2023-07115.pdf

change, including the rules regarding how to account for coverage not provided by the Part D sponsor, and instead provided by other payers, because they do not directly address the calculation of the reinsurance payment amount and thus do not rely on the current regulatory definition of GCPDC. For example, we explained that under rules regarding Medicare secondary payer (MSP) or subrogated claims, the amounts reported in the cost and payment fields of the PDE record reflect a reduction in the Part D plans incurred cost for a drug resulting from other payer arrangements, which is currently captured in GCPDC and would continue to be captured in GCPDC under our proposed revisions. We noted that in the 2022 final rule titled Medicare Program; Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs; Policy and Regulatory Revisions in Response to the COVID19 Public Health Emergency; Additional Policy and Regulatory Revisions in Response to the COVID19 Public Health Emergency (87 FR 27833 through 27851) which appeared in the Federal Register on May 9, 2022, we amended our regulations at  423.100, to add a new definition of negotiated price effective January 1, 2024. The new definition specifies, among other things, that the negotiated price for a Part D drug is the lowest possible reimbursement a network pharmacy will receive, in total, for the drug, net of all pharmacy price concessions. Thus, as of January 1, 2024, all price concessions from network pharmacies, negotiated by Part D sponsors and their contracted pharmacy benefit managers (PBMs), will be reflected in the negotiated price that is made available at the POS and reported to CMS on a PDE record, meaning that these pharmacy price concessions will be reflected in GCPDC even if the phrase actually paid is removed from the regulatory definition of the term as VerDate Sep<11>2014 21:20 Apr 11, 2023 Jkt 259001 PO 00000 Frm 00143 Fmt 4701 Sfmt 4700 E:\FR\FM\12APR2.SGM 12APR2ddrumheller on DSK120RN23PROD with RULES222262 Federal Register / Vol. 88, No. 70 / Wednesday, April 12, 2023 / Rules and Regulations 137See sections 11001(c) and 11002(c) of the IRA. 138We refer readers to the Initial Guidance for the Medicare Drug Price Negotiation Program for further discussion of implementation of the Medicare Drug Price Negotiation Program for initial price applicability year 2026. Available here: https://www.cms.gov/files/document/medicare- drug-price-negotiation-program-initial- guidance.pdf. proposed. We reiterated that, accounting for DIR, including pharmacy price concessions, applied at the POS in the calculation of GCPDC, does not make the resulting amount actually paid, which requires accounting for all DIR, including DIR not applied at the POS. While this proposed change to the regulatory definition would not be a change in policy and would not directly affect the way in which GCPDC are calculated and used for purposes of Part D, we stated that we believe it is important to revise the definition to remove any ambiguity regarding the meaning of the term gross covered prescription drug costs. As noted previously, the IRA added provisions to the Social Security Act that refer to gross covered prescription drug costs as defined in section 1860D15(b)(3) [of the Act]. Removing the phrase actually paid from the regulatory definition of GCPDC as proposed would eliminate any ambiguity in the regulation text and help to ensure there is a consistent understanding of the meaning of this term for purposes of both the Part D program and the relevant provisions of the IRA. We further explained that nothing in the proposed change would place additional requirements on Part D sponsors or beneficiaries or change how CMS currently uses the GCPDC reported by the Part D sponsor on the PDE for purposes of determining payments under Part D. Rather the proposed change would be consistent with our current policy and operations, including the current reporting requirements. As such, the proposed change to the definition of gross covered prescription drug costs at  423.308 would not place any additional burden on Part D sponsors, nor did we expect that the proposed change would result in savings. We received 19 pieces of correspondence containing one or more comments in response to our proposal to amend the regulatory definition of gross covered prescription drug costs at  423.308 by removing the phrase actually paid. Comment: Several commenters supported the proposed revisions to the regulatory definition of GCPDC at  423.308 to mirror the statutory definition. The commenters agreed that the statutory definition of GCPDC at section 1860D15(b)(3) of the Act does not use the phrase actually paid or otherwise specify that such costs must be net of all DIR. Some of these commenters agreed with CMS that the use of the phrase actually paid in the statutory definition of allowable reinsurance costs at section 1860D 15(b)(2) of the Act, but not in the statutory definition of GCPDC at section 1860D15(b)(3) indicates that GCPDC should not be understood to mean net drug costs. These commenters agreed that removing the phrase actually paid from the regulatory definition would allow the definition to better reflect the definition of GCPDC in the Social Security Act and avoid any ambiguity. Response: We appreciate the feedback and support from these commenters. Comment: A few commenters asserted that the distinction between GCPDC and allowable reinsurance costs is not based on whether GCPDC is net of all DIR and that GCPDC does not need to reflect gross drug costs. These commenters contended that the statute merely requires allowable reinsurance costs to be the subset of costs (1) incurred by the plan alone, not the enrollee, and (2) for basic prescription drug coverage only. Response: We disagree with the commenters. First, even if we accept the suggestion that GCPDC does not need to reflect gross drug costs, the commenters did not demonstrate why GCPDC should or must reflect net drug costs and thus why the change being considered is not reasonable and appropriate. Second, the commenters did not account for the fact that the phrase actually paid is used in the statutory definition of allowable reinsurance costs at section 1860D 15(b)(2) of the Act but does not appear in the statutory definition of GCPDC at section 1860D15(b)(3). As a result, we believe the statute draws a distinction between the two terms with respect to the treatment of DIR. As stated in the proposed rule, this distinction, coupled with the use of the modifier gross to describe GCPDC, indicates that the best reading of section 1860D15(b)(3) of the Act is that GCPDC should reflect gross costs, not net costs. Finally, we note that section 1860D15(b)(2) of the Act requires that allowable reinsurance costs include costs incurred by the Part D sponsor as well as the enrollee (specifically defining such costs as those actually paid by the sponsor or organization or by (or on behalf of) an enrollee under the plan), and not, as the commenters suggest, just the costs incurred by the plan alone. Comment: Several commenters stated that CMS did not complete an adequate regulatory impact analysis because the agency failed to account for the policy implications of this proposed change on IRA implementation, including on the selection of drugs for Medicare price negotiation. A commenter added that the IRA impacts should have been part of CMS analysis given that CMS acknowledged in the proposed rule that the term for which the regulatory definition is being amended is referenced in the IRA. These commenters further posited that, by omitting any discussion of the proposals implications for the implementation of the IRA, CMS did not provide the specificity and clarity needed to allow interested parties to participate in the rulemaking process in a meaningful and informed manner and that finalizing the proposed change would therefore violate the requirements for notice-and-comment rulemaking under the Administrative Procedure Act (APA). Response: We disagree with the commenters. We do not believe that it was necessary for the proposed rule to take into account possible impacts that the proposed change to the regulatory definition of GCPDC might have on IRA implementation. The regulatory definition that CMS is amending was adopted for use and currently applies only in the context of determining reinsurance payments under the Part D program. Guidance related to the IRA, including details of the requirements and procedures for implementing the Medicare Drug Price Negotiation Program, is being provided outside of this rulemaking, in accordance with the requirements under the IRA to implement certain provisions by program instruction instead of notice- and-comment rulemaking.137 138  Within the reinsurance context, as noted in the proposed rule, amending the regulatory definition of GCPDC as proposed creates no additional requirements or other burden on Part D sponsors or beneficiaries, nor does it change how CMS currently uses the GCPDC reported by the Part D sponsor on the PDE record for purposes of determining payments under Part D. Moreover, as discussed in the proposed rule, because we will continue to take the important step of removing all DIR in determining allowable reinsurance costs for purposes of calculating the reinsurance payment amount, there will be no change in the final reinsurance payment amount a Part D sponsor receives, and thus no change in government costs. We believe this analysis is a sufficient assessment of the impact of the proposed revisions to the VerDate Sep<11>2014 21:20 Apr 11, 2023 Jkt 259001 PO 00000 Frm 00144 Fmt 4701 Sfmt 4700 E:\FR\FM\12APR2.SGM 12APR2ddrumheller on DSK120RN23PROD with RULES222263 Federal Register / Vol. 88, No. 70 / Wednesday, April 12, 2023 / Rules and Regulations regulatory definition of GCPDC and meets all applicable APA requirements. Comment: A commenter agreed with our impact assessment and noted that the level of information was helpful in providing clarity on the agencys thinking. Response: We appreciate the feedback from the commenter. Comment: A commenter encouraged CMS to make the proposed change effective as of September 1, 2023 to coincide with IRA implementation timelines. Response: The revised definition of GCPDC will take effect on the effective date of this final rule and will also be applicable on that date. Comment: A few commenters suggested that since a clear interpretive rule that defined GCPDC in regulation as actually paid already existed when the IRA was enacted, Congress intentionally used the term GCPDC to mean net drug costs. Response: There is no reference in the IRA to the regulatory definition of GCPDC at  423.308. Although certain provisions of the IRA reference GCPDC as defined in section 1860D15(b)(3), the statutory definition of GCPDC does not use the phrase actually paid or otherwise specify that these costs must be net of all DIR. Furthermore, as we stated in the proposed rule, because the definition of GCPDC was codified in regulation for the sole purpose of describing the methodology for calculating the reinsurance payment amount, the use of the phrase actually paid in the regulatory definition of GCPDC was intended to incorporate a requirement from the statutory definition of allowable reinsurance costs to emphasize that DIR would be netted out in the calculation of costs eligible for Part D reinsurance as required by the statute. Thus, the current regulatory definition should not be understood to reflect the agencys interpretation of the plain language of section 1860D15(b)(3) at the time the IRA was enacted. Comment: Several commenters expressed concern that CMS proposed revision of the regulatory definition of GCPDC serves as a determination by CMS that the selection of drugs for the Medicare Drug Price Negotiation Program will be based on gross drug costs instead of net drug costs. Commenters noted several concerns related to the selection of drugs based on gross drug costs. A few commenters also provided general comments about drug selection under the Medicare Drug Price Negotiation Program, including a request for CMS to publish gross expenditure data that will be used for ranking drugs selected for negotiation and provide guidance on drug pricing and selection for Medicare Drug Price Negotiation Program. Response: We thank the commenters for their consideration. As previously stated, the regulatory definition that CMS is amending was adopted for use and currently applies only in the context of determining reinsurance payments under the Part D program. Guidance related to the IRA, including guidance on the selection of drugs for the Medicare Drug Price Negotiation Program, is being provided outside of this rulemaking. Specifically, we refer readers to the Initial Guidance for the Medicare Drug Price Negotiation Program issued on March 15, 2023 for further discussion of the topics raised by the commenters. After considering all of the comments received, CMS is finalizing as proposed the revisions to the definition of gross covered prescription drug costs at  423.308 and removing the two uses of the phrase actually paid and replacing the second use with paid. V. Medicare Advantage/Part C and Part D Prescription Drug Plan Quality Rating System (42 CFR 422.162, 422.164, 422.166, 423.182, 423.184, and 423.186) A. Introduction CMS develops and publicly posts a 5- star rating system for Medicare Advantage (MA)/Part C and Part D plans based on the requirement to disseminate comparative information, including information