. We 

considered the potential shortcomings 

of the 270/271 standards that a few 

commenters identified, such as the 

standards not being sufficiently robust 

for returning pharmacy-related 

eligibility information. However, the 

majority of commenters indicated that 

the 270/271 standards are adequate and 

have been successfully implemented in 

e-prescribing programs. In addition, the 

270/271 standards are HIPAA standards 

and are already in widespread industry 

use, including in e-prescribing 

programs. We also will work with Part 

D plans to assure appropriate 

implementation of the 270/271 

standards. 

c. Eligibility Proposal (NCPDP 

Telecommunication Standard, Version 

5.1) 

In the February 4, 2005 proposed rule, 

we also proposed to adopt the NCPDP 

Telecommunication Standard, version 

5.1, for conducting eligibility 

67574 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

transactions between dispensers and 

Part D sponsors. 

Comment: Many commenters agreed 

that the NCPDP Telecommunications 

Standard, Version 5.1 should be 

adopted as a foundation standard. Some 

stipulated that this version should be 

adopted as a foundation standard as 

long as newer versions may be utilized. 

Other commenters suggested that the 

implementation of this standard be 

made voluntary until pilot tested. A few 

commenters alleged that the standard is 

not in widespread use within the eprescribing industry. 

Response: The majority of 

commenters supported the adoption of 

the NCPDP Telecommunications 

Standard, Version 5.1. as a foundation 

standard because it had been 

successfully implemented in eprescribing programs. We agree that the 

standard should be one of the 

foundation standards, and we are 

adopting it in this final rule to be 

effective on January 1, 2006. In addition, 

the NCPDP Telecommunications 

Standard v 5.1 is a HIPAA standard that 

must be used for the relevant electronic 

transactions and already has adequate 

industry experience. The use of later 

versions will be addressed with the 

comments on version updating and 

maintenance. 

3. Formulary and Medication History 

In the February 4, 2005 proposed rule, 

we discussed how the adoption of 

formulary representation and 

medication history would enhance eprescribing capabilities under Part D by 

making it possible for the prescriber to 

obtain information on the patient’s 

benefits, including the formulary status 

of drugs that the physician is 

considering prescribing, as well as 

information on medications the patient 

is already taking, including those 

prescribed by other providers. We also 

discussed the potential for cost savings 

and quality improvements that could 

result from the use of formulary and 

medication history standards. 

Proprietary file transfer protocols 

developed by RxHub are currently being 

used to communicate this information 

in many e-prescribing programs. The 

RxHub protocols have been submitted to 

NCPCP for accreditation, and this 

process is ongoing. We did not 

specifically propose adoption of these 

formats as foundation standards because 

they did not meet the accreditation 

criteria. However, we proposed 

characteristics for formulary and 

medication history standards, and noted 

that, if those characteristics were met 

and there was adequate industry 

experience with them, we would 

consider adopting foundation standards 

for formulary and medication history. 

In the interim, the RxHub protocols 

have taken different routes in terms of 

accreditation. The medication history 

protocol is no longer a discrete 

standard; rather, it was incorporated 

into the latest version of NCPDP SCRIPT 

(v. 8.0) as a transaction. This is in 

NCPDP’s formal review process. The 

formulary and benefits protocol is a 

discrete standard and is also undergoing 

NCPDP formal review and ANSI 

accreditation. 

Comment: Commenters generally 

opposed adoption of the RxHub 

protocols, even if they became 

accredited standards. The commenters 

recommended that those standards be 

pilot tested. A few commenters 

supported adoption of the RxHub 

protocols. No other foundation 

standards for these functions were 

proposed by commenters. 

Response: In response to many 

comments about the need for pilot 

testing the formulary and benefits 

standard and concerns about its 

interoperability with other standards, 

we will not adopt it as a foundation 

standard, but will include it in pilot 

testing. However, the transactions may 

be used voluntarily in the meantime. 

We are not adopting the RxHub 

medication history protocol as a 

foundation standard because it is 

included as a transaction in NCPDP 

SCRIPT v. 8.0, which does not meet the 

criterion for adequate industry 

experience. We plan to include that 

version of NCPDP SCRIPT, including 

the medication history functionality, in 

the pilot project. 

E. Comments and Responses on Related 

Issues 

In the proposed rule, we requested 

comments on various issues related to 

the e-prescribing process. We received 

numerous comments on those issues 

and we discuss those comments and our 

responses in the following section: 

1. State Preemption 

The MMA addresses preemption of 

State laws at section 1860D–4(e)(5) of 

the Act as follows: 

‘‘(5) Relation to State laws. The 

standards promulgated under this 

subsection shall supersede any State 

law or regulation that—

(A) Is contrary to the standards or 

restricts the ability to carry out this part; 

and 

(B) Pertains to the electronic 

transmission of medication history and 

of information on the eligibility, 

benefits, and prescriptions with respect 

to covered Part D drugs under this part.’’

In the February 4, 2005 proposed rule, 

we proposed to interpret this language 

as preempting State law provisions that 

conflict with Federal electronic 

prescription drug program requirements 

that are adopted under Part D. This 

interpretation allows Federal 

preemption of State laws that are either 

contrary to the Federal standards or that 

restrict the ability to carry out (or stand 

as an obstacle to) the electronic 

prescription drug program 

requirements, and that pertain to the 

electronic transmission of prescriptions 

or certain information regarding covered 

Part D drugs (such as medication 

history) for Part D enrolled individuals. 

This is an important issue because 

there is wide variation among the State 

laws regarding the extent to which 

electronic prescribing can be done, what 

information e-prescriptions must 

contain, how that information is worded 

and represented, and whether and how 

this information can be received into or 

transmitted from that State. As a result, 

Part D sponsors may face significant 

operational barriers and costs in 

implementing their e-prescribing 

programs. 

We invited public comment on our 

proposed interpretation of the scope of 

preemption, particularly with respect to 

relevant contrary State statutes that 

commenters believe should be 

preempted, beyond those that would be 

preempted under our proposed 

interpretation. We specifically asked for 

comment on whether this preemption 

provision pertains only to transactions 

and entities that are part of an electronic 

prescription drug program under Part D 

or to a broader set of transactions and 

entities. We also asked for comment on 

whether this preemption provision 

pertains to only electronic prescription 

transactions or to paper transactions as 

well. The comments that we received in 

response to our requests and our 

response to those comments are as 

follows: 

Comment: Some commenters agreed 

that the MMA’s preemption provision 

would pertain only to electronic 

prescriptions for Part D enrolled 

Medicare beneficiaries for drugs covered 

under Part D, as set forth in our 

proposed rule. However, many other 

commenters argued for a broader 

interpretation of the statute. Some 

commenters suggested preempting State 

laws concerning e-prescribing for all 

drugs that are prescribed for all 

Medicare beneficiaries. The commenters 

believed that the narrower 

interpretation would be unworkable 

because it would create one set of rules 

for Part D enrolled beneficiaries and 

another set for other Medicare 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67575 

beneficiaries. Since prescribers may not 

know at the point-of-care whether a 

Medicare beneficiary is enrolled in Part 

D, or whether the drug being prescribed 

would be covered under Part D, they 

would not know whether State law 

applied, or was preempted. 

Response: Based on these comments, 

we agree that the preemption provision 

can be read more broadly than proposed 

in the February 4, 2005 proposed rule. 

The scope of preemption includes all 

Part D-eligible individuals, whether or 

not they are enrolled in a Part D plan. 

This group is identical to the universe 

of persons who participate in Medicare 

(Parts A or B or both). Since Medicare 

A or B status is virtually always known 

or immediately ascertainable by a 

prescriber, this interpretation will 

minimize both confusion and mistakes. 

This is particularly important because 

the patients themselves may not always 

know whether they are enrolled in Part 

D (beneficiaries often know the plan 

name, but not their enrollment status), 

but will have a Medicare card and 

number if they are enrolled in Parts A 

or B. 

The preemption provision and other 

language in the e-prescribing statute 

give the Federal government the ability 

to preempt those State laws that 

‘‘restrict the ability to carry out this 

part’’ and ‘‘pertain to the electronic 

transmission of medication history and 

of information on eligibility, benefits, 

and prescriptions with respect to part D 

drugs under this part’’ (section 1860D–

4(e)(5) of the Act). This language 

permits preemption to pertain to more 

than Part D enrolled individuals. 

Therefore, we are interpreting section 

1860D–4(e)(5) of the Act to preempt all 

contrary State laws that are applicable 

to a prescription that is transmitted 

electronically not only for those 

individuals who are enrolled in Part D, 

but for all Part D eligible individuals. 

As to our proposal to limit 

preemption to ‘‘covered Part D drugs,’’

we agree with commenters that it will 

not always be possible for a prescriber 

to know, in advance, which category a 

particular drug falls. Indeed, some 

drugs, such as immunosuppressive 

drugs, may be reimbursed under either 

Part D or Part B depending not only on 

which coverage the patient has, but also 

on whether the transplant occurred 

before or after turning age 65. We do not 

believe that the States have any 

plausible interest in applying different 

rules in these situations, or that 

prescribers should face such 

uncertainty. Accordingly, we interpret 

the MMA preemption provision as 

preempting State laws that restrict the 

Department of Health and Human 

Services’ (DHHS) ability to carry out 

electronic prescribing, as specified at 

section 1860D–4(e) of the Act, and 

pertain to the electronic prescribing, for 

Part D eligible individuals, of drugs that 

may be covered by Part D in at least 

some circumstances, whether or not that 

particular prescription is covered under 

Part D in those specific circumstances. 

We have codified the statutory 

preemption provision found at section 

1860D–4(e) of the Act in this final rule. 

This addition, found at § 423.160(a)(4), 

is essentially identical to the statutory 

language. 

Comment: Some commenters 

proposed an even broader 

interpretation, arguing that preemption 

should pertain to all e-prescribing, not 

just to e-prescribing in the Medicare 

context. They stated that limiting 

preemption to Medicare would create a 

‘‘Medicare silo’’ with significantly 

different rules than for other payers, 

which would be costly for PBMs, plans, 

and pharmacies to address and 

administer. Those commenters believe 

that one set of rules for all payers would 

facilitate the adoption of e-prescribing 

outside the Medicare program. They 

contend that some States have existing 

statutory or regulatory barriers that 

could impede the success of eprescribing. For example, some State 

laws were drafted with only paper 

prescriptions in mind and, thus, may 

not be well-suited to e-prescribing 

applications. 

Response: We agree that broadening 

our interpretation of State preemption to 

include all Medicare beneficiaries and 

drugs that may be covered by Part D, in 

at least some circumstances, whether or 

not that particular prescription is 

covered under Part D, is consistent with 

our statutory authority. It also would 

reduce confusion for prescribers and, 

therefore, would likely encourage 

expanded use of e-prescribing and the 

adopted standards. Therefore, we 

interpret the MMA’s State preemption 

provision to preempt State laws that are 

contrary to the e-prescribing standards 

or restricts the ability to carry out this 

part for drugs that may be covered 

under Part D, in at least some 

circumstances, whether or not that 

particular prescription is covered under 

Part D, and that are e-prescribed for any 

Part D eligible beneficiaries. We also 

urge States to enact legislation 

consistent with and complementary to 

the goals of the MMA’s e-prescribing 

provisions and to remove existing 

barriers to e-prescribing. 

Comment: Several commenters 

proposed that the preemption should be 

applied to any State laws that could be 

considered a barrier to e-prescribing. 

Some commenters noted that this 

interpretation would be consistent with 

their view of the Congress’ intent to 

enable e-prescribing. The commenters 

suggested preempting a variety of laws, 

such as those that—

• Prohibit or fail to allow for eprescribing; 

• Establish requirements or standards 

for e-prescribing content and formats 

that are inconsistent with current eprescribing practices in other 

jurisdictions; and 

• Prevent e-prescribing across State 

lines. 

One commenter stressed that State 

laws also can afford patient safety and 

quality of care protections and that 

preempting those laws could adversely 

affect patient safety and quality. 

Response: While these commenters 

suggested categories of laws that might 

be preempted, few specific examples 

emerged. Under our interpretation of the 

statutory preemption provision, State 

laws that restrict the ability of entities 

to electronically prescribe covered Part 

D drugs for Part D eligible individuals 

in accordance with the Federal 

provisions would be preempted. While 

we agree that some State laws 

preempted under our interpretation of 

the statute may have had health or 

safety objectives, the statutory test is 

whether those laws are contrary to the 

standards we adopt or restrict the ability 

to carry out e-prescribing under Part D, 

and also pertain to the electronic 

transmission of prescription-related 

information. We also note that for a law 

to ‘‘pertain’’ to e-prescribing, it need not 

specifically single out e-prescribing. Our 

strategy is to define a general 

preemption rule in this final rule and 

identify several specific categories of 

laws that would be preempted. 

Preemption of these State laws is 

necessary because they restrict the 

ability of entities to electronically 

prescribe covered Part D drugs for Part 

D eligible individuals. Further, this 

preemption is necessary at a minimum 

in order for Part D sponsors and the 

providers and pharmacies that choose to 

e-prescribe covered Part D drugs for Part 

D eligible individuals to conduct eprescribing beginning on January 1, 

2006. Of course, under the statutory 

provisions, preemption of State laws 

that are contrary to these standards, or 

otherwise restrict the ability to carry out 

e-prescribing, will be effective upon the 

effective date of this regulation. 

We also anticipate that, as problems 

are identified with particular State laws 

or practices, some States will enact laws 

to address specific patient safety or 

confidentiality concerns that will not be 

contrary to, or restrict the ability to 

67576 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

carry out, the requirements of this final 

rule. We encourage States to consider 

the impact on Federal e-prescribing 

standards of laws that could directly or 

indirectly impede the adoption of eprescribing technology and standards on 

a statewide and national basis. We also 

urge States to enact legislation 

consistent with and complementary to 

the goals of the MMA’s e-prescribing 

provisions. This includes removing 

existing barriers to e-prescribing. We 

believe that, under this approach, we 

can achieve national uniformity in eprescribing standards and practices, 

while preserving the maximum 

reasonable autonomy for State-specific 

practices that do not consequentially 

hamper e-prescribing. If other State laws 

also stand as an obstacle to Congress’s 

goal of implementing uniform eprescribing standards that are to be used 

in electronic prescribing of Part D 

covered drugs for Part D eligible 

individuals, we can reevaluate the scope 

of preemption that is warranted when 

we adopt additional standards or in 

future rulemaking. 

At this time, we have identified 

several categories of State laws that are 

preempted, in whole or in part, upon 

the effective date of this final rule. 

These categories are intended to be 

examples and do not constitute an 

exhaustive list. However, they are 

illustrative of the examples identified 

through NCVHS testimony and 

comments received in response to our 

proposed rule; our application of the 

MMA’s preemption provisions to those 

State laws are based on our 

interpretation of the statute, in which 

State laws would be preempted if they 

restrict the ability of entities to 

electronically prescribe covered Part D 

drugs for Part D eligible individuals in 

accordance with Federal provisions. It is 

important to note that those State laws 

are preempted to the extent that they 

pertain to covered Part D drugs that are 

electronically prescribed for Part D 

eligible individuals. A State law, 

whether or not it includes an eprescribing standard, can be preempted 

if it is contrary to the adopted standards 

or restricts the ability to carry out Part 

D standards, and pertains to electronic 

transmission of prescription-related 

information. Those categories of State 

laws are as follows: 

• State laws that expressly prohibit 

electronic prescribing. 

• State laws that prohibit the 

transmission of electronic prescriptions 

through intermediaries, such as 

networks and switches or PBMs, or that 

prohibit access to such prescriptions by 

plans or their agents or other duly 

authorized third parties. 

• State laws that require certain 

language to be used, such as dispense as 

written, to indicate whether generic 

drugs may or may not be substituted, 

insofar as such language is not 

consistent with the adopted standard. 

• State laws that require handwritten 

signatures or other handwriting on 

prescriptions. 

We interpret the MMA preemption 

provision to preempt State laws that 

prohibit e-prescribing. Such laws would 

clearly restrict the Department’s ability 

to carry out the e-prescribing program 

for Part D, and they pertain to the 

electronic transmission of prescription 

and prescription-related information for 

covered Part D drugs. The application of 

this preemption provision is necessary 

for e-prescribing to occur for covered 

Part D drugs for Part D eligible 

individuals. 

We interpret the MMA preemption to 

preempt laws that prohibit transmission 

of electronic prescriptions through 

intermediaries because they would 

effectively preclude e-prescribing since 

establishing direct connectivity between 

each prescriber and each pharmacy is 

impractical, according to NCVHS 

testimony and information from other 

sources. In addition, this is current 

industry practice, and Part D plans may 

in many cases use software systems that 

rely on third party processing eprescriptions either simultaneously or 

before they reach pharmacies. Without 

preemption, this type of law would 

restrict the ability to carry out eprescribing for Medicare Part D because 

prescribers would be unable to eprescribe covered Part D drugs for Part 

D eligible individuals. 

We interpret the preemption 

provision to preempt State laws that 

establish specific generic substitution 

language to the extent that such a 

requirement is not consistent with an 

adopted standard—that is, where an 

adopted standard does not permit use of 

specific generic substitution language or 

where the State requires that the 

language be placed at a specific location 

on the prescription. Such requirements 

would be contrary to adopted standards 

and restrict the ability of Part D 

sponsors to conduct e-prescribing in 

accordance with the adopted standards. 

Lastly, we interpret the preemption 

provision to preempt State laws that 

require handwritten signatures or other 

handwriting on prescriptions. Those 

laws restrict e-prescribing for Part D 

covered drugs for Part D eligible 

individuals because they introduce 

manual requirements and a resulting 

paper product into the electronic 

prescribing process, which effectively 

prevents the prescription from being 

transmitted electronically from the 

prescriber to the pharmacy as required 

by this final rule. As a result, these State 

laws restrict the ability of entities to 

electronically prescribe covered Part D 

drugs for Part D eligible individuals in 

accordance with Federal provisions. 

Comment: Several commenters 

suggested that the MMA e-prescribing 

provision should preempt State laws 

that affect the security of prescription 

information and patient privacy. 

Response: The security of electronic 

prescriptions and the protection of 

electronic prescription information 

must meet the requirements set forth 

under HIPAA’s administrative 

simplification provisions for the 

protection of protected health 

information (PHI) and electronic 

protected health information (EPHI) (see 

45 CFR Parts 160 and 164) since, so far 

as we can determine, entities that 

conduct e-prescribing transactions 

under this final rule will be covered 

entities under HIPAA and the 

information contained in these 

transactions is PHI and EPHI. 

Because HIPAA’s privacy 

requirements are a floor, some States 

have additional privacy requirements 

that remain in effect, such as those laws 

requiring electronic or digital signatures 

and prescriber authentication, and those 

restricting the release of medication 

information for certain sensitive 

medical diagnoses, such as substance 

abuse disorders and HIV/AIDS, without 

patient consent. State privacy laws that 

are not contrary to the HIPAA Privacy 

Rule will also be in effect. Because it is 

not clear that all variations in State 

privacy laws negatively impact eprescribing, no preemption 

determination can be made categorically 

at this time. Variations in privacy laws 

within and among States will be 

assessed in the broader context of EHRs. 

When specific State privacy laws are 

identified, we will be able to assess their 

impact on e-prescribing under this or 

any other preemption analysis. 

Comment: Several commenters 

requested preemption of State laws 

affecting electronic transmission of 

prescriptions for controlled substances. 

Other commenters urged HHS to work 

with the Drug Enforcement 

Administration (DEA) to develop 

guidance on electronic signature 

requirements for controlled substances. 

Response: HHS and the DEA are 

working together to address the 

intersection of the Controlled 

Substances Act and regulations issued 

thereunder and rules regarding eprescribing issued pursuant to the 

MMA. 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67577 

Comment: One commenter pointed 

out that many States require that 

Medicaid prescriptions must have a 

prescriber’s handwritten statement 

across the prescription, if a brand name 

prescription is required when a generic 

drug is available. Even the wording is 

dictated. 

Response: The MMA transfers 

payment responsibility for the 

prescription drugs of dually eligible 

Medicaid and Medicare enrollees from 

Medicaid to Medicare. However, some 

States will provide additional 

prescription drug coverage for other Part 

D beneficiaries for drugs that would 

otherwise be paid out-of-pocket. If any 

State law or regulation prohibited a 

brand name drug prescription for 

prescriptions for these Part D eligible 

beneficiaries without a ‘‘handwritten’’

statement, the requirement that the 

statement be handwritten (but not the 

requirement for a written statement) 

would be preempted. 

2. Anti-Kickback Statute Safe Harbor 

and Stark Exception 

As stated earlier in this preamble, in 

the proposed rule, we indicated that we 

would be proposing an e-prescribing 

exception under the Stark law and an eprescribing safe harbor under the antikickback statute. We also indicated that, 

in the meantime, compliance with 

existing provisions is required. We also 

solicited comments on the nature and 

extent of incentives being offered to 

encourage prescribers to conduct eprescribing or incentives likely to be 

offered after rulemaking for a Stark 

exception and an anti-kickback safe 

harbor. We received many comments on 

this issue. 

Comment: Commenters requested this 

regulatory guidance and noted that the 

lack of it is a barrier to adoption of eprescribing. 

Response: We agree that guidance is 

needed and two proposed rules have 

been issued. The Physicians’ Referrals 

to Health Care Entities with which They 

Have Financial Relationships—EPrescribing Exceptions proposed rule, 

which proposed new exceptions to the 

Stark law for e-prescribing and 

electronic medical records, published in 

the Federal Register on October 11, 

2005. The Medicare and State Health 

Care Programs; Fraud and Abuse: Safe 

Harbor for Certain Electronic 

Prescribing Arrangements under the 

Anti-Kickback Statute proposed rule, 

published in the Federal Register on 

October 11, 2005, proposed new safe 

harbors under the anti-kickback statute 

for e-prescribing and electronic medical 

records. 

3. Three Criteria for Assessing Adequate 

Industry Experience 

In the February 4, 2005 proposed rule, 

we discussed adopting the following 

three criteria for assessing adequate 

industry experience: 

• Approval by an ANSI-accredited 

SDO to assure consideration of industry 

requirements. 

• Implementations among multiple 

partners to assure interoperability. 

• Recognition by key stakeholders to 

assure industry recognition of a single 

standard. 

Comment: One commenter proposed 

that standards meeting some, but not all, 

of the criteria be recognized as ‘‘draft 

standards for trial use’’ (DSTU) on a 

voluntary basis. Some SDOs use the 

concept of DSTU to permit interested 

parties to test new standards prior to 

their final voting process. 

Response: This suggestion presumes a 

category of standards that would fall 

outside the structure of the MMA and 

we, therefore, cannot accommodate it. 

The MMA does not recognize the 

concept of DSTUs, and for purposes of 

standards development and 

implementation, it characterizes 

standards as either final (to be 

implemented) or initial (to be pilot 

tested). The standards adopted in this 

final rule are the first set of final 

standards. In addition, NCPDP’s 

procedures, unlike those of other SDOs, 

do not recognize DSTUs. However, we 

encourage the voluntary adoption of eprescribing standards that are not 

adopted as final standards. 

Comment: Several commenters 

generally supported the proposed 

criteria. Many of the commenters 

specifically favored the requirement for 

ANSI accreditation, although a few 

commenters indicated that this 

requirement was unnecessary and that 

the remaining two requirements were 

adequate. Some commenters felt that the 

criteria were not strong enough to 

demonstrate widespread utilization 

throughout the health care industry and 

thus were not an adequate substitute for 

pilot testing, particularly in light of the 

short implementation deadline for the 

Part D benefit. 

Response: Based on the majority of 

comments we received in response to 

the proposed rule, we believe the 

proposed criteria for assessing adequate 

industry experience are valid, and will 

assure that foundation standards 

adopted in this final rule are consistent 

with them. Therefore, we will continue 

to use these criteria to assess adequate 

industry experience for future 

standards. 

4. Medical History 

Medical history broadly relates to 

information about a patient’s health care 

and health status. We did not propose 

standards for communicating medical 

history in the February 4, 2005 

proposed rule. Section 1860D–4(e)(2)(B) 

of the Act treats the electronic 

transmission of medical history 

differently from the electronic 

transmission of other information in an 

electronic prescription drug program in 

that it explicitly states that the medical 

history provision shall be effective ‘‘on 

and after such date as the Secretary 

specifies and after the establishment of 

appropriate standards.’’

Comment: A few commenters 

suggested that POC checking should 

include allergy/intolerance checking, 

validation of patient, and confirmation 

that a prescription is linked to a patient 

problem list. Moreover, the commenters 

recommended that an e-prescribing 

system provide physicians with 

information needed to discuss drug 

therapy with the patient at the POC. 

Response: Because we currently are 

not aware of any medical history 

standards, we are, therefore, not 

adopting any at this time. However, we 

welcome industry suggestions for those 

standards that we might consider at a 

future time. 

5. RxNorm 

RxNorm is a standardized 

nomenclature for clinical drugs that is 

produced by the National Library of 

Medicine. While RxNorm was not 

explicitly discussed in the February 4, 

2005 proposed rule, it was referenced in 

the table of potential standards 

contained in section G. of that proposed 

rule (70 FR 6262) because the NCVHS 

recommended that the 2006 pilot 

project include the RxNorm 

terminology. Efforts to map RxNorm to 

other terminologies are currently 

underway. 

Comment: While many commenters 

recognized the potential advantages of 

RxNorm, they recommended pilot 

testing the RxNorm terminology because 

it is not established as a recognized 

industry standard and needs to be tested 

in a variety of practice settings. Several 

commenters recommended accelerating 

the RxNorm project. One commenter 

reported that two commercial database 

vendors are concerned that RxNorm 

may be incomplete. They suggested that 

RxNorm’s content be validated for 

completeness and to assure that the 

code set accurately conveys the drug 

that the prescriber intends to prescribe, 

and that a translation table between 

67578 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

RxNorm and the commercial database 

publishers be developed. 

Response: We plan to include 

RxNorm in the 2006 pilot project to 

determine its interaction with 

commercial data bases and certain drug 

labeling initiatives, to determine 

whether it translates to the National 

Drug Code (NDC) for new prescriptions, 

renewals and changes; and to test 

RxNorm’s completeness and 

interoperability in the e-prescribing 

environment. 

6. Provider Identifier 

In the February 4, 2005 proposed rule, 

we discussed the salient issues 

regarding provider identifiers for the 

Medicare e-prescribing program. 

NCVHS recommended the use of the 

National Provider Identifier (NPI) as the 

primary identifier for dispensers and 

prescribers once it becomes available. 

CMS began issuing NPIs on May 23, 

2005. However, the use of the NPI in 

HIPAA standard transactions is not 

required by regulation until May 23, 

2007 (May 23, 2008 for small health 

plans). We indicated that we were 

considering requiring the use of the NPI 

in an electronic prescription drug 

program as of January 1, 2006, well in 

advance of the HIPAA regulatory 

requirements. We noted that 

accelerating NPI usage for e-prescribing 

may not be possible, as we may not have 

the capacity to issue NPIs to all 

providers involved in the e-prescribing 

program by January 1, 2006. We also 

solicited comments on the availability 

of alternative identifiers that could be 

adopted as a standard. 

Comment: Most of the commenters 

agreed that the NPI should eventually be 

the standard provider identifier for use 

in e-prescribing transactions. There also 

were some commenters who felt that the 

NPI needed to establish a proven track 

record, and should be included in the 

2006 pilot project. 

Response: We agree that the NPI 

should be the standard identifier for eprescribing. It already is a HIPAA 

standard identifier that must be used in 

standard transactions, which means that 

covered entities (including Medicare, 

Medicaid, private insurers, 

clearinghouses, and other covered 

entities) must accept and use NPIs for 

covered HIPAA transactions by May 23, 

2007, and May 23, 2008 for small health 

plans. Because the NPI is a new 

identifier and has not been used in the 

e-prescribing context, we will include it 

in the 2006 pilot project to determine 

how it works with e-prescribing 

standards that will be assessed. This 

also will allow for provider testing and 

phase-in. 

Comment: The majority of 

commenters said that the NPI should 

not be required for use until the May 

2007 (or May 2008 for small health 

plans) HIPAA regulatory compliance 

dates. They indicated that there is a 

need for sufficient time for all providers 

to obtain NPIs since enumeration began 

on May 23, 2005. They stated that the 

industry has been preparing for the 2007 

(and 2008 for small health plans) 

compliance dates, and any change to 

those dates will cause major disruption. 

Response: We agree that a transition 

period is needed. CMS will transition to 

the NPI when compliance for most 

covered entities is mandated in May 

2007 (May 2008 for small health plans). 

The NPI will not be required for use in 

e-prescribing transactions until the May 

2007 date (May 2008 for small health 

plans). As a result, we will not adopt a 

specific standard identifier for 

prescribers or pharmacies conducting eprescribing for Medicare beneficiaries 

prior to the NPI dates. The NPI will be 

tested in the 2006 pilot project. 

Comment: Commenters had a variety 

of suggestions for alternative identifiers 

that could be used in Medicare eprescribing on an interim basis. These 

included the NCPDP provider number, 

the HCIdea number, Medicare provider 

identifiers, the DEA number, and 

proprietary numbers. However, not one 

of these identifiers is assigned to all 

pharmacies and prescribers in the 

United States. 

Response: Until May 2007, entities 

that want to e-prescribe for Medicare 

beneficiaries may use other identifiers 

as specified by CMS in program 

instructions. Details are in CMS’

‘‘Instructions: Requirements for 

Submitting Prescription Drug Event 

Data’’ (June 24, 2005) available at 

http://www.cms.hhs.gov/pdps/ 

revisedinstrs062305.pdf. 

7. Prior Authorization 

Prior authorization is the protocol 

used between a prescriber and payer to 

determine, in advance, if a particular 

treatment medication, procedure, 

service, or device will be covered. 

Numerous drugs, supplies, and medical 

services are only covered for certain 

conditions or under special 

circumstances, and require coverage 

authorization by a health plan prior to 

administration. 

Because we are not aware of a prior 

authorization standard that incorporates 

real-time prior authorization 

functionality with messages for drugs, 

we did not propose adopting a prior 

authorization foundation standard. 

However, in the February 4, 2005 

proposed rule, the table that 

summarized the NCVHS 

recommendations indicated that we 

should support the ASC X12N efforts to 

incorporate real-time prior authorization 

functionality in the ASC X12N 278 

Health Care Services Review transaction 

(70 FR 6262). 

Comment: All of the comments that 

we received on this subject supported 

pilot testing a proposed formulary and 

benefit standard that includes some 

measure of electronic prior 

authorization support. Also, the 

commenters suggested that electronic 

prior authorization information should 

include specific clinical requirements or 

rules, so that the prescriber would know 

what information was needed prior to 

submitting an authorization request. A 

number of the comments stressed the 

importance of a prior authorization 

standard to an electronic prescribing 

system for improving workflows and 

ensuring appropriate drug utilization. 

Response: We agree with the 

comments that supported adoption of a 

prior authorization standard. We also 

are aware of further development of the 

ASC X12N 278 Health Care Services 

Review Transaction and will be pilot 

testing it for e-prescribing prior 

authorization in 2006. We will not 

adopt a standard for prior authorization 

transactions at this time. 

8. Fill Status Notification 

While fill status notification was not 

discussed at length in the proposed rule, 

it was mentioned in the discussion of 

the NCPDP SCRIPT standard (70 FR 

6265–6266). In addition, because the 

NCVHS recommended that it be 

included in the 2006 pilot project, fill 

status notification was referenced in the 

table in section I.G. of the proposed rule 

(70 FR 6262). 

Comment: A commenter expressed 

their disappointment that we decided 

not to include the NCPDP SCRIPT fill 

status notification transaction in the 

2006 pilot project as this standard has 

the potential of significantly improving 

the health of Medicare beneficiaries. 

Response: As we mentioned, while 

we do not think there exists adequate 

industry experience for this transaction 

to meet the criteria for a foundation 

standard, we will be testing the standard 

in the 2006 pilot project. 

9. Pilot Testing 

Section 1860D–4(e) of the Act 

includes an exception to the pilot 

testing requirement for standards with 

adequate industry experience. 

Comment: Many commenters 

recommended that all standards be pilot 

tested to ensure that standards work in 

multiple environments including 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67579 

settings where there are three-way 

transactions. Other reasons cited for 

pilot testing all standards include the 

following: 

• To determine that an undue burden 

is not imposed on specific entities. 

• To ensure that standards are useful 

and efficient for the e-prescribing 

process. 

• To ensure that standards function 

in a manner that enhances the 

prescribing process. 

• To determine if standards are 

functional and interoperable. 

Other commenters warned that if 

standards are implemented without 

pilot testing, there will be more 

electronic errors, less effective 

prescribing safeguards, or increased 

system vulnerability and instability. 

Another commenter added that if the 

functionalities of the standards are not 

perfected, frustration could lead to a 

reduction or cessation of e-prescribing. 

Response: We agree that pilot testing 

all of the standards may provide useful 

information for the implementation and 

operation of a multifunctional eprescribing system. We note that, while 

we will be including the foundation 

standards in the pilot project, we do not 

consider them to be initial standards to 

be tested. We are including them solely 

to ensure their interoperability with the 

various other standards, including both 

the initial standards and other 

foundation standards. Moreover, 

because of interoperability concerns, the 

pilot project will include both new and 

emerging standards, as well as 

established standards for additional 

functionalities that are not in 

widespread use. If the standards testing 

is unsuccessful, we will work with the 

industry to correct any outstanding 

issues. 

10. Version Updating and Maintenance 

In the February 4, 2005 proposed rule, 

we proposed to adopt specific versions 

of the foundation standards. However, 

we also proposed that if standards are 

updated and newer versions are 

developed, HHS would evaluate the 

changes and consider how and when to 

adopt new updates to the standards. 

HHS anticipates, as appropriate, 

updating adopted standards through the 

incorporation by reference update 

process, which provides for publishing 

an amendment to the Code of Federal 

Regulations (CFR). 

When updating a standard, we will 

look at a variety of factors to consider 

how the update should occur. If the 

Department intends to impose new 

requirements on the public, we would 

go through notice and comment 

rulemaking. If, on the other hand, the 

updates or newer versions simply 

correct technical errors, eliminate 

technical inconsistencies, or add 

functions unnecessary for the specified 

e-prescribing transaction, the Secretary 

would consider waiving notice and 

comment under an Administrative 

Procedure Act exception to the 

requirement for notice and comment 

rulemaking. In the latter case, we would 

likely adopt the version that was 

previously adopted as well as the new 

version. This would mean that 

compliance with either version for a 

covered transaction would constitute 

compliance with the standard. 

When determining whether to waive 

notice and comment and whether to 

incorporate by reference multiple 

existing versions, we would consider 

the significance of any corrections or 

revisions to the standard as well as 

whether the newer version is ‘‘backward 

compatible’’ with the previously 

adopted version. Backward compatible 

means that the newer version would 

retain, at a minimum, the full 

functionality of the version previously 

adopted in regulation, and would 

permit the successful completion of the 

applicable transaction with entities that 

continue to use the previous version. 

We noted, however, that if an eprescribing transaction standard had 

also been adopted under the 45 CFR 

parts 160 through 162, the updating 

process for the e-prescribing transaction 

standard would have to be coordinated 

with the maintenance and modification 

of the applicable HIPAA transaction 

standard. In the proposed rule, we also 

sought comment on whether we should 

simply reference the relevant HIPAA 

standards so that the e-prescribing 

standards would be updated 

automatically in concert with any 

HIPAA standard modification. In 

addition, we invited public comment on 

how to establish a process to assess new 

and modified standards consistent with 

the Administrative Procedures Act and 

other applicable legal requirements, and 

specifically invited comment regarding 

the role of industry SDOs and the 

NCVHS. This final rule adopts and 

incorporates by reference the relevant 

HIPAA transactions standards (the 

X12N 270/271 and the NCPDP 

Telecommunication Standard). In doing 

so, whenever these HIPAA transactions 

standards are modified, the parallel eprescribing standards would likewise be 

modified through a separate rulemaking. 

Comment: Many commenters 

recommended that the process of 

maintenance and modification of 

standards should not be hindered by 

extensive rulemaking. They cited 

industry experience with HIPAA, and 

pointed out that the update process 

precludes even voluntary adoption of 

newer versions, which stifles progress 

and innovation. They also supported 

our proposal of permitting voluntary 

implementation of later versions if they 

are backward compatible. Some 

commenters advocated permitting use of 

older standards for a period of time after 

new versions are adopted, while a few 

commenters recommended that all 

revisions be accomplished through 

notice and comment rulemaking. 

Response: We agree with the majority 

of commenters who stressed that the 

process for adopting new versions of 

standards must keep pace with industry 

needs. We also recognize the need to 

maintain an open process for assessing 

changes to assure that various 

viewpoints are considered. However, we 

are bound by law to comply with the 

Administrative Procedure Act. 

Therefore, we will establish a review 

process to determine—

• Whether a standard should be 

updated with a new version; and 

• Whether the update would 

necessitate notice and comment 

rulemaking. 

Where it is determined that the notice 

and comment rulemaking is not 

required, the new version will be 

adopted by incorporating the new 

version by reference, through a Federal 

Register notice. In that case, use of 

either the new version or the older 

version would be considered compliant. 

We would subsequently conduct a 

rulemaking prior to requiring the use of 

the newer version and retiring the older 

version on a specific date. 

Where notice and comment 

rulemaking is required, compliance 

with the new version will be mandated 

only after notice and comment 

rulemaking. We anticipate that such a 

regulation will provide for an 

implementation period during which 

either version of the standard may be 

used. After that period and on a date 

specified in the subsequent final rule, 

only use of the new version would be 

considered compliant. 

Comment: Several commenters 

wanted to know details concerning the 

process by which new versions would 

be assessed to determine whether 

rulemaking would be waived. Some of 

the commenters suggested that HHS 

should make this determination, while 

others stated that the relevant SDOs 

were best equipped to make this 

assessment. Still others suggested that 

NCVHS facilitate this discussion. 

Response: Under the Administrative 

Procedure Act, only the Secretary may 

make the decision to waive notice and 

comment rulemaking. Additionally, the 

67580 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

Secretary will ensure that any newer 

version that incorporates significant 

changes from the prior version 

undergoes notice and comment 

rulemaking before industry compliance 

is required. However, we acknowledge 

the need to elicit input from interested 

parties. Therefore, we will ask the 

NCVHS to assess new versions of 

standards as they are developed, obtain 

input from SDOs and other 

organizations, and provide 

recommendations to the Secretary 

regarding whether the new versions 

should be adopted. We do not anticipate 

that the Secretary would waive notice 

and comment rulemaking in any case 

where a new version is not backward 

compatible with the most recent prior 

adopted version. Additionally, the 

Secretary would ensure that any newer 

version that incorporates substantive 

changes from the prior version 

undergoes notice and comment 

rulemaking prior to the industry being 

required to comply with it. We believe 

that affected organizations will be 

adequately protected by this process 

because adoption of the new version 

would be voluntary in cases where 

rulemaking is waived. 

Comment: Several commenters 

requested that we explicitly state that 

entities that voluntarily adopt later 

versions of standards that are backward 

compatible must still accommodate the 

earlier version without modification. 

For example, a plan that adopts a later 

version could not require its trading 

partners to adopt the later version, and 

could not require its partners to modify 

their implementations of the earlier 

version. 

Response: We agree. Since in this 

situation both versions of the standard 

would be compliant, trading partners 

that voluntarily adopt the later version 

must continue to accept the earlier 

version without alteration until the 

older version is officially retired. 

Comment: Several commenters 

wanted to know who should participate 

in the process of assessing new versions 

of standards. A number of the 

commenters suggested collaboration 

between HHS and the SDOs, while 

others suggested that the NCVHS also be 

involved. Another commenter 

recommended that no update process be 

specified until we have additional 

experience with the e-prescribing 

standards. 

Response: We agree with the majority 

of the commenters that a process must 

be put into place now. We will, 

therefore, utilize the process described 

above, with the NCVHS providing 

recommendations to the Secretary for 

decision after obtaining industry input. 

We acknowledge that there may be a 

need for future revisions to the process. 

Comment: A number of commenters 

addressed the fact that several of our 

proposed foundation standards (the 

X12N 270/271 and the NCPDP 

Telecommunication Standard) had 

already been adopted as standards 

under HIPAA. They noted that the 

HIPAA modification process does not 

currently permit even voluntary 

adoption of newer versions of the 

standards without rulemaking. Some 

commenters advocated extending the 

ability to voluntarily adopt new 

versions of the final uniform foundation 

standards that are also HIPAA standards 

to provide the maximum benefit from 

this flexibility. Others recommended 

that the adoption of new versions be 

limited to final standards, including the 

foundation standards, to synchronize 

use around a single version. 

Response: We believe the first 

approach, which would permit 

voluntary use of newer versions, would 

be inconsistent with current HIPAA 

regulations, and, HIPAA covered 

entities may use only the versions of the 

270/271 and NCPDP 

Telecommunications standards that are 

adopted under 45 CFR Part 162. We are 

assessing a number of proposals for 

making the HIPAA standards 

modification process more flexible. 

Comment: A number of commenters 

recommended developing a predictable 

cycle for the update process, and other 

commenters specifically recommended 

an annual cycle. 

Response: We agree that a predictable 

update cycle would facilitate planning 

and budgeting for plans and providers. 

To the extent possible, we will work 

with the SDOs and NCVHS to establish 

a timetable for such deliberations. 

Comment: While we did not propose 

a process for maintaining vocabulary 

and code set standards, commenters 

specifically favored an open updating 

process for vocabulary and code set 

standards similar to the process in place 

today for HIPAA standard code sets. 

Under this process, vocabulary and code 

set maintenance could be accomplished 

by their maintainers without respect to 

the version updating process. This 

process permits flexibility to respond 

quickly to new concepts. 

Response: We did not propose 

vocabulary and code sets in our 

proposed rule, nor are we adopting any 

in this final rule. When we do propose 

vocabulary and code sets, we will 

propose a process for their updating and 

maintenance. 

11. Interoperability/EHR 

We proposed adopting foundation 

standards that are ANSI accredited and 

have adequate industry experience as a 

means of facilitating interoperability for 

Electronic Health Records (EHRs). We 

also asked for comment on how eprescribing functionality and our 

incremental approach to implementing 

e-prescribing relates to a comprehensive 

EHR system and interoperates across 

software and hardware products. 

Comment: The majority of 

commenters supported our approach 

toward achieving interoperability by 

requiring ANSI accreditation and 

establishing criteria that demonstrate 

adequate industry experience. Some of 

the commenters suggested that we 

broaden our approach to include 

various settings, such as long-term care. 

One commenter did not support our 

approach because the proposed 

foundation standards allegedly have not 

been adequately tested together in a 

wide range of settings. This commenter 

also suggested that we conduct a pilot 

project to assess the overall impact of eprescribing on Medicare and on other 

payers and patient populations. 

Response: We agree that e-prescribing 

functionality should be an essential 

component of a comprehensive EHR 

system and that it must interoperate 

across various software and hardware 

products and various care settings to be 

effective. Our incremental approach 

toward adoption of e-prescribing 

standards, along with the 2006 pilot 

project, will address interoperability 

across software and hardware products 

in a variety of care settings. 

Comment: We received several 

comments concerning timing. The 

commenters recommended that 

implementation of e-prescribing and 

EHR standards occur at various, 

independent stages without halting 

current e-prescribing development. 

Some commenters suggested postponing 

the establishment and adoption of 

standards for e-prescribing until a time 

when there are commonly accepted 

industry standards for EHRs, so that 

standards for the interoperability of eprescribing and EHR systems could be 

established at the same time. 

Response: We believe that our 

incremental approach to adopting eprescribing standards for use in the 

Medicare Part D benefit will be viewed 

as an initial step and facilitate the 

development of EHR standards, thus, 

promoting interoperability in the short 

and long terms. 

Comment: One commenter 

recommended that the Federal 

government use the Integrating the 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67581 

Healthcare Enterprise (IHE) process. 

This promotes the coordinated use of 

established standards, such as DICOM 

and HL7, to address specific clinical 

needs. 

Response: IHE is an initiative by 

healthcare professionals and the 

industry to improve the way computer 

systems in healthcare share information. 

IHE promotes the use of established 

standards to address specific clinical 

needs in support of optimal patient care. 

While we do not specifically participate 

in the IHE and we believe this comment 

is beyond the scope of the proposed 

rule, we nonetheless support and 

participate in projects that foster the 

coordination of standards across the 

health care enterprise such as through 

the SDO process. 

12. Closed Enterprise 

In the February 4, 2005 proposed rule, 

we solicited comment on whether Part 

D plans should be required to use the 

standards for e-prescribing transactions 

taking place within their own 

enterprises, the potential implications 

(including timing) of required 

compliance with adopted standards for 

these transactions, the extent to which 

these entities exist, and the advantages 

and disadvantages associated with 

excluding these transactions from the 

requirement to comply with adopted eprescribing standards. Under the HIPAA 

transactions rule, it is immaterial 

whether the transmissions are within a 

corporate HIPAA covered entity or 

between two different entities; 

compliance with the HIPAA 

transactions standard is required. 

Comment: One commenter 

recommended that both HL7 and 

NCPDP SCRIPT be allowed for any 

prescription transactions, with usage 

based on trading partner agreements. 

Several commenters recommended that 

HHS view the exchange of prescription 

transactions that occur ‘‘within the same 

enterprise’’ as being outside the scope of 

the MMA. Another requested that HHS 

clarify the definition of a ‘‘closed 

enterprise’’ for purposes of identifying 

prescription transactions within an 

enterprise that fall outside the scope of 

the MMA. One commenter did not 

believe that closed enterprises should be 

exempt from following the standards, 

noting that HIPAA applies to 

transactions in open and closed 

environments. 

Response: To clarify our use of the 

term ‘‘closed enterprise’’ in the February 

4, 2005 proposed rule, we intended 

‘‘closed enterprise’’ to mean a discrete 

legal entity that may serve as a closed 

network, such as a staff model HMO, 

which seeks to conduct e-prescribing 

within the confines of the enterprise. To 

avoid any confusion, we have steered 

away from using the term ‘‘closed 

enterprise’’ in this final rule and have 

stated explicitly that in line with the 

NCVHS recommendation and comments 

received, entities may use either HL7 or 

NCPDP SCRIPT Standard to conduct 

internal electronic transmittals for the 

specified NCPDP SCRIPT transactions. 

For example, there are many entities, 

such as staff model HMOs, in which all 

parties to the transaction, including the 

prescriber and the pharmacy, are 

employed by, and part of, the same legal 

entity. The NCVHS recommended that 

these organizations not be required to 

convert to the adopted standard (NCPDP 

SCRIPT) for prescription 

communications within their enterprise 

because these closed systems typically 

utilize HL7 messaging. However, if they 

send prescriptions outside the 

organization (for example, from an HMO 

to a non-HMO pharmacy) they would be 

required to use the adopted standards. 

We acknowledge the NCVHS 

recommendation. Thus, MA–PDs and 

PDPs continue to use HL7 messages for 

electronic prescriptions sent and 

received within the same legal entity. 

This requirement differs from the 

HIPAA requirement which sets the same 

standards for internal and external 

transactions and which will continue to 

apply to HIPAA transactions, even if the 

HIPAA transactions are used in eprescribing. We will require entities to 

use NCPDP SCRIPT if they 

electronically send prescriptions for 

Medicare beneficiaries outside the 

organization, such as to a non-network 

pharmacy. Any pharmacy, even if it is 

part of a larger legal entity must be able 

to receive electronic prescription 

transmittals for Medicare beneficiaries 

via NCPDP SCRIPT from outside the 

enterprise. 

Comment: Another commenter 

suggested that the February 4, 2005 

proposed rule be modified to either 

allow for the use of both transactions by 

large institutions, or to allow for the use 

of an intermediary to translate the HL7 

pharmacy order messages to the 

required NCPDP format that will reach 

the sponsor or dispenser. 

Response: Entities may use HL7 and 

NCPDP SCRIPT to conduct internal 

electronic prescription transmittals. We 

have, therefore, provided an exemption 

in this final rule for entities to conduct 

internal transactions using either the 

NCPDP SCRIPT or HL7, which would 

otherwise be required to comply with 

the NCPDP SCRIPT. However, 

electronic prescriptions sent to 

pharmacies for Medicare beneficiaries 

outside the institution or enterprise 

network must be converted to NCPDP 

SCRIPT; a clearinghouse or other 

intermediary may be used for 

translation purposes. 

13. NCVHS Process 

The Secretary is required to develop, 

adopt, recognize or modify initial 

uniform standards relating to the 

requirements for an electronic 

prescription drug program taking into 

consideration recommendations, if any, 

from the NCVHS. 

Comment: Several commenters were 

in favor of the process used by the 

NCVHS in recommending e-prescribing 

standards to the Secretary and 

supported the criteria developed to 

determine whether a standard 

demonstrated adequate industry 

experience. There was general 

agreement among the commenters that 

the NCVHS has helped set the path for 

the e-prescribing environment. Some of 

the commenters expressed support for 

the NCVHS process, and the 

opportunity to participate with the 

NCVHS and CMS on developing and 

adopting the standards required for an 

electronic prescription drug program. A 

number of commenters suggested that 

the NCVHS determine if an approved 

change to a standard is substantive and 

requires rulemaking. There also were 

some commenters that recommended 

that the NCVHS consult with CMS on 

when rulemaking can be waived for 

standard updates. 

Response: We agree with the 

commenters on the usefulness of the 

NCVHS process in recommending eprescribing standards to the Secretary. 

The NCVHS will continue to conduct 

hearings on e-prescribing standards to 

ensure input and participation with 

industry stakeholders, and will continue 

to consult with CMS on the 

development and updates for eprescribing standards. We note, 

however, that the Secretary will 

determine what is required to comply 

with the law. 

14. Privacy/Security 

In the February 4, 2005 proposed rule, 

we stated that it should be noted that 

disclosures of protected health 

information (PHI) in connection with an 

e-prescribing transaction would have to 

meet the minimum necessary 

requirements of the Privacy Rule if the 

entity is a covered entity (70 FR 6261). 

We also noted that entities that are 

covered entities under HIPAA must 

continue to abide by the applicable 

HIPAA standards, including those for 

privacy and security. Although we did 

not request comments on e-prescribing 

67582 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

privacy and security, we received 

several comments on the topics. 

Comment: Several commenters were 

concerned about the protection of 

patient privacy and the confidentiality 

of patient data, in both the patient care 

and research settings. The commenters 

also were concerned about assuring the 

security of, and authorized access to, 

transactions among prescribers, 

pharmacies and health plans. For 

example, some of the commenters 

suggested higher levels of security, such 

as digital and electronic signatures 

(including public key infrastructure, or 

PKI). 

Response: We agree that privacy and 

security are important issues related to 

e-prescribing. Achieving the benefits of 

e-prescribing requires the prescriber and 

dispenser to have access to medical 

history and other patient medical 

information that may not have been 

previously available to them. Section 

1860D–4(e)(2)(C) of the Act requires that 

disclosure of patient data in eprescribing must, at a minimum, 

comply with HIPAA’s privacy and 

security requirements. Pharmacists 

generally are responsible under State 

laws for ensuring the authenticity and 

validity of prescriptions. Based upon 

extensive testimony and consultation 

with industry experts such as the 

National Institute of Standards and 

Technology (NIST), the American 

Society for Testing and Materials 

(ASTM), and leaders in the financial 

services industry, the NCVHS did not 

recommend any standards relating to eprescribing security at this time. We 

agree that a standard for the security of 

prescriptions and related information is 

essential, but we are not adopting 

specific standards for security 

technology at this time because we are 

not aware of any such standards with 

adequate industry experience. It is 

important to note that health plans, 

prescribers, and dispensers are HIPAA 

covered entities, that must comply with 

the HIPAA security standards. Although 

those standards are flexible and scalable 

to each entity’s situation, they provide 

comprehensive protections. We will 

continue to evaluate additional 

standards, including encryption 

standards, for consideration as adopted 

e-prescribing standards. 

Comment: One commenter 

recommended more aggressive 

educational programs for the public 

concerning privacy and security. 

Response: We agree that public 

education is important. The HHS Office 

for Civil Rights (OCR) and CMS will 

continue their ongoing national 

educational efforts related to HIPAA’s 

privacy and security requirements, 

respectively. (OCR’s Web site is http:// 

www.hhs.gov/ocr/hipaa. CMS’’ Web site 

is http://www.cms.hhs.gov/hipaa/ 

hipaa2.) 

Comment: One commenter suggested 

that because of the need to ensure data 

security and privacy, health plans 

should be allowed to select their own 

POC vendors for e-prescribing. 

Response: All entities involved in eprescribing are free to select any 

technology vendor. However, they 

should make this decision with 

consideration of their needs and 

compliance with internal policies and 

laws, including those for security and 

privacy. 

15. Compliance Date 

In the February 4, 2005 proposed rule, 

we discussed the Secretary proposing 

January 1, 2006 as the compliance date 

for the foundation standards (70 FR 

6267). We proposed that, beginning 

January 1, 2006, Part D sponsors, and 

prescribers and dispensers that conduct 

e-prescribing transactions for which 

standards are adopted, would be 

required to use the standards adopted in 

this final rule for transactions involving 

prescriptions or prescription-related 

information regarding Part D enrolled 

individuals. Compliance is required 

whether the entity conducts eprescribing transactions directly or 

through an intermediary. 

Comment: Many of the commenters 

were in support of the January 1, 2006 

compliance date. Some commenters 

suggested that the date be moved. 

Reasons to delay compliance included 

concerns that some pharmacies, such as 

those in rural areas, will be unable to 

comply by this deadline; doing so may 

create a competitive advantage for those 

pharmacies (primarily large chains) that 

could comply; and the deadline will 

provide insufficient time for PDPs and 

MA-PDs to communicate the required 

contractual requirements to downstream 

providers as well as complete the 

necessary contracting activities. A few 

commenters suggested that delaying the 

compliance date will increase the use of 

e-prescribing as the extra time will 

allow physicians time to acquire the 

necessary technology as well as obtain 

financial assistance for doing so. 

Response: We will require the January 

1, 2006, compliance date for all eprescribing standards adopted in this 

final rule. We recognize that because eprescribing is voluntary for pharmacies, 

not all will be ready to comply with 

NCPDP SCRIPT by January 1, 2006. As 

a result, plans may take more time to 

work with the pharmacies in their 

network. While e-prescribing will be a 

requirement for Part D plans, our goal is 

to work with plans to facilitate 

widespread compliance and avoid the 

need to impose program sanctions 

wherever possible. 

Comment: Some commenters 

supported delaying the compliance date 

because they believe that the NPI will 

not be ready in time, or on a sufficient 

scale to achieve wide-spread use by 

January 1, 2006. The commenters stated 

that many entities would not be ready 

for such accelerated implementation 

because they were working to meet the 

HIPAA implementation deadline for the 

NPI of May 2007 (May 2008 for small 

health plans). 

Response: We recognize that the NPI 

may not be ready for wide-spread 

industry use by January 1, 2006. The use 

of the NPI in the e-prescribing context 

will be pilot tested. However, entities 

participating in Part D that want to eprescribe may use the NPI or other 

identifiers as specified by CMS, such as 

the NCPDP pharmacy identifier and the 

State license number for prescribers. 

Consequently, the availability of the NPI 

for use by January 1, 2006 will not affect 

the compliance date for the foundation 

standards. However, the NPI will be 

required for use in e-prescribing 

standards that are also HIPAA 

transactions as of the May 2007 HIPAA 

regulatory compliance date (except for 

small health plans for which the 

compliance date is May 2008). 

F. Additional E-Prescribing Related 

Topics 

We did not solicit comments on the 

following issues, however, we did 

receive several comments regarding 

long-term care pharmacy, and 

commercial messaging. We respond to 

those comments in this section. 

1. Long Term Care (LTC) Pharmacy 

In the February 4, 2005 proposed rule 

we did not distinguish the flow of 

information for LTC pharmacies, home 

infusion pharmacies, or renal dialysis 

pharmacies from the pharmacies 

described in the section E of (Current EPrescribing Environment) of the 

proposed rule (70 FR 6260). 

Comment: Several commenters noted 

that e-prescribing is rarely conducted in 

LTC facilities today. They pointed out 

that while the foundation standards may 

be said to have adequate industry 

experience in the ambulatory setting, 

this is not the case in the LTC setting. 

They also indicated that the proposed 

foundation standards do not support the 

complexities of the prescribing process 

for patients in LTC facilities. They 

explained that, while the standard 

outpatient prescribing process involves 

a prescriber and a pharmacy, 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67583 

prescribing in the LTC setting also 

involves the facility itself and its 

nursing staff. The patient’s chart may be 

at the LTC facility, but the prescribing 

physician may not be, and frequently 

the facility nursing staff transmits the 

prescription to the pharmacy, annotates 

the medical record, and dispenses the 

drug to the patient. 

Some of the commenters requested 

that the foundation standards not be 

applied to the LTC setting, unless they 

are first pilot tested in that environment. 

They specifically suggested that the 

2006 pilot project include LTC facilities 

and that they test the three-way 

communication between facility, 

physician and pharmacy. 

Response: We agree that the nursing 

home industry standard practice is not 

conducive to early application of eprescribing standards. The foundation 

standards that have been adequately 

tested in the ambulatory setting may not 

be directly transferable to the LTC 

setting for several reasons. First, there 

are generally three parties in LTC 

prescribing: The provider, the nursing 

facility, and the LTC Pharmacy. The 

provider generally writes prescriptions 

on a 1 to 3 month cycle at the facility, 

or by phone contact with the nursing 

station on an as needed basis. There is 

generally no provision in standard 

practice for direct provider to pharmacy 

transmission; in fact, such transmission 

is considered a potential risk if the 

administering facility staff is out of the 

communication loop. Second, the 

facility has the legal responsibility for 

processing medication orders as written, 

before pharmacy transmission. There is 

also a Federal requirement for 

concurrent and retroactive Drug 

Regimen Review (DRR) on all residents, 

which is the responsibility of the 

nursing home rather than the provider 

or pharmacist. Finally, less than 30 

percent of nursing homes have 

computer access at the nursing station. 

The current practice is for written 

orders to be faxed to the pharmacist as 

well as transcribed onto the Plan of Care 

at the nursing station. These 

intermediate steps would need to be 

developed separately in an e-prescribing 

system. 

The systems should be made 

compatible with a three party approach 

able to accommodate the LTC recording 

and DRR requirements, as well as 

changes due to the Part D benefit. 

Therefore, we do not require Part D 

plans to support e-prescribing when a 

facility, such as a LTC facility, is 

involved in the prescribing process in 

addition to the prescriber and the 

dispenser. Moreover, we exempt from 

the requirement to use the NCPDP 

SCRIPT Standard prescription 

transactions between prescribers and 

dispensers where a non-prescribing 

provider is required by law to be a part 

of the overall transaction process. 

We also agree with the commenters 

who requested that the 2006 pilot 

project include LTC facilities, and that 

the three-way prescribing 

communication between facility, 

physician, and pharmacy be tested 

using the standards. We expect to pilot 

test e-prescribing standards specifically 

in the LTC environment and welcome 

participation of LTC facilities. 

2. Commercial Messaging 

The proposed rule did not address 

electronic prescribing messaging, 

which, under the MMA, is aimed at 

giving providers the appropriate 

information they need at the POC to 

make informed decisions for treating 

Medicare beneficiaries. Section 1860D–

4(e)(3)(D) of the Act states that ‘‘eprescribing standards shall allow for the 

messaging of information only if it 

relates to the appropriate prescribing of 

drugs, including quality assurance 

measures and systems referred to in 

subsection (c)(1)(B).’’

Comment: Some of the commenters 

were concerned that standards for 

appropriate messaging were not 

included in the proposed rule. 

Response: We agree that there needs 

to be an appropriate balance between 

providing appropriate information at the 

POC with messaging that might steer the 

prescriber to use specific drugs and 

therapeutics as specified at section 

1860D–4(e)(3)(D) of the Act. We also 

recognize the potential for inappropriate 

messaging to occur in e-prescribing and 

share concerns about how the provision 

of certain information may unduly 

influence physician prescribing 

patterns. For example, inappropriate 

messages include those that would steer 

the filling of a prescription to a 

particular mail order pharmacy, and 

electronic ‘‘detailing’’ messages from a 

manufacturer promoting a particular 

brand or brand-name drug. Moreover, if 

a drug manufacturer engages in this 

practice to promote unapproved uses for 

a drug, this could be a violation of the 

Federal Food, Drug, and Cosmetic Act. 

We will monitor this as an operational 

issue and will provide guidance to plans 

at a future date and, if necessary, 

propose more specific standards for 

messaging. We intend to pilot test 

messaging standards when they are 

available for testing. 

3. Diagnosis Codes 

Although we did not propose the use 

of diagnosis codes in electronic 

prescriptions or solicit comments on 

this subject, we received a number of 

comments requesting a requirement to 

report diagnosis codes on standard 

electronic prescription transactions. 

Comment: Some commenters 

requested the addition of diagnosis 

codes to the standards required for 

electronic prescriptions under the 

electronic prescription drug program. 

The commenters indicated that this 

information is helpful for drug 

utilization review, decision support, 

formulary compliance, and therapy 

choices. One commenter believed that 

requiring a diagnosis on the prescription 

supports the MMA requirements and 

objectives and complies with HIPAA. 

Response: We agree that diagnosis 

codes may provide useful information 

that could assist in improving patient 

safety and quality of care, and may be 

helpful in data collection. The diagnosis 

data field is an optional field in the 

NCPDP SCRIPT standard and is not in 

widespread use. Therefore, we are not 

requiring it for e-prescribing under Part 

D at this time and it is not part of this 

final rule. 

G. Other Issues 

We received a number of unsolicited 

comments that included 

recommendations for CMS, and requests 

for additional functionality. 

Comment: Several commenters 

suggested that we conduct an analysis of 

formulary compliance, generic 

utilization, and their impact on patient 

care, health outcomes, and overall 

quality of care, and that health plans not 

be allowed to use financial incentives to 

influence physician’s prescribing habits. 

Comment: Several commenters stated 

that there was no transaction for the 

alteration of the status of a requested 

refill. 

Comment: Some commenters 

suggested that CMS provide guidance to 

pharmacists on how drug product 

selection instructions may be separately 

transmitted in electronic prescriptions, 

an authentication process for end-to-end 

prescribing, information on whether a 

prescription was filled, allergy/tolerance 

checking and validation of patient and 

prescription, information for the 

physician to discuss drug therapy with 

the patient at POC, diagnosis on the 

prescription, security measures for 

internet flow of information, testing 

statistical interoperability, and drug 

dosage forms, units of measure, 

modifiers, and SIG with drug names in 

standards. One commenter also 

referenced the Joint Commission on 

Accreditation of Healthcare 

Organizations (JCAHO) requirement that 

67584 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

pharmacists review medication orders 

prior to the medication being dispensed. 

Comment: Several commenters 

offered suggestions for an e-prescribing 

model such as one built with the patient 

and prescriber at the center; and a 

model designed to improve patient care 

and strengthen the physician-patient 

relationship, reduce costs, and provide 

information when it is needed. Also, it 

was suggested that an e-prescribing 

model reflect that community 

pharmacies have significant patient 

clinical medication information. One 

commenter suggested that CMS, the 

NCVHS, the SDOs, and technology 

vendors collaborate to build an eprescribing system to support the 

physician order set for home infusion 

therapy and be compatible with the X12 

837P claim standard. 

Comment: Several commenters 

addressed specific codes for spinal 

surgery in an ASC setting, 

reimbursement for specific drugs, and 

limitations for manipulating a computer 

keyboard that were out of the scope for 

the February 4, 2005 proposed rule. 

Response: We acknowledge these 

comments and will take them into 

consideration in the future as we further 

develop the electronic prescription drug 

program. We view e-prescribing as an 

evolving process and will collaborate 

with the industry and key stakeholders 

to enhance and improve the standards 

for e-prescribing that meet the 

requirements outlined in the MMA for 

an electronic prescription drug program. 

IV. Provisions of the Final Regulation 

For the most part, this final rule 

incorporates the provisions of the 

proposed rule. Those provisions of this 

final rule that differ from the proposed 

rule are as follows: 

• In § 423.150(c), we are revising the 

description of the scope to state 

expressly that this subpart sets forth 

requirements relating to electronic 

prescription drug programs for 

prescribers, dispensers, and Part D 

sponsors. 

• In § 423.159, we are revising the 

proposed definition for e-prescribing to 

further define e-prescribing to state that 

it includes, but is not limited to, twoway transmissions between the point-ofcare (POC) and the dispenser. In 

§ 423.159, we are revising our definition 

of prescription-related information to 

mean information regarding eligibility 

for drug benefits, medication history or 

related health or drug information for 

Part D eligible individuals. 

• In § 423.160(a)(1), we are revising 

our general rule for Part D sponsors to 

state that Part D sponsors must establish 

and maintain an electronic prescription 

drug program that complies with the 

applicable standards in paragraph (b) of 

this section when transmitting, directly 

or through an intermediary, 

prescriptions and prescription-related 

information using electronic media for 

Part D eligible individuals. 

• In § 423.160(a)(2), we are revising 

our general rule for prescribers and 

dispensers to state that prescribers and 

dispensers that transmit directly or 

through an intermediary, prescriptions 

and prescription-related information 

using electronic media must comply 

with the applicable standards in 

paragraph (b) of this section when eprescribing for covered Part D drugs for 

Part D eligible individuals. 

• In response to comments received, 

we decided that an exemption would be 

appropriate for computer-generated 

faxes to comply with the adopted 

NCPDP SCRIPT Standard. 

Therefore, in § 423.160(a), we are 

adding a new paragraph (3)(i) that will 

permit an exemption for complying 

with the adopted NCPDP SCRIPT 

standard for transmitting prescription 

information between the prescriber’s 

computer and the pharmacy’s 

computers. In paragraph (3)(ii) of this 

section, we are providing entities with 

the option of using either HL7 or 

NCPDP SCRIPT Standard to conduct 

internal electronic prescription 

transmittals. In paragraph (3)(iii) of this 

section, we are including an exemption 

for complying with the adopted NCPDP 

SCRIPT Standard when a nonprescribing provider is required by law 

to be involved in the prescribing process 

in addition to the prescriber and the 

dispenser. 

• In § 423.160(a), we will add a new 

paragraph (4) to state that, in accordance 

with section 1860D–4(e)(5) of the Act, 

the standards under this section 

supersede any State law or regulation 

that is contrary to the standards or 

restricts the ability to carry out Part D 

of Title XVIII of the Act and pertains to 

the electronic transmission of 

medication history and of information 

on eligibility, benefits, and prescriptions 

with respect to covered Part D drugs 

under Part D of Title XVIII of the Act. 

V. Collection of Information 

Requirements 

Section 423.160 of this rule does 

contain information collection 

requirements as discussed below: 

Section 423.160 Standards for an 

Electronic Prescribing Program 

As the government participates in the 

development of EDI standards, the 

question of whether the PRA is 

implicated has emerged. Part D sponsors 

offering qualified prescription drug 

coverage must support and must comply 

with electronic prescription standards 

relating to covered Part D drugs, for Part 

D eligible individuals as would be 

required under § 423.160. It has been 

determined that a regulatory 

requirement mandating the use of a 

particular EDI standard constitutes an 

agency-sponsored third-party disclosure 

as defined under the PRA. 

However, the requirement that Part D 

sponsors support electronic prescription 

drug programs in accordance with 

standards set forth in this section, as 

established by the Secretary, does not 

require that prescriptions be written or 

transmitted electronically by prescribers 

or dispensers. After the promulgation of 

this first set of final standards, PDPs and 

MA–PDs will be required to comply 

with these adopted standards as 

discussed in section 1860D–4(e)(1) and 

(2) of the Act. E-prescribing is voluntary 

for prescribers and dispensers; but, if 

they electronically transmit 

prescriptions and other prescriptionrelated information, they are required to 

comply with the standards. 

Testimony presented to the NCVHS 

indicated that many health plans/PBMs 

currently have e-prescribing capability 

either directly or by contracting with 

another entity. While we agree, we note 

that such capabilities (such as 

computer-generated faxes) may not be 

comparable to the functionality that will 

be required for electronic prescription 

drug programs under these regulations. 

Therefore, we do not believe that 

conducting an electronic prescription 

drug program would be an additional 

burden for those plans. 

Since these standards are already in 

use, we believe the requirement to adopt 

these standards constitutes a usual and 

customary business practice and the 

burden associated with the 

requirements is exempt from the PRA as 

stipulated under 5 CFR 1320.3(b)(2). 

VI. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the impacts of this 

final rule as required by Executive 

Order 12866 (September 1993, 

Regulatory Planning and Review), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Social Security 

Act, the Unfunded Mandates Reform 

Act of 1995 (Pub. L. 104–4), Executive 

Order 13132 on Federalism, and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Order 12866 (as amended 

by Executive Order 13258, which 

merely reassigns responsibility of 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67585 

duties) directs 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). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in costs and 

benefits in any 1 year). Our estimate is 

that this rulemaking has ‘‘economically 

significant’’ benefits as measured by the 

$100 million standard, and is, therefore, 

a major rule under the Congressional 

Review Act. Accordingly, we have 

prepared a regulatory impact analysis. 

Statistics from the Henry J. Kaiser 

Family Foundation indicate that more 

than 3.1 billion retail prescriptions 

totaling $154 billion were written in the 

United States in 2003, with the average 

cost for a prescription ranging from $45 

to $67. Individuals who are age 65 years 

and older average 26 prescriptions per 

year. The Medicare Prescription Drug 

Benefit final rule (published in the 

Federal Register on January 28, 2005 

(70 FR 4193–4585), available online at 

http://www.gpoaccess.gov) estimates 

that in CY 2006 about 29 million 

Medicare beneficiaries will receive drug 

coverage through a Medicare Part D 

plan. By CY 2010, estimates indicate 

that about 35 million Medicare 

beneficiaries will be receiving this drug 

coverage. (In addition, in CY 2006 

approximately 13 million others are Part 

D eligible, in most cases enrolled in the 

plans of former employers, and, 

therefore, will be covered by these 

rules.) While the Medicare drug benefit 

participation estimates are subject to 

uncertainty, changes in the rate or 

extent of adoption of Part D coverage 

would not affect the rate of adoption of 

e-prescribing or the impact of these eprescribing standards significantly. 

Virtually all prescribers and pharmacies 

who serve these beneficiaries now will 

find that the great majority of their 

elderly or severely disabled patients are 

eligible for and enrolled in Part D. To 

continue to serve any of these patients 

through Part D plans, and to use eprescribing, these providers will be 

subject to these standards. 

This impact analysis discusses the 

overall impact of instituting eprescribing standards under the 

Medicare Prescription Drug Program. 

However, as indicated in the analysis, 

there are several major factors 

influencing the adoption of eprescribing (including existing and 

future HIPAA rules, these final rules, 

and forthcoming Stark and antikickback rules) and the attribution of 

effects among them cannot be 

accomplished with precision. 

The overall requirements for 

supporting e-prescribing and providing 

incentives were discussed in the 

Medicare Prescription Drug Benefit 

proposed and final rules. However, 

specific standards were not contained in 

the Medicare Prescription Drug Benefit 

proposed rule and the impact analysis 

in that proposed rule did not analyze 

those requirements. The adoption of 

standards for the program will enhance 

the implementation and provide 

specific direction for providers, 

dispensers, plans, and vendors. 

According to testimony before the 

NCVHS and in the written comments in 

response to the Medicare Prescription 

Drug Benefit proposed rule (69 FR 

46632–46863), between 5 and 18 

percent of prescribers are conducting eprescribing. However, some studies 

have indicated increased prescriber 

interest and the likelihood of greater 

adoption of e-prescribing. We anticipate 

that the use of the standards in this final 

rule and the fact that these standards 

will be available at the time of the 

January 2006 implementation of the 

Medicare Prescription Drug Program, 

will accelerate adoption of e-prescribing 

due to heightened awareness of the 

benefits, the variety of devices and 

connections available for prescribers, 

and the fact that the standards are 

already successfully being used. While 

there are no detailed models predicting 

specific rates of adoption for this 

technology, based on prevailing expert 

opinion, we think it likely that the 

proportion of prescribers using eprescribing will increase by about 10 

percent annually over the next 5 years. 

The 10 percent annual growth in 

prescriber participation is a rough 

estimate, based on our expectations of—

• Publicity surrounding the Medicare 

Prescription Drug Program; 

• More publicity about the benefits of 

e-prescribing and the experience of 

prescribers who are participating; 

• Increased emphasis on health 

information technology in general; 

• Potential cost savings to providers 

using e-prescribing; and 

• The availability of incentives for 

participation. 

We believe that, as prescribers gain 

experience with e-prescribing, they will 

recognize the benefits and share those 

experiences with colleagues. In the 

February 4, 2005 proposed rule, we 

invited public comment on our 

expectations for prescriber 

participation. We received the following 

comments in response to our request: 

Comment: Most of the commenters 

believe that CMS has appropriately 

estimated or even underestimated the 

annual rate of participation in electronic 

prescribing. An e-health management 

firm stated that ‘‘the CMS estimate of 10 

percent growth in electronic prescribing 

per year is reasonable, but only with 

proper incentives or sponsorships.’’ One 

of the commenters that is a leading 

seller of e-prescribing systems stated 

that ‘‘in order to achieve greater than 10 

percent annual growth, cost savings 

from other stakeholders, particularly 

payers, must be shared with 

physicians.’’

A PBM commented that the CMS 

estimate of prescriber participation is 

too conservative based on two studies’

results. A Pri-Med Research Group 

study showed 1 in 5 physicians report 

using electronic prescribing technology 

now and another 42 percent are 

planning to adopt it in 2005. A recent 

Medical Economics survey indicated 1 

in 4 physicians plan to purchase an EHR 

system soon, at least 70 percent of 

which already include e-prescribing 

capability. 

However, some commenters stated 

that expectations for provider 

participation must be seen in the 

context of increasing practice expenses. 

These commenters pointed out that 

CMS actuaries predict five percent 

reductions in Medicare physician 

reimbursement each year between 

2006–2011. Also, physicians are under 

pressure to purchase EHR technology 

rather than e-prescribing stand-alone 

technology. In many cases EHR software 

does not yet contain e-prescribing 

modules, and physicians may be 

reluctant to invest in incompatible 

software. Many of the commenters 

stated that financial incentives and 

support for physicians and other 

prescribers who utilize e-prescribing 

technology should be readily available. 

Response: Based on these comments, 

we see no need to change our estimate 

of 10 percent annual growth in 

prescriber participation over the next 5 

years. The interoperability between EHR 

and e-prescribing is particularly 

important, as mentioned above. We 

intend to monitor the progress of any 

future certification process of EHRs and 

recognize the enhanced value of eprescribing with the availability of 

advanced decision support through an 

EHR. We plan to create incentives for 

adoption of full EHR through our 

forthcoming rules on exceptions to the 

Stark law and safe harbors to the antikickback statute. 

67586 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

B. Discussion of E-Prescribing Benefits 

According to the Center for 

Information Technology Leadership 

(CITL), more than 8.8 million adverse 

drug events (ADEs) occur each year in 

ambulatory care. (CITL, The Value of 

Computerized Order Entry in 

Ambulatory Settings, 2003. A summary 

is available at http://www.citl.org/ 

research/CITL_ACPOE_Summary.pdf.) 

E-prescribing helps to deliver relevant 

patient information at the time of 

prescribing. The CITL estimates that 

nationwide adoption of e-prescribing 

will eliminate nearly 2.1 million ADEs 

per year in the U.S. This will prevent 

nearly 1.3 million provider visits, more 

than 190,000 hospitalizations, and more 

than 136,000 life-threatening ADEs. 

These improvements will result in 

improved care and safety for health 

plans’ members. 

There is also evidence suggesting that 

the use of specific drugs may reduce 

adverse health events and utilization of 

other health care services for certain 

groups of patients. E-prescribing will 

promote efficient and effective use of 

drugs by ensuring that prescribers have 

up-to-date information regarding 

advances in drug therapies. For 

example, a recent study found that the 

use of statins in cholesterol-lowering 

drug therapy reduced the incidence of 

coronary disease-related deaths by 24 

percent in elderly men and women (ages 

70 to 82) with a history of, or risk factors 

for, vascular disease, and also reduced 

the incidence of non-fatal heart attacks 

and fatal or non-fatal strokes in these 

patients (‘‘Pravastatin in Elderly 

Individuals at Risk of Vascular Disease 

(PROSPER): A Randomized Controlled 

Trial,’’ Lancet 2002, 360:9346, 1623–

1630). 

In addition to the anticipated 

reductions in adverse health events 

associated with anticipated 

improvements in prescription drug 

compliance, we believe that many 

elements of the Medicare prescription 

drug benefit, including quality 

assurance, better information on drug 

costs (for example, through generic 

substitution), and medication therapy 

management will be enhanced by eprescribing. All of these are designed to 

improve medication use and reduce the 

risk of adverse events, including adverse 

drug interactions. We believe that these 

improvements, enabled by e-prescribing 

programs, will occur through enhanced 

beneficiary education, health literacy 

and compliance programs; improved 

prescription drug-related quality and 

disease management efforts; and 

ongoing improvements in the 

information systems that are used to 

detect various kinds of prescribing 

errors, including duplicate 

prescriptions, drug-drug interactions, 

incorrect dosage calculations, and 

problems relating to coordination 

between pharmacies and health 

providers. We also believe that 

additional reductions in errors and 

additional improvements in 

prescription choices based on the latest 

available evidence will occur over time 

as the electronic prescription program 

provisions of the MMA are 

implemented. (To Err is Human: 

Building a Safer Health System, 

Institute of Medicine of the National 

Academies, 1999, pp. 191–193, http:// 

www.iom.edu or http://www.nap.edu). 

At this time, we cannot predict how 

fast (or even if) all of these savings will 

occur, nor their precise magnitude, as 

they are dependent on the rate at which 

we are able to adopt final standards for 

various aspects/functions of eprescribing and EHRs, the adoption rate 

of e-prescribing by prescribers and 

pharmacies (depending in turn on if 

savings are realized), the effectiveness 

and existence of various incentives 

provided by private vendors/health 

plans, the quality of the systems 

implemented for e-prescribing, and the 

behavioral responses of prescribers, 

health care practitioners, dispensers, 

insurers (who help manage treatments), 

and patients. However, as indicated by 

the CITL report estimate, the potential is 

clearly substantial. We received a few 

comments on our analysis of benefits for 

e-prescribing which is largely 

unchanged from the proposed rule. 

Comment: One commenter expressed 

skepticism regarding CITL’s and IOM’s 

findings that electronic prescribing can 

reduce morbidity and mortality rates 

through reductions in common errors as 

described. 

Response: We appreciate that the 

predictions as to what can be achieved 

are necessarily speculative to some 

degree, and that similar kinds of 

predictions sometimes are unduly 

optimistic. However, these data are 

derived from reputable sources and 

there is general agreement in the 

industry about the direction and 

potential magnitude of these benefits. 

C. HIPAA Standards Impact 

The ASC X12N 270/271 Transaction 

and the NCPDP Telecommunication 

Standard adopted in this final rule, for 

e-prescribing transactions, are already 

adopted standards for HIPAA. Thus, any 

costs associated with the adoption of 

these transaction standards are already 

encompassed in the baseline. (The 

impact of implementing these standards 

was analyzed and adopted in the HIPAA 

final rule and available on the web 

through http://www.gpoaccess.gov). 

We note, however, that there is one 

very important difference between those 

HIPAA regulations and this final rule. In 

the HIPAA regulations, we knew that 

some of the electronic claims standards 

we were requiring were incompatible 

with many of those already in use for 

electronic billing of Medicare claims. 

We know that some prescribers and 

other entities are already using the 

standards we are adopting in this final 

rule. Thus, while the HIPAA Final Rule 

and this final rule share common goals 

and methods, they have different 

implementation consequences. 

This final rule involves both 

mandatory and voluntary elements, but 

even the mandatory elements are 

enabling. For example, the statute might 

have encouraged e-prescribing by 

making it a required condition of 

participation in Medicare, through 

positive financial incentives, by 

reducing barriers to adoption, by 

increasing the value of e-prescribing 

systems, or through other means. The 

primary method chosen by the Congress 

was to increase the value of eprescribing systems by mandating 

uniform standards for e-prescribing. 

Uniform standards reduce barriers to 

adoption by reducing uncertainty in the 

marketplace regarding which standards 

will be the industry standards of the 

future. These incentives are created 

without imposing substantial costs. For 

potential new e-prescribers, whose 

choice to adopt e-prescribing is 

voluntary, these standards provide the 

advantages of uniformity and reduced 

uncertainty, and, hence, reduce costs or 

increase benefits of adoption. For those 

existing entities that currently engage in 

e-prescribing transactions whose 

systems are currently incompatible with 

these standards, transitioning to the 

foundation standards will be mandatory 

to continue e-prescribing (with the 

option of returning to paper or, for 

internal use, the option of continuing to 

use HL7 provided that communication 

with external parties meets the adopted 

standards and that there is compliance 

with the HIPAA standards) and will 

come at some cost, but will also increase 

value of these systems in the long run 

as it will enable these entities to 

communicate with all other eprescribers. Only for Part D sponsors is 

use of these standards mandatory, and 

even then, only to receive or reply to eprescribing transactions initiated by 

other entities. In the proposed rule, we 

requested comments and data on the 

impact of the proposed standards on 

prescribers, health plans, and 

pharmacies based upon our estimates. 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67587 

We received the following comments 

on the estimates used to determine the 

regulatory impact of the proposed rule 

and input on the data and issues 

presented in this impact analysis. 

Comment: One commenter urged us 

to clarify the policy for those PDPs that 

have pharmacies which are not in 

compliance with e-prescribing 

standards by the deadline. The 

suggestion was made to allow a grace 

period and explain any repercussions. 

Response: Our regulations do not 

require pharmacies to implement eprescribing. Health plans must have that 

capability, but use of e-prescribing by 

both pharmacies and physicians is 

elective. Accordingly, a grace period is 

unnecessary. 

Comment: One commenter suggested 

that CMS deal with policy 

considerations around how eprescribing technology and standards 

will relate to Medicare Part B drugs, as 

well as the Competitive Acquisition 

Program (CAP). 

Response: The MMA only authorized 

us to impose an e-prescribing 

requirement on MA plans and freestanding prescription drug plans that 

pay for Part D drugs. This in no way 

precludes use of e-prescribing in other 

Medicare contexts, and likely 

encourages it, but does not force it. 

Since there are no separate e-prescribing 

requirements under Part B or the CAP 

program, there is no potential 

inconsistency problem. 

D. Impact on Health Plans/PBMs 

The Medicare Prescription Drug 

Benefit final rule (70 FR 4194) estimated 

that 100 PDP sponsors and 350 MA 

organizations would submit 

applications on an annual basis for 

participation in the Medicare 

Prescription Drug Program. In fact, a 

substantially larger number of 

organizations applied and we approved 

contracts with 73 PDP sponsors and 416 

MA–PD organizations on September 29, 

2005. 

Testimony presented to the NCVHS 

(available on the Web at http:// 

www.ncvhs.hhs.gov) indicated that, 

because most health plans/PBMs 

currently have e-prescribing capability, 

any additional costs associated with 

hardware/software connectivity will be 

minimal. Since the great majority of 

health plans contract with PBMs for 

pharmacy benefit administration, we do 

not consider the fees associated with 

these contracts to be an additional cost 

for plans conducting electronic 

prescription drug programs, although 

connectivity costs could increase based 

on volume. 

Although we believe that costs 

incurred by health plans will be 

minimal, even in those few cases where 

plans do not currently support eprescribing directly or through PBM 

contracts, it is possible that some plans 

will experience consequential costs that 

we have not foreseen. In the February 4, 

2005 proposed rule, we requested 

comments on possible costs to plans, 

and on steps we could take to 

ameliorate any unnecessary costs. We 

also requested comment on our 

expectation, discussed below, that plans 

will experience substantial financial 

benefits from e-prescribing and that the 

new standards will be cost-beneficial to 

plans. We received the following 

comments in response to our request: 

Comment: Most of the commenters on 

the subject of financial impact agreed 

that health plans/PBMs stand to gain the 

most from savings generated by eprescribing, but most of these 

commenters believe HHS has 

underestimated the cost of 

implementation and management, 

including the cost to health plans/ 

PBMs. While most health plans/PBMs 

have e-prescribing capability, start-up 

costs such as downloading formularies 

and medication histories, developing 

and standardizing acceptable medical 

terminology, as well as ongoing 

transaction costs, must not be 

overlooked. 

The commenters noted that PBMs 

may not have the incentive to continue 

paying for implementation and 

transaction fees and that other parties in 

the e-prescribing chain, in the past, have 

not been paying these fees. The 

commenters stated that HHS must 

recognize that costs, or the lack of 

knowledge of true costs, has been the 

primary barrier to implementation up to 

this point. Vendors’ costs regarding the 

HIPAA standards upgrade process were 

not minimal and many of the 

commenters do not anticipate eprescribing updating/systems creation 

to be negligible. 

The commenters stated that the cost 

for a health plan to have e-prescribing 

capability, that is, the start-up operating 

cost, was estimated to be $250,000 by 

one e-health management firm. This is 

the cost of connecting to RxHub, the 

‘‘only viable option for broad-scale 

connectivity that enables eligibilitybased formulary services and Rx claims 

history at POC.’’

One commenter concurred with HHS 

that the impact on health plans/PBMs 

would be a minimal financial burden, 

but noted that health plans/PBMs would 

have to pay for new transaction costs 

(for example, transactions between 

prescriber and PBM). The same 

commenter expressed skepticism that 

plans would incur a ‘‘substantial 

financial benefit from just e-prescribing 

alone.’’ The commenters mentioned 

savings from formulary and benefits 

compliance, improved patient outcomes 

and fewer adverse drug events/ 

hospitalizations, better utilization 

management and increased use of 

generics. Additional benefits may 

include tax incentives to engage in eprescribing, and/or improvements from 

implementation of more universal 

electronic health records systems (EHRs 

systems). 

Full sponsorship of a prescriber by a 

health plan was estimated to cost at 

least $1,500 per physician by several 

commenters. The cost would vary based 

on benefit design, market share, covered 

lives and local market competition. 

Health plans should see a complete 

return on investment within 12–18 

months after full implementation, 

according to one commenter. A few 

commenters did not agree that costs to 

health plans would be minimal, and 

stated that systems upgrade 

requirements may be significant. One 

commenter stated that the costs 

associated with adoption are not merely 

the cost of provider incentives, but also 

operating costs. There are human, 

technical and project management 

resource costs as well. The same 

commenter recommended 

implementing a sliding scale for PDP 

compliance with foundation standards. 

An e-health management firm 

estimated health plan savings from eprescribing to be 1 to 4 percent over 

traditional prescribing through 

formulary and generic drug use 

improvements and 1 to 3 percent or 

more through improvements in mail 

order use. 

A commenter discussed the Council 

for Affordable Quality Healthcare 

(CAQH) e-prescribing pilot program that 

began in 2003 and in which 120 area 

physicians participated. One 

participating health plan experienced a 

35 percent net savings (average savings 

of $29.91 per prescription) in drug costs 

when a formulary warning was given. 

Savings for other health plans with 

fewer non-formulary warnings were 

lower. 

Response: We did not intend to 

suggest that there were no costs to 

health plans associated with the 

implementation of e-prescribing. We 

agree with commenters that there will 

be a variety of start-up and 

implementation costs to plans. Some 

types of costs will be one time (for 

example, downloading formulary and 

tiering categories for each drug) subject 

only to updates, and others will be 

67588 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

recurring and grow with use. Our belief, 

and one that most of these commenters 

implicitly or explicitly accept, is that 

over time plans may save substantially 

more than the costs they incur. 

Moreover, e-prescribing is just one small 

element in the entire panoply of 

investments plans are making to 

participate in the new prescription drug 

benefit. For example, formulary 

development and the downloading of 

formulary and tiering information into 

several computer systems is necessary 

for purposes of payment, regardless of 

whether the prescriptions are made 

electronically. 

We did not accept the comment 

requesting a sliding scale of adoption for 

health plans. We are not persuaded that 

plans face substantial technical or 

financial barriers to establishing and 

maintaining the ability to support eprescribing as would warrant such a 

delay. Moreover, the larger than 

expected number of organizations 

seeking and obtaining MA and PDP 

contracts indicates that health plans 

themselves do not see this as a 

significant impediment. 

We agree with commenters that it is 

likely to cost at least as much as, and 

perhaps much more than, we originally 

estimated for prescribers to adopt the 

new technology. Nonetheless, we 

continue to expect many plans to 

provide incentives to prescribers to 

offset at least some of the prescribers’

initial cost of installing the hardware 

and software, thereby encouraging the 

adoption of e-prescribing. 

We expect that incentives to 

prescribers from Part D sponsors and 

other health care entities will represent 

a transfer of costs from prescribers to 

those entities that offer incentives. 

These transfers of electronic prescribing 

items and services should neither 

increase nor decrease the overall impact 

of implementing an electronic 

prescription drug program. 

We note that these incentives must 

not violate either anti-kickback 

prohibitions or the physician selfreferral prohibitions. Section 1860D–

4(e)(6) of the Act requires the Secretary 

to publish regulations that provide for 

an exception to the Federal self-referral 

prohibition in section 1877 of the Act 

and a safe harbor under the Federal antikickback statute (section 1128B(b) of the 

Act) for certain arrangements in which 

a physician receives necessary nonmonetary remuneration that is used 

solely to receive and transmit electronic 

prescription drug information. 

Both the physician self-referral 

exception and the anti-kickback safe 

harbor would protect certain nonmonetary remuneration in the form of 

hardware, software, or information 

technology and training services 

necessary and used solely to receive and 

transmit electronic prescription drug 

information. As discussed earlier in this 

preamble, we published two proposed 

rules that would implement these 

provisions and intend to publish final 

rules as soon as possible. They will both 

apply to hospitals, group practices, and 

PDP sponsors and MA organizations. 

Health plans have a substantial 

incentive to subsidize the cost of 

physicians’ adoption of e-prescribing 

because the plans would share potential 

savings in health care spending through 

reductions in adverse events and 

improved compliance. Thus, it is likely 

that the net effect on plans would be 

positive rather than negative. Moreover, 

there is no reason to expect health plans 

to incur costs without the expectation of 

a positive return. However, we have no 

basis at this time for estimating the 

precise timing or magnitude of either 

gross or net savings. 

E. E-Prescribing Incentives 

In the proposed rule, we stated that 

health plans that have offered incentives 

to prescribers have estimated the 

hardware and software costs for 

implementing an e-prescribing system 

for a provider to be approximately 

$1,500 per prescriber. At this time, a 

number of health plans are developing 

incentive packages for prescribers to 

initiate e-prescribing. We received the 

following comments on the impact that 

this regulation will have on both 

prescribers and the likely costs of those 

incentives. 

Comments: In addition to the 

commenters previously mentioned, one 

health plan stated that it had spent $3 

million to equip 700 physicians with 

hardware and installation, software, and 

training in their e-prescribing initiative 

(an average of almost $4,300 per 

physician). To boost participation, the 

health plan is now piloting a program to 

grant honoraria (between $600 and 

$2,000) to physicians who write 

electronic prescriptions. The commenter 

believes that without the financial, 

hardware/software, and support 

incentives, the average physicians’

practice would incur costs up to $2,500 

per physician to adopt e-prescribing. 

Another commenter cited a 

Massachusetts collaborative project that 

is partially funding physician adoption 

of e-prescribing and has reported only 

about 13 percent of targeted physicians 

(2,700 of 21,000) have adopted the 

technology. Wellpoint also offered eprescribing and physician incentives. 

Among physicians participating in this 

initiative, only 12 percent adopted an eprescribing system over an offer for a 

desktop-based practice management 

system. 

Response: These commenters 

illustrate both the difficulty of changing 

prescriber behavior and the potentially 

positive effects of relatively inexpensive 

incentives. It is clear that training and 

support, not just equipment and 

software, are necessary to foster eprescribing. 

F. Impact on Prescribers 

Current surveys estimate that between 

5 and 18 percent of physicians and 

other clinicians are using e-prescribing. 

According to the Agency for Healthcare 

Research and Quality, MEPS Highlights 

#11, more than 3 billion prescriptions 

are written annually. The ‘‘2003 CMS 

Statistics’’ publication reports the 

number of physicians in active practice 

at 888,061. We assume that all of these 

physicians are considered prescribers. 

However, the number of practicing 

physicians is not a direct measure of the 

volume or scope of potential eprescribing adoption. According to the 

2002 Economic Census, Health Care and 

Social Assistance industry publication 

(http://www.census.gov), there are about 

203,000 physician office establishments. 

This smaller number reflects the 

common use of group practices and 

other arrangements that allow 

physicians to share caseload, facilities, 

and costs. For these and other 

prescribers, the likely focus of a 

decision to adopt e-prescribing is the 

office, rather than the individual 

physician. 

Although physicians are encouraged 

to adopt e-prescribing technology, 

whether physicians prescribe 

electronically under the MMA is, 

nevertheless, voluntary. As previously 

discussed in this analysis, we expect eprescribing to reduce prescriber costs 

and produce net economic benefits to 

prescribers, but the magnitude and 

timing of savings first will have to be 

demonstrated to many prescribers to 

induce them to make the ‘‘up front’’

investment in new systems. Finally, an 

additional incentive for prescribers to eprescribe is the improved patient care 

that e-prescribing brings. Because we 

cannot determine the effect of these 

factors on prescribers at this time, we do 

not know how many prescribers will 

move to e-prescribing or when they will 

do so. 

As discussed earlier in the preamble 

of this final rule, once a prescriber 

decides to conduct e-prescribing for Part 

D drugs, for Part D eligible beneficiaries, 

the prescriber will be required to 

comply with the standards being 

adopted in this regulation. However, we 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67589 

have no reason to believe that the use 

of these particular standards will 

increase costs for new adopters, 

compared to what costs otherwise 

would have been, even for those (and 

we think they are few) who are 

currently using systems that may be in 

some respects incompatible with these 

standards. The February 4, 2005 

proposed rule stated that we expected 

vendors to upgrade those systems at no 

or nominal cost as part of their normal 

version updating process. 

Comment: One commenter disputed 

this claim because, according to the 

commenter, this was not the case with 

HIPAA upgrades. 

Response: We are not sure what 

specific experience the commenter is 

referencing in relation to HIPAA 

upgrades. More importantly, if existing 

systems are not upgraded to meet 

adopted standards at low or nominal 

expense to current users, then those 

users will switch to newer systems that 

do not require costly investments to 

meet those standards. For example, as 

we stated in the February 4, 2005 

proposed rule, a system that uses 

uniform standards will enable a 

prescriber to do business with multiple 

entities, and reduce costs compared to 

the alternative of having to deal with 

multiple incompatible systems. 

Comment: Several commenters stated 

that administrative professionals in 

medical settings, rather than prescribers 

themselves, may more readily adopt eprescribing, particularly as a ‘‘standalone’’ tool. 

Response: We agree that support staff 

will often facilitate the adoption of eprescribing, ease the transition, and 

manage the system. 

Comment: All of the commenters 

suggested estimated start-up costs for an 

individual physician to be at least 

$1,500 and perhaps exceeding $2,000. 

This estimate would vary based on 

benefit design, market share, covered 

lives and local market competition. 

Response: As previously discussed, 

the magnitude and timing of potential 

savings will first have to be 

demonstrated to many prescribers to 

induce them to make the ‘‘up front 

investment’’ in e-prescribing 

technology. The purpose of this final 

rule is to adopt standards for electronic 

drug prescription programs for covered 

Part D drugs for Part D eligible 

individuals so that physicians, health 

plans/PBMs, pharmacies and other 

stakeholders can plan for widespread 

adoption of this useful technology in a 

coordinated and uniform way. As to the 

cost of system implementation, the 

comments and information we received 

varied widely, though generally the 

estimated costs cited in these comments 

were not far above our initial estimates. 

For average e-prescribing software 

implementation, according to a 2003 

CITL report, ‘‘The Value of 

Computerized Provider Order Entry’’, a 

basic e-prescribing system costs $1248 

plus $1690 for annual support, 

maintenance, infrastructure and 

licensing costs. The total first year cost 

averaged approximately $3000. 

The Journal of Healthcare Information 

Management has published that even 

though vendors nearly always provide 

free e-prescribing devices to physicians, 

physicians reported paying user-based 

licensing fees ranging from $80 to $400 

per month. Physicians also reported that 

they had to invest in new or updated 

hardware, such as computer servers and 

networking infrastructure, to operate the 

e-prescribing system (the amount varied 

significantly by product). 

G. Discussion of E-Prescribing Barriers 

One of the barriers to early adoption 

of e-prescribing by prescribers is the 

cost of buying and installing a system. 

Included in the overall costs of buying 

and installing systems are several 

factors including—

• Changing the business practices of 

providers’ offices; 

• Changing record systems from 

paper to electronic; and 

• Training staff. 

Since these costs may be defrayed by 

the incentives that are being offered, or 

that may be offered, to prescribers, we 

expect a steady increase in the number 

of electronic prescribers. We do not 

know all of the various incentives being 

offered, but are aware that some health 

plans have offered hardware and 

software for e-prescribing and 

reimbursement for the first year’s eprescribing subscription fees (as 

indicated above, those arrangements 

must not violate Federal and State laws 

prohibiting kickbacks and physician 

self-referrals). We invited public 

comments on the nature and extent of 

incentives being offered to encourage 

prescribers to conduct e-prescribing or 

likely to be offered subsequent to the 

publishing of regulations to create an 

exception to the Stark law and an antikickback safe harbor for e-prescribing. 

We also anticipate that increased 

communication regarding the safety 

improvements and potential cost 

savings experienced with e-prescribing 

will encourage prescriber acceptance. 

As we indicated in the proposed rule, 

there is anecdotal evidence of direct 

economic benefits that accrue to 

prescribers that implement eprescribing, in addition to the 

previously discussed health benefits to 

patients. The following examples of 

these benefits have been reported: 

• A 53 percent reduction in calls 

from, and a 62 percent reduction in calls 

to, the pharmacy. 

• Time savings of 1 hour per nurse 

and 30 minutes per file clerk per day by 

streamlining medication management 

processes. 

• A large practice in Lexington, 

Kentucky estimates that e-prescribing 

saves the group $48,000 a year in 

decreased time spent handling 

prescription renewal requests. 

• Before implementation of eprescribing, a large practice in Kokomo, 

Indiana with 20 providers and 134,000 

annual patient office visits was 

receiving 370 daily phone calls, 206 of 

which were related to prescriptions. Of 

the 206 prescription-related calls, 97 

were prescription renewal requests. The 

remainder consisted of clarification 

calls from pharmacists or requests for 

new prescriptions. Staff time to process 

these calls included 28 hours per day of 

nurse time and 4 hours per day of 

physician time. Chart pulls were 

required in order to process half of the 

renewal requests. Implementation of an 

e-prescribing system produced dramatic 

time savings that permitted reallocation 

of nursing and chart room staff. 

• Potential reductions in malpractice 

insurance because of improvements in 

the quality of patient care resulting from 

better tracking of patients’ drug regimen 

and a reduction of ADEs, which may 

occur with e-prescribing. 

These examples come from large 

practices, but we expect that most if not 

all of them will apply equally well to 

smaller practices. We requested public 

comments and additional information 

on actual and potential savings, 

particularly in solo and small group 

practices. We received the following 

comments and information regarding 

this issue: 

Comment: A commenter stated that 

savings in the e-prescribing pilot 

conducted by the CAQH were not 

quantifiable because of the small size of 

the pilot (127,000 e-prescriptions were 

generated). However, prescribers did 

experience reduced call volume and 

time savings from easier access to 

medication lists. According to other 

commenters, McKesson Corporation has 

achieved similar time savings with 

partners in Illinois and Iowa. For 

example, improved clinical information 

access eliminated the need for chart 

pulls; 100 percent compliance with 

prescription requirements leading to 

reduced call volume regarding 

formulary questions; and 83 percent 

improvement in efficiency related to 

medication refills. While the results 

67590 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

have not been quantified in dollar 

savings, the initiative has generated a 26 

percent increase in nursing time with 

patients. The Tufts Health Plan Pilot 

program and Newton-Wellesley Case 

Study also corroborated physician 

practice time savings, of approximately 

2 hours per day. 

Response: These commenters provide 

additional information confirming that 

e-prescribing will provide significant 

savings. Some of the reported savings, 

such as daily savings measured in 

hours, would, if replicated, appear to be 

economically highly significant. 

Despite these supportive comments, 

we still do not have sufficient 

information on either the costs or 

benefits for a given type or size of 

provider to conduct a cost-benefit 

analysis for that provider type or size. 

H. Impact on Pharmacies and Other 

Dispensers 

Testimony from pharmacists and 

professional pharmacy organizations 

provided to the NCVHS (available on 

the Web at http://www.ncvhs.hhs.gov) 

reported the following benefits of eprescribing for pharmacies: 

• Reduced time-consuming phone 

calls to physicians. 

• Improved accuracy and less time for 

refill authorizations. 

• Additional time available for 

patient contact and services. 

• Improved prescription 

communication between prescriber and 

dispenser (through, among other things, 

reduction in illegible handwritten paper 

prescriptions). 

• Improved turnaround time for refill 

authorizations. 

We do not expect to see a material 

change in the volume of prescriptions 

written for pharmacies to fill because of 

e-prescribing. While we expect to see 

the efficiencies (discussed at the 

beginning of this section) at pharmacies 

with some possible reductions in 

administrative staff time, we do not 

expect to see a significant economic 

effect from the implementation of eprescribing in the Medicare Part D 

program. We note that pharmacies could 

benefit from the incentives permissible 

under both the physician self-referral 

exception and the anti-kickback safe 

harbor. These exceptions would protect 

certain non-monetary remuneration in 

the form of hardware, software, or 

information technology and training 

services necessary and used solely to 

receive and transmit electronic 

prescription drug information. 

The industry has provided 

information indicating that 75 percent 

of the approximately 57,000 pharmacies 

in the U.S. already have e-prescribing 

capability which suggests that 

pharmacies already find this a beneficial 

investment (75 percent figure from 

testimony of Kevin Hutchinson of 

SureScripts before the NCVHS 

Subcommittee on Standards and 

Security, May 25, 2004; estimate of 

number of pharmacies from National 

Community Pharmacists’ Association, 

press release of June 29, 2004). In this 

respect, we note that the great majority 

of pharmacies are already highly 

networked for other reasons, and, 

therefore, assume that the marginal 

costs of e-prescribing are likely to be 

small. For example, as indicated earlier 

in this preamble, we believe that over 95 

percent of pharmacy systems are already 

compatible with the NCPDP retail 

pharmacy drug claim standard. Since 

adoption is voluntary and only 

undertaken where it is likely to be 

profitable, we expect any net effects to 

be positive. 

In the February 4, 2005 proposed rule, 

we did, however, request additional 

information on pharmacy impacts. We 

received the following comments and 

information on pharmacy impacts: 

Comment: According to one 

commenter, e-prescribing will likely 

save time and money for pharmacies by 

automating the pre-authorization 

process between prescribers, third party 

payers and pharmacies. The commenter 

stated that it also will reduce calls to 

physicians and save time for refills. 

However, the commenter indicated that 

there also will be costs associated with 

implementation. There are training 

expenses associated with supporting 

inbound e-prescriptions. One 

commenter who agreed that the net 

effect on pharmacies will be positive 

noted that there may actually be a slight 

negative effect early in the process of 

implementation due to the learning 

curve. The number of prescriptions that 

actually reach pharmacies will likely 

increase, in part because patients other 

than Medicare beneficiaries will benefit 

from e-prescribing. The increase in 

volume will create additional burden on 

staff time and the number of 

prescriptions that are not picked up will 

likely increase. 

According to one commenter (and 

inconsistent with the information we 

presented in the proposed rule), most 

pharmacies, especially small 

pharmacies, are not networked to 

exchange data with prescribers 

electronically. The number of 

pharmacies actually receiving 

computer-to-computer prescription 

transactions is much smaller than CMS 

estimates. For example, according to 

this commenter, of 200,000 

prescriptions that prescribers using its 

system transmit electronically each 

month, 63 percent must be re-formatted 

for transmittal to a pharmacy’s fax 

machine. CMS should not 

underestimate the costs, logistics and 

training required to migrate to true eprescribing. 

The National Association of Chain 

Drug Stores (NACDS) stated that there 

should be incentives for pharmacy 

adoption of e-prescribing in addition to 

incentives for prescribers because 

pharmacies will need to invest in new 

technology and training as well as pay 

e-prescribing transaction fees. Another 

expert organization estimated eprescribing transaction fees to be 

between $0.215 and $0.35. Therefore, 

the average community pharmacy may 

incur costs of between $4,000 and 

$5,000 per year in transaction fees. 

Response: While there are costs 

associated with e-prescribing 

technology adoption, it is clear that 

most pharmacies will benefit. The Tufts 

Health Plan Pilot Program found that 

pharmacists were very satisfied with eprescribing (as defined by their Pilot 

Program but not ‘‘true’’ e-prescribing as 

defined under this final rule) and saved 

almost one hour per day using relatively 

inefficient fax e-prescribing technology. 

While the standards being adopted do 

not accommodate the use of facsimile 

technology, which involves 

transmission of graphic image copies 

rather than fielded data, this relatively 

primitive modality illustrates potential 

cost-effectiveness. Broader use of ‘‘true’’

e-prescribing would yield even better 

results. 

I. Impact on Patients 

E-prescribing has the potential for 

improving beneficiary health outcomes. 

E-prescribing systems enable 

appropriate drug compliance 

management and improved medication 

use, and provide information to prevent 

adverse drug events. E-prescribing 

systems can improve patient safety by 

detecting various kinds of prescribing 

errors, including duplicate 

prescriptions; drug-drug, drug-allergy 

and drug-disease interactions; incorrect 

dosage strengths prescribed; misprescribing, and problems relating to 

coordination between health care 

providers and pharmacies (for example, 

early and late refills). These types of 

reductions in errors and improvements 

in regimens will occur increasingly as 

more and more providers use the eprescribing systems for the Medicare 

Prescription Drug Benefit (To Err is 

Human: Building a Safer Health System, 

Institute of Medicine of the National 

Academies, 1999, pp. 191–193, http:// 

www.oim.eduhttp://www.ioim.edu or 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67591 

http://www.nap.edu). E-prescribing can 

also inform physicians on appropriate 

formulary choices, which can save 

money for the health plans, patients, 

and health care system. 

Nothing in the e-prescribing system 

creates direct costs for patients. We 

believe that reductions in patient 

mortality and morbidity will be a 

substantial benefit resulting from the 

adoption of e-prescribing, although we 

are unable at this time to provide 

quantitative estimates. The Department 

of Defense has an e-prescribing system, 

Pharmacy Data Transaction Service 

(PDTS), which uses a centralized 

repository of prescription and 

medication information to detect drug 

interactions (more than 117,000 were 

found over the last three years). 

However, this system is integrated with 

a full patient record. 

Comment: All of the commenters on 

this issue agreed that patients will 

benefit from e-prescribing. Positive 

effects include ameliorating care 

fragmentation; encouraging prescribers 

to prescribe less expensive drugs so that 

patients halve their medications less 

frequently in order to save money; 

improving accessibility of clinical and 

personal health history at the POC; 

eliminating duplicate and negative 

interaction prescriptions; improving 

patient compliance by making the 

process of filling prescriptions easier; 

and prescriber notification of 

prescriptions being filled. 

Response: We continue to agree that 

e-prescribing will have a substantial net 

positive impact on patient care, 

including improved outcomes, 

reductions in errors, and the ability for 

providers to monitor compliance. The 

previously cited CTIL report estimated 

in 2003 that e-prescribing will eliminate 

nearly 2.1 million adverse drug events 

annually in the U.S. and also projected 

$2.7 billion in annual savings with 

widespread adoption. 

Although we did not receive negative 

comments, we do point out that there 

are two potentially negative effects of eprescribing, both of which have been 

raised at NCVHS meetings. First, like 

the creation of any computer-based 

system that includes personal 

information, e-prescribing creates new 

privacy risks. The problem is not that 

private information is not already 

available to authorized users, but that 

despite authentication procedures and 

other safeguards any electronic data 

base available to authorized users is 

potentially vulnerable to penetration by 

unauthorized users who, if they 

succeed, can potentially gain access to 

the records of many persons. Relatedly, 

increases in the number of authorized 

users increase the potential for 

unscrupulous users to sell or otherwise 

reveal private information. Second, 

there is the possibility that an eprescribing system, like any system, can 

be programmed in ways that result in 

errors. We think that both potential 

problems are likely to be infrequent, 

small in scope, and unlikely to create 

significant costs. 

J. Impact on Others 

We see the growth of e-prescribing as 

business potential for healthcare 

information technology vendors. Any 

costs associated with e-prescribing and 

potential business opportunities could 

be allocated toward new product 

development and would likely be 

recouped. We have no estimates for 

these types of costs and did not receive 

public comment from healthcare 

information technology vendors and 

others on the impact of e-prescribing. 

E-prescribing is in widespread use 

among some segments of the industry, 

especially health plans and PBMs and 

some pharmacies; however, we have not 

determined the impact and extent of 

experience for other entities such as 

pharmaceutical and medical device 

manufacturers, public health 

organizations, research and academic 

institutions, and professional lay 

organizations. We invited public 

comment on the impact of e-prescribing 

for these entities. 

The Health Information Network 

Weekly Update (Volume VI, No. 49, 

November 15, 2004) stated that eprescribing is at the top of the list of ehealth applications that will see the 

greatest growth. Thirty-nine percent of 

participants predict e-prescribing will 

be the most widely embraced e-health 

application. 

We received the following comments 

on the impact of e-prescribing on the 

entities discussed above: 

Comment: Commenters stated that the 

research community and public health 

professionals could also benefit from 

new, de-identified data that may 

become available. 

Response: We agree with the 

commenters. We are already 

undertaking initiatives to increase 

reporting on outcomes of new medical 

devices and drugs that have been 

approved conditionally or with 

circumscribed applicability through our 

coverage decisions. We expect that the 

records generated in implementing the 

new Part D drug benefit will provide 

substantially expanded data bases that, 

properly analyzed without violating 

individual patient privacy, will help 

establish the absolute or comparative 

effectiveness of pharmaceutical 

therapies in curing or alleviating 

diseases that affect Medicare 

beneficiaries, and help establish the 

incidence of adverse or positive side 

effects. 

K. Impact on Small Businesses 

The RFA requires agencies to analyze 

options for regulatory relief for small 

entities when final rules may create a 

significant impact on a substantial 

number of small entities. For purposes 

of the RFA, small entities include small 

businesses whose revenues fall below 

specified thresholds, nonprofit 

organizations of any size, and small 

governmental jurisdictions (population 

under 50,000). Most hospitals and most 

other providers and suppliers are small 

entities, either by nonprofit status or by 

having revenues of less than $6 million 

a year. For purposes of the RFA, 

approximately 95 percent of pharmacy 

firms, which account for about 51 

percent of pharmacy establishments, are 

small businesses based upon 1997 

Census data. There are approximately 

57,000 retail pharmacy establishments 

based upon the ‘‘2004 National 

Community Pharmacists Association 

Pfizer Digest.’’ We estimate that about 

29,000 pharmacy establishments are 

considered small businesses, and, 

therefore, small entities. Almost all 

physicians in private practice (or the 

practices of which they are members) 

are small businesses, and, therefore, 

small entities because their annual 

revenues do not meet the Small 

Business Administration’s threshold for 

‘‘small’’ physician practices. Individuals 

and States are not included in the 

definition of a small entity, and this 

final rule has no effect on small 

governmental jurisdictions. 

We believe that this final rule will 

have an impact on a substantial number 

of small entities due to the large 

proportion of pharmacies and providers 

that are small businesses. We recognize 

that there will be a distribution of costs 

and benefits with proportionately higher 

costs incurred by smaller entities than 

by larger entities, primarily as a result 

of economies of scale. However, as 

indicated earlier in this section, as many 

as 75 percent of pharmacies already are 

conducting e-prescribing and 5 to 18 

percent of prescribers are using this 

technology. Clearly, these rates of 

voluntary adoption indicate that it 

provides net economic benefits. 

Furthermore, this final rule recognizes 

that e-prescribing remains voluntary for 

entities that are not Part D sponsors. 

That is, prescribers and dispensers are 

only required to comply with the 

standards adopted under section 

1860D–4(e)(1) of the Act if they 

67592 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

electronically transmit prescriptions or 

prescription-related information, with 

respect to covered Part D drugs for 

beneficiaries eligible for Part D. Small 

entity prescribers, therefore, are able to 

determine whether they incur costs of 

any kind. Finally, we believe that the 

effects of adoption are economically 

beneficial to affected entities. 

We note that this conclusion differs 

from the impact analysis of the HIPAA 

final rule which was determined to have 

a significant impact. The basis for that 

determination was that a significant 

percentage of providers were already 

conducting the relevant transactions 

electronically in nonstandard form. For 

example, over 80 percent of Medicare 

claims submitted by physicians were 

transmitted electronically. Those 

providers would have been required to 

switch to the HIPAA standards, which 

were not in widespread use, creating a 

burden on a large percentage of affected 

entities. By contrast, only 5 to 18 

percent of prescriptions are conducted 

electronically, and the small number of 

providers who are doing so are very 

likely already using the standards that 

we are finalizing in this final rule. 

Accordingly, we conclude that this 

final rule will not have a significant 

economic impact upon a substantial 

number of small entities, and that 

neither an Initial nor Final Regulatory 

Flexibility Analysis is required. In the 

February 4, 2005 proposed rule, we 

welcomed comments on this conclusion 

and additional information on the 

effects this rule would have on small 

businesses. We received the following 

comments and information regarding 

effects of this regulation on small 

businesses: 

Comment: A number of commenters 

stated that very small businesses (such 

as some pharmacy chains, independent 

pharmacies, and physician offices) will 

incur disproportionately higher 

implementation costs than larger 

entities due to economies of scale. 

Furthermore, currently, most small 

pharmacies and physician offices are 

not currently networked to exchange 

prescription data electronically (many 

are only fax-equipped). The cost of 

implementing and maintaining 

electronic prescribing technology will 

be more difficult for small business 

entities to absorb. Implementation is not 

truly voluntary in the sense that lack of 

participation likely means going out of 

business. Small rural pharmacies, 

especially, may be less likely to contract 

with PDPs, thus, creating access issues. 

On the other hand, one commenter 

stated most small physician offices will 

not be impacted because electronic 

prescribing is still voluntary. For those 

that choose to implement electronic 

prescribing, their practice will 

experience a neutral or small impact. 

Another commenter believes CMS’

estimates of prescriber participation are 

too conservative and cited a Pri-Med 

Research Group study which found 1 in 

5 physicians report using e-prescribing 

and another 42 percent planned on 

implementing the technology in 2005. 

Also, small computing firms and 

consultants may experience a positive 

impact in terms of increased demand for 

their services. 

Response: There are three kinds of 

costs associated with e-prescribing—

initial purchase of hardware and 

software; costs associated with daily use 

and maintenance, including on-line 

connectivity; and education and 

training. 

Although e-prescribing is voluntary 

for physicians and pharmacies, we agree 

that the cost of implementing and 

maintaining electronic prescribing 

technology will be more difficult for 

small business entities to absorb. 

However, we believe that those costs 

could be offset by the grants to 

physicians that will be made available 

in 2007, as authorized by section 108 of 

the MMA. We also believe that our oneyear phase-in period for moving from 

computer-generated prescription 

facsimiles to true computer-to-computer 

e-prescribing, as described earlier in 

section III.1.C. of this final rule, will 

give small providers and pharmacies the 

time needed to obtain both funding and 

acquisition of e-prescribing hardware 

and software. This also should help 

these entities better absorb the upfront 

costs associated with e-prescribing 

adoption. 

In addition, physicians and 

pharmacies will be able to take 

advantage of incentives for adoption of 

e-prescribing technologies from 

hospitals, plans and other entities, 

which will be created under an eprescribing exception under the Stark 

law and an e-prescribing safe harbor 

under the anti-kickback statute as 

discussed earlier in the preamble of this 

final rule. 

Finally, small business entities do not 

conduct their operations in a vacuum 

and, as prudent business practice 

dictates, they should be upgrading their 

hardware and software on a regular 

basis. As a result, much of the costs of 

changing over to new e-prescribing 

technology should be absorbed as a 

usual cost of doing business, and may 

be additionally offset as allowable 

business-related, tax-deductible 

expenditures. 

A second kind of cost is the cost of 

daily operations and maintenance, 

including internet access. Some small 

providers and pharmacies already have 

internet capability for handling bills and 

claims. As the computerization of 

payment-related transactions become 

more and more common, small 

providers and pharmacies increasingly 

will acquire internet access. As a result, 

such costs may be sunk costs with 

respect to e-prescribing. 

Further, the costs of more 

sophisticated internet access, such as 

high-speed internet connectivity, are 

negligible in the context of annual costs 

and revenues of virtually any health 

care provider. Even in the most remote 

rural areas, satellite internet access is 

available at costs similar to those in the 

most ‘‘connected’’ urban areas. Internet 

access through power lines is on the 

verge of equally widespread and low 

cost access. For all practical purposes, 

the cost of wide-band ‘‘Wi-Fi’’ Internet 

access in a physician office or 

neighborhood pharmacy is under $1000 

one time investment cost (assuming that 

a personal computer is not already used 

for correspondence, billing, or other 

purposes) and in most cases under $100. 

In fact, it is free in some municipalities 

or designated areas in certain cities. 

Annual connection costs for broadband 

access are several hundred dollars. 

Finally, in this context, software and 

training costs for e-prescribing loom 

larger, but are still small. While a 

prescriber or pharmacist doing 

negligible levels of business will incur 

high costs per prescription at even these 

cost levels, we do not agree that a solo 

provider with a medical practice large 

enough to be a source of livelihood, or 

small pharmacy, faces consequential 

cost disadvantages in embarking on eprescribing. Furthermore, nothing in 

current or reasonably foreseeable 

circumstances suggests that a provider 

or pharmacy unwilling to engage in eprescribing will be forced out of 

business in the next decade. 

L. Impact on Small Rural Hospitals 

Section 1102(b) of the Act requires us 

to prepare a regulatory impact analysis 

if a rule may have a significant impact 

on the operations of a substantial 

number of small rural hospitals. This 

analysis must conform to the standards 

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. Because prescription drugs are 

dispensed in hospitals to Medicare 

outpatients, this final rule will have an 

effect on small rural hospitals. When 

hospital pharmacies dispense non-Part 

B prescription drugs to Medicare 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67593 

hospital outpatients, if the hospital 

pharmacy is participating in the 

patient’s Part D plan, the hospital 

pharmacy will bill under Part D. Since 

the use of the standards adopted by this 

final rule is required for Part D plans 

and is voluntary for prescribers and 

dispensers, we estimate that this final 

rule will not have a significant impact 

on small rural hospitals because the eprescribing provisions are both 

voluntary and cost-beneficial for 

prescribers. In-hospital pharmacy units 

and staff physicians should face the 

same benefit/cost calculus as their 

counterparts, and will, therefore, have 

no net costs imposed upon them by 

adoption of e-prescribing. 

M. Effects on States and Federalism 

Statement 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that agencies assess anticipated costs 

and benefits before issuing any rule that 

includes a Federal mandate that could 

result in expenditure in any one year by 

State, local, or tribal governments, in the 

aggregate, or by the private sector, of 

$100 million in 1995 dollars, updated 

for annual inflation (the current 

threshold is about $120 million). The 

private sector will incur costs for 

hardware and software upgrades, and 

connectivity for implementation of eprescribing. However, except for MA 

and PDP plans, this final rule does not 

include any mandate that will result in 

this spending because it only deals with 

the informational standards to be used 

in voluntarily adopted practices, and, 

therefore, that spending does not pertain 

to the thresholds of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4). Furthermore, we believe that the 

effects of adoption will be positive, 

rather than involve net expenditures. 

Regardless, even using our estimates of 

significant increases in the use of eprescribing, we do not believe annual 

expenditures on installing this 

capability will reach $120 million 

annually. Certainly, we expect the only 

entities that are required to comply, Part 

D sponsors (and possibly a few existing 

e-prescribers), to incur only minimal 

costs, totaling no more than a small 

fraction of this threshold. 

With respect to States, nothing in this 

final rule mandates any expenditure by 

States. While some hospitals and other 

providers are State-owned, our 

conclusions with respect to each type of 

affected entity are not affected by 

ownership status. 

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 

costs on State and local governments, 

preempts State law, or otherwise has 

Federalism implications. For the same 

reasons given above, we have 

determined that States will not incur 

any direct costs as a result of this final 

rule. However, as discussed extensively 

in this preamble, and as mandated by 

section 1860D–4(e) of the Act, some 

State laws will be preempted. Under the 

Executive Order, we are required to 

minimize the extent of preemption, 

consistent with achieving the objectives 

of the Federal statute, and to meet 

certain other conditions. We believe 

that, taken as a whole, this final rule 

will meet these requirements. We did 

seek comments from States and other 

entities on possible problems and on 

ways to minimize conflicts, consistent 

with achieving the objectives of the 

MMA, and will be undertaking outreach 

to States on these issues. 

We have consulted with the National 

Association of Boards of Pharmacy 

directly and through participation in 

NCVHS hearings, and we believe that 

the approach we suggest as to the scope 

of preemption discussed earlier in the 

preamble provide both States and other 

affected entities the best possible means 

of addressing preemption issues. This 

section, together with the earlier 

preamble section entitled ‘‘State 

Preemption,’’ constitute the Federalism 

summary impact statement required 

under the Executive Order. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 423 

Administrative practice and 

procedure, Emergency medical services, 

Health facilities, Health maintenance 

organizations, (HMO), Health 

professions, Incorporation by reference, 

Medicare, Penalties, Privacy, Reporting 

and recordkeeping requirements. 

■ For reasons set forth in the preamble 

in this final regulation, the Centers for 

Medicare & Medicaid Services amends 

42 CFR part 423 as follows: 

PART 423—VOLUNTARY MEDICARE 

PRESCRIPTION DRUG BENEFIT 

■ 1. The authority citation for part 423 

continues to read as follows: 

Authority: Secs 1102, 1860D–1 through 

1860D–42, and 1871 of the Social Security 

Act (42 U.S.C. 1302, 1395w–101 through 

1395w–152, and 1395hh). 

Subpart D—Cost Control and Quality 

Improvement Requirements 

■ 2. The heading for subpart D is revised 

to read as set forth above. 

■ 3. In § 423.150, paragraph (c) is 

revised to read as follows: 

§ 423.150 Scope. 

* * * * * 

(c) Electronic prescription drug 

programs for prescribers, dispensers, 

and Part D sponsors. 

* * * * * 

■ 4. Section 423.159 is amended by 

revising the heading and adding a new 

paragraph (a) to read as follows: 

§ 423.159 Electronic prescription drug 

program. 

(a) Definitions. For purposes of this 

section, the following definitions apply: 

Dispenser means a person or other 

legal entity licensed, registered, or 

otherwise permitted by the jurisdiction 

in which the person practices or the 

entity is located to provide drug 

products for human use by prescription 

in the course of professional practice. 

Electronic media has the same 

meaning given this term in 45 CFR 

160.103. 

E-prescribing means the transmission 

using electronic media, of prescription 

or prescription-related information 

between a prescriber, dispenser, 

pharmacy benefit manager, or health 

plan, either directly or through an 

intermediary, including an e-prescribing 

network. E-prescribing includes, but is 

not limited to, two-way transmissions 

between the point of care and the 

dispenser. 

Electronic prescription drug program 

means a program that provides for eprescribing for covered Part D drugs 

prescribed for Part D eligible 

individuals. 

Prescriber means a physician, dentist, 

or other person licensed, registered, or 

otherwise permitted by the U.S. or the 

jurisdiction in which he or she 

practices, to issue prescriptions for 

drugs for human use. 

Prescription-related information 

means information regarding eligibility 

for drug benefits, medication history, or 

related health or drug information for 

Part D eligible individuals. 

* * * * * 

■ 5. Section 423.160 is added to read as 

follows: 

§ 423.160 Standards for electronic 

prescribing. 

(a) General rules. (1) Part D sponsors 

must establish and maintain an 

electronic prescription drug program 

that complies with the applicable 

67594 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 

standards in paragraph (b) of this 

section when transmitting, directly or 

through an intermediary, prescriptions 

and prescription-related information 

using electronic media for covered Part 

D drugs for Part D eligible individuals. 

(2) Except as provided in paragraph 

(a)(3) of this section, prescribers and 

dispensers that transmit, directly or 

through an intermediary, prescriptions 

and prescription-related information 

using electronic media must comply 

with the applicable standards in 

paragraph (b) of this section when eprescribing for covered Part D drugs for 

Part D eligible individuals. 

(3) Exemptions. (i) Entities 

transmitting prescriptions or 

prescription-related information by 

means of computer-generated facsimile 

are exempt from the requirement to use 

the NCPDP SCRIPT Standard adopted 

by this section in transmitting such 

prescriptions or prescription-related 

information. 

(ii) Entities may use either HL7 

messages or the NCPDP SCRIPT 

Standard to transmit prescriptions or 

prescription-related information 

internally when the sender and the 

recipient are part of the same legal 

entity. If an entity sends prescriptions 

outside the entity (for example, from an 

HMO to a non-HMO pharmacy), it must 

use the adopted NCPDP SCRIPT 

Standard or other applicable adopted 

standards. Any pharmacy within an 

entity must be able to receive electronic 

prescription transmittals for Medicare 

beneficiaries from outside the entity 

using the adopted NCPDP SCRIPT 

Standard. This exemption does not 

supersede any HIPAA requirement that 

may require the use of a HIPAA 

transaction standard within an 

organization. 

(iii) Entities transmitting prescriptions 

or prescription-related information 

where the prescriber is required by law 

to issue a prescription for a patient to 

a non-prescribing provider (such as a 

nursing facility) that in turn forwards 

the prescription to a dispenser are 

exempt from the requirement to use the 

NCPDP SCRIPT Standard adopted by 

this section in transmitting such 

prescriptions or prescription-related 

information. 

(4) In accordance with section 1860D–

4(e)(5) of the Act, the standards under 

this paragraph (b) of this section 

supersede any State law or regulation 

that—

(i) Is contrary to the standards or 

restricts the ability to carry out Part D 

of Title XVIII of the Act; and 

(ii) Pertains to the electronic 

transmission of medication history and 

of information on eligibility, benefits, 

and prescriptions with respect to 

covered Part D drugs under Part D of 

Title XVIII of the Act. 

(b) Standards. (1) Prescription. The 

National Council for Prescription Drug 

Programs SCRIPT Standard, 

Implementation Guide, Version 5, 

Release 0, May 12, 2004, to provide for 

the communication of a prescription or 

prescription-related information 

between prescribers and dispensers, for 

the following: 

(i) Get message transaction. 

(ii) Status response transaction. 

(iii) Error response transaction. 

(iv) New prescription transaction. 

(v) Prescription change request 

transaction. 

(vi) Prescription change response 

transaction. 

(vii) Refill prescription request 

transaction. 

(viii) Refill prescription response 

transaction. 

(ix) Verification transaction. 

(x) Password change transaction. 

(xi) Cancel prescription request 

transaction. 

(xii) Cancel prescription response 

transaction. 

(2) Eligibility. (i) The Accredited 

Standards Committee X12N 270/271- 

Health Care Eligibility Benefit Inquiry 

and Response, Version 4010, May 2000, 

Washington Publishing Company, 

004010X092 and Addenda to Health 

Care Eligibility Benefit Inquiry and 

Response, Version 4010, A1, October 

2002, Washington Publishing Company, 

004010X092A1, for transmitting 

eligibility inquiries and responses 

between prescribers and Part D 

sponsors. 

(ii) The National Council for 

Prescription Drug Programs 

Telecommunication Standard 

Specification, Version 5, Release 1 

(Version 5.1), September 1999, and 

equivalent NCPDP Batch Standard 

Batch Implementation Guide, Version 1, 

Release 1 (Version 1.1), January 2000 

supporting Telecommunications 

Standard Implementation Guide, 

Version 5, Release 1 (Version 5.1), 

September 1999, for the NCPDP Data 

Record in the Detail Data Record, for 

transmitting eligibility inquiries and 

responses between dispensers and Part 

D sponsors. 

(c) Incorporation by reference. The 

Director of the Federal Register 

approves, in accordance with 5 U.S.C. 

552(a) and 1 CFR Part 51, the 

incorporation by reference of the 

National Council for Prescription Drug 

Programs SCRIPT Standard, 

Implementation Guide, Version 5, 

Release 0, May 12, 2004, excluding the 

Prescription Fill Status Notification 

Transaction (and its three business 

cases; Prescription Fill Status 

Notification Transaction—Filled, 

Prescription Fill Status Notification 

Transaction—Not Filled, and 

Prescription Fill Status Notification 

Transaction—Partial Fill); the 

Accredited Standards Committee X12N 

270/271—Health Care Eligibility Benefit 

Inquiry and Response, Version 4010, 

May 2000, 004010X092 and Addenda to 

Health Care Eligibility Benefit Inquiry 

and Response, Version 4010, October 

2002, Washington Publishing Company, 

004010X092A1, and the National 

Council for Prescription Drug Programs 

Telecommunication Standard 

Specification, Version 5, Release 1 

(Version 5.1), September 1999, and 

equivalent NCPDP Batch Standard 

Batch Implementation Guide, Version 1, 

Release 1 (Version 1.1), January 2000 

supporting Telecommunications 

Standard Implementation Guide, 

Version 5, Release 1 (Version 5.1), 

September 1999, for the NCPDP Data 

Record in the Detail Data Record. You 

may inspect copies of these materials at 

the headquarters of the Centers for 

Medicare & Medicaid Services (CMS), 

7500 Security Boulevard, Baltimore, 

Maryland 21244, Monday through 

Friday from 8:30 a.m. to 4 p.m. or at the 

National Archives and Records 

Administration (NARA). For 

information on the availability of this 

material at CMS, call 410–786–0273. For 

information on the availability of this 

material at NARA, call 202–741–6030, 

or go to http://www.archives.gov/ 

federal_register/code_of_federal_ 

regulations/ibr_locations.html. You may 

obtain a copy of the National Council 

for Prescription Drug Programs SCRIPT 

Standard, Version 5, Release 0, May 12, 

2004, from the National Council for 

Prescription Drug Programs, 

Incorporated, 9240 E. Raintree Drive, 

Scottsdale, AZ 85260–7518; Telephone 

(480) 477–1000; and FAX (480) 767–

1042 or http://www.ncpdp.org. You may 

obtain a copy of the Accredited 

Standards Committee X12N 270/271—

Health Care Eligibility Benefit Inquiry 

and Response, Version 4010, May 2000, 

Washington Publishing Company, 

004010X092 and Addenda to Health 

Care Eligibility Benefit Inquiry and 

Response, Version 4010, 

004010X092A1, October 2002, from the 

Washington Publishing Company, 301 

West North Bend Way, Suite 107, P.O. 

Box 15388, North Bend, WA 98045; 

Telephone (425) 831–4999; and FAX: 

(425) 831–3233 or http://www.wpcedi.com/. You may obtain a copy of the 

National Council for Prescription Drug 

Programs Telecommunication Standard 

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Rules and Regulations 67595 

Guide, Version 5, Release 1 (Version 

5.1), September 1999, and equivalent 

NCPDP Batch Standard Batch 

Implementation Guide, Version 1, 

Release 1 (Version 1.1), January 2000 

supporting Telecommunications 

Standard Implementation Guide, 

Version 5, Release 1 (Version 5.1), 

September 1999, for the NCPDP Data 

Record in the Detail Data Record, from 

the National Council for Prescription 

Drug Programs, Incorporated, 9240 E. 

Raintree Drive, Scottsdale, AZ 85260–

7518; Telephone (480) 477–1000; and 

FAX (480) 767–1042 or http:// 

www.ncpdp.org. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: August 9, 2005. 

Mark B. McClellan, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: October 4, 2005. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 05–22026 Filed 11–1–05; 3:17 pm] 

BILLING CODE 4120–01–P