[Federal Register Volume 60, Number 32 (Thursday, February 16, 1995)]
[Rules and Regulations]
[Pages 8951-8955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3835]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 410

[BPD-424-F]
RIN 0938-AE94


Medicare Program; Medicare Coverage of Prescription Drugs Used in 
Immunosuppressive Therapy

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: This final rule amends the regulations to provide Medicare 
coverage for prescription drugs used in immunosuppressive therapy 
furnished to an individual who receives an organ transplant for which 
Medicare payment is made. This rule reflects the enactment of section 
1861(s)(2)(J) of the Social Security Act that provides Medicare 
coverage for prescription drugs used in immunosuppressive therapy for a 
period of up to 1 year from the date of discharge from an inpatient 
hospital stay during which the Medicare-covered organ or tissue 
transplant was performed.
    This final rule also implements section 13565 of the Omnibus Budget 
Reconciliation Act of 1993 (Public Law 103-66) and section 160 of the 
Social Security Act Amendments of 1994 (Public Law 103-432) that, 
beginning January 1, 1995, expand Medicare coverage for prescription 
drugs used in immunosuppressive therapy from 1 year to a phased-in 
period of 3 years from the date of discharge from a hospital stay 
during which the Medicare-covered organ or tissue transplant was 
performed.

DATES: These regulations are effective January 1, 1995, the effective 
date of the statute.

FOR FURTHER INFORMATION CONTACT: Debra McKeldin, (410) 966-9671.

SUPPLEMENTARY INFORMATION:

I. Background

    Before enactment of section 9335(c) of the Omnibus Budget 
Reconciliation Act of 1986 (OBRA '86), Public Law 99-509, there was no 
specific Medicare benefit that provided for Medicare Part B coverage of 
prescription drugs used in immunosuppressive therapy.
    OBRA '86 added subparagraph (J) to section 1861(s)(2) of the Social 
Security Act (the Act) to provide Medicare coverage for 
immunosuppressive drugs, furnished to an individual who receives an 
organ transplant for which Medicare payment is made, for a period not 
to exceed 1 year after the transplant procedure. Coverage of these 
drugs under Medicare Part B began January 1, 1987.
    We published a proposed rule with a 60-day public comment period 
(53 FR 1383) on January 19, 1988, which we discuss below. Before its 
publication, however, the Omnibus Budget Reconciliation Act of 1987 
(OBRA '87), Public Law 100-203, was enacted and effective December 22, 
1987, revised section 1861(s)(2)(J) of the Act so that the scope of 
coverage was expanded from coverage of ``immunosuppressive drugs'' to 
coverage of ``prescription drugs used in immunosuppressive therapy.'' 
We issued the proposed rule before changes could be made to reflect 
this new terminology. We did propose, however, coverage that would 
include, in addition to immunosuppressive drugs, other drugs used in 
conjunction with immunosuppressive therapy. In addition, in April 1988, 
we issued manual instructions to Medicare contractors that reflected 
the new terminology.
    Also, section 202 of the Medicare Catastrophic Coverage Act of 
1988, Public Law 100-360, enacted on July 1, 1988, extended coverage of 
drugs used in immunosuppressive therapy to include drugs furnished in 
subsequent years after the first year following a covered transplant. 
It also extended coverage to include drugs used following a noncovered 
transplant irrespective of any prescribed time limitations. This 
extended coverage, which was to be effective on January 1, 1990, was 
part of the outpatient drug coverage set forth in section 202(a) of 
Public Law 100-360. On December 19, 1989, however, these provisions of 
the law were repealed as part of the Medicare Catastrophic Coverage 
Repeal Act of 1989, Public Law 101-234. As a result, the extended 
Medicare coverage of drugs used in immunosuppressive therapy set forth 
in Public Law 100-360 never became effective.
    Since publication of the proposed rule, section 13565 of the 
Omnibus Reconciliation Act of 1993 (OBRA '93), Public Law 103-66, 
amended section 1861(s)(2)(J) of the Act. In accordance with OBRA '93, 
the coverage period for prescription drugs used in immunosuppressive 
therapy will be extended to 18 months from the hospital discharge date 
following a covered transplant procedure for drugs furnished in 1995; 
24 months for drugs furnished in 1996; 30 months for drugs furnished in 
1997; and 36 months for drugs furnished after 1997. Subsequently, 
section 160 of the Social Security Act Amendments of 1994, Public Law 
103-432, enacted on October 31, 1994, allows us to administer the OBRA 
'93 provision in such a way that coverage would be continued 
consecutively.
    Since this provision is self-executing, we have issued it as part 
of this final rule, rather than in proposed form.

II. Provisions of the Proposed Rule

    In the January 1988 proposed rule, we proposed to amend 42 CFR part 
410 (``Supplementary Medical Insurance (SMI) Benefits'') to incorporate 
the following:
    <bullet> Cover immunosuppressive drugs under Medicare Part B by 
revising Sec. 410.10 to include immunosuppressive drugs in the term 
``medical and other health services'';
    <bullet> Add a new Sec. 410.31 to provide specifically for coverage 
of immunosuppressive drugs generally; and
    <bullet> Add a new Sec. 410.65 to provide Medicare coverage of 
drugs used in immunosuppressive therapy, that are furnished to an 
individual who receives an organ transplant for which Medicare payment 
is made, for a period of up to 1 year beginning with the date of 
discharge from the inpatient hospital stay during which the transplant 
was performed (the proposed rule did not, of course, include the OBRA 
'93 phased-in extension to the coverage period that follows a Medicare 
approved transplant). We proposed that coverage include: (1) Those 
immunosuppressive drugs specifically labeled as immunosuppressive drugs 
and approved for marketing by the Food and Drug Administration (FDA) 
and (2) other drugs that FDA-approved labeling indicates are used in 
conjunction with immunosuppressive drug therapy.

III. Discussion of Comments

    We received 11 timely comments in response to the January 1988 
proposed rule. The comments were from representatives of hospitals, 
medical centers, national associations representing health care 
professionals, and a university. The specific comments and our 
responses follow:
    Comment: Several commenters suggested that coverage of 
immunosuppressive drugs be extended beyond 1 year.
    Response: As stated earlier, since the publication of the proposed 
rule, OBRA [[Page 8952]] '93 has authorized phased-in extensions to the 
Medicare coverage period for prescription drugs used in 
immunosuppressive therapy. In accordance with this new legislation, the 
period after the hospital discharge date in which a Medicare 
beneficiary is eligible to receive Part B coverage of prescription 
drugs used in immunosuppressive therapy has been extended as follows:
    <bullet> For drugs furnished during 1995, a Medicare beneficiary is 
eligible for coverage within 18 months after the date of discharge from 
an inpatient stay during which the covered transplant was performed.
    <bullet> For drugs furnished during 1996, a Medicare beneficiary is 
eligible for coverage within 24 months after the date of discharge from 
an inpatient stay during which the covered transplant was performed.
    <bullet> For drugs furnished during 1997, a Medicare beneficiary is 
eligible for coverage within 30 months after the date of discharge from 
an inpatient stay during which the covered transplant was performed.
    <bullet> For drugs furnished after 1997, a Medicare beneficiary is 
eligible for coverage within 36 months after the date of discharge from 
an inpatient stay during which the covered transplant was performed.
    Thus, the extension provides a range of coverage extending from 12 
to 36 months depending on the date of discharge from an inpatient stay 
during which the covered transplant was performed.
    For example, if prescription drugs used in immunosuppressive 
therapy are furnished to a beneficiary who received a covered 
transplant and was discharged on February 1, 1994, the initial coverage 
period is for 12 months (February 1, 1994 to January 31, 1995). In 
accordance with OBRA '93, on January 1, 1995, the coverage period for 
prescription drugs used in immunosuppressive therapy will be extended 
to 18 months from the hospital discharge date following a covered 
transplant procedure. Therefore, the initial 12-month coverage period 
is extended to July 31, 1995 because section 13565 of OBRA '93 extends 
coverage for drugs furnished in 1995 to 18 months. Subsequently, the 
eligibility for coverage for drugs furnished in 1996 is extended to 24 
months after the discharge date. Because January 31, 1996 is 24 months 
after the discharge date of the covered transplant procedure in this 
example, the beneficiary is eligible for an additional month of 
coverage beginning January 1, 1996 and ending on January 31, 1996. 
Thus, the beneficiary will receive a total of 19 months of coverage for 
prescription drugs used in immunosuppressive therapy.
    The following chart illustrates how the extension periods 
prescribed by OBRA '93 will be phased in using a discharge date of the 
first day of each month.

      Phased-in Benefit Periods for Immunosuppressive Drug Therapy      
------------------------------------------------------------------------
                                  Coverage                              
Discharge date     Coverage        period       Coverage    Total months
                 period ends      resumes      period ends   of coverage
------------------------------------------------------------------------
08/1/93.......     07/31/94        01/1/95      01/31/95            13  
09/1/93.......     08/31/94        01/1/95      02/28/95            14  
10/1/93.......     09/30/94        01/1/95      03/31/95            15  
11/1/93.......     10/31/94        01/1/95      04/30/95            16  
12/1/93.......     11/30/94        01/1/95      05/31/95            17  
01/1/94.......     06/30/95    .............  ............          18  
02/1/94.......     07/31/95        01/1/96      01/31/96            19  
03/1/94.......     08/31/95        01/1/96      02/29/96            20  
04/1/94.......     09/30/95        01/1/96      03/31/96            21  
05/1/94.......     10/31/95        01/1/96      04/30/96            22  
06/1/94.......     11/30/95        01/1/96      05/31/96            23  
07/1/94.......     06/30/96    .............  ............          24  
08/1/94.......     07/31/96        01/1/97      01/31/97            25  
09/1/94.......     08/31/96        01/1/97      02/28/97            26  
10/1/94.......     09/30/96        01/1/97      03/31/97            27  
11/1/94.......     10/31/96        01/1/97      04/30/97            28  
12/1/94.......     11/30/96        01/1/97      05/31/97            29  
01/1/95.......     06/30/97    .............  ............          30  
02/1/95.......     07/31/97        01/1/98      01/31/98            31  
03/1/95.......     08/31/97        01/1/98      02/28/98            32  
04/1/95.......     09/30/97        01/1/98      03/31/98            33  
05/1/95.......     10/31/97        01/1/98      04/30/98            34  
06/1/95.......     11/30/97        01/1/98      05/31/98            35  
07/1/95.......     06/30/98    .............  ............          36  
------------------------------------------------------------------------

    As illustrated in the chart, the statutory construction of the 
provision in OBRA '93 that prescribed the phased-in extension of 
coverage for drugs used in immunosuppressive therapy resulted in gaps 
in the coverage period. However, as stated earlier, section 160 of the 
Social Security Act Amendments of 1994 allows us to administer this 
provision in such a way that consecutive months of coverage are 
furnished provided the total number of months of coverage allowed by 
OBRA '93 are the same. Thus, in the above example, the beneficiary who 
was discharged on February 1, 1994 will receive 19 consecutive months 
of coverage (through August 31, 1995) for prescription drugs used in 
immunosuppressive therapy.
    The periods of consecutive coverage for prescription drugs used in 
immunosuppressive therapy are illustrated in the following chart. The 
chart demonstrates how the OBRA '93 provisions would be phased in using 
a discharge date of the first day of each month.

 Phased-in Consecutive Benefit Periods for Immunosuppresive Drug Therapy
------------------------------------------------------------------------
                                                      Total months of   
     Discharge date        Coverage period ends          coverage       
------------------------------------------------------------------------
08/1/93................           08/31/94                       13     
09/1/93................           10/31/94                       14     
10/1/93................           12/31/94                       15     
11/1/93................           02/28/95                       16     
12/1/93................           04/30/95                       17     
01/1/94................           06/30/95                       18     
02/1/94................           08/31/95                       19     
03/1/94................           10/31/95                      20      
[[Page 8953]]                                                           
                                                                        
04/1/94................           12/31/95                       21     
05/1/94................           02/29/96                       22     
06/1/94................           04/30/96                       23     
07/1/94................           06/30/96                       24     
08/1/94................           08/31/96                       25     
09/1/94................           10/31/96                       26     
10/1/94................           12/31/96                       27     
11/1/94................           02/28/97                       28     
12/1/94................           04/30/97                       29     
01/1/95................           06/30/97                       30     
02/1/95................           08/31/97                       31     
03/1/95................           10/31/97                       32     
04/1/95................           12/31/97                       33     
05/1/95................           02/28/98                       34     
06/1/95................           04/30/98                       35     
07/1/95................           06/30/98                       36     
------------------------------------------------------------------------

    Comment: One commenter recommended that each patient be given a 
card showing eligibility dates for immunosuppressive drug therapy.
    Response: We have not adopted this suggestion because it would add 
an unnecessary paperwork burden without a commensurate benefit to the 
program. This information is contained in the Medicare Handbook.
    The Medicare contractors processing claims for prescription drugs 
used in immunosuppressive therapy are prepared to implement the 
extended periods of coverage. The claims processing systems are capable 
of determining the periods for which Part B coverage is available 
beginning with the date of discharge from a hospital stay during which 
a covered transplant was performed.
    Comment: One commenter requested that we define several classes of 
drugs, such as treatment related drugs (for example, prednisone, 
antihypertensives, and cardiac medicines) that, in his opinion, would 
be eligible for payment. This classification would provide guidelines 
for coverage of each type of drug. Another commenter urged that there 
be flexible criteria to permit providers to use a full range of drug 
therapy, including drugs prescribed for unapproved indications, rather 
than limiting coverage to ``other drugs that are used in conjunction 
with immunosuppressive drugs as part of a therapeutic regimen.''
    Response: Section 1861(s)(2)(J) of the Act provides for coverage of 
only prescription drugs used in immunosuppressive therapy. We interpret 
this to mean that coverage is limited to those drugs that are medically 
necessary and appropriate for the specific purpose of preventing or 
treating the rejection of a transplanted organ or tissue by suppressing 
a patient's natural immune responses. To meet this definition, a drug 
must be approved by the FDA, be available only through a prescription, 
and belong to one of the following three categories:
    <bullet> It is a drug approved for marketing by the FDA and is 
labeled as an immunosuppressive drug.
    <bullet> It is a drug, such as a corticosteroid, that is approved 
by the FDA and is labeled for use in conjunction with immunosuppressive 
drugs to treat or prevent the rejection of a patient's transplanted 
organ or tissue.
    <bullet> It is a drug that a Part B carrier, in processing a 
Medicare claim, determined to be reasonable and necessary for the 
specific purpose of preventing or treating the rejection of a patient's 
transplanted organ or tissue, or for use in conjunction with those 
immunosuppressive drugs for the purpose of preventing or treating the 
rejection of a patient's transplanted organ or tissue.
    Accordingly, drugs that are used for the treatment of conditions 
that may result from an immunosuppressive drug regimen (for example, 
antibiotics, antihypertensives, analgesics, vitamins, and other drugs 
that are not directly related to organ rejection) are not covered under 
this benefit.
    Comment: One commenter suggested that we clarify the statement in 
the proposed rule (53 FR 1383) that implied that corticosteroids may be 
covered by Medicare only if used in association with Sandimmune (that 
is, cyclosporine).
    Response: The statement in the proposed rule was meant as an 
example of a drug treatment regimen that included corticosteroids. It 
was not our intention to imply that corticosteroids would not be 
covered if prescribed in conjunction with another immunosuppressive, or 
alone, to prevent rejection of an organ or tissue transplant.
    Comment: One commenter concluded that our statement that commonly 
prescribed immunosuppressive drugs are available at substantial 
discounts from prices listed in the Red Book (an annual publication 
that lists drugs and their wholesale prices) is wrong because the drugs 
we listed (with the exception of prednisone) are sole source drugs and 
there is no competition to reduce the prices.
    Response: Since publication of the proposed rule in January 1988, 
payment for Medicare Part B drugs was modified by the November 25, 1991 
final rule for the fee schedule for physicians' services (56 FR 59502). 
Section 405.517 states that payment for drugs (other than those paid on 
a cost or prospective basis) is based on the lower of the estimated 
acquisition cost or the national average wholesale price of the drug. 
The estimated acquisition cost is determined by individual carrier 
surveys of actual invoice prices paid for the drug. If physicians or 
pharmacies receive price discounts, the reductions are reflected in 
their invoice costs.
    Comment: One commenter objected to our statement in the preamble to 
the proposed rule (53 FR 1385) that mail service pharmacies ``offer 
reduced prices that minimize beneficiaries' coinsurance liability,'' on 
the grounds that it amounted to a ``commercial'' on behalf of mail 
service pharmacies.
    Response: Our intent was not to endorse one source of drugs over 
another, but to make the public aware of the alternative of mail 
service pharmacies.
    Comment: One commenter expressed concern that ordering drugs 
through the mail eliminates patient-pharmacist contact.
    Response: The absence of face-to-face contact is one of the many 
things a beneficiary would want to consider in deciding from whom he or 
she will obtain prescribed drugs.
    Comment: One commenter suggested that we buy drugs from 
manufacturers and have them shipped directly to participating 
transplant centers.
    Response: We lack the legal authority to do this. We administer the 
Medicare program at the national level as authorized by the law. We are 
not empowered to participate in the delivery of health care services.
    Comment: One commenter asked that we update prices for 
immunosuppressive drugs.
    Response: Medicare carriers use the Red Book or a similar 
publication that is updated periodically during the year for current 
prices.
    Comment: One organization suggested that our payment policy cover 
not only the costs of drugs, but also pharmaceutical care services. The 
organization explained that in addition to traditional drug 
distribution services, contemporary pharmaceutical services include 
clinical functions that ensure the safe and effective use of drug 
therapy. Examples of these functions, which were characterized by the 
commenter as ``pharmacy'' services, are providing patient education, 
assessing patient compliance, and monitoring for therapeutic 
effectiveness and adverse effects.
    Response: Payment for functions furnished by pharmacists is 
included in the amount that Medicare pays for the drugs. [[Page 8954]] 
    Comment: One commenter recommended that all payments, including 
those to hospital outpatient departments, should be made under Part B 
on a reasonable charge basis. The commenter maintained that payments 
based on costs do not allow the hospital to be paid a reasonable rate 
for pharmaceutical services and overhead and that many hospitals 
maintain separate inventory and purchasing practices for drugs used in 
the outpatient setting.
    Response: The statute mandates that the outpatient department of a 
hospital be paid based on the lower of reasonable cost or customary 
charges as established in the following sections of the Act:
    <bullet> Sections 1832(a)(2)(B) and 1861(s)(2)(J), which establish 
that drugs used in immunosuppressive therapy furnished in a provider 
are a covered medical service.
    <bullet> Section 1833(a)(2)(B), which states that payment is based 
on the lesser of the reasonable cost of hospital outpatient department 
services as determined under section 1861(v), or the customary charges 
with respect to these services.
    <bullet> Section 1861(u), which defines a provider of services to 
include a hospital.
    <bullet> Section 1862(a)(14), which states, in part, that no 
payment may be made under Part A or Part B for any expenses incurred 
for items or services, other than for statutorily specified exceptions, 
that are furnished to an individual who is a patient of a hospital by 
an entity other than the hospital or under arrangements with the 
hospital. (``Patient'' means inpatients and outpatients of a hospital.)
    Therefore, if a patient is an outpatient of a hospital and receives 
prescription drugs from the hospital pharmacy, payment would have to be 
made to the hospital pharmacy according to the mandate of section 
1833(a)(2)(B) of the Act. That section establishes that payment to any 
provider of services (in this case, the outpatient pharmacy department 
of a hospital) must be the lesser of the reasonable cost of these 
services, as determined under section 1861(v) (which includes 
recognition of both direct and indirect costs), or the customary 
charges with respect to these services.
    Comment: One commenter suggested that we improve our communication 
with fiscal intermediaries, because some intermediaries are unaware 
that they should be paying for prescription drugs used in 
immunosuppressive therapy.
    Response: We have taken steps to ensure that all contractors 
processing claims for prescription drugs used in immunosuppressive 
therapy are aware of current Medicare coverage and payment policies. We 
have not been informed of any specific problems in this area of program 
administration.

IV. Provisions of This Final Rule

    The provisions of this final rule restate the provisions of the 
January 1988 proposed rule. The final rule differs from the proposed 
rule in that we have changed the term ``immunosuppressive drugs,'' 
wherever it appears, to ``prescription drugs used in immunosuppressive 
therapy'' to conform with section 4075 of OBRA `87. Also, we have 
redesignated the proposed Sec. 410.65 as Sec. 410.31. The final rule 
also differs from the proposed rule in that we have specified that 
drugs also will be covered if they have been determined, by a Part B 
carrier in processing a Medicare claim, to be reasonable and necessary 
(that is, safe and effective) for the purpose of treating or preventing 
the rejection of a patient's transplanted organ or tissue, or for use 
in conjunction with these immunosuppressive drugs for the purpose of 
preventing or treating the rejection of a patient's transplanted organ 
or tissue. The carriers make these determinations by considering 
factors such as authoritative drug compendia, current medical 
literature, recognized standards of medical practice, and professional 
medical publications. This change makes the policy governing drugs used 
in immunosuppressive therapy consistent with Medicare's general drug 
coverage policy.
    An additional point of clarification is that the coverage of 
prescription drugs for transplants under this rule includes 
prescription drugs used in immunosuppressive therapy furnished to an 
individual who receives a bone marrow tissue transplant for which 
Medicare payment is made. For purposes of this rule, we consider bone 
marrow tissue transplants to be subsumed within the term ``organ 
transplant'' under section 1861(s)(2)(J) of the Act. Medicare currently 
covers heart, kidney, bone marrow, and certain liver transplants.
    The final rule also differs from the proposed rule in that OBRA '93 
requires phased-in extensions (up to 3 years) to the coverage period 
for prescription drugs used in immunosuppressive therapy.

V. Collection of Information Requirements

    This notice does not impose information collection or recordkeeping 
requirements. Consequently, it need not be reviewed by the Office of 
Management and Budget under the authority of the Paperwork Reduction 
Act of 1980 (44 U.S.C 3501 et seq.).

VI. Regulatory Impact Statement

A. Introduction

    This final rule amends the regulations to provide Medicare coverage 
for prescription drugs used in immunosuppressive therapy following an 
inpatient hospital stay during which a Medicare-covered organ 
transplant was performed. OBRA '86 amended section 1861(s)(2) of the 
Act to provide Part B coverage for a period not to exceed 1 year 
beginning July 1, 1987. As a result of OBRA '93, the period of coverage 
of prescription drugs used in immunosuppressive therapy after the 
discharge from a hospital has been increased to 18 months for drugs 
furnished in 1995, 24 months for drugs furnished in 1996, 30 months for 
drugs furnished in 1997, and 36 months for drugs furnished after 1997. 
The following table shows the estimated additional expenditures as a 
result of the extended coverage.

   Estimated Additional Cost Because of Extended Coverage of Drugs for  
      Immunosuppressive Therapy--Rounded to the Nearest $5 Million      
------------------------------------------------------------------------
   FY 1995        FY 1996        FY 1997        FY 1998        FY 1999  
------------------------------------------------------------------------
$20..........         $60            $90           $110           $120  
------------------------------------------------------------------------

    The use of immunosuppressive drug therapy is indicated for the 
prevention of organ rejection when an organ or tissue transplant is 
performed. The estimated number of transplants that will be performed 
in CY 1994 is 10,125, some of which will have an effect on 
immunosuppressive drug therapy expenditures in CYs 1995 and 1996. The 
estimated 10,850 transplants that will be performed in CY 1995 will 
have an effect on drug therapy costs in CYs [[Page 8955]] 1996, 1997, 
and 1998. We estimate that the annual drug cost following 
transplantation for a full time user of immunosuppressive drugs will be 
as follows:

  Estimated Annual Cost of Immunosuppressive Drugs for Each Transplant  
                                 Patient                                
------------------------------------------------------------------------
        CY 1995                  CY 1996                  CY 1997       
------------------------------------------------------------------------
$5580..................              $5910                    $6275     
------------------------------------------------------------------------

    This final rule also differs from the proposed rule in that the 
term ``immunosuppressive drugs'' has been changed to ``prescription 
drugs used in immunosuppressive therapy'' to conform with section 4075 
of OBRA '87. This expanded coverage will allow payment for other 
necessary drugs used in conjunction with immunosuppressive drugs.

B. Regulatory Flexibility Act

    Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612), we prepare a regulatory flexibility analysis unless the 
Secretary certifies that a rule will not have a significant economic 
impact on a substantial number of small entities. For purposes of the 
RFA, pharmacists, physicians who perform transplantation services, and 
manufacturers of covered pharmaceuticals are considered to be small 
entities. Although pharmaceutical manufacturers are frequently not 
considered to be small entities, the possibility exists that certain 
manufacturers affected by this final rule may meet the definition of a 
small entity.
    In addition, section 1102(b) of the Act requires the Secretary 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 
Metropolitan Statistical Area and has fewer than 50 beds.
    Because of the high cost of a majority of the drugs used for 
immunosuppressive therapy and the extended time that beneficiaries are 
required to take the drugs to ensure that the transplanted organ is not 
rejected, all Medicare transplant patients and many small entities will 
benefit by this regulation. In many cases, 1 year of immunosuppressive 
therapy is not sufficient. Also, it is possible that we may avoid the 
additional cost of a second transplant if a patient is kept on 
immunosuppressive drug therapy beyond the original 12 month coverage 
period.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined, and the Secretary certifies, 
that this rule will not have a significant economic impact on a 
substantial number of small entities or a significant impact on the 
operations of a substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was not reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 410

    Medical and other health services, Medicare.

    For the reasons set forth in the preamble, 42 CFR chapter IV, part 
410 is amended as set forth below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

    1. The authority citation continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

    2. In Sec. 410.10, the introductory text is republished and a new 
paragraph (u) is added to read as follows:


Sec. 410.10  Medical and other health services: Included services.

    Subject to the conditions and limitations specified in this 
subpart, ``medical and other health services'' includes the following 
services:
* * * * *
    (u) Prescription drugs used in immunosuppressive therapy.
    3. A new Sec. 410.31 is added to read as follows:


Sec. 410.31  Prescription drugs used in immunosuppressive therapy.

    (a) Scope. Payment may be made for prescription drugs used in 
immunosuppressive therapy that have been approved for marketing by the 
FDA and that meet one of the following conditions:
    (1) The approved labeling includes the indication for preventing or 
treating the rejection of a transplanted organ or tissue.
    (2) The approved labeling includes the indication for use in 
conjunction with immunosuppressive drugs to prevent or treat rejection 
of a transplanted organ or tissue.
    (3) Have been determined by a carrier (in accordance with part 421, 
subpart C of this chapter), in processing a Medicare claim, to be 
reasonable and necessary for the specific purpose of preventing or 
treating the rejection of a patient's transplanted organ or tissue, or 
for use in conjunction with immunosuppressive drugs for the purpose of 
preventing or treating the rejection of a patient's transplanted organ 
or tissue. (In making these determinations, the carriers may consider 
factors such as authoritative drug compendia, current medical 
literature, recognized standards of medical practice, and professional 
medical publications.)
    (b) Period of eligibility. Coverage is available only for 
prescription drugs used in immunosuppressive therapy, furnished to an 
individual who receives an organ or tissue transplant for which 
Medicare payment is made, for the following periods:
    (1) For drugs furnished before 1995, for a period of up to 1 year 
beginning with the date of discharge from the hospital during which the 
covered transplant was performed.
    (2) For drugs furnished during 1995, within 18 months after the 
date of discharge from the hospital during which the covered transplant 
was performed.
    (3) For drugs furnished during 1996, within 24 months after the 
date of discharge from the hospital during which the covered transplant 
was performed.
    (4) For drugs furnished during 1997, within 30 months after the 
date of discharge from the hospital during which the covered transplant 
was performed.
    (5) For drugs furnished after 1997, within 36 months after the date 
of discharge from the hospital during which the covered transplant was 
performed.
    (c) Coverage. Drugs are covered under this provision irrespective 
of whether they can be self-administered.

(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance)

    Dated: January 9, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Approved: February 9, 1995.
Donna E. Shalala,
Secretary.
[FR Doc. 95-3835 Filed 2-15-95; 8:45 am]
BILLING CODE 4120-01-P