18918 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 423 

[CMS–0016–F and CMS–0018–F] 

RINs 0938–AO66 and 0938–AO42 

Medicare Program; Standards for EPrescribing Under Medicare Part D and 

Identification of Backward Compatible 

Version of Adopted Standard for EPrescribing and the Medicare 

Prescription Drug Program (Version 

8.1) 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule adopts uniform 

standards for medication history, 

formulary and benefits, and fill status 

notification (RxFill) for the Medicare 

Part D electronic prescribing (eprescribing) drug program as required 

by section 1860D–4(e)(4)(D) of the 

Social Security Act (the Act). In 

addition, we are adopting the National 

Provider Identifier (NPI) as a standard 

for identifying health care providers in 

e-prescribing transactions. It also 

finalizes the June 23, 2006 interim final 

rule with comment period that 

identified the National Council for 

Prescription Drug Programs (NCPDP) 

Prescriber/Pharmacist Interface SCRIPT 

standard, Implementation Guide, 

Version 8.1 (‘‘NCPDP SCRIPT 8.1’’) as a 

backward compatible update of the 

NCPDP SCRIPT 5.0 (‘‘NCPDP SCRIPT 

5.0’’), until April 1, 2009. This final rule 

also retires NCPDP SCRIPT 5.0 and 

adopts the newer version, NCPDP 

SCRIPT 8.1, as the adopted standard. 

Finally, except as otherwise set forth 

herein, we are implementing our 

compliance date of 1 year after the 

publication of these final uniform 

standards. This is the second set in a 

continuing process of issuing eprescribing final standards for the 

Medicare Part D program, 

DATES: Effective Date: These regulations 

are effective on June 6, 2008. The 

incorporation by reference of the 

publications listed in this final rule is 

approved by the Director of the Federal 

Register June 6, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Denise M. Buenning, (410–786–6711) or 

Andrew Morgan, (410) 786–2543. 

SUPPLEMENTARY INFORMATION: 

I. Background 

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 

a voluntary prescription drug benefit 

program. Prescription Drug Plan (PDP) 

sponsors, Medicare Advantage (MA) 

organizations offering Medicare 

Advantage-Prescription Drug Plans 

(MAPDs) and other Medicare Part D 

sponsors are required to establish 

electronic prescription drug programs to 

provide for electronic transmittal of 

certain information to the prescribing 

provider and dispensing pharmacy and 

the dispenser. This includes 

information about eligibility, benefits 

(including drugs included in the 

applicable formulary, any tiered 

formulary structure and any 

requirements for prior authorization), 

the drug being prescribed or dispensed 

and other drugs listed in the medication 

history, as well as the availability of 

lower cost, therapeutically appropriate 

alternatives (if any) for the drug 

prescribed. Section 101 of the MMA 

established section 1860D–4(e)(4)(D) of 

the Act, which directed the Secretary to 

promulgate final uniform standards for 

the electronic transmission of such data. 

There is no requirement that 

prescribers or dispensers implement eprescribing. However, prescribers and 

dispensers who electronically transmit 

prescription and certain other 

prescription-related information for 

Medicare Part D covered drugs 

prescribed for Medicare Part D eligible 

individuals, directly or through an 

intermediary, are required to comply 

with any applicable final standards that 

are in effect. 

Section 1860D–4(e)(4) of the Act 

generally requires the Secretary to 

conduct a pilot project to test initial 

standards recognized under section 

1860D–4(e)(4)(A) of the Act, prior to 

issuing final standards in accordance 

with section 1860D–4(e)(4)(D) of the 

Act. Section 1860D–4(e)(4)(C)(ii) of the 

Act created an exception to the 

requirement for pilot testing of 

standards where, after consultation with 

the National Committee on Vital and 

Health Statistics (NCVHS), the Secretary 

determined that there already was 

adequate industry experience with the 

standards. Such standards could be 

recognized by the Secretary and adopted 

through notice and comment 

rulemaking as final standards without 

pilot testing. 

We exercised this option in the EPrescribing and Prescription Drug 

Program final rule, published on 

November 7, 2005 (70 FR 67568), when 

we adopted three ‘‘foundation 

standards’’ that met the criteria for 

adoption without pilot testing. Those 

foundation standards are as follows: 

• The National Council for 

Prescription Drug Programs (NCPDP) 

SCRIPT standard, Implementation 

Guide, Version 5, Release 0 (Version 

5.0), hereinafter referred to as ‘‘NCPDP 

SCRIPT 5.0,’’ for communicating 

prescription or prescription related 

information between prescribers and 

dispensers for the transactions listed at 

§ 423.160(b)(2). 

• Accredited Standards Committee 

(ASC) X12N 270/271–Health Care 

Eligibility Benefit Inquiry and Response, 

Version 4010 and Addenda to Health 

Care Eligibility Benefit Inquiry and 

Response, Version 4010A1 for 

communicating eligibility information 

between Medicare Part D sponsors and 

prescribers. 

• NCPDP Telecommunication 

Standard Specification, Version 5, 

Release 1 (Version 5.1) and equivalent 

NCPDP Batch Standard Batch 

Implementation Guide, Version 1, 

Release 1 (Version 1.1) supporting 

Telecommunications Standard 

Implementation Guide, Version 5, 

Release 1 (Version 5.1) for NCPDP Data 

Record in the Detail Data Record, 

hereinafter referred to as ‘‘NCPDP 

Telecom 5.1’’ for communicating 

eligibility information between 

Medicare Part D sponsors and 

dispensers. 

In that same final rule, we established 

three exemptions to the use of the 

NCPDP SCRIPT foundation standard. 

The first exemption provided for 

entities transmitting prescriptions or 

prescription-related information by 

means of computer-generated facsimile. 

We ultimately modified this exemption 

in the CY 2008 Physician Fee Schedule 

final rule with comment period, which 

was published November 27, 2007 (72 

FR 66222). (For a more in-depth 

discussion of the computer-generated 

facsimile exemption, please see the 

preamble discussion in the November 

27, 2007 final rule with comment at 72 

FR 66334.) 

The second exemption required the 

use of either HL7 or the adopted NCPDP 

SCRIPT standards in electronic 

transmittals of prescriptions or 

prescription related information when 

the sender and recipient are part of the 

same legal entity (for example, within a 

staff model HMO). The third exemption 

was when an entity is required by law 

to issue a prescription for a patient to 

a nonprescribing provider (such as a 

nursing facility) that in turn forwards 

the prescription to a dispenser. This 

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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 18919 

exemption was established to 

accommodate many legitimate business 

needs of entities in the long-term care 

setting. 

The November 7, 2005 final rule (70 

FR 67579) also established a means of 

addressing the industry’s desire for a 

streamlined standards updating and 

maintenance process that could keep 

pace with changing business needs. 

That process provided that a standard 

could be updated with a new version, 

and identified whether and when the 

update/maintenance would necessitate 

notice and comment rulemaking. Where 

it is determined that the notice and 

comment rulemaking is not required, 

the new version is adopted by 

incorporating the new version by 

reference through a Federal Register 

publication. In that case, use of either 

the new or old version would be 

considered compliant. ‘‘Backward 

compatible’’ new versions of standards 

are eligible for recognition through this 

process. This version updating and 

maintenance of the implementation 

specifications for the adopted 

identifying and e-prescribing standards 

allows for the correction of technical 

errors, the elimination of technical 

inconsistencies, and the addition of 

functions that are unnecessary for the 

specified e-prescribing transaction. 

Subsequent industry input indicated 

that the adopted e-prescribing standard 

for the transactions listed at 

§ 423.160(b)(2) should be updated to 

permit the use of NCPDP SCRIPT 5.0 or 

a later version of the standard, NCPDP 

SCRIPT standard, Implementation 

Guide, Version 8, Release 1 (Version 

8.1), October 2005, hereinafter referred 

to as NCPDP SCRIPT 8.1. 

Using the streamlined process 

established in the November 7, 2005 

rule, we published an interim final rule 

with comment period on June 23, 2006, 

updating the adopted NCPDP SCRIPT 

standard, thereby permitting either 

NCPDP SCRIPT 5.0 or 8.1 to be used. 

(For more information, see section III of 

this final rule and the June 23, 2006 

interim final rule with comment period 

(71 FR 36020).) 

Previously, six initial standards were 

recognized by the Secretary in 2005 and 

then tested in a pilot project during 

calendar year (CY) 2006. Based upon the 

evaluation of the pilot project, the 

Secretary issued a report to Congress on 

the pilot results. The Secretary is 

required to issue this set of final 

uniform standards for e-prescribing by 

no later than April 1, 2008. These final 

standards must be effective not later 

than 1 year after the date of their 

issuance. 

Based on the pilot results as detailed 

in the report to Congress, we issued a 

notice of proposed rulemaking on 

November 16, 2007 (72 FR 64900) and 

solicited comments from stakeholders 

and other interested parties on industry 

experience with certain standards. In 

that proposed rule (72 FR 64906 through 

64907), we also solicited comments 

regarding the impact of adopting NCPDP 

SCRIPT 8.1 and retiring SCRIPT 5.0. 

Those comments and our responses are 

addressed in section III. B.1. of this final 

rule. 

For a complete discussion of the 

statutory basis for this final rule and the 

statutory requirements at section 

1860D–4(e) of the Act, please refer to 

the E–Prescribing and the Prescription 

Drug Program proposed rule published 

November 16, 2007 (72 FR 64901). 

II. Pilot Testing of Initial Standards 

In the November 16, 2007 proposed 

rule (72 FR 64901), we discussed the 

provision at section 1860D–4(e)(4)(A) of 

the Act which requires the Secretary 

develop, adopt, recognize or modify 

‘‘initial uniform standards’’ for eprescribing in 2005 and pilot test these 

initial e-prescribing standards in 2006. 

To fulfill this requirement, the Secretary 

ultimately recognized (based in part on 

NCVHS input) six ‘‘initial’’ standards in 

a September 2005 ‘‘Request for 

Applications’’. For more information on 

the pilot test findings, refer to the 

November 16, 2007 proposed rule (72 

FR 64904 through 64906). 

In the November 16, 2007 proposed 

rule (72 FR 64903) we noted that, as we 

had not published a final rule 

identifying the foundation standards at 

the time the Request for Applications 

was published, the proposed foundation 

standards were included among the 

Request for Applications list of ‘‘initial 

standards’’ to be tested. Any proposed 

foundation standards that were not 

adopted as foundation standards were to 

be tested as initial standards in the pilot 

project. Furthermore, if the proposed 

foundation standards were ultimately 

adopted as foundation standards, those 

standards nevertheless were to be used 

in the pilot project to ensure 

interoperability with the initial 

standards. 

The Request for Applications also 

specified that pilot sites would use 

NCPDP SCRIPT 5.0. With the 

Secretary’s adoption of the updated 

NCPDP SCRIPT 8.1, the Agency for 

Healthcare Research and Quality 

(AHRQ), in its capacity as the 

administrator of the pilot project, gave 

pilot sites the option to voluntarily use 

NCPDP SCRIPT 8.1 in place of NCPDP 

SCRIPT 5.0. 

As a result, all grantees/contractors in 

the pilot sites voluntarily decided to use 

the updated NCPDP SCRIPT 8.1 in their 

various testing modalities. 

The initial standards and the results 

of the pilot test are as follows: 

• Formulary and benefits 

information—NCPDP Formulary and 

Benefits Standard, Implementation 

Guide, Version 1, Release 0 (hereinafter 

referred to as NCPDP Formulary and 

Benefits 1.0), to provide prescribers 

with information from a plan about a 

patient’s drug coverage at the point of 

care. 

The Medicare Part D e-prescribing 

formulary and benefits standard must 

provide a uniform means for pharmacy 

benefit payers (Medicare Part D 

sponsors) to communicate a range of 

formulary and benefits information to 

prescribers via point-of-care (POC) 

systems. These include general 

formulary data; formulary status of 

individual drugs; preferred alternatives 

(including any coverage restrictions, 

such as quantity limits and need for 

prior authorization); and co-payment. 

NCPDP Formulary and Benefits 1.0 

enables the prescriber to consider this 

information at the point of care and 

make the most appropriate drug choice 

without extensive back-and-forth 

administrative activities with the 

pharmacy or the health plan. The pilot 

sites demonstrated that NCPDP 

Formulary and Benefits 1.0 can be 

successfully implemented between 

prescriber and plan, and is ready to be 

used as part of the e-prescribing 

program under Medicare Part D. 

• Exchange of medication history—

‘‘The Medication History Standard’’, 

included in the National Council for 

Prescription Drug Programs (NCPDP) 

Prescriber/Pharmacist Interface SCRIPT 

standard, Version 8, Release 1 and its 

equivalent NCPDP Prescriber/ 

Pharmacist Interface SCRIPT 

Implementation Guide, Version 8, 

Release 1 (hereinafter referred to as the 

Medication History Standard), provides 

a uniform means for prescribers and 

payers to communicate about the list of 

drugs that have been dispensed to a 

patient. It may provide information that 

would help identify potential drug 

interactions. This Medication History 

Standard meets the requisite objectives, 

functionality and criteria required by 

the MMA for use in the Medicare Part 

D e-prescribing program and has been 

widely adopted by the prescribing 

industry. The pilot sites found that the 

Medication History Standard supported 

the exchange of this information, and is 

ready to be used for the Medicare Part 

D e-prescribing program. 

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18920 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

• Structured and Codified Sig—

NCPDP Structured and Codified Sig 

Standard 1.0, (hereinafter referred to as 

NCPDP Structured and Codified Sig 

1.0), provides a standard structured 

code set for expressing patient 

instructions for taking medications 

(such as ‘‘by mouth, three times a day’’). 

These instructions are currently 

generally provided as free text at the 

end of a prescription. Pilot sites tested 

NCPDP Structured and Codified Sig 1.0 

and found that it needed additional 

work on field definitions and examples, 

field naming conventions, and 

clarifications of field use. There were 

contradictions with other structured 

fields, and there were limitations on the 

ability to capture directions for use of 

topical drugs (such as the area of 

application). Analysis showed that 

NCPDP Structured and Codified Sig 1.0 

was not able to meet the requisite 

objectives, functionality and criteria 

required by the MMA for use in the 

Medicare Part D e-prescribing program. 

• Fill status notification—The Fill 

Status Notification, or RxFill, was 

included in NCPDP SCRIPT 5.0 and the 

updated NCPDP SCRIPT 8.1, but it 

previously was not proposed as a 

foundation standard due to a lack of 

adequate industry experience. RxFill is 

a function within versions 5.0 and 8.1 

of the NCPDP SCRIPT standard that 

enables a pharmacy to notify a 

prescriber when the prescription has 

been dispensed (medication picked up 

by patient), partially dispensed (partial 

amount of medication picked up by the 

patient), or not dispensed (medication 

not picked up by patient, resulting in 

the medication being returned to stock). 

This information can provide 

prescribers with information regarding 

their patients’ adherence to a prescribed 

medication regimen, especially for those 

patients with chronic conditions such as 

hypertension and diabetes, which 

require medication management. It also 

has the potential to assist in combating 

fraud and abuse, and contribute to 

preventing prescription drug diversion. 

While the standard was technically 

capable of performing the function, the 

pilot sites’ experiences and observations 

indicated there was no marketplace 

demand for this information. Prescribers 

had previously expressed concerns 

about being inundated with data if they 

were to receive fill status notifications 

every time a patient picked up a 

prescription at the pharmacy, and 

weren’t sure how useful the information 

that the Fill Status Notification 

transaction generated would be in their 

medical practices. Dispensers were 

concerned about having to make 

significant business process changes, 

such as, having to check to make sure 

that fill status notification information 

was being transmitted by their 

pharmacy to those prescribers who 

requested it. The proposed rule 

therefore relayed that adoption of RxFill 

‘‘May cause an unnecessary 

administrative burden on prescribers 

and dispensers.’’ (72 FR 64905). As 

such, in the proposed rule, we asked 

about the marketplace demand for Fill 

Status Notification and solicited 

stakeholder comments regarding their 

potential utilization of RxFill for the Fill 

Status Notification transaction. Those 

comments and our responses are 

addressed in section III.C.1. of this final 

rule. 

• Clinical drug terminology—

RxNorm, a standardized nomenclature 

for clinical drugs developed by the 

National Library of Medicine (NLM), 

provides standard names for clinical 

drugs (active ingredient + strength + 

dose form) and for dose forms as 

administered to a patient. These 

concepts are relevant to how a 

physician would order a drug. It 

provides links from clinical drugs, both 

branded and generic, to their active 

ingredients, drug components (active 

ingredient + strength), and related brand 

names. National Drug Codes (NDCs) for 

specific drug products (where there are 

often many NDCs for a single product) 

are linked to that product in RxNorm. 

NDCs for specific drug products identify 

not only the drug but also the 

manufacturer and the size of the 

package from which it is dispensed. 

NDCs are relevant to how a pharmacy 

would dispense the drug. There are 

often several NDCs for any specific drug 

product, which are linked to a specific 

drug product code in RxNorm. RxNorm 

links its drug product codes to many of 

the drug vocabularies commonly used 

in pharmacy management and drug 

interaction software. By providing links 

between these vocabularies, RxNorm 

can mediate messages between systems 

not using the same software and 

vocabulary. 

The pilot sites demonstrated that 

RxNorm had significant potential to 

simplify e-prescribing, create 

efficiencies, and reduce dependence on 

NDCs among dispensers. In some 

testing, RxNorm erroneously linked 

some NDCs to lists of ingredients rather 

than to the drugs themselves and 

sometimes the NDCs linked by RxNorm 

did not match to the semantic clinical 

drug (SCD), which always contains the 

ingredient(s), strength and dose form, in 

that order. This indicates either an error 

in matching to the correct RxNorm 

concept, or an error with RxNorm itself, 

with more than one term being available 

for the same clinical drug concept (that 

is, unresolved synonymy). Analysis 

showed that, as of the time of the pilot 

study, RxNorm was not able to meet the 

requisite objectives, functionality and 

criteria required by section 1860D–

4(e)(3) of the Act for use for Medicare 

Part D e-prescribing. 

• Prior authorization—The 

Accredited Standards Committee (ASC) 

X12N 275 Version 4010 with HL7, and 

ASC X12N 278, Version 4010 and 

addendum 4010A1, (hereinafter 

collectively referred to as the Prior 

Authorization standard), were utilized 

in concert to allow prescribers to obtain 

certification from a plan that a patient 

meets the coverage criteria for a given 

drug. Prior Authorization is a very 

complex standard to implement, 

involving four different standards and 

multiple payer requirements. The pilot 

sites found that the combination of the 

ASC X12N 278, and the ASC X12N 275 

with the HL7 Prior Authorization (PA) 

attachment was cumbersome, confusing 

and required expertise that may limit 

adoption. Because health plans typically 

require prior authorization only for a 

small subset of drugs, the pilot sites had 

limited live experience with this 

standard. 

Investigators agreed that the HIPAA 

Prior Authorization standard—the ASC 

X12N 278 Version 4010, and Addendum 

4010A— was not adequate to support eprescribing prior authorization because 

it was designed for service or procedure 

prior authorizations, not for medication 

prior authorization. Modifications to the 

standard would need to be made prior 

to adoption as a final standard for the 

Medicare Part D e-prescribing program. 

As required by section 1860D–

4(e)(4)(C)(iv)(II), the Secretary issued a 

report to Congress, ‘‘Pilot Testing of 

Initial Electronic Prescribing 

Standards,’’ in April 2007 on the results 

of the pilot test of the initial standards. 

The report is available at http:// 

www.healthit.ahrq.gov/erxpilots. 

III. Provisions of and Analysis and 

Response to Public Comments for the 

June 23, 2006 Interim Final Rule With 

Comment Period and the November 16, 

2007 Proposed Rule 

A. June 23, 2006 Interim Final Rule With 

Comment Period 

Using the streamlined process 

established in the November 7, 2005 

rule, we published an interim final rule 

with comment on June 23, 2006 

updating the adopted NCPDP SCRIPT 

standard, thereby permitting either 

NCPDP SCRIPT 5.0 or 8.1 to be used for 

the covered transactions listed below 

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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 18921 

effective June 23, 2006. Version 8.1 of 

the NCPDP SCRIPT standard is an 

update to Version 5.0, and we had 

determined that it was backward 

compatible with the adopted NCPDP 

SCRIPT Version 5.0. (Although Version 

8.1 of the NCPDP SCRIPT standard has 

additional e-prescribing functionalities, 

we did not adopt any of these additional 

functionalities at that time.) Use of 

Version 8.1 of the NCPDP SCRIPT 

standard for the communication of a 

prescription or prescription-related 

information between prescribers and 

dispensers, for the following functions, 

therefore constituted compliance with 

the adopted e-prescribing standard: 

• Get message transaction. 

• Status response transaction. 

• Error response transaction. 

• New prescription transaction. 

• Prescription change request 

transaction. 

• Prescription change response 

transaction. 

• Refill prescription request 

transaction. 

• Refill prescription response 

transaction. 

• Verification transaction. 

• Password change transaction. 

• Cancel prescription request 

transaction. 

• Cancel prescription response 

transaction. 

We received 5 timely public comments 

on this interim final rule with comment 

period. The following is a summary of 

the comments and our responses: 

Comment: All commenters supported 

the voluntary use of the backward 

compatible functions of version 8.1 of 

the NCPDP SCRIPT standard. Four 

commenters recommended that it be 

adopted as soon as reasonably possible, 

and that NCPDP SCRIPT 5.0 be retired 

as soon as reasonably practicable. They 

also indicated that NCPDP SCRIPT 8.1 

was already in widespread use 

throughout their respective industries. 

One commenter indicated a concern 

with making backward compatibility 

‘‘the criteria’’ for determining if notice 

and comment rulemaking is required. 

The commenter stated that backward 

compatibility must be viewed as just 

one factor in making a determination to 

adopt a modified standard. 

Response: We agree with the 

commenters who supported the 

retirement of NCPDP SCRIPT 5.0 in 

favor of NCPDP SCRIPT 8.1. Regarding 

the comment that backward 

compatibility should not be the single 

criterion for determining if notice and 

comment rulemaking is used for the 

purpose of adopting a modified 

standard and that we should look for 

and support other effective alternatives 

to the backward compatibility issue, we 

note that we are required by law to 

employ notice and comment rulemaking 

to modify an adopted e-prescribing 

standard. We are also required by 

section 1860D–4(e)(3) of the Act to 

ensure, among other things, that the 

adopted standards meet certain 

objectives and design criteria. Based on 

these various statutory requirements 

and our own policies, we analyze 

various factors in addition to backward 

compatibility such as the standard 

modification’s impact on affected 

entities relative to cost and benefit 

projections, productivity and workflow 

losses/gains, etc., as well as industry 

and stakeholder feedback by both the 

written comment process and input 

from the NCVHS. (For more 

information, see the June 23, 2006 

interim final rule with comment (71 FR 

36020). 

B. November 16, 2007 Proposed Rule 

In the November 16, 2007 proposed 

rule (72 FR 64900) we discussed the 

results of the pilot test, and based 

largely on those results, we proposed 

the following: 

• To retire NCPDP SCRIPT 5.0 and 

adopt NCPDP SCRIPT 8.1 as a final 

standard for the transactions listed at 

§ 423.160(b)(1). 

• To adopt a final e-prescribing 

standard for the medication history 

transaction. 

• To adopt a final e-prescribing 

standard for the formulary and benefits 

transaction. 

• To adopt the National Provider 

Identifier (NPI) as a standard for 

identifying health care providers in eprescribing transactions. 

• To establish a compliance date of 1 

year after the publication of the final 

uniform standards. 

We received 70 timely comments on 

the November 16, 2007 proposed rule 

from dispensers and physicians; 

national retail drug store chains; 

vendors; national healthcare industry 

professional and trade associations; a 

standards development organization 

(SDO); state pharmacy associations; a 

state department of health; healthcare 

plans and systems; consumer/ 

beneficiary advocacy groups; national 

prescription information exchange 

networks; long-term care industry 

representatives; corporations and 

pharmaceutical manufacturers, and a 

federal government agency. These 

documents frequently contained 

multiple comments on the various 

proposals and issues detailed in the 

proposed rule. 

We also received comments outside 

the scope of the proposed rule. These 

included one set of comments on 

another, unrelated notice of proposed 

rulemaking, and comments on Medicare 

program operations that are outside the 

scope of this final rule. The relevant and 

timely comments within the scope of 

the proposed rule that we received and 

our responses to those comments, are 

discussed in the following sections. 

1. Proposed Retirement of NCPDP 

SCRIPT 5.0 and Adoption of NCPDP 

SCRIPT 8.1 as a Final Standard 

In section III.A. of this final rule we 

discussed the identification of NCPDP 

SCRIPT 8.1 as a backward compatible 

update to NCPDP SCRIPT 5.0. In that 

discussion, we noted that under the 

interim final rule with comment, the use 

of NCPDP SCRIPT 8.1 was voluntary. 

Commenters to this rule recommended 

that NCPDP SCRIPT 8.1 be adopted as 

soon as possible and that NCPDP 

SCRIPT 5.0 be retired. 

Therefore, in the November 16, 2007 

proposed rule (72 FR 64906 through 

64907), we summarized comments 

received on the voluntary use of NCPDP 

SCRIPT 8.1 and proposed to revise 

§ 423.160(b)(1) and (c) to replace the 

NCPDP SCRIPT 5.0 standard with 

NCPDP SCRIPT 8.1 for the transactions 

listed at § 423.160(b)(1) (see section 

III.A. of this final rule). We also 

solicited additional comments on the 

retirement of NCPDP SCRIPT 5.0. 

Comment: Most commenters 

supported the adoption of NCPDP 

SCRIPT 8.1, and retirement of NCPDP 

SCRIPT 5.0, for the transactions listed at 

§ 423.160(b)(1). They noted that NCPDP 

SCRIPT 8.1 will provide a uniform 

communications mechanism for 

prescribers, dispensers, and payers, 

support reconciliation of useful data 

from a larger number of sources, and 

raise awareness of the availability of 

medication history and, subsequently, 

its use among prescribers. Some 

commenters noted that the industry is 

already using NCPDP SCRIPT 8.1, so 

there would be limited impact of 

converting to NCPDP SCRIPT 8.1 to 

only those few still using NCPDP 

SCRIPT 5.0. They indicated that 

conversion from NCPDP SCRIPT 5.0 to 

NCPDP SCRIPT 8.1 would not require 

any significant enhancements for the 

majority of entities. Seven commenters 

supported ultimately moving to NCPDP 

SCRIPT 10.5, but only one commenter 

recommended bypassing NCPDP 

SCRIPT 8.1 and adopting version 

NCPDP SCRIPT 10.5 directly. 

Response: NCPDP SCRIPT 8.1 is 

already in widespread use, has adequate 

industry experience, and supports the 

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18922 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

1ANSI accredits the procedures of national 

standards development organizations. Accreditation 

by ANSI signifies that the procedures used by the 

standards body in connection with the standard’s 

development meet the Institute’s requirements for 

openness, balance, consensus and due process. 

Refer to www.ansi.org for additional information. 

e-prescribing transactions for which it 

was pilot tested (with the exception of 

long-term care e-prescribing 

applications). Therefore, we believe at 

this time that NCPDP SCRIPT 8.1 

should be adopted in place of NCPDP 

SCRIPT 5.0 at § 423.160(b)(2)(ii) and (c). 

In keeping with the pilot findings, the 

exception to this standard at 

§ 423.160(a)(3)(iii) for e-prescribing in 

long-term care settings will be retained 

until a subsequent version of NCPDP 

SCRIPT is adopted that will support 

transactions in that setting. 

Regarding the comment that we 

bypass NCPDP SCRIPT 8.1, and adopt 

NCPDP SCRIPT 10.5, NCPDP SCRIPT 

10.5 has not yet been approved by the 

NCPDP Board of Directors and the 

Accredited National Standards Institute 

(ANSI).1 Based on the Department’s 

criteria consistently applied to the 

adoption of e-prescribing standards, 

NCPDP SCRIPT 10.5 will not be 

considered by the Secretary for adoption 

until such time as that SDO/ANSI 

approval process has been completed. 

Comment: A number of commenters 

favored adoption of NCPDP SCRIPT 8.1, 

but with the caveat that CMS not 

preclude stakeholders who need to use 

the advanced functionalities of NCPDP 

SCRIPT 10.2 or higher, such as those in 

long-term care settings, from doing so 

voluntarily. One commenter noted that 

any version of NCPDP SCRIPT 10.0 or 

higher would be acceptable. Others said 

that NCPDP SCRIPT 10.2 or 10.3 would 

be the appropriate standard for use in 

long-term care. We also received 

comments that the agency should retire 

NCPDP SCRIPT 8.1 in favor of NCPDP 

SCRIPT 10.5 by the year 2010, and one 

commenter supported the current 

adoption of NCPDP SCRIPT 8.1, but 

with adoption of NCPDP SCRIPT 10.5 

within a year’s time. 

Response: By their very nature, 

standards are subject to updating and 

modifications as new business needs, 

workflows and other issues are 

identified and resolved. We recognize 

industry’s desire for adoption of the 

most current and robust versions of 

standards. We note that, in instances 

where a subsequent standard is 

backward compatible with previously 

adopted standards, the streamlined 

process described earlier can allow for 

use of subsequent versions of the 

adopted standard as well as the 

previously adopted version of the 

standard. Under this process, the 

Secretary may identify a subsequent 

backward compatible version(s) of an 

adopted non-HIPAA standard, and, with 

publication of an interim final rule with 

comment in the Federal Register, adopt 

such subsequent versions of the 

standard for voluntary use. As new 

backward compatible versions of nonHIPAA e-prescribing standards such as 

NCPDP SCRIPT are identified, they 

could be adopted under this process for 

voluntary use as an alternative to 

NCPDP SCRIPT 8.1. 

With regard to the recommendation 

that we adopt versions of standards 

‘‘X.X or higher,’’ we cannot adopt 

versions of standards that do not 

currently exist. Notice and comment 

rulemaking requires a meaningful 

opportunity to comment. It is not 

possible to comment meaningfully on a 

version of a standard that is not yet in 

existence, and as such, is not available 

for public review. 

Comment: One commenter suggested 

voluntary use of the Get Message and 

Password Change transactions 

supported by NCPDP SCRIPT 8.1. 

Response: The NCPDP SCRIPT 5.0 

standard includes standards for the Get 

Messsage and Password Change 

transactions (70 FR 67594). The NCPDP 

SCRIPT 8.1 standard also includes 

standards that support these 

transactions. Those who elect to 

electronically transmit prescription and 

prescription-related information for 

Medicare Part D covered drugs 

prescribed for Medicare Part D eligible 

individuals, directly or through an 

intermediary, are required to comply 

with final standards that are in effect. 

We will finalize the recognition of 

NCPDP SCRIPT 8.1 as a backward 

compatible version of the adopted 

NCPDP SCRIPT 5.0, but in response to 

the comments that were received to that 

interim final rule with comment, as of 

April 1, 2009, we will retire NCPDP 

SCRIPT 5.0 and leave NCPDP SCRIPT 

8.1 as the adopted standard. To 

effectuate this, we are—

• Redesignating and amending 

proposed § 423.160(b)(1) as 

§ 423.160(b)(2)(ii) to apply to 

transactions on or after April 1, 2009; 

• Adding a new § 423.160(b)(1) to 

identify which paragraphs are 

applicable to which timeframes; and 

• Adding new § 423.160(b)(2)(i) to 

apply to transactions before April 1, 

2009 and adding the appropriate 

regulatory citations to § 423.160(b) to 

identify where each standard is 

incorporated by reference, if applicable. 

2. Proposed Adoption of an EPrescribing Standard for Medication 

History Transaction 

In the November 16, 2007 proposed 

rule (72 FR 64907), we discussed that if 

NCPDP SCRIPT 8.1 is adopted in place 

of NCPDP SCRIPT 5.0 at § 423.160(b)(1), 

we would also add a new 

§ 423.160(b)(3) to adopt the NCPDP 

SCRIPT 8.1 Medication History 

Standard for electronic medication 

history exchange among the Medicare 

Part D sponsor, prescriber, and the 

dispenser when e-prescribing Medicare 

Part D covered drugs for Medicare Part 

D eligible individuals. 

We also discussed how the adoption 

of the NCPDP SCRIPT 8.1 Medication 

History Standard will provide a uniform 

communications mechanism for 

prescribers, dispensers and payers, 

support reconciliation of useful data 

from a large number of sources, and 

raise awareness of medication history 

availability and use among prescribers. 

Comment: Most commenters 

supported the adoption of the NCPDP 

SCRIPT 8.1 Medication History 

Standard, noting that over time, 

medication history will help reduce 

adverse drug events, doctor shopping, 

and prescription drug diversion/fraud, 

and provide for emergency prescription 

drug histories in case of natural 

disasters. One commenter believes that 

large scale implementation of the 

NCPDP SCRIPT 8.1 Medication History 

Standard will result in significant 

challenges as well as useful refinement 

of the standard. 

A number of commenters supported 

adoption of the standard, but only on a 

voluntary basis between trading 

partners, noting that requiring use of the 

medication history function could cause 

some current e-prescribers to revert to 

paper prescribing if they cannot meet 

the compliance date. One commenter on 

the NCPDP SCRIPT 8.1 Medication 

History Standard stated that the pilot 

test was performed in a closed system 

and is not scalable in larger 

deployments, and also indicated that 

the medication history transaction, 

while relatively mature in the 

prescribing sector, is not widely used in 

the dispensing sector. The commenter 

recommended that the use of the 

standard be encouraged but not 

required. 

Response: The Medication History 

Standard was tested in four of five pilot 

project sites, among community 

physicians, dispensers, plans and 

payers. The testing included the two 

national prescription information 

exchange networks. While tested within 

closed systems, the pilot project 

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evaluators determined that the testing 

adequately supported concluding that 

the standard met the requisite 

objectives, functionality and criteria 

(including not imposing an undue 

burden on the industry thanks to there 

being adequate health care industry 

experience with the standard) for 

adoption as a Medicare Part D eprescribing standard. The pilot project 

demonstrated that the NCPDP SCRIPT 

8.1 Medication History Standard works 

effectively, and includes the 

functionality and meets the eprescribing standards criteria and 

objectives identified in sections 1860D–

4(e)(2) and 1860D–4(e)(3) of the Act, 

and we will adopt it as a standard. We 

note that, while Medicare Part D 

sponsors are required to support all eprescribing functions for which 

standards have been adopted, 

prescribers and dispensers are not 

required to do so. As a result, 

prescribers and dispensers who 

currently use e-prescribing but do not 

utilize the medication history function 

will not be required to conduct 

transactions using the NCPDP SCRIPT 

8.1 Medication History Standard. 

However, if they choose to conduct an 

electronic medication history 

transaction in the context of eprescribing Medicare Part D covered 

drugs for Medicare Part D eligible 

individuals, they must use the adopted 

standard. Regarding the comment that 

some current e-prescribers might revert 

to paper prescribing if they are required 

to use the NCPDP SCRIPT 8.1 

Medication History Standard by the 

proposed compliance date, we refer 

back to comments received from a wide 

spectrum of the industry, that NCPDP 

SCRIPT 8.1 is already in widespread 

use, and the Medication History 

function already resides on the 

standard. Most providers need only to 

enable the function on their software 

system. For those who already enjoy the 

benefits of e-prescribing, reverting to 

paper would constitute a setback for 

their practices. We assume that they 

would continue to build upon the 

investment they have already made in 

their e-prescribing systems and become 

current, within the time allowed, with 

the adopted standards for those eprescribing functionalities they choose 

to transact. 

Comment: Commenters made a 

number of recommendations about the 

completeness and availability of 

medication history data to prescribers 

and dispensers. Several noted that 

information about all medications 

should be made available through the 

medication history transaction, 

including controlled substances (which 

cannot be e-prescribed under current 

law), over-the-counter drugs, drugs for 

which the beneficiary paid in cash, and 

drugs not covered under Medicare Part 

D, including those prescribed in the 

hospital setting. Other commenters 

recommended that medication history 

should be available 24 hours a day, 7 

days a week through downloads to any 

prescriber and pharmacy, and that 

medication history data should not be 

limited to those who subscribe to any 

given e-prescribing system or network. 

One commenter suggested that any 

Medicare Part D e-prescribing standard 

for medication history should 

accommodate family and medical 

history information that supports 

linkage of these data sources to an 

electronic health record system. 

Response: Our intent for the scope of 

this final rule is to establish standards 

that will be used to support the 

Medicare electronic prescription 

program. These standards will provide 

additional common language and 

terminology for those operating in the 

Medicare Part D e-prescribing 

environment that will further the 

electronic exchange of information in a 

data format that is consistent and 

recognizable. 

We agree that the more complete a 

medication history is, the more useful it 

will be to the prescriber. However, 

prescriptions paid for in cash that are 

not adjudicated through insurance 

claims systems, and over-the-counter 

medications, for example, may not be 

captured by the patient’s Medicare Part 

D sponsor medication history, and 

therefore would not be available for 

communication using the standard. The 

suggestion that we include family and 

medical history information in the 

NCPDP SCRIPT 8.1 Medication History 

Standard is outside of the scope of this 

rule. While the MMA does provide for 

the establishment of appropriate 

medical history standards, no initial 

standards were identified for this 

function. The NCPDP SCRIPT 8.1 

Medication History Standard is the 

product of NCPDP, a voluntary 

consensus standards development 

organization. Only NCPDP could 

expand the NCPDP SCRIPT 8.1 

Medication History Standard to 

encompass medical history. Despite its 

limited function, we believe that the 

NCPDP SCRIPT 8.1 Medication History 

Standard will facilitate the flow of 

available medication history data from 

Medicare Part D sponsors, and we 

expect this will have a positive impact 

on medication errors and ADEs. 

Comment: Several commenters noted 

operational and business flow 

shortcomings that could limit the utility 

of medication history. One commenter 

indicated that the current criteria for 

medication history match is higher than 

that for formulary and benefits, and that 

current experience with one 

prescription information exchange 

network demonstrates a 50 to 65 percent 

match rate for submitted eligibility 

requests. Another commenter 

mentioned that many physicians are 

unable to access all medication history 

information, and that physicians should 

be able to add medications to the 

medication history without having to 

generate a prescription. Another 

commenter noted that as the pilot 

results showed, clinicians’ willingness 

to access medication history was limited 

due to incomplete information, and that 

further testing of the standard is needed 

prior to adoption to clarify requirements 

for completeness and usability of 

information, and to determine where the 

information can be most effectively 

introduced and exchanged within the 

provider’s workflow. Another 

commenter noted that the current 

medication history transaction does not 

support drug utilization review and 

medication management. 

Response: In the November 16, 2007, 

proposed rule, we acknowledged that 

many physicians were unaware of the 

medication history function likely 

because, while it resides within the 

widely used NCPDP SCRIPT 8.1 suite of 

functional standards, most users have 

apparently not activated this feature on 

their e-prescribing systems. We expect 

that, as the standard achieves 

widespread use, industry feedback to 

the SDO will result in improvements 

and modifications that support more 

robust and complete medication history 

capacities. While industry input 

indicates there may be many reasons for 

less than a 100 percent match rate, 

including incomplete access to 

eligibility data, data inconsistencies and 

inaccuracies, etc., they also indicate that 

this could be corrected through the use 

of a unique identifier. While there is 

significant opportunity to improve the 

use of medication history, we believe 

that adopting the standard and 

expanding its use will help identify and 

drive process improvements. 

We have adopted the NCPDP SCRIPT 

8.1 Medication History Standard as 

proposed with two technical changes. 

We redesignated the standard from 

§ 423.160(b)(3) to § 423.160(b)(4) and 

added a reference to the paragraph 

regarding the incorporation by reference 

of this standard. 

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18924 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

3. Proposed Adoption of an Eprescribing Standard for Formulary and 

Benefits 

In the November 16, 2007, proposed 

rule (72 FR 64907), we discussed that, 

as a result of pilot testing, we proposed 

to add § 423.160(b)(4) to adopt NCPDP 

Formulary and Benefits 1.0, as a 

standard for electronic transactions 

communicating formulary and benefits 

information between the prescriber and 

the Medicare Part D sponsor when eprescribing for covered Medicare Part D 

drugs for Medicare Part D eligible 

individuals. 

Comment: We received many 

comments supporting adoption of the 

NCPDP Formulary and Benefits 1.0, 

which noted that the pilot test 

demonstrated that NCPDP Formulary 

and Benefits 1.0 was technically capable 

of communicating the intended 

information to support this transaction. 

A prescription information exchange 

network also concurred, relaying that 

they began certifying physician software 

vendors and payers for formulary and 

benefits functionality last year, and have 

had good results implementing it since 

that time. A few commenters also 

pointed to the inherent complexities 

associated with implementing the 

standard, saying that without real-time 

information, patient information is often 

outdated and lacks detail, which can 

lead to higher co-pays and confusion for 

patients. They said that plans, carriers, 

and pharmacy benefit managers (PBMs) 

should be required to provide accurate, 

timely and complete formulary and 

benefits information. One commenter 

recommended that plans not be required 

to conduct the transaction, but if they 

do so, they must use the standard. 

Several commenters indicated that use 

of the transaction be voluntary among 

trading partners. 

Response: Based on pilot test results 

and industry comments on the proposed 

rule, we agree that NCPDP Formulary 

and Benefits 1.0 has met the requisite 

objectives, functionality and criteria 

requirements of the MMA for use in the 

Medicare Part D e-prescribing program, 

and we will adopt it as a standard. 

E-prescribing under Medicare Part D, 

as outlined in section 101 of the MMA, 

is voluntary for providers and 

dispensers. However, Medicare Part D 

sponsors must support the use of, and 

comply with, these standards when 

electronically transmitting prescriptions 

or prescription-related information for 

covered Medicare Part D drugs for 

Medicare Part D eligible individuals. 

We do not believe that there would be 

any additional value gained from 

continued pilot testing of the standard. 

We acknowledge that formularies are 

complex, frequently change due to 

updates in coverage decisions, and that 

coverage benefits are fluid, sometimes 

changing from day to day. Currently, the 

industry practice is to send formulary 

and benefits information periodically 

and in batch-file format. We agree that 

the capacity to provide this information 

on a real-time basis is an important step 

toward realizing the full potential of the 

benefit of the standard, and expect that, 

as the standard gains widespread use, 

marketplace forces will encourage 

incorporation of real-time transaction 

capacities into the formulary and 

benefits e-prescribing process. In the 

meantime, we believe that additional 

testing, not of the standard itself but of 

the ability to provide real-time benefit 

responses, is desirable as the industry 

seeks to maximize e-prescribing system 

capabilities, and it is our understanding 

that industry efforts are underway to 

test real-time transactions through 

electronic prescription information 

exchange networks. 

Also, as the NCPDP commented, there 

is an effort underway to bring industry 

participants together for further analysis 

and testing to address any remaining 

NCPDP Formulary and Benefits 1.0 

implementation issues, which result 

from missing or incomplete data, and 

are not the result of the standard 

functioning inadequately for the 

transaction. NCPDP also is following up 

on a Healthcare Information Technology 

Standards Panel (HITSP) 

recommendation that NCPDP evaluate 

data element/list requirements and 

propose solutions to any outstanding 

issues. 

Comment: Several commenters stated 

the need to restrict the ‘‘list of 

alternative drugs’’ to only those 

products that are bioequivalent or that 

have received the ‘‘AB’’ designation 

from the Food and Drug Administration 

(FDA), preventing the prescribing of 

potentially inappropriate or unsafe 

therapeutic substitutions. They 

supported adoption of the standard, but 

not the current version that includes 

‘‘preferred’’ or ‘‘formulary alternatives 

lists.’’

Response: NCPDP Formulary and 

Benefits 1.0 supports a codified way of 

sending information that includes 

‘‘preferred’’ or ‘‘formulary alternatives 

lists,’’ if a health plan offers such 

products. The standard does not assess 

the appropriateness of the alternatives, 

rather it merely conveys the applicable 

formulary requirements, including any 

step therapy requirements, of a given 

patient’s health coverage. The Medicare 

Part D program provides for formularies 

in which therapeutically non-equivalent 

and non-bioequivalent drugs are offered 

in each category and class of a Medicare 

Part D drug formulary. (See 

§ 423.120(b)(2).) The Medicare Part D 

program allows Medicare Part D 

sponsors to have utilization review 

management procedures, including step 

therapy guidelines, within approved 

formularies. Our adoption of NCPDP 

Formulary and Benefits 1.0 applies 

specifically to e-prescriptions for 

Medicare Part D covered drugs 

prescribed for Medicare Part D eligible 

individuals. As such, we believe that it 

should support conveying formulary 

information about the non-equivalent 

and non-bioequivalent drugs that are 

part of an approved Medicare Part D 

sponsor’s formulary. 

We have adopted the NCPDP 

Formulary and Benefits 1.0 standard as 

proposed with two technical changes. 

We redesignated the standard from the 

proposed § 423.160(b)(4) to 

§ 423.160(b)(5) and added a reference to 

the paragraph regarding the 

incorporation by reference of this 

standard. 

4. Adoption of the National Provider 

Identifier (NPI) as a Standard for Use in 

E-Prescribing 

In the November 16, 2007, proposed 

rule (72 FR 64908), we proposed to add 

§ 423.160(b)(5) to adopt the National 

Provider Identifier (NPI) as a standard 

identifier for health care providers for 

use in e-prescribing among the Medicare 

Part D sponsor, prescriber, and the 

dispenser. NCPDP SCRIPT 8.1, which 

we proposed to adopt, supports the use 

of the NPI. 

We solicited comments from the 

industry and other stakeholders on the 

adoption of the NPI as an e-prescribing 

standard, and we specifically requested 

comments as to whether use of the NPI 

in HIPAA-compliant transactions 

constitutes adequate industry 

experience for purposes of using NPI as 

a covered health care provider identifier 

in Medicare Part D e-prescribing 

transactions. 

Comment: Commenters generally 

acknowledged industry familiarity with 

the NPI from having used it in HIPAA 

standard transactions. While most 

commenters supported the use of the 

NPI on electronic prescriptions to 

identify the prescriber and the 

dispenser, they agreed that the NPI must 

not be used for routing transactions 

(message envelope), or sender/receiverlevel information used in e-prescribing 

routing transactions, as it does not offer 

the clarity needed for routing data to 

destinations. However, it can be used to 

identify an organization or a provider 

involved in electronic prescribing 

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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 18925 

transactions. We received several 

comments about how the adoption of 

the NPI as a health care provider 

identifier for use in e-prescribing would 

improve the ability to uniquely identify 

a prescriber, but that the NPI must be 

used to identify a prescriber at the 

individual versus organizational level. 

A number of commenters urged CMS to 

provide more specific guidance on the 

use of the NPI in e-prescribing. 

Three commenters opposed the 

adoption of the NPI as a standard 

identifier for use in Medicare eprescribing because they contend that, 

as it is currently constructed, the NPI 

does not convey appropriate location 

and routing information which is 

essential to the e-prescribing process. 

One commenter said the NPI works as 

a name, but not as an address (that is, 

the location and setting of the 

prescriber). Another commenter stated 

that they do not use the NPI for eprescribing because its use would force 

the industry to incur significant 

implementation costs. This commenter 

took issue with CMS’ assumption that 

experience in using NPI in HIPAAcovered transactions constitutes 

adequate industry experience for 

adopting it for use in e-prescribing 

Medicare Part D covered drugs for 

Medicare Part D eligible individuals. 

One other commenter stated that, since 

it was not pilot tested, the NPI should 

be adopted only after pilot testing has 

been conducted and evaluated. 

Response: Our intention in proposing 

the use of the NPI in e-prescribing 

transactions was to extend the 

functionality of the NPI from HIPAAcovered transactions to non-HIPAA eprescribing transactions so that those 

with NPIs could use one identifier for 

both HIPAA-covered transactions and 

non-HIPAA e-prescribing transactions, 

versus a separate identifier(s), and allow 

the identification of both an individual 

prescriber and the dispensers. As the 

NPI has the ability to identify health 

care providers such as prescribers and 

dispensers, and as NCPDP SCRIPT 8.1 

supports the NPI, its use in the eprescribing of Medicare Part D covered 

drugs for Medicare Part D eligible 

individuals would fulfill the function 

for which it was intended. If the NPI is 

used as we proposed, as that of an 

identifier of individual, noninstitutional health care providers, and 

not for routing or location purposes, we 

see nothing that would preclude its use 

for purposes of identification, or that 

would require pilot testing. Therefore, 

in NCPDP SCRIPT 8.1, the NPI would be 

used in the PVD Provider Segments to 

identify the prescriber or the dispenser. 

However, the NPI would not be used in 

the UIH Interactive Interchange Control 

Segment to route the transaction. 

Based on our analysis of the 

comments received, we will adopt the 

NPI for use in e-prescribing to identify 

the individual healthcare prescriber and 

the dispenser. We note that, in doing 

this, we do not alter the compliance 

dates or other requirements under 

HIPAA for covered entities with respect 

to e-prescribing transactions that are 

also HIPAA covered transactions. For 

instance, we do not intend to alter any 

provisions requiring the use of the NPI 

for identifying institutional providers in 

HIPAA transactions, including those 

HIPAA transactions which are also eprescribing transactions. We will also 

provide specific guidance in the future 

regarding how the NPI should and 

should not be used in e-prescribing 

Medicare Part D covered drugs for 

Medicare Part D eligible individuals. 

Comment: A number of commenters 

noted that not all prescribers are 

covered entities under HIPAA, and 

expressed concern that if the NPI were 

mandated as the sole identifier for 

prescribers, prescribers who do not have 

an NPI may not be able to engage in eprescribing. 

Response: While not all providers are 

required by HIPAA to obtain an NPI, 

they are all permitted to do so. 

Moreover, we believe that most, if not 

all, providers who treat Medicare 

beneficiaries, already have an NPI, 

either because they are HIPAA-covered 

entities, or if not, because as providers 

they are otherwise identified on HIPAA 

transactions (for example, as a rendering 

physician) or on submitted paper 

claims, as Medicare requires the use of 

the NPI on paper claims. 

Comment: One commenter suggested 

that the DEA number be used to clarify 

the identity of the prescribing provider 

when the NPI number is not adequately 

specific. Another noted that the DEA 

number is still required for prescribing 

controlled substances, but it is unclear 

as to whether prescribers will need to 

use their DEA number in the eprescribing of controlled substances 

once it is allowable under law. 

Response: Not all providers prescribe 

controlled substances and thus, not all 

providers have DEA numbers. As eprescribing of controlled substances is 

still not allowed by law, we cannot 

speculate as to the potential role of the 

DEA number in that process. We also 

note that as the intent of the NPI is to 

consolidate multiple and/or proprietary 

prescriber identifiers for use in the 

Medicare program, it would appear to 

be counterproductive to use one 

number, namely the DEA number, to 

clarify another number, the NPI. 

Comment: One commenter requested 

that CMS allow adequate time for 

adoption. 

Response: We will monitor industry 

feedback regarding this issue and 

respond accordingly. 

Comment: One commenter stated that 

dispensers should not be deemed to be 

in violation of e-prescribing standards if 

the prescriber does not have an NPI or 

fails to include an NPI in an 

e-prescribing message, and questioned 

what effect that may have on the 

dispenser’s compliance with 

e-prescribing regulations. 

Response: If a prescriber is 

e-prescribing under the Medicare Part D 

program, the prescriber is required to 

use the adopted standards, in this case, 

the NPI, to identify an individual 

e-prescribing provider. By the 

compliance date of this final rule, we 

expect that providers who participate in 

Medicare, including those who submit 

paper claims, will have already have 

obtained their NPI for claims 

reimbursement purposes. 

Absent an NPI, prescribers likely 

would not be engaged in e-prescribing. 

However, in the instance of a dispenser 

receiving an e-prescription for a Part D 

covered drug for a Part D eligible 

individual from a prescriber without an 

NPI, the prescriber, not the dispenser, 

would be considered to be in violation 

of Part D e-prescribing regulations. 

We have adopted the NPI as a 

standard identifier as proposed with a 

technical change. We redesignated this 

standard from the proposed 

§ 423.160(b)(5) to § 423.160(b)(6). 

5. Proposed Compliance Date 

In accordance with sections 1860D–

4(e)(1) and 1860D–4(e)(4)(D) of the Act, 

the Secretary must issue certain final 

uniform standards for e-prescribing no 

later than April 1, 2008, to become 

effective not later than 1 year after the 

date of their promulgation. Therefore, in 

accordance with this requirement, we 

proposed a compliance date of 1 year 

after the publication of the final rule. 

We also proposed adopting NCPDP 

SCRIPT 8.1 as the e-prescribing 

standard for the transactions listed in 

section II.A. of the proposed rule (72 FR 

64906), effective 1 year after publication 

of the final rule. We solicited comments 

in the proposed rule regarding the 

impact of these proposed dates on 

industry and other interested 

stakeholders, and whether an earlier 

compliance date should be established. 

Comment: Many commenters 

supported a compliance date of 1 year 

after issuance of the final rule, stating 

that based on their respective industry 

feedback and experience with NCPDP 

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18926 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

SCRIPT 8.1, 1 year should be adequate 

time for the industry to work toward 

implementation of these standards with 

minimum impact. A few thought that 

industry compliance prior to that time 

could be achieved. A few other 

commenters said that the proposed 

compliance date is extremely aggressive 

and does not take into consideration 

vendor system development life cycles, 

release dates of supporting systems, and 

time and resources required for health 

systems to adopt and deploy the needed 

infrastructure to attain the expected 

financial and safety benefits of 

e-prescribing. One commenter stated 

that the proposed implementation date 

is problematic for Medicare Part D 

sponsors that own dispensers that have 

already begun to adopt e-prescribing, 

because having to retrofit standards into 

existing systems may be more costly and 

time consuming. This commenter 

suggested an additional year or two 

beyond the proposed compliance date to 

allow adopters to bring current 

e-prescribing systems into compliance. 

Another recommended that providers be 

given a minimum of 2 years to comply. 

Two commenters requested that we 

consider contingency plans if the 

industry is unable to meet the 1 year 

compliance timeframe. One commenter 

recommended that CMS conduct a 

study to identify pharmacy 

preparedness, and that once the final 

rule is released, that CMS monitor the 

progress of the industry in 

implementing the standards, and 

develop an extended adoption 

timeframe as warranted. 

Response: Section 1840D–4(e)(4)(D) of 

the Act requires that final e-prescribing 

standards be promulgated by the 

Secretary by April 1, 2008, with 

implementation no more than 1 year 

following that date, which would place 

the latest possible implementation date 

at April 1, 2009. We agree that, based on 

comments received, adoption of these 

standards with the 1 year compliance 

date imposes no undue burden on the 

industry, and concur with commenters 

who supported the proposed 1 year 

compliance date. 

Based on industry feedback, 

numerous e-prescribing software 

systems now using NCPDP SCRIPT 8.1 

have been certified for use by electronic 

prescribing networks. The NCPDP 

Formulary and Benefits 1.0 standard is 

based on a proprietary transaction 

developed by RxHub, which is currently 

being used to communicate this 

information in many e-prescribing 

products. The NCPDP SCRIPT 8.1 

Medication History Standard is already 

contained in NCPDP SCRIPT 8.1, which 

is in widespread use. We anticipate that 

any e-prescribing software vendor or 

service has already, or will provide, 

these standards upgrades as part of a 

monthly subscription charge or annual 

maintenance fee, and that it would not 

require massive systems changes that 

would be overly burdensome. We have 

received no extensive stakeholder or 

vendor feedback that upgrades to 

current e-prescribing systems are more 

burdensome than installations of new 

e-prescribing systems. There will always 

be modifications to standards to which 

e-prescribing systems must be 

retrofitted, and we trust that industry 

software vendors will anticipate these 

modifications and accommodate 

standards upgrades to make their use by 

existing customers as smooth and 

seamless a transition as possible. We 

cannot delay the implementation date 

for the standards adopted under section 

1860D–4(e)(4)(D) of the Act, which is set 

by statute, and continue to believe that 

1 year is adequate time to accomplish 

any system changes necessitated by the 

adoption of these final standards. 

However, we will monitor industry 

feedback relative to their ability to meet 

the 1 year compliance timeframe and 

determine the need for any other action 

based on that information within the 

applicable statutory parameters. 

We are adopting a compliance date of 

1 year after publication of the final 

standards as proposed. Therefore, to 

clarify the compliance dates for the 

revised and existing standards, we have 

revised § 423.160(b) as follows: 

• Redesignated the proposed 

paragraphs (b)(1) through (b)(5) (we 

proposed to add new paragraphs (b)(3) 

through (b)(5)) as paragraphs (b)(2) 

through (b)(6). 

• Added a new paragraph (b)(1) that 

identifies the compliance dates for each 

standards in paragraphs (b)(2) through 

(b)(6). 

• In newly redesignated (b)(2) (the 

prescription standard), revised the 

standard to separately identify the 

NCPDP SCRIPT 8.1 and NCPDP SCRIPT 

5.0 based on the compliance dates of 

these standards. 

C. Related Issues Included in and 

Analysis and Response to Public 

Comments for the November 16, 2007 

Proposed Rule 

In the November 16, 2007 proposed 

rule, we requested comments on various 

issues related to the e-prescribing 

process. We received numerous 

comments on those and other issues and 

we discuss those comments and our 

responses below. 

1. Fill Status Notification (RxFill) 

In the November 16, 2007 proposed 

rule, we explained that the Fill Status 

Notification within the NCPDP SCRIPT 

8.1 enables a pharmacy to notify a 

prescriber when the prescription has 

been dispensed, partially dispensed, or 

not dispensed. The pilot test 

demonstrated that the standard was 

technically capable of performing this 

function, but pilot sites questioned 

whether prescribers would be inundated 

with data, and dispensers would be 

burdened by the business process 

changes that would ensue. We solicited 

industry comments regarding RxFill’s 

usefulness. 

Comment: Many commenters noted 

that RxFill contains useful functionality, 

such as monitoring patient adherence to 

a medication regimen, or identifying 

drug diversion/abuse. However, most 

recommended that the transaction be 

used on a voluntary basis among trading 

partners, noting that the need for 

information provided by RxFill varies 

by prescriber. One commenter predicted 

that physician demand for this standard 

will increase dramatically following the 

rollout of the 2008 Physician Quality 

Reporting Initiative (PQRI) measures, as 

performance on these measures is 

influenced by patient compliance with 

therapy. 

Several commenters stated that the 

NCPDP SCRIPT 8.1 Medication History 

Standard offers prescribers and 

dispensers similar but richer 

information, making RxFill 

unnecessary. 

A number of commenters noted that 

there were business process and 

implementation issues associated with 

RxFill. Others noted shortcomings in 

the standard, such as omission of 

features such as pharmacy receipt, 

patient pick up, reason for refusal of fill, 

and the placement of the order in the 

prescription filling process. They 

recommended additional analysis and 

testing prior to adoption. 

Response: As stated in the November 

16, 2007 proposed rule, we previously 

referenced industry feedback that had 

indicated that the adoption of RxFill 

‘‘may cause an unnecessary 

administrative burden on prescribers 

and dispensers’’ as a basis for not 

proposing the adoption of RxFill. This 

feedback was derived from the findings 

contained in the report to Congress on 

the results of the CY 2006 e-prescribing 

pilot (http://www.healthit.ahrq.gov/ 

erxpilots). The report noted that the 

industry feared that adoption of the 

RxFill standard for electronic fill status 

notification transactions might result in 

increased ‘‘administrative workflow’’

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issues, namely being inundated with fill 

status notifications every time a patient 

picked up (or conversely, did not pick 

up) a prescription. However, it is now 

clear from the comments received in 

response to the November 16, 2007 

proposed rule that the industry, upon 

further consideration, now perceives 

there to be no administrative burden 

associated with the adoption of the 

RxFill standard. This is a result of the 

realization by the industry that the 

prescriber would have to use their eprescribing system to electronically 

‘‘flag’’ or switch on the fill status 

notification transaction for those 

patients whose medication adherence 

they wish to monitor. When a patient 

picks up a prescription at the pharmacy, 

they likely sign an electronic signature 

log. In instances in which the prescriber 

has switched on the fill status 

notification transaction in their eRx 

system, this electronic signature triggers 

a pharmacy software system update 

which, in turn, would trigger a fill status 

notification message using the RxFill 

standard to be sent back to the 

prescriber. Prescriber comments in 

response to the proposed rule indicates 

that they perceived real value in RxFill 

for prescribers whose patients with 

chronic conditions may benefit from 

closer medication adherence 

monitoring. In addition, the pilot 

demonstrated that RxFill supports the 

transactions for which it was tested. 

Given the voluntary nature of eprescribing for dispensers and 

prescribers under Medicare Part D, 

prescribers can choose whether or not 

they want to avail themselves of the 

information that use of this standard in 

the electronic Fill Status Notification 

transaction would provide, and 

voluntarily incur costs, if any, 

associated with its use. Therefore, we 

will revise § 423.160(c) and add a 

paragraph (M) to § 423.160(b)(2)(ii) to 

adopt the Rxfill standard by adding the 

prescription Fill Status Notification 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) to provide for 

the communication of fill status 

notification of Medicare Part D 

prescription drugs for Medicare Part D 

eligible individuals, among Medicare 

Part D sponsors, prescribers and 

dispensers, to the list of transactions for 

which NCPDP SCRIPT 8.1 is used. 

Comment: Several commenters who 

supported RxFill’s adoption suggested 

modifications that they believed might 

make it less burdensome to providers. 

These included the suggestion of 

identifying only key categories of drugs, 

such as blood pressure or diabetes 

medications, that would trigger an 

RxFill notification to a provider from a 

pharmacy; or an RxFill notification if a 

patient did not pick up an e-prescribed 

prescription at their pharmacy within 

one week to 10 days after its 

transmission. One commenter also 

suggested the use of RxFill as a way to 

auto-populate medication history fields. 

Response: We expect that increased 

use of RxFill will allow the industry to 

identify a variety of functional and 

business flow improvements that could 

be incorporated through the standards 

maintenance process. The Department 

will continue to monitor the further 

development of, and revisions to, this 

standard and will consider updating the 

adopted standard when and as 

appropriate. 

2. RxNORM, Structured and Codified 

Sig, and Prior Authorization 

In the proposed rule we identified 

three of the six initial standards that the 

pilot results showed were not ready for 

adoption: RxNORM, NCPDP Structured 

and Codified Sig 1.0, and the Prior 

Authorization Standard. We also noted 

that RxFill was technically ready for 

adoption, but as previously discussed, 

we were unsure as to industry’s desire 

to adopt it as a standard. As a result, we 

did not propose to adopt these 

standards, but we solicited public 

comment on this decision. 

Comment: Most commenters agreed 

that the standards for NCPDP Structured 

and Codified Sig 1.0, clinical drug 

terminology (RxNorm) and the Prior 

Authorization Standard were 

technically unable to convey the needed 

information and lacked adequate 

industry experience. Only one 

commenter asserted that all six initial 

standards tested in the CY 2006 pilot 

could feasibly be implemented by 2009. 

Response: We agree that these 

standards are not ready for 

implementation, and are not adopting 

them at this time. 

Comment: Many commenters stressed 

the potential value of these standards, 

and urged us to work actively with the 

industry to promptly mitigate the 

problems and concerns with the 

standards. Commenters also noted that 

there are efforts underway to bring 

industry participants together for further 

analysis and testing of RxNorm, NCPDP 

Structured and Codified Sig 1.0, and the 

Prior Authorization Standard, to expand 

upon and bring to completion the work 

begun in the CY 2006 e-prescribing 

pilot. Several commenters asked that 

CMS include language ‘‘in the standards 

that commits it (CMS) to development 

and pilot testing of the Prior 

Authorization Standard.’’

One commenter who was familiar 

with the pilot of the initial standards 

stated that many of the shortcomings of 

RxNorm that were identified in the pilot 

test were focused on difficulties in 

conveying information about drug 

delivery devices and packages, and not 

the overall function of the standard in 

other contexts. They said that while 

there may have been instances of 

unresolved synonymy, that at least half 

of them, if not all of them, have already 

been resolved. 

Commenters stated that they believed 

the Prior Authorization Standard is an 

inefficient, time consuming process that 

is a source of frustration for both 

physicians and patients, and a process 

that is ripe for improvement. One 

commenter recommended additional 

research on the Prior Authorization 

Standard to alleviate the manual 

administrative burden associated with 

the high volume of prior authorizations 

in the long-term care setting. 

Response: One commenter asked that 

CMS include language in the standards 

that commits it to development and 

pilot testing of the prior authorization 

standard. We note that standards are 

guidelines, rules or characteristics for 

activities, and are the purview of the 

standards development organizations 

and not CMS; therefore, the inclusion of 

such language as part of the technical 

specifications of a standard would be 

inappropriate. 

We agree that these three standards 

would contribute significant value to eprescribing, and will continue to work 

with the SDOs, industry, and interested 

stakeholders toward readying these 

standards for consideration by the 

Secretary for adoption as final standards 

for e-prescribing Medicare Part D 

covered drugs for Medicare Part D 

eligible individuals. 

3. Exemption for Computer-Generated 

Facsimiles 

The November 2, 2005 foundation 

standards final rule (70 FR 67568) 

exempted entities that transmit 

prescriptions or prescription-related 

information by means of a computergenerated facsimile from the 

requirement to use the adopted NCPDP 

SCRIPT standard for the transactions 

that, prior to this rule, were listed at 

§ 423.160(b)(1). In response to industry 

concerns that the exemption was 

hindering the movement toward 

computer-to-computer e-prescribing, we 

included a proposal to eliminate the 

exemption in the CY 2008 Physician Fee 

Schedule proposed rule (July 12, 2007 

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(72 FR 38122, 38196)), effective January 

2009. In the November 27, 2007 CY 

2008 Physician Fee Schedule Final Rule 

with Comment, 72 FR 66334, we 

modified the computer-generated 

facsimiles exemption, but did not 

eliminate it entirely, allowing computergenerated facsimiles to be used in the 

event that an EDI-transmitted 

prescription fails due to network 

transmission failures or similar, 

temporary communication problems 

that are episodic and nonrepetitive in 

nature. 

In the November 16, 2007 proposed 

rule (72 FR 64902) we referenced, but 

did not solicit comments on our 

inclusion of a proposal to remove the 

exemption for computer-generated 

facsimiles in the CY 2008 Physician Fee 

Schedule proposed rule (72 FR 8196). 

However, we received comments on this 

provision in response to our solicitation 

for comments on the November 16, 2007 

proposed rule. 

Comment: Several commenters 

requested that we not eliminate the use 

of all facsimiles (including computergenerated facsimiles) as a means of 

transmitting prescriptions and 

prescription-related information 

between provider and pharmacy, and 

vice versa. Commenters stated that if all 

facsimiles of prescriptions and 

prescription-related information were 

eliminated, it would constitute a burden 

on dispensers and provider offices that 

would have to revert to paper, which 

would result in decreased productivity 

and increased costs. Another 

commenter stated that use of secure 

facsimile via computer to computer link 

or computer to facsimile link, should be 

allowed when the NCPDP SCRIPT 8.1 

standard transmission is ‘‘not available’’

to all prescribers. 

Two commenters stated that the 

elimination of the exemption for 

computer-generated facsimiles should 

be delayed until January 2010; and that 

the provisions of the final rule should 

be modified to allow its use when 

transmitting prescription or 

prescription-related information to 

dispensers and facilities that do not 

e-prescribe, or when prescribing 

controlled substances. 

Response: First, we note that 

transmitting paper prescriptions from 

one facsimile machine to another for 

Medicare Part D covered drugs for 

Medicare Part D eligible individuals, as 

described by one of the commenters, 

does not constitute electronic data 

interchange. Such paper faxing is not 

subject to the Medicare Part D eprescribing standards adopted for the eprescribing of Medicare Part D covered 

drugs for Medicare Part D eligible 

individuals. 

In the July 2007 proposed rule, we did 

not propose the elimination of the use 

of paper facsimiles as a way to transmit 

prescriptions and prescription-related 

information. Rather, we proposed 

eliminating the exemption for 

computer-generated e-prescribing 

facsimiles from the adopted NCPDP 

SCRIPT standard for the communication 

of prescriptions and prescription-related 

information between prescribers and 

dispensers for the transactions listed at 

§ 423.160(b)(1)(i) through (xii). In the 

final rule, we acknowledged that 

computer-generated facsimiles may be 

needed for prescriptions which fail due 

to network transmission failures or 

similar, temporary communication 

problems that are episodic and nonrepetitive in nature and preclude the 

use of NCPDP SCRIPT. However, this 

exception applies only to transmission 

failures, and not simply to those who 

choose to use e-prescribing software that 

does not employ the NCPDP SCRIPT 

standard. We assume the commenter is 

referring to such a situation when 

referencing that computer to computer 

link or computer to facsimile link, 

should be allowed when the NCPDP 

SCRIPT 8.1 standard transmission is 

‘‘not available’’ to all prescribers. 

During the time period allotted for 

comment following the issuance of the 

July 2007 proposed rule we received 

several comments regarding the 

elimination of the exemption for 

computer-generated facsimiles. A 

number of commenters disagreed with 

the lifting of the exemption, indicating 

that its elimination could be 

problematic in performing a certain eprescribing function, that of 

prescription refill requests, but only one 

of those commenters offered 

substantiation. Absent receipt of any 

other industry feedback on the impact of 

the elimination of computer-generated 

facsimiles on prescription refill 

requests, and not considering these 

comments to constitute widespread 

concern regarding the refill request 

function, we proceeded in CY 2008 

Physician Fee Schedule final rule (72 

FR 66334) to amend the exemption to 

eliminate the exemption except, as 

noted above, in cases of network failure. 

Taken in the aggregate, we determined 

that the 1 year time period was adequate 

time during which providers and 

dispensers would have the opportunity 

to change over to conducting true eprescribing (computer to computer EDI) 

and that costs would be mitigated due 

to the growing volume of e-prescriptions 

and practice of e-prescribing, with a 

commensurate reduction in 

transmission, software and other costs 

during that 1 year time period. These 

changes are due to become effective in 

January 2009. 

Since that time, we have been 

informed by the industry that the 

elimination of the exemption for 

computer-generated facsimiles would 

have a significant adverse effect in the 

electronic transmission of prescription 

refill requests, and interested 

stakeholders have provided us with 

more specific information regarding the 

economic and workflow impact that 

will result from the modification of the 

exemption that was not forthcoming 

during the public comment period. In 

particular, dispensers have indicated 

that they use computer-generated 

facsimiles for a significant volume of 

refill requests, and that eliminating the 

exemption would require them to revert 

to paper facsimiles for those 

transactions. We are now in the process 

of examining and considering these 

data, and may soon issue a proposed 

solution through the rulemaking process 

that we intend to finalize prior to the 

scheduled January 2009 effective date. 

Through this process the public will, 

once again, be afforded an opportunity 

to offer public comment. 

4. Elimination of the Exemption for 

Non-Prescribing Providers (Long Term 

Care) 

In the proposed rule (72 FR 64902 

through 64906), we noted that, because 

NCPDP SCRIPT was not proven to 

support the workflows and legal 

responsibilities in the long-term care 

setting, 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 (‘‘three-way prescribing 

communications’’ between facility, 

physician, and pharmacy), were 

provided with an exemption from the 

requirement to use NCPDP SCRIPT 5.0 

in transmitting such prescriptions or 

prescription-related information. We 

also noted the results of the CY 2006 eprescribing pilot relative to the use of 

NCPDP SCRIPT 8.1 in the long-term 

care setting, namely that workarounds 

were needed to accommodate the 

unique workflow needs in long term 

care. We conveyed that, when an 

updated version of the NCPDP SCRIPT 

standard in the long-term care setting, 

we would consider removing the 

current exemption. We then solicited 

comments on the impact and timing of 

lifting this exemption. 

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Comment: Commenters generally 

acknowledged that progress is being 

made toward accommodating the 

specific needs of the long term industry 

in e-prescribing standards, and 

supported the eventual elimination of 

the long-term care exemption to the 

NCPDP SCRIPT standard. They noted 

that, while NCPDP SCRIPT 8.1 may 

work well in most instances, each 

higher level of NCPDP SCRIPT (10.0 or 

higher) contains more functionality that 

ultimately will build to that which will 

be needed for long-term care 

applications. They noted that one of 

these higher level standards should be 

the designated standard for use if/when 

the exemption for e-prescribing in the 

long-term care setting is eliminated. 

Several commenters stated that the 

exemption for e-prescribing in long-term 

care could be lifted upon adoption of 

NCPDP SCRIPT version 10.2. This 

newer version of the standard is ANSI 

approved, and, according to these 

commenters, meets the basic eprescribing needs of the long-term care 

industry. Another commenter 

recommended adoption of NCPDP 

SCRIPT 10.3, citing its expanded ability 

to support resupply requests, fill status 

and census notification messages in the 

long-term care setting. Still other 

commenters insisted that CMS should 

adopt NCPDP SCRIPT 10.5 for use in eprescribing in the long-term care setting. 

Commenters also stated that they 

anticipated that the Certification 

Commission for Healthcare Information 

Technology (CCHIT) would begin work 

in 2009 to launch certification of 

electronic health records products for 

long-term care, and that in preparation 

for that activity, national standards for 

e-prescribing for long-term care will 

need to be in place. One commenter 

stated that the long-term care exemption 

should remain in place until such time 

as e-prescribing standards can support 

the needs of long-term care, taking in 

account medication management across 

multiple care settings and providers. 

Another stated that the exemption 

should not be lifted until all standards 

for e-prescribing had been adopted, and 

the industry had conducted adequate 

testing. One commenter recommended 

that CMS should, with this final rule, 

remove the current exemption for long 

term care entities from using the 

Medicare Part D e-prescribing standards, 

effective with the compliance date of 

this rule. 

Response: While NCPDP SCRIPT 10.2 

was approved in July 2007, NCPDP 

SCRIPT 10.3 is not scheduled for 

approval until April 2008, and NCPDP 

SCRIPT 10.5 is not scheduled for 

approval until July 2008. We agree with 

commenters that NCPDP SCRIPT 10.5 

appears to meet all of the long-term care 

business needs that have been identified 

to date, and therefore would be 

appropriate for adoption. When NCPDP 

SCRIPT 10.5 is approved by NCPDP, we 

will review it with the purpose of 

ascertaining whether it is backward 

compatible with the adopted standard, 

and thus a candidate for the streamlined 

process outlined earlier that would 

permit its use in place of NCPDP 

SCRIPT 8.1, or if rulemaking will be 

required. We anticipate eliminating the 

long-term care exemption when 

rulemaking is utilized to retire the thenexisting standard in favor of version 

10.5. From feedback received from the 

industry, NCPDP SCRIPT 10.2 meets the 

basic needs of the long-term care 

industry relative to e-prescribing, 

including the ‘‘need no later than’’ date/ 

time added for special delivery needs. 

NCPDP SCRIPT 10.3 features this as 

well as additional functionality, 

including medication history source and 

fill number information for de-duplicate 

processing. NCPDP SCRIPT 10.5 

features all of the functionality of these 

previous NCPDP SCRIPT 10.0 and above 

versions, and supports federal 

medication terminologies code sets. We 

agree with commenters that NCPDP 

SCRIPT 10.5 appears to meet all of the 

long-term care business needs identified 

to date. Therefore, it would be 

appropriate to adopt the standard with 

the most robust functions, since this is 

what vendors will incorporate into their 

products. As we indicated in the 

previous discussion, once NCPDP 

SCRIPT 10.5. is balloted and approved 

by the NCPDP, and then approved by 

the Accredited National Standards 

Institute (ANSI), we will review it with 

the intent of moving forward if 

appropriate. However, we note that 

long-term care facilities may voluntarily 

use the standard at any time, and we 

encourage its adoption in that setting. 

5. Electronic Prescribing for Controlled 

Substances 

Comment: Several commenters noted 

that all categories of prescriptions—

including controlled substances—

should be able to be electronically 

prescribed, and that to require 

handwritten prescriptions for controlled 

substances would necessitate a dual 

paper/electronic system which would 

be a major barrier to adoption. For 

example, a physician noted that one out 

of every ten prescriptions he wrote 

could not be e-prescribed because they 

were for controlled substances. One 

commenter recommended that it be 

mandated that prescribers should check 

the identification of patients before 

prescribing for them electronically. 

Response: We agree that the inability 

to e-prescribe controlled substances can 

hinder broader e-prescribing adoption. 

The Drug Enforcement Administration 

(DEA) which has responsibility for 

administering the Controlled Substances 

Act, currently requires that controlled 

substances be prescribed on paper with 

a written signature. We continue to 

work with the DEA toward revised 

requirements that would permit such eprescribing while maintaining 

safeguards against drug diversion. 

6. Diagnosis on Prescription 

Comment: One commenter proposed 

that Medicare require diagnosis 

information on electronic prescriptions, 

arguing that this would allow the 

pharmacy to evaluate the drug 

prescribed against the diagnosis and 

thus identify potential errors. 

Response: NCPDP SCRIPT 8.1 does 

contain an optional field for diagnosis, 

but requiring its use is outside the scope 

of our proposed rule. We have not 

solicited nor have we received any 

industry feedback on this issue, and 

therefore cannot attest as to the 

industry’s use and/or perceived value of 

this feature. 

7. Issues Related to State Law 

Comment: One commenter urged 

CMS to take a broader view of the 

authority to preempt state law than we 

outlined in the November 7, 2005 final 

rule (70 FR 67574 through 67576). They 

stated that the lack of national 

applicability of the standards we adopt 

serves as a barrier to broader adoption 

of e-prescribing. 

Response: In the November 7, 2005 

final rule, we identified four categories 

of State law that restrict the ability to 

carry out Medicare Part D standards, 

and which pertain to electronic 

transmission of prescription-related 

information. We encouraged States to 

consider the impact on Federal 

e-prescribing standards of laws that 

could directly or indirectly impede the 

adoption of e-prescribing technology 

and standards on a statewide and 

national basis. We also urged States to 

enact legislation consistent with, and 

complementary to, the goals of the 

MMA’s e-prescribing provisions. This 

included removing existing barriers to 

e-prescribing. 

The commenter did not identify any 

specific State laws that stand as an 

obstacle to Congress’s goal of 

implementing uniform e-prescribing 

standards that are to be used in 

e-prescribing of Medicare Part D 

covered drugs for Medicare Part D 

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eligible individuals. Therefore, we will 

not re-evaluate the scope of preemption 

at this time. We would consider 

recommendations related to any specific 

statute or regulation if such laws and 

recommendations are brought to our 

attention at some point in the future. 

Comment: Another commenter noted 

that some State laws restrict 

communication of ‘‘sensitive’’

medication information (for example, 

drugs indicative of HIV status, 

substance abuse, genetic disorder, etc.). 

The commenter recommended that we 

preempt any State or local statute or 

regulation that would limit disclosure of 

a patient’s medication history, noting 

that these laws and regulations are often 

inconsistent and hard to find, impeding 

the ability of vendors to display this 

information to the prescriber at the 

point of care. 

Response: We acknowledge that 

medication history data will be most 

valuable to the prescriber when it is 

complete. However, these laws do 

provide patients with additional 

safeguards for certain categories of 

medical information. We believe that, as 

medication history becomes more 

available to prescribers, these 

limitations will be identified, and may 

be appropriate for future regulation. We 

will not, however, address this issue at 

this time since it is outside of the scope 

of this final rule. 

8. Incentives to e-prescribing 

Comment: A number of commenters 

suggested that CMS should support 

adequate financial incentives, and 

should itself provide financial 

incentives, to physicians and dispensers 

to assist them with their investments in, 

and implementation of, e-prescribing. 

Response: The Administration 

supports the adoption of health 

information technology as a normal cost 

of doing business. However, other 

means of encouraging the adoption of 

e-prescribing are already in place, such 

as regulations that provide a safe harbor 

under the federal anti-kickback statute 

and an exception under the federal 

Physician Self-Referral (‘‘Stark’’) Law 

for certain arrangements involving the 

donation of e-prescribing and electronic 

health records technology. These 

regulations pave the way for increased 

adoption of health information 

technology by physicians and other 

health care providers. We also note that 

providers may participate in, and 

receive incentives through, the 2008 

Physician Quality Reporting Initiative 

(PQRI). This project includes measures 

for patient compliance with therapy, 

which can be supported through the 

utilization of e-prescribing transactions 

such as fill status notification. 

9. ‘‘Pharmacist’’ versus ‘‘Dispenser’’

Comment: One comment included a 

recommendation that we refer to 

‘‘pharmacists’’, rather than ‘‘dispensers’’

in the final rule because referring to a 

pharmacist as a ‘‘dispenser’’ ignores the 

clinical component of pharmacistpatient interactions. 

Response: We fully recognize and 

appreciate the importance of the 

pharmacist-patient relationship, which 

provides critical clinical and 

educational support to the patient. 

However, we wish to clarify that we 

have defined the term ‘‘dispenser’’ at 42 

CFR 423.159 to mean 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. 

Based on this definition, we will 

continue to use the term ‘‘dispenser’’

when referencing these entities. 

Comment: A number of commenters 

stated that the benefits of e-prescribing 

will not be fully realized until 

e-prescribing is included among CCHITcertified interoperable electronic health 

records (EHR) featuring robust decisionmaking software. 

Response: We recognize the 

immediate benefits that e-prescribing as 

a stand-alone function can bring to the 

health care community. However, we 

support the Administration’s health 

information technology initiatives 

including EHR certification and 

standards harmonization, and agree that 

the full benefits of e-prescribing will be 

realized through the adoption of 

certified interoperable electronic health 

records. Additionally, CMS has 

participated in the development of the 

medication management use case that 

will ultimately result in harmonized 

standards and support interoperable 

e-prescribing functionality. 

10. Mandatory e-prescribing 

Comment: One commenter expressed 

support for the recommendation from 

the American Health Information 

Community (AHIC) that the Secretary 

seek authority to mandate e-prescribing 

under Medicare. Another commenter 

opposed mandating e-prescribing, and 

another suggested it not be mandated 

until at least 50 percent of prescribers 

and dispensers are e-prescribing. 

Response: Currently, e-prescribing 

under Medicare Part D, as outlined in 

the MMA, is voluntary for prescribers 

and dispensers. Medicare Part D 

sponsors must support the use of these 

standards in e-prescribing transactions. 

The breadth of this final rule is limited 

to that statutory authority. 

11. Exemption for e-prescribing in a 

Closed Enterprise 

Comment: Several commenters 

requested clarification regarding 

whether prescriptions transmitted 

within a closed enterprise (for example, 

from prescribers within an HMO plan to 

a plan-owned pharmacy) are exempted 

from the use of the NCPDP SCRIPT 

standard. 

Response: Entities may use either HL7 

messages or the adopted NCPDP SCRIPT 

standard to conduct internal electronic 

transmittals (that is, when all parties to 

the transaction are employed by, and 

part of, the same legal entity) for the 

specified NCPDP SCRIPT transactions 

as described above. 

12. Commercial Messaging 

Comment: One commenter said that 

commercially oriented messages should 

not be permitted in e-prescribing until 

adequate standards for content, 

integrity, and display of these messages 

have been developed. 

Response: We agree that there needs 

to be an appropriate balance between 

providing appropriate information at the 

point of care, and messaging that might 

steer the prescriber to use specific drugs 

and therapeutics as specified at section 

1860 D–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 versus a 

retail pharmacy, and electronic 

‘‘detailing’’ messages from a 

manufacturer promoting a particular 

brand or brand-name drug over and 

above that which the Medicare Part D 

sponsor requires or to which it gives 

preference. 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 Medicare Part 

D sponsors at a future date and, if 

necessary, propose more specific 

standards for messaging. 

13. E-prescribing Errors 

Comment: One commenter noted an 

increasing number of new errors are 

associated with electronic prescribing. 

Computerized Physician Order Entry 

(CPOE) systems have the potential to 

contribute to errors in certain situations, 

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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 18931 

such as the selection of a wrong drug or 

dose selection from a drop down menu 

that a dispenser, if they are aware of the 

error, must then communicate to the 

prescriber to address. The commenter 

urged us to consider the potential for 

new types of errors as the industry 

implements e-prescribing standards and 

clarify in the final regulation ways the 

agency will address or prevent such 

errors. 

Response: We cite this commenter’s 

example to raise the point that no 

system, whether electronic or paper, is 

infallible. Just as in paper prescribing, 

errors can still take place. E-prescribing 

helps to substantially mitigate some 

risk, such as illegible prescriber hand 

writing on a paper script that could be 

mis-interpreted by the dispenser; and 

medication history, which supports the 

reduction of the occurrence of adverse 

drug events at the prescriber level. We 

would expect that e-prescribing 

software systems would employ 

safeguards and redundancies, such as 

multiple prompts asking for prescriber 

review and confirmation of nonconforming information, prior to 

transmission. 

14. Privacy and Medication History 

Comment: Two commenters 

expressed concern with privacy and 

medication history. One inquired as to 

who would have access to medication 

history under the HIPAA Privacy Rule; 

the other stated that the HIPAA notice 

of privacy practices should make it very 

clear that e-prescribing is taking place 

and that prescription information is part 

of one’s medical record. One commenter 

felt that individuals should have the 

right not to participate in either eprescribing or electronic medical 

records, and to have the right to 

determine who has access to their 

prescription histories. 

Response: Patients can always ask 

their physicians to refrain from 

requesting their personal medication 

histories as derived from the patient’s 

Medicare Part D sponsor. While there is 

no legal guarantee a provider would 

agree to their request, patients may 

always ask that their prescribers only 

use paper prescriptions when 

prescribing for them. 

15. Regular Cycle of Rulemaking 

Comment: Two commenters suggested 

that CMS consider creating a regular 

cycle of rulemaking in order to keep 

standards adoption in sync with the 

rapid pace of standards development by 

the industry. For example, CMS could 

issue a new notice of proposed 

rulemaking for e-prescribing standards 

every 2 years in a particular month. 

Response: The creation of a regular 

cycle of rulemaking to adopt eprescribing standards would restrict 

CMS’ ability to adopt standards when 

they meet the requisite objectives, 

functionality and other criteria required 

that CMS employs in deciding whether 

to adopt e-prescribing standards. We 

further reiterate that in response to 

industry’s desire for a streamlined 

updating process that could keep pace 

with changing business needs, as 

previously discussed in this final rule, 

we adopted a process for the Secretary 

to adopt subsequent version(s) of a 

standard for voluntary use where the 

new version(s) are backwards 

compatible with the adopted standard. 

The industry’s request for a regular 

cycle of rulemaking clearly indicates a 

desire to adopt standards as soon as 

possible, which is contrary to a biannual rulemaking process. 

16. Medicaid Prescription Requirements 

Comment: One commenter raised the 

issue that federal Medicaid regulations 

require a prescriber’s hand written 

authorization for dispensers to dispense 

brand name drugs when an equivalent 

generic is available, which would 

appear to be in conflict with federal 

e-prescribing guidelines. 

Response: The issue that the 

commenter raised applies to 

prescriptions obtained under their 

Medicaid benefits. Under section 

1860D–4(e) of the Act, e-prescribing 

regulations apply only to covered 

Medicare Part D covered drugs 

prescribed for Medicare Part D eligible 

individuals. In those instances in which 

Medicare Part D provides prescription 

drug coverage for beneficiaries who 

receive their Medicaid prescription drug 

benefits through the Medicare program 

(dual-eligible beneficiaries), Medicare 

Part D e-prescribing regulations would 

apply. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), agencies are required to 

provide a 30-day notice in the Federal 

Register and solicit public comment 

before a collection of information 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. In order to fairly 

evaluate whether an information 

collection should be approved by OMB, 

section 3506(c)(2)(A) of the PRA 

requires that we solicit comment on the 

following issues: 

• Whether the information collection 

is necessary and useful to carry out the 

proper functions of the agency. 

• The accuracy of the agency’s 

estimate of the information collection 

burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We solicited public comment on each 

of these issues for 42 CFR 423.160, 

‘‘Standards for Electronic Prescribing.’’

The emerging and increasing use of 

health care electronic data interchange 

(EDI) standards and transactions have 

raised the issue of the applicability of 

the PRA. It has been determined that a 

regulatory requirement mandating the 

use of a particular EDI standard 

constitutes an agency-sponsored thirdparty disclosure as defined under the 

PRA. 

As a third-party disclosure 

requirement subject to the PRA, 

Medicare Part D sponsors must support 

and comply with the adopted eprescribing standards relating to 

covered Medicare Part D drugs, 

prescribed for Medicare Part D eligible 

individuals. 

However, the requirement that 

Medicare 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. These entities are required 

to comply with the adopted standards 

when they electronically transmit 

prescription or prescription-related 

information for covered transactions. 

Testimony presented to the NCVHS 

indicates that most health plans/PBMs 

currently have e-prescribing capability 

either directly or through contract with 

another entity. Therefore, we do not 

believe that utilizing the adopted 

standards will impose an additional 

burden on Medicare Part D sponsors. 

Since the standards that have been 

adopted are already familiar to industry, 

we believe the requirement to utilize 

them in covered e-prescribing 

transactions constitutes a usual and 

customary business practice. As such, 

the burden associated with the 

requirements is exempt from the PRA as 

stipulated under 5 CFR section 

1320.3(b)(2). As required by section 

3504(h) of the Paperwork Reduction Act 

of 1995, we have submitted a copy of 

this document to OMB for its review of 

these information collection 

requirements. 

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18932 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

V. Regulatory Impact Analysis 

We have examined the impacts of this 

rule as required by Executive Order 

12866 (September 1993, as further 

amended, 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 (March 22, 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 

duties, and as further amended by 

Executive Order 13422) 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). Among other things, a 

regulatory impact analysis (RIA) must 

be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). 

We estimate that this rulemaking will 

have an annual benefit on the economy 

of $100 million or more and will have 

‘‘economically significant effects.’’ We 

believe that prescribers and dispensers 

that are now e-prescribing have already 

largely invested in the hardware, 

software and connectivity necessary to 

e-prescribe. We do not anticipate that 

the retirement of NCPDP SCRIPT 5.0 in 

favor of NCPDP SCRIPT 8.1 for the 

transactions listed at § 423.160(b)(2), the 

adoption of the NCPDP SCRIPT 8.1 

Medication History Standard for the 

exchange of medication history 

information, the adoption of the NCPDP 

Formulary and Benefits 1.0 for 

formulary and benefits transactions, the 

adoption of NPI for use in e-prescribing 

transactions and the adoption of NCPDP 

SCRIPT 8.1 (RxFill) for electronic fill 

status notification purposes will result 

in significant costs. We solicited 

industry and other interested 

stakeholder comment and input on this 

issue. 

We anticipate that the ability to 

utilize electronic formulary and benefits 

inquiries will result in administrative 

efficiencies and increased prescribing of 

generic drugs versus brand name drugs, 

and the access to medication history at 

the point of care will result in reduced 

adverse drug events (ADEs). The 

benefits accruing from using the 

adopted standards in these transactions 

will have an economically significant 

effect on Medicare Part D program costs 

and patient safety. As this is a 

significant rule under Executive Order 

12866, we are required to prepare a 

regulatory impact analysis (RIA) for this 

final rule. 

The Regulatory Flexibility Act (RFA) 

requires agencies to analyze options for 

regulatory relief of small entities. For 

purposes of the RFA, small entities 

include small businesses, nonprofit 

organizations, and small governmental 

jurisdictions. Most hospitals and most 

other providers and suppliers are small 

entities, either by nonprofit status or by 

qualifying as small businesses under the 

Small Business Administration’s size 

standards (revenues of $6.5 million to 

$31.5 million in any 1 year for the 

health care industry). States and 

individuals are not included in the 

definition of a small entity. For details, 

see the Small Business Administration’s 

regulation that set forth the current size 

standards for health care industries at 

http://sba.gov/idc/groups/public/ 

documents/sba_homepage/ 

serv_sstd_tablepdf.pdf (refer to the 

620000 series). 

Based on our initial analysis, we 

expect this rulemaking will not have a 

significant impact on a substantial 

number of small entities because, while 

many prescribing physician practices 

and independent dispensers would be 

small entities, e-prescribing is voluntary 

for prescribers and dispensers. For 

prescribers and dispensers that have 

already implemented e-prescribing, the 

adoption of NCPDP SCRIPT 8.1 would 

in most cases be accommodated through 

software upgrades whose cost would 

already be included in annual 

maintenance fees. Medicare Part D 

sponsors are required to support eprescribing, and may incur some costs 

to support the NCPDP Formulary and 

Benefits 1.0, the NCPDP SCRIPT 8.1 

Medication History Standard, the 

NCPDP SCRIPT 8.1 standard for fill 

status notification (RxFill), and the 

National Provider Identifier (NPI). 

However, using the SBA revenue 

guidelines, the majority of Medicare 

Part D sponsors would not be 

considered small entities as they 

represent major insurance companies 

with annual revenues of over $31.5 

million. We also do not anticipate that 

the requirement to use NPI in eprescribing would have any effect on 

Medicare Part D sponsors, prescribers or 

dispensers as they likely are already 

using the NPI in HIPAA-covered 

transactions. 

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 provisions 

of section 604 of the RFA. For purposes 

of section 1102(b) of the Act, we define 

a small rural hospital as a hospital that 

is located outside of a core-bed 

Metropolitan Statistical Area and has 

fewer than 100 beds. This rule will not 

affect small rural hospitals because the 

program will be directed at outpatient 

prescription drugs covered under 

Medicare Part D and not drugs provided 

during a hospital stay. Prescription 

drugs provided during hospital stays are 

covered under Medicare Part A as part 

of Medicare payments to hospitals. 

Therefore, for purposes of our 

obligations under section 1102(b) of the 

Act, we are not providing an analysis. 

Comment: It was recommended by 

one commenter that CMS prepare a 

regulatory impact analysis for small 

rural hospitals, as this rule may have a 

significant impact on small rural 

hospitals that dispense discharge 

medication and ‘‘after hours’’

emergency medications to patients. 

Response: In the November 16, 2007 

proposed rule (72 FR 64909), we 

considered how adoption of these 

standards might affect small rural 

hospitals. We determined that drugs 

dispensed to Medicare beneficiaries by 

small rural hospitals are, for the most 

part, drugs dispensed in an inpatient 

setting and as such, are covered under 

Medicare Part A. The smaller volume of 

Medicare Part D drugs that might be 

dispensed as noted by the commenter 

did not constitute a major impact to the 

extent that it that would necessitate a 

regulatory impact analysis. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2008, that 

threshold is approximately $127 

million. Since only Medicare Part D 

sponsors are required to support eprescribing, this rule does not include 

any mandate that would result in this 

spending by State, local or tribal 

governments. We acknowledge that 

there may be transaction costs borne by 

payers and pharmacy benefit managers 

(PBMs), but, based on our analysis, they 

would fall below the $127 million 

threshold. We would expect that many 

Medicare Part D sponsors already 

support the exchange of formulary, 

benefits, and medication history, 

because the standards we are proposing 

are based on proprietary transactions 

originally developed by RxHub which 

are already in use in the current eprescribing environment. 

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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 18933 

2Congressional Budget Office, The Role of 

Computer Technology in the Growth of 

Productivity May 2002, http://www.cbo.gov/. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a rule 

that imposes substantial direct costs on 

State and local governments, preempts 

State law, or otherwise has Federalism 

implications. No State categorically bars 

e-prescribing. In recent years, many 

States have more actively legislated in 

this area. Should a State law be contrary 

to the Medicare Part D e-prescribing 

standards, or should it restrict the 

ability to carry out the Medicare Part D 

e-prescribing program, section 101 of 

the MMA established preemption of that 

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

Act. It provides the following: 

(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 eligibility, benefits, 

and prescriptions with respect to 

covered Medicare Part D drugs under 

this part. 

For the same reasons given above, we 

have determined that States would not 

incur any direct costs as a result of this 

proposed rule. We believe that, taken as 

a whole, this final rule would meet 

these requirements. 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 

suggested provides both States and 

other affected entities the best possible 

means of addressing preemption issues. 

This section constitutes the Federalism 

summary impact statement required 

under the Executive Order. 

The objective of this regulatory 

impact analysis is to summarize the cost 

and benefits of implementing the 

standards for the conversion from 

NCPDP SCRIPT 5.0 to NCPDP SCRIPT 

8.1 at § 423.160(b)(2); the adoption of 

final uniform standards for the 

electronic communication of 

prescription and prescription-related 

information on formulary and benefits, 

medication history, and prescription fill 

notification status; and the adoption of 

NPI for use as a health provider 

identifier in e-prescribing. The adoption 

of these standards for use in Medicare 

Part D e-prescribing will build upon the 

foundation standards e-prescribing 

requirements that were published as a 

final rule on November 7, 2005 (70 FR 

67568). That rule contained an impact 

analysis that addressed the costs 

associated with implementing the use of 

those foundation standards, and it also 

discussed, in concept, the benefits that 

will accrue from e-prescribing in 

general. In the November 7, 2005 final 

rule (70 FR 67589), we noted that 

commenters had suggested that the 

estimated e-prescribing start-up costs for 

an individual physician to be at least 

$1,500 and perhaps in excess of $2,000. 

For average e-prescribing software 

implementation, according to a 2003 

Center for Information Technology 

Leadership (CITL) Report, ‘‘The Value of 

Computerized Provider Order Entry’’

(http://www.citl.org/research), a basic-eprescribing system cost $1,248 plus 

$1,690 for annual support, maintenance, 

infrastructure and licensing costs. The 

total first year cost averaged 

approximately $3,000. The Journal of 

Healthcare Information Management has 

published that physicians reported 

paying user-based licensing fees ranging 

from $80 to $400 per month, although 

we believe through anecdotal 

information that these licensing fees 

have decreased over time to between 

$25 to $66 a month ($300 to $800 

annually). (For further discussion of the 

start-up costs associated with eprescribing, see the November 7, 2005 

final rule (70 FR 67589)). The impact 

analysis built upon the foundation rule 

analysis, and we referred to the 

foundation rule analysis to assure that 

costs and benefits were not counted 

twice. 

Comment: One commenter discussed 

CMS’ assumptions regarding the cost of 

e-prescribing systems for physicians, 

especially those practices which have 

five or less physicians, which they 

categorize as small practices. One 

commenter suggested that CMS consider 

scaling the savings to be realized 

through e-prescribing according to 

practice size. Another comment was 

that CMS omitted opportunity costs, 

and that advanced e-prescribing systems 

that have more robust features differ 

significantly from basic systems and are 

therefore, more costly, which CMS did 

not take into account. They contend that 

CMS may have double counted 

licensing fees that were already 

included in overall cost figures, and that 

there are significant technology, training 

and upgrade costs, as well as significant 

differences between the cost of a T1 

Internet access line in a rural versus 

urban area which the agency should 

take into account. As only three of the 

six initial standards were found to be 

technologically ready for use, they 

asked that the adoption of standards 

should continue to be voluntary for 

physicians, thus keeping their costs at a 

minimum. Another commenter also 

asked that CMS recognize additional 

costs related to processing eprescriptions, and the ongoing expenses 

incurred by prescribers for hardware/ 

software and other associated costs. 

Response: In the impact analysis for 

the November 16, 2007 proposed rule, 

we attempted to address the cost and 

benefit of implementation of the two 

standards that were proposed for 

adoption at that time, namely 

medication history and formulary and 

benefits, and not that of e-prescribing in 

general, so as not to double count costs 

already attributed to the implementation 

of the foundation standards. In the 

November 7, 2005 final rule (70 FR 

67589), we considered the cost of eprescribing in general. At that time, 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 market share, 

covered lives and local market 

competition. Given that, we proffered a 

conservative estimate of $3,000, taking 

into account variations in products, 

level of adoption, etc., and industry 

feedback indicated that vendors often 

provided free and low cost handheld or 

similar devices. The Journal of 

Healthcare Information Management 

report cited by one commenter took this 

practice into account, but also noted 

that physicians reported paying userbased licensing fees ranging from $80 to 

$400 per month. We did not note that 

this cost was included in the overall 

cost of e-prescribing as cited in that 

report, nor at that time did we account 

for opportunity costs because eprescribing for Medicare Part D is 

voluntary for providers and dispensers, 

and we received no feedback from 

industry and other interested 

stakeholders indicating that opportunity 

costs should be considered. 

As one commenter noted, The Journal 

of Healthcare Information Management 

also reported that in some instances 

prescribers had to invest in new or 

updated hardware, such as computer 

servers, and networking infrastructure 

to use an e-prescribing system, but 

again, that the amount varied 

significantly by product and level of 

adoption. Since that time, we note that 

the cost of new or updated hardware in 

particular has come down dramatically 

due to increased semi-conductor 

production, improved computer 

manufacturing methods and total factor 

productivity growth.2 One commenter 

said that e-prescribing requires a T1 

data transmission line, which may be 

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18934 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

3CMS, Total Medicare Beneficiaries with 

Prescription Drug Coverage as of January 2008, 1–

31–08, http://www.cms.hhs.gov/ 

PrescriptionDrugCovGenIn/. 

true for very large practices, but if the 

mainstream physician practice 

constitutes less than five physicians, we 

believe that e-prescribing can be 

initiated by many physician practices 

without the installation of a T1 data 

transmission line. 

We have acknowledged, and continue 

to acknowledge, that e-prescribing has 

both initial and ongoing costs associated 

with it. Those include, and for the most 

part we have accounted for, some initial 

loss of productivity, hardware costs, 

software costs, training, etc., but with 

widespread e-prescribing, we anticipate 

that prescribers will eventually absorb 

these as a cost of doing business, much 

as they would any purchase of 

equipment. Additionally, provider costs 

for e-prescribing are very much 

contingent on a wide variety of factors, 

including the size of the practice; 

whether an e-prescribing system under 

consideration for purchase is a standalone versus integrated into an 

electronic health record system; the 

level at which a provider enters into 

e-prescribing (in other words, entrylevel necessitating the purchase of 

hardware/software, versus integrating 

into existing hardware/software); 

whether the provider is located in an 

urban versus rural area, and the related 

costs/availability of connectivity; the 

features, whether basic, intermediate or 

advanced, of any given e-prescribing 

package; the number of patients seen 

per year, and the number of 

prescriptions written, etc. Physicians in 

some medical specialties (such as 

geriatrics or internal medicine) may 

regularly prescribe a higher volume of 

prescription drugs per patient due to 

severity of illness, multiple diagnoses, 

etc., versus other medical specialties, 

and thus realize more benefits through 

more frequent, repeated use. We also 

acknowledged in the proposed rule that 

benefits will not be immediately 

recognized, that benefits will accrue 

over a multi-year timeframe and that, 

with more widespread adoption, we 

anticipate that costs will come down, 

systems capabilities will be more robust, 

and the full benefits of e-prescribing 

will be realized. 

We again reiterate that nothing in the 

proposed rule or this final rule changes 

the tenet of section 101 of the MMA that 

e-prescribing Medicare Part D covered 

drugs for Medicare Part D eligible 

individuals is voluntary for prescribers 

and dispensers. Because adoption of eprescribing is voluntary under Medicare 

Part D, we also assume that an 

individual provider or group practice 

will perform their own cost/benefit 

analysis, and will make the decision to 

invest in e-prescribing if they determine 

that their investment will yield a net 

benefit and positive patient outcome 

results. Dispensers may incur higher 

transaction fee costs as a result of the 

increased volume of electronic 

prescriptions, and any costs associated 

with dispenser access to medication 

history. Again, we anticipate that with 

this increased volume of eprescriptions, transaction fees will 

decrease, and whatever residual 

transaction and/or access costs 

associated with medication history 

remain, eventually will be absorbed into 

the dispenser’s cost of doing business, 

while benefits continue to accrue. 

Comment: One commenter said that 

there currently is no way to verify that 

the pharmacy has received an 

electronically transmitted prescription 

or renewal, which, since many 

dispensers do not routinely check their 

electronic prescription messages or 

facsimiles, results in an increase of 

physician office inquiries and call backs 

from the pharmacy. The commenter 

noted that this workflow issue was not 

accounted for in the impact analysis 

relative to physician costs of 

e-prescribing. 

Response: We have received industry 

feedback that most physician 

e-prescribing software packages feature 

a response mechanism that indicates a 

successful transmission of the electronic 

prescription to the pharmacy. In the 

case of EDI transmissions, we also 

understand that the failure rate of EDI 

transmission is less than three tenths of 

one percent. We assume that the small 

failure rate of EDI transmission, 

combined with basic pharmacy 

workflow adjustments to routinely 

check on the receipt of electronic 

prescriptions, that any resulting call 

backs to physicians’ offices would be 

minimized, and would not represent a 

significant cost for either the dispenser 

or provider. 

A. Overall Impact 

In the November 7, 2007 proposed 

rule (72 FR 64912) we noted that 

according to 2006 CMS data, 

approximately 24 million beneficiaries 

were enrolled in a Medicare Part D 

sponsor’s plan, either a stand-alone 

Prescription Drug Plan or a Medicare 

Advantage Drug Plan. This data has 

since been revised to approximately 25 

million Medicare beneficiaries.3

Another 7 million retirees were enrolled 

in employer or union-sponsored retiree 

drug coverage receiving the Retiree Drug 

Subsidy (RDS); 3 million in Federal 

retiree programs such as TRICARE and 

the Federal Employees Health Benefits 

Plans (FEHBP) and 5 million receiving 

drug coverage from alternative sources, 

including 2 million who have coverage 

through the Veterans’ Administration. 

The breadth of Medicare’s coverage 

suggests that e-prescribing under 

Medicare Part D could impact virtually 

every pharmacy and a large percentage 

of the physician practices in the 

country. Standards established for the eprescribing of Medicare Part D covered 

drugs for Medicare Part D eligible 

individuals will, as a matter of 

economic necessity, be adopted by 

vendors of e-prescribing and pharmacy 

software, and as a result, would extend 

to other e-prescribing populations 

unless they are manifestly unsuited for 

the purpose. However, we note again 

that e-prescribing Medicare Part D 

covered drugs for Medicare Part D 

eligible individuals is voluntary for both 

prescribers and dispensers under the 

Medicare Part D e-prescribing program. 

Our pilot testing and industry 

collaboration activities were partially 

intended to prevent the development of 

multiple, ‘‘parallel’’ e-prescribing 

environments, with their attendant 

incremental costs. We have worked to 

avoid imposing an undue administrative 

burden on prescribing health care 

professionals, and dispensers. With the 

exception of the NPI, the standards we 

are adopting in this final rule, as with 

the foundation standards adopted 

previously, are maintained by 

accredited standards development 

organizations. The standards for the 

Medication History, Formulary and 

Benefits, and Fill Status Notification 

transactions have been shown through 

pilot testing to work effectively with the 

foundation standards. 

B. Costs 

Because e-prescribing is voluntary for 

prescribers and dispensers, we 

anticipate that entities who currently do 

not now e-prescribe and who will not 

implement e-prescribing during the 

period reflected in the regulatory impact 

analysis will incur neither costs nor 

benefits. 

Entities that do not now e-prescribe, 

but that will implement e-prescribing 

during the period reflected in the 

regulatory impact analysis will incur the 

costs and benefits associated with the 

foundation standards (which we 

discussed in the November 7, 2005 final 

rule (70 FR 67568) but we do not claim 

either in this analysis). We assume that 

as e-prescribing becomes more 

widespread, workflow adjustments will 

follow that will result in the full range 

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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 18935 

4Michael C. Sokol, M.D., M.S.; Kimberly A. 

McGuigan, PhD; Robert R. Vebrugge, PhD. And 

Robert S. Epstein, M.D., M.S.. Impact of Medication 

Adherence on Hospitalization Risk and Healthcare 

Cost. Medical Care. 2005;43:521–530. 

5Theida, Patricia, M.A., Beard, Stephen, M.S., 

Richter, Anke, Ph.D., and Kane, John, M.D. An 

Economic Review of Compliance with Medication 

Therapy in the Treatment of Schizophrenia. 

Psychiatric Services. April 2003: 54:508–516. 

6Steiner, J.F., Prochazka, A.V. The assessment or 

refill compliance using pharmacy records: methods, 

validity and applications. Journal of Clinical 

Epidemiology. 1997: 50:105–116. 

of benefits that can potentially be 

realized through e-prescribing. Also, 

implementation of the standards that are 

adopted in this rule will not materially 

affect the implementation cost that was 

projected for NCPDP SCRIPT 5.0 in the 

foundation standards final rule. That is, 

the cost to implement NCPDP SCRIPT 

8.1 under § 423.160(b)(2), the NCPDP 

SCRIPT 8.1 Medication History 

Standard, NCPDP Formulary and 

Benefits 1.0, the National Provider 

Identifier (NPI) and the NCPDP SCRIPT 

8.1 standard for fill status notification 

(RxFill) are not materially higher than 

the cost of implementing the NCPDP 

SCRIPT 5.0 foundation standard alone. 

These entities could incur additional 

costs for the purchase of new eprescribing products that include 

functions that support the ability to 

conduct transactions using these eprescribing standards. They would also 

incur the benefits of the all of these final 

standards. 

Comment: One commenter stated that 

our analysis did not take into account 

the adoption of RxFill, and any 

associated costs and benefits. 

Response: In the November 16, 2007, 

proposed rule we asked for stakeholder 

comments on the potential utilization of 

RxFill in Medicare Part D e-prescribing, 

but did not propose its adoption. As 

previously discussed, in the proposed 

rule we referenced industry feedback 

that the adoption of RxFill ‘‘may cause 

an unnecessary administrative burden 

on prescribers and dispensers,’’ and 

solicited feedback regarding industry’s 

views on any potential administrative 

burden associated with its use. 

Therefore, no cost/benefit analysis was 

performed in consideration of the 

adoption of RxFill as a final uniform 

standard. As a result of comments 

received through the notice and 

comment rulemaking process, and as we 

discussed above, the industry has now 

indicated that it believes there will be 

no administrative burden associated 

with the adoption of the RxFill 

standard. Therefore, we will adopt both 

the NPI, and the RxFill standard for fill 

status notification transactions for use 

by providers who see value in utilizing 

electronic transaction using the adopted 

standards to support patient medication 

management and discuss both the costs 

and benefits here. 

Because use of the electronic fill 

status notification transaction is 

voluntary, we have no clear indication 

from the industry as to how many 

providers potentially will see value in, 

and use transactions utilizing the 

adopted e-prescribing standards for this 

function. The feedback we have 

received from provider organizations 

indicates that they envision that its use 

will be more prevalent among those 

providers who wish to track medication 

adherence for Medicare Part D 

beneficiaries who have chronic medical 

conditions, such as diabetes, 

hypertension, etc., for whom following 

a medication regimen is imperative. We 

also note that RxFill is limited to 

informing the prescriber that the 

prescription has been filled, not filled, 

etc., and it is but an initial indicator of 

a patient’s intention to actually take the 

prescribed medication. The assumption 

here is that a patient is more likely to 

take a medication prescribed for him/ 

her if they know that the prescriber will 

be monitoring this information, and 

more likely to take the medication if 

they have made the effort to go to the 

pharmacy, purchase and take the 

prescription drug home. 

We also understand from industry 

feedback that prescription information 

exchange networks have fill status 

notification functionality (RxFill) built 

into their systems but that most 

physicians currently are not signed up 

to use it. When a patient picks up a 

prescription at the pharmacy, they 

likely sign an electronic signature log. 

This electronic signature triggers a 

pharmacy software system update 

which, in turn, triggers a fill status 

notification message transaction using 

the RxFill standard to be sent to the 

prescriber, if the prescriber has 

requested receipt of such information. 

Conversely, when a prescription is not 

picked up and returned to inventory, 

this activity also triggers a similar 

message if the prescriber has requested 

receipt of such information. Stand alone 

e-prescribing systems usually send such 

updates to requesting prescribers 

overnight; however, there are integrated 

e-Signature systems which employ realtime notification. Given that most 

dispensers who are already eprescribing use an electronic signature 

pad to verify prescription pick-up by the 

patient are already gathering this 

information and need acknowledgement 

from the prescriber through a ‘‘flag’’ in 

their e-prescribing software system that 

they want to receive this information, 

we do not believe that there will be any 

significant changes to pharmacy or 

prescriber workflows once that ‘‘flag’’ is 

activated, and no cost impact associated 

with the use of RxFill for those 

prescribers and dispensers who are 

currently e-prescribing. 

Those dispensers still using paper 

logs to record patient pick-up of a 

prescription likely are not e-prescribing 

and therefore, would not be impacted 

either from a workflow or economic 

perspective. 

We agree with commenters who 

stated that neither the medication 

history nor the formulary and benefits 

standard would result in additional 

e-prescribing costs for those already 

e-prescribing, and apply that rationale 

to RxFill. As the fill status notification 

function resides on the NCPDP SCRIPT 

8.1 standard alongside the medication 

history function, we expect that it 

would also not result in any additional 

costs being incurred. For those not 

currently e-prescribing, they would 

incur the costs and benefits associated 

with the foundation standards (which 

we discussed in the final rule at 70 FR 

67568), but which we did not claim in 

our analysis. 

One potential benefit anticipated from 

the use of RxFill are those associated 

with better medication adherence on the 

part of patients, and this varies 

depending on the clinical condition. 

According to a study entitled, ‘‘Impact 

of Medication Adherence on 

Hospitalization Risk and Healthcare 

Cost’’,4 adherence with medication 

therapy is generally low—

approximately 50 to 65 percent, on 

average, for common chronic conditions 

such as hypertension and diabetes. In 

this study, for diabetes, the average 

annual incremental drug cost associated 

with a 20 percent increase in drug 

utilization was $177, and the associated 

disease-related medical cost reduction 

was $1,251, for a net savings of $1,074 

per patient, or an average return on 

investment of 7.1:1. Other studies of a 

mental health condition such as 

schizophrenia estimate the cost of noncompliance with medication therapy to 

be about $705 million over a 2-year 

period.5 Another study on medication 

therapy adherence in hypertensive 

patients showed that interventions 

aimed at improving compliance with 

medication regimens increased patient 

adherence by up to 11 percent, and that 

when it came to prescription refills, 

partial compliance with prescription 

refills identified important clinical 

consequences of reduced compliance, 

with gaps in taking medication resulting 

in an increase in hospitalizations.6

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18936 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

Researchers generally agree that it is 

difficult to arrive at a dollar figure that 

would reflect the outcomes of 

medication adherence for all clinical 

conditions, but we believe that, based 

on studies such as those cited, it is 

prudent to assume that in the Medicare 

Part D program, an increase in 

prescription drug utilization by patients 

as a result of better medication 

adherence would be far offset by a larger 

reduction in the cost of Medicare 

beneficiary hospitalizations, outpatient 

procedures and other clinical treatments 

that might result from non-adherence to 

medication regimens. 

Relative to the NPI, in the proposed 

rule we discussed that we did not 

anticipate any significant costs to be 

associated with the use of the NPI by 

vendors, prescribers, dispensers or 

Medicare Part D sponsors for eprescribing transactions under section 

1860D–4(e). Use of the NPI is already 

required in order to conduct HIPAAcovered transactions which require the 

identity of HIPAA-covered health care 

providers; and the compliance date for 

the NPI, May 27, 2007, has already 

passed. The NPI is easily obtainable, 

and there is no cost associated with 

applying for and/or obtaining an NPI. 

Once received, the NPI is usually 

entered by the physician initially into 

their e-prescribing software system, and 

it is carried thereafter by the system, 

which automatically populates the NPI 

field on the NCPDP SCRIPT 8.1 

standard. The NPI is in widespread use 

by HIPAA-covered entities in HIPAA 

transactions. Although the transactions 

using the NCPDP SCRIPT standard are 

not HIPAA transactions, the prescribers 

and dispensers that conduct such 

transactions would be HIPAA-covered 

entities, and as such, they would 

already be using NPI as they conduct 

their HIPAA transactions. They would, 

therefore, already be familiar with the 

NPI, even though they may not 

currently use it in the context of 

transactions using the NCPDP SCRIPT 

standard. 

For e-prescribers whose software 

products are not able to generate 

transactions using the NCPDP SCRIPT 

8.1 standard, they will not have the 

capability to use the NCPDP Formulary 

and Benefits Standard 1.0, the NCPDP 

SCRIPT 8.1 Medication History 

transaction, or the NCPDP SCRIPT 8.1 

RxFill standard. Costs would be 

incurred if they were to replace such 

software with software that generates 

transactions that comply with the 

adopted standards. We anticipate that 

the NCPDP SCRIPT 8.1 will be 

accommodated in later software version 

upgrades where that standard is not 

already utilized. We believe that the 

implementation of the NPI would be 

accomplished as part of this transition. 

Prescribers and dispensers already 

should be using the NPI to conduct 

retail pharmacy drug claim transactions. 

Medicare Part D sponsors will not be 

significantly affected by the adoption of 

the NPI because the Medicare Part D 

sponsors already use the NPI in HIPAA 

transactions, such as the retail 

pharmacy drug claim. 

Software vendors are already 

implementing NCPDP SCRIPT 8.1 in 

their products, NPI is supported by 

NCPDP SCRIPT 8.1, and we believe that 

any needed upgrades will be included 

in routine version upgrades. 

Benefits for the use of the NPI in eprescribing under Medicare Part D have 

not been quantified by the industry. The 

NPI provides a standard way for 

dispensers to identity individual 

prescribers in an e-prescribing 

transaction. We anticipate that its use 

will help dispensers reduce the number 

of callbacks to a physicians office to 

verify an e-prescriber’s identity, 

although it is unclear and 

unsubstantiated from industry feedback 

as to what percentage of callbacks 

between the dispenser and the 

prescriber can be attributed solely to 

this inquiry. 

Comment: One commenter offered 

that neither the adoption of NCPDP 

SCRIPT 8.1 nor adoption of the 

standards for medication history and 

formulary and benefits would result in 

significant costs as the majority of the eprescribing industry is already using 

these standards. The commenter agreed 

that the costs for entities that do not 

now e-prescribe, but will be 

implementing the e-prescribing 

technology in the future, would not be 

substantially increased by the adoption 

of these standards. Another commenter 

said although the NCPDP SCRIPT 8.1 

Medication History transaction and the 

NCPDP Formulary Benefit Standard 1.0 

are relatively new, it is not accurate for 

CMS to state that they are not currently 

deployed for use in the functions that 

were listed at § 423.160(b)(1). 

Response: From industry feedback, 

we have learned that the medication 

history and formulary and benefits 

functions were adopted by some entities 

nearly two years ago, and there are 

others in the industry that have been 

using them for even longer. As such, our 

conclusion remains the same that 

adoption of these standards now would 

result in no new additional costs. 

Entities that e-prescribe now using a 

software product that cannot use the 

NPI and conduct medication history, 

formulary and benefits, and fill status 

notification standards, and that cannot 

be upgraded to conduct them (for 

example, stand-alone Microsoft Wordbased prescription writers) will not be 

required to conduct these transactions 

(if they choose to conduct these 

transactions) using the NCPDP SCRIPT 

standard until April 2009. If they decide 

to upgrade their entire e-prescribing 

system to take advantage of the benefits 

of these new standards, they would 

incur costs. However, we have no clear 

sense of how many entities would fall 

into this category. 

Entities that e-prescribe now using a 

product that could be upgraded to 

conduct medication history, formulary 

and benefits, and fill status notification 

using the three adopted standards 

would incur no cost or benefit if they 

decide not to upgrade. If they decide to 

upgrade, they would incur the cost of 

the upgrade (unless the upgrade is 

included in their maintenance 

agreement) and any testing costs, and 

would incur the benefits of utilizing 

these three standards. This would also 

apply to entities that e-prescribe now 

using a product that conducts the three 

transactions using nonstandard (Non 

NCPDP SCRIPT) formats, but the 

functionality is not used. Based on our 

research, this category likely is the one 

in which most current e-prescribers fall. 

Entities that e-prescribe now using a 

product that conducts one or more of 

the three transactions using 

nonstandard formats and who continue 

to use the electronic transactions would 

have to upgrade their software. They 

would not enjoy all the benefits of 

conducting transactions using the three 

new standards since they would have 

already been performing them in some 

manner, but definitely would incur cost 

savings due to the increased 

interoperability of using the NCPDP 

SCRIPT standards. However, any entity 

engaging in e-prescribing would incur 

benefits due to increased 

interoperability, as the existence of 

standards simplifies data exchange 

product selection and testing. 

1. Retail Pharmacy 

Because e-prescribing is voluntary for 

dispensers, unless they were to 

commence e-prescribing, those who do 

not currently conduct e-prescribing 

would not incur any costs related to any 

of the provisions of this rule. However, 

we recognize that costs would be 

incurred by those dispensers that 

currently conduct e-prescribing 

transactions, as well as those who 

voluntarily implement e-prescribing 

during the period reflected in our 

regulatory impact analysis. Industry 

estimates are that 97 percent of the 

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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 18937 

7Surescripts, National Report on E-prescribing, 

December 2007. http://www.surescripts.com/ 

report/. 

8E-Prescribing and the Prescription Drug Program 

final rule, published November 7, 2005 (70 FR 

67568). 

nation’s retail chain dispensers 

currently e-prescribe, in contrast to only 

27 percent of independent dispensers 

that e-prescribe.7

Transactions using NCPDP Formulary 

and Benefits 1.0 are carried out between 

the plan and prescriber and, therefore, 

dispensers will not incur any cost 

related to this transaction. 

While the NCPDP SCRIPT 8.1 

Medication History Standard can be 

used in transactions to support 

communication between the dispenser 

and prescriber, its use is, nonetheless, 

voluntary for both. We assume for 

purposes of this analysis that the 

NCPDP SCRIPT 8.1 Medication History 

Standard will be used in medication 

history exchange transactions. 

Effective May 23, 2008 dispensers are 

required under HIPAA to use the NPI to 

conduct retail pharmacy drug claim 

transactions. Therefore, we associate no 

additional costs with the use of the NPI 

in Medicare Part D e-prescribing for 

retail dispensers. 

Comment: One commenter remarked 

that the cost of migrating to NCPDP 

SCRIPT 8.1 has already been borne by 

dispensers and their system vendors, 

and that there should be no cost 

associated with adoption of NCPDP 

Formulary and Benefits 1.0. However, 

the commenter acknowledged that there 

may be some costs to dispensers that 

supply data to support the medication 

history functionality and these costs are 

already being borne by participating 

dispensers. 

Response: The benefits of eprescribing in general, and the specific 

standards to be adopted through this 

final rule, are significant, especially in 

terms of patient safety. As noted in the 

November 16, 2007 proposed rule (72 

FR 64912), depending on their stage of 

e-prescribing adoption, there may be 

costs associated with the adoption of 

these standards for dispensers. These 

costs are far outweighed by the eventual 

economies realized by improved 

workflows and productivity savings 

within the pharmacy environment; 

marketplace forces should come into 

play as e-prescribing volume increases, 

which will help drive down costs and 

realize economies of scale. 

The adoption of NCPDP SCRIPT 8.1 

in place of the NCPDP SCRIPT 5.0 

foundation standard for the transactions 

listed at § 423.160(b)(2) will impact 

dispensers that conduct e-prescribing. 

Dispensers will have to ensure that their 

software can accept prescription 

transactions using the NCPDP SCRIPT 

8.1 standard, and they will need to test 

with prescribers to assure that their 

electronic transactions are being 

received and can be processed. We 

believe there is little, if any, incremental 

costs associated with these activities. 

Software vendors have or are already 

incorporating NCPDP SCRIPT 8.1 in 

their products, and we believe that any 

needed upgrades will be included in 

routine version upgrades. The number 

of current e-prescribers per pharmacy is 

small, and the testing process is not 

complicated. We believe that the 

implementation of the NPI will be 

accomplished as part of this transition. 

Prescribers and dispensers already use 

the NPI to conduct retail pharmacy drug 

claim transactions. 

2. Medical Practices 

Medical practices, compared to 

dispensers, face a different set of costs 

in implementing information systems 

for clinical care and financial 

management. Unlike dispensers, where 

technology has become an important 

part of operations (especially for larger 

retail chains), many providers have been 

cautious in their adoption of health 

information technology. We assume 

that, based on industry estimates, 

anywhere from 5 to 18 percent of 

physicians are e-prescribing today.8

Because e-prescribing is voluntary for 

prescribers, medical practices that do 

not currently conduct e-prescribing 

would not incur any costs related to any 

of the provisions of this rule. However, 

we recognize that costs would be 

incurred by those prescribers currently 

e-prescribing, as well as those who 

voluntarily begin to e-prescribe during 

the period reflected in our regulatory 

impact analysis. If a practice decides to 

implement e-prescribing at a later time, 

we anticipate that the software products 

on the market would be compliant with 

these standards and, therefore, no 

additional cost would be incurred. In 

assessing the cost to prescribers that are 

currently e-prescribing, many of the eprescribing software products generally 

already contain some capability to 

communicate formulary and benefits 

and medication history information 

because they incorporate the RxHub 

proprietary format on which the 

proposed standards were based. We 

expect that any changes that might be 

necessary as a result of this rulemaking 

would likely be included in routine 

version upgrades that are covered by 

annual maintenance and subscription 

fees. 

For e-prescribers whose software 

products are not able to generate 

transactions using the NCPDP SCRIPT 

8.1 standards, they will not have the 

capability to conduct electronic 

transactions using the NCPDP 

Formulary and Benefits Standard 1.0 

and NCPDP SCRIPT 8.1 Medication 

History Standard. Costs would be 

incurred if they were to replace such 

software with software that can conduct 

transactions that comply with the 

proposed standards. We anticipate that 

the NCPDP SCRIPT 8.1 will be 

accommodated in later software version 

upgrades where that standard is not 

already utilized. We believe that the 

implementation of the NPI will be 

accomplished as part of this transition. 

As the fill status notification function 

resides on the NCPDP SCRIPT 8.1 

standard alongside the medication 

history function, we expect that it 

would also not result in any additional 

costs being incurred. However, we 

recognize that the use of RxFill may 

result in workflow changes for the 

prescriber who must determine what 

he/she will do with the information 

provided by the RxFill transaction 

relative to their clinical practices. For 

those not currently e-prescribing, they 

would incur the costs and benefits 

associated with the foundation 

standards (which we discussed in the 

final rule at (70 FR 67568)), but which 

we did not claim in our analysis. 

3. Medicare Part D Sponsors and 

Pharmacy Benefit Managers (PBMs) 

Medicare Part D sponsors will be 

required to support NCPDP SCRIPT 8.1 

for the transactions listed at 

§ 423.160(b)(2), the NCPDP Formulary 

and Benefits 1.0, and the NCPDP 

SCRIPT 8.1 Medication History 

Standard. They will need to assure that 

their software can receive and conduct 

transactions utilizing NCPDP Formulary 

and Benefits 1.0 and the NCPDP SCRIPT 

8.1 Medication History Standard, and 

that their internal systems and databases 

can supply the information needed to 

build the transaction. For example, they 

will need to be able to extract 

prescription claims history and format it 

according to the NCPDP SCRIPT 8.1 

Medication History Standard. We 

believe that many Medicare Part D 

sponsors will have already implemented 

this functionality because the standards 

we are proposing are based on 

proprietary file transfer protocols 

developed by Rx-Hub that have been 

included in many e-prescribing 

products. Medicare Part D sponsors may 

need to restructure systems to assure 

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18938 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

9RxHub Announces 2006 e-Prescribing Results 

and Highlights Milestones for 2007, St. Paul, MN, 

February 23, 2007, http://www.rxhub.com. 

10CMS, Total Medicare Beneficiaries with 

Prescription Drug Coverage as of January 2008, 1–

31–08, http://www.cms.hhs.gov/ 

PrescriptionDrugCovGenIn/. 

that the data output is in the proper 

format, but, for the most part, the 

needed functionality is in place. 

We recognize that some Medicare Part 

D sponsors may need to make additional 

investments to support these standards. 

Because plans typically pay the per 

transaction network fees for eligibility 

transactions, which likely includes 

providing a formulary and benefits 

response as well as a medication history 

response, Medicare Part D sponsors will 

incur increased transaction costs for 

formulary and benefits and medication 

history transactions as the frequency in 

which these transactions are conducted 

electronically increases. 

Through information provided by 

SureScripts and industry consultants, 

this transaction fee appears to range 

from 6 cents to 25 cents per transaction, 

with the midpoint being 15 cents. In 

2006, RxHub, one of the nation’s largest 

electronic prescription and prescriptionrelated information routing networks, 

estimated that their transaction volume 

increased 50 percent, from 29 million in 

2005 to more than 43 million in 2006. 

These transactions were real-time 

requests for patient eligibility and 

benefits, formulary, and medication 

history information.9

Based on data available at that time, 

we estimated that approximately 24 

million Medicare beneficiaries received 

Medicare Part D benefits in 2006. (These 

data have since been revised to 

approximately 25 million Medicare 

beneficiaries). 10 This figure reflected 

those Medicare beneficiaries enrolled in 

a Medicare Prescription Drug Plan (PDP) 

or a Medicare Advantage plan with 

Prescription Drug coverage (MA–PD) or 

both, for which we have prescription 

drug event data. Approximately 

825,000,000 claims (prescription drug 

events) were finalized and accepted for 

2006 payment. The annual percentage 

increase in the number of Medicare Part 

D prescriptions was estimated by CMS 

at 4.6 percent based on industry 

feedback (http://www.imshealth.com/

ims/portal/front/articleC/0,2777,6599

_3665_80415465,00.html). So that 

impact comparisons could be made 

equally across all years, inflation was 

removed from the price effects. 

Conservatively, we calculated the 

increase in the number of Medicare Part 

D prescriptions and applied the current 

estimates of 5 and 18 percent electronic 

prescribing adoption rates to arrive at 

the number of Medicare Part D 

electronic transactions, and cost them 

out at a range of a low of 6 cents per 

transaction to a high of 25 cents per 

transaction. We estimated costs for 

Medicare Part D sponsors of between $2 

million to $46 million per year. 

Medicare Part D sponsors may 

negotiate the cost of e-prescribing 

transactions as part of the dispensing 

fees included in their pharmacy 

contracts, and account for these costs in 

their annual bids to participate in the 

Medicare Part D program. In these 

instances, inclusion of these costs may 

increase the cost of their Medicare Part 

D bids. However, we anticipated that 

these costs would be negated by the 

savings from an increased rate of 

conversion from brand name to generic 

prescriptions realized through 

utilization of NCPDP Formulary and 

Benefits 1.0, which would more than 

offset the transaction costs. 

Medicare Part D sponsors would not 

be affected by the adoption of the 

NCPDP SCRIPT 8.1 for the transactions 

listed at § 423.160(b)(2) because these 

transactions are conducted between 

prescribers and dispensers, and 

Medicare Part D sponsors are not 

involved. 

Medicare Part D sponsors would not 

be significantly affected by the adoption 

of the NPI as a standard for use in eprescribing transactions among the 

Medicare Part D sponsors, prescribers, 

and dispensers because the Medicare 

Part D sponsors already use the NPI in 

HIPAA transactions, such as the retail 

pharmacy drug claim. 

4. Vendors 

Vendors of e-prescribing software 

would incur costs to bring their 

products into compliance with these 

requirements. However, we considered 

the need to enhance functionality and 

comply with industry standards to be a 

normal cost of doing business that will 

be subsumed into normal version 

upgrade activities. Vendors may incur 

somewhat higher costs connected with 

testing activities but vendors should be 

able to address this potential workload 

on a flow basis. We believed these costs 

to be minimal. 

Comment: A commenter noted that 

the costs to vendors of migrating to 

NCPDP SCRIPT 8.1 for the transactions 

listed at § 423.160(b)(2), as well as 

adding the NCPDP SCRIPT 8.1 

Medication History Standard, the fill 

status notification standard (RxFill), and 

the NCPDP Formulary and Benefits 1.0 

to their applications, are a normal cost 

of vendors doing business, and these 

costs have in large part already been 

borne by e-prescribing vendors. 

Response: We agree with the 

commenter’s contention that minimal 

additional costs will be incurred by 

vendors by switching to the NCPDP 

SCRIPT 8.1 standard, nor by adding the 

use of the NPI, RxFill, the NCPDP 

SCRIPT 8.1 Medication History 

Standard and the NCPDP Formulary and 

Benefits 1.0 to their applications. Many 

of them have already incorporated 

Formulary and Benefits 1.0 into their 

software products, and have already 

transitioned to NCPDP SCRIPT 8.1, 

which houses the RxFill and the 

Medication History functionality on its 

platform. As previously discussed in the 

Cost section of this regulatory impact 

analysis, software vendors are already 

implementing NCPDP SCRIPT 8.1 in 

their products, NPI is supported by 

NCPDP SCRIPT 8.1, and we believe that 

any needed upgrades will be included 

in routine version upgrades. Vendors 

did not indicate in their comments in 

response to the proposed rule that the 

use of the NPI in e-prescribing will 

create any additional vendor costs, and 

we assume that any costs that might be 

incurred, such as testing, would be 

absorbed by vendors as a cost of doing 

business. 

C. Benefits 

In the November 16, 2007 proposed 

rule (72 FR 64913), we assumed that the 

benefits of the proposed adoption of 

standards for formulary and benefits 

and medication history transactions 

would take place over a multiyear 

timeframe. (For discussion of the 

benefits associated with the adoption of 

these standards, refer to the discussion 

in the November 16, 2007 proposed rule 

(72 FR 64913).) 

1. Formulary and Benefits Standard—

Generic Drug Usage 

We based our assumptions on 

industry estimates that approximately 5 

percent to 18 percent of group practices 

are e-prescribing today. We anticipated 

that transactions utilizing NCPDP 

Formulary and Benefits 1.0 would allow 

the prescriber to view formulary drugs, 

alternative preferred drugs in a given 

class that may offer savings to the 

patient, or to see in advance what other, 

less costly drugs within a given drug 

classification or generic drugs can be 

substituted for a given brand name 

prescription drug, resulting in reduced 

calls to the plan, and fewer callbacks 

from a pharmacy because a prescribed 

drug is not on a beneficiary’s drug plan 

formulary. 

In the first half of 2006, the ratio of 

generic versus brand name prescription 

drugs in the Medicare Part D program 

was 60 percent versus 40 percent. An 

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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 18939 

11http://www.nacds.org/ 

wmspage.cfm?parm1=5507. National Association of 

Chain Drug Stores data. 

industry study indicated a 15 percent 

increase in generic substitution rates for 

physicians with e-prescribing. However, 

not all beneficiaries will accept generic 

prescription drugs and there are some 

instances in which the brand name 

prescription drug has proven through 

physician experience to be the more 

effective drug. Therefore, we applied a 

more conservative 7 percent increase in 

generic prescriptions. 

Based on industry data, we assumed 

the cost of a brand name prescription 

drug at $111.02 and the cost of a generic 

drug at $32.23.11

While Medicare beneficiaries will be 

the most direct recipients of the savings 

realized by the conversion of brand 

name to generic prescription drugs, the 

Medicare program also will save money 

as it will be paying for an increased 

number of lower cost generic 

prescriptions versus higher cost, brandname prescription drugs. We calculated 

a ten-year cost savings of $95 million to 

$410 million. 

Comment: A commenter agreed that 

while they did not conduct a financial 

analysis, the benefits identified by CMS 

in the proposed rule appeared to be 

reasonable. Another commenter stated 

that CMS underestimated the benefits 

that the switch from brand name to 

generic drugs would generate as a result 

of prescribers having access to 

formulary and benefits information at 

the point of care, and that it would 

vastly exceed CMS’ 7 percent estimate. 

Response: We made a good faith effort 

to estimate both costs and benefits 

associated with the adoption of these 

standards using very conservative 

assumptions on the benefit side, and 

estimating costs so as to elicit industry 

and stakeholder comments on the 

feasibility of our approach. While we 

believe that the benefits of adoption of 

these standards could far exceed 

expectations, we also caution that any 

one of a number of factors—for example, 

delays in making real-time formulary 

and benefits information available to 

prescribers at the point of care—could 

hinder the adoption of e-prescribing and 

the benefits to be realized through, for 

example, anticipated wider use of 

generic versus brand name prescription 

drugs in the Medicare Part D 

prescription drug program. Given this, 

we estimated that realistically, a 7 

percent increase in the prescribing of 

generic versus brand name drugs could 

be achieved through the use of 

formulary and benefits information. 

2. Formulary and Benefits Standard—

Administrative Savings 

a. Physician and Physician Office Staff 

The 2004 Medical Group Management 

Association (MGMA) survey entitled, 

‘‘Analyzing the Cost of Administrative 

Complexity’’ (http://www.mgma.com/ 

about/default.aspx?id=280) estimated 

the staff and physician time spent, on a 

per physician full time equivalent (FTE) 

basis, interacting with dispensers on 

formulary questions and generic 

substitutions. Physician time was 

estimated at almost 16 hours a year; 

another 14 hours were spent per 

physician per year on generic 

substitution issues. Staff spent almost 

26 hours per FTE physician on 

formulary issues, and another 24 hours 

per FTE physician on generic 

substitution issues. 

CMS estimated the number of 

physicians in active practice who 

participated in the Medicare program in 

2006 at 1,048,243, and a percentage rise 

in the number of physicians 

participating in the Medicare program of 

.94 percent per year, so we applied that 

percentage increase to estimate the 

number of Medicare physicians for 2009 

through 2013. We also applied the 

previous assumption that from 5 to 18 

percent of prescribers are e-prescribing 

today. Per the MGMA survey, we 

assumed a physician labor cost of $100 

per hour and an average staff labor cost 

of $22 per hour per physician FTE. 

Pilot site experience shows that with 

e-prescribing, responding to refill 

requests, and resolving pharmacy 

callbacks were all done more efficiently 

with e-prescribing than before. 

However, full implementation would be 

difficult to achieve, and we used an 

estimate of 25 percent implementation. 

Our model calculated that, at that rate 

of implementation, physicians and staff 

would realize savings ranging from $55 

million to $206 million. 

b. Dispensers 

If each physician and their office staff 

saved a total of 80 hours a year by using 

the NCPDP Formulary and Benefits 1.0, 

and reduced the time spent on the 

phone with dispensers, we assumed that 

dispensers would save the equivalent 

amount of time by not making these 

calls. Since the MGMA survey assumed 

a dispenser labor rate of $60 per hour, 

our model predicted an annualized cost 

benefit savings ranging from a low of 

$65 million to a high of $242 million at 

25 percent implementation. 

Comment: A commenter expressed 

concern that the administrative savings 

for dispensers as represented in Table 4 

of the proposed rule overestimated the 

administrative cost savings for 

dispensers. They stated that while 

dispensers are on the phone waiting for 

a response from a physician on a 

formulary question, dispensers often 

perform other work concurrently, and 

thus devote less time than was 

estimated for this particular task, which 

in turn affects the overall estimate of 

administrative cost-savings benefits to 

dispensers. 

Response: When estimating the 

benefits accrued to dispensers in Table 

4 of the proposed rule, we were 

conservative in our assumptions so as 

not to unnecessarily inflate the benefit 

projections. We used the generally 

accepted 5 and 18 percent e-prescribing 

adoption rates versus much higher rates 

as projected in some widely read 

industry publications. We relied upon 

the Medical Group Management 

Association (MGMA) study of physician 

and staff time spent on the phone 

resolving, among other things, 

formulary and benefits issues, and 

further reduced our benefit projects 

down to the 25 percent level. 

3. Medication History Standard—

Reduction of Adverse Drug Events 

(ADEs) 

Utilizing the medication history 

standard in the transmission of 

medication history information will 

simplify medication reconciliation 

through transitions in care and, in so 

doing, provide consumers with a safer 

medication delivery system, and greater 

convenience. 

Although outpatient ADEs were 

difficult to estimate, literature estimated 

that, as of 2005, there were 530,000 

preventable ADEs for Medicare 

beneficiaries annually. Moreover, the 

estimated cost per ADE ranged from 

$2,000 to upwards of $6,000 depending 

on the care setting. We computed the 

benefits of using the NCPDP SCRIPT 8.1 

Medication History Standard based on 

data regarding ADEs as a percentage of 

the total Medicare population. Based on 

CMS Medicare population data, we 

calculated that of the total Medicare 

population, ADEs occur in about 1.24 

percent of that population each year. 

Based on pilot experience, we 

assumed that the reduction in the risk 

of ADEs could be attributed mostly to 

the use of the NCPDP SCRIPT 8.1 

Medication History Standard history 

rather than to e-prescribing in general. 

The pilot project demonstrated that 50 

percent of preventable ADEs could be 

eliminated if e-prescribing is used, but 

also recognized that the pilot project 

may not have accurately represented 

mainstream experience. Given that, we 

conservatively assumed that the number 

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18940 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

12Michael C. Sokol, M.D., M.S.; Kimberly A. 

McGuigan, PhD; Robert R. Vebrugge, PhD; and 

Robert S. Epstein, M.D., M.S. Impact of Medication 

Adherence on Hospitalization Risk and Healthcare 

Cost. Medical Care. 2005;43:521–530. 

of ambulatory ADEs associated with 

Medicare Part D beneficiaries could be 

reduced by the use of medication 

history by 25 percent for those patients 

for whom prescriptions were written 

electronically; we used the same uptake 

e-prescribing estimates (5 to 18 percent) 

as earlier for e-prescribing adoption. We 

estimated a potential cost savings over 

10 years of $13 million to $156 million 

from avoided ADEs. 

4. RxFill—Medication Adherence 

As previously discussed in the Cost 

section of this regulatory impact 

analysis, one potential benefit 

anticipated from the use of RxFill are 

those associated with better medication 

adherence on the part of patients, and 

this varies depending on the clinical 

condition. Researchers generally agree 

that it is difficult to arrive at a dollar 

figure that would reflect the outcomes of 

medication adherence for all clinical 

conditions, but we believe that it is 

prudent to assume that in the Medicare 

Part D program, an increase in 

prescription drug utilization by patients 

as a result of better medication 

adherence would be far offset by a larger 

reduction in the cost of Medicare 

beneficiary hospitalizations, outpatient 

procedures and other clinical treatments 

that might result from non-adherence to 

medication regimens. See the Cost 

section of this regulatory impact 

analysis for more details regarding our 

benefit assumption for the use of RxFill. 

5. National Provider Identifier (NPI)—

Reduced Callbacks 

We reiterate our previous discussion 

in the Cost section of this regulatory 

impact analysis that benefits for the use 

of the NPI in e-prescribing under 

Medicare Part D have not been 

quantified by the industry. We 

anticipate that its use will help 

dispensers reduce the number of 

callbacks to a physicians office to verify 

an e-prescriber’s identity, although it is 

unclear and unsubstantiated from 

industry feedback as to what percentage 

of call backs between the dispenser and 

the prescriber can be attributed solely to 

this inquiry. 

D. Total Impact 

We concluded that the cost of 

implementing these standards is 

minimal, with quantifiable benefits 

reaped by dispensers, prescribers, and 

beneficiaries. Over five years, we 

expected that these groups will see 

average net benefits in a range from 

$218.0 million to $863.9 million from 

the utilization of formulary and benefits 

and medication history transactions, 

and the promulgation of these 

standards. As previously discussed, we 

do not expect that the adoption of RxFill 

and the use of the NPI in e-prescribing 

will result in any additional costs. We 

expect that their use will result in 

unquantifiable benefits which include 

the assumption, in the case of RxFill, of 

better patient medication adherence that 

will likely result in long-term savings 

for the Medicare program; and for the 

NPI, in improved pharmacy workflows 

via reduced call backs to physician 

offices to identify individual 

prescribers. 

Comment: A prescription information 

exchange network agreed that the 

benefits to all stakeholders of utilizing 

the NCPDP Formulary and Benefits 1.0 

and adopting NCPDP SCRIPT 8.1 for the 

transactions listed at § 423.160(b)(2) will 

far exceed the financial costs. In their 

estimation, the total benefits range of 

$218 to $863.9 million appears to be 

realistic. 

Response: Again, efforts were made to 

estimate both costs and benefits 

associated with the adoption of the final 

standards using very conservative 

assumptions on the benefit side, and 

conversely, overestimating costs so as to 

elicit industry and stakeholder 

comments on the feasibility of our 

approach. As previously discussed, in 

addition to the anticipated costs and 

benefits associated with use of 

medication history and formulary and 

benefits, we expect there will be 

minimal or no cost associated with the 

use of either the NPI, or RxFill by 

providers who find value in use of an 

electronic fill status transaction for 

purposes of tracking patient adherence 

to medication therapies. We expect use 

of the NPI will assist dispensers to 

identify individual e-prescribing 

providers, resulting in a reduction of 

call backs to physician offices. The use 

of the Fill Status Notification standard 

by those providers who use an 

electronic fill status transaction to 

monitor patient medication adherence 

will realize benefits such as reduced 

patient hospitalizations, outpatient 

procedures, and clinical treatments, and 

improved patient outcomes. 

Comment: One commenter made the 

observation that actual drug costs will 

increase due to increased volume 

related to improved patient compliance, 

and that CMS should account for this in 

its discussions of costs and benefits. 

Response: We believe that the 

commenter was referring to the 

increased drug cost to the Medicare Part 

D program because the number of 

prescriptions being picked up at the 

pharmacy by a Medicare beneficiary 

might increase with the use of the fill 

status notification, and not an increase 

in the the actual cost of the drug itself. 

It is true that the Medicare Part D 

program may incur additional costs if 

more patients had their prescriptions 

filled, and in some studies this could 

account for as much as an 11 percent 

increase, depending on the clinical 

condition for which the prescription is 

being dispensed (for example, diabetes 

versus hypertension). However, we 

anticipate that medication adherence 

could result in lower disease-related 

medical costs, such as hospitalization, 

that would benefit the Medicare 

program. In the study, ‘‘Impact of 

Medication Adherence on 

Hospitalization Risk and Healthcare 

Cost,’’ results showed that, for the four 

clinical conditions studied, 

hospitalization rates were significantly 

lower for patients with high medication 

adherence, and that drug costs are a 

relatively small fraction of total 

healthcare costs. Drug costs have high 

leverage; in other words, a small 

increase in drug costs (associated with 

improved adherence) can produce a 

much larger reduction in medical costs. 

This leverage will become even stronger 

as medications become available, and 

are prescribed as generic drugs, 

lowering drug costs even more.12

E. Alternatives Considered 

For more information on all the 

alternatives considered, refer to the 

discussion in the November 16, 2007 

proposed rule (72 FR 64916). 

As we had successful results from the 

e-prescribing pilot project, and the value 

added by the proposed additional 

standards is substantial, we chose to 

proceed to a final rule. We considered 

adopting the prior authorization, 

Structured and Codified Sig and 

RxNorm standards for adoption, and 

elected not to do so until outstanding 

issues with these standards have been 

resolved. In the case of the RxFill 

standard, we considered not adopting it, 

but based on industry feedback, opted 

for adoption so that those providers who 

felt it was of value could benefit from 

the existence of a standard for use in 

electronic fill status transactions. 

We considered not adopting the NPI 

as a standard for identifying health care 

providers in e-prescribing transactions 

for Medicare Part D covered drugs for 

Medicare Part D eligible individuals. 

The fact that large portions of the health 

care industry are required to use NPI as 

a HIPAA standard, convinced us that 

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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 18941 

adoption at this time was feasible and 

desirable. 

We considered providing for an 

effective date for these new and updated 

standards that was less than the 

maximum amount of time allowed by 

the MMA. Based on industry feedback, 

however, we decided to provide the 

maximum allowed time prior to the 

effective date of this rule. 

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 the reasons set forth in the 

preamble, 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). 

■ 2. Section 423.160 is amended by 

revising paragraphs (b) and (c) to read 

as follows: 

§ 423.160 Standards for electronic 

prescribing. 

* * * * * 

(b) Standards. (1) Entities described in 

paragraph (a) of this section must 

comply with the following adopted 

standards for transactions under this 

section: 

(i) Before April 1, 2009 the standards 

specified in paragraphs (b)(2)(i) and 

(b)(3) of this section. 

(ii) On or after April 1, 2009, the 

standards specified in paragraphs 

(b)(2)(ii) and (b)(3) through (b)(6) of this 

section. 

(2) Prescription. (i) The National 

Council for Prescription Drug Programs 

SCRIPT Standard, Implementation 

Guide, Version 5, Release 0, (Version 

5.0) May 12, 2004 (incorporated by 

reference in paragraph (c)(1)(iv) of this 

section), or the National Council for 

Prescription Drug Programs Prescriber/ 

Pharmacist Interface SCRIPT Standard, 

Implementation Guide, Version 8, 

Release 1, (Version 8.1) October 2005 

(incorporated by reference in paragraph 

(c)(1)(i) of this section), to provide for 

the communication of a prescription or 

prescription-related information 

between prescribers and dispensers, for 

the following: 

(A) Get message transaction. 

(B) Status response transaction. 

(C) Error response transaction. 

(D) New prescription transaction. 

(E) Prescription change request 

transaction. 

(F) Prescription change response 

transaction. 

(G) Refill prescription request 

transaction. 

(H) Refill prescription response 

transaction. 

(I) Verification transaction. 

(J) Password change transaction. 

(K) Cancel prescription request 

transaction. 

(L) Cancel prescription response 

transaction. 

(ii) The National Council for the 

Prescription Drug Programs Prescriber/ 

Pharmacist Interface SCRIPT standard, 

Implementation Guide, Version 8, 

Release 1 (Version 8.1) October 2005 

(incorporated by reference in paragraph 

(c)(1)(i) of this section), to provide for 

the communication of a prescription or 

prescription-related information 

between prescribers and dispensers, for 

the following: 

(A) Get message transaction. 

(B) Status response transaction. 

(C) Error response transaction. 

(D) New prescription transaction. 

(E) Prescription change request 

transaction. 

(F) Prescription change response 

transaction. 

(G) Refill prescription request 

transaction. 

(H) Refill prescription response 

transaction. 

(I) Verification transaction. 

(J) Password change transaction. 

(K) Cancel prescription request 

transaction. 

(L) Cancel prescription response 

transaction. 

(M) Fill status notification 

transaction. 

(3) 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 (incorporated by 

reference in paragraph (c)(2)(i) of this 

section), 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 

(incorporated by reference in paragraph 

(c)(1)(iii) of this section), for 

transmitting eligibility inquiries and 

responses between dispensers and Part 

D sponsors. 

(4) Medication history. The National 

Council for Prescription Drug Programs 

Prescriber/Pharmacist Interface SCRIPT 

Standard, Implementation Guide, 

Version 8, Release 1 (Version 8.1), 

October 2005 (incorporated by reference 

in paragraph (c)(1)(i) of this section) to 

provide for the communication of 

Medicare Part D medication history 

information among Medicare Part D 

sponsors, prescribers, and dispensers. 

(5) Formulary and benefits. The 

National Council for Prescription Drug 

Programs Formulary and Benefits 

Standard, Implementation Guide, 

Version 1, Release 0 (Version 1.0), 

October 2005 (incorporated by reference 

in paragraph (c)(1)(ii) of this section) for 

transmitting formulary and benefits 

information between prescribers and 

Medicare Part D sponsors. 

(6) Provider identifier. The National 

Provider Identifier (NPI), as defined at 

45 CFR 162.406, to identify an 

individual health care provider to 

Medicare Part D sponsors, prescribers 

and dispensers, in electronically 

transmitted prescriptions or 

prescription-related materials for 

Medicare Part D covered drugs for 

Medicare Part D eligible individuals. 

(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 certain 

publications into this section. You may 

inspect copies of these publications 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 more 

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. The publications 

approved for incorporation by reference 

and their original sources are as follows: 

(1) National Council for Prescription 

Drug Programs, Incorporated, 9240 E. 

Raintree Drive, Scottsdale, AZ 85260–

7518; Telephone (480) 477–1000; and 

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18942 Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules and Regulations 

Facsimile (480) 767–1042 or http:// 

www.ncpdp.org. 

(i) National Council for Prescription 

Drug Programs Prescriber/Pharmacist 

Interface SCRIPT Standard, 

Implementation Guide, Version 8, 

Release 1, October 2005. 

(ii) The National Council for 

Prescription Drug Programs Formulary 

and Benefits Standard, Implementation 

Guide, Version 1, Release 0, October 

2005. 

(iii) National Council for Prescription 

Drug Programs Telecommunication 

Standard Specification, Version 5, 

Release 1 (Version 5.1), September 1999 

and equivalent National Council for 

Prescription Drug Programs (NCPDP) 

Batch Standard Batch Implementation 

Guide, Version 1, Release 1 (Version 

1.1), January 2000 supporting 

Telecommunication Standard 

Implementation Guide, Version 5, 

Release 1 (Version 5.1) for the NCPDP 

Data Record in the Detail Data Record. 

(iv) 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). 

(2) Accredited Standards Committee, 

7600 Leesburg Pike, Suite 430, Falls 

Church, VA 22043; Telephone (301) 

970–4488; and Facsimile: (703) 970–

4488 or http://www.x12.org. 

(i) Accredited Standards Committee 

(ASC) 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 

4010A1, October 2002, Washington 

Publishing Company, 004010X092A1. 

(ii) Reserved. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: March 14, 2008. 

Kerry Weems, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: March 28, 2008. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 08–1094 Filed 4–2–08; 10:44 am] 

BILLING CODE 4120–01–P 

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