Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58491 

States prior to publication of the notice 

in the Federal Register. A major rule 

cannot take effect until 60 days after it 

is published in the Federal Register. 

This action is not a ‘‘major rule’’ as 

defined by 5 U.S.C. 804(2). This rule 

will be effective October 7, 2008. 

List of Subjects in 40 CFR Part 59 

Air pollution control, Consumer and 

commercial products, Confidential 

business information, Ozone, Reporting 

and recordkeeping requirements, 

Volatile organic compounds. 

Dated: September 30, 2008. 

Stephen L. Johnson, 

Administrator. 

■ For the reasons stated in the preamble, 

title 40, chapter I of the Code of Federal 

Regulations is amended as follows: 

PART 59—[AMENDED] 

■ 1. The authority citation for part 59 

continues to read as follows: 

Authority: 42 U.S.C. 7414 and 7511b(e). 

Subpart A—General 

■ 2. Section 59.1 is revised to read as 

follows: 

§ 59.1 Final determinations under Section 

183(e)(3)(C) of the CAA. 

This section identifies the consumer 

and commercial product categories for 

which EPA has determined that CTGs 

will be substantially as effective as 

regulations in reducing VOC emissions 

in ozone nonattainment areas: 

(a) Wood furniture coatings; 

(b) Aerospace coatings; 

(c) Shipbuilding and repair coatings; 

(d) Lithographic printing materials; 

(e) Letterpress printing materials; 

(f) Flexible packaging printing 

materials; 

(g) Flat wood paneling coatings; 

(h) Industrial cleaning solvents; 

(i) Paper, film, and foil coatings; 

(j) Metal furniture coatings; 

(k) Large appliance coatings; 

(l) Miscellaneous metal products 

coatings; 

(m) Plastic parts coatings; 

(n) Auto and light-duty truck 

assembly coatings; 

(o) Fiberglass boat manufacturing 

materials; and 

(p) Miscellaneous industrial 

adhesives. 

[FR Doc. E8–23750 Filed 10–6–08; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 447 

[CMS–2238–F] 

RIN 0938–AP26 

Medicaid Program; Multiple Source 

Drug Definition 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule revises the 

definition of ‘‘multiple source drug’’ to 

better conform the regulatory definition 

to the provisions of section 1927(k)(7) of 

the Social Security Act. It also responds 

to public comments received on the 

March 14, 2008 interim final rule with 

comment period. 

DATES: Effective Date: This final rule is 

effective November 6, 2008. 

FOR FURTHER INFORMATION CONTACT: Gail 

Sexton, (410) 786–4583. 

SUPPLEMENTARY INFORMATION: 

I. Background 

In the July 17, 2007 Federal Register 

we published a final rule with comment 

period (72 FR 39142) implementing the 

provisions of the Deficit Reduction Act 

of 2005 (DRA) pertaining to prescription 

drugs under the Medicaid Program. In 

that rule, we codified terms pertaining 

to the calculation and reporting of 

average manufacturer price (AMP) and 

best price and amended existing 

regulations regarding the calculation of 

the Federal upper limits (FULs) for 

certain covered outpatient drugs. The 

rule was effective October 1, 2007. On 

March 14, 2008, we issued an interim 

final rule with comment period (73 FR 

13785) that revised the definition of 

multiple source drug to conform to the 

statutory provisions. As stated in that 

rule, the interim final rule with 

comment period was not issued in 

response to public comments received 

on the Medicaid prescription drug rule. 

We are still considering those 

comments. On November 15, 2007, the 

National Association of Chain Drug 

Stores and the National Community 

Pharmacists Association filed a motion 

for a preliminary injunction in the 

United States District Court for the 

District of Columbia. They contended, 

in part, that the definition of ‘‘multiple 

source drug’’ adopted in the Medicaid 

prescription drug rule is contrary to the 

statutory language in that it defined a 

multiple source drug, in part, as a drug 

which is sold or marketed in the United 

States, as opposed to the State. Plaintiffs 

argued that all drugs are not generally 

available in every State. National 

Association of Chain Drug Stores et al. 

v. Health and Human Services, Civil 

Action No. 1:07–cv–02017 (RCL). 

Although we continue to believe that, 

when an FDA-approved, 

therapeutically, pharmaceutically, and 

bioequivalent drug is sold or marketed 

in the United States, at least one 

therapeutically, pharmaceutically, and 

bioequivalent drug is sold or marketed 

in every State, we issued an interim 

final rule with comment period to revise 

the definition of ‘‘multiple source 

drug.’’ We stated that we expected the 

effect of the revision, if any, to be 

minimal. 

We are publishing this final rule to 

address comments received on the 

interim final rule with comment period 

published on March 14, 2008 (73 FR 

13785). Specifically, we are addressing 

comments pertaining to the definition of 

‘‘multiple source drug’’ in the March 14, 

2008 interim final rule with comment 

period. For a full discussion of the 

multiple source drug definition 

provisions see the March 14, 2008 

interim final rule with comment period 

(73 FR 13785). 

As noted in the interim final rule with 

comment period, this rule to the extent 

that it may affect Medicaid 

reimbursement rates for retail 

pharmacies, is subject to the injunction 

issued by the United States District 

Court for the District of Columbia in 

National Association of Chain Drug 

Stores et al. v. Health and Human 

Services, Civil Action No. 1:07–cv– 

02017 (RCL). 

II. Provisions of the Interim Final Rule 

In § 447.502, we defined key terms 

used for payment and rebates for 

Medicaid covered outpatient drugs. We 

defined multiple source drug, with 

respect to a rebate period, as a covered 

outpatient drug for which there is at 

least one other drug product which is: 

(1) Rated as therapeutically equivalent 

(for the list of drug products rated as 

therapeutically equivalent, see the 

FDA’s most recent publication of 

‘‘Approved Drug Products with 

Therapeutic Equivalence Evaluations’’ 

which is available at http:// 

www.fda.gov/cder/orange/default.htm 

or can be viewed at the FDA’s Freedom 

of Information Public Reading Room at 

5600 Fishers Lane, rm. 12A–30, 

Rockville, MD 20857); (2) 

pharmaceutically equivalent and 

bioequivalent, as determined by the 

FDA; and (3) sold or marketed in the 

United States during the rebate period. 


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58492 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 

In the March 14, 2008 interim final 

rule with comment period, we revised 

the definition of ‘‘multiple source drug’’ 

at § 447.502 to state, in part, that a 

covered outpatient drug is a multiple 

source drug when it is sold or marketed 

in the ‘‘State’’ during the rebate period. 

In accordance with section 

1927(k)(7)(C)(iii) of the Social Security 

Act (‘‘the Act’’) and as discussed in the 

interim final rule with comment period, 

we consider a drug to be sold or 

marketed in a State if it appears in a 

published national listing of average 

wholesale prices that we have 

selected—currently, Red Book, 

Bluebook, or Medi-Span—provided the 

listed product is generally available to 

the public through retail pharmacies in 

that State. We also addressed our belief, 

based on our experience with the FUL 

and the drug rebate program that a 

national market exists for covered 

outpatient drugs. We also provided in 

the interim final rule with comment 

period, that when a covered outpatient 

drug is not a multiple source drug in the 

State, that drug is not subject to the FUL 

in that State for the applicable rebate 

period. We further provided that where 

the drug does not qualify as a multiple 

source drug in the State, the State 

should apply the appropriate pricing 

methodologies as set forth in the 

approved State plan. 

III. Analysis of and Responses to Public 

Comments 

We received nine items of 

correspondence that addressed the 

March 14, 2008 interim final rule with 

comment period. We received 

comments from drug manufacturers and 

wholesalers, retail pharmacies, and 

membership organizations. To the 

extent that comments were outside the 

scope of the March 14, 2008 interim 

final rule with comment period they are 

not addressed in this final rule. A 

summary of the major issues and our 

responses are discussed below. 

A. General Comments 

Comment: We received several 

comments expressing general support 

and appreciation for CMS revising the 

definition of ‘‘multiple source drug.’’ 

One commenter specifically stated that 

the statutory definition of ‘‘multiple 

source drug’’ has existed since 1990, 

and it is important for CMS to include 

that definition in the regulations. One 

commenter noted that States appreciate 

the increased flexibility to determine a 

product’s availability and to be able to 

adjust FUL prices accordingly. 

Response: We appreciate these and all 

comments received relating to our 

interim final rule with comment period 

revising the definition of ‘‘multiple 

source drug.’’ 

B. Adherence to the Administrative 

Procedures Act 

Comment: Several commenters stated 

that the interim final rule with comment 

period was not promulgated in 

accordance with the Administrative 

Procedure Act (APA) which provides 

that a Federal agency provide the public 

with notice of, and an opportunity to 

comment on, proposed agency 

rulemaking before issuing a final rule, 

which includes a statement of basis and 

purpose that responds to public 

comments. Several commenters were in 

disagreement with CMS that a formal 

notice and comment rulemaking process 

was not necessary because they said the 

new rule was not an ‘‘interpretive’’ rule, 

a general statement of policy, and/or a 

rule of agency procedure or practice. 

Response: We disagree. We are 

applying the definition of ‘‘multiple 

source drug’’ as specified in the statute 

and informing the public of the 

procedures and practices the agency 

will follow to ensure compliance with 

the statutory provisions. We do not 

believe that we need to propose a rule 

to incorporate the words of a provision 

already contained in the statute, and we 

therefore found good cause for waiving 

the notice and comment procedures. We 

believe that such a proposed rule would 

not be necessary because we would not 

be able to change the definition in the 

rule in response to public comments. In 

addition, as discussed in the interim 

final rule with comment period, we 

believe that the interim final rule with 

comment period is exempt from notice 

and comment rulemaking as an 

interpretative rule, general statement of 

policy and/or rule of agency procedure 

or practice. 

Furthermore, we have provided an 

opportunity for comment and have now 

considered all comments in issuing this 

final rule. 

Comment: One commenter stated that 

the fact that the Court issued a 

preliminary injunction against the old 

rule does not, as a matter of law, 

constitute good cause to eliminate 

notice and comment rulemaking. 

Another commenter stated that CMS 

had time to go through the notice and 

comment rulemaking, because the rule 

cannot be enforced due to Federal court 

injunction. 

Response: We issued the interim final 

rule with comment period revising the 

definition of ‘‘multiple source drug’’ to 

better conform the definition to the 

statutory language and to address the 

concerns raised by plaintiffs in the 

Medicaid prescription drug rule 

litigation. In that litigation, the plaintiffs 

contended, in part, that the definition of 

‘‘multiple source drug’’ adopted in the 

Medicaid prescription drug rule is 

contrary to the statutory language in that 

it defined a multiple source drug, in 

part, as a drug which is sold or 

marketed in the ‘‘United States’’ as 

opposed to the ‘‘State.’’ We issued this 

rule to apply the definition specified in 

the statute. We believe it is unnecessary 

to propose a rule to, in effect, 

incorporate the words of the statute and 

to establish a procedure to ensure 

compliance with that statutory 

provision. 

Furthermore, we have provided an 

opportunity for comment and have now 

considered all comments in issuing this 

final rule. 

C. Interpretive Versus Substantive Rule 

Comment: Several commenters 

submitted reasons why they believe that 

this rule should not be considered an 

interpretive rule, as explained above, 

but rather, a substantive rule, and thus 

subject to notice and comment 

rulemaking. One commenter stated that 

this rule should be considered a 

substantive rule because it will be 

published in the Federal Register. 

Several commenters stated that this rule 

amends another substantive rule subject 

to notice and comment rulemaking, and 

thus should also be considered 

substantive. Other commenters stated 

that rules which affect methodologies 

for calculating Federal funding levels 

are substantive rules that are subject to 

notice and comment under the APA. 

Several commenters stated that, because 

the new rule establishes significant new 

burdens on pharmacies and States 

regarding the State availability standard 

that has never been imposed by either 

the statute or CMS, it must be 

considered a substantive rule. 

Response: We disagree. We issued the 

March 14, 2008 interim final rule with 

comment period to revise the Medicaid 

prescription drug rule to better conform 

to the statute. The statute includes a 

provision that a multiple source drug is 

sold or marketed in the State during the 

rebate period and a separate provision 

that describes when a drug is 

considered to be sold or marketed in a 

State. We revised the Medicaid 

prescription drug rule to include these 

provisions and put forth procedures to 

ensure compliance with the statute. We 

consider these provisions to be exempt 

from notice and comment rulemaking as 

an interpretive rule, general statement of 

policy, and/or rule of agency procedure 

or practice. Moreover, to the extent that 

notice and comment rulemaking might 

apply, we found good cause to waive 


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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58493 

such requirements given that the 

revisions were made to revise the rule 

to better comply with the statute. 

Furthermore, we have provided an 

opportunity for comment and have now 

considered all comments in issuing this 

final rule. 

D. Definition—Regulation Text Changes 

Comment: Several commenters 

suggested that the term ‘‘multiple source 

drug’’ as it is currently defined should 

be revised. One commenter stated that 

CMS should (1) change the introductory 

portion to read, ‘‘multiple source drug’’ 

means, with respect to a rebate period, 

a covered outpatient drug for which 

there ‘‘are at least two drug products 

which’’, and (2) change the initial word 

of paragraphs (1)–(3) of the definition 

from ‘‘is’’ to ‘‘are.’’ Several commenters 

stated that for CMS to comply with the 

statute, the term ‘‘covered outpatient 

drug’’ in the rule must be replaced with 

‘‘drug product’’ in paragraphs 3(i) and 

3(ii) of the definition of ‘‘multiple 

source drug’’ to assure that FULs are 

applied properly. 

Response: We have revised the 

definition of multiple source drug in 

this final rule in accordance with the 

language in the Act. We have retained 

the term ‘‘covered outpatient drug’’ in 

paragraph (3)(ii) of that definition 

because FULs are set for ‘‘multiple 

source drugs,’’ which under section 

1927(k)(7)(A)(i) of the Act are a subset 

of ‘‘covered outpatient drugs.’’ 

E. Drug Versus Drug Product— 

Compliance With the Social Security 

Act 

Comment: Several commenters stated 

that the language of the rule does not 

follow the language of the statute 

because the rule does not properly 

distinguish between a ‘‘drug’’ and a 

‘‘drug product.’’ Several commenters 

stated that the distinction between drug 

and drug product is important. Several 

commenters noted that a ‘‘drug’’ is a 

chemical ingredient contained in one or 

more drug products but that a ‘‘drug 

product’’ is a ‘‘finished dosage form’’ 

such as a tablet or capsule. The 

commenters stated that a drug may be 

generally available to the public through 

retail pharmacies in a State even though 

an individual drug product is not 

generally available to the public through 

retail pharmacies in a State. 

Response: We appreciate the 

comment and have revised the 

regulation to conform to the statute. We 

note, however, that the Act does not 

distinguish between the terms ‘‘drug’’ 

and ‘‘drug product’’ in the manner 

suggested in these comments. 

F. National Availability 

Comment: One commenter stated that 

drug products cannot be assumed to 

have national availability because 

regional manufacturers, marketers, 

distributors and wholesalers may sell 

exclusively to entities in a specific class 

of trade and may not make their drug 

products generally available to any or 

all pharmacies in a given State or to the 

general public, even though they are 

listed in the national compendia. 

Another commenter stated that there are 

many instances of limited and sporadic 

supply of a drug product, particularly in 

the first year after a new multiple source 

drug product is introduced to the 

market, so that not all pharmacies have 

access to sufficient supply. 

Response: We believe, based on our 

experience with the FUL program that 

when an FDA-approved, 

therapeutically, pharmaceutically, and 

bioequivalent drug product is sold or 

marketed on a nationwide basis, at least 

one therapeutically, pharmaceutically, 

and bioequivalent drug product is 

generally sold or marketed in every 

State. However, we have established a 

process in this rule to determine 

whether a listed product is generally 

available through retail pharmacies in a 

State. If a State concludes that a 

particular covered outpatient drug has 

no therapeutically, pharmaceutically, 

and bioequivalent drug product that is 

generally available in that State and, as 

a result, does not meet the definition of 

a multiple source drug in the State, that 

drug would not be subject to the FUL in 

that State. When at least two 

therapeutically, pharmaceutically, and 

bioequivalent drug products are 

generally available to the public through 

retail pharmacies within the State, the 

drug will be considered a multiple 

source drug. In the case where the 

covered outpatient drug is not a 

multiple source drug, that drug would 

not be subject to the FUL in that State 

for the applicable rebate period. 

G. National Availability—Compliance 

With the Social Security Act 

Comment: Several commenters stated 

that CMS’ assumption that drug 

products are nationally available does 

not ‘‘interpret’’ the statute, but rather 

contradicts the statute. Other 

commenters stated that CMS assumes 

nationwide availability of all drug 

products without a legal or factual basis 

for that assumption. Several 

commenters stated that CMS has not 

compiled evidence to justify its 

assumption of national availability. One 

commenter stated that an assumption 

that all drug products are available 

nationwide would render the statute’s 

State availability standard completely 

superfluous. Another commenter said 

that the same assumption of national 

availability was contained in CMS’ 

original definition of ‘‘multiple source 

drug’’ which looked to whether drug 

products were available ‘‘in the United 

States’’ rather than in each ‘‘State.’’ 

Response: The State availability 

requirement has been in the Social 

Security Act since the Omnibus Budget 

Reconciliation Act of 1990. Nonetheless, 

we have received few complaints that 

drug products listed in the national 

compendia are not widely available, and 

the few complaints that we have 

received generally suggested availability 

problems occurring nationwide, rather 

than availability problems unique to a 

particular State. Therefore, in light of 

our experience with the implementation 

of section 1927 of the Act, we believe 

that when an FDA-approved, 

therapeutically, pharmaceutically, and 

bioequivalent drug product is sold or 

marketed on a nationwide basis, that at 

least one therapeutically, 

pharmaceutically, and bioequivalent 

drug product is sold or marketed in 

every State. However, to the extent that 

a particular covered outpatient drug has 

no therapeutically, pharmaceutically, 

and bioequivalent drug product 

generally available to the public through 

retail pharmacies within a State, this 

rule gives States the flexibility to 

disregard the FUL for that drug and 

apply alternate pricing methodologies as 

set forth in the State’s approved plan. 

Comment: One commenter stated that 

a Federal court enjoined 

implementation of the July 17, 2007 

rule’s definition of ‘‘multiple source 

drug’’ because it violated the provisions 

of the statute’s State availability 

standard. Several commenters stated 

that despite the court’s ruling, CMS has 

made it clear that the agency will 

continue to ignore the statute’s State 

availability standard and continue to 

assume that all drugs are available 

nationally, and that pharmacies and 

States may enforce the statute’s State 

availability standard, but CMS will not. 

Response: We disagree. We have 

revised the definition of ‘‘multiple 

source drug’’ as it appeared in the 

Medicaid prescription drug rule to be 

consistent with statutory language and 

fully compliant with the court’s 

preliminary ruling. We have not ignored 

the State availability requirement; we 

have set forth a mechanism for 

determining whether a drug is a 

‘‘multiple source drug.’’ As we stated in 

the March 14, 2008 interim final rule, 

when a State confirms that a covered 

outpatient drug is not a multiple source 


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58494 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 

drug in that State, that drug is not 

subject to a FUL in that State. We have 

further clarified in our final rule that 

when at least two therapeutically, 

pharmaceutically, and bioequivalent 

drug products, covered under the 

Medicaid drug rebate program, are 

generally available within the State, the 

drug will be considered a multiple 

source drug. In the case where the 

covered outpatient drug is not a 

multiple source drug, that drug would 

not be subject to the FUL in that State 

for the rebate period. Thus, we have 

given States increased flexibility to 

determine a product’s availability. We 

believe that this is the most effective 

means to ensure that drug products not 

available in a State are identified and 

not treated as multiple source drugs. 

Comment: A few commenters stated 

that if Congress had intended that CMS 

simply assume that equivalent drug 

products are available nationwide, it 

would not have adopted a specific 

process for CMS to confirm availability 

in each State. 

Response: Congress did not adopt a 

specific process for CMS to confirm 

State availability but left it to the agency 

to set forth such a process. We adopted 

the process set forth in the interim final 

rule with comment period because we 

believe that pharmacies and States are 

in a substantially better position to 

assess the availability of drugs available 

for purchase in their areas. For example, 

the States have daily updated claims 

files and could validate drug availability 

in a more timely and efficient manner 

than could be done at the Federal level. 

In addition, pharmacies are in the best 

position to know the drug products to 

which they have access. 

H. State Availability—Compliance With 

the Social Security Act 

Comment: A few commenters stated 

that this rule does not comply with the 

Act’s ‘‘State availability’’ standard, 

which they state requires CMS to 

confirm whether particular drug 

products are generally available to the 

public through retail pharmacies in each 

State. A few commenters stated that 

CMS must actually implement the 

statutory language by not applying FULs 

unless it has first confirmed State 

availability as mandated by the statute. 

The commenters further stated that the 

statute does not authorize CMS to 

calculate and apply FULs and then 

impose on pharmacies and States the 

burden of investigating whether 

particular drug products satisfy the 

State availability standard. The 

commenters state that the Federal 

statute clearly discusses the duty of ‘‘the 

Secretary’’ to apply FULs to multiple 

source drug products that satisfy the 

State availability standard. 

Response: We disagree. The statute 

does not prohibit States from assisting 

in the availability determination or, as 

noted previously, otherwise set forth 

any mechanism for determining 

whether a drug is ‘‘generally available.’’ 

We believe the most efficient means to 

do so is to have the State make the 

initial determination that drugs are not 

generally available in that State. The 

Act, as amended by the DRA, clearly 

contemplates the creation of a single 

nationwide FUL list. To first confirm 

availability of each and every drug on a 

State-by-State basis before setting a FUL 

would render the FUL provisions 

established by the DRA administratively 

impossible to implement, and would 

create an undue burden that would 

make the publication of a timely list 

unlikely. This practice would be 

inconsistent with the statute which 

provides that the Secretary establish a 

FUL for each multiple source drug that 

enters the market on a timely basis. 

Comment: Several commenters 

asserted that CMS incorrectly instructs 

States that the State availability 

standard focuses on whether drugs are 

unavailable to pharmacies, not whether 

drug products are generally available to 

the public through retail pharmacies. 

Response: We disagree. Since the 

statute uses the phrase ‘‘generally 

available to the public through retail 

pharmacies,’’ we have decided that 

availability to retail pharmacies is a 

necessary component of the State 

availability determination. We believe 

that if a drug is available to a retail 

pharmacy, then it will be available to 

the public. 

Comment: A commenter stated that 

CMS has traditionally surveyed 

manufacturers to determine if products 

are available before setting a FUL. The 

commenter stated that he believes that 

CMS should undertake a similar task to 

determine whether each dosage form 

and strength of a multiple source drug 

is generally available to the public 

through retail pharmacies in each State. 

Response: As noted previously, we do 

not interpret the law to require us to 

continually survey drug availability in 

the retail pharmacies of every State. 

Such continuous surveys would be 

burdensome and very time consuming 

and could likely result in an untimely 

and outdated FUL list. In addition, such 

surveys would be inconsistent with our 

understanding of other statutory 

amendments in the DRA where 

Congress contemplated that we establish 

FULs on a timely basis. For example, 

section 1927(f)(1) of the Act requires the 

Secretary’s response within 7 days after 

notification of availability of multiple 

source products. We also note that 

pharmacies and States are in a 

substantially better position to assess 

the general availability of drugs in their 

areas. 

I. State Availability and FUL 

Reimbursement 

Comment: Several commenters 

expressed concern about the FUL 

reimbursement in regard to drug 

availability in the State. One commenter 

asked if States will receive an 

exemption from the FUL retroactively 

because a State determination 

concerning the availability of a drug 

will presumably be after a FUL effective 

date, and after CMS confirms 

availability issues. Another commenter 

stated that FULs should only be based 

on the AMPs of products that satisfy the 

State availability standard. 

Response: If a State can confirm that 

a covered outpatient drug is not a 

multiple source drug in the State, for a 

particular rebate period, the FUL will 

not apply to that drug in that State for 

that rebate period. Where the drug does 

not qualify as a multiple source drug in 

the State, the State should apply the 

appropriate pricing methodologies as set 

forth in the approved State plan. We 

have further clarified in our final rule 

that when at least two therapeutically, 

pharmaceutically, and bioequivalent 

drug products, covered under the 

Medicaid drug rebate program, are 

generally available within the State, the 

drug will be considered a multiple 

source drug. In the case where a covered 

outpatient drug is not a multiple source 

drug within the State, that drug would 

not be subject to the FUL in that State 

for the rebate period. The final comment 

regarding the calculation of the FUL 

based on certain products is outside of 

the scope of this rule. 

Comment: One commenter stated that 

the rule notes that if a particular State 

could confirm that a drug is unavailable 

from two sources, the FUL will be lifted 

for the rebate period. 

Response: In the case where a State 

can confirm that a covered outpatient 

drug is not a multiple source drug in the 

State, for a particular rebate period, the 

FUL will not apply to that drug in that 

State for that rebate period. Where the 

drug does not qualify as a multiple 

source drug in the State, the State 

should apply the appropriate pricing 

methodologies as set forth in the 

approved State plan. 

Comment: One commenter requested 

further information on how the multiple 

source definition is to be applied in a 

rebate period, that is, quarterly, when 


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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58495 

the FUL process will be on a monthly 

schedule. 

Response: We appreciate the 

comment, but the definition of multiple 

source drug contemplates availability 

determinations on a rebate, as opposed 

to a monthly, period. 

Comment: CMS has not always 

assigned FULs to every group of drug 

products, so one commenter assumed 

that CMS took this approach in 

recognition of the lack of product 

availability in one or more States. One 

commenter stated that it is apparent that 

CMS limited its conclusion about at 

least two equivalent products being 

available everywhere once a generic 

drug enters the market by adding the 

modifier ‘‘nearly always.’’ 

Response: Prior to the DRA revisions, 

we focused on applicability of the FULs 

based on the number of suppliers listed 

in a national published listing of 

average wholesale prices (such as Red 

Book, Blue Book, and Medi-Span). We 

have no reason not to believe that 

virtually all drug products are generally 

available in every State on a nationwide 

basis. However, we recognize there is a 

potential that certain drug products may 

not be generally available in every State 

and, as a result, we have established 

procedures which allow States to 

address such drug availability. 

Comment: One commenter asserted 

that the States should be given an 

opportunity for an appeals process to 

address availability issues directly with 

CMS. They contend that this would 

support a more effective 

implementation of the new FUL pricing 

calculation by providing CMS with the 

ability to directly address unforeseen 

marketplace issues and ensure drug 

availability in each State across the 

nation. 

Response: We do not believe that a 

formal appeals process will be needed. 

We continue to believe that the States 

are in the best position to determine 

drug availability and implement the 

process afforded in this rule when a 

covered outpatient drug has no 

equivalent that is generally available in 

the State. We have on going 

communication with the States, and 

through those discussions States may 

bring availability issues to our attention, 

or may bring availability issues to our 

attention in response to a pharmacy’s 

complaint. We do not believe more 

formal appeals would be necessary as 

our source for setting FULs will be 

manufacturer submitted AMP data. 

Regardless, a State may disregard a FUL 

for a drug when it determines that the 

drug is not a multiple source drug 

within the State for the rebate period. 

J. State Availability and Retail 

Pharmacy Definition 

Comment: One commenter stated that 

CMS does not define ‘‘retail 

pharmacies’’ in the revised definition. 

However, CMS has included in the 

definition of the ‘‘retail pharmacy class 

of trade’’ many entities that do not 

constitute retail pharmacies. The 

commenter stated that determining that 

multiple source drug products are 

generally available in non-retail 

pharmacies would not be sufficient to 

satisfy the State availability standard. 

Response: We appreciate the 

comment. However, the definition of 

retail pharmacies is outside the scope of 

this rulemaking. 

K. Burden on States and Providers 

Comment: Several commenters 

expressed concern about the burden that 

may be placed upon States and 

providers in determining whether a 

drug is a multiple source drug within 

the State. 

Response: We believe that the effect 

on States and pharmacy providers will 

be small given our experience with the 

FUL program. To the extent a State 

would find, however, that a covered 

outpatient drug product is not a 

multiple source drug in that State, the 

effect will be to permit that State to 

disregard the FUL price for that drug, 

and apply appropriate pricing 

methodologies as set forth in the 

approved State plan. 

Comment: One commenter expressed 

concern that there will be a substantial 

and ongoing burden on States because 

all retail pharmacies would have little 

choice but to notify the State that 

virtually any and every drug product 

may not be available as a multiple 

source drug in that State. Several 

commenters stated that a particular 

retail pharmacy will rarely if ever know 

whether a particular drug product is 

‘‘generally available to the public 

through retail pharmacies’’ in a State. A 

commenter stated that, in practice, the 

most likely result would be that 

pharmacies would investigate only if 

they cannot buy enough inventory 

without losing more than they can 

afford. Another comment inquired how 

a State can confirm whether or not a 

multiple source drug is available from 

two sources. 

Response: The statute provides that a 

drug product is considered to be sold or 

marketed in a State if the drug product 

appears in a published national listing 

of average wholesale prices, provided 

the listed product is ‘‘generally available 

to the public through retail pharmacies 

in that State.’’ In light of that standard, 

we see no reason why pharmacies 

would report that a substantial number 

of drugs would be generally unavailable; 

however, States have the authority to set 

reasonable standards for such reporting. 

We fully expect that pharmacies would 

report to their States information 

concerning any covered outpatient drug 

that is subject to a FUL but for which 

they cannot purchase an equivalent 

drug product. 

Comment: One commenter stated that 

CMS is not only assigning States the 

burden of determining whether a 

multiple source drug is available in the 

marketplace (as listed in the Regulatory 

Impact Statement) but also of 

determining the adequacy of the FUL 

rates to cover pharmacy actual 

acquisition costs. 

Response: We disagree. As we have 

previously indicated, we believe that 

the effect on States and pharmacy 

providers will be small. This rule does 

not require that States determine the 

adequacy of the FUL relative to the 

pharmacies’ actual acquisition costs. 

L. State Versus Federal Responsibility 

Comment: CMS has given no 

guidance as to what the agency believes 

constitutes ‘‘general availability to the 

public’’ and what is considered by CMS 

to be a sufficient number of retail 

pharmacies that offer the drug product 

in sufficient quantities to be ‘‘generally 

available to the public.’’ 

Response: At this time we have not 

provided a definition of general 

availability to the public. The definition 

of multiple source drug has been in the 

statute since the amendments of the 

Omnibus Budget Reconciliation Act of 

1990 and yet we have received very few 

complaints that drug products listed in 

the national compendia are not 

generally available, and the few 

complaints that we have received 

generally pertained to availability 

problems occurring nationwide, rather 

than availability problems unique to a 

particular State. We continue to believe 

that complaints regarding general 

availability will be infrequent and thus 

do not believe it is necessary to provide 

additional instructions to States at this 

time. However, if, after consultation 

with the States, we determine it is 

necessary to offer additional guidance, 

we will do so. We also note that the 

commenter has misconstrued this 

regulation which, in accordance with 

the statute, provides that the listed 

product be generally available to the 

public through retail pharmacies. 

General availability to the public is 

determined not by considering which 

drug products pharmacies have chosen 

to offer but by considering which drug 


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58496 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 

products are available for pharmacies to 

offer. We believe that if a drug is 

available to a retail pharmacy, then it 

will be available to the general public. 

Comment: One commenter expressed 

concern that, if States cannot or will not 

act when pharmacies report a lack of 

availability of a drug, will CMS 

establish a process for pharmacies to 

directly petition CMS to remove a FUL? 

The commenter adds that CMS has not 

indicated that it will implement a 

timely process to remove the FUL on a 

product in a State. 

Response: We have not established a 

separate Federal process for pharmacies 

to petition us for removal of a FUL and 

based on our experience with the FUL 

program, we see no need to add such a 

process at this time. We consider it the 

responsibility of the State to confirm the 

information provided by the 

pharmacies. 

Comment: One commenter proposed 

that rather than having a process that 

has to be managed in 50 different States, 

it would be more efficient for CMS to 

establish a national process for States 

and providers to express their concerns. 

Response: As discussed previously, 

we disagree. The statute and regulation 

provide that the listed product be 

generally available to the public through 

retail pharmacies in that State. We 

believe that States and pharmacies in 

those States are in a better position to 

assess the general availability of drugs 

in their areas. 

M. Effects on Other Issues 

Comment: We received an audit 

report entitled, Audit of Chain and 

Independent Pharmacies, Mass 

Merchandisers, Proprietary Stores and 

Foodstores with Pharmacies, March 

2006, attached to a comment. 

Response: We appreciate the report. 

However, the report did not address the 

provisions of this rule. 

Comment: We received several 

comments regarding the definitions of 

AMP, wholesaler, and retail class of 

trade as well as comments regarding the 

outlier policy applied when setting 

FULs. 

Response: The purpose of this rule is 

to define ‘‘multiple source drug.’’ The 

topics addressed by the commenters 

regarding AMP, wholesaler, retail class 

of trade, and outliers are not within the 

scope of this final rule. 

Comment: One commenter stated that 

CMS must adopt a definition of 

‘‘multiple source drug’’ that is based on 

the median or weighted AMP in order 

to ensure that such drug products are 

available to the public through retail 

pharmacies. One commenter urged CMS 

to clarify that when a drug product 

ceases to meet either the first or second 

prong of the ‘‘multiple source drug’’ 

definition (that is, there is not at least 

one other drug which is rated by the 

FDA as therapeutically equivalent in the 

most recent publication of the Approved 

Drug Products with Therapeutic 

Equivalence Evaluations and is 

pharmaceutically equivalent and 

bioequivalent as determined by FDA) 

that CMS will take Federal action to 

remove that drug from the FUL list and 

inform State Medicaid agencies to cease 

application of the FUL. Further, the 

commenter requested that CMS confirm 

that the State-by-State approach applies 

only in situations where the third prong 

of the ‘‘multiple source drug’’ definition 

is not satisfied—that is, where a generic 

equivalent is not ‘‘sold or marketed in 

the State.’’ 

Response: To the extent that a drug 

does not qualify as a multiple source 

drug, that drug is not subject to the FUL. 

Those comments concerning the revised 

definition of multiple source drug and 

the FUL methodology are not within the 

scope of the interim final rule with 

comment period. 

Comment: One commenter asserted 

that updating AMPs and AMP based 

FULs monthly does not assure 

availability of drug products at the FUL 

rates, since corrections are not made to 

previously issued FULs. Another 

commenter stated that this proposed 

rule change does nothing to address 

fundamental shortcomings of using the 

currently proposed basis to set FULs. 

Response: These comments are 

beyond the scope of this rulemaking 

document and will not be addressed in 

this rulemaking document. 

IV. Provisions of the Final Regulations 

This final rule incorporates the 

provisions of the March 2008 interim 

final rule with comment period with 

two changes. 

In § 447.205, paragraph (3)(i) of the 

definition of multiple source drug, the 

term ‘‘covered outpatient drug’’ is 

revised to read ‘‘drug product,’’ and 

‘‘listed product’’ respectively to reflect 

the statutory language. 

V. Collection of Information 

Requirements 

This document does not impose any 

information collection and 

recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 35). 

VI. Regulatory Impact Statement 

We have examined the impact of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Act, the Unfunded Mandates Reform 

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

Order 13132 on Federalism, and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). This final rule does not 

reach the economic threshold and thus 

is not considered a major rule. 

The 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. Individuals 

and States are not included in the 

definition of a small entity. 

We are not preparing an analysis for 

the RFA because the Secretary has 

determined that this final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

The only small entities that will 

potentially be affected by this final rule 

are small pharmacies. We believe that 

the effect will be small because we are 

unaware of any situation in which there 

are at least two FDA-approved, 

therapeutically, pharmaceutically, and 

bioequivalent drugs generally available 

in one State but not another State. To 

the extent a State would find, however, 

that a drug is not a multiple source drug 

in that State because no FDA-approved, 

therapeutically, pharmaceutically, and 

bioequivalent drug product is generally 

available in that State, the only effect 

will be to permit that State to disregard 

the FUL price for a drug that no longer 

qualifies as a multiple source drug in 

that State when determining the 

aggregate limit. To the extent this final 

rule has an effect on small retail 

pharmacies, that effect will be to 

increase payment rates to those 

pharmacies by allowing States to 

disregard FULs for certain drugs. Small 

pharmacies would only need to report 

when one drug in a two-drug group of 

therapeutically, pharmaceutically, and 


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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58497 

bioequivalent drugs is unavailable. 

However, such reporting would clearly 

be in their interest. In addition, 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 metropolitan 

statistical area and has fewer than 100 

beds. We are not preparing an analysis 

for section 1102(b) of the Act, because 

the Secretary has determined that this 

final rule will not have a significant 

impact on the operations of a substantial 

number of small rural hospitals. Small 

rural hospitals would be affected only to 

the extent that no FDA-approved, 

therapeutically and bioequivalent drug 

is available in that State for a particular 

outpatient drug provided through their 

outpatient pharmacies. As discussed 

above for pharmacies, States may 

choose to change reimbursement for 

drugs that are not multiple source drugs 

within the State, but this change is 

expected to increase reimbursement. 

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 on State, local, or 

tribal governments in the aggregate, or 

by the private sector, in any 1 year of 

$100 million in 1995, updated annually 

for inflation. In 2008, that threshold is 

approximately $130 million. This final 

rule does not contain any mandates that 

will impose spending costs on State, 

local, or tribal governments in the 

aggregate, or by the private sector, of 

$130 million. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

This regulation will impose only a very 

small burden, if any, on States. When a 

pharmacy has notified a State that a 

drug on the CMS FUL list may not be 

available as a multiple source drug in 

that State, the State should determine 

whether the pharmacy’s assertion of 

lack of general availability in the State 

is valid. The State, however, has no 

obligation to make an independent 

assessment of drug availability in the 

absence of such notification by a 

pharmacy. This final rule will only 

revise payment rates in those rare cases 

in which a particular FDA-approved 

therapeutically, pharmaceutically, and 

bioequivalent drug is not generally 

available to the public through retail 

pharmacies in a particular State and, as 

a result, only one therapeutically, and 

bioequivalent drug product is generally 

available to the public through those 

pharmacies. In this circumstance, a 

State would need to confirm the 

information received from its 

pharmacies regarding drug availability. 

This would impose only a small burden 

on States. State systems are designed to 

allow for payment changes as a routine 

matter and to change the composition of 

the FUL groups or delete FUL groups. 

Since this regulation does not impose 

any significant costs on State or local 

governments, the requirements of E.O. 

13132 are not applicable. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Sections in 42 CFR Part 447 

Accounting, Administrative practice 

and procedure, Drugs, Grant programs— 

health, Health facilities, Health 

professions, Medicaid, Reporting and 

recordkeeping requirements, rural areas. 

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services, is confirming the 

interim rule published on March 14, 

2008 (73 FR 13785) as final with the 

following changes: 

PART 447—PAYMENTS FOR 

SERVICES 

■ 1. The authority citation for part 447 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

■ 2. Section 447.502 the definition of 

‘‘Multiple source drug’’ is amended by 

revising paragraph (3)(i) to read as 

follows: 

§ 447.502 Definitions. 

* * * * * 

Multiple source drug * * * 

* * * * * 

(3) * * * 

(i) A drug product is considered sold 

or marketed in a State if it appears in 

a published national listing of average 

wholesale prices, selected by the 

Secretary, provided that the listed 

product is generally available to the 

public through retail pharmacies in that 

State. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

Dated: August 20, 2008. 

Kerry Weems, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: August 21, 2008. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. E8–23653 Filed 10–6–08; 8:45 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 648 

[Docket No. 070817467–8554–02] 

RIN 0648–XK82 

Magnuson-Stevens Fishery 

Conservation and Management Act 

Provisions; Fisheries of the 

Northeastern United States; Atlantic 

Sea Scallop Fishery; Closure of the 

Limited Access General Category 

Scallop Fishery to Individual Fishing 

Quota Scallop Vessels 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Temporary rule; closure. 

SUMMARY: NMFS announces that the 

Limited Access General Category 

(LAGC) Scallop Fishery will close to 

individual fishing quota (IFQ) scallop 

vessels until it re-opens on December 1, 

2008, under current regulations. This 

action is based on the determination 

that the third quarter scallop total 

allowable catch (TAC) for LAGC IFQ 

scallop vessels (including vessels issued 

an IFQ letter of authorization (LOA) to 

fish under appeal), is projected to be 

landed. This action is being taken to 

prevent IFQ scallop vessels from 

exceeding the 2008 third quarter TAC, 

in accordance with the regulations 

implementing Amendment 11 to the 

Atlantic Sea Scallop Fishery 

Management Plan (FMP), enacted by 

Framework 19 to the FMP, and the 

Magnuson-Stevens Fishery 

Conservation and Management Act. 

DATES: The closure of the LAGC fishery 

to all IFQ scallop vessels is effective 

0001 hr local time, October 5, 2008, 

through November 30, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Biegel, Fishery 

Management Specialist, (978) 281–9112, 

fax (978) 281–9135. 

SUPPLEMENTARY INFORMATION: 

Regulations governing fishing activity in 


jlentini on PROD1PC65 with RULES