Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Rules and Regulations 61621 

List of Subjects in 33 CFR Part 165 

Harbors, Marine safety, Navigation 

(water), Reporting and recordkeeping 

requirements, Security measures, 

Waterways. 

■ For the reasons discussed in the 

preamble, the Coast Guard amends 33 

CFR part 165 as follows: 

PART 165—REGULATED NAVIGATION 

AREAS AND LIMITED ACCESS AREAS 

■ 1. The authority citation for part 165 

continues to read as follows: 

Authority: 33 U.S.C. 1226, 1231; 46 U.S.C. 

Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 

33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; 

Pub. L. 107–295, 116 Stat. 2064; Department 

of Homeland Security Delegation No. 0170.1. 

■ 2. Add a new temporary § 165.T11– 

182 to read as follows: 

§ 165.T11–182 Safety Zone; IJSBA World 

Finals; Lower Colorado River, Lake Havasu, 

AZ. 

(a) Location. The following area is a 

safety zone: All waters of Lake Havasu, 

from surface to bottom, encompassed by 

lines connecting the following points: 

Beginning at 34°28.49′ N, 114°21.33′ W; 

thence to 34°28.55′ N, 114°21.56′ W; 

thence to 34°28.43′ N, 114°21.81′ W; 

thence to 34°28.32′ N, 114°21.71′ W; 

thence along the shoreline returning to 

34°28.49′ N, 114°21.33′ W. 

These coordinates are based upon 

NAD 83. 

(b) Enforcement Period. This section 

will be enforced from sunrise to sunset 

on October 3, 2010 through October 10, 

2010. If the International Jet Sports 

Boating Association World Finals 

concludes prior to the scheduled 

termination of the effective period, the 

Captain of the Port will cease 

enforcement of this safety zone and will 

announce that fact via Broadcast Notice 

to Mariners. 

(c) Definitions. The following 

definition applies to this section: 

Designated representative means any 

Commissioned, Warrant, or Petty 

Officers of the Coast Guard or Coast 

Guard Auxiliary, and local, state, and 

federal law enforcement officers who 

have been authorized to act on the 

behalf of the Captain of the Port. 

(d) Regulations. (1) Under the general 

regulations in § 165.23, entry into, 

transit through or anchoring within this 

safety zone is prohibited unless 

authorized by the Captain of the Port 

San Diego or his designated 

representative. 

(2) Mariners desiring to enter or 

operate in the safety zone may request 

authorization to do so from the Patrol 

Commander (PATCOM). The PATCOM 

may be contacted on VHF–FM Channel 

16. 

(3) All persons and vessels must 

comply with the instructions of the 

Coast Guard Captain of the Port or his 

designated representative. 

(4) Upon being hailed by U.S. Coast 

Guard patrol personnel by siren, radio, 

flashing light, or other means, the 

operator of a vessel must proceed as 

directed. 

(5) The Coast Guard may be assisted 

by other federal, state, or local agencies. 

Dated: September 17, 2010. 

P.J. Hill, 

Commander, U.S. Coast Guard, Acting 

Captain of the Port San Diego. 

[FR Doc. 2010–25193 Filed 10–5–10; 8:45 am] 

BILLING CODE 9110–04–P 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 17 

RIN 2900–AN15 

Charges Billed to Third Parties for 

Prescription Drugs Furnished by VA to 

a Veteran for a Nonservice-Connected 

Disability 

AGENCY: Department of Veterans Affairs. 

ACTION: Final rule. 

SUMMARY: This document amends the 

medical regulations of the Department 

of Veterans Affairs (VA) concerning 

‘‘reasonable charges’’ for medical care or 

services provided or furnished by VA to 

a veteran for a nonservice-connected 

disability. More specifically, VA 

amends the regulations regarding 

charges billed for prescription drugs not 

administered during treatment by 

changing the billing formula to reflect 

VA’s actual drug costs for each drug 

rather than using a national average 

drug cost for all prescriptions 

dispensed. The revised formula for 

calculating reasonable charges for 

prescription drug costs will also 

continue to include an average 

administrative cost for each 

prescription. The purpose is to provide 

VA with a more accurate billing 

methodology for prescription drugs. 

DATES: Effective Date: This final rule is 

effective on March 18, 2011. 

Applicability Date: The final rule will 

apply to prescriptions filled on or after 

March 18, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Romona Greene, Manager of Rates and 

Charges, VHA Chief Business Office 

(168), Veterans Health Administration, 

Department of Veterans Affairs, 810 

Vermont Avenue, NW., Washington, DC 

20420, (202) 461–1595. (This is not a 

toll-free number.) 

SUPPLEMENTARY INFORMATION: Under 38 

U.S.C. 1729, VA has the right to recover 

or collect reasonable charges for medical 

care or services (including the provision 

of prescription drugs) from a third party 

to the extent that the veteran or the 

provider of the care or services would 

be eligible to receive payment from the 

third party for: 

• A nonservice-connected disability 

for which the veteran is entitled to care 

(or the payment of expenses of care) 

under a health plan contract, 38 U.S.C. 

1729(a)(2)(D), 38 CFR 17.101(a)(1)(i); 

• A nonservice-connected disability 

incurred incident to the veteran’s 

employment and covered under a 

worker’s compensation law or plan that 

provides reimbursement or 

indemnification for such care and 

services, 38 U.S.C. 1729(a)(2)(A), 38 

CFR 17.101(a)(1)(ii); or 

• A nonservice-connected disability 

incurred as a result of a motor vehicle 

accident in a State that requires 

automobile accident reparations (nofault) insurance, 38 U.S.C. 1729(a)(2)(B), 

38 CFR 17.101(a)(1)(iii). 

However, under current 38 CFR 

17.101(a)(4), which implements 38 

U.S.C. 1729(c)(2)(B), a third-party payer 

liable for such medical care and services 

under a health plan contract has the 

option of paying, to the extent of its 

coverage, either the billed charges or the 

amount the third-party payer 

demonstrates it would pay for care or 

services furnished by providers other 

than entities of the United States for the 

same care or services in the same 

geographic area. 

Prior to the effective date of this 

document, VA billed for prescription 

drugs not administered during treatment 

based on the sum of two components: 

(1) The national average of VA’s drug 

costs for all prescriptions, and (2) the 

national average of VA’s administrative 

costs associated with furnishing 

prescription drugs. Further, in 

accordance with § 17.102(h), prior to the 

effective date of this document, VA 

billed $51 for each prescription filled 

(see 70 FR 66866, Nov. 3, 2005). 

In a document published in the 

Federal Register on July 9, 2009 (74 FR 

32819), we proposed to change the 

billing methodology for prescription 

drugs not administered during 

treatment. With respect to the portion of 

the billing concerning VA’s cost for 

such prescription drugs, we proposed to 

bill based on the actual cost to VA of 

each prescription drug rather than the 

national average of drug costs for all 

prescriptions. In this regard, we 

proposed to bill the total of: 

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61622 Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Rules and Regulations 

• The actual cost to VA for 

prescription drugs (i.e., the cost to the 

facility that purchased the drugs); and 

• The average national administrative 

cost associated with dispensing the 

drugs for each prescription. 

We provided a 30-day comment 

period that ended on August 10, 2009. 

We received comments from three 

commenters and the issues they raised 

are discussed below. Based on the 

rationale set forth in the proposed rule 

and this document, we are adopting the 

proposed rule with the nonsubstantive 

changes discussed below. 

Two commenters indicated that the 

final rule should ensure that insurance 

companies pay VA in response to VA 

billing, and thereby reduce or eliminate 

the veterans’ copayment. We agree that 

the payment practices of third-party 

payers need to be addressed. However, 

those practices are not within the scope 

of this rulemaking. This rulemaking 

concerns VA’s methodology for 

determining reasonable charges for 

prescription drugs. We did not propose 

to amend other VA regulations 

regarding third-party payment 

procedures or to promulgate new 

regulations regarding such procedures. 

However, we intend to separately 

publish a proposed rule to address 

issues regarding requirements for thirdparty payers making payments to VA. 

Another commenter raised a number 

of issues. All of these issues are 

discussed below. 

The commenter indicated that the VA 

acquisition cost for prescription drugs 

could be more than the third-party 

payer cost for the same prescription 

drugs and seemed to suggest that the 

billing amount for the cost of the drugs 

should not be more than the amount 

that the third-party payer would be 

required to pay for the same 

prescription drugs. The commenter also 

indicated that the VA administrative fee 

of $11.17 is more than the average 

private dispensing fee and that private 

industry has been successful in 

negotiating such fees in the range of 

$1.50 to $2.00. We clarified what is 

meant by administrative costs but made 

no other changes based on these 

comments. 

Under the provisions of 38 U.S.C. 

1729, VA has authority to bill thirdparty payers in an amount constituting 

‘‘reasonable charges.’’ We believe that 

the billing formula is warranted under 

the statute. Moreover, VA has taken 

steps to keep costs at a minimum. 

In most cases VA purchases drugs in 

bulk at discounted prices. Also, insofar 

as possible, VA prescribes generic 

drugs. 

Further, the $1.50 to $2.00 amounts 

quoted by the commenter were 

represented as negotiated fees and not 

represented as covering the actual 

administrative costs. We question 

whether these negotiated fees include 

all of the actual administrative costs. 

The VA administrative costs include 

general overhead costs, such as costs of 

buildings and maintenance, utilities, 

billing, and collections, and includes 

dispensing costs, such as costs of the 

labor of the pharmacy department, 

packaging, and mailing. 

Even so, in some cases, a third party 

payor may be allowed to pay less than 

the VA billed amount. In this regard, 

under section 1729 a third party payor 

has the option of paying, to the extent 

of its coverage, either the billed charges 

or the amount the third-party payor 

would pay for the prescription drugs to 

private sector providers in the same 

geographic area. Accordingly, this 

alternative will continue to be available 

to third party payors in accordance with 

the statutory mandate (see 38 CFR 

17.101(a)(4)). 

The commenter questioned how VA 

will determine the price point within 

the drug file and how this information 

will be communicated to health plan 

payers. We made no changes based on 

this comment. The proposed rule stated 

that the prescription cost will be 

obtained from the Outpatient Pharmacy 

Prescription file or the Drug file at each 

VA facility (74 FR 32820). The product 

cost of the prescription will be 

calculated using the most recent 

purchase price of the product used by 

VA to fill the prescription. VA’s bill will 

reflect the cost of the drugs, taking into 

consideration the quantity dispensed 

and VA’s national administrative cost. 

The total prescription cost will be 

transmitted on a bill to a third-party 

payer. 

In addition, the commenter also 

questioned what billing claim field VA 

will use for submitting cost information. 

We made no changes based on this 

comment. VA will combine the drug 

costs plus administrative costs and 

provide the total prescription cost in the 

appropriate field in the form submitted, 

e.g., National Council for Prescription 

Drug Programs electronic format, UB04; 

Centers for Medicare and Medicaid 

Services (CMS) 1500. 

The commenter also suggested that 

VA have a graduated or phased 

implementation so that third-party 

payers will have time to absorb the 

increased cost of payments. We do not 

believe that a graduated or phased 

implementation is necessary. Although 

payments made to VA by third party 

payors will represent an increase in the 

amount of collections, we believe that 

the overall impact on third party payors 

will be minimal. In 2009, U.S sales of 

prescription drugs totaled 

approximately $300.3 billion. In 

contrast, VA spent an estimated 4.9 

billion on prescription drugs in 2009 

(less than 2 per cent of the total sales). 

A large portion of the prescription drugs 

distributed in the U.S. are covered by 

third party payors. However, with or 

without the changes made by this rule, 

VA would have collected less than $200 

million in 2009 from third party payors. 

Not only do we believe that the 

overall impact to third party payors will 

be minimal because of VA’s minimal 

share, but as noted above, in some cases 

a third party payor may be allowed to 

pay less than the VA billed amount 

based on the provisions in section 1729 

which provide that a third party payor 

has the option of paying, to the extent 

of its coverage, either the billed charges 

or the amount the third-party payor 

would pay for the prescription drugs to 

private sector providers in the same 

geographic area. 

The commenter suggested that the 

final rule become effective only 

prospectively, questioned when the 

changes will become effective, and 

expressed concerns regarding when VA 

will make system changes necessary to 

implement the final rule. We agree with 

the commenter that the new billing 

methodology should not be applied 

retrospectively. This final rule is 

effective March 18, 2011. The system 

changes are scheduled to be in place on 

that date. For further clarification, we 

have added in the DATES section of this 

document a statement indicating that 

the final rule will apply to prescriptions 

filled on or after the effective date of 

this final rule. This will also provide 

some lead time for third party payors to 

prepare for compliance with the 

amended regulations. 

We also added a clarifying change in 

paragraph (m). We inserted ‘‘regarding 

VA charges’’ after ‘‘Notwithstanding 

other provisions of this section’’ to 

emphasize that paragraph (m) does not 

concern other aspects of § 17.101, such 

as the provisions of 38 CFR 17.101(a)(4), 

which explain that a third-party payer’s 

liability is limited, to the extent of its 

coverage, to the lesser of the billed 

charges or the amount that the thirdparty payer would pay to a provider 

other than VA. 

As required by 38 U.S.C. 

1729(c)(2)(A), we consulted with the 

Comptroller General of the United 

States prior to promulgating this final 

rule. 

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Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Rules and Regulations 61623 

Unfunded Mandates 

The Unfunded Mandates Reform Act 

of 1995 requires, at 2 U.S.C. 1532, that 

agencies prepare an assessment of 

anticipated costs and benefits before 

issuing any rule that may result in an 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

(adjusted annually for inflation) in any 

year. This final rule will have no such 

effect on State, local, and tribal 

governments, or on the private sector. 

Paperwork Reduction Act 

This document contains no 

collections of information under the 

Paperwork Reduction Act (44 U.S.C. 

3501–3521). 

Executive Order 12866 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

when regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety, and other advantages; 

distributive impacts; and equity). The 

Executive Order classifies as a 

‘‘significant regulatory action,’’ requiring 

review by the Office of Management and 

Budget (OMB), unless OMB waives such 

review, as any regulatory action that is 

likely to result in a rule that may: (1) 

Have an annual effect on the economy 

of $100 million or more or adversely 

affect in a material way the economy, a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local, 

or tribal governments or communities; 

(2) create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

VA has examined the economic, 

interagency, budgetary, legal, and policy 

implications of this final rule and has 

concluded that it is a significant 

regulatory action under Executive Order 

12866 because it may raise novel legal 

or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

Regulatory Flexibility Act 

The Secretary hereby certifies that 

this final rule will not have a significant 

economic impact on a substantial 

number of small entities as they are 

defined in the Regulatory Flexibility 

Act, 5 U.S.C. 601–612. This final rule 

will mainly affect large insurance 

companies. This final rule might have 

an insignificant impact on a few small 

entities that do an inconsequential 

amount of their business with VA. 

Therefore, pursuant to 5 U.S.C. 605(b), 

this final rule is exempt from the initial 

and final regulatory flexibility analysis 

requirements of sections 603 and 604. 

Catalog of Federal Domestic Assistance 

Numbers 

The Catalog of Federal Domestic 

Assistance numbers and titles for the 

programs affected by this document are 

64.005, Grants to States for Construction 

of State Home Facilities; 64.007, Blind 

Rehabilitation Centers; 64.008, Veterans 

Domiciliary Care; 64.009, Veterans 

Medical Care Benefits; 64.010, Veterans 

Nursing Home Care; 64.011, Veterans 

Dental Care; 64.012, Veterans 

Prescription Service; 64.013, Veterans 

Prosthetic Appliances; 64.014, Veterans 

State Domiciliary Care; 64.015, Veterans 

State Nursing Home Care; 64.016, 

Veterans State Hospital Care; 64.018, 

Sharing Specialized Medical Resources; 

64.019, Veterans Rehabilitation Alcohol 

and Drug Dependence; 64.022, Veterans 

Home Based Primary Care. 

List of Subjects in 38 CFR Part 17 

Administrative practice and 

procedure, Alcohol abuse, Alcoholism, 

Claims, Day care, Dental health, Drug 

abuse, Foreign relations, Government 

contracts, Grant programs—health, 

Grant programs—veterans, Health care, 

Health facilities, Health professions, 

Health records, Homeless, Medical and 

dental schools, Medical devices, 

Medical research, Mental health 

programs, Nursing homes, Philippines, 

Reporting and recordkeeping 

requirements, Scholarships and 

fellowships, Travel and transportation 

expenses, Veterans. 

Editorial Note: This document was 

received in the Office of the Federal Register 

on September 30, 2010. 

Approved: January 11, 2010. 

John R. Gingrich, 

Chief of Staff, Department of Veterans Affairs. 

■ For the reasons stated in the preamble, 

VA amends 38 CFR part 17 as follows: 

PART 17—MEDICAL 

■ 1. The authority citation for part 17 

continues to read as follows: 

Authority: 38 U.S.C. 501, 1721, and as 

noted in specific sections. 

■ 2. Revise the second sentence of 

paragraph (a)(2) and paragraph (m) of 

§ 17.101 to read as follows: 

§ 17.101 Collection or recovery by VA for 

medical care or services provided or 

furnished to a veteran for a nonserviceconnected disability. 

(a) * * * 

(2) * * * In addition, the charges 

billed for prescription drugs not 

administered during treatment will be 

the amount determined under paragraph 

(m) of this section. * * * 

* * * * * 

(m) Charges for prescription drugs not 

administered during treatment. 

Notwithstanding other provisions of this 

section regarding VA charges, when VA 

provides or furnishes prescription drugs 

not administered during treatment, 

within the scope of care referred to in 

paragraph (a)(1) of this section, charges 

billed separately for such prescription 

drugs will consist of the amount that 

equals the total of the actual cost to VA 

for the drugs and the national average of 

VA administrative costs associated with 

dispensing the drugs for each 

prescription. The actual VA cost of a 

drug will be the actual amount 

expended by the VA facility for the 

purchase of the specific drug. The 

administrative cost will be determined 

annually using VA’s managerial cost 

accounting system. Under this 

accounting system, the average 

administrative cost is determined by 

adding the total VA national drug 

general overhead costs (such as costs of 

buildings and maintenance, utilities, 

billing, and collections) to the total VA 

national drug dispensing costs (such as 

costs of the labor of the pharmacy 

department, packaging, and mailing) 

with the sum divided by the actual 

number of VA prescriptions filled 

nationally. Based on this accounting 

system, VA will determine the amount 

of the average administrative cost 

annually for the prior fiscal year 

(October through September) and then 

apply the charge at the start of the next 

calendar year. 

* * * * * 

[FR Doc. 2010–25043 Filed 10–5–10; 8:45 am] 

BILLING CODE 8320–01–P 

WReier-Aviles on DSKGBLS3C1PROD with RULES