Source: https://regulations.justia.com/regulations/fedreg/2019/11/25/2019-25514.html
Timestamp: 2020-08-13 09:58:49
Document Index: 266403847

Matched Legal Cases: ['§ 302', '§ 302', '§ 302', '§ 302', '§ 302', '§ 302', '§ 302', 'art 447', '§ 302', '§ 302', '§ 302', '§ 302', '§ 447', '§ 447', '§ 447', 'art 447', 'ART 447', 'art 447', '§ 447']

Medicaid Program; Covered Outpatient Drug; Further Delay of Inclusion of Territories in Definitions of States and United States, 64783-64787 [2019-25514] :: Centers For Medicare & Medicaid Services :: Department Of Health And Human Services :: Regulation Tracker :: Justia
Justia Regulation Tracker Department Of Health And Human Services Centers For Medicare & Medicaid Services Medicaid Program; Covered Outpatient Drug; Further Delay of Inclusion of Territories in Definitions of States and United States, 64783-64787 [2019-25514]
Medicaid Program; Covered Outpatient Drug; Further Delay of Inclusion of Territories in Definitions of States and United States, 64783-64787 [2019-25514]
Download as PDF Federal Register / Vol. 84, No. 227 / Monday, November 25, 2019 / Rules and Regulations regardless of whether it is a reimbursement, allowance, or direct payment to a vendor, it is considered ‘‘supplemental wages’’ as defined in 26 CFR 31.3402(g)–1(a) (see also IRS Publication 15, Employer’s Tax Guide). You owe taxes on the WTA itself because, like most other relocation allowances, it is taxable income. To reimburse you for the taxes on the WTA itself, your agency computes the WTA by using the grossed-up withholding formula below and the appropriate supplemental wage rate, as specified in IRS Publication 15. This rate, along with examples of how to calculate the WTA, is published in an FTR bulletin available at https://gsa.gov/ftrbulletins. The formula for calculating the WTA is: WTA = R/(1 ¥ R) × Expense Where R is the withholding rate for supplemental wages. Note to § 302–17.24: Your agency must deduct withholding for FICA (Medicare and Social Security), as the WTA does not cover such expenses. § 302–17.30 received the majority of your relocation reimbursements, you may want to elect to receive the WTA. (2) If you expect that your marginal Federal tax rate will be less than the supplemental wage rate for the calendar year in which you received the majority of your relocation reimbursements, you may want to decline receiving the WTA to avoid or limit possible overpayment of the WTA, the so-called ‘‘negative RITA’’ situation. In a ‘‘negative RITA’’ situation, you must repay some of the WTA in Year 2. However, even if your marginal Federal tax rate will be less than the supplemental wage rate, you may want to accept the WTA so that your initial reimbursement is larger. (3) Examples showing relocation allowances paid by accepting or declining the WTA are published in an FTR bulletin available at https:// gsa.gov/ftrbulletins. § 302–17.62 [Amended] 20. Amend § 302–17.62 by removing the last sentence from paragraph (b). ■ [FR Doc. 2019–25411 Filed 11–22–19; 8:45 am] [Amended] 16. Amend § 302–17.30 by removing from paragraph (a) ‘‘25 percent’’. ■ 17. Amend § 302–17.40 by adding a sentence to the end of paragraph (b) and revising paragraph (c) to read as follows: ■ BILLING CODE 6820–14–P DEPARTMENT OF HEALTH AND HUMAN SERVICES § 302–17.40 How does my agency calculate my CMTR? Centers for Medicare & Medicaid Services * 42 CFR Part 447 * * * * (b) * * * Examples of how to calculate the CMTR are published in an FTR bulletin available at https:// gsa.gov/ftrbulletins. (c) The formula for calculating the CMTR is: CMTR = F + (1 ¥ F)S + (1 ¥ F)L Where: F = Your Federal marginal tax rate S = Your state marginal tax rate, if any L = Your local marginal tax rate, if any * * * § 302–17.60 * Medicaid Program; Covered Outpatient Drug; Further Delay of Inclusion of Territories in Definitions of States and United States Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Interim final rule with comment period. * [Amended] The Covered Outpatient Drug final rule with comment period was published in the February 1, 2016 Federal Register. As part of that final rule with comment period, we amended the regulatory definitions of ‘‘States’’ and ‘‘United States’’ to include the U.S. territories (American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the Virgin Islands of the United States) beginning April 1, 2017. Subsequently, in the November 15, 2016 Federal Register, we published an interim final rule with comment period (IFC) to further delay the inclusion of the U.S. territories in the SUMMARY: 18. Amend § 302–17.60 by removing paragraph (d) and its accompanying table. ■ 19. Amend § 302–17.61 by revising paragraph (b) to read as follows: § 302–17.61 Is the WTA optional under the two-year process? * * * * * (b) When deciding whether or not to receive the WTA, you should consider the following: (1) If you expect that your marginal Federal tax rate will be equal to or higher than the supplemental wage rate for the calendar year in which you 15:57 Nov 22, 2019 RIN 0938–AT09 AGENCY: ■ VerDate Sep<11>2014 [CMS–2345–IFC3] Jkt 250001 PO 00000 Frm 00081 Fmt 4700 Sfmt 4700 64783 regulatory definitions of ‘‘States’’ and ‘‘United States’’ until beginning April 1, 2020. This IFC further delays the inclusion of the territories in the definitions of ‘‘States’’ and ‘‘United States’’ until beginning April 1, 2022. DATES: Effective date: These regulations are effective on January 24, 2020. Comment date: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on January 24, 2020. In commenting, please refer to file code CMS–2345–IFC3. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed): 1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the ‘‘Submit a comment’’ instructions. 2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–2345–IFC3, P.O. Box 8016, Baltimore, MD 21244–8016. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–2345–IFC3, Mail Stop C4–26–05, 7500 Security Boulevard, Baltimore, MD 21244–1850. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. ADDRESSES: FOR FURTHER INFORMATION CONTACT: Wendy Tuttle, (410) 786–8690. Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: http:// regulations.gov. Follow the search instructions on that website to view public comments. SUPPLEMENTARY INFORMATION: E:\FR\FM\25NOR1.SGM 25NOR1 64784 Federal Register / Vol. 84, No. 227 / Monday, November 25, 2019 / Rules and Regulations seek to waive participation in the MDR program. I. Background A. Introduction The Covered Outpatient Drug final rule with comment period was published in the February 1, 2016 Federal Register (81 FR 5170) (final rule). The final rule implemented provisions of section 1927 of the Social Security Act (the Act) that were added by the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act) pertaining to Medicaid reimbursement for covered outpatient drugs (CODs). The final rule also revised other requirements related to CODs, including key aspects of Medicaid coverage and payment and the Medicaid Drug Rebate (MDR) program under section 1927 of the Act. The final rule became effective on April 1, 2016. However, the regulatory definitions of ‘‘States’’ and ‘‘United States’’ under § 447.502 were amended to include the U.S. territories (American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands) beginning April 1, 2017. We stated in the preamble to the final rule that U.S. territories may use existing waiver authority to elect not to participate in the MDR program consistent with the statutory waiver standards. Specifically, the Northern Mariana Islands and American Samoa may seek to opt out of participation under the broad waiver that has been granted to them in accordance with section 1902(j) of the Act. Puerto Rico, the Virgin Islands, and Guam may use waiver authority under section 1115(a)(1) of the Act to waive section 1902(a)(54) of the Act, which requires state compliance with the applicable requirements of section 1927 of the Act (81 FR 5203 through 5204). We also stated in the final rule that, effective with the change in the definition of ‘‘United States’’, drug manufacturers would be required to include prices paid by entities in the U.S. territories in the same manner in which they include prices paid by entities located in one of the 50 states and District of Columbia (81 FR 5224) in their calculations of average manufacturer price (AMP) and best price. This change requires manufacturers to include eligible sales and associated discounts, rebates, and other financial transactions that take place in the U.S. territories in their calculations of AMP and best price once the revised definitions of States and United States become effective, regardless of whether the U.S. territories VerDate Sep<11>2014 15:57 Nov 22, 2019 Jkt 250001 B. Interim Final Rule With Comment Period Published November 15, 2016 Based on initial discussions with the U.S. territories, it became evident that interested U.S. territories would not be ready to implement the program by April 1, 2017. Specifically, the territories needed time to develop and change electronic claims processing systems to identify and report utilization (taking into account all of the complexities in tracking utilization by National drug code numbers) and to match utilization with the unit rebate amounts to generate rebate invoices. Further, these systems must be capable of collecting, reporting, validating and tracking drug utilization on an ongoing basis. In addition, they require extensive advance planning and budgeting. We received comments during the comment period of the COD proposed rule, which requested that we delay the inclusion of the territories in the MDR program because the manufacturers and territories would need this additional time to implement provisions necessary to include territories in all aspects of the MDR program. We took these comments into consideration and in the final rule delayed the inclusion of the territories into the definitions of ‘‘States’’ and ‘‘United States’’ until 1 year after the effective date of the final rule (81 FR 5203, 5204), that is, beginning April 1, 2017. However, despite this 1-year delay, it became evident that we underestimated the timeline required, particularly in light of other demands on territorial systems development and the fact that the territories are at various stages of planning and development for these systems. While the U.S. territories have the ability to seek a waiver from the requirements that they would have to meet when classified as ‘‘States’’, doing so would impose some burdens on a territory, particularly for those territories that are not included in the broad waiver authority under section 1902(j) of the Act. Moreover, waivers under section 1115 of the Act are limited to requirements applicable to States or territories under section 1902(a) of the Act, and would not apply to the requirements placed on drug manufacturers that sell in the territories. These manufacturers cannot be waived from the section 1927 of the Act requirements under which manufacturers must include sales that take place in the U.S. territories when determining AMP and best price. We heard from various stakeholders who reiterated many of the concerns that were summarized in the final rule PO 00000 Frm 00082 Fmt 4700 Sfmt 4700 (81 FR 5224) that drug manufacturers would likely be prompted to increase drug prices, including prices paid by U.S. territory Medicaid programs. This would result in the U.S. territories that receive a waiver realizing an increase in their Medicaid drug costs without the offsetting benefit of receiving Medicaid rebates. Furthermore, the increase in Medicaid costs could adversely impact territories because of their Medicaid funding cap. For these reasons, in the November 15, 2016 Federal Register, we published an interim final rule with comment period (IFC) (81 FR 80003) that amended the regulatory definitions of ‘‘States’’ and ‘‘United States’’ to include the U.S. territories beginning April 1, 2020 rather than April 1, 2017 (interim final rule). C. Impracticability of Implementation by April 1, 2020 Based on further discussions with the U.S. territories since the publication of the interim final rule, we have learned that while the territories are making progress towards developing their Medicaid Management Information Systems (MMIS), only one territory would be prepared to implement the MDR program by April 1, 2020. In particular, Puerto Rico has been delayed in its development of the necessary components of the MMIS system due to the natural disasters experienced by the territory over the past 2 years, and has specifically requested another delay in the inclusion of U.S. territories in the definitions of ‘‘States’’ and ‘‘United States’’.1 We considered whether it would be feasible to delay the inclusion of U.S. territories in the definitions of ‘‘States’’ and ‘‘United States’’ for only those territories that are not prepared to implement the MDR program by April 1, 2020. However, since all five territories are referenced in each definition, the effect of a delay for only certain territories would possibly modify the previously finalized definitions rather than merely delay their effective dates. Additionally, a delay for only certain territories would only be feasible if we were also able to expressly permit manufacturers to continue treating sales to the territories not yet included in the definitions of ‘‘States’’ and ‘‘United States’’ as excluded from their calculations of AMP and best price. Such changes would require us to 1 Angela M. Avila Marrero, Executive Director of Puerto Rico Health Insurance Administration (ASES for its acronym in Spanish) letter to John Coster, Director of the Division of Pharmacy, Disabled and Elderly Health Programs Group, Centers for Medicaid and CHIP Services, Centers for Medicare and Medicaid Services, March 21, 2019. E:\FR\FM\25NOR1.SGM 25NOR1 Federal Register / Vol. 84, No. 227 / Monday, November 25, 2019 / Rules and Regulations undertake full notice and comment rulemaking ahead of the April 1, 2020 effective date. As discussed in section III. of this IFC, we have determined that there is insufficient time to undertake full notice and comment rulemaking ahead of the April 1, 2020 effective date. As discussed in section I.B. of this IFC, the U.S. territories have the ability to seek a waiver from the requirements that they would have to meet when classified as ‘‘States’’, but doing so would impose some burdens on a territory, and waivers under section 1115 of the Act are limited to requirements applicable to States or territories under section 1902(a) of the Act, and would not apply to the requirements placed on drug manufacturers that sell covered outpatient drugs in the territories. These manufacturers cannot be waived from the section 1927 of the Act requirements under which manufacturers must include sales that take place in the U.S. territories when determining AMP and best price. As stated previously, we heard from various stakeholders that drug manufacturers would likely be prompted to increase drug prices, including prices paid by U.S. territory Medicaid programs. While territories that need more time to prepare to implement the MDR program could seek the appropriate waiver, it would result in such territories realizing an increase in their Medicaid drug costs without the offsetting benefit of receiving Medicaid rebates. II. Provisions of the Interim Final Rule With Comment Period For the reasons discussed in section I.C. of this IFC, this IFC amends the regulatory definitions of ‘‘States’’ and ‘‘United States’’ under § 447.502 to include the U.S. territories (American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands) beginning April 1, 2022 rather than April 1, 2020. III. Waiver of Proposed Rulemaking We ordinarily publish a notice of proposed rulemaking in the Federal Register and invite public comment on the proposed rule. The notice of proposed rulemaking includes a reference to the legal authority under which the rule is proposed, and the terms and substances of the proposed rule or a description of the subjects and issues involved. This procedure can be waived, however, if an agency finds good cause that a notice-and-comment procedure is impracticable, unnecessary, or contrary to the public interest and incorporates a statement of VerDate Sep<11>2014 15:57 Nov 22, 2019 Jkt 250001 the finding and its reasons in the rule issued. As discussed in sections I.B. and C. of this IFC, in light of the longer time frames needed by territories for planning, budgeting and developing systems necessary to implement the MDR program, the competing demand on system development resources, the long time frames for manufacturer pricing determinations, and particularly delays caused by the natural disasters experienced by Puerto Rico over the past 2 years, we believe it is necessary to provide territories and manufacturers with advance notice of any change in the timing for the inclusion of territories in the MDR program. As previously stated, we considered whether it would be feasible to delay the inclusion of U.S. territories in the definitions of ‘‘States’’ and ‘‘United States’’ for only certain territories, but the effect of such a delay would possibly modify rather than merely delay the previously finalized definitions. Additionally, such a delay would only be feasible if we were to undertake full notice and comment rulemaking ahead of the April 1, 2020 effective date to expressly permit manufacturers to continue treating sales to the territories not yet included in the definitions of ‘‘States’’ and ‘‘United States’’ as excluded from their calculations of AMP and best price. We have determined that there is insufficient time to undertake full notice and comment rulemaking ahead of the April 1, 2020 effective date. Issuance of a proposed rule would be impracticable, and contrary to public interest such that a delay of the inclusion of U.S. territories in the definitions of ‘‘States’’ and ‘‘United States’’ would not become effective until after public comments are submitted, considered, and addressed in a final rule, which would not become effective until after the April 1, 2020 effective date. Thus, we find good cause to waive the requirement for proposed rulemaking because the short time frame remaining before the inclusion of territories would otherwise take effect does not permit sufficient time to both undertake proposed rulemaking and provide the necessary advance notice for territories and manufacturers to meaningfully adjust planning and systems development to accommodate the revised timing. Furthermore, we find good cause to waive the requirement for proposed rulemaking because it would be contrary to public interest to delay notifying manufacturers of the change in the timing of the territorial inclusion in light of the potential that, absent sufficient advance notice, drug PO 00000 Frm 00083 Fmt 4700 Sfmt 4700 64785 manufacturers may raise prices on drugs sold in the territories and thereby increase drug costs for both Medicaid and non-Medicaid consumers in the territories. Therefore, we find good cause to waive the notice of proposed rulemaking and to issue this final rule on an interim basis. We are providing a 60-day public comment period. IV. Collection of Information Requirements This IFC further delays the inclusion of the U.S. territories in the regulatory definitions of ‘‘States’’ and ‘‘United States’’ under § 447.502 until beginning April 1, 2022. This delay does not impose any new or revised information collection requirements or burden. Consequently, there is no need for review of this action by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). V. Response to Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this preamble, and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document. VI. Regulatory Impact Statement We have examined the impact of this IFC as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96– 354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs (January 30, 2017). Executive Orders 12866 and 13563 direct 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). This rule does not reach the economic threshold of an annual effect E:\FR\FM\25NOR1.SGM 25NOR1 64786 Federal Register / Vol. 84, No. 227 / Monday, November 25, 2019 / Rules and Regulations on the economy of $100 million or more and thus is not considered a major rule. To estimate the potential impact of this rule, we reviewed current levels of Medicaid prescription drug expenditures in the 5 U.S. territories with Medicaid programs. In 4 of the 5 territories, total prescription drug spending in fiscal year (FY) 2018 was about $29 million (American Samoa, Guam, Northern Mariana Islands, and the U.S. Virgin Islands) as reported in the CMS–64 financial management reports. In Puerto Rico, prescription drug spending was not reported separately. We estimated prescription drug spending by assuming that 17 percent of managed care expenditures went towards prescription drugs; 17 percent is consistent with our analysis of managed care expenditures on drugs in Medicaid and data from the Medicaid drug rebate data system. Using this assumption, we estimated that drug expenditures in Puerto Rico were about $366 million in FY 2018. In total, we estimate Medicaid drug spending in the 5 territories was about $395 million in FY 2018. Using this estimate as a baseline for territory spending on prescription drugs in Medicaid, we believe delaying the inclusion of the territories in the definitions of ‘‘States’’ and ‘‘United States’’ does not reach the economic threshold of an annual effect on the economy of $100 million or more for the following reasons. First, while territory prescription drug expenditures after rebates may be lower once territories participate in the MDR Program, this effect may be partially offset by an increase in gross prices when manufacturers are required to report territory drug sales for Medicaid Best Price, and therefore the impact of a delay in territory participation in the MDR Program is expected to be modest. Second, as a condition of joining the MDR Program the territories will be required to expand their drug coverage to include every COD of every manufacturer that has a National Drug Rebate Agreement (NDRA) with the Secretary of the Department of Health and Human Services. Currently, the territories have significantly more flexibility in establishing their own drug formularies and can choose which drugs of which manufacturers they will cover. We believe this may also lead to increased prescription drug spending and offsetting some portion of the reductions in net drug spending due to the rebates. Third, given the varying sizes of the territories (in population), it is nearly impossible to claim that all territories will experience the same economic VerDate Sep<11>2014 15:57 Nov 22, 2019 Jkt 250001 impact if they were to join the MDR program. For example, based on the information from the CMS–64 financial management reports American Samoa’s drug spending represented 1 percent of its total Medicaid spending compared to the 21 percent in the U.S. Virgin Islands. Due to limitations in the data from the territory Medicaid programs, we are unable to quantify these effects. However, we believe that it is likely the financial impact of extending the Medicaid drug rebates to territory programs is less than $100 million. Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Office of lnformation and Regulatory Affairs designated this rule as not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). 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. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of less than $7.5 million to $38.5 million in any 1 year. Individuals and states are not included in the definition of a small entity. We are not preparing an analysis for the RFA because we have determined, and the Secretary certifies, that this IFC will not have a significant economic impact on a substantial number of small entities. 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 for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this IFC will not have a significant impact on the operations of a substantial number of small rural hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2019, that threshold is approximately $154 million. This rule will have no consequential effect on state, local, or tribal governments or on the private sector. PO 00000 Frm 00084 Fmt 4700 Sfmt 4700 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. Since this regulation does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable. Executive Order 13771 (January 30, 2017) requires that the costs associated with significant new regulations ‘‘to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.’’ This interim final rule’s designation under E.O. 13771 will be informed by public comments received. In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget. List of Subjects in 42 CFR Part 447 Accounting, Administrative practice and procedure, Drugs, Grant programshealth, 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 amends 42 CFR chapter IV as set forth below: PART 447—PAYMENTS FOR SERVICES 1. The authority citation for part 447 is revised to read as follows: ■ Authority: 42 U.S.C. 1302 and 1396r–8. 2. Section 447.502 is amended by revising the definitions of ‘‘States’’ and ‘‘United States’’ to read as follows: ■ § 447.502 Definitions. * * * * * States means the 50 States and the District of Columbia and, beginning April 1, 2022, also includes the Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, the Commonwealth of the Northern Mariana Islands and American Samoa. United States means the 50 States and the District of Columbia and, beginning April 1, 2022, also includes the Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, the Commonwealth of the Northern Mariana Islands and American Samoa. * * * * * E:\FR\FM\25NOR1.SGM 25NOR1 Federal Register / Vol. 84, No. 227 / Monday, November 25, 2019 / Rules and Regulations Dated: October 31, 2019. Seema Verma, Administrator, Centers for Medicare & Medicaid Services. Dated: November 19, 2019. Alex M. Azar II, Secretary, Department of Health and Human Services. [FR Doc. 2019–25514 Filed 11–21–19; 11:15 am] BILLING CODE 4120–01–P VerDate Sep<11>2014 15:57 Nov 22, 2019 Jkt 250001 PO 00000 Frm 00085 Fmt 4700 Sfmt 9990 E:\FR\FM\25NOR1.SGM 25NOR1 64787
[Pages 64783-64787]
[FR Doc No: 2019-25514]
[CMS-2345-IFC3]
Medicaid Program; Covered Outpatient Drug; Further Delay of
Inclusion of Territories in Definitions of States and United States
SUMMARY: The Covered Outpatient Drug final rule with comment period was
published in the February 1, 2016 Federal Register. As part of that
final rule with comment period, we amended the regulatory definitions
of ``States'' and ``United States'' to include the U.S. territories
(American Samoa, the Commonwealth of the Northern Mariana Islands,
Guam, the Commonwealth of Puerto Rico, and the Virgin Islands of the
United States) beginning April 1, 2017. Subsequently, in the November
15, 2016 Federal Register, we published an interim final rule with
comment period (IFC) to further delay the inclusion of the U.S.
territories in the regulatory definitions of ``States'' and ``United
States'' until beginning April 1, 2020. This IFC further delays the
inclusion of the territories in the definitions of ``States'' and
``United States'' until beginning April 1, 2022.
Effective date: These regulations are effective on January 24,
received at one of the addresses provided below, no later than 5 p.m.
ADDRESSES: In commenting, please refer to file code CMS-2345-IFC3.
Health and Human Services, Attention: CMS-2345-IFC3, P.O. Box 8016,
Department of Health and Human Services, Attention: CMS-2345-IFC3, Mail
FOR FURTHER INFORMATION CONTACT: Wendy Tuttle, (410) 786-8690.
the following website as soon as possible after they have been
received: http://regulations.gov. Follow the search instructions on
that website to view public comments.
The Covered Outpatient Drug final rule with comment period was
published in the February 1, 2016 Federal Register (81 FR 5170) (final
rule). The final rule implemented provisions of section 1927 of the
Social Security Act (the Act) that were added by the Patient Protection
and Affordable Care Act of 2010, as amended by the Health Care and
Education Reconciliation Act of 2010 (collectively referred to as the
Affordable Care Act) pertaining to Medicaid reimbursement for covered
outpatient drugs (CODs). The final rule also revised other requirements
related to CODs, including key aspects of Medicaid coverage and payment
and the Medicaid Drug Rebate (MDR) program under section 1927 of the
Act. The final rule became effective on April 1, 2016. However, the
regulatory definitions of ``States'' and ``United States'' under Sec.
447.502 were amended to include the U.S. territories (American Samoa,
Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands)
beginning April 1, 2017.
We stated in the preamble to the final rule that U.S. territories
may use existing waiver authority to elect not to participate in the
MDR program consistent with the statutory waiver standards.
Specifically, the Northern Mariana Islands and American Samoa may seek
to opt out of participation under the broad waiver that has been
granted to them in accordance with section 1902(j) of the Act. Puerto
Rico, the Virgin Islands, and Guam may use waiver authority under
section 1115(a)(1) of the Act to waive section 1902(a)(54) of the Act,
which requires state compliance with the applicable requirements of
section 1927 of the Act (81 FR 5203 through 5204).
We also stated in the final rule that, effective with the change in
the definition of ``United States'', drug manufacturers would be
required to include prices paid by entities in the U.S. territories in
the same manner in which they include prices paid by entities located
in one of the 50 states and District of Columbia (81 FR 5224) in their
calculations of average manufacturer price (AMP) and best price. This
change requires manufacturers to include eligible sales and associated
discounts, rebates, and other financial transactions that take place in
the U.S. territories in their calculations of AMP and best price once
the revised definitions of States and United States become effective,
regardless of whether the U.S. territories seek to waive participation
in the MDR program.
B. Interim Final Rule With Comment Period Published November 15, 2016
Based on initial discussions with the U.S. territories, it became
evident that interested U.S. territories would not be ready to
implement the program by April 1, 2017. Specifically, the territories
needed time to develop and change electronic claims processing systems
to identify and report utilization (taking into account all of the
complexities in tracking utilization by National drug code numbers) and
to match utilization with the unit rebate amounts to generate rebate
invoices. Further, these systems must be capable of collecting,
reporting, validating and tracking drug utilization on an ongoing
basis. In addition, they require extensive advance planning and
budgeting. We received comments during the comment period of the COD
proposed rule, which requested that we delay the inclusion of the
territories in the MDR program because the manufacturers and
territories would need this additional time to implement provisions
necessary to include territories in all aspects of the MDR program. We
took these comments into consideration and in the final rule delayed
the inclusion of the territories into the definitions of ``States'' and
``United States'' until 1 year after the effective date of the final
rule (81 FR 5203, 5204), that is, beginning April 1, 2017. However,
despite this 1-year delay, it became evident that we underestimated the
timeline required, particularly in light of other demands on
territorial systems development and the fact that the territories are
at various stages of planning and development for these systems. While
the U.S. territories have the ability to seek a waiver from the
requirements that they would have to meet when classified as
``States'', doing so would impose some burdens on a territory,
particularly for those territories that are not included in the broad
waiver authority under section 1902(j) of the Act. Moreover, waivers
under section 1115 of the Act are limited to requirements applicable to
States or territories under section 1902(a) of the Act, and would not
apply to the requirements placed on drug manufacturers that sell in the
territories. These manufacturers cannot be waived from the section 1927
of the Act requirements under which manufacturers must include sales
that take place in the U.S. territories when determining AMP and best
We heard from various stakeholders who reiterated many of the
concerns that were summarized in the final rule (81 FR 5224) that drug
manufacturers would likely be prompted to increase drug prices,
including prices paid by U.S. territory Medicaid programs. This would
result in the U.S. territories that receive a waiver realizing an
increase in their Medicaid drug costs without the offsetting benefit of
receiving Medicaid rebates. Furthermore, the increase in Medicaid costs
could adversely impact territories because of their Medicaid funding
cap. For these reasons, in the November 15, 2016 Federal Register, we
published an interim final rule with comment period (IFC) (81 FR 80003)
that amended the regulatory definitions of ``States'' and ``United
States'' to include the U.S. territories beginning April 1, 2020 rather
than April 1, 2017 (interim final rule).
C. Impracticability of Implementation by April 1, 2020
Based on further discussions with the U.S. territories since the
publication of the interim final rule, we have learned that while the
territories are making progress towards developing their Medicaid
Management Information Systems (MMIS), only one territory would be
prepared to implement the MDR program by April 1, 2020. In particular,
Puerto Rico has been delayed in its development of the necessary
components of the MMIS system due to the natural disasters experienced
by the territory over the past 2 years, and has specifically requested
another delay in the inclusion of U.S. territories in the definitions
of ``States'' and ``United States''.\1\
\1\ Angela M. Avila Marrero, Executive Director of Puerto Rico
Health Insurance Administration (ASES for its acronym in Spanish)
letter to John Coster, Director of the Division of Pharmacy,
Disabled and Elderly Health Programs Group, Centers for Medicaid and
CHIP Services, Centers for Medicare and Medicaid Services, March 21,
We considered whether it would be feasible to delay the inclusion
of U.S. territories in the definitions of ``States'' and ``United
States'' for only those territories that are not prepared to implement
the MDR program by April 1, 2020. However, since all five territories
are referenced in each definition, the effect of a delay for only
certain territories would possibly modify the previously finalized
definitions rather than merely delay their effective dates.
Additionally, a delay for only certain territories would only be
feasible if we were also able to expressly permit manufacturers to
continue treating sales to the territories not yet included in the
definitions of ``States'' and ``United States'' as excluded from their
calculations of AMP and best price. Such changes would require us to
[[Page 64785]]
undertake full notice and comment rulemaking ahead of the April 1, 2020
effective date. As discussed in section III. of this IFC, we have
determined that there is insufficient time to undertake full notice and
comment rulemaking ahead of the April 1, 2020 effective date.
As discussed in section I.B. of this IFC, the U.S. territories have
the ability to seek a waiver from the requirements that they would have
to meet when classified as ``States'', but doing so would impose some
burdens on a territory, and waivers under section 1115 of the Act are
limited to requirements applicable to States or territories under
section 1902(a) of the Act, and would not apply to the requirements
placed on drug manufacturers that sell covered outpatient drugs in the
price. As stated previously, we heard from various stakeholders that
drug manufacturers would likely be prompted to increase drug prices,
including prices paid by U.S. territory Medicaid programs. While
territories that need more time to prepare to implement the MDR program
could seek the appropriate waiver, it would result in such territories
realizing an increase in their Medicaid drug costs without the
offsetting benefit of receiving Medicaid rebates.
For the reasons discussed in section I.C. of this IFC, this IFC
amends the regulatory definitions of ``States'' and ``United States''
under Sec.  447.502 to include the U.S. territories (American Samoa,
beginning April 1, 2022 rather than April 1, 2020.
Federal Register and invite public comment on the proposed rule. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and
substances of the proposed rule or a description of the subjects and
issues involved. This procedure can be waived, however, if an agency
finds good cause that a notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued.
As discussed in sections I.B. and C. of this IFC, in light of the
longer time frames needed by territories for planning, budgeting and
developing systems necessary to implement the MDR program, the
competing demand on system development resources, the long time frames
for manufacturer pricing determinations, and particularly delays caused
by the natural disasters experienced by Puerto Rico over the past 2
years, we believe it is necessary to provide territories and
manufacturers with advance notice of any change in the timing for the
inclusion of territories in the MDR program.
As previously stated, we considered whether it would be feasible to
delay the inclusion of U.S. territories in the definitions of
``States'' and ``United States'' for only certain territories, but the
effect of such a delay would possibly modify rather than merely delay
the previously finalized definitions. Additionally, such a delay would
only be feasible if we were to undertake full notice and comment
rulemaking ahead of the April 1, 2020 effective date to expressly
permit manufacturers to continue treating sales to the territories not
yet included in the definitions of ``States'' and ``United States'' as
excluded from their calculations of AMP and best price. We have
comment rulemaking ahead of the April 1, 2020 effective date. Issuance
of a proposed rule would be impracticable, and contrary to public
interest such that a delay of the inclusion of U.S. territories in the
definitions of ``States'' and ``United States'' would not become
effective until after public comments are submitted, considered, and
addressed in a final rule, which would not become effective until after
the April 1, 2020 effective date.
Thus, we find good cause to waive the requirement for proposed
rulemaking because the short time frame remaining before the inclusion
of territories would otherwise take effect does not permit sufficient
time to both undertake proposed rulemaking and provide the necessary
advance notice for territories and manufacturers to meaningfully adjust
planning and systems development to accommodate the revised timing.
Furthermore, we find good cause to waive the requirement for proposed
rulemaking because it would be contrary to public interest to delay
notifying manufacturers of the change in the timing of the territorial
inclusion in light of the potential that, absent sufficient advance
notice, drug manufacturers may raise prices on drugs sold in the
territories and thereby increase drug costs for both Medicaid and non-
Medicaid consumers in the territories.
Therefore, we find good cause to waive the notice of proposed
rulemaking and to issue this final rule on an interim basis. We are
providing a 60-day public comment period.
This IFC further delays the inclusion of the U.S. territories in
the regulatory definitions of ``States'' and ``United States'' under
Sec.  447.502 until beginning April 1, 2022. This delay does not impose
any new or revised information collection requirements or burden.
Consequently, there is no need for review of this action by the Office
We have examined the impact of this IFC as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22,
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4,
1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive
Order 13771 on Reducing Regulation and Controlling Regulatory Costs
(January 30, 2017).
does not reach the economic threshold of an annual effect
[[Page 64786]]
on the economy of $100 million or more and thus is not considered a
major rule. To estimate the potential impact of this rule, we reviewed
current levels of Medicaid prescription drug expenditures in the 5 U.S.
territories with Medicaid programs. In 4 of the 5 territories, total
prescription drug spending in fiscal year (FY) 2018 was about $29
million (American Samoa, Guam, Northern Mariana Islands, and the U.S.
Virgin Islands) as reported in the CMS-64 financial management reports.
In Puerto Rico, prescription drug spending was not reported separately.
We estimated prescription drug spending by assuming that 17 percent of
managed care expenditures went towards prescription drugs; 17 percent
is consistent with our analysis of managed care expenditures on drugs
in Medicaid and data from the Medicaid drug rebate data system. Using
this assumption, we estimated that drug expenditures in Puerto Rico
were about $366 million in FY 2018. In total, we estimate Medicaid drug
spending in the 5 territories was about $395 million in FY 2018.
Using this estimate as a baseline for territory spending on
prescription drugs in Medicaid, we believe delaying the inclusion of
the territories in the definitions of ``States'' and ``United States''
does not reach the economic threshold of an annual effect on the
economy of $100 million or more for the following reasons. First, while
territory prescription drug expenditures after rebates may be lower
once territories participate in the MDR Program, this effect may be
partially offset by an increase in gross prices when manufacturers are
required to report territory drug sales for Medicaid Best Price, and
therefore the impact of a delay in territory participation in the MDR
Program is expected to be modest.
Second, as a condition of joining the MDR Program the territories
will be required to expand their drug coverage to include every COD of
every manufacturer that has a National Drug Rebate Agreement (NDRA)
with the Secretary of the Department of Health and Human Services.
Currently, the territories have significantly more flexibility in
establishing their own drug formularies and can choose which drugs of
which manufacturers they will cover. We believe this may also lead to
increased prescription drug spending and offsetting some portion of the
reductions in net drug spending due to the rebates.
Third, given the varying sizes of the territories (in population),
it is nearly impossible to claim that all territories will experience
the same economic impact if they were to join the MDR program. For
example, based on the information from the CMS-64 financial management
reports American Samoa's drug spending represented 1 percent of its
total Medicaid spending compared to the 21 percent in the U.S. Virgin
Due to limitations in the data from the territory Medicaid
programs, we are unable to quantify these effects. However, we believe
that it is likely the financial impact of extending the Medicaid drug
rebates to territory programs is less than $100 million.
the Office of lnformation and Regulatory Affairs designated this rule
as not a ``major rule'' as defined by 5 U.S.C. 804(2).
of small entities. For purposes of the RFA, small entities include
less than $7.5 million to $38.5 million in any 1 year. Individuals and
states are not included in the definition of a small entity. We are not
preparing an analysis for the RFA because we have determined, and the
Secretary certifies, that this IFC will not have a significant economic
analysis must conform to the provisions of section 604 of the RFA. For
Statistical Area for Medicare payment regulations and has fewer than
100 beds. We are not preparing an analysis for section 1102(b) of the
Act because we have determined, and the Secretary certifies, that this
IFC will not have a significant impact on the operations of a
substantial number of small rural hospitals.
million in 1995 dollars, updated annually for inflation. In 2019, that
threshold is approximately $154 million. This rule will have no
implications. Since this regulation does not impose any costs on state
or local governments, the requirements of Executive Order 13132 are not
Executive Order 13771 (January 30, 2017) requires that the costs
associated with significant new regulations ``to the extent permitted
by law, be offset by the elimination of existing costs associated with
at least two prior regulations.'' This interim final rule's designation
under E.O. 13771 will be informed by public comments received.
Accounting, Administrative practice and procedure, Drugs, Grant
programs-health, Health facilities, Health professions, Medicaid,
Reporting and recordkeeping requirements, Rural areas.
& Medicaid Services amends 42 CFR chapter IV as set forth below:
Authority: 42 U.S.C. 1302 and 1396r-8.
2. Section 447.502 is amended by revising the definitions of ``States''
and ``United States'' to read as follows:
Sec.  447.502  Definitions.
States means the 50 States and the District of Columbia and,
beginning April 1, 2022, also includes the Commonwealth of Puerto Rico,
the Virgin Islands of the United States, Guam, the Commonwealth of the
United States means the 50 States and the District of Columbia and,
[[Page 64787]]
[FR Doc. 2019-25514 Filed 11-21-19; 11:15 am]