VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

• Citation: 42 CFR Part 423
• Sections: 316

§ 423.1 Basis and scope.

(a) Basis. (1) This part is based on the indicated provisions of the following sections of the Social Security Act:

1106. Disclosure of Information in Possession of Agency.

1128J(d). Reporting and Returning of Overpayments.

1860D-1. Eligibility, enrollment, and information.

1860D-2. Prescription drug benefits.

1860D-3. Access to a choice of qualified prescription drug coverage.

1860D-4. Beneficiary protections for qualified prescription drug coverage.

1860D-11. PDP regions; submission of bids; plan approval.

1860D-12. Requirements for and contracts with prescription drug plan (PDP) sponsors.

1860D-13. Premiums; late enrollment penalty.

1860D-14. Premium and cost-sharing subsidies for low-income individuals.

1860D-14A. Medicare coverage gap discount program.

1860D-15. Subsidies for Part D eligible individuals for qualified prescription drug coverage.

1860D-16. Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund.

1860D-21. Application to Medicare Advantage program and related managed care programs.

1860D-22. Special rules for Employer-Sponsored Programs

1860D-23. State pharmaceutical assistance programs.

1860D-24. Coordination requirements for plans providing prescription drug coverage.

1860D-31. Medicare prescription drug discount card and transitional assistance program.

1860D-41. Definitions; treatment of references to provisions in Part C.

1860D-42. Miscellaneous provisions.

1860D-43. Condition for coverage of drugs under this part.

(2) The following specific sections of the Medicare Modernization Act also address the prescription drug benefit program:

Sec. 102 Medicare Advantage conforming amendments.

Sec. 103 Medicaid amendments.

Sec. 104 Medigap.

Sec. 109 Expanding the work of Medicare Quality Improvement Organizations to include Parts C and D.

(3) Section 1611 of Title 8 of the United States Code regarding individuals who are not lawfully present and ineligible for Federal public benefits.

(b) Scope. This part establishes standards for beneficiary eligibility, access, benefits, protections, and low-income subsidies in Part D, as well as establishes standards and sets forth requirements, limitations, procedures and payments for organizations participating in the Voluntary Medicare Prescription Drug Program.

§ 423.4 Definitions.

The following definitions apply to this part, unless the context indicates otherwise:

Actuarial equivalence means a state of equivalent value demonstrated through the use of generally accepted actuarial principles and in accordance with section 1860D-11(c) of the Act and with CMS actuarial guidelines.

Authorized generic drug means a drug as defined in section 505(t)(3) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(t)).

Biological product means a product licensed under section 351 of the Public Health Service Act (42 U.S.C. 262).

Biosimilar biological product means a biological product licensed under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) that, in accordance with section 351(i)(2) of the Public Health Service Act (42 U.S.C. 262(i)(2)), is highly similar to the reference product, notwithstanding minor differences in clinically inactive components, and has no clinically meaningful differences between the biological product and the reference product, in terms of the safety, purity, and potency of the product.

Brand name biological product means a product licensed under section 351(a) (42 U.S.C. 262(a)) or 351(k) (42 U.S.C. 262(k)) of the Public Health Service Act and marketed under a brand name.

Brand name drug means a drug for which an application is approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act (21 USC 355(c)), including an application referred to in section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (21 USC 355(b)(2)).

Cost plan means a plan operated by a Health Maintenance Organization (HMO) or Competitive Medical Plan (CMP) in accordance with a cost-reimbursement contract under section 1876(h) of the Act.

Credible allegation of fraud means an allegation from any source, including but not limited to the following:

(1) Fraud hotline tips verified by further evidence.

(2) Claims data mining.

(3) Patterns identified through provider audits, civil false claims cases, and law enforcement investigations. Allegations are considered to be credible when they have indicia of reliability.

Downstream entity means any party that enters into a written arrangement, acceptable to CMS, with persons or entities involved with the Part D benefit, below the level of the arrangement between a Part D plan sponsor (or applicant) and a first tier entity. These written arrangements continue down to the level of the ultimate provider of both health and administrative services.

Eligible fallback entity or fallback entity is defined at § 423.855.

Fallback prescription drug plan is defined at § 423.855.

First tier entity means any party that enters into a written arrangement, acceptable to CMS, with a Part D plan sponsor or applicant to provide administrative services or health care services for a Medicare eligible individual under Part D.

Fiscally sound operation means an operation which at least maintains a positive net worth (total assets exceed total liabilities).

Formulary means the entire list of Part D drugs covered by a Part D plan.

Fraud hotline tip is a complaint or other communications that are submitted through a fraud reporting phone number or a website intended for the same purpose, such as the Federal Government's HHS OIG Hotline or a health plan's fraud hotline.

Full-benefit dual eligible individual has the meaning given the term at § 423.772, except where otherwise provided.

Generic drug means a drug for which an application under section 505(j) of the Federal Food, Drug, and Cosmetic Act (21 USC 355(j)) is approved.

Group health plan is defined at § 423.882.

Immediate need individual means a beneficiary whose enrollment into LI NET is on the basis of presumed low income subsidy eligibility and immediate need of a Part D drug.

Inappropriate prescribing means that, after consideration of all the facts and circumstances of a particular situation identified through investigation or other information or actions taken by Medicare Advantage (MA) organizations and Part D plan sponsors, there is an established pattern of potential fraud, waste, and abuse related to prescribing of opioids, as reported by the plan sponsors. Beneficiaries with cancer and sickle-cell disease, as well as those patients receiving hospice and long term care (LTC) services are excluded, when determining inappropriate prescribing. Plan sponsors may consider any number of factors including, but not limited, to the following:

(1) Documentation of a patient's medical condition.

(2) Identified instances of patient harm or death.

(3) Medical records, including claims (if available).

(4) Concurrent prescribing of opioids with an opioid potentiator in a manner that increases risk of serious patient harm.

(5) Levels of morphine milligram equivalent (MME) dosages prescribed.

(6) Absent clinical indication or documentation in the care management plan or in a manner that may indicate diversion.

(7) State-level prescription drug monitoring program (PDMP) data.

(8) Geography, time, and distance between a prescriber and the patient.

(9) Refill frequency and factors associated with increased risk of opioid overdose.

Insurance risk means, for a participating pharmacy, risk of the type commonly assumed only by insurers licensed by a State and does not include payment variations designed to reflect performance-based measures of activities within the control of the pharmacy, such as formulary compliance and generic drug substitutions, nor does it include elements potentially in the control of the pharmacy (for example, labor costs or productivity).

Interchangeable biological product means a product licensed under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) that FDA has determined meets the standards described in section 351(k)(4) of the Public Health Service Act (42 U.S.C. 262(k)(4)), which in accordance with section 351(i)(3) of the Public Health Service Act (42 U.S.C. 262(i)(3)), may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product.

Limited Income Newly Eligible Transition (LI NET) sponsor means a Part D sponsor selected by CMS to administer the LI NET program.

MA stands for Medicare Advantage, which refers to the program authorized under Part C of title XVIII of the Act.

MA plan has the meaning given the term in § 422.2 of this chapter.

MA-PD plan means an MA plan that provides qualified prescription drug coverage.

Medicare prescription drug account means the account created within the Federal Supplementary Medical Insurance Trust Fund for purposes of Medicare Part D.

Monthly beneficiary premium means the amount calculated under § 423.286 for Part D plans other than fallback prescription drug plans, and § 423.867(a) for fallback prescription drug plans.

MTM program means a medication therapy management program described at § 423.153(d).

PACE Plan means a plan offered by a PACE organization.

PACE organization is defined in § 460.6 of this chapter.

Parent organization means the legal entity that exercises a controlling interest, through the ownership of shares, the power to appoint voting board members, or other means, in a Part D sponsor or MA organization, directly or through a subsidiary or subsidiaries, and which is not itself a subsidiary of any other legal entity.

Part D eligible individual means an individual who meets the requirements at § 423.30(a).

Part D plan (or Medicare Part D plan) means a prescription drug plan, an MA-PD plan, a PACE Plan offering qualified prescription drug coverage, or a cost plan offering qualified prescription drug coverage.

Part D plan sponsor or Part D sponsor refers to a PDP sponsor, MA organization offering a MA-PD plan, a PACE organization offering a PACE plan including qualified prescription drug coverage, and a cost plan offering qualified prescription drug coverage.

PDP region means a prescription drug plan region as determined by CMS under § 423.112.

PDP sponsor means a nongovernmental entity that is certified under this part as meeting the requirements and standards of this part that apply to entities that offer prescription drug plans. This includes fallback entities.

Pharmacist means any individual who holds a current valid license to practice pharmacy in a State or territory of the United States or the District of Columbia.

Prescription drug plan or PDP means prescription drug coverage that is offered under a policy, contract, or plan that has been approved as specified in § 423.272 and that is offered by a PDP sponsor that has a contract with CMS that meets the contract requirements under subpart K of this part. This includes fallback prescription drug plans.

Reference product means a product as defined in section 351(i)(4) of the Public Health Service Act (42 U.S.C. 262(i)(4)).

Related entity means any entity that is related to the Part D sponsor by common ownership or control and

(1) Performs some of the Part D plan sponsor's management functions under contract or delegation;

(2) Furnishes services to Medicare enrollees under an oral or written agreement; or

(3) Leases real property or sells materials to the Part D plan sponsor at a cost of more than $2,500 during a contract period.

Service area (Service area does not include facilities in which individuals are incarcerated.) means for—

(1) A prescription drug plan, an area established in § 423.112(a) within which access standards under § 423.120(a) are met;

(2) An MA-PD plan, an area that meets the definition of MA service area as described in § 422.2 of this chapter, and within which access standards under § 423.120(a) are met;

(3) A fallback prescription drug plan, the service area described in § 423.859(b);

(4) A PACE plan offering qualified prescription drug coverage, the service area described in § 460.12(c) of this chapter; and

(5) A cost plan offering qualified prescription drug coverage, the service area defined in § 417.1 of this chapter.

Subsidy-eligible individual means a full subsidy eligible individual (as defined at § 423.772) or other subsidy eligible individual (as defined at § 423.772).

Substantiated or suspicious activities of fraud, waste, or abuse means and includes, but is not limited to, allegations that a provider of services (including a prescriber) or supplier;

(1) Engaged in a pattern of improper billing;

(2) Submitted improper claims with suspected knowledge of their falsity;

(3) Submitted improper claims with reckless disregard or deliberate ignorance of their truth or falsity; or

(4) Is the subject of a fraud hotline tip verified by further evidence.

Tiered cost-sharing means a process of grouping Part D drugs into different cost sharing levels within a Part D sponsor's formulary.

Unbranded biological product means a product licensed under a biologics license application (BLA) under section 351(a) or 351(k) of the Public Health Service Act (42 U.S.C. 262(a) or 262(k)) and marketed without a brand name. It is licensed under the same BLA as the corresponding brand name biological product.

§ 423.6 Cost-sharing in beneficiary education and enrollment-related costs.

The requirements of section 1857(e)(2) of the Act and § 422.6 of this chapter with regard to the payment of fees established by CMS for cost sharing of enrollment related costs apply to PDP sponsors under Part D.

§ 423.30 Eligibility and enrollment.

(a) General rule. (1) An individual is eligible for Part D if he or she does all of the following:

(i) Is entitled to Medicare benefits under Part A or enrolled in Medicare Part B (but not including an individual enrolled solely for coverage of immunosuppressive drugs under § 407.1(a)(6)) of this subchapter.

(ii) Lives in the service area of a Part D plan, as defined under § 423.4.

(iii) Is a United States citizen or is lawfully present in the United States as determined in 8 CFR 1.3.

(2) Except as provided in paragraphs (b), (c), and (d) of this section, an individual is eligible to enroll in a PDP if:

(i) The individual is eligible for Part D in accordance with paragraph (a)(1) of this section;

(ii) The individual resides in the PDP's service area; and

(iii) The individual is not enrolled in another Part D plan.

(3) Retroactive Part A or Part B determinations. Individuals who become entitled to Medicare Part A or enrolled in Medicare Part B for a retroactive effective date are Part D eligible as of the month in which a notice of entitlement Part A or enrollment in Part B is provided.

(b) Coordination with MA plans. A Part D eligible individual enrolled in a MA-PD plan must obtain qualified prescription drug coverage through that plan. MA enrollees are not eligible to enroll in a PDP, except as follows:

(1) A Part D eligible individual is eligible to enroll in a PDP if the individual is enrolled in a MA private fee-for-service plan (as defined in section 1859(b)(2) of the Act) that does not provide qualified prescription drug coverage; and

(2) A Part D eligible individual is eligible to enroll in a PDP if the individual is enrolled in a MSA plan (as defined in section 1859(b)(3) of the Act).

(c) Enrollment in a PACE plan. A Part D eligible individual enrolled in a PACE plan that offers qualified prescription drug coverage under this Part must obtain such coverage through that plan.

(d) Enrollment in a cost-based HMO or CMP. A Part D eligible individual enrolled in a cost-based HMO or CMP (as defined under part 417 of this chapter) that elects to receive qualified prescription drug coverage under such plan is ineligible to enroll in another Part D plan. A Part D eligible individual enrolled in a cost-based HMO or CMP offering qualified prescription drug coverage is eligible to enroll in a PDP if the individual does not elect to receive qualified prescription drug coverage under the cost-based HMO or CMP and otherwise meets the requirements of paragraph (a)(2) of this section.

§ 423.32 Enrollment process.

(a) General rule. A Part D eligible individual who wishes to enroll in a PDP may enroll during the enrollment periods specified in § 423.38, by filing the appropriate enrollment form with the PDP or through other mechanisms CMS determines are appropriate.

(b) Enrollment form or CMS-approved enrollment mechanism. The enrollment form or CMS-approved enrollment mechanism must comply with CMS instructions regarding content and format and must have been approved by CMS as described in § 423.2262.

(1) The enrollment must be completed by the individual and include an acknowledgement by the beneficiary for disclosure and exchange of necessary information between the U.S. Department of Health and Human Services (or its designees) and the PDP sponsor. Individuals who assist beneficiaries in completing the enrollment, including authorized representatives, must indicate they have provided assistance and their relationship to the beneficiary.

(2) Part D eligible individuals enrolling or enrolled in a Part D plan must provide information regarding reimbursement for Part D costs through other insurance, group health plan or other third-party payment arrangement, and consent to the release of the information provided by the individual on other insurance, group health plan or other third-party payment arrangements, as well as any other information on reimbursement of Part D costs collected or obtained from other sources, in a form and manner approved by CMS.

(c) Timely process an individual's enrollment request. A PDP sponsor must timely process an individual's enrollment request in accordance with CMS enrollment guidelines and enroll Part D eligible individuals who are eligible to enroll in its plan under § 423.30(a) and who elect to enroll or are enrolled in the plan during the periods specified in § 423.38.

(d) Notice requirement. The PDP sponsor must provide the individual with prompt notice of acceptance or denial of the individual's enrollment request, in a format and manner specified by CMS.

(e) Maintenance of enrollment. An individual who is enrolled in a PDP remains enrolled in that PDP until one of the following occurs:

(i) The individual successfully enrolls in another PDP or MA-PD plan;

(ii) The individual voluntarily disenrolls from the PDP;

(iii) The individual is involuntary disenrolled from the PDP in accordance with § 423.44(b)(2);

(iv) The PDP is discontinued within the area in which the individual resides; or

(iv) The individual is enrolled after the initial enrollment, in accordance with § 423.34(c).

(f) Enrollees of cost-based HMOs or CMPs and PACE. Individuals enrolled in a cost-based HMO or CMP plan (as defined in part 417 of this chapter) or PACE (as defined in § 460.6 of this chapter) that offers prescription drug coverage under this part as of December 31, 2005, remain enrolled in that plan as of January 1, 2006, and receive Part D benefits offered by that plan until one of the conditions in § 423.32(e) are met.

(g) Passive enrollment by CMS. In situations involving either immediate terminations as provided in § 423.509(a)(5) or § 422.510(a)(5) of this chapter, or other situations in which CMS determines that remaining enrolled in a plan poses potential harm to plan members, CMS may implement passive enrollment procedures.

(1) Passive enrollment procedures. Individuals will be considered to have enrolled in the plan selected by CMS unless individuals—

(i) Decline the plan selected by CMS, in a form and manner determined by CMS; or

(ii) Request enrollment in another plan.

(2) Beneficiary notification. The organization that receives the enrollment must provide notification that describes the costs and benefits of the new plan and the process for accessing care under the plan and the beneficiary's ability to decline the enrollment or choose another plan. Such notification must be provided to all potential enrollees prior to the enrollment effective date (or as soon as possible after the effective date if prior notice is not practical), in a form and manner determined by CMS.

(3) Special election period. All individuals will be provided with a special enrollment period, as described in § 423.38(c)(8)(ii).

(h) Notification of reinstatement based on beneficiary cancellation of new enrollment. When an individual is disenrolled from a Part D plan due to the election of a new plan, the Part D plan sponsor must reinstate the individual's enrollment in that plan if the individual cancels the election in the new plan within timeframes established by CMS. The Part D plan sponsor offering the plan from which the individual was disenrolled must send the member notification of the reinstatement within 10 calendar days of receiving confirmation of the individual's reinstatement.

(i) Exception for employer group health plans. (1) In cases when a PDP sponsor has both a Medicare contract and a contract with an employer, and in which the PDP sponsor arranges for the employer to process election forms for Part D eligible group members who wish to enroll under the Medicare contract, the effective date of the election may be retroactive. Consistent with § 423.343(a), payment adjustments based on a retroactive effective date may be made for up to a 90-day period.

(2) In order to obtain the effective date described in paragraph (i)(1) of this section, the beneficiary must certify that, at the time of enrollment in the PDP, he or she received the disclosure statement specified in § 423.128.

(3) Upon receipt of the election from the employer, the PDP sponsor must submit the enrollment to CMS within timeframes specified by CMS.

(j) Authorized representatives. As used in this subpart, an authorized representative is an individual who is the legal representative or otherwise legally able to act on behalf of an enrollee, as the law of the State in which the beneficiary resides may allow, in order to execute an enrollment or disenrollment request.

(1) The authorized representative would constitute the “beneficiary” or the “enrollee” for the purpose of making an election.

(2) Authorized representatives may include court-appointed legal guardians, persons having durable power of attorney for health care decisions, or individuals authorized to make health care decisions under state surrogate consent laws, provided they have the authority to act for the beneficiary in this capacity.

§ 423.34 Enrollment of low-income subsidy eligible individuals.

(a) General rule. CMS must ensure the enrollment into Part D plans of low-income subsidy eligible individuals who fail to enroll in a Part D plan.

(b) Definitions—Full-benefit dual-eligible individual. For purposes of this section, a full-benefit dual eligible individual means an individual who is—

(1) Determined eligible by the State for—

(i) Medical assistance for full-benefits under Title XIX of the Act for the month under any eligibility category covered under the State plan or comprehensive benefits under a demonstration under section 1115 of the Act; or

(ii) Medical assistance under section 1902(a)(10(C) of the Act (medically needy) or section 1902(f) of the Act (States that use more restrictive eligibility criteria than are used by the SSI program) for any month if the individual was eligible for medical assistance in any part of the month.

(2) Eligible for Part D in accordance with § 423.30(a) of this subpart.

Low-income subsidy-eligible individual. For purposes of this section, a low-income subsidy eligible individual means an individual who meets the definition of full subsidy eligible (including full benefit dual eligible individuals as set forth in this section) or other subsidy eligible in § 423.772 of this part.

(c) Reassigning low income subsidy eligible individuals —(1) General rule. Notwithstanding § 423.32(e) of this subpart, during the annual coordinated election period, CMS may reassign certain low income subsidy eligible individuals in another PDP if CMS determines that the further enrollment is warranted, except as specified in paragraph (c)(2) of this section.

(2) Part D prescription drug plans that waive a de minimis premium amount. If a Part D plan offering basic prescription drug coverage in the area where the beneficiary resides has a monthly beneficiary premium amount that exceeds the low-income subsidy amount by a de minimis amount, and the Part D plan volunteers to waive that de minimis amount in accordance with § 423.780, then CMS does not reassign low income subsidy individuals who would otherwise be enrolled under paragraph (d)(1) of this section on the basis that the monthly beneficiary premium exceeds the low-income subsidy by a de minimis amount. A Part D plan that volunteers to waive such a de minimis amount agrees to do so for each month during the contract year for which a beneficiary qualifies for 100 percent low-income premium subsidy as provided in § 423.780(f).

(d) Automatic enrollment rules —(1) General rule. Except for low income subsidy eligible individuals who are qualifying covered retirees with a group health plan sponsor, as specified in paragraph (d)(3) of this section, CMS enrolls those individuals who fail to enroll in a Part D plan into a PDP offering basic prescription drug coverage in the area where the beneficiary resides that has a monthly beneficiary premium amount that does not exceed the low income subsidy amount (as defined in § 423.780(b) of this part). In the event that there is more than one PDP in an area with a monthly beneficiary premium at or below the low income premium subsidy amount, individuals are enrolled in such PDPs on a random basis.

(2) Individuals enrolled in an MSA plan or one of the following that does not offer a Part D benefit. Low-income subsidy eligible individuals enrolled in an MA private fee-for-service plan or cost-based HMO or CMP that does not offer qualified prescription drug coverage or an MSA plan and who fail to enroll in a Part D plan must be enrolled into a PDP plan as described in paragraph (d)(1) of this section.

(3) Exception for individuals who are qualifying covered retirees. (i) Full benefit dual eligible individuals who are qualifying covered retirees as defined in § 423.882 of this part, and for whom CMS has approved the group health plan sponsor to receive the retirement drug subsidy described in subpart R of this part, also are automatically enrolled in a Part D plan, consistent with this paragraph, unless they elect to decline that enrollment.

(ii) Before effectuating such an enrollment, CMS provides notice to such individuals of their choices and advises them to discuss the potential impact of Medicare Part D coverage on their group health plan coverage. The notice informs individuals that they will be deemed to have declined to enroll in Part D unless they affirmatively enroll in a Part D plan or contact CMS and confirm that they wish to be auto-enrolled in a PDP. Individuals who elect not to be auto-enrolled, may enroll in Medicare Part D at a later time if they choose to do so.

(iii) All other low income subsidy eligible beneficiaries who are qualified covered retirees are not enrolled by CMS into PDPs.

(4) Enrollment in PDP plans that voluntarily waive a de minimis premium amount. CMS may include in the process specified in paragraph (d)(1) of this section that PDPs that voluntarily waive a de minimis amount as specified in § 423.780, if CMS determines that such inclusion is warranted.

(e) Declining enrollment and disenrollment. Nothing in this section prevents a low income subsidy eligible individual from—

(1) Affirmatively declining enrollment in Part D; or

(2) Disenrolling from the Part D plan in which the individual is enrolled and electing to enroll in another Part D plan during the special enrollment period provided under § 423.38.

(f) Effective date of enrollment for full-benefit dual eligible individuals. Enrollment of full-benefit dual eligible individuals under this section must be effective as follows:

(1) January 1, 2006 for individuals who are full-benefit dual-eligible individuals as of December 31, 2005.

(2) The first day of the month the individual is eligible for Part D under § 423.30(a)(1) for individuals who are Medicaid eligible and subsequently become newly eligible for Part D under § 423.30(a)(1) on or after January 1, 2006.

(3) For individuals who are eligible for Part D under § 423.30(a)(1) of this subpart and subsequently become newly eligible for Medicaid on or after January 1, 2006, enrollment is effective with the first day of the month when the individuals become eligible for both Medicaid and Part D.

(g) Effective date of enrollment for non-full-benefit dual-eligible individuals who are low-income subsidy-eligible individuals. The effective date for non-full-benefit dual-eligible individuals who are low-income subsidy-eligible individuals is no later than the first day of the second month after CMS determines that they meet the criteria for enrollment under this section.

§ 423.36 Disenrollment process.

(a) General rule. An individual may disenroll from a PDP during the periods specified in § 423.38 by enrolling in a different PDP plan, submitting a disenrollment request to the PDP in the form and manner prescribed by CMS, or filing the appropriate disenrollment request through other mechanisms as determined by CMS.

(b) Responsibilities of the PDP sponsor. The PDP sponsor must—

(1) Submit a disenrollment notice to CMS within timeframes CMS specifies;

(2) Provide the enrollee with a notice of disenrollment as CMS determines and approves; and

(3) File and retain disenrollment requests for the period specified in CMS instructions.

(4) In the case of an incomplete disenrollment request—

(i) Document its efforts to obtain information to complete the disenrollment request;

(ii) Notify the individual (in writing or verbally) within 10 calendar days of receipt of the disenrollment request; and

(iii) The organization must deny the request if any additional information needed to make the disenrollment request “complete” is not received within the following timeframes:

(A) For disenrollment requests received during the AEP by December 7, or within 21 calendar days of the request for additional information, whichever is later; and

(B) For disenrollment requests received during all other election periods, by the end of the month in which the disenrollment request was initially received, or within 21 calendar days of the request for additional information, whichever is later.

(c) Retroactive disenrollment. CMS may grant retroactive disenrollment in the following cases:

(1) There never was a legally valid enrollment; or

(2) A valid request for disenrollment was properly made but not processed or acted upon.

(d) Incomplete disenrollment. A disenrollment request is considered to be incomplete if the required but missing information is not received by the PDP sponsor within the timeframe specified in paragraph (b)(4)(iii) of this section.

(e) Exception for employer group health plans. (1) In cases when a PDP sponsor has both a Medicare contract and a contract with an employer, and in which the PDP sponsor arranges for the employer to process election forms for Part D eligible group members who wish to disenroll from the Medicare contract, the effective date of the election may be retroactive. Consistent with § 423.343(a), payment adjustments based on a retroactive effective date may be made for up to a 90-day period.

(2) Upon receipt of the election from the employer, the PDP sponsor must submit the disenrollment to CMS within timeframes specified by CMS.

(f) Effect of failure to submit disenrollment notice to CMS promptly. If the PDP sponsor fails to submit the correct and complete notice required in paragraph (b)(1) of this section, the PDP sponsor must reimburse CMS for any capitation payments received after the month in which payment would have ceased if the requirement had been met timely.

§ 423.38 Enrollment periods.

(a) Initial enrollment period for Part D—Basic rule. The initial enrollment period is the period during which an individual is first eligible to enroll in a Part D plan.

(1) In 2005. An individual who is first eligible to enroll in a Part D plan on or prior to January 31, 2006, has an initial enrollment period from November 15, 2005 through May 15, 2006.

(2) February 2006. An individual who is first eligible to enroll in a Part D plan in February 2006 has an initial enrollment period from November 15, 2005 through May 31, 2006.

(3) March 2006 and subsequent months. (i) Except as provided in paragraph (a)(3)(ii) and (a)(3)(iii) of this section, the initial enrollment period for an individual who is first eligible to enroll in a Part D plan on or after March 2006 is the same as the initial enrollment period for Medicare Part B under § 407.14 of this chapter.

(ii) Exception. For those individuals who are not eligible to enroll in a Part D plan at any time during their initial enrollment period for Medicare Part B, their initial enrollment period under this Part is the 3 months before becoming eligible for Part D, the month of eligibility, and the three months following eligibility to Part D.

(iii) An individual who becomes entitled to Medicare Part A or enrolled in Part B for a retroactive effective date has an initial enrollment period under this Part beginning with the month in which notification of the Medicare determination is received and ending on the last day of the third month following the month in which the notification was received.

(b) Annual coordinated election period —(1) For 2006. This period begins on November 15, 2005 and ends on May 15, 2006.

(2) For 2007 through 2010. The annual coordinated election period for the following calendar year is November 15 through December 31.

(3) For 2011 and subsequent years. Beginning with 2011, the annual coordinated election period for the following calendar year is October 15 through December 7.

(c) Special enrollment periods. A Part D eligible individual may enroll in a PDP or disenroll from a PDP and enroll in another PDP or MA-PD plan (as provided at § 422.62(b) of this chapter), as applicable, under any of the following circumstances:

(1) The individual involuntarily loses creditable prescription drug coverage or such coverage is involuntarily reduced so that it is no longer creditable coverage as defined under § 423.56(a). Loss of credible prescription drug coverage due to failure to pay any required premium is not considered involuntary loss of the coverage.

(2) The individual was not adequately informed, as required by standards established by CMS under § 423.56, that he or she has lost his or her creditable prescription drug coverage, that he or she never had credible prescription drug coverage, or the coverage is involuntarily reduced so that it is no longer creditable prescription drug coverage.

(3) The individual's enrollment or non-enrollment in a Part D plan is unintentional, inadvertent, or erroneous because of the error, misrepresentation, or inaction of a Federal employee, or any person authorized by the Federal government to act on its behalf.

(4)(i) Except as provided in paragraph (ii) of this section, the individual is a full-subsidy eligible individual or other subsidy-eligible individual as defined in § 423.772, who is making a one-time-per month election into a PDP.

(ii) An individual described in paragraph (i) is not eligible for this special enrollment period if he or she has been notified that he or she has been identified as a “potential at-risk beneficiary” or “at-risk beneficiary” as defined in § 423.100 and such identification has not been terminated in accordance with § 423.153(f)).

(5) The individual elects to disenroll from a MA-PD plan and elects coverage under Medicare Part A and Part B in accordance with § 422.62(c) of this chapter.

(6) The PDP sponsor's contract is terminated by the PDP sponsor or by CMS, as provided under § 423.507 through § 423.510, or the PDP plan is no longer offered in the area when the individual resides.

(7)(i) The individual is no longer eligible for the PDP because of a change in his or her place of residence to a location outside of the PDP region(s) in which the PDP is offered; or

(ii) The individual who, as a result of a change in permanent residence, has new Part D plan options available to them.

(8) The individual demonstrates to CMS, in accordance with guidelines issued by CMS, that the PDP sponsor offering the PDP substantially violated a material provision of its contract under this part in relation to the individual, including, but not limited to any of the following:

(i) Failure to provide the individual on a timely basis benefits available under the plan.

(ii) Failure to provide benefits in accordance with applicable quality standards.

(iii) The PDP (or its agent, representative, or plan provider) materially misrepresented the plan's provisions in communications as outlined in subpart V of this part.

(9) The individual is making an election within 3 months after a gain, loss, or change to Medicaid or LIS eligibility, or notification of such a change, whichever is later.

(10) The individual is making an election within 3 months after notification of a CMS or State-initiated enrollment action or that enrollment action's effective date, whichever is later.

(11) The individual is making an enrollment request into or out of an employer sponsored Part D plan, is disenrolling from a Part D plan to take employer sponsored coverage of any kind, or is disenrolling from employer sponsored coverage (including Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage) to elect a Part D plan.

(i) This special election period (SEP) is available to individuals who have (or are enrolling in) an employer or union sponsored Part D plan and ends 2 months after the month the employer or union coverage of any type ends.

(ii) The individual may choose an effective date that is not earlier than the first of the month following the month in which the election is made and no later than up to 3 months after the month in which the election is made.

(12) The individual is enrolled in a Part D plan offered by a Part D plan sponsor that has been sanctioned by CMS and elects to disenroll from that plan in connection with the matter(s) that gave rise to that sanction.

(i) Consistent with the disclosure requirements at § 423.128(f), CMS may require the sponsor to notify current enrollees that if the enrollees believe they are affected by the matter(s) that gave rise to the sanction, the enrollees are eligible for a SEP to elect another PDP.

(ii) The SEP starts with the imposition of the sanction and ends when the sanction ends or when the individual makes an election, whichever occurs first.

(13) The individual is enrolled in a section 1876 cost contract that is non-renewing its contract for the area in which the enrollee resides.

(i) Individuals eligible for this SEP must meet Part D plan eligibility requirements.

(ii) This SEP begins December 8 of the then-current contract year and ends on the last day of February of the following year.

(14) The individual is disenrolling from a PDP to enroll in a Program of All-inclusive Care for the Elderly (PACE) organization or is enrolling in a PDP after disenrolling from a PACE organization.

(i) An individual who disenrolls from PACE has a SEP for 2 months after the effective date of PACE disenrollment to elect a PDP.

(ii) An individual who disenrolls from a PDP has a SEP for 2 months after the effective date of PDP disenrollment to elect a PACE plan.

(15) The individual moves into, resides in, or moves out of an institution, as defined by CMS, and elects to enroll in, or disenroll from, a Part D plan.

(16) The individual who is not entitled to premium free Part A and enrolls in Part B during the General Enrollment Period for Part B that starts January 1, 2023, is eligible to request enrollment in a Part D plan. The special enrollment period begins when the individual submits their Part B application and continues for the first 2 months of Part B enrollment. The Part D plan enrollment is effective the first of the month following the month the Part D sponsor receives the enrollment request.

(17) The individual belongs to a qualified State Pharmaceutical Assistance Program (SPAP) and is requesting enrollment in a Part D plan.

(i) The individual is eligible to make one enrollment election per year.

(ii) This SEP is available while the individual is enrolled in the SPAP and, upon loss of eligibility for SPAP benefits, for an additional 2 calendar months after either the month of the loss of eligibility or notification of the loss, whichever is later.

(18) The individual is enrolled in a Part D plan and elects to disenroll from that Part D plan to enroll in or maintain other creditable prescription drug coverage.

(19)(i) The individual is enrolled in a section 1876 cost contract and an optional supplemental Part D benefit under that contract and elects a Part D plan upon disenrolling from the cost contract.

(ii) The SEP begins the month the individual requests disenrollment from the cost contract and ends when the individual makes an enrollment election or on the last day of the second month following the month the cost contract enrollment ended, whichever is earlier.

(20) The individual is requesting enrollment in a Part D plan offered by a Part D plan sponsor with a Star Rating of 5 Stars. An individual may use this SEP only once for the contract year in which the Part D plan was assigned a 5-star overall performance rating, beginning the December 8 before that contract year through November 30 of that contract year.

(21)(i) The individual is a non-U.S. citizen who becomes lawfully present in the United States.

(ii) This SEP begins the month the enrollee attains lawful presence status and ends the earlier of when the individual makes an enrollment election or 2 calendar months after the month the enrollee attains lawful presence status.

(22) The individual was adversely affected by having requested, but not received, required notices or information in an accessible format, as outlined in section 504 of the Rehabilitation Act of 1973, within the same timeframe that the Part D plan sponsor or CMS provided the same information to individuals who did not request an accessible format.

(i) The SEP begins at the end of the election period during which the individual was seeking to make an election and the length is at least as long as the time it takes for the information to be provided to the individual in an accessible format.

(ii) Part D plan sponsors may determine eligibility for this SEP when the criterion is met, ensuring adequate documentation of the situation, including records indicating the date of the individual's request, the amount of time taken to provide accessible versions of materials and the amount of time it takes for the same information to be provided to an individual who does not request an accessible format.

(23) Individuals affected by an emergency or major disaster declared by a Federal, State or local government entity are eligible for an SEP to make a Part D enrollment or disenrollment election. The SEP starts as of the date the declaration is made, the incident start date or, if different, the start date identified in the declaration, whichever is earlier. The SEP ends 2 full calendar months following the end date identified in the declaration or, if different, the date the end of the incident is announced, the date the incident automatically ends under applicable state or local law, or, if the incident end date is not otherwise identified, the incident end date specified in paragraph (c)(23)(i) of this section.

(i) If the incident end date of an emergency or major disaster is not otherwise identified, the incident end date is 1 year after the SEP start date or, if applicable, the date of a renewal or extension of the emergency or disaster declaration, whichever is later. Therefore, the maximum length of this SEP, if the incident end date is not otherwise identified, is 14 full calendar months after the SEP start date or, if applicable, the date of a renewal or extension of the emergency or disaster declaration.

(ii)(A) Resides, or resided at the start of the SEP eligibility period described in this paragraph (c)(23), in an area for which a Federal, state or local government entity has declared an emergency or major disaster; or

(B) Does not reside in an affected area but relies on help making healthcare decisions from one or more individuals who reside in an affected area;

(iii) Was eligible for another election period at the time of SEP eligibility period described in this paragraph (c)(23); and

(iv) Did not make an election during that other election period due to the emergency or major disaster.

(24) The individual is using the SEP at § 422.62(b)(8) of this chapter to disenroll from a MA plan that includes Part D benefits.

(i) This SEP permits a one-time election to enroll in a Part D plan.

(ii) This SEP begins upon disenrollment from the MA plan and continues for 2 calendar months.

(25)(i) An individual using the MA Open Enrollment Period for Institutionalized Individuals (OEPI) to disenroll from a MA plan that includes Part D benefits plan is eligible for a SEP to request enrollment in a Part D plan.

(ii) The SEP begins with the month the individual requests disenrollment from the MA plan and ends on the last day of the second month following the month MA enrollment ended.

(26) An individual using the Medicare Advantage Open Enrollment Period (MA OEP) to elect original Medicare is eligible for a SEP to make a Part D enrollment election.

(27)(i) The individual is enrolled in a MA special needs plan (SNP) and is no longer eligible for the SNP because he or she no longer meets the specific special needs status.

(ii) The individual may request enrollment in a Part D plan that begins the month the individual's special needs status changes and ends the earlier of when he or she makes an election or 3 months after the effective date of involuntary disenrollment from the SNP.

(28) The individual is found, after enrollment into a Chronic Care SNP, not to have the required qualifying condition.

(i) This individual is eligible to enroll prospectively in a Part D plan.

(ii) This SEP begins when the MA organization notifies the individual of the lack of eligibility for the Chronic Care SNP and extends through the end of that month and the following 2 calendar months.

(iii) The SEP ends when the individual makes an enrollment election or on the last day of the second of the 2 calendar months following notification of the lack of eligibility, whichever occurs first.

(29) The individual uses the SEP at § 422.62(b)(15) of this chapter to enroll in a MA Private Fee-for-Service plan without Part D benefits, or enrolls in a section 1876 cost plan, is eligible to request enrollment in a PDP or the cost plan's optional supplemental Part D benefit, if offered.

(i) This SEP begins the month the individual uses the SEP at § 422.62(b)(15) of this chapter and continues for 2 additional months.

(ii) [Reserved]

(30) An individual who uses the SEP at § 422.62(b)(23) of this chapter to disenroll from a MA plan is eligible to request enrollment in a PDP.

(i) This SEP begins the month the individual is notified of eligibility for the SEP at § 422.62(b)(23) of this chapter and continues for an additional 2 calendar months.

(ii) This SEP permits one enrollment into a PDP.

(iii) This SEP ends when the individual has enrolled in the PDP.

(iv) An individual may use this SEP to request enrollment in a PDP subsequent to having submitted a disenrollment to the MA plan or may simply request enrollment in the PDP, resulting in automatic disenrollment from the MA plan.

(31) The individual is enrolled in a plan offered by a Part D plan sponsor that has been placed into receivership by a state or territorial regulatory authority. The SEP begins the month the receivership is effective and continues until it is no longer in effect or until the enrollee makes an election, whichever occurs first. When instructed by CMS, the MA plan that has been placed under receivership must notify its enrollees, in the form and manner directed by CMS, of the enrollees' eligibility for this SEP and how to use the SEP.

(32) The individual is enrolled in a plan that has been identified with the low performing icon in accordance with § 423.186(h)(1)(ii). This SEP exists while the individual is enrolled in the low performing Part D plan.

(33) The individual was involuntarily disenrolled from an MA-PD plan due to loss of Part B but continues to be entitled to Part A. This SEP begins when the individual is advised of the loss of Part B and continues for 2 additional months.

(34) The individual enrolls in Medicare premium-Part A or Part B using an exceptional condition SEP, as described in 42 CFR parts 406.27 and 407.23. The SEP begins when the individual submits their premium-Part A or Part B application and continues for the first 2 months of enrollment in premium Part A or Part B. The Part D plan enrollment is effective the first of the month following the month the Part D plan receives the enrollment request.

(35)(i) The individual is a full-benefit dual eligible individual (as defined in § 423.772) making a one-time-per month election into a fully integrated dual eligible special needs plan as defined in § 422.2 of this chapter, a highly integrated dual eligible special needs plan as defined in § 422.2 of this chapter, or an applicable integrated plan as defined in § 422.561 of this chapter.

(ii) The SEP is available only to facilitate aligned enrollment as defined in § 422.2 of this chapter.

(36) The individual meets other exceptional circumstances as CMS may provide.

(d) Enrollment period to coordinate with MA annual 45-day disenrollment period. Through 2018, an individual enrolled in an MA plan who elects Original Medicare from January 1 through February 14, as described in § 422.62(a)(5) of this chapter, may also elect a PDP during this time.

(e) Enrollment period to coordinate with MA open enrollment period. For 2019 and subsequent years, an individual who makes an election as described in § 422.62(a)(3) of this chapter, may make an election to enroll in or disenroll from Part D coverage. An individual who elects Original Medicare during the MA open enrollment period may elect to enroll in a PDP during this time.

§ 423.40 Effective dates.

(a) Initial enrollment period. (1) An enrollment made prior to the month of entitlement to Part A or enrollment in Part B is effective the first day of the month the individual is entitled to or enrolled in Part A or enrolled in Part B.

(2) Except as otherwise provided under § 423.34(f), an enrollment made during or after the month of entitlement to Part A or enrollment in Part B is effective the first day of the calendar month following the month in which the enrollment in Part D is made.

(3) If the individual is not eligible to enroll in Part D on the first day of the calendar month following the month in which the election to enroll in Part D is made, the enrollment in Part D is effective the first day of the month the individual is eligible for Part D.

(4) In no case is an enrollment in Part D effective before January 1, 2006 or before entitlement to Part A or enrollment Part B.

(b) Annual coordinated election periods —(1) General rule. Except as provided under paragraph (b)(2) of this section, for an enrollment or change of enrollment in Part D made during an annual coordinated election period as described in § 423.38(b), the coverage or change in coverage is effective as of the first day of the following calendar year.

(2) Exception for January 1, 2006 through May 15, 2006. Enrollment elections made during the annual coordinated election period between January 1, 2006 and May 15, 2006 are effective the first day of the calendar month following the month in which the enrollment in Part D is made.

(c) Special enrollment periods. For an enrollment or change of enrollment in Part D made during a special enrollment period specified in § 423.38(c), the coverage or change in coverage is effective the first day of the calendar month following the month in which the election is made, unless otherwise noted.

(d) PDP enrollment period to coordinate with the MA annual disenrollment period. Through 2018, an enrollment made from January 1 through February 14 by an individual who has disenrolled from an MA plan as described in § 422.62(a)(5) of this chapter will be effective the first day of the month following the month in which the enrollment in the PDP is made.

(e) PDP enrollment period to coordinate with the MA open enrollment period. For 2019 and subsequent years, an enrollment made by an individual who elects Original Medicare during the MA open enrollment period as described in § 422.62(a)(3) of this chapter, will be effective the first day of the month following the month in which the election is made.

(f) Beneficiary choice of effective date. If a beneficiary is eligible for more than one election period, resulting in more than one possible effective date, the Part D plan sponsor must allow the beneficiary to choose the election period that results in the individual's desired effective date.

(1) To determine the beneficiary's choice of election period and effective date, the Part D plan sponsor must attempt to contact the beneficiary and must document its attempts.

(2) If the Part D plan sponsor is unable to obtain the beneficiary's desired enrollment effective date, the Part D plan sponsor must assign an election period using the following ranking of election periods:

(i) ICEP/Part D IEP.

(ii) MA-OEP.

(iii) SEP.

(iv) AEP.

(v) OEPI.

(3) If the Part D plan sponsor is unable to obtain the beneficiary's desired disenrollment effective date, the Part D plan sponsor must assign an election period that results in the earliest disenrollment.

§ 423.44 Involuntary disenrollment from Part D coverage.

(a) General rule. Except as provided in paragraphs (b) through (d) of this section, a PDP sponsor may not—

(1) Involuntarily disenroll an individual from any PDP it offers; or

(2) Orally or in writing, or by any action or inaction, request or encourage an individual to disenroll.

(b) Basis for disenrollment —(1) Optional involuntary disenrollment. A PDP sponsor may disenroll an individual from a PDP it offers in any of the following circumstances:

(i) Any monthly premium is not paid on a timely basis, as specified under paragraph (d)(1) of this section; or

(ii) The individual has engaged in disruptive behavior, as specified under paragraph (d)(2) of this section.

(iii) The individual provides fraudulent information on his or her election form or permits abuse of his or her enrollment card as specified in paragraph (d)(9) of this section.

(2) Required involuntary disenrollment. A PDP sponsor must disenroll an individual from a PDP it offers in any of the following circumstances:

(i) The individual no longer resides in the PDP's service area.

(ii) The individual loses eligibility for Part D.

(iii) Death of the individual.

(iv) The PDP sponsor's contract is terminated by CMS or by a PDP or through mutual consent. The PDP sponsor must disenroll affected enrollees in accordance with the procedures for disenrollment set forth at § 423.507 through § 423.510.

(v) The individual materially misrepresents information, as determined by CMS, to the PDP sponsor that the individual has or expects to receive reimbursement for third-party coverage.

(vi) The individual is not lawfully present in the United States.

(c) Notice requirement. (1) If the disenrollment is for any of the reasons specified in paragraphs (b)(1), (b)(2)(i), or (b)(2)(iv) of this section (that is, other than death or loss of Part D eligibility, the PDP sponsor must give the individual timely notice of the disenrollment with an explanation of why the PDP is planning to disenroll the individual.

(2) Notices for reasons specified in paragraphs (b)(1) through (b)(2)(i) and (b)(2)(iii) of this section must—

(i) Be provided to the individual before submission of the disenrollment notice to CMS; and

(ii) Include an explanation of the individual's right to file a grievance under the PDP's grievance procedures.

(d) Process for disenrollment —(1) Except as specified in paragraph (d)(1)(v) of this section, a PDP sponsor may disenroll an individual from the PDP for failure to pay any monthly premium under the following circumstances:

(i) The PDP sponsor can demonstrate to CMS that it made reasonable efforts to collect the unpaid premium amount.

(ii) The PDP sponsor gives the enrollee notice of disenrollment that meets the requirements set forth in paragraph (c) of this section.

(iii) The PDP sponsor provides the individual with a grace period, that is, an opportunity to pay past due premiums in full. The grace period must—

(A) Be at least 2 whole calendar months; and

(B) Begin on the first day of the month for which the premium is unpaid or the first day of the month following the date on which premium payment is requested, whichever is later.

(iv) Reenrollment in the PDP. If an individual is disenrolled from the PDP for failure to pay monthly PDP premiums, the PDP sponsor has the option to decline future enrollment by the individual in any of its PDPs until the individual has paid any past premiums due to the PDP sponsor.

(v) A PDP sponsor may not disenroll either of the following:

(A) An individual who had monthly premiums withheld per § 423.293(a) and (e) of this part or who is in premium withhold status, as defined by CMS.

(B) A member or initiate the disenrollment process if the sponsor has been notified that an SPAP, or other payer, is paying the Part D portion of the premium, and the sponsor has not yet coordinated receipt of the premium payments with the SPAP or other payer.

(vi) Extension of grace period for good cause and reinstatement. When an individual is disenrolled for failure to pay the plan premium, CMS (or a third party to which CMS has assigned this responsibility, such as a Part D sponsor) may reinstate enrollment in the PDP, without interruption of coverage, if the individual does all of the following:

(A) Submits a request for reinstatement for good cause within 60 calendar days of the disenrollment effective date.

(B) Has not previously requested reinstatement for good cause during the same 60-day period following the involuntary disenrollment.

(C) Shows good cause for failure to pay within the initial grace period.

(D) Pays all overdue premiums within 3 calendar months after the disenrollment date.

(E) Establishes by a credible statement that failure to pay premiums within the initial grace period was due to circumstances for which the individual had no control, or which the individual could not reasonably have been expected to foresee.

(vii) No extension of grace period. A beneficiary's enrollment in the PDP may not be reinstated if the only basis for such reinstatement is a change in the individual's circumstances subsequent to the involuntary disenrollment for non-payment of premiums.

(2) Disruptive behavior —(i) Definition. A PDP enrollee is disruptive if his or her behavior substantially impairs the plans ability to arrange or provide for services to the individual or other plan members. An individual cannot be considered disruptive if the behavior is related to the use of medical services or compliance (or noncompliance) with medical advice or treatment.

(ii) Basis of disenrollment for disruptive behavior. A PDP may disenroll an individual whose behavior is disruptive as defined in § 423.44(d)(2)(i) only after the PDP sponsor meets the requirements described in this section and after CMS has reviewed and approved the request.

(iii) Effort to resolve the problem. The PDP sponsor must make a serious effort to resolve the problems presented by the individual, including providing reasonable accommodations, as determined by CMS, for individuals with mental or cognitive conditions, including mental illness, Alzheimer's disease, and developmental disabilities. In addition, the PDP sponsor must inform the individual of the right to use the PDP's grievance procedures, through the notices described in paragraph (d)(2)(viii) of this section. The individual has a right to submit any information or explanation that he or she may wish to the PDP.

(iv) Documentation. The PDP sponsor—

(A) Must document the enrollee's behavior, its own efforts to resolve any problems, as described in paragraph (d)(2)(iii) of this section, and any extenuating circumstances;

(B) May request from CMS the ability to decline future enrollment by the individual; and

(C) Must submit the following:

( 1 ) The information specified in paragraph (d)(2)(iv)(A) of this section.

( 2 ) Any documentation received by the individual to CMS.

( 3 ) Dated copies of the notices required in paragraph (d)(2)(viii) of this section.

(v) CMS review of the proposed disenrollment. CMS reviews the information submitted by the PDP sponsor and any information submitted by the individual (which the PDP sponsor has submitted to CMS) to determine if the PDP sponsor has fulfilled the requirements to request disenrollment for disruptive behavior. If the PDP sponsor has fulfilled the necessary requirements, CMS reviews the information and make a decision to approve or deny the request for disenrollment, including conditions on future enrollment, within 20 working days. During the review, CMS ensures that staff with appropriate clinical or medical expertise reviews the case before making a final decision. The PDP sponsor is required to provide a reasonable accommodation, as determined by CMS, for the individual in exceptional circumstances that CMS deems necessary. CMS notifies the PDP sponsor within 5 working days after making its decision.

(vi) Exception for fallback prescription drug plans. CMS reserves the right to deny a request from a fallback prescription drug plan as defined in § 423.855 to disenroll an individual for disruptive behavior.

(vii) Effective date of disenrollment. If CMS permits a PDP to disenroll an individual for disruptive behavior, the termination is effective the first day of the calendar month after the month in which the PDP gives the individual written notice of the disenrollment that meets the requirements set forth in paragraph (c) of this section.

(viii) Required notices. The PDP sponsor must provide the individual two notices prior to submitting the request for disenrollment to CMS.

(A) The first notice, the advance notice, informs the member that continued disruptive behavior could lead to involuntary disenrollment and provides the individual an opportunity to cease the behavior in order to avoid the disenrollment action.

( 1 ) If the disruptive behavior ceases after the member receives the advance notice and then later resumes, the sponsor must begin the process again.

( 2 ) The sponsor must wait at least 30 days after sending the advance notice before sending the second notice, during which 30-day period the individual has the opportunity to cease their behavior.

(B) The second notice, the notice of intent to request CMS permission to disenroll the member, notifies the member that the PDP sponsor requests CMS permission to involuntarily disenroll the member.

( 1 ) This notice must be provided prior to submission of the request to CMS.

( 2 ) These notices are in addition to the disenrollment submission notice required under § 423.44(c).

(3) Loss of Part D eligiblity. If an individual is no longer eligible for Part D, CMS notifies the PDP that the disenrollment is effective the first day of the calendar month following the last month of Part D eligibility.

(4) Death of the individual. If the individual dies, disenrollment is effective the first day of the calendar month following the month of death.

(5) Individual no longer resides in the PDP service area—Basis for disenrollment. (i) Basis for disenrollment. The PDP must disenroll an individual, and must document the basis for such action, if the PDP establishes, on the basis of a written statement from the individual or other evidence acceptable to CMS, that the individual has permanently moved out of the PDP service area and must give the individual a written notice of the disenrollment that meets the requirements set forth in paragraph (c) of this section within 10 calendar days of the plan's confirmation of the individual's residence outside of the plan service area.

(ii) Special rule. If the individual has not moved from the PDP service area, but has been determined by the PDP sponsor to be absent from the service area for more than 12 consecutive months, the PDP sponsor must disenroll the individual from the plan, and document the basis for such action, effective on the first day of the 13th month after the individual left the service area and must give the individual a written notice of the disenrollment that meets the requirements set forth in paragraph (c) of this section within the first 10 calendar days of the 12th month of an individual's temporary absence from the plan service area or, if the sponsor learns of the individual's temporary absence from the plan service area after the expiration of the 12 month period, within 10 calendar days of the sponsor learning of the absence. The individual is considered to be temporarily absent from the plan service area when one or more of the required materials and content referenced in § 423.2267(e), if provided by mail, is returned to the Part D plan sponsor by the U.S. Postal Service as undeliverable and a forwarding address is not provided.

(iii) Incarceration. The PDP must disenroll an individual if the PDP establishes, on the basis of evidence acceptable to CMS, that the individual is incarcerated and does not reside in the service area of the PDP as specified at § 423.4 or when notified of an incarceration by CMS as specified in paragraph (d)(5)(iv) of this section.

(iv) Notification by CMS of incarceration. When CMS notifies the PDP of the disenrollment due to the individual being incarcerated and not residing in the service area of the PDP as per § 423.4, disenrollment is effective the first of the month following the start of incarceration, unless otherwise specified by CMS.

(6) Plan termination. (i) When a PDP contract terminates as provided in § 423.507 through § 423.510, the PDP sponsor must give each affected PDP enrollee notice of the effective date of the plan termination and a description of alternatives for obtaining prescription drug coverage under Part D, as specified by CMS.

(ii) The notice must be sent before the effective date of the plan termination or area reduction, and in the timeframes specified by CMS.

(7) Misrepresentation of third-party reimbursement. (i) If CMS determines an individual has materially misrepresented information to the PDP sponsor as described under § 423.44(b)(2)(v), the termination is effective the first day of the calendar month after the month in which the PDP sponsor gives the individual written notice of the disenrollment that meets the requirements set forth in paragraph (c) of this section.

(ii) Reenrollment in the PDP. Once an individual is disenrolled from the PDP for misrepresentation of third party reimbursement, the PDP sponsor has the option to decline future enrollment by the individual in any of its PDPs for a period of time CMS specifies.

(8) Individual is not lawfully present in the United States. Disenrollment is effective the first day of the month following notice by CMS that the individual is ineligible in accordance with § 423.30(a)(1)(iii).

(9) Individual commits fraud or permits abuse of enrollment card —(i) Basis for disenrollment. A PDP may disenroll the individual from a Part D plan if the individual—

(A) Knowingly provides, on the election form, fraudulent information that materially affects the individual's eligibility to enroll in the PDP; or

(B) Intentionally permits others to use his or her enrollment card to obtain drugs under the PDP.

(ii) Notice of disenrollment. The Part D plan must give the individual a written notice of the disenrollment that meets the requirements set forth in paragraph (c) of this section.

(iii) Report to CMS. The Part D plan must report to CMS any disenrollment based on fraud or abuse by the individual.

(e) Involuntary disenrollment by CMS —(1) General rule. CMS will disenroll individuals who fail to pay the Part D income related monthly adjustment amount (Part D—IRMAA) specified in § 423.286(d)(4) and § 423.293(d) of this part.

(2) Initial grace period. For all Part D—IRMAA amounts directly billed to an enrollee in accordance with § 423.293(d)(2), the grace period ends with the last day of the third month after the billing month.

(3) Extension of grace period for good cause and reinstatement. When an individual is disenrolled for failing to pay the Part D—IRMAA within the initial grace period specified in paragraph (e)(2) of this section, CMS (or an entity acting on behalf of CMS) may reinstate enrollment, without interruption of coverage, if the individual shows good cause as specified in § 423.44(d)(1)(vi), pays all Part D—IRMAA arrearages, and any overdue premiums due the Part D plan sponsor within 3 calendar months after the disenrollment date.

(4) Notice of termination. Where CMS has disenrolled an individual in accordance with paragraph (e)(1) of this section, the Part D plan sponsor must provide notice of termination in a form and manner determined by CMS.

(5) Effective date of disenrollment. After a grace period and notice of termination has been provided in accordance with paragraphs (e)(2) and (4) of this section, the effective date of disenrollment is the first day following the last day of the initial grace period.

§ 423.46 Late enrollment penalty.

(a) General. A Part D eligible individual must pay the late penalty described under § 423.286(d)(3), except as described at § 423.780(e), if there is a continuous period of 63 days or longer at any time after the end of the individual's initial enrollment period during which the individual meets all of the following conditions:

(1) The individual was eligible to enroll in a Part D plan;

(2) The individual was not covered under any creditable prescription drug coverage; and

(3) The individual was not enrolled in a Part D plan.

(b) Role of Part D plan in determination of the penalty. Part D sponsors must obtain information on prior creditable coverage from all enrolled or enrolling beneficiaries and report this information to CMS in a form and manner determined by CMS.

(c) Reconsideration. Individuals determined to be subject to a late enrollment penalty may request reconsideration of this determination, consistent with § 423.56(g) of this part. Such review will be conducted by CMS, or an independent review entity contracted by CMS, in accordance with guidance issued by CMS. Decisions made through this review are not subject to appeal, but may be reviewed and revised at the discretion of CMS.

(d) Record retention. Part D plan sponsors must retain all information collected concerning a creditable coverage period determination in accordance with the enrollment records retention requirements described in § 423.505(e)(1)(iii).

§ 423.48 Information about Part D.

Each Part D plan must provide, on an annual basis, and in a format and using standard terminology that CMS may specify in guidance, the information necessary to enable CMS to provide to current and potential Part D eligible individuals the information they need to make informed decisions among the available choices for Part D coverage.

§ 423.56 Procedures to determine and document creditable status of prescription drug coverage.

(a) Definition. Creditable prescription drug coverage means any of the following types of coverage listed in paragraph (b) of this section only if the actuarial value of the coverage equals or exceeds the actuarial value of defined standard prescription drug coverage under Part D in effect at the start of such plan year, not taking into account the value of any discount or coverage provided during the coverage gap, and demonstrated through the use of generally accepted actuarial principles and in accordance with CMS guidelines.

(b) Types of coverage. The following coverage is considered creditable if it meets the definition provided in paragraph (a) of this section:

(1) Prescription drug coverage under a PDP or MA-PD plan.

(2) Medicaid coverage under title XIX of the Act or under a waiver under section 1115 of the Act.

(3) Coverage under a group health plan, including the Federal employees health benefits program, and qualified retiree prescription drug plans as defined in section 1860D-22(a)(2) of the Act.

(4) Coverage under State Pharmaceutical

Assistance Programs (SPAP) as defined at § 423.454.

(5) Coverage of prescription drugs for veterans, survivors and dependents under chapter 17 of title 38, U.S.C.

(6) Coverage under a Medicare supplemental policy (Medigap policy) as defined at § 403.205 of this chapter.

(7) Military coverage under chapter 55 of title 10,

U.S.C., including TRICARE.

(8) Individual health insurance coverage (as defined in section 2791(b)(5) of the Public Health Service Act) that includes coverage for outpatient prescription drugs and that does not meet the definition of an excepted benefit (as defined in section 2791(c) of the Public Health Service Act).

(9) Coverage provided by the medical care program of the Indian Health Service, Tribe or Tribal organization, or Urban Indian organization (I/T/U).

(10) Coverage provided by a PACE organization.

(11) Coverage provided by a cost-based HMO or CMP under part 417 of this chapter.

(12) Coverage provided through a State High-Risk Pool as defined under 42 CFR 146.113(a)(1)(vii).

(13) Other coverage as the Secretary may determine appropriate.

(c) General disclosure requirements. With the exception of PDPs and MA-PD plans under § 423.56(b)(1) and PACE or cost-based HMO or CMP that provide qualified prescription drug coverage under this Part, each entity that offers prescription drug coverage under any of the types described in § 423.56(b), must disclose to all Part D eligible individuals enrolled in or seeking to enroll in the coverage whether the coverage is creditable prescription drug coverage.

(d) Disclosure of non-creditable coverage. In the case that the coverage of the type described in § 423.56(b) is not creditable prescription drug, the disclosure described in paragraph (c) of this section to Part D eligible individuals must also include:

(1) The fact that the coverage is not creditable prescription drug coverage, as provided by CMS;

(2) That there are limitations on the periods in a year in which the individual may enroll in Part D plans; and

(3) That the individual may be subject to a late enrollment penalty, as described under § 423.46.

(e) Disclosure to CMS. With the exception of PDPs and MA-PD plans under § 423.56(b)(1) and PACE or cost-based HMO or CMP that provide qualified prescription drug coverage under this Part, all other entities listed under paragraph (b) of this section must disclose whether the coverage they provide is creditable prescription drug coverage to CMS in a form and manner described by CMS.

(f) Notification content and timing requirements. The disclosure notification to Part-D eligible individuals required in § 423.56(c) and (d) must be provided in a form and manner prescribed by CMS. Notices must be provided, at minimum, at the following times:

(1) Prior to an individual's initial enrollment period for Part D, as described under § 423.38(a);

(2) Prior to the effective date of enrollment in the prescription drug coverage and upon any change that affects whether the coverage is creditable prescription drug coverage;

(3) Prior to the commencement of the Annual Coordinated Election Period as defined in § 423.38(b); and

(4) Upon request by the individual.

(g) When an individual is not adequately informed of coverage. If an individual establishes to CMS that he or she was not adequately informed that his or her prescription drug coverage was not creditable prescription drug coverage, the individual may apply to CMS to have the coverage treated as creditable prescription drug coverage for purposes of applying the late penalty described in § 423.46.

§ 423.100 Definitions.

As used in this part, unless otherwise specified—

ACIP-recommended adult vaccine means a covered Part D drug, as defined in this section, that is a vaccine licensed by the U.S. Food and Drug Administration (FDA) under section 351 of the Public Health Service Act for use by adult populations and administered in accordance with recommendations of the Advisory Committee on Immunization Practices (ACIP) of the Centers for Disease Control and Prevention (CDC) as adopted by the CDC Director.

Actual cost means the negotiated price for a covered Part D drug when the drug is purchased at a network pharmacy, and the usual and customary price when a beneficiary purchases the drug at an out-of-network pharmacy consistent with § 423.124(a).

Affected enrollee, as used in this subpart, means a Part D enrollee who is currently taking a covered Part D drug that is subject to a negative formulary change that affects the Part D enrollee's access to the drug during the current plan year.

Alternative prescription drug coverage means coverage of Part D drugs, other than standard prescription drug coverage that meets the requirements of § 423.104(e). The term alternative prescription drug coverage must be either—

(1) Basic alternative coverage (alternative coverage that is actuarially equivalent to defined standard coverage, as determined through processes and methods established under § 423.265(d)(2)); or

(2) Enhanced alternative coverage (alternative coverage that meets the requirements of § 423.104(f)(1)).

Applicable beneficiary means an individual who, on the date of dispensing a covered Part D drug—

(1) Is enrolled in a prescription drug plan or an MA-PD plan;

(2) Is not enrolled in a qualified retiree prescription drug plan;

(3) Is not entitled to an income-related subsidy under section 1860D-14(a) of the Act;

(4) Has reached or exceeded the initial coverage limit under section 1860D-2(b)(3) of the Act during the year;

(5) Has not incurred costs for covered part D drugs in the year equal to the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B) of the Act; and

(6) Has a claim that—

(i) Is within the coverage gap;

(ii) Straddles the initial coverage period and the coverage gap;

(iii) Straddles the coverage gap and the annual out-of-pocket threshold; or

(iv) Spans the coverage gap from the initial coverage period and exceeds the annual out-of-pocket threshold.

Applicable drug means a Part D drug that is—

(1)(i) Approved under a new drug application under section 505(b) of the Federal Food, Drug, and Cosmetic Act (FDCA); or

(ii) In the case of a biological product, licensed under section 351 of the Public Health Service Act (other than, with respect to a plan year before 2019, a product licensed under subsection (k) of such section 351); and

(2)(i) If the PDP sponsor of the prescription drug plan or the MA organization offering the MA-PD plan uses a formulary, which is on the formulary of the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in;

(ii) If the PDP sponsor of the prescription drug plan or the MA organization offering the MA-PD plan does not use a formulary, for which benefits are available under the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in; or

(iii) Is provided to a particular applicable beneficiary through an exception or appeal for that particular applicable beneficiary.

At-risk beneficiary means a Part D eligible individual—

(1) Who is—

(i) Identified using clinical guidelines (as defined in this section);

(ii) Not an exempted beneficiary; and

(iii) Determined to be at-risk for misuse or abuse of such frequently abused drugs by a Part D plan sponsor under its drug management program in accordance with the requirements of § 423.153(f); or

(2) With respect to whom a Part D plan sponsor receives a notice upon the beneficiary's enrollment in such sponsor's plan that the beneficiary was identified as an at-risk beneficiary (as defined in the paragraph (1) of this definition) under the prescription drug plan in which the beneficiary was most recently enrolled and such identification had not been terminated upon disenrollment.

Basic prescription drug coverage means coverage of Part D drugs that is either standard prescription drug coverage or basic alternative coverage.

Bioequivalent has the meaning given such term in section 505(j)(8) of the Food, Drug, and Cosmetic Act.

Clinical guidelines, for the purposes of a drug management program under § 423.153(f), are criteria—

(1) To identify potential at-risk beneficiaries who may be determined to be at-risk beneficiaries under such programs; and

(2) That are developed in accordance with the standards in § 423.153(f)(16) and, beginning with contract year 2020, will be published in guidance annually.

Contracted pharmacy network means licensed pharmacies, including retail, mail-order, and institutional pharmacies under contract with a Part D sponsor to provide covered Part D drugs at negotiated prices to Part D enrollees.

Corresponding drug means, respectively, a generic or authorized generic of a brand name drug, an interchangeable biological product of a reference product, or an unbranded biological product marketed under the same biologics license application (BLA) as a brand name biological product.

Coverage gap means the period in prescription drug coverage that occurs between the initial coverage limit and the out-of-pocket threshold. For purposes of applying the initial coverage limit, Part D sponsors must apply their plan specific initial coverage limit under basic alternative, enhanced alternative or actuarially equivalent Part D benefit designs.

Covered insulin product means, for purposes of § 423.120(h), an insulin product, including a product that is a combination of more than one type of insulin or a product that is a combination of both insulin and a non-insulin drug or biological product, that—

(1) Is a covered Part D drug covered under a PDP or MA-PD plan—

(i) Is licensed under section 351 of the Public Health Service Act; and

(ii) Is marketed under the license described in paragraph (1)(i) of this definition.

(2) Is not a compounded drug product that contains insulin (as described in § 423.120(d)).

Covered insulin product applicable cost-sharing amount means, with respect to a covered insulin product, as defined in this section, covered under a PDP or an MA-PD plan prior to an enrollee reaching the annual out-of-pocket threshold during plan year 2026 and each subsequent plan year, the lesser of the following:

(1) $35.

(2) An amount equal to 25 percent of the maximum fair price established for the covered insulin product in accordance with Part E of title XI of the Act.

(3) An amount equal to 25 percent of the negotiated price (as defined in this section) of the covered insulin product under the PDP or MA-PD plan.

Covered Part D drug means a Part D drug that is included in a Part D plan's formulary, or treated as being included in a Part D plan's formulary as a result of a coverage determination or appeal under §§ 423.566, 423.580, and 423.600, 423.610, 423,620, and 423.630, and obtained at a network pharmacy or an out-of-network pharmacy in accordance with § 423.124.

Daily cost-sharing rate means, as applicable, the established—

(1) Monthly copayment under the enrollee's Part D plan, divided by the number of days in the approved month's supply for the drug dispensed and rounded to the nearest cent; or

(2) Coinsurance percentage under the enrollee's Part D plan.

Dispensing fees means costs that-

(1) Are incurred at the point of sale and pay for costs in excess of the ingredient cost of a covered Part D drug each time a covered Part D drug is dispensed;

(2) Include only pharmacy costs associated with ensuring that possession of the appropriate covered Part D drug is transferred to a Part D enrollee. Pharmacy costs include, but are not limited to, any reasonable costs associated with a pharmacist's time in checking the computer for information about an individual's coverage, performing quality assurance activities consistent with § 423.153(c)(2), measurement or mixing of the covered Part D drug, filling the container, physically providing the completed prescription to the Part D enrollee, delivery, special packaging, and salaries of pharmacists and other pharmacy workers as well as the costs associated with maintaining the pharmacy facility and acquiring and maintaining technology and equipment necessary to operate the pharmacy. Dispensing fees should take into consideration the number of dispensing events in a billing cycle, the incremental costs associated with the type of dispensing methodology, and with respect to Part D drugs dispensed in LTC facilities, the techniques to minimize the dispensing of unused drugs. Dispensing fees may also take into account costs associated with data collection on unused Part D drugs and restocking fees associated with return for credit and reuse in long-term care pharmacies, when return for credit and reuse is permitted under the State in law and is allowed under the contract between the Part D sponsor and the pharmacy.

(3) Do not include administrative costs incurred by the Part D plan in the operation of the Part D benefit, including systems costs for interfacing with pharmacies.

Effective date of the ACIP recommendation means the date specified on the CDC website noting the date the CDC Director adopted the ACIP recommendation.

Exempted beneficiary means with respect to a drug management program, an enrollee who—

(1) Has elected to receive hospice care or is receiving palliative or end-of-life care;

(2) Is a resident of a long-term care facility, of a facility described in section 1905(d) of the Act, or of another facility for which frequently abused drugs are dispensed for residents through a contract with a single pharmacy;

(3) Is being treated for cancer-related pain or

(4) Has sickle cell disease.

Frequently abused drug means a controlled substance under the Federal Controlled Substances Act that the Secretary determines is frequently abused or diverted, taking into account all of the following factors:

(1) The drug's schedule designation by the Drug Enforcement Administration.

(2) Government or professional guidelines that address that a drug is frequently abused or misused.

(3) An analysis of Medicare or other drug utilization or scientific data.

Government-funded health program means any program established, maintained, or funded, in whole or in part, by the Government of the United States, by the government of any State or political subdivision of a State, or by any agency or instrumentality of any of the foregoing, which uses public funds, in whole or in part, to provide to, or pay on behalf of, an individual the cost of Part D drugs, including any of the following:

(1) An approved State child health plan under title XXI of the Act providing benefits for child health assistance that meets the requirements of section 2103 of the Act;

(2) The Medicaid program under title XIX of the Act or a waiver under section 1115 of the Act;

(3) The veterans' health care program under Chapter 17 of title 38 of the United States Code;

(4) The Indian Health Service program under the Indian Health Care Improvement Act under Chapter 18 of title 25 of the United States Code; and

(5) Any other government-funded program whose principal activity is the direct provision of health care to persons.

Group health plan, for purposes of applying the definition of incurred costs in § 423.100, has the meaning given such term in 29 U.S.C. 1167(1), but specifically excludes a personal health savings vehicle, as used in this subpart.

Immediate negative formulary change means an immediate substitution or market withdrawal that meets the requirements of § 423.120(e)(2)(i) or (ii) respectively.

Incurred costs means costs incurred by a Part D enrollee for—

(1)(i) Covered Part D drugs that are not paid for under the Part D plan as a result of application of any annual deductible or other cost-sharing rules for covered Part D drugs prior to the Part D enrollee satisfying the out-of-pocket threshold under § 423.104(d)(5)(iii), including any price differential for which the Part D enrollee is responsible under § 423.124(b); or

(ii) Nominal cost-sharing paid by or on behalf of an enrollee, which is associated with drugs that would otherwise be covered Part D drugs, as defined in § 423.100, but are instead paid for, with the exception of said nominal cost-sharing, by a patient assistance program providing assistance outside the Part D benefit, provided that documentation of such nominal cost-sharing has been submitted to the Part D plan consistent with the plan processes and instructions for the submission of such information; and

(2) That are paid for—

(i) By the Part D enrollee or on behalf of the Part D enrollee by another person, and the Part D enrollee (or person paying on behalf of the Part D enrollee) is not reimbursed through insurance or otherwise, a group health plan, or other third party payment arrangement, or the person paying on behalf of the Part D enrollee is not paying under insurance or otherwise, a group health plan, or third party payment arrangement;

(ii) Under State Pharmaceutical Assistance Program (as defined in § 423.464); by the Indian Health Service, an Indian tribe or tribal organization, or urban Indian organization (as defined in section 4 of the Indian Health Care Improvement Act) or under an AIDS Drug Assistance Program (as defined in part B of title XXVI of the Public Health Service); or by a manufacturer as payment for an applicable discount (as defined in § 423.2305) or under the Medicare Coverage Gap Discount Program (as defined in § 423.2305); or

(iii) Under § 423.782 of this part.

Insurance means a health plan that provides, or pays the cost of Part D drugs, including, but not limited to, any of the following:

(1) Health insurance coverage (as defined in 42 U.S.C. 300gg-91(b)(1));

(2) A Medicare Advantage plan (as described under section 1851(a)(2) of the Act); and

(3) A PACE organization (as defined under sections 1894(a)(3) and 1934(a)(13) of the Act) but specifically excluding a personal health savings vehicle.

I/T/U pharmacy means a pharmacy operated by the Indian Health Service, an Indian tribe or tribal organization, or an urban Indian organization, all of which are defined in section 4 of the Indian Health Care Improvement Act, 25 U.S.C. 1603.

Long-term care facility means a skilled nursing facility as defined in section 1819(a) of the Act, or a medical institution or nursing facility for which payment is made for an institutionalized individual under section 1902(q)(1)(B) of the Act.

Long-term care pharmacy means a pharmacy owned by or under contract with a long-term care facility to provide prescription drugs to the facility's residents.

Long-term care network pharmacy means a long-term care pharmacy that is a network pharmacy.

Maintenance change means one of the following negative formulary changes with respect to a covered Part D drug:

(1) Making any negative formulary changes to a drug within 90 days of adding a corresponding drug to the same or a lower cost-sharing tier and with the same or less restrictive prior authorization (PA), step therapy (ST), or quantity limit (QL) requirements (other than immediate substitutions that meet the requirements of § 423.120(e)(2)(i)).

(2) Making any negative formulary changes to a reference product within 90 days of adding a biosimilar biological product other than an interchangeable biological product of that reference product to the same or a lower cost-sharing tier and with the same or less restrictive PA, ST, or QL requirements.

(3) Removing a non-Part D drug.

(4) Adding or making more restrictive PA, ST, or QL requirements based upon a new FDA-mandated boxed warning.

(5) Removing a drug withdrawn from sale by the manufacturer or that FDA determines to be withdrawn for safety or effectiveness reasons if the Part D sponsor chooses not to treat it as an immediate negative formulary change.

(6) Removing a drug based on long term shortage and market availability.

(7) Making negative formulary changes based upon new clinical guidelines or information or to promote safe utilization.

(8) Adding PA to help determine Part B versus Part D coverage.

Negative formulary change means one of the following changes with respect to a covered Part D drug:

(1) Removing a drug from a formulary.

(2) Moving a drug to a higher cost-sharing tier.

(3) Adding or making more restrictive prior authorization (PA), step therapy (ST), or quantity limit (QL) requirements. Negative formulary changes do not include safety-based claim edits which are not submitted to CMS as part of the formulary.

Negotiated price means the price for a covered Part D drug that—

(1) The Part D sponsor (or other intermediary contracting organization) and the network dispensing pharmacy or other network dispensing provider have negotiated as the lowest possible reimbursement such network entity will receive, in total, for a particular drug;

(2) Meets all of the following:

(i) Includes all price concessions (as defined in this section) from network pharmacies or other network providers;

(ii) Includes any dispensing fees; and

(iii) Excludes additional contingent amounts, such as incentive fees, if these amounts increase prices; and

(3) Is reduced by non-pharmacy price concessions and other direct or indirect remuneration that the Part D sponsor passes through to Part D enrollees at the point of sale.

Network pharmacy means a licensed pharmacy that is under contract with a Part D sponsor to provide covered Part D drugs at negotiated prices to its Part D plan enrollees.

Non-maintenance change means a negative formulary change that is not a maintenance change or an immediate negative formulary change.

Non-preferred pharmacy means a network pharmacy that offers covered Part D drugs at negotiated prices to Part D enrollees at higher cost-sharing levels than apply at a preferred pharmacy.

Or otherwise means through a government-funded health program.

Other specified entities means State Pharmaceutical Assistance Programs (as defined in § 423.454), entities providing other prescription drug coverage (as described in § 423.464(f)(1)), authorized prescribers, network pharmacies, and pharmacists.

Out-of-network pharmacy means a licensed pharmacy that is not under contract with a Part D sponsor to provide negotiated prices to Part D plan enrollees.

Part D drug means—

(1) Unless excluded under paragraph (2) of this definition, any of the following if used for a medically accepted indication (as defined in section 1860D-2(e)(4) of the Act)—

(i) A drug that may be dispensed only upon a prescription and that is described in sections 1927(k)(2)(A)(i) through (iii) of the Act.

(ii) A biological product described in sections 1927(k)(2)(B)(i) through (iii) of the Act.

(iii) Insulin described in section 1927(k)(2)(C) of the Act.

(iv) Medical supplies associated with the injection of insulin, including syringes, needles, alcohol swabs, and gauze.

(v) A vaccine licensed under section 351 of the Public Health Service Act and for vaccine administration on or after January 1, 2008, its administration.

(vi) Supplies that are directly associated with delivering insulin into the body, such as an inhalation chamber used to deliver the insulin through inhalation.

(vii) A combination product approved and regulated by the FDA as a drug, vaccine, or biologic described in paragraphs (1)(i), (ii), (iii), or (v) of this definition.

(2) Does not include any of the following:

(i) Drugs for which payment as so prescribed and dispensed or administered to an individual is available for that individual under Part A or Part B (even though a deductible may apply, or even though the individual is eligible for coverage under Part A or Part B but has declined to enroll in Part A or Part B).

(ii) Drugs or classes of drugs, or their medical uses, which may be excluded from coverage or otherwise restricted under Medicaid under sections 1927(d)(2) or (d)(3) of the Act, except for smoking cessation agents.

(iii) Medical foods, defined as a food that is formulated to be consumed or administered enterally under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation, and that are not regulated as drugs under section 505 of the Federal Food, Drug, and Cosmetic Act.

Person means a natural person, corporation, mutual company, unincorporated association, partnership, joint venture, limited liability company, trust, estate, foundation, not-for-profit corporation, unincorporated organization, government or governmental subdivision or agency.

Personal health savings vehicle means a vehicle through which individuals can set aside their own funds to pay for health care expenses, including covered Part D drugs, on a tax-free basis including any of the following—

(1) A Health Savings Account (as defined under section 220 of the Internal Revenue Code);

(2) A Flexible Spending Account (as defined in section 106(c)(2) of the Internal Revenue Code) offered in conjunction with a cafeteria plan under section 125 of the Internal Revenue Code; and

(3) An Archer Medical Savings Account (as defined under section 223 of the Internal Revenue Code); but specifically excluding a Health Reimbursement Arrangement (as described under Internal Revenue Ruling 2002-41 and Internal Revenue Notice 2002-45)

Plan allowance means the amount Part D plans that offer coverage other than defined standard coverage may use to determine their payment and Part D enrollees' cost-sharing for covered Part D drugs purchased at an out-of-network pharmacy or in a physician's office in accordance with the requirements of § 423.124(b).

Potential at-risk beneficiary means a Part D eligible individual who is not an exempted beneficiary (as defined in this section) and—

(1) Who is identified using clinical guidelines (as defined in this section); or

(2) With respect to whom a Part D plan sponsor receives a notice upon the beneficiary's enrollment in such sponsor's plan that the beneficiary was identified as a potential at-risk beneficiary (as defined in paragraph (1) of this definition) under the prescription drug plan in which the beneficiary was most recently enrolled and such identification had not been terminated upon disenrollment.

Preclusion list means a CMS compiled list of prescribers who—

(1) Meet all of the following requirements:

(i) The prescriber is currently revoked from Medicare for a reason other than that stated in § 424.535(a)(3) of this chapter.

(ii) The prescriber is currently under a reenrollment bar under § 424.535(c) of this chapter.

(iii) CMS determines that the underlying conduct that led to the revocation is detrimental to the best interests of the Medicare program. In making this determination under this paragraph (1)(iii), CMS considers the following factors:

(A) The seriousness of the conduct underlying the prescriber's revocation;

(B) The degree to which the prescriber's conduct could affect the integrity of the Part D program; and

(C) Any other evidence that CMS deems relevant to its determination; or

(2) Meet both of the following requirements:

(i) The prescriber has engaged in behavior, other than that described in § 424.535(a)(3) of this chapter, for which CMS could have revoked the individual to the extent applicable had he or she been enrolled in Medicare.

(ii) CMS determines that the underlying conduct that would have led to the revocation is detrimental to the best interests of the Medicare program. In making this determination under this paragraph, CMS considers all of the following factors:

(A) The seriousness of the conduct involved.

(B) The degree to which the prescriber's conduct could affect the integrity of the Part D program.

(C) Any other evidence that CMS deems relevant to its determination; or

(3) The prescriber, regardless of whether he or she is or was enrolled in Medicare, has been convicted of a felony under Federal or State law within the previous 10 years that CMS deems detrimental to the best interests of the Medicare program. Factors that CMS considers in making such a determination under this paragraph are as follows:

(i) The severity of the offense.

(ii) When the offense occurred.

(iii) Any other information that CMS deems relevant to its determination.

Preferred drug means a covered Part D drug on a Part D plan's formulary for which beneficiary cost-sharing is lower than for a non-preferred drug in the plan's formulary.

Preferred pharmacy means a network pharmacy that offers covered Part D drugs at negotiated prices to Part D enrollees at lower levels of cost-sharing than apply at a non-preferred pharmacy under its pharmacy network contract with a Part D plan.

Price concession means any form of discount, direct or indirect subsidy, or rebate received by the Part D sponsor or its intermediary contracting organization from any source that serves to decrease the costs incurred under the Part D plan by the Part D sponsor. Examples of price concessions include but are not limited to: Discounts, chargebacks, rebates, cash discounts, free goods contingent on a purchase agreement, coupons, free or reduced-price services, and goods in kind.

Program size means the estimated population of potential at-risk beneficiaries in drug management programs (described in § 423.153(f)) operated by Part D plan sponsors that the Secretary determines can be effectively managed by such sponsors as part of the process to develop clinical guidelines.

Qualified prescription drug coverage means any standard prescription drug coverage or alternative prescription drug coverage

Required prescription drug coverage means coverage of Part D drugs under an MA-PD plan that consists of either—

(1) Basic prescription drug coverage; or

(2) Enhanced alternative coverage, provided there is no MA monthly supplemental beneficiary premium (as defined under section 1854(b)(2)(C) of the Act) applied under the plan due to the application of a credit against the premium of a rebate under § 422.266(b) of this chapter.

Retail pharmacy means any licensed pharmacy that is open to dispense prescription drugs to the walk-in general public from which Part D enrollees could purchase a covered Part D drug without being required to receive medical services from a provider or institution affiliated with that pharmacy.

Rural means a five-digit ZIP code in which the population density is less than 1,000 individuals per square mile.

Standard prescription drug coverage means coverage of Part D drugs that meets the requirements of § 423.104(d). The term standard prescription drug coverage must be either—

(1) Defined standard coverage (standard prescription drug coverage that provides for cost-sharing as described in § 423.104(d)(2)(i)(A) and (d)(5)(i)); or

(2) Actuarially equivalent standard coverage (standard prescription drug coverage that provides for cost-sharing as described in § 423.104(d)(2)(i)(B) or cost-sharing as described in § 423.104(d)(5)(ii), or both).

Suburban means a five-digit ZIP code in which the population density is between 1,000 and 3,000 individuals per square mile.

Supplemental benefits means benefits offered by Part D plans, other than employer group health or waiver plans, that meet the requirements of § 423.104(f)(1)(ii).

Therapeutically equivalent refers to drugs that are rated as therapeutic equivalents under the Food and Drug Administration's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations.”

Third party payment arrangement means any contractual or similar arrangement under which a person has a legal obligation to pay for covered Part D drugs.

Urban means a five-digit ZIP code in which the population density is greater than 3,000 individuals per square mile.

Usual and customary (U&C) price means the price that an out-of-network pharmacy or a physician's office charges a customer who does not have any form of prescription drug coverage for a covered Part D drug.

Valid prescription means a prescription that complies with all applicable State law requirements constituting a valid prescription.

§ 423.104 Requirements related to qualified prescription drug coverage.

(a) General. Subject to the conditions and limitations set forth in this subpart, a Part D sponsor must provide enrollees with coverage of the benefits described in paragraph (c) of this section. The benefits may be provided directly by the Part D sponsor or through arrangements with other entities. CMS reviews and approves these benefits consistent with § 423.272, and using written policy guidelines and requirements in this part and other CMS instructions.

(b) Availability of prescription drug plan. A PDP sponsor offering a prescription drug plan must offer the plan—

(1) To all Part D eligible beneficiaries residing in the plan's service area; and

(2) At a uniform premium, with uniform benefits and level of cost-sharing throughout the plan's service area.

(c) Types of benefits. The coverage provided by a Part D plan must be qualified prescription drug coverage.

(d) Standard prescription drug coverage. Standard prescription drug coverage includes access to negotiated prices as described under paragraph (g)(1) of this section, provides coverage of Part D drugs, and must meet the following requirements

(1) Deductible. An annual deductible equal to—

(i) For 2006. $250; or

(ii) For years subsequent to 2006. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $5.

(2) Cost-sharing under the initial coverage limit. (i) Subject to paragraph (d)(4) of this section, coinsurance for actual costs for covered Part D drugs covered under the Part D plan above the annual deductible specified in paragraph (d)(1) of this section, and up to the initial coverage limit under paragraph (d)(3) of this section, that is—

(A) Equal to 25 percent of actual cost; or

(B) Actuarially equivalent to an average expected coinsurance of no more than 25 percent of actual cost, as determined through processes and methods established under § 423.265(c) and (d).

(ii) Tiered copayments. A Part D plan providing actuarially equivalent standard coverage may apply tiered copayments, provided that any tiered copayments are consistent with paragraphs (d)(2)(i)(B) and (d)(4) of this section and are approved as described in § 423.272(b)(2).

(iii) Tiered cost sharing under paragraph (d)(2)(ii) of this section may not exceed levels annually determined by CMS to be discriminatory.

(iv) Specialty tier means a formulary cost sharing tier dedicated to high-cost Part D drugs with ingredient costs for a 30-day equivalent supply (as described in paragraph (d)(2)(iv)(A)( 2 ) of this section) that are greater than the specialty tier cost threshold specified in paragraph (d)(2)(iv)(A) of this section.

(A) Specialty-tier cost threshold. CMS sets the specialty-tier cost threshold for a plan year in accordance with this paragraph (d)(2)(iv)(A), using the following steps:

( 1 ) 30-day equivalent ingredient cost. Using the PDE data as specified in paragraph (d)(2)(iv)(C) of this section, CMS uses the ingredient cost reflected on the prescription drug event (PDE) to determine the ingredient cost in dollars for a 30-day equivalent supply of the Part D drug.

( 2 ) 30-day equivalent supply. CMS determines the 30-day equivalent supply as follows: If the days' supply reported on a PDE is less than or equal to 34, the number of 30-day equivalent supplies equals one. If the days' supply reported on a PDE is greater than 34, the number of 30-day equivalent supplies is equal to the number of days' supply reported on each PDE divided by 30.

( 3 ) Top 1 percent. CMS determines the amount that equals the lowest 30-day equivalent ingredient cost that is within the top 1 percent of all 30-day equivalent ingredient costs reflected in the PDE data.

( 4 ) Determination. Except as provided in paragraph (d)(2)(iv)(B) of this section, the amount determined in paragraph (d)(2)(iii) of this section is the specialty-tier cost threshold for the plan year.

( 5 ) Claims history. Except for newly FDA-approved Part D drugs only recently available on the market for which Part D sponsors would have little or no claims data, CMS approves placement of a Part D drug on a specialty tier when that Part D sponsor's claims data from the time period specified in paragraph (d)(2)(iv)(C) of this section demonstrates that greater than 50 percent of the Part D sponsor's PDEs for a given Part D drug, when adjusted for 30-day equivalent supplies, have ingredient costs for 30-day equivalent supplies, as described in paragraph (d)(2)(iv)(A)( 2 ) of this section, that exceed the specialty-tier cost threshold.

( 6 ) No claims history. For newly FDA-approved Part D drugs only recently available on the market for which Part D sponsors would have little or no claims data, CMS approves placement of a Part D drug on a specialty tier when that Part D sponsor estimates that ingredient cost portion of their negotiated prices for a 30-day equivalent supply, as defined in subparagraph (d)(2)(iv)(A)( 2 ), is anticipated to exceed the specialty-tier cost threshold more than 50 percent of the time, subject to the requirements at §§ 423.120(b), (e), and (f).

(B) Limit on specialty-tier cost threshold adjustment. ( 1 ) CMS increases the specialty-tier cost threshold for a plan year only if the amount determined in paragraph (d)(2)(iv)(A)( 3 ) of this section for a plan year is at least 10 percent above the specialty tier cost threshold for the prior plan year.

( 2 ) If an increase is made in accordance with this paragraph (d)(2)(iv)(B), CMS rounds the amount determined in paragraph (d)(2)(iv)(A)( 3 ) of this section to the nearest $10, and the resulting dollar amount is the specialty-tier cost threshold for the plan year.

(C) Data used to determine the specialty-tier cost threshold. CMS uses PDEs from the plan year that ended 12 months prior to the applicable plan year.

(D) Maximum number of specialty tiers and maximum allowable cost sharing. A Part D plan may maintain up to two specialty tiers. CMS sets the maximum allowable cost sharing for a single specialty tier, or, in the case of a plan with two specialty tiers, the higher cost sharing specialty tier as follows:

( 1 ) For Part D plans with the full deductible provided under the Defined Standard benefit, as specified in paragraph (d)(1) of this section, 25 percent coinsurance.

( 2 ) For Part D plans with no deductible, 33 percent coinsurance.

( 3 ) For Part D plans with a deductible that is greater than $0 and less than the deductible provided under the Defined Standard benefit, a coinsurance percentage that is determined by subtracting the plan's deductible from 33 percent of the initial coverage limit (ICL) under section 1860D-2(b)(3) of the Act, dividing this difference by the difference between the ICL and the plan's deductible, and rounding to the nearest 1 percent.

(3) Initial coverage limit. Except as provided in paragraphs (d)(4) and (d)(5) of this section, the initial coverage limit is equal to—

(i) For 2006. $2,250.

(ii) For years subsequent to 2006. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $10.

(4) Cost-sharing in the coverage gap for applicable beneficiaries. (i) Coinsurance in the coverage gap (as defined in § 423.100) for costs for covered Part D drugs that are not applicable drugs (as defined in § 423.100) under the Medicare coverage gap discount program that is—

(A) Equal to the generic gap coinsurance percentage described in paragraph (d)(4)(iii) of this section; or

(B) Actuarially equivalent to an average expected coinsurance for covered Part D drugs that are not applicable drugs under the Medicare coverage gap discount program, as determined through processes and methods established under § 423.265 (c) and (d).

(ii) Coinsurance in the coverage gap for the actual cost minus the dispensing fee and any vaccine administration fee for covered Part D drugs that are applicable drugs under the Medicare coverage gap discount program that is—

(A) Equal to the difference between the applicable gap coinsurance percentage described in paragraph (d)(4)(iv) of this section and the discount percentage determined under the Medicare coverage gap discount program; or

(B) Actuarially equivalent to an average expected coinsurance for covered Part D drugs that are applicable drugs under the Medicare coverage gap discount program, as determined through processes and methods established under § 423.265 (c) and (d).

(iii) Generic gap coinsurance percentage. The generic gap coinsurance percentage is equal to—

(A) For 2011, 93 percent.

(B) For years 2012 through 2019, the amount specified in this paragraph for the previous year, decreased by 7 percentage points.

(C) For 2020 and each subsequent year, 25 percent.

(iv) Applicable gap coinsurance percentage. The applicable gap coinsurance percentage is equal to—

(A) For 2013 and 2014, 97.5 percent.

(B) For 2015 and 2016, 95 percent.

(C) For 2017, 90 percent.

(D) For 2018, 85 percent.

(E) For 2019, 80 percent.

(F) For 2020 and subsequent years, 75 percent.

(5) Protection against high out-of-pocket expenditures. (i) After an enrollee's incurred costs exceed the annual out-of-pocket threshold described in paragraph (d)(5)(iii) of this section, cost-sharing equal to the greater of—

(A) Copayments. ( 1 ) In 2006, $2 for a generic drug or preferred drug that is a multiple source drug (as defined in section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug; and

( 2 ) For subsequent years, the copayment amounts specified in this paragraph for the previous year increased by the annual percentage increase described in paragraph (d)(5)(iv) of this section and rounded to the nearest multiple of 5 cents; or

(B) Coinsurance. Coinsurance of five percent of actual cost.

(ii) As determined through processes and methods established under § 423.265(c) and (d), a Part D plan may substitute for cost-sharing under paragraph (d)(5)(i) of this section an amount that is actuarially equivalent to expected cost-sharing under paragraph (d)(5)(i) of this section.

(iii) Annual out-of-pocket threshold. For purposes of this part, the annual out-of-pocket threshold equals—

(A) For 2006. $3,600.

(B) For each year 2007 through 2013. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $50.

(C) For years 2014 and 2015. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, minus 0.25 percentage point.

(D) For each year 2016 through 2019. The amount specified in this paragraph for the previous year, increased by the lesser of—

( 1 ) The annual percentage increase specified in (d)(5)(v) of this section plus 2 percentage points; or

( 2 ) The annual percentage increase specified in (d)(5)(iv) of this section.

(E) For 2020. The amount specified in this paragraph for 2013 increased by the annual percentage increases specified in paragraph (d)(5)(iv) of this section for 2014 through 2020, and rounded to the nearest $50.

(F) For 2021 and subsequent years. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest $50.

(iv) Annual percentage increase. The annual percentage increase for each year is equal to the annual percentage increase in average per capita aggregate expenditures for Part D drugs in the United States for Part D eligible individuals and is based on data for the 12-month period ending in July of the previous year.

(v) Additional annual percentage increase. The annual percentage increase for each year is equal to the annual percentage increase in the consumer price index for all urban consumers (United States city average) for the 12-month period ending in July of the previous year.

(e) Alternative prescription drug coverage. Alternative prescription drug coverage includes access to negotiated prices as described under paragraph (g)(1) of this section, provides coverage of Part D drugs, and must meet the following requirements—

(1) Has an annual deductible that does not exceed the annual deductible specified in paragraph (d)(1) of this section;

(2) Imposes cost-sharing no greater than that specified in paragraphs (d)(5)(i) or (ii) of this section once the annual out-of-pocket threshold described in paragraph (d)(5)(iii) of this section is met;

(3) Has a total or gross value that is at least equal to the total or gross value of defined standard coverage.

(4) Has an unsubsidized value that is at least equal to the unsubsidized value of standard prescription drug coverage. For purposes of this subparagraph, the unsubsidized value of coverage is the amount by which the actuarial value of the coverage exceeds the actuarial value of the subsidy payments under § 423.782 for the coverage; and

(5) Provides coverage that is designed, based upon an actuarially representative pattern of utilization, to provide for the payment, for costs incurred for covered Part D drugs, that are equal to the initial coverage limit under paragraph (d)(3) of this section, of an amount equal to at least the product of -

(i) The amount by which the initial coverage limit described in paragraph (d)(3) of this section for the year exceeds the deductible described in paragraph (d)(1) of this section; and

(ii) 100 percent minus the coinsurance percentage specified in paragraph (d)(2)(i) of this section.

(f) Enhanced alternative coverage. (1) Enhanced alternative coverage must meet the requirements under paragraph (e) of this section and includes-

(i) Basic prescription drug coverage, as defined in § 423.100; and

(ii) Supplemental benefits, which include-

(A) Coverage of drugs that are specifically excluded as Part D drugs under paragraph (2)(ii) of the definition of Part D drug under § 423.100; or

(B) Any of the following changes or combination of changes that increase the actuarial value of benefits under the Part D plan above the actuarial value of defined standard prescription drug coverage, as determined through processes and methods established under § 423.265—

( 1 ) A reduction in the annual deductible described in paragraph (d)(1) of this section;

( 2 ) A reduction in the cost-sharing described in paragraphs (d)(2) or (d)(5) of this section, or

( 3 ) An increase in the initial coverage limit described in paragraph (d)(3) of this section.

(C) Both the coverage described in paragraph (f)(1)(ii)(A) of this section and the changes or combination of changes described in paragraph (f)(1)(ii)(B) of this section.

(2) Restrictions on the offering of enhanced alternative coverage by PDP sponsors. A PDP sponsor may not offer enhanced alternative coverage in a service area unless the PDP sponsor also offers a prescription drug plan in that service area that provides basic prescription drug coverage.

(3) Restrictions on the offering of enhanced alternative coverage by MA organization s. Effective January 1, 2006, an MA organization—

(i) May not offer an MA coordinated care plan, as defined in § 422.4 of this chapter, in an area unless either that plan (or another MA plan offered by the MA organization in that same service area) includes required prescription drug coverage; and

(ii) May not offer prescription drug coverage (other than that required under Parts A and B of title XVIII of the Act) to an enrollee—

(A) Under an MSA plan, as defined in § 422.2 of this chapter; or

(B) Under another MA plan (including a private fee-for-service plan, as defined in § 422.4 of this chapter) unless the drug coverage under the other plan provides qualified prescription drug coverage and unless the requirements of paragraph (f)(3)(i) of this section are met.

(4) Restrictions on the offering of enhanced alternative coverage by cost plans. (i) A cost plan that elects to offer qualified prescription drug coverage may offer enhanced alternative coverage as an optional supplemental benefit under § 417.440(b)(2)(ii) of this chapter only if the cost plan also offers basic prescription drug coverage. An enrollee in the cost plan may, at the individual's option, elect whether to receive qualified prescription drug coverage under the cost plan and, if so, whether to receive basic prescription drug coverage or, if offered by the cost plan, enhanced alternative coverage.

(ii) A cost plan that offers qualified prescription drug coverage as an optional supplemental benefit under § 417.440(b)(2)(ii) of this chapter may not offer prescription drug coverage that is not qualified prescription drug coverage. A cost plan that does not offer qualified prescription drug coverage under § 417.440(b)(2)(ii) of this chapter may offer prescription drug coverage that is not qualified prescription drug coverage under § 417.440(b)(2)(i) of this chapter.

(g) Negotiated prices —(1) Access to negotiated prices. A Part D sponsor is required to provide its Part D enrollees with access to negotiated prices for covered Part D drugs included in its Part D plan's formulary. Negotiated prices must be provided even if no benefits are payable to the beneficiary for covered Part D drugs because of the application of any deductible or 100 percent coinsurance requirement following satisfaction of any initial coverage limit. Negotiated prices must be provided when the negotiated price for a covered Part D drug under a Part D sponsor's benefit package is less than the applicable cost-sharing before the application of any deductible, before any initial coverage limit, before the annual out-of-pocket threshold, and after the annual out-of-pocket threshold.

(2) Interaction with Medicaid best price. Prices negotiated with a pharmaceutical manufacturer, including discounts, subsidies, rebates, and other price concessions, for covered Part D drugs by the following entities are not taken into account in establishing Medicaid's best price under section 1927(c)(1)(C) of the Act—

(i) A Part D plan, as defined in § 423.4; or

(iii) A qualified retiree prescription drug plan (as defined in § 423.882) for Part D eligible individuals.

(3) Disclosure. (i) A Part D sponsor is required to disclose to CMS data on aggregate negotiated price concessions obtained from pharmaceutical manufacturers, as well as data on aggregate negotiated price concessions obtained from pharmaceutical manufacturers that are passed through to beneficiaries, via pharmacies and other dispensers, in the form of lower subsidies paid by CMS on behalf of low-income individuals described in § 423.782, or in the form of lower monthly beneficiary premiums or lower covered Part D drug prices at the point of sale.

(ii) Information on negotiated prices disclosed to CMS under paragraph (g)(3) of this section is protected under the confidentiality provisions applicable under section 1927(b)(3)(D) of the Act.

(4) Audits. CMS and the Office of the Inspector General may conduct periodic audits of the financial statements and all records of Part D sponsors pertaining to any qualified prescription drug coverage they may offer under a Part D plan.

(h) Valid prescription. A Part D sponsor may only provide benefits for Part D drugs that require a prescription if those drugs are dispensed upon a valid prescription.

(i) Daily cost-sharing rate. Beginning January 1, 2014, a Part D sponsor is required to provide its enrollees access to a daily cost-sharing rate in accordance with § 423.153(b)(4).

§ 423.112 Establishment of prescription drug plan service areas.

(a) Service area for prescription drug plan sponsors. The service area for a prescription drug plan sponsor other than a fallback prescription drug plan sponsor consists of one or more PDP regions as established under paragraphs (b) and (c) of this section.

(b) Establishment of PDP regions —(1) General. CMS establishes PDP regions in a manner consistent with the requirements for the establishment of MA regions as described at § 422.455 of this chapter.

(2) Relation to MA regions. To the extent practicable, PDP regions are the same as MA regions. CMS may establish PDP regions that are not the same as MA regions if CMS determines that the establishment of these regions improves access to prescription drug plan benefits for Part D eligible individuals.

(c) Authority for territories. CMS establishes a PDP region or regions for States that are not within the 50 States and the District of Columbia.

(d) Revision of PDP regions. CMS may revise the PDP regions established under paragraphs (b) and (c) of this section.

(e) Regional or national plan. Nothing in this section prevents a prescription drug plan from being offered in two or more PDP regions in their entirety or in all PDP regions in their entirety.

§ 423.120 Access to covered Part D drugs.

(a) Assuring pharmacy access —(1) Standards for convenient access to network pharmacies. Except as provided in paragraph (a)(7) of this section, a Part D sponsor (as defined in § 423.4 of this part) must have a contracted pharmacy network consisting of retail pharmacies sufficient to ensure that, for beneficiaries residing in each State in a PDP sponsor's service area (as defined in § 423.112(a) of this part), each State in a regional MA-organization's service area (as defined in § 422.2 of this part), the entire service area of a local MA organization (as defined in § 422.2 of this chapter) or the entire geographic area of a cost contract (as defined in § 417.401 of this chapter) all of the following requirements are satisfied:

(i) At least 90 percent of Medicare beneficiaries, on average, in urban areas served by the Part D sponsor live within 2 miles of a network pharmacy that is a retail pharmacy or a pharmacy described under paragraph (a)(2) of this section.

(ii) At least 90 percent of Medicare beneficiaries, on average, in suburban areas served by the Part D sponsor live within 5 miles of a network pharmacy that is a retail pharmacy or a pharmacy described under paragraph (a)(2) of this section.

(iii) At least 70 percent of Medicare beneficiaries, on average, in rural areas served by the Part D sponsor live within 15 miles of a network pharmacy that is a retail pharmacy or a pharmacy described under paragraph (a)(2) of this section.

(2) Applicability of some non-retail pharmacies to standards for convenient access. Part D sponsors may count I/T/U pharmacies and pharmacies operated by Federally Qualified Health Centers and Rural Health Centers toward the standards for convenient access to network pharmacies in paragraph (a)(1) of this section.

(3) Access to non-retail pharmacies. A Part D sponsor's contracted pharmacy network may be supplemented by non-retail pharmacies, including pharmacies offering home delivery via mail-order and institutional pharmacies, provided the requirements of paragraph (a)(1) of this section are met.

(4) Access to home infusion pharmacies. A Part D sponsor's contracted pharmacy network must provide adequate access to home infusion pharmacies consistent with written policy guidelines and other CMS instructions. A Part D plan must ensure that such network pharmacies, at a minimum meet all the following requirements:

(i) Are capable of delivering home-infused drugs in a form that can be administered in a clinically appropriate fashion.

(ii) Are capable of providing infusible Part D drugs for both short-term acute care and long-term chronic care therapies.

(iii) Ensure that the professional services and ancillary supplies necessary for home infusion therapy are in place before dispensing Part D home infusion drugs.

(iv) Provide delivery of home infusion drugs within 24 hours of discharge from an acute care setting, or later if so prescribed.

(5) Access to long-term care pharmacies. A Part D sponsor must offer standard contracting terms and conditions, including performance and service criteria for long-term care pharmacies that CMS specifies, to all long-term care pharmacies in its service area. The sponsor must provide convenient access to long-term care pharmacies consistent with written policy guidelines and other CMS instructions.

(6) Access to I/T/U pharmacies. A Part D sponsor must offer standard contracting terms and conditions conforming to the model addendum that CMS develops, to all I/T/U pharmacies in its service area. The sponsor must provide convenient access to I/T/U pharmacies consistent with written policy guidelines and other CMS instructions.

(7) Waiver of pharmacy access requirements. CMS waives the requirements under paragraph (a)(1) of this section in the case of either of the following:

(i) An MA organization or cost contract (as described in section 1876(h) of the Act) that provides its enrollees with access to covered Part D drugs through pharmacies owned and operated by the MA organization or cost contract, provided the organization's or plan's pharmacy network meets the access standard set forth—

(A) At § 422.112 of this chapter for an MA organization; or

(B) At § 417.416(e) of this chapter for a cost contract.

(ii) An MA organization offering a private fee-for-service plan described in § 422.4 of this chapter that—

(A) Offers qualified prescription drug coverage; and

(B) Provides plan enrollees with access to covered Part D drugs dispensed at all pharmacies, without regard to whether they are contracted network pharmacies and without charging cost-sharing in excess of that described in § 423.104(d)(2) and (d)(5).

(8) Pharmacy network contracting requirements. In establishing its contracted pharmacy network, a Part D sponsor offering qualified prescription drug coverage—

(i) Must contract with any pharmacy that meets the Part D sponsor's standard terms and conditions;

(ii) May not require a pharmacy to accept insurance risk as a condition of participation in the Part D sponsor's contracted pharmacy network; and

(iii) May not prohibit a pharmacy from, nor penalize a pharmacy for, informing a Part D plan enrollee of the availability at that pharmacy of a prescribed medication at a cash price that is below the amount that the enrollee would be charged to obtain the same medication through the enrollee's Part D plan.

(9) Differential cost-sharing for preferred pharmacies. A Part D sponsor offering a Part D plan that provides coverage other than defined standard coverage may reduce copayments or coinsurance for covered Part D drugs obtained through a preferred pharmacy relative to the copayments or coinsurance applicable for such drugs when obtained through a non-preferred pharmacy. Such differentials are taken into account in determining whether the requirements under § 423.104(d)(2) and (d)(5) and § 423.104(e) are met. Any cost-sharing reduction under this section must not increase CMS payments to the Part D plan under § 423.329.

(10) Level playing field between mail-order and network pharmacies. A Part D sponsor must permit its Part D plan enrollees to receive benefits, which may include a 90-day supply of covered Part D drugs, at any of its network pharmacies that are retail pharmacies. A Part D sponsor may require an enrollee obtaining a covered Part D drug at a network pharmacy that is a retail pharmacy to pay any higher cost-sharing applicable to that covered Part D drug at the network pharmacy that is a retail pharmacy instead of the cost-sharing applicable to that covered Part D drug at the network pharmacy that is a mail-order pharmacy.

(b) Formulary requirements. A Part D sponsor that uses a formulary under its qualified prescription drug coverage must meet the following requirements—

(1) Development and revision by a pharmacy and therapeutic committee. A Part D sponsor's formulary must be developed and reviewed by a pharmacy and therapeutic committee that—

(i) Includes a majority of members who are practicing physicians and/or practicing pharmacists.

(ii) Includes at least one practicing physician and at least one practicing pharmacist who are independent and free of conflict relative to-

(A) The Part D sponsor and Part D plan; and

(B) Pharmaceutical manufacturers.

(iii) Includes at least one practicing physician and one practicing pharmacist who are experts regarding care of elderly or disabled individuals.

(iv) Clearly articulates and documents processes to determine that the requirements under paragraphs (b)(1)(i) through (iii) of this section have been met, including the determination by an objective party of whether disclosed financial interests are conflicts of interest and the management of any recusals due to such conflicts.

(v) Bases clinical decisions on the strength of scientific evidence and standards of practice, including assessing peer-reviewed medical literature, pharmacoeconomic studies, outcomes research data, and other such information as it determines appropriate.

(vi) Considers whether the inclusion of a particular Part D drug in a formulary or formulary tier has any therapeutic advantages in terms of safety and efficacy.

(vii) Reviews policies that guide exceptions and other utilization management processes, including drug utilization review, quantity limits, generic substitution, and therapeutic interchange.

(viii) Evaluates and analyzes treatment protocols and procedures related to the plan's formulary at least annually consistent with written policy guidelines and other CMS instructions.

(ix) Documents in writing its decisions regarding formulary development and revision and utilization management activities.

(x) Reviews and approves all clinical prior authorization criteria, step therapy protocols, and quantity limit restrictions applied to each covered Part D drug.

(xi) Meets other requirements consistent with written policy guidelines and other CMS instructions.

(2) Provision of an Adequate Formulary. A Part D plan's formulary must—

(i) Except as provided in paragraphs (b)(2)(ii) and (v) of this section, include within each therapeutic category and class of Part D drugs at least two Part D drugs that are not therapeutically equivalent and bioequivalent, with different strengths and dosage forms available for each of those drugs, except that only one Part D drug must be included in a particular category or class of covered Part D drugs if the category or class includes only one Part D drug.

(ii) Include at least one Part D drug within a particular category or class of Part D drugs to the extent the Part D plan demonstrates, and CMS approves, the following-

(A) That only two drugs are available in that category or class of Part D drugs; and

(B) That one drug is clinically superior to the other drug in that category or class of Part D drugs.

(iii) Include adequate coverage of the types of drugs most commonly needed by Part D enrollees, as recognized in national treatment guidelines.

(iv) Be approved by CMS consistent with § 423.272(b)(2).

(v) Until such time as there are established, through notice and comment rulemaking, criteria to identify, as appropriate, categories and classes of clinical concern, the categories and classes of clinical concern are as specified in section 1860D-4(b)(3)(G)(iv) of the Act.

(vi) Exceptions to paragraph (b)(2)(v) of this section are as follows:

(A) Drug or biological products that are rated as either of the following:

( 1 ) Therapeutically equivalent (under the Food and Drug Administration's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations,” also known as the Orange Book).

( 2 ) Interchangeable (under the Food and Drug Administration's most recent publication of the Purple Book: Lists of Licensed Biological Products with Reference Product Exclusivity and Biosimilarity or Interchangeability Evaluations).

(B) Utilization management processes that limit the quantity of drugs due to safety.

(C) Subject to CMS review and approval, for enrollees that are not on existing therapy on the protected class Part D drug, and except for antiretroviral medications, prior authorization and step therapy requirements to confirm intended use is for a protected class indication, to ensure clinically appropriate use, to promote utilization of preferred formulary alternatives, or a combination thereof.

(D) Other drugs that CMS specifies through a process that is based upon scientific evidence and medical standards of practice (and, in the case of antiretroviral medications, is consistent with the Department of Health and Human Services Guidelines for the Use of Antiretroviral Agents in HIV-1-Infected Adults and Adolescents) and which permits public notice and comment.

(3) Transition process. A Part D sponsor must provide for an appropriate transition process for enrollees prescribed Part D drugs that are not on its Part D plan's formulary (including Part D drugs that are on a sponsor's formulary but require prior authorization or step therapy under a plan's utilization management rules). The transition process must:

(i)(A) Be applicable to all of the following:

( 1 ) New enrollees into Part D plans following the annual coordinated election period.

( 2 ) Newly eligible Medicare enrollees from other coverage.

( 3 ) Individuals who switch from one plan to another after the start of the contract year.

( 4 ) Current enrollees remaining in the plan affected by formulary changes.

(B) Not apply in cases of immediate changes as permitted under paragraph (e)(2) of this section.

(ii) Ensure access to a temporary supply of drugs within the first 90 days of coverage under a new plan. This 90 day timeframe applies to retail, home infusion, long-term care and mail-order pharmacies,

(iii) Ensure the provision of a temporary fill when an enrollee requests a fill of a non-formulary drug during the time period specified in paragraph (b)(3)(ii) of this section (including Part D drugs that are on a plan's formulary but require prior authorization or step therapy under a plan's utilization management rules) by providing a one-time, temporary supply of at least an approved month's supply of medication, unless the prescription is written by a prescriber for less than an approved month's supply and requires the Part D sponsor to allow multiple fills to provide up to a total of an approved month's supply of medication.

(iv) Ensure written notice is provided to each affected enrollee within 3 business days after adjudication of the temporary fill. For long-term care residents dispensed multiple supplies of a Part D drug, in increments of 14-days-or-less, consistent with the requirements under § 423.154, the written notice must be provided within 3 business days after adjudication of the first temporary fill.

(v) Ensure that reasonable efforts are made to notify prescribers of affected enrollees who receive a transition notice under paragraph (b)(3)(iv) of this section.

(vi) A Part D sponsor must charge cost sharing for a temporary supply of drugs provided under its transition process such that the following conditions are met:

(A) For low-income subsidy (LIS) enrollees, a sponsor must not charge higher cost sharing for transition supplies than the statutory maximum copayment amounts.

(B) For non-LIS enrollees, a sponsor must charge—

( 1 ) The same cost sharing for non-formulary Part D drugs provided during the transition that would apply for non-formulary drugs approved through a formulary exception in accordance with § 423.578(b); and

( 2 ) The same cost sharing for formulary drugs subject to utilization management edits provided during the transition that would apply once the utilization management criteria are met.

(4) Limitation on changes in therapeutic classification. Except as CMS may permit to account for new therapeutic uses and newly approved Part D drugs, a Part D sponsor may not change the therapeutic categories and classes in a formulary other than at the beginning of each plan year.

(5) Notice of formulary changes. Part D sponsors must provide notice of changes to CMS-approved formularies as specified in § 423.120(f).

(6) Changes to CMS-approved formularies. Changes to CMS-approved formularies may be made only in accordance with paragraph (e) of this section.

(7) Provider and patient education. A Part D sponsor must establish policies and procedures to educate and inform health care providers and enrollees concerning its formulary.

(c) Use of standardized technology. (1) A Part D sponsor must issue and reissue, as necessary, a card or other type of technology that its enrollees may use to access negotiated prices for covered Part D drugs as provided under § 423.104(g). The card or other technology must comply with standards CMS establishes.

(2) When processing Part D claims, a Part D sponsor or its intermediary must comply with the electronic transaction standards established by 45 CFR 162.1102. CMS will issue guidance on the use of conditional fields within such standards.

(3) A Part D sponsor must require its network pharmacies to submit claims to the Part D sponsor or its intermediary whenever the card described in paragraph (c)(1) of this section is presented or on file at the pharmacy unless the enrollee expressly requests that a particular claim not be submitted to the Part D sponsor or its intermediary.

(4) Beginning January 1, 2012, a part D sponsor must assign and exclusively use a unique—

(i) Part D BIN or RxBIN and Part D processor control number (RxPCN) combination in its Medicare line of business; and

(ii) Part D cardholder identification number (RxID) to each Medicare Part D enrollee to clearly identify Medicare Part D beneficiaries.

(5)(i) A Part D plan sponsor must reject, or must require its pharmacy benefit manager (PBM) to reject, a pharmacy claim for a Part D drug unless the claim contains the active and valid National Provider Identifier (NPI) of the prescriber who prescribed the drug.

(ii) The sponsor must communicate at point-of sale whether or not a submitted NPI is active and valid in accordance with this paragraph (c)(5)(ii).

(A) If the sponsor communicates that the NPI is not active and valid, the sponsor must permit the pharmacy to—

( 1 ) Confirm that the NPI is active and valid; or

( 2 ) Correct the NPI.

(B) If the pharmacy confirms that the NPI is active and valid or corrects the NPI, the sponsor must pay the claim if it is otherwise payable.

(iii) A Part D sponsor must not later recoup payment from a network pharmacy for a claim that does not contain an active and valid individual prescriber NPI on the basis that it does not contain one, unless the sponsor—

(A) Has complied with paragraph (c)(5)(ii) of this section;

(B) Has verified that a submitted NPI was not in fact active and valid; and

(C) The agreement between the parties explicitly permits such recoupment.

(iv) With respect to requests for reimbursement submitted by Medicare beneficiaries, a Part D sponsor may not make payment to a beneficiary dependent upon the sponsor's acquisition of an active and valid individual prescriber NPI, unless there is an indication of fraud. If the sponsor is unable to retrospectively acquire an active and valid individual prescriber NPI, the sponsor may not seek recovery of any payment to the beneficiary solely on that basis.

(6)(i) Except as provided in paragraph (c)(6)(iv) of this section, a Part D sponsor must reject, or must require its PBM to reject, a pharmacy claim for a Part D drug if the individual who prescribed the drug is included on the preclusion list, defined in § 423.100.

(ii) Except as provided in paragraph (c)(6)(iv) of this section, a Part D sponsor must deny, or must require its PBM to deny, a request for reimbursement from a Medicare beneficiary if the request pertains to a Part D drug that was prescribed by an individual who is identified by name in the request and who is included on the preclusion list, defined in § 423.100.

(iii) A Part D plan sponsor may not submit a prescription drug event (PDE) record to CMS unless it includes on the PDE record the active and valid individual NPI of the prescriber of the drug, and the prescriber is not included on the preclusion list, defined in § 423.100, for the date of service.

(iv) With respect to Part D prescribers who have been added to an updated preclusion list but are not currently excluded by the OIG, the Part D plan sponsor must do all of the following:

(A) Subject to all other Part D rules and plan coverage requirements, and no later than 30 days after the posting of this updated preclusion list, must provide an advance written notice to any beneficiary who has received a Part D drug prescribed by an individual added to the preclusion list in this update and whom the plan sponsor has identified during the applicable 30-day period.

(B)( 1 ) Subject to paragraph (c)(6)(iv)(B)( 2 ) of this section, must ensure that reasonable efforts are made to notify the individual described in paragraph (c)(6)(iv) of this section of a beneficiary who was sent a notice under paragraph (c)(6)(iv)(A) of this section.

( 2 ) Paragraph (c)(6)(iv)(B)( 1 ) of this section applies only upon a prescriber writing a prescription in Medicare Part D when:

( i ) The plan sponsor has enough information on file to either copy the prescriber on the notification previously sent to the beneficiary or send a new notice informing the prescriber that they may not see plan beneficiaries due to their preclusion status; and

( ii ) The claim is received after the claim denial or reject date in the preclusion file.

(C) Must not reject a pharmacy claim or deny a beneficiary request for reimbursement for a Part D drug prescribed by the prescriber, solely on the ground that they have been included in the updated preclusion list, in the 60-day period after the date it sent the notice described in paragraph (c)(6)(iv)(A) of this section.

(v)(A) CMS sends written notice to the prescriber via letter of his or her inclusion on the preclusion list. The notice must contain the reason for the inclusion on the preclusion list and inform the prescriber of his or her appeal rights. A prescriber may appeal his or her inclusion on the preclusion list under this section in accordance with part 498 of this chapter.

(B) If the prescriber's inclusion on the preclusion list is based on a contemporaneous Medicare revocation under § 424.535 of this chapter:

( 1 ) The notice described in paragraph (c)(6)(v)(A) of this section must also include notice of the revocation, the reason(s) for the revocation, and a description of the prescriber's appeal rights concerning the revocation.

( 2 ) The appeals of the prescriber's inclusion on the preclusion list and the prescriber's revocation must be filed jointly by the prescriber and, as applicable, considered jointly under part 498 of this chapter.

(C)( 1 ) Except as provided in paragraph (c)(6)(v)(C)( 2 ) of this section, a prescriber will only be included on the preclusion list after the expiration of either of the following:

( i ) If the prescriber does not file a reconsideration request under § 498.5(n)(1) of this chapter, the prescriber will be added to the preclusion list upon the expiration of the 60-day period in which the prescriber may request a reconsideration.

( ii ) If the prescriber files a reconsideration request under § 498.5(n)(1) of this chapter, the prescriber will be added to the preclusion list effective on the date on which CMS, if applicable, denies the prescriber's reconsideration.

( 2 ) An OIG excluded prescriber is added to the preclusion list effective on the date of the exclusion.

(vi) CMS has the discretion not to include a particular individual on (or if warranted, remove the individual from) the preclusion list should it determine that exceptional circumstances exist regarding beneficiary access to prescriptions. In making a determination as to whether such circumstances exist, CMS takes into account—

(A) The degree to which beneficiary access to Part D drugs would be impaired; and

(B) Any other evidence that CMS deems relevant to its determination.

(vii)(A) Except as provided in paragraphs (c)(6)(vii)(C) and (D) of this section, a prescriber who is revoked under § 424.535 of this chapter will be included on the preclusion list for the same length of time as the prescriber's reenrollment bar.

(B) Except as provided in paragraphs (c)(6)(vii)(C) and (D) of this section, a prescriber who is not enrolled in Medicare will be included on the preclusion list for the same length of time as the reenrollment bar that CMS could have imposed on the prescriber had the prescriber been enrolled and then revoked.

(C) Except as provided in paragraph (c)(6)(vii)(D) of this section, an individual, regardless of whether the individual is or was enrolled in Medicare, that is included on the preclusion list because of a felony conviction will remain on the preclusion list for a 10-year period, beginning on the date of the felony conviction, unless CMS determines that a shorter length of time is warranted. Factors that CMS considers in making such a determination are—

( 1 ) The severity of the offense;

( 2 ) When the offense occurred; and

( 3 ) Any other information that CMS deems relevant to its determination.

(D) In cases where an individual is excluded by the OIG, the individual must remain on the preclusion list until the expiration of the CMS-imposed preclusion list period or reinstatement by the OIG, whichever occurs later.

(viii) Payment denials under paragraph (c)(6) of this section that are based upon the prescriber's inclusion on the preclusion list are not appealable by beneficiaries.

(d) Treatment of compounded drug products. With respect to multi-ingredient compounds, a Part D sponsor must—

(1) Make a determination as to whether the compound is covered under Part D.

(i) A compound that contains at least one ingredient covered under Part B as prescribed and dispensed or administered is considered a Part B compound, regardless of whether other ingredients in the compound are covered under Part B as prescribed and dispensed or administered.

(ii) Only compounds that contain at least one ingredient that independently meets the definition of a Part D drug, and that do not meet the criteria under paragraph (d)(1)(i) of this section, may be covered under Part D. For purposes of this paragraph (d) these compounds are referred to as Part D compounds.

(iii) For a Part D compound to be considered on-formulary, all ingredients that independently meet the definition of a Part D drug must be considered on-formulary (even if the particular Part D drug would be considered off-formulary if it were provided separately—that is, not as part of the Part D compound).

(iv) For a Part D compound that is considered off-formulary—

(A) Transition rules apply such that all ingredients in the Part D compound that independently meet the definition of a Part D drug must become payable in the event of a transition fill under § 423.120(b)(3); and

(B) All ingredients that independently meet the definition of a Part D drug must be covered if an exception under § 423.578(b) is approved for coverage of the compound.

(2) Establish consistent rules for beneficiary payment liabilities for both ingredients of the Part D compound that independently meet the definition of a Part D drug and non-Part D ingredients.

(i) For low income subsidy beneficiaries the copayment amount is based on whether the most expensive ingredient that independently meets the definition of a Part D drug in the Part D compound is a generic or brand name drug (as described under § 423.782).

(ii) For any non-Part D ingredient of the Part D compound (including drugs described under § 423.104(f)(1)(ii)(A)), the Part D sponsor's contract with the pharmacy must prohibit balance billing the beneficiary for the cost of any such ingredients.

(e) Approval of changes to CMS-approved formularies. A Part D sponsor may not make any negative formulary changes to its CMS-approved formulary except as specified in this section.

(1) Negative change request. Except as provided in paragraph (e)(2) of this section, prior to implementing a negative formulary change, Part D sponsors must submit to CMS, at a time and in a form and manner specified by CMS, a negative formulary change request.

(2) Exception for immediate negative formulary changes. A negative change request is not required in the following circumstances:

(i) Immediate substitutions. A Part D sponsor may make negative formulary changes to a brand name drug, a reference product, or a brand name biological product within 30 days of adding a corresponding drug to its formulary on the same or lower cost sharing tier and with the same or less restrictive formulary prior authorization (PA), step therapy (ST), or quantity limit (QL) requirements, so long as the Part D sponsor previously could not have included such corresponding drug on its formulary when it submitted its initial formulary for CMS approval consistent with paragraph (b)(2) of this section because such drug was not yet available on the market, and the Part D sponsor has provided advance general notice as specified in paragraph (f)(2) of this section.

(ii) Market withdrawals. A Part D sponsor may immediately remove from its formulary any Part D drugs withdrawn from sale by their manufacturer or that the Food and Drug Administration (FDA) determines to be withdrawn for safety or effectiveness reasons.

(3) Approval process for negative formulary changes —(i) Maintenance changes. Negative change requests for maintenance changes are deemed approved 30 days after submission unless CMS notifies the Part D sponsor otherwise.

(ii) Non-maintenance changes. Part D sponsors must not implement non-maintenance changes until they receive notice of approval from CMS. Affected enrollees are exempt from non-maintenance changes for the remainder of the contract year.

(4) Limitation on formulary changes prior to the beginning of a contract year. Except as provided in paragraph (e)(2) of this section, a Part D sponsor may not make a negative formulary change that takes effect between the beginning of the annual coordinated election period described in § 423.38(b) and 60 days after the beginning of the contract year associated with that annual coordinated election period.

(f) Provision of notice regarding changes to CMS-approved formularies —

(1) Notice of negative formulary changes. Except as specified in paragraphs (f)(2) and (3) of this section, prior to making any negative formulary change, a Part D sponsor must provide notice to CMS and other specified entities at least 30 days prior to the date such change becomes effective, and must either: provide written notice to affected enrollees at least 30 days prior to the date the change becomes effective, or when an affected enrollee requests a refill of the Part D drug, provide such enrollee with an approved month's supply of the Part D drug under the same terms as previously allowed and written notice of the formulary change. The requirement to provide notice to CMS is satisfied upon a Part D sponsor's submission of a negative change request described in paragraph (e) of this section. The requirement to provide notice to other specified entities is satisfied by the Part D sponsor's compliance with § 423.128(d)(2).

(2) Advance general notice of immediate negative formulary changes. In the case of immediate negative formulary changes described in paragraph (e)(2) of this section, a Part D sponsor must provide advance general notice to all current and prospective enrollees and other specified entities in its formulary and other applicable beneficiary communication materials advising that the Part D sponsor may make immediate negative formulary changes consistent with the requirements of paragraph (e)(2) at any time. Such advance general notice must include information about how to access the plan's online formulary; about how to contact the plan; and that written notice of any change made will describe the specific drugs involved. Advance general notice of immediate substitutions must also specify that the written notice will contain information on the steps that enrollees may take to request coverage determinations and exceptions. Advance general notice of immediate substitutions is provided to CMS during bid submission. Advance general notice of market withdrawals is provided to CMS in the advance notice of immediate negative formulary changes that Part D sponsors provide to enrollees and other specified entities required earlier in this paragraph (f)(2).

(3) Retrospective notice and update. In the case of a negative formulary change described in paragraph (e)(2) of this section, the Part D sponsor must provide notice to other specified entities and written notice to affected enrollees as soon as possible, but no later than by the end of the month following any month in which the change takes effect. The requirement to provide notice to other specified entities is satisfied by the Part D sponsor's compliance with § 423.128(d)(2). Part D sponsors also must submit such changes to CMS, in a form and manner specified by CMS, in their next required or scheduled formulary update.

(4) Content of written notice: Any written notice required under this paragraph (other than advance general notice) must contain all of the following information:

(i) The name of the affected covered Part D drug.

(ii) Whether the plan is removing the covered Part D drug from the formulary, moving it to a higher cost-sharing tier, or adding or making more restrictive PA, ST, or QL requirements.

(iii) The reason for the negative formulary change.

(iv) Appropriate alternative drugs on the formulary in the same or a lower cost-sharing tier and the expected cost sharing for those drugs.

(v) For formulary changes other than those described in paragraph (e)(2)(ii) of this section, the means by which enrollees may obtain a coverage determination under § 423.566, including an exception to a coverage rule under § 423.578.

(5) Notice of other formulary changes. Part D sponsors provide appropriate notice of all formulary changes other than negative formulary changes by providing—

(i) Advance general notice to all current and prospective enrollees, CMS, and other specified entities in formulary and other applicable beneficiary communication materials advising them that the Part D sponsor may make formulary changes other than negative formulary changes at any time and providing information about how to access the plan's online formulary and how to contact the plan; and

(ii) Notice of specific formulary changes to other specified entities by complying with § 423.128(d)(2) and to CMS by submitting such changes to CMS in their next required or scheduled formulary update.

(g) Coverage of ACIP-recommended adult vaccines. With respect to an ACIP-recommended adult vaccine, a Part D sponsor must—

(1) Not apply any deductible nor charge any cost sharing; and

(2) Once a new or revised recommendation is posted on the CDC website, provide coverage consistent with paragraph (g)(1) of this section for dates of service on or after the effective date of the ACIP recommendation, as defined at § 423.100.

(3) Apply the requirements in paragraphs (g)(1) and (2) of this section to ACIP-recommended adult vaccines obtained from either an in-network or out-of-network pharmacy or provider in accordance with § 423.124(a) and (c).

(h) Cost sharing for covered insulin products. With respect to a covered insulin product, as defined at § 423.100, covered under a PDP or an MA-PD plan prior to an enrollee reaching the annual out-of-pocket threshold, a Part D sponsor must do all of the following:

(1) Not apply a deductible.

(2) Ensure any enrollee cost sharing for each prescription fill up to a one-month supply does not exceed the covered insulin product applicable cost-sharing amount defined at § 423.100.

(3) Ensure any enrollee cost sharing for each prescription fill greater than a 1-month supply does not exceed the cumulative covered insulin product applicable cost-sharing amount (as defined in § 423.100) that would apply if the same days' supply was dispensed in the fewest number of 1-month supply increments necessary.

(4) Apply the requirements in paragraphs (h)(1) through (3) of this section to covered insulin products obtained from either an in-network or out-of-network pharmacy or provider.

§ 423.124 Special rules for out-of-network access to covered Part D drugs at out-of-network pharmacies.

(a) Out-of-network access to covered part D drugs —(1) Out-of-network pharmacy access. A Part D sponsor must ensure that Part D enrollees have adequate access to covered Part D drugs dispensed at out-of-network pharmacies when the enrollees—

(i) Cannot reasonably be expected to obtain such drugs at a network pharmacy; and

(ii) Do not access covered Part D drugs at an out-of-network pharmacy on a routine basis.

(2) Physician's office access. A Part D sponsor must ensure that Part D enrollees have adequate access to vaccines and other covered Part D drugs appropriately dispensed and administered by a physician in a physician's office.

(b) Financial responsibility for out-of-network access to covered Part D drugs. A Part D sponsor that provides its Part D enrollees with coverage other than defined standard coverage may require its Part D enrollees accessing covered Part D drugs as provided in paragraph (a) of this section to assume financial responsibility for any differential between the out-of-network pharmacy's (or provider's) usual and customary price and the Part D sponsor's plan allowance, consistent with the requirements of §§ 423.104(d)(2)(i)(B) and 423.104(e).

(c) Limits on out-of-network access to covered Part D. A Part D sponsor must establish reasonable rules to appropriately limit out-of-network access to covered Part D drugs.

§ 423.128 Dissemination of Part D plan information.

(a) Detailed description. A Part D sponsor must disclose the information specified in paragraph (b) of this section in the manner specified by CMS—

(1) To each enrollee of a Part D plan offered by the Part D sponsor under this part, except as provided in paragraph (b)(11)(ii) of this section;

(2) In a clear, accurate, and standardized form; and

(3) At the time of enrollment and at least annually thereafter, by the first day of the annual coordinated election period.

(b) Content of Part D plan description. The Part D plan description must include the following information about the qualified prescription drug coverage offered under the Part D plan—

(1) Service area. The plan's service area.

(2) Benefits. The benefits offered under the plan, including—

(i) Applicable conditions and limitations.

(ii) Premiums.

(iii) Cost-sharing (such as copayments, deductibles, and coinsurance), and cost-sharing for subsidy eligible individuals.

(iv) Any other conditions associated with receipt or use of benefits.

(3) Cost-sharing. A description of how a Part D eligible individual may obtain more information on cost-sharing requirements, including tiered or other copayment levels applicable to each drug (or class of drugs), in accordance with paragraph (d) of this section.

(4) Formulary. Information about the plan's formulary, including-

(i) A list of drugs included on the plan's formulary;

(ii) The manner in which the formulary (including any tiered formulary structure and utilization management procedures used) functions;

(iii) The process for obtaining an exception to a plan's formulary or tiered cost-sharing structure; and

(iv) A description of how a Part D eligible individual may obtain additional information on the formulary, in accordance with paragraph (d) of this section.

(5) Access. The number, mix, and distribution (addresses) of network pharmacies from which enrollees may reasonably be expected to obtain covered Part D drugs and how the Part D sponsor meets the requirements of § 423.120(a)(1) for access to covered Part D drugs;

(6) Out-of-network coverage. Provisions for access to covered Part D drugs at out-of-network pharmacies, consistent with § 423.124(a).

(7) Grievance, coverage determination, and appeal procedures. All grievance, coverage determination, and appeal rights and procedures required under § 423.562 et. seq., including—

(i) Access to a uniform model form used to request a coverage determination under § 423.568 or § 423.570, and a uniform model form used to request a redetermination under § 423.582 or § 423.584, to the extent such uniform model forms have been approved for use by CMS;

(ii) Immediate access to the coverage determination and redetermination processes via an Internet Web site; and

(iii) A system that transmits codes to network pharmacies so that the network pharmacy is notified to populate and/or provide a printed notice at the point-of-sale to an enrollee explaining how the enrollee can request a coverage determination by contacting the plan sponsor's toll free customer service line or by accessing the plan sponsor's internet Web site.

(8) Quality assurance policies and procedures. A description of the quality assurance policies and procedures required under § 423.153(c), as well as the medication therapy management program required under § 423.153(d).

(9) Disenrollment rights and responsibilities.

(10) Potential for contract termination. The fact that a Part D sponsor may terminate or refuse to renew its contract, or reduce the service area included in its contract, and the effect that any of those actions may have on individuals enrolled in a Part D plan;

(11) Opioid information. (i) Beginning January 1, 2022, and subject to paragraph (b)(11)(ii) of this section, a Part D sponsor must disclose to each enrollee at least once per year the following:

(A) The risks associated with prolonged opioid use.

(B) Coverage of non-pharmacological therapies, devices, and non-opioid medications—

( 1 ) In the case of an MA-PD, under such plan; and

( 2 ) In the case of a PDP, under such plan and Medicare Parts A and B.

(ii) The Part D sponsor may elect to, in lieu of disclosing the information described in paragraph (b)(11)(i) of this section to each enrollee under each plan offered by the Part D sponsor under this part, disclose such information to a subset of enrollees, such as enrollees who have been prescribed an opioid in the previous 2-year period.

(c) Disclosure upon request of general coverage information, utilization, and grievance information. Upon request of a Part D eligible individual, a Part D sponsor must provide the following information—

(1) General coverage information. General coverage information, including—

(i) Enrollment procedures. Information and instructions on how to exercise election options under this part;

(ii) Rights. A general description of procedural rights (including grievance, coverage determination, reconsideration, exceptions, and appeals procedures) under this part;

(iii) Benefits. (A) Covered services under the Part D plan;

(B) Any beneficiary cost-sharing, such as deductibles, coinsurance, and copayment amounts, including cost-sharing for subsidy eligible individuals;

(C) Any maximum limitations on out-of-pocket expenses;

(D) The extent to which an enrollee may obtain benefits from out-of-network providers;

(E) The types of pharmacies that participate in the Part D plan's network and the extent to which an enrollee may select among those pharmacies; and

(F) The Part D plan's out-of-network pharmacy access policy.

(iv) Premiums;

(v) The Part D plan's formulary;

(vi) The Part D plan's service area; and

(vii) Quality and performance indicators for benefits under the Part D plan as determined by CMS.

(2) The procedures the Part D sponsor uses to control utilization of services and expenditures.

(3) The number of disputes, and the disposition in the aggregate, in a manner and form described by CMS. These disputes are categorized as—

(i) Grievances according to § 423.564;

(ii) Appeals according to § 423.580 et. seq.; and

(iii) Exceptions according to § 423.578.

(4) Financial condition of the Part D sponsor, including the most recently audited information regarding, at a minimum, a description of the financial condition of the Part D sponsor offering the Part D plan.

(d) Provision of specific information. Each Part D sponsor offering qualified prescription drug coverage under a Part D plan must have mechanisms for providing specific information on a timely basis to current and prospective enrollees upon request. These mechanisms must include—

(1) A toll-free customer call center that—

(i) Is open during usual business hours.

(A) For coverage beginning on and after January 1, 2022, is open at least from 8:00 a.m. to 8:00 p.m. in all regions served by the Part D plan, with the following exceptions:

( 1 ) From October 1 through March 31 of the following year, a customer call center may be closed on Thanksgiving Day and Christmas Day so long as the interactive voice response (IVR) system or similar technology records messages from incoming callers and such messages are returned within one (1) business day.

( 2 ) From April 1 through September 30, a customer call center may be closed any Federal holiday, Saturday, or Sunday, so long as the interactive voice response (IVR) system or similar technology records messages from incoming callers and such messages are returned within one (1) business day.

(B) For coverage beginning on and after January 1, 2022, any call center serving pharmacists or pharmacies must be open so long as any network pharmacy in that region is open.

(ii) Provides customer telephone service, including to pharmacists, in accordance with standard business practices.

(A) For coverage beginning on and after January 1, 2022, limits average hold time to 2 minutes. The hold time is defined as the time spent on hold by callers following the interactive voice response (IVR) system, touch-tone response system, or recorded greeting, before reaching a live person.

(B) For coverage beginning on and after January 1, 2022, answers 80 percent of incoming calls within 30 seconds after the interactive voice response (IVR), touch-tone response system, or recorded greeting interaction.

(C) For coverage beginning on and after January 1, 2022, limits the disconnect rate of all incoming calls to 5 percent. The disconnect rate is defined as the number of calls unexpectedly dropped divided by the total number of calls made to the customer call center.

(iii)(A) Provides interpreters for non-English speaking and limited English proficient (LEP) individuals.

(B) For coverage beginning on and after January 1, 2022, interpreters must be available for 80 percent of incoming calls requiring an interpreter within 8 minutes of reaching the customer service representative and be made available at no cost to the caller.

(iv) Provides immediate access to the coverage determination and redetermination processes.

(v) At a minimum, for coverage beginning on and after January 1, 2022:

(A) Provides effective real-time communication with individuals using auxiliary aids and services, including TTYs and all forms of Federal Communication Commission-approved telecommunications relay systems, when using automated-attendant systems. See 28 CFR 35.161 and 36.303(d).

(B) Establishes contact with a customer service representative within 7 minutes on no fewer than 80 percent of incoming calls requiring TTY services.

(vi) For coverage beginning on and after January 1, 2022, provides the information described in paragraph (d)(4) of this section to enrollees who call the customer service call center.

(2) An Internet website that—

(i) Includes, at a minimum, the information required in paragraph (b) of this section.

(ii) Includes a current formulary for its Part D plan, updated at least monthly.

(iii) Provides current and prospective Part D enrollees with notice that is timely under § 423.120(f) regarding any negative formulary changes on its Part D plan's formulary.

(3) The provision of information in writing, upon request.

(4) Beginning on January 1, 2023, a Part D sponsor must implement, and make available directly to enrollees, in an easy to understand manner, the following complete, accurate, timely, clinically appropriate, patient-specific formulary and benefit real-time information in their beneficiary-specific portal or computer application:

(i) Enrollee cost sharing amounts.

(ii) Formulary medication alternatives for a given condition.

(iii) Formulary status, including utilization management requirements applicable to each alternative medication, as appropriate for each enrollee and medication presented.

(5) The Part D sponsor may provide rewards and incentives to enrollees who use the beneficiary real time benefit tool (RTBT) described in paragraph (d)(4) of this section, provided the rewards and incentives comply with the requirements in paragraphs (d)(5)(i) through (vi) of this section, and the rewards and incentives information is made available to CMS upon request. Use is defined as logging into the RTBT, via portal or computer application, or calling the customer service call center to obtain the information described in paragraph (d)(4) of this section. The rewards and incentives must meet the following:

(i) Be of reasonable value, both individually and in the aggregate.

(ii) Be designed so that all enrollees are eligible to earn rewards and incentives, and that there is no discrimination based on race, color, national origin, including limited English proficiency, sex, age, disability, chronic disease, health status, or other prohibited basis.

(iii) Not be offered in the form of cash or other cash equivalents.

(iv) Not be used to target potential enrollees.

(v) Be earned solely for logging onto the beneficiary RTBT and not for any other purpose.

(vi) Otherwise comply with all relevant fraud and abuse laws, including, when applicable, the anti-kickback statute and civil money penalty prohibiting inducements to beneficiaries.

(e) Claims information. A Part D sponsor must furnish directly to enrollees, in the manner specified by CMS and in a form easily understandable to such enrollees, a written explanation of benefits when prescription drug benefits are provided under qualified prescription drug coverage. The explanation of benefits must—

(1) List the item or service for which payment was made and the amount of the payment for each item or service.

(2) Include a notice of the individual's right to request an itemized statement.

(3) Include the cumulative, year-to-date total amount of benefits provided, in relation to—

(i) The deductible for the current year.

(ii) The initial coverage limit for the current year.

(iii) The annual out-of-pocket threshold for the current year.

(4) Include the cumulative, year-to-date total of incurred costs to the extent practicable.

(5) For each prescription drug claim, must include the cumulative percentage increase (if any) in the negotiated price since the first claim of the current benefit year and therapeutic alternatives with lower cost-sharing, when available as determined by the plan, from the applicable approved plan formulary.

(6) Include any negative formulary changes applicable to an enrollee for which Part D plans are required to provide notice as described in § 423.120(f).

(7) Be provided no later than the end of the month following any month when prescription drug benefits are provided under this part, including the covered Part D spending between the initial coverage limit described in § 423.104(d)(3) and the out-of-pocket threshold described in § 423.104(d)(5)(iii).

(f) Disclosure requirements. CMS may require a Part D plan sponsor to disclose to its enrollees or potential enrollees, the Part D plan sponsor's performance and contract compliance deficiencies in a manner specified by CMS.

(g) Changes in rules. If a Part D sponsor intends to change its rules for a Part D plan, it must do all of the following:

(1) Submit the changes for CMS review under the procedures of Subpart V of this part.

(2) For changes that take effect on January 1, notify all enrollees at least 15 days before the beginning of the Annual Coordinated Election Period as defined in section 1860D-1(b)(1)(B) of the Act.

(3) Provide notice of all other changes in accordance with notice requirements as specified in this part.

§ 423.129 Resolution of complaints in complaints tracking module.

(a) Definitions. For the purposes of this regulation, the following terms have the following meanings:

Assignment date is the date CMS assigns a complaint to a particular Part D sponsor in the Complaints Tracking Module.

Complaints Tracking Module is an electronic system maintained by CMS to record and track complaints submitted to CMS about Medicare health and drug plans from beneficiaries and others.

Immediate need complaint is a complaint involving a situation that prevents a beneficiary from accessing care or a service for which they have an immediate need. This includes when the beneficiary currently has enough of the drug or supply to which they are seeking access to last for 2 or fewer days.

Urgent complaint is a complaint involving a situation that prevents a beneficiary from accessing care or a service for which they do not have an immediate need. This includes when the beneficiary currently has enough of the drug or supply to which they are seeking access to last for 3 to 14 days.

(b) Timelines for complaint resolution —(1) Immediate need complaint s. The Part D sponsor must resolve immediate need complaints within 2 calendar days of the assignment date.

(2) Urgent complaints. The Part D sponsor must resolve urgent complaints within 7 calendar days of the assignment date.

(3) All other complaints. The Part D sponsor must resolve all other complaints within 30 calendar days of the assignment date.

(4) Extensions. Except for immediate need complaints, urgent complaints, and any complaint that requires expedited treatment under § 423.564(f), if a complaint is also a grievance within the scope of § 423.564 and the requirements for an extension of the time to provide a response in § 423.564(e)(2) are met, the Part D sponsor may extend the timeline to provide a response.

(5) Coordination with timeframes for grievances, PACE service determination requests, and PACE appeals. When a complaint under this section is also a grievance within the scope of §§ 423.564 or 460.120, a PACE service determination request within the scope of § 460.121, or a PACE appeal within the definition of § 460.122, the Part D sponsor must comply with the shortest applicable timeframe for resolution of the complaint.

(c) Timeline for contacting individual filing a complaint. Regardless of the type of complaint received, the Part D sponsor must attempt to contact the individual who filed a complaint within 7 calendar days of the assignment date.

§ 423.132 Public disclosure of pharmaceutical prices for equivalent drugs.

(a) General requirements. Except as provided under paragraph (c) of this section, a Part D sponsor must require a pharmacy that dispenses a covered Part D drug to inform an enrollee of any differential between the price of that drug and the price of the lowest priced generic version of that covered Part D drug that is therapeutically equivalent and bioequivalent and available at that pharmacy, unless the particular covered Part D drug being purchased is the lowest-priced therapeutically equivalent and bioequivalent version of that drug available at that pharmacy.

(b) Timing of notice. Subject to paragraph (d) of this section, the information under paragraph (a) of this section must be provided after the drug is dispensed at the point of sale or, in the case of dispensing by mail order, at the time of delivery of the drug.

(c) Waiver of public disclosure requirement. CMS waives the requirement under paragraph (a) of this section in any of the following cases:

(1) An MA private fee-for-service plan described in § 422.4 of this chapter that—

(i) Offers qualified prescription drug coverage and provides plan enrollees with access to covered Part D drugs dispensed at all pharmacies, without regard to whether they are contracted network pharmacies; and

(ii) Does not charge additional cost-sharing for access to covered Part D drugs dispensed at out-of-network pharmacies.

(2) An out-of-network pharmacy.

(3) An I/T/U network pharmacy.

(4) A network pharmacy that is located in any of the U.S. territories.

(5) A long-term care network pharmacy.

(6) Other circumstances where CMS deems compliance with the requirements of paragraph (a) of this section to be impossible or impracticable.

(d) Modification of timing requirement. CMS modifies the requirement under paragraph (b) of this section under circumstances where CMS deems compliance with this requirement to be impossible or impracticable.

§ 423.136 Privacy, confidentiality, and accuracy of enrollee records.

For any medical records or other health and enrollment information it maintains with respect to enrollees, a PDP sponsor must establish procedures to do the following—

(a) Abide by all Federal and State laws regarding confidentiality and disclosure of medical records, or other health and enrollment information. The PDP sponsor must safeguard the privacy of any information that identifies a particular enrollee and have procedures that specify—

(1) For what purposes the information is used within the organization; and

(2) To whom and for what purposes it discloses the information outside the organization.

(b) Ensure that medical information is released only in accordance with applicable Federal or State law, or under court orders or subpoenas.

(c) Maintain the records and information in an accurate and timely manner.

(d) Ensure timely access by enrollees to the records and information that pertain to them.

§ 423.137 Medicare Prescription Payment Plan.

(a) General. For plan years beginning on or after January 1, 2026, or, in the case of a plan operating on a non-calendar year basis, for the portion of the plan year starting on January 1, 2026, each PDP sponsor offering a prescription drug plan and each MA organization offering an MA-PD plan must provide to any enrollee of such plan, including an enrollee who is a subsidy eligible individual (as defined at § 423.4), the option to elect with respect to a plan year to pay $0 cost sharing at the point of sale and pay cost sharing under the plan in monthly amounts that are capped in accordance with this section.

(b) Definitions. For the purposes of this section, the following definitions apply:

(1) OOP costs for the Medicare Prescription Payment Plan means the out-of-pocket (OOP) cost sharing amount the Part D enrollee is directly responsible for paying.

(i) For the subsequent month calculation of the Part D cost sharing incurred by the Part D enrollee, it includes those Part D cost sharing amounts that the enrollee is responsible for paying after taking into account amounts paid by third-party payers.

(ii) It does not include the covered plan pay amount or other costs defined under section 1860D-2(b)(4)(C) of the Act.

(2) Remaining OOP costs owed by the participant means the sum of out-of-pocket costs for the Medicare Prescription Payment Plan that have not yet billed to the program participant. For example, if a Medicare Prescription Payment Plan participant incurs $2,000 in January 2025 and is billed $166.67, the remaining OOP costs for the Medicare Prescription Payment Plan are $2,000−$166.67 = $1,833.33.

(c) Calculation of the maximum monthly cap on cost-sharing payments. For each month in the plan year for which an enrollee in a PDP or an MA-PD plan has made an election to participate in the Medicare Prescription Payment Plan, the PDP sponsor or MA organization must determine a maximum monthly cap (as defined in paragraph (c)(1) of this section) for such enrollee.

(1) Enrollee monthly payments. For each month an enrollee is participating in the Medicare Prescription Payment Plan, the PDP sponsor or MA organization shall bill such enrollee an amount (not to exceed the maximum monthly cap) for the out-of-pocket costs of such enrollee in such month.

(i) First month maximum monthly cap calculation. For the first month for which the enrollee has made an election to participate in the Medicare Prescription Payment Plan, the maximum monthly cap is an amount determined by calculating the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B) of the Act minus the incurred costs of the enrollee as described in section 1860D-2(b)(4)(C) of the Act; divided by the number of months remaining in the plan year.

(A) When the out-of-pocket costs incurred in the first month of program participation are less than the maximum monthly cap defined in this paragraph (c)(1)(i), the PDP sponsor or MA organization must bill the participant the lesser of the participant's actual out-of-pocket costs or the first month's maximum monthly cap.

(B) When an enrollee opts into the Medicare Prescription Payment Plan prior to the start of the plan year, the calculation described in this paragraph (c)(1)(i) applies to their first month of active coverage within the plan year.

(ii) Calculation of maximum monthly cap in subsequent months. For subsequent months in the plan year, the maximum monthly cap is an amount determined by calculating the sum of any remaining out-of-pocket costs owed by the enrollee from a previous month that have not yet been billed to the enrollee and any additional out-of-pocket costs incurred by the enrollee; divided by the number of months remaining in the plan year.

(2) Eligible out-of-pocket costs. The calculations described in paragraphs (c)(1)(i) and (ii) of this section apply only to covered Part D drugs, as defined at § 423.100.

(3) Months remaining in the plan year. For the calculations described in paragraphs (c)(1)(i) and (ii) of this section, the number of months remaining in the plan year includes the month for which the cap is being calculated.

(4) Impact on true out-of-pocket cost accumulation. Participation in the Medicare Prescription Payment Plan must have no impact on true out-of-pocket cost accumulation. Costs defined under section 1860D-2(b)(4)(C) of the Act incurred under the Medicare Prescription Payment Plan must still be treated as incurred based on the date each Part D claim is adjudicated.

(5) Prescriptions for an extended day supply. For participants who fill prescriptions for an extended day supply, their OOP costs for the Medicare Prescription Payment Plan for those prescriptions must be attributed to the month the prescription was filled and not be pro-rated over the months covered by the prescription.

(6) Mid-year plan switching. When an individual opts into the Medicare Prescription Payment Plan after switching plans midyear, the new Part D sponsor must calculate the individual's monthly cap for the first month of participation under the new plan using the formula for the calculation of the maximum monthly cap in the first month.

(d) Eligibility and election. An individual is eligible for the Medicare Prescription Payment Plan if they are enrolled in a Part D plan and have not been precluded from participation due to failure to pay, as described in paragraphs (f)(2)(ii) and (f)(5) of this section. LIS-eligible Part D enrollees are eligible to participate in the program. The requirements described in this paragraph (d) are applicable beginning October 1, 2025, with respect to eligibility and election in the Medicare Prescription Payment Plan for 2026.

(1) Election. A Part D sponsor must allow any Part D enrollee, including those who are LIS-eligible, to opt into the program prior to the beginning of the plan year or at any point during the plan year. A Part D enrollee must also be allowed to opt into the program in advance of a new plan enrollment effective date, including during any of the following:

(i) The annual coordinated election period for the subsequent plan year.

(ii) The Part D initial enrollment period.

(iii) Part D special election periods.

(2) Format of election requests. A Part D sponsor must allow any Part D enrollee or a Part D enrollee's authorized legal representative acting on behalf of the enrollee to opt into the program using a paper or electronic election request form or through a telephone call. Part D sponsors must process any election request regardless of format.

(i) Paper election requests. Paper election requests are considered received on the date and time:

(A) The Part D sponsor initially stamps a document received by regular mail (that is, U.S. Postal Service); or

(B) A delivery service that has the ability to track when a shipment is delivered (for example, U.S. Postal Service, UPS, FedEx, or DHL) delivers the document.

(ii) Telephonic election requests. Telephonic election requests are considered received on the date and time that either of the following occurs:

(A) The verbal request is made by telephone with a customer service representative.

(B) A message is left on the Part D sponsor's voicemail system if the Part D sponsor utilizes a voicemail system to accept requests or supporting statements after normal business hours.

(iii) Electronic election requests. An electronic election request is considered received on the date and time a request is received through the Part D sponsor's website. This is true regardless of when a Part D sponsor ultimately retrieves or downloads the request.

(3) Completion of election request. For an election request to be considered complete, the Part D sponsor must receive all of the following:

(i) The name of the Part D enrollee.

(ii) The Medicare ID number of the Part D enrollee.

(iii) The Part D enrollee's or their authorized legal representative's agreement to the Part D sponsor's terms and conditions for the program (signature or, in the case of telephonic requests, verbal attestation).

(4) Processing an election request —(i) Prior to plan year. Part D sponsors must process election requests received prior to the plan year within the following timeframes:

(A) Within 10 calendar days of receipt, process a complete election request as specified in paragraph (d)(3) of this section.

(B) Within 10 calendar days of receipt of an incomplete election request, contact the Part D enrollee to request the necessary information to process the request as specified in paragraph (d)(3) of this section.

(C) If information necessary to consider the request complete, as required at paragraph (d)(3) of this section, is not received within 21 calendar days of the request for information, the Part D sponsor may deny the request.

(ii) During a plan year. Part D sponsors must process election requests received during a plan year within the following timeframes:

(A) Within 24 hours of receipt, process a complete election request, as specified in paragraph (d)(3) of this section.

(B) Within 24 hours of receipt of an incomplete election request, contact the Part D enrollee to request the necessary information to process the request, as required in paragraph (d)(3) of this section.

(C) If information necessary to consider the request complete, as required at paragraph (d)(3) of this section, is not received within 21 calendar days of the request for information, the Part D sponsor may deny the request.

(D) In the event a Part D sponsor fails to process the request within 24 hours due to no fault of the Part D enrollee, the Part D sponsor must—

( 1 ) Process a retroactive election effective on the date on which the enrollee should have been admitted into the program; and

( 2 ) Reimburse the enrollee for any cost-sharing paid on or after that date within 45 calendar days and include those amounts, as appropriate, in the program calculations.

(5) Inclusion of all covered Part D drugs once in the program. Once a participant has opted into the program, cost sharing for all covered Part D drugs must be included in the program.

(6) Retroactive election. (i) A Part D sponsor must have in place a process to effectuate a retroactive election into the Medicare Prescription Payment Plan if both of the following conditions are met:

(A) The Part D enrollee believes that any delay in filling the prescription(s) due to the 24-hour timeframe required to process their request to opt in may seriously jeopardize their life, health, or ability to regain maximum function.

(B) The Part D enrollee requests retroactive election within 72 hours of the date and time the claim(s) were adjudicated.

(ii) The Part D sponsor must process the reimbursement for all cost sharing paid by the enrollee for the prescription and any covered Part D prescription filled between the date of adjudication of the claim and the date that the enrollee's election is effectuated within 45 calendar days of the election date.

(iii) If the Part D sponsor determines that an enrollee failed to request retroactive election within the required timeframe, it must promptly notify the individual of its determination and provide instructions on how the individual may file a grievance, as required under paragraph (h)(2) of this section.

(7) Retroactive LIS eligibility. A Part D sponsor must develop standardized procedures for determining and processing reimbursements for excess Medicare Prescription Payment Plan payments made by program participants who become LIS eligible and that meet requirements specified at §§ 423.800(c) and (e) and 423.466(a).

(8) Mid-year plan switching. When a Part D enrollee switches Part D plans, whether offered by the same or a different Part D sponsor, during the plan year or is reassigned by CMS, the Part D sponsor of the new Part D plan is not permitted to automatically sign up the individual for the Medicare Prescription Payment Plan under the new plan but must allow the individual to opt into the program. Part D plan has the definition established at § 423.4.

(i) The Part D sponsor of the prior Part D plan must offer the participant the option to repay the full outstanding amount in a lump sum. If the individual chooses to continue paying monthly, the Part D sponsor must continue to bill the participant monthly based on the participant's accrued OOP costs for the Medicare Prescription Payment Plan while in the program under that sponsor's Part D plan. The Part D sponsor cannot require full immediate repayment.

(ii) Part D enrollees may only be precluded from opting into the program under a new Part D plan if both of the following conditions are met:

(A) Both the former and new plans are offered by the same Part D sponsor.

(B) The enrollee was involuntarily terminated from the program under the former plan, as described in paragraph (f)(2)(ii) of this section, for failure to pay and still owes an overdue balance.

(9) Automatic renewal. A Part D sponsor is required to automatically renew a Part D enrollee's participation in the Medicare Prescription Payment Plan for subsequent plan years. The Part D sponsor must notify the enrollee of the renewal and remind enrollees that they may opt out of the program at any time, in accordance with paragraph (f)(2)(i) of this section.

(10) Election communications —(i) Election request form. A Part D sponsor must make available throughout the plan year and during the Part D plan enrollment periods described at paragraph (d)(4)(i)(A) of this section an election request form in the formats specified in paragraph (d)(2) of this section.

(A) Timing. A Part D sponsor must send a paper election request form within the same timeframe as the membership ID card mailing specified at § 423.2267(e)(32)(i). The election form may be sent in the membership ID card mailing itself or in a separate mailing.

(B) Contents. The election request form must include or provide all of the following:

( 1 ) Fields for all of the following Part D enrollee information:

( i ) First and last name.

( ii ) Medicare Number.

( iii ) Birth date.

( iv ) Phone number.

( v ) Permanent residence street address, and mailing address, if different from permanent residence street address.

( vi ) Signature field, allowing the enrollee to attest that they understand that form is a request to participate in the Medicare Prescription Payment Plan and the Part D sponsor will contact them if more information is needed to complete the request; their signature indicates they have read and understood the Part D sponsor's terms and conditions; and the Part D sponsor will inform the individual when their participation in the program is active, and, until the individual receives that notification, they are not a participant in the program.

( 2 ) Instructions for how to submit the form to the Part D sponsor.

( 3 ) Instructions for how the Part D enrollee can contact the Part D sponsor for questions or assistance.

(C) Additional information. Additional educational information about the Medicare Prescription Payment Plan must accompany the election request form when provided in hard copy or on the web. The additional information requirement may be fulfilled by including with the election request form the CMS-developed fact sheet about the program. If the Part D sponsor develops and uses alternative informational materials in lieu of the CMS-developed fact sheet to satisfy this paragraph (d)(10)(i)(C), they must ensure that these alternative materials accurately convey program information and are compliant with existing Part D requirements specified at subpart V of this part.

(D) Terms and conditions. A Part D sponsor may include their program terms and conditions on the election request form or may include them on a separate attachment.

(ii) Notice of election approval. Upon accepting an election request, the Part D sponsor must send a notice of election approval.

(A) Timing. ( 1 ) For requests received prior to the plan year, the notice of election approval must be sent within 10 calendar days of receipt of the election request.

( 2 ) For requests received during the plan year, the notice of election approval must be sent within 24 hours of receipt of the election request.

( 3 ) The initial notice must be delivered via telephone, to be followed by a written notice delivered to the participant within 3 calendar days of delivering the initial telephone notice. If a Part D plan sponsor is processing an election request over the phone or electronically and at that same time provides the enrollee with the effective date of their program effectuation and other notice of election requirements as outlined at this paragraph (d)(10)(ii), then a second telephonic notification of election acceptance is not required.

(B) Contents. The notice of election approval must include all of the following:

( 1 ) The effective date of the individual's participation.

( 2 ) A description of how payments for covered Part D drugs under the program will work.

( 3 ) An overview of how the monthly bill is calculated.

( 4 ) Information about procedures for involuntary termination due to failure to pay and how to submit an inquiry or file a grievance.

( 5 ) A statement that leaving the program will not affect the individual's Part D plan enrollment.

( 6 ) A description of how individuals may still owe a program balance if they leave the program, and they can choose to pay their balance all at once or be billed monthly.

( 7 ) An overview of other Medicare programs that can help lower costs and how to learn more about these programs. These programs include all of the following:

( i ) Extra Help.

( ii ) The Medicare Savings Program.

( iii ) The State Pharmaceutical Assistance Program.

( iv ) A manufacturer's Pharmaceutical Assistance Program.

(C) Additional information. Additional educational information about the Medicare Prescription Payment Plan must accompany the notice of election approval. The additional information requirement may be fulfilled by including with the notice the CMS-developed fact sheet about the program. If the Part D sponsor develops and uses alternative informational materials in lieu of the CMS-developed fact sheet to satisfy this paragraph (d)(10)(ii)(C), they must ensure that these alternative materials accurately convey program information and are compliant with existing Part D requirements specified at subpart V of this part.

(iii) Notification of denial. Upon denial of an election request, the Part D sponsor must send a notice of denial.

(A) Timing. ( 1 ) For requests received prior to the plan year, the notice of denial must be sent within 10 calendar days of receipt of the election request.

( 2 ) For requests received during the plan year, the notice of denial must be sent within 24 hours of receipt of the election request.

( 3 ) For incomplete election requests, within 10 calendar days of the expiration of the timeframe for submission of additional information.

(B) Contents. The notice of denial must explain the reason for denial and a description of the grievance process available to the individual.

(iv) Renewal notice. A Part D sponsor must send a notice alerting program participants that their participation in the program will automatically renew for the subsequent plan year.

(A) Timing. The notice must be sent after the end of the annual coordinated election period, as described at § 422.62(a)(2) of this chapter, but prior to the end of the plan year.

(B) Contents. The notice must include all of the following:

( 1 ) Notification to the participant that their participation will automatically renew for the upcoming year.

( 2 ) Reminder that the participant may opt out of the program at any time, including for the upcoming plan year.

( 3 ) Terms and conditions. A Part D sponsor must include their program terms and conditions for the upcoming year as part of the renewal notice or as a separate attachment.

(e) Part D enrollee targeted outreach. A Part D sponsor must undertake targeted outreach to enrollees who are likely to benefit from making an election into the Medicare Prescription Payment Plan. The requirements described in this paragraph (e) are applicable beginning October 1, 2025, with respect to targeted outreach for the Medicare Prescription Payment Plan for 2026.

(1) Identification criteria. An enrollee deemed to be “likely to benefit” from the Medicare Prescription Payment Plan is identified by the Part D sponsor based on the following criteria.

(i) For 2026 and subsequent years, the targeted outreach criteria are as follows:

(A) A Part D enrollee is likely to benefit from participating in the program if the enrollee incurs $600 or more in out-of-pocket costs for a single covered Part D drug.

(B) A Part D enrollee is likely to benefit from participating in the program if the enrollee incurred $2,000 in out-of-pocket costs for covered Part D drugs in the first nine months of the year prior to the upcoming plan year.

(ii) A Part D sponsor may develop supplemental strategies for identification of additional Part D enrollees likely to benefit. If supplemental strategies are implemented, then the Part D sponsor must apply any additional identification criteria to every enrollee of each plan equally.

(2) Point of sale notification. (i) A Part D sponsor must have a mechanism to notify a pharmacy when a Part D enrollee incurs out-of-pocket costs with respect to covered Part D drugs that make it likely the enrollee may benefit from participating in the program using the identification criteria set forth in paragraphs (e)(1)(i)(A) and (e)(1)(ii) of this section.

(ii) A Part D sponsor must ensure that a pharmacy, after receiving such a notification from the Part D sponsor, informs the Part D enrollee that it is likely that the Part D enrollee may benefit from the Medicare Prescription Payment Plan.

(3) Part D sponsor notification. A Part D sponsor must directly outreach to enrollees identified as likely to benefit from the program during either of the following timeframes:

(i) Prior to the plan year. Prior to the plan year, a Part D sponsor must notify current enrollees that they are likely to benefit from the program during the fourth quarter of the year, and no later than the end of the annual coordinated election period, as described at § 422.62(a)(2) of this chapter, using the identification criteria set forth in paragraphs (e)(1)(i)(B) and (e)(1)(ii) of this section.

(ii) On an ongoing basis during the plan year. Part D sponsors must put in place reasonable guidelines for ongoing identification and notification of enrollees that are likely to benefit from the program on an ongoing basis during the plan year.

(4) Targeted outreach notification requirements. When an enrollee is identified as likely to benefit from the program, using the identification criteria set forth in paragraphs (e)(1)(i) and (ii) of this section or based on Part D sponsor-developed guidelines set forth at paragraph (e)(3)(ii) of this section, the Part D sponsor must provide to the enrollee the standardized “Medicare Prescription Payment Plan Likely to Benefit Notice” consistent with the requirements at § 423.2267(b).

(i) When the enrollee is identified as likely to benefit directly by the Part D sponsor, either prior to or during the plan year, the notification may be done via mail or electronically (based on the Part D enrollee's preferred and authorized communication methods).

(A) The outreach must include a program election request form and additional information about the Medicare Prescription Payment Plan. The additional information requirement may be fulfilled by including with the notice the CMS-developed fact sheet about the program. If the Part D sponsor develops and uses alternative informational materials in lieu of the CMS-developed fact sheet to satisfy this paragraph (e)(4)(i)(A), they must ensure that these alternative materials accurately convey program information and are compliant with existing Part D requirements specified at subpart V of this part.

(B) During the plan year, the initial notice may be provided via telephone, so long as the written “Medicare Prescription Payment Plan Likely to Benefit Notice,” election request form, and additional information are sent within 3 calendar days of the telephone notification.

(ii) When the enrollee is identified as likely to benefit during the plan year at the pharmacy point of sale, the notice must be provided as described in paragraph (i)(2) of this section.

(5) Targeted outreach exclusions. A Part D sponsor does not have to notify enrollees that they are likely to benefit from the program under any of the following circumstances:

(i) For the current year during the final month of the plan year (December).

(ii) When the enrollee is currently participating in the program, including—

(A) For the current year; and

(B) For the upcoming year.

(iii) When the enrollee is precluded from opting into the program.

(iv) When the PDP is non-renewing its contract or individual plan benefit package. This exclusion only applies to the requirements at paragraph (e)(3)(i) of this section related to prior to plan year targeted outreach.

(f) Termination of election, reinstatement, and preclusion —(1) General rule. Except as provided in paragraph (f)(2) of this section, a Part D sponsor may not do any of the following:

(i) Terminate an individual from the Medicare Prescription Payment Plan.

(ii) Orally or in writing, or by any action or inaction, request or encourage an individual to disenroll.

(2) Basis for termination —(i) Voluntary terminations. A Part D sponsor must have a process to allow participants who have opted into the Medicare Prescription Payment Plan to opt out during the plan year.

(A) When a participant opts out of the Medicare Prescription Payment Plan, a Part D sponsor must—

( 1 ) Process the termination with an effective date within 3 calendar days of receipt of the request for termination.

( 2 ) Provide the individual with a notice of termination after the individual notifies the Part D sponsor that they intend to opt out under the Part D sponsor's established process.

( i ) Timing. The Part D sponsor must send the notice of termination within 10 calendar days of receipt of the request for termination.

( ii ) Contents. The notice of voluntary termination must include all of the following. The date on which the individual's participation in the program ends. An explanation of why the individual is receiving the notice. A statement clarifying that the notice only applies to participation in the Medicare Prescription Payment Plan. A statement clarifying that the individual will continue to be billed monthly or can choose to pay the amount owed all at once, and that the individual will not pay interest or fees on the amount owed. A statement clarifying that the individual can join the Medicare Prescription Payment Plan again and instructions for how to do so. An overview of other Medicare programs that can help lower costs and how to learn more about these programs, including Extra Help, the Medicare Savings Program, the State Pharmaceutical Assistance Program, and a manufacturer's Pharmaceutical Assistance Program.

( 3 ) Offer the participant the option to repay the full outstanding amount in a lump sum. A Part D sponsor is prohibited from requiring full immediate repayment from a participant who has been terminated from the Medicare Prescription Payment Plan.

( 4 ) If the participant opts not to repay the full outstanding amount in a lump sum, continue to bill amounts owed under the program in monthly amounts not to exceed the maximum monthly cap according to the statutory formula for the duration of the plan year after an individual has been terminated.

( 5 ) Maintain appropriate records of the termination once the termination is processed.

(B) [Reserved]

(ii) Involuntary termination. If a participant fails to pay their monthly billed amount under the program, a Part D sponsor is required to terminate that individual's Medicare Prescription Payment Plan participation.

(A) A participant will be considered to have failed to pay their monthly billed amount only after the conclusion of the required grace period as specified at paragraph (f)(4) of this section.

(B) When a Part D sponsor involuntarily terminates a participant, the sponsor must do all of the following:

( 1 ) Provide the individual with a notice of termination consistent with the requirements of paragraphs (f)(2)(ii)(C) and (D) of this section.

( 2 ) Offer the participant the option to repay the full outstanding amount in a lump sum. A Part D sponsor is prohibited from requiring full immediate repayment from a participant who has been terminated from the Medicare Prescription Payment Plan.

( 3 ) If the participant opts not to repay the full outstanding amount in a lump sum, continue to bill amounts owed under the program in monthly amounts not to exceed the maximum monthly cap according to the statutory formula for the duration of the plan year after an individual has been terminated.

(C) If a Part D sponsor involuntarily terminates a participant under this paragraph (f)(2)(ii), the Part D sponsor must send the individual an initial notice explaining that the individual has failed to pay the billed amount.

( 1 ) Timing. The notice of failure to pay must be sent within 15 calendar days of the payment due date.

( 2 ) Contents. The notice of failure to pay must include all of the following:

( i ) Pertinent dates, including the date the missed monthly payment was due, the amount the individual must pay to remain in the program, and the date by when payment must be received, which is the date of the end of the grace period.

( ii ) A statement clarifying that the notice only applies to participation in the Medicare Prescription Payment Plan.

( iii ) Instructions for how to submit payment.

( iv ) Information about procedures for involuntary termination due to failure to pay, including the date on which the participant would be removed if payment is not received, and how to submit an inquiry or file a grievance.

( v ) A statement describing how individuals should pay their Part D plan premium first if they cannot afford both their premium and their program balance.

( vi ) An overview of other Medicare programs that can help lower costs and how to learn more about these programs, including Extra Help, the Medicare Savings Program, the State Pharmaceutical Assistance Program, and a manufacturer's Pharmaceutical Assistance Program.

(D) If the individual has failed to pay the amount due by the end of the grace period described at paragraph (f)(4) of this section, the Part D sponsor must send the individual a termination notice explaining that the individual has been terminated from the Medicare Prescription Payment Plan.

( 1 ) Timing. The involuntary termination notice must be sent within 3 calendar days following the last day of the end of the grace period.

( 2 ) Contents. The involuntary termination notice must include all of the following:

( i ) Pertinent dates, including the date the individual was originally notified of the missed monthly payment and the due date for that payment, as well as the date on which the individual's participation in the program ends, which should be the same date as the notice.

( ii ) A statement clarifying that the notice only applies to participation in the Medicare Prescription Payment Plan, and that the individual's Part D drug coverage will not be impacted.

( iii ) Instructions for how to submit payment and the amount owed.

( iv ) Instructions for how to submit an inquiry or file a grievance.

( v ) A statement clarifying that the individual can join the Medicare Prescription Payment Plan again if they pay the amount owed.

( vi ) An overview of other Medicare programs that can help lower costs and how to learn more about these programs, including Extra Help, the Medicare Savings Program, the State Pharmaceutical Assistance Program, and a manufacturer's Pharmaceutical Assistance Program.

(E) If either notice is returned to the Part D sponsor as undeliverable, the Part D sponsor must immediately implement its existing procedure for researching a potential change of address.

(3) Required grace period and reinstatement. When a program participant fails to pay a program bill, the Part D sponsor must provide individuals with a grace period of at least two months upon notifying the individual of the initial missed payment.

(i) The grace period must begin on the first day of the month following the date on which the initial notice described in this paragraph (f)(3) is sent.

(ii) A participant must be allowed to pay the overdue balance in full during the grace period to remain in the program.

(iii) If a participant fails to pay their monthly billed amount under the program with fewer than two full calendar months remaining in the calendar year, the grace period must carry over into the next calendar year.

(A) If the program participant is within their grace period from the prior year, the Part D sponsor must allow the participant to opt into the program for the next year.

(B) If that participant fails to pay the amount due from the prior year during the required grace period, the Part D sponsor may terminate the individual's participation in the program in the new year following the procedures outlined in paragraph (f)(2)(ii) of this section.

(iv) If an individual who has been terminated from the Medicare Prescription Payment Plan demonstrates good cause for failure to pay the program billed amount within the grace period and pays all overdue amounts billed, a Part D sponsor must reinstate that individual into the Medicare Prescription Payment Plan.

(A) A Part D sponsor is expected to reinstate an individual into the program within a reasonable timeframe after the individual has repaid their past due Medicare Prescription Payment Plan balance in full.

(B) To demonstrate good cause, the individual must establish by a credible statement that failure to pay the monthly amount billed within the grace period was due to circumstances for which the individual had no control, or which the individual could not reasonably have been expected to foresee.

(v) If an individual who has been terminated from the Medicare Prescription Payment Plan pays all overdue amounts billed in full, a Part D sponsor may also reinstate that individual, at the sponsor's discretion and within a reasonable timeframe, even if the individual does not demonstrate good cause.

(4) Preclusion of election in a subsequent plan year. If an individual fails to pay the amount billed for a month as required under the Medicare Prescription Payment Plan, a Part D sponsor may preclude that individual from opting into the Medicare Prescription Payment Plan in a subsequent year.

(i) A Part D sponsor may only preclude an individual from opting into the Medicare Prescription Payment Plan in a subsequent year if the individual owes an overdue balance to that Part D sponsor.

(ii) If an individual enrolls in a Part D plan offered by a different Part D sponsor than the Part D sponsor to which the individual owes an overdue balance, that individual cannot be precluded from opting into the Medicare Prescription Payment Plan in a subsequent year by that different Part D sponsor.

(iii) If a Part D enrollee remains in a plan offered by the same Part D sponsor and continues to owe an overdue balance, preclusion may extend beyond the immediately subsequent plan year.

(A) If an individual pays off the outstanding balance under the Medicare Prescription Payment Plan during a subsequent year, the Part D sponsor must promptly permit them to opt into the Medicare Prescription Payment Plan after the balance is paid.

(B) [Reserved]

(iv) A Part D sponsor that offers more than one Part D plan may have different preclusion policies for its different plans. However, the Part D sponsor must apply its preclusion policy consistently among all enrollees of the same Part D plan.

(5) Prohibition on Part D enrollment penalties. A Part D plan sponsor is prohibited from doing any of the following:

(i) Disenrolling a Part D enrollee from a Part D plan for failure to pay any amount billed under the Medicare Prescription Payment Plan.

(ii) Declining future enrollment into a Part D plan based on an individual's failure to pay a monthly amount billed under the Medicare Prescription Payment Plan.

(6) Disenrollment. (i) If a participant in the Medicare Prescription Payment Plan is disenrolled voluntarily or involuntarily from their Part D plan under the provisions in § 423.44(b), the participant is also terminated from the Medicare Prescription Payment Plan in that plan.

(ii) If the participant enrolls in a different plan, they may opt into the Medicare Prescription Payment Plan under their new plan.

(7) Billing for amounts owed. Nothing in this section prohibits a Part D sponsor from billing an individual for an outstanding Medicare Prescription Payment Plan amount owed.

(g) Participant billing rights —(1) General rule. For each billing period after an individual has opted into the program and incurred out-of-pocket costs, a Part D sponsor must calculate a monthly amount that takes into account the out-of-pocket costs in that month that were incurred on or after the date on which the individual opted into the program.

(i) A Part D sponsor must not bill a participant who is in the program but has not yet incurred any out-of-pocket costs during the plan year.

(ii) While past due balances from prior monthly bills may also be included in a billing statement, which could result in the total amount on the billing statement exceeding the maximum monthly cap, the amount billed for the month for which the maximum monthly cap is being calculated cannot be higher than the cap for that month.

(iii) A Part D sponsor must not charge late fees, interest payments, or other fees, such as for different payment mechanisms.

(A) A Part D sponsor must ensure that—

( 1 ) Any third party it contracts with complies with such requirements.

( 2 ) Participants do not incur any charges or fees as a result of overbilling or overpayment errors made by the Part D sponsor.

(B) [Reserved]

(iv) A Part D sponsor must send a bill for the Medicare Prescription Payment Plan that is separate from the bill for collection of premiums, if applicable.

(2) Billing period. Each billing period will be a calendar month.

(i) The billing period begins on either of the following:

(A) The effective date of a Part D enrollee's participation in the Medicare Prescription Payment Plan (for the first month a participant elects into the program during the plan year).

(B) The first day of the month (for each subsequent month or for the first month of a participant who elects into the program prior to the start of the plan year).

(ii) The billing period ends on the last date of that month.

(3) Billing statement. Billing statements must include all of the following information:

(i) A statement that the bill is for the Medicare Prescription Payment Plan.

(ii) A brief description of the program.

(iii) A reference to where additional information about the program can be found.

(iv) The effective date of program participation.

(v) The last payment received, showing the date, amount of the last payment, and the means of payment made by the participant.

(vi) Any balance carried over from the prior month, including any missed payments.

(vii) Itemized out-of-pocket costs by prescription for the month being billed.

(viii) The amount due from the participant for the month being billed (that is, the amount based on the application of the monthly cap calculation).

(ix) The remaining total out-of-pocket cost sharing balance.

(x) Information on the next steps if the participant fails to pay by the stated due date.

(xi) Information on how to voluntarily opt out of the program and balances due if participation is terminated.

(xii) Information on the dispute processes available if the individual disputes their bill.

(xiii) LIS program information, including the following:

(A) General information about how to enroll in the LIS program (as an additional or alternative avenue for addressing prescription drug costs).

(B) A statement that LIS enrollment, for those who qualify, is likely to be more advantageous than participation in the Medicare Prescription Payment Plan.

(xiv) Plan contact information for participant questions about the billing statement.

(4) Treatment of unsettled balances. Any unsettled balances with respect to amounts owed under the program will be treated as plan losses.

(i) The Secretary is not liable for any such balances outside of those assumed as losses estimated in a Part D sponsor's plan bid.

(ii) If a Part D sponsor is compensated by or on behalf of the participant for an unsettled balance or sells an unsettled balance as a debt, that Part D sponsor cannot treat the amount as a loss and cannot include it in its bid.

(5) Prioritization of premium payments. If a Part D enrollee has opted into the program and makes payments directly to the Part D sponsor, and it is unclear whether a payment should go towards the participant's outstanding Part D plan premium or Medicare Prescription Payment Plan balance, then the payment must be applied to the Part D premium.

(6) Financial reconciliation. A Part D sponsor must have a financial reconciliation process in place to correct inaccuracies in billing or payments or both.

(i) Participant payment. (A) A participant may pay more than the maximum monthly cap, up to the annual out-of-pocket threshold.

(B) The participant cannot pay more than their total OOP costs for the Medicare Prescription Payment Plan.

(C) If a participant does pay more than their total OOP costs for the Medicare Prescription Payment Plan, then the Part D sponsor must reimburse the participant the amount that is paid above the balance owed.

(ii) Reimbursements for excess participant payments. A Part D sponsor must develop standardized procedures for determining and processing reimbursements for excess Medicare Prescription Payment Plan payments made by program participants.

(iii) Claims adjustments resulting in increased amounts owed. When Part D claims adjustments result in increased amounts owed by the participant, and these amounts have not yet been billed to the participant, they must be included in the revised remaining OOP costs owed by the participant (as defined at paragraph (b)(1) of this section) and, thus, in the subsequent month maximum cap for the next billing period.

(h) Participant disputes —(1) Coverage determination and appeals procedures. A Part D sponsor must apply the Part D coverage determination and appeals procedures specified at § 423.566(a) to any disputes made by program participants concerning the cost sharing amount of a covered Part D drug.

(2) Grievance procedures. A Part D sponsor must apply the Part D grievance procedure specified at § 423.562 to any dispute made by a program participant related to any aspect of the Medicare Prescription Payment Plan.

(i) Pharmacy point of sale notification process. (1) When a Part D sponsor is notifying a pharmacy that a Part D enrollee has incurred out-of-pocket costs with respect to covered Part D drugs that make it likely the enrollee may benefit from participating in the program, as required at paragraph (e)(2) of this section, the Part D sponsor must use standard code values for notifying the pharmacy that an enrollee has been identified as likely to benefit, as outlined by the National Council for Prescription Drug Programs.

(2) A Part D sponsor must ensure that the “Medicare Prescription Payment Plan Likely to Benefit Notice” is provided to enrollees identified as likely to benefit (or the person acting on their behalf) through the pharmacy point of sale notification process.

(i) In pharmacy settings in which there is direct contact with enrollees (for example, community pharmacies where enrollees present in person to pick up prescriptions), the Part D sponsor must ensure that a hard copy of the “Medicare Prescription Payment Plan Likely to Benefit Notice” is provided to enrollees identified as likely to benefit (or the person acting on their behalf) at the time the prescription is picked up.

(ii) For non-retail pharmacy settings without in-person encounters (such as mail order pharmacies), a Part D sponsor must require the pharmacy to notify the Part D enrollee via a telephone call or their preferred contact method.

(iii) For long-term care pharmacy settings, the Part D plan sponsor should not require that the pharmacy notify the Part D enrollee prior to dispensing the medication. Instead, the Part D plan sponsor should require the long-term care pharmacy to provide the notice to the Part D enrollee (or their authorized representative) at the time of its typical enrollee cost-sharing billing process.

(iv) If the pharmacy is in contact with a Part D enrollee identified as likely to benefit and the enrollee declines to complete the prescription filling process, the Part D sponsor must ensure that the pharmacy provides the “Medicare Prescription Payment Plan Likely to Benefit Notice” to the Part D enrollee.

(3) A Part D sponsor must ensure that any contract between the Part D sponsor and a pharmacy (or between a first tier, downstream, or related entity and a pharmacy on the Part D sponsor's behalf) for participation in one or more of the Part D sponsor's networks includes a provision requiring pharmacies to provide this notification to Part D enrollees.

(j) Pharmacy claims processing —(1) Electronic claims processing methodology. Part D sponsors must use, and must ensure pharmacies use, a bank identification number (BIN) or processor control number (PCN) electronic claims processing methodology for applicable Medicare Prescription Payment Plan transactions.

(i) Part D sponsors must utilize, and ensure pharmacies utilize, an additional BIN/PCN that is unique to the Medicare Prescription Payment Plan to facilitate electronic processing of supplemental coordination of benefits (COB) transactions for program participants.

(ii) A Part D sponsor must provide the unique Medicare Prescription Payment Plan BIN/PCN and any other pertinent billing information to the pharmacy on paid claim responses when the enrollee is also a Medicare Prescription Payment Plan participant.

(iii) A Part D sponsor must assign a program-specific PCN that starts with “MPPP” and report the new BIN/PCN to CMS.

(iv) The transaction processed through the Medicare Prescription Payment Plan BIN/PCN will be submitted after processing any applicable other payer transactions in order to capture the final patient responsibility amount after all other payers have paid.

(2) Supplemental coverage that increases final patient pay amount. When a Part D enrollee has supplemental coverage that modifies their final out-of-pocket responsibility for covered Part D drugs:

(i) When the final patient pay amount returned to the pharmacy by a supplemental payer for a covered Part D drug is higher than the original Part D patient pay amount, the Part D sponsor may only include in the Medicare Prescription Payment Plan the participant's original Part D cost sharing, as determined by their plan-specific benefit structure.

(ii) [Reserved]

(3) Prescription drug event reporting. A Part D sponsor must ensure that the claims processing methodology described in paragraph (j)(1) of this section has no impact on prescription drug event (PDE) cost/payment field reporting, meaning PDE records must reflect participant and plan liability amounts as if the Medicare Prescription Payment Plan did not apply.

(4) Real-time benefit tools. A Part D sponsor must ensure that participation in the Medicare Prescription Payment Plan or the associated claims processing methodology described in paragraph (j)(1) of this section or both has no impact on the cost-sharing information displayed in real-time benefit tools.

(5) Inclusion of retroactive claims. A Part D sponsor is not required to retroactively include under this program claims submitted to the Part D sponsor by a Medicare Prescription Payment Plan participant (whether the request is made via paper form, telephonically, or electronically) except as provided in paragraph (d)(6) of this section.

(6) Re-adjudication of prescription drug claims for new program participants. (i) When a Part D enrollee receives the “Medicare Prescription Payment Plan Likely to Benefit Notice” from the pharmacy, they may choose to take time to consider opting into the program and leave the pharmacy without the prescription that triggered the notification.

(ii) When the Part D enrollee returns to the pharmacy after their election into the Medicare Prescription Payment Plan has been effectuated, the plan sponsor must require the pharmacy to reverse and reprocess the high-cost claim that triggered the likely to benefit notification.

(A) Should a Part D enrollee have other unpaid claims at the same pharmacy for covered Part D drugs from prior dates of service, in addition to the prescription that may have triggered the likely to benefit notification, they may also request that those claims be readjudicated.

(B) [Reserved]

(iii) When the Part D claim date of service is the same as the date of program effectuation), the Part D sponsor is not required to ensure the pharmacy reverse and resubmit the Part D claim, provided that they otherwise obtain the necessary Medicare Prescription Payment Plan BIN/PCN for the program-specific transaction.

(k) Pharmacy payment obligations. A Part D sponsor must ensure that enrollee participation in the Medicare Prescription Payment Plan does not affect the amount paid to pharmacies or the timing of such payments, consistent with § 423.520. A Part D sponsor must not do either of the following:

(1) Impose any fees or costs related to program implementation on pharmacies.

(2) Hold pharmacies responsible for any unsettled balances of a participant or for collecting unpaid balances from the participant on the Part D sponsor's behalf.

(l) [Reserved]

(m) General Part D sponsor outreach and education requirements. The requirements described in this paragraph (m) are applicable beginning October 1, 2025, with respect to general outreach for the Medicare Prescription Payment Plan for 2026.

(1) Mailing. A Part D sponsor, except a dual eligible special needs plan (D-SNP), must provide a Medicare Prescription Payment Plan election request form, described at paragraph (d)(10)(i) of this section, and additional educational information on the program in a hard copy mailing.

(i) The mailing must be sent by the later of—

(A) Within 10 calendar days from receipt of CMS confirmation of enrollment in the Part D plan; or

(B) The last day of the month prior to the plan effective date.

(ii) The election request form and supplemental information may be sent—

(A) With the membership ID card mailing described at § 423.2267(e)(32); or

(B) In its own envelope.

(iii) The mailing may be sent only to a Part D enrollee who is receiving a new membership ID card or to all Part D enrollees.

(iv) The additional information requirement may be fulfilled by including in the mailing the CMS-developed fact sheet about the program. If the Part D sponsor develops and uses alternative informational materials in lieu of the CMS-developed fact sheet to satisfy this paragraph (m)(1)(iv), they must ensure that these alternative materials accurately convey program information and are compliant with existing Part D requirements specified at subpart V of this part.

(2) Websites. In addition to meeting requirements described at §§ 423.128(d)(2) and 423.2265(b), a Part D sponsor is required to include all of the following on its website:

(i) An election request mechanism, as described at paragraph (d)(2) of this section.

(ii) An overview of the Medicare Prescription Payment Plan.

(iii) Examples of the program calculation and explanations.

(iv) A description of Part D enrollees who may be likely to benefit from the program.

(v) The financial implications of participation.

(vi) The implications of not paying monthly bills.

(vii) Instructions for how to opt into and out of the program, including timing requirements around election effectuation.

(viii) A description of the standards for retroactive election in cases where an enrollee believes that a delay in filling a prescription may seriously jeopardize their life, health, or ability to regain maximum function.

(ix) A description of the dispute and grievance procedure, as required under § 423.137(h).

(x) Contact information Part D enrollees can use to obtain further information

(xi) General information about the LIS program, including an overview of how LIS enrollment, for those who qualify, is likely to be more advantageous than program participation.

§ 423.150 Scope.

This subpart sets forth the requirements relating to the following:

(a) Drug utilization management programs, quality assurance measures and systems, and MTM programs for Part D sponsors.

(b) Appropriate dispensing of prescription drugs in long-term care facilities under PDPs and MA-PD plans.

(c) Consumer satisfaction surveys of Part D plans.

(d) Electronic prescription drug programs for prescribers, dispensers, and Part D sponsors.

(e) Quality improvement organization (QIO) activities.

(f) Compliance deemed on the basis of accreditation.

(g) Accreditation organizations.

(h) Procedures for the approval of accreditation organizations as a basis for deeming compliance.

§ 423.153 Drug utilization management, quality assurance, medication therapy management (MTM) programs, drug management programs, and access to Medicare Parts A and B claims data extracts.

(a) General rule. Each Part D sponsor must have established, for covered Part D drugs furnished through a Part D plan, a drug utilization management program, quality assurance measures and systems, and an MTM program as described in paragraphs (b), (c), and (d) of this section. No later than January 1, 2022, a Part D plan sponsor must have established a drug management program for at-risk beneficiaries enrolled in their prescription drug benefit plans to address overutilization of frequently abused drugs, as described in paragraph (f) of this section.

(b) Drug utilization management. A Part D sponsor must have established a reasonable and appropriate drug utilization management program that address all of the following:

(1) Includes incentives to reduce costs when medically appropriate.

(2) Maintains policies and systems to assist in preventing over-utilization and under-utilization of prescribed medications.

(3) Provides CMS with information concerning the procedures and performance of its drug utilization management program, according to guidelines specified by CMS.

(4)(i) Daily cost sharing rate. Subject to paragraph (b)(4)(ii) of this section, establishes a daily cost-sharing rate (as defined in § 423.100) and applies it to a prescription presented to a network pharmacy for a covered Part D drug that is dispensed for a supply less than the approved month's supply, if the drug is in the form of a solid oral dose and may be dispensed for less than the approved month's supply under applicable law.

(ii) Exceptions. The requirements of paragraph (b)(4)(i) of this section do not apply to either of the following:

(A) Solid oral doses of antibiotics.

(B) Solid oral doses that are dispensed in their original container as indicated in the Food and Drug Administration Prescribing Information or are customarily dispensed in their original packaging to assist patients with compliance.

(iii) Cost-sharing —(A) Copayments. In the case of a drug that would incur a copayment, the Part D sponsor must apply cost-sharing as calculated by multiplying the applicable daily cost-sharing rate by the days' supply actually dispensed when the beneficiary receives less than the approved month's supply.

(B) Coinsurance. In the case of a drug that would incur a coinsurance percentage, the Part D sponsor must apply the coinsurance percentage for the drug to the days' supply actually dispensed.

(c) Quality assurance. A Part D sponsor must have established quality assurance measures and systems to reduce medication errors and adverse drug interactions and improve medication use that include all of the following—

(1) Representation that network providers are required to comply with minimum standards for pharmacy practice as established by the States.

(2) Concurrent drug utilization review systems, policies, and procedures designed to ensure that a review of the prescribed drug therapy is performed before each prescription is dispensed to an enrollee in a sponsor's Part D plan, typically at the point-of-sale or point of distribution. The review must include, but not be limited to,

(i) Screening for potential drug therapy problems due to therapeutic duplication.

(ii) Age/gender-related contraindications.

(iii) Over-utilization and under-utilization.

(iv) Drug-drug interactions.

(v) Incorrect drug dosage or duration of drug therapy. (vi) Drug-allergy contraindications.

(vii) Clinical abuse/misuse.

(3) Retrospective drug utilization review systems, policies, and procedures designed to ensure ongoing periodic examination of claims data and other records, through computerized drug claims processing and information retrieval systems, in order to identify patterns of inappropriate or medically unnecessary care among enrollees in a sponsor's Part D plan, or associated with specific drugs or groups of drugs.

(4) Internal medication error identification and reduction systems.

(5) Provision of information to CMS regarding its quality assurance measures and systems, according to guidelines specified by CMS.

(d) Medication therapy management (MTM) program —(1) General rule. A Part D sponsor must have established a MTM program that—

(i) Is designed to ensure that covered Part D drugs prescribed to targeted beneficiaries described in paragraph (d)(2) of this section are appropriately used to optimize therapeutic outcomes through improved medication use;

(ii) Is designed to reduce the risk of adverse events, including adverse drug interactions, for targeted beneficiaries described in paragraph (d)(2) of this section;

(iii) May be furnished by a pharmacist or other qualified provider; and

(iv) May distinguish between services in ambulatory and institutional settings.

(v) Must enroll targeted beneficiaries using an opt-out method of enrollment only.

(vi) Must target beneficiaries for enrollment in the MTM program at least quarterly during each plan year.

(vii) Must offer a minimum level of medication therapy management services for each beneficiary enrolled in the MTM program that includes all of the following:

(A) Interventions for both beneficiaries and prescribers.

(B) Annual comprehensive medication review with written summaries. ( 1 ) The beneficiary's comprehensive medication review—

( i ) Must include an interactive consultation, performed by a pharmacist or other qualified provider, that is either in person or performed via synchronous telehealth; and

( ii ) May result in a recommended medication action plan.

( 2 ) If a beneficiary is offered the annual comprehensive medication review and is unable to accept the offer to participate due to cognitive impairment, the pharmacist or other qualified provider may perform the comprehensive medication review with the beneficiary's prescriber, caregiver, or other authorized individual.

(C) Quarterly targeted medication reviews with follow-up interventions when necessary.

(D) Standardized action plans and summaries that comply with requirements as specified by CMS for the standardized format.

(E) Beginning January 1, 2022, for enrollees targeted in paragraph (d)(2) of this section, provide at least annually as part of the comprehensive medication review, a targeted medication review, or other MTM correspondence or service, information about safe disposal of prescription drugs that are controlled substances, drug take back programs, in-home disposal and cost-effective means to safely dispose of such drugs.

(F) The information to be provided under paragraph (d)(1)(vii)(E) of this section must comply with all requirements of § 422.111(j) of this chapter.

(2) Targeted beneficiaries. Targeted beneficiaries for the MTM program described in paragraph (d)(1) of this section are enrollees in the sponsor's Part D plan who meet the characteristics of at least one of the following two groups:

(i)(A) Have multiple chronic diseases, with three chronic diseases being the maximum number a Part D plan sponsor may require for targeted enrollment;

(B) Are taking multiple Part D drugs, with eight Part D drugs being the maximum number of drugs a Part D plan sponsor may require for targeted enrollment; and

(C) Are likely to incur annual covered Part D drug costs greater than or equal to the MTM cost threshold determined by CMS, as specified in this paragraph (d)(2)(i)(C) of this section.

( 1 ) For 2011, the MTM cost threshold is set at $3,000.

( 2 ) For 2012 through 2024, the MTM cost threshold is set at $3,000 increased by the annual percentage specified in § 423.104(d)(5)(iv).

( 3 ) For 2025, the MTM cost threshold is set at the average annual cost of eight generic drugs, as defined at § 423.4, as determined using the PDE data specified at § 423.104(d)(2)(iv)(C).

(ii) Beginning January 1, 2022, are at-risk beneficiaries as defined in § 423.100.

(iii) Beginning January 1, 2025, in identifying beneficiaries who have multiple chronic diseases under paragraph (d)(2)(i)(A) of this section, Part D plan sponsors must include all of the following diseases, and may include additional chronic diseases:

(A) Alzheimer's disease.

(B) Bone disease-arthritis (including osteoporosis, osteoarthritis, and rheumatoid arthritis).

(C) Chronic congestive heart failure (CHF).

(D) Diabetes.

(E) Dyslipidemia.

(F) End-stage renal disease (ESRD).

(G) Human immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS).

(H) Hypertension.

(I) Mental health (including depression, schizophrenia, bipolar disorder, and other chronic/disabling mental health conditions).

(J) Respiratory disease (including asthma, chronic obstructive pulmonary disease (COPD), and other chronic lung disorders).

(iv) Beginning January 1, 2025, in identifying the number of Part D drugs under paragraph (d)(2)(i)(B) of this section, Part D plan sponsors must include all Part D maintenance drugs, relying on information in a widely accepted, commercially or publicly available drug database to make such determinations, and may include all Part D drugs.

(3) Use of experts. The MTM program must be developed in cooperation with licensed and practicing pharmacists and physicians.

(4) Coordination with care management plans. The MTM program must be coordinated with any care management plan established for a targeted individual under a chronic care improvement program (CCIP) under section 1807 of the Act. A Part D sponsor must provide drug claims data to CCIPs for those beneficiaries that are enrolled in CCIPs in a manner specified by CMS.

(5) Considerations in pharmacy fees. An applicant to become a Part D sponsor must—

(i) Describe in its application how it takes into account the resources used and time required to implement the MTM program it chooses to adopt in establishing fees for pharmacists or others providing MTM services for covered Part D drugs under a Part D plan.

(ii) Disclose to CMS upon request the amount of the management and dispensing fees and the portion paid for MTM services to pharmacists and others upon request. Reports of these amounts are protected under the provisions of section 1927(b)(3)(D) of the Act.

(6) MTM program reporting. A Part D sponsor must provide CMS with information regarding the procedures and performance of its MTM program, according to guidelines specified by CMS.

(e) Exception for private fee-for-service MA plans offering qualified prescription drug coverage. In the case of an MA plan described in § 422.4(a)(3) of this chapter providing qualified prescription drug coverage, the requirements under paragraphs (b) and (d) of this section do not apply.

(f) Drug management programs. A drug management program must meet all the following requirements:

(1) Written policies and procedures. A sponsor must document its drug management program in written policies and procedures that are approved by the applicable P&T committee and reviewed and updated as appropriate. In the case of a Part D sponsor, including a PACE organization, without its own or a contracted P&T committee because it does not use a formulary, the written policies and procedures described in this section must be approved by the Part D sponsor's medical director as described at § 423.562(a)(5) (or, for a PACE organization, at § 460.60(b)) and applicable clinical and other staff or contractors as determined appropriate by the medical director. These policies and procedures must address all aspects of the sponsor's drug management program, including but not limited to the following:

(i) The appropriate credentials of the clinical staff conducting case management required under paragraph (f)(2) of this section, including that the staff must have a current and unrestricted license to practice within the scope of his or her profession in a State, Territory, Commonwealth of the United Stated (that is, Puerto Rico), or the District of Columbia.

(ii) The necessary and appropriate contents of files for case management required under paragraph (f)(2) of this section, which must include documentation of the substance of prescriber and beneficiary contacts.

(iii) Monitoring reports and notifications about incoming enrollees who meet the definition of an at-risk beneficiary or a potential at-risk beneficiary in § 423.100 and responding to requests from other sponsors for information about at-risk beneficiaries and potential at-risk beneficiaries who recently disenrolled from the sponsor's prescription drug benefit plan.

(2) Case management/clinical contact/prescriber verification —(i) General rule. The sponsor's clinical staff must conduct case management for each potential at-risk beneficiary for the purpose of engaging in clinical contact with the prescribers of frequently abused drugs and verifying whether a potential at-risk beneficiary is an at-risk beneficiary. Except as provided in paragraph (f)(2)(ii) of this section, the sponsor must do all of the following:

(A) Send written information to the beneficiary's prescribers that the beneficiary met the clinical guidelines and is a potential at risk beneficiary.

(B) Elicit information from the prescribers about any factors in the beneficiary's treatment that are relevant to a determination that the beneficiary is an at-risk beneficiary, including whether prescribed medications are appropriate for the beneficiary's medical conditions or the beneficiary is an exempted beneficiary.

(C) In cases where prescribers have not responded to the inquiry described in paragraph (f)(2)(i)(B) of this section, make reasonable attempts to communicate with the prescribers telephonically and/or by another effective communication method designed to elicit a response from the prescribers within a reasonable period after sending the written information.

(ii) Exception for identification by prior plan. If a beneficiary was identified as a potential at-risk or an at-risk beneficiary by his or her most recent prior plan and such identification has not been terminated in accordance with paragraph (f)(14) of this section, the sponsor meets the requirements in paragraph (f)(2)(i) of this section, so long as the sponsor obtains case management information from the previous sponsor and such information is still clinically adequate and up to date.

(3) Limitation on access to coverage for frequently abused drugs. Subject to the requirements of paragraph (f)(4) of this section, a Part D plan sponsor may do any or all of the following:

(i) Implement a point-of-sale claim edit for frequently abused drugs that is specific to an at-risk beneficiary.

(ii) In accordance with paragraphs (f)(9) and (13) of this section, limit an at-risk beneficiary's access to coverage for frequently abused drugs to those that are—

(A) Prescribed for the beneficiary by one or more prescribers;

(B) Dispensed to the beneficiary by one or more network pharmacies; or

(C) Both.

(iii)(A) If the sponsor implements an edit as specified in paragraph (f)(3)(i) of this section, the sponsor must not cover frequently abused drugs for the beneficiary in excess of the edit, unless the edit is terminated or revised based on a subsequent determination, including a successful appeal.

(B) If the sponsor limits the at-risk beneficiary's access to coverage as specified in paragraph (f)(3)(ii) of this section, the sponsor must cover frequently abused drugs for the beneficiary only when they are obtained from the selected pharmacy(ies) or prescriber(s) or both, as applicable—

( 1 ) In accordance with all other coverage requirements of the beneficiary's prescription drug benefit plan, unless the limit is terminated or revised based on a subsequent determination, including a successful appeal; and

( 2 ) Except as necessary to provide reasonable access in accordance with paragraph (f)(12) of this section.

(4) Requirements for limiting access to coverage for frequently abused drugs. (i) A sponsor may not limit the access of an at-risk beneficiary to coverage for frequently abused drugs under paragraph (f)(3) of this section, unless the sponsor has done all of the following:

(A) Conducted case management as required by paragraph (f)(2) of this section and updated it, if necessary.

(B) Except in the case of a pharmacy limitation imposed pursuant to paragraph (f)(3)(ii)(B) of this section, obtained the agreement of at least one prescriber of frequently abused drugs for the beneficiary that the specific limitation is appropriate.

(C) Provided the notices to the beneficiary in compliance with paragraphs (f)(5) and (6) of this section.

(ii)(A) Except as provided in paragraph paragraph (f)(3)(ii)(A) of this sectionregarding a prescriber limitation, if the sponsor has complied with the requirement of paragraph paragraph (f)(2)(i)(B) of this section about attempts to reach prescribers, and the prescribers were not responsive after 3 attempts by the sponsor to contact them within 10 business days, then the sponsor has met the requirement of paragraph (f)(4)(i)(B) of this section for eliciting information from the prescribers.

(B) The sponsor may not implement a prescriber limitation pursuant to paragraph (f)(3)(ii)(A) of this section if no prescriber was responsive.

(5) Initial notice to a beneficiary. (i) After conducting the case management required by paragraph (f)(2) of this section, a Part D sponsor that intends to limit the access of a potential at-risk beneficiary, or subject to the exception in paragraph (f)(8)(ii) of this section, of an at-risk beneficiary (as defined in subparagraph (2) of the definition in § 423.100), to coverage for frequently abused drugs under paragraph (f)(3) of this section must provide an initial written notice to the beneficiary.

(ii) The notice must do all of the following:

(A) Use language approved by the Secretary.

(B) Be in a readable and understandable form.

(C) Provide all of the following information:

( 1 ) An explanation that the beneficiary's current or immediately prior Part D plan sponsor has identified the beneficiary as a potential at-risk beneficiary.

( 2 ) A description, of all State and Federal public health resources that are designed to address prescription drug abuse to which the beneficiary has access, including mental health and other counseling services and information on how to access such services, including any such services covered by the plan under its Medicare benefits, supplemental benefits, or Medicaid benefits (if the plan integrates coverage of Medicare and Medicaid benefits).

( 3 ) An explanation of the beneficiary's right to a redetermination if the sponsor issues a determination that the beneficiary is an at-risk beneficiary and the standard and expedited redetermination processes described at §§ 423.582 and 423.584, including notice that if on redetermination the plan sponsor affirms its denial, in whole or in part, the case must be automatically forwarded to the independent review entity contracted with CMS for review and resolution.

( 4 ) A request that the beneficiary submit to the sponsor within 30 days of the date of this initial notice any information that the beneficiary believes is relevant to the sponsor's determination, including which prescribers and pharmacies the beneficiary would prefer the sponsor to select if the sponsor implements a limitation under paragraph (f)(3)(ii) of this section.

( 5 ) An explanation of the meaning and consequences of being identified as an at-risk beneficiary, including the following:

( i ) An explanation of the sponsor's drug management program, the specific limitation the sponsor intends to place on the beneficiary's access to coverage for frequently abused drugs under the program.

( ii ) The timeframe for the sponsor's decision.

( iii ) If applicable, any limitation on the availability of the special enrollment period described in § 423.38.

( 6 ) Clear instructions that explain how the beneficiary can contact the sponsor, including how the beneficiary may submit information to the sponsor in response to the request described in paragraph (f)(5)(ii)(C)( 4 ) of this section.

( 7 ) Contact information for other organizations that can provide the beneficiary with assistance regarding the sponsor's drug management program.

( 8 ) Other content that CMS determines is necessary for the beneficiary to understand the information required in this notice.

(iii) The Part D plan sponsor must make reasonable efforts to provide the beneficiary's prescriber(s) of frequently abused drugs with a copy of the notice required under paragraph (f)(5)(i) of this section.

(iv) If the Part D plan sponsor subsequently intends to make a change to the terms of an ongoing limitation(s) established under paragraph (f)(3) of this section, including the intention to impose an additional limitation on the at-risk beneficiary, the sponsor must comply with the requirements of paragraph (f)(3) of this section, as well as all applicable requirements for beneficiary notices described in paragraphs (f)(5) through (8) of this section.

(6) Second notice. (i) Upon making a determination that a beneficiary is an at-risk beneficiary and to limit the beneficiary's access to coverage for frequently abused drugs under paragraph (f)(3) of this section, a Part D sponsor must provide a second written notice to the beneficiary.

(ii) The second notice must do all of the following:

(A) Use language approved by the Secretary.

(B) Be in a readable and understandable form.

(C) Provide all of the following information:

( 1 ) An explanation that the beneficiary's current or immediately prior Part D plan sponsor has identified the beneficiary as an at-risk beneficiary.

( 2 ) An explanation that the beneficiary is subject to the requirements of the sponsor's drug management program, including—

( i ) The limitation the sponsor is placing on the beneficiary's access to coverage for frequently abused drugs and the effective and end date of the limitation; and

( ii ) If applicable, any limitation on the availability of the special enrollment period described in § 423.38.

( 3 ) The prescriber(s) or pharmacy(ies) or both, if and as applicable, from which the beneficiary must obtain frequently abused drugs in order for them to be covered by the sponsor.

( 4 ) An explanation of the beneficiary's right to a redetermination under § 423.580, including all of the following:

( i ) A description of both the standard and expedited redetermination processes.

( ii ) The beneficiary's right to, and conditions for, obtaining an expedited redetermination.

( iii ) Notice that if on redetermination the plan sponsor affirms its denial, in whole or in part, the case must be automatically forwarded to the independent review entity contracted with CMS for review and resolution.

( 5 ) An explanation that the beneficiary may submit to the sponsor, if the beneficiary has not already done so, the prescriber(s) and pharmacy(ies), as applicable, from which the beneficiary would prefer to obtain frequently abused drugs.

( 6 ) Clear instructions that explain how the beneficiary may contact the sponsor, including how the beneficiary may submit information to the sponsor in response to the request described in paragraph (f)(6)(ii)(C)( 5 ) of this section.

( 7 ) Other content that CMS determines is necessary for the beneficiary to understand the information required in this notice.

(iii) The Part D plan sponsor must make reasonable efforts to provide the beneficiary's prescriber(s) of frequently abused drugs with a copy of the notice required by paragraph (f)(6)(i) of this section.

(7) Alternate second notice. (i) If, after providing an initial notice to a potential at-risk beneficiary under paragraph (f)(4) of this section, a Part D sponsor determines that the potential at-risk beneficiary is not an at-risk beneficiary, the sponsor must provide an alternate second written notice to the beneficiary.

(ii) The alternate second notice must do all of the following:

(A) Use language approved by the Secretary.

(B) Be in a readable and understandable form.

(C) Provide all of the following information:

( 1 ) The sponsor has determined that the beneficiary is not an at-risk beneficiary.

( 2 ) The sponsor will not limit the beneficiary's access to coverage for frequently abused drugs.

( 3 ) If applicable, the SEP limitation no longer applies.

( 4 ) Clear instructions that explain how the beneficiary may contact the sponsor.

( 5 ) Other content that CMS determines is necessary for the beneficiary to understand the information required in this notice.

(iii) The Part D sponsor must make reasonable efforts to provide the beneficiary's prescriber(s) of frequently abused drugs with a copy of the notice required in accordance with paragraph (f)(7)(i) of this section.

(8) Notices: Timing and exceptions. (i) Subject to paragraphs (f)(8)(ii) and (iii) of this section, a Part D sponsor must provide the second notice described in paragraph (f)(6) of this section or the alternate second notice described in paragraph (f)(7) of this section, as applicable, on a date that is not less than 30 days after the date of the initial notice described in paragraph (f)(5) of this section and not more than the earlier of the following two dates:

(A) Within 3 days of the date the sponsor makes the relevant determination.

(B) Sixty days after the date of the initial notice described in paragraph (f)(5) of this section.

(ii) In the case of a beneficiary who is determined by a Part D sponsor to be exempt, the sponsor must provide the alternate second notice within 3 days of the date the sponsor makes the relevant determination, even if such determination is made less than 30 days from the date of the initial notice described in paragraph (f)(5) of this section.

(iii) A gaining plan sponsor may forgo providing the initial notice and may immediately provide a second notice described in paragraph (f)(6) of this section to an at-risk beneficiary as defined in subparagraph (2) of the definition in § 423.100), if the sponsor is implementing either of the following:

(A) A beneficiary-specific point-of-sale claim edit as described in paragraph (f)(3)(i) of this section, if the edit is the same as the one that was implemented in the immediately prior plan.

(B) A limitation on access to coverage as described in paragraph (f)(3(ii) of this section, if such limitation would require the beneficiary to obtain frequently abused drugs from the same location of pharmacy and/or the same prescriber, as applicable, that was selected under the immediately prior plan under paragraph (f)(9) of this section.

(9) Beneficiary preferences. Except as described in paragraph (f)(10) of this section, if a beneficiary submits preferences for prescribers or pharmacies or both from which the beneficiary prefers to obtain frequently abused drugs, the sponsor must do the following:

(i) Review such preferences.

(ii) If the beneficiary is—

(A) Enrolled in a stand-alone prescription drug benefit plan and specifies a prescriber(s) or network pharmacy(ies) or both, select or change the selection of prescriber(s) or network pharmacy(ies) or both for the beneficiary based on beneficiary's preference(s).

(B) Enrolled in a Medicare Advantage prescription drug benefit plan and specifies a network prescriber(s) or network pharmacy(ies) or both, select or change the selection of prescriber(s) or pharmacy(ies) or both for the beneficiary based on the beneficiary's preference(s).

(iii) The sponsor must inform the beneficiary of the selection or change in—

(A) The second notice; or

(B) If the second notice is not feasible due to the timing of the beneficiary's submission, in a subsequent written notice, issued no later than 14 days after receipt of the submission.

(10) Exception to beneficiary preferences. (i) If the Part D sponsor determines that the selection or change of a prescriber or pharmacy under paragraph (f)(9) of this section would contribute to prescription drug abuse or drug diversion by the at-risk beneficiary, the sponsor may change the selection without regard to the beneficiary's preferences if there is strong evidence of inappropriate action by the prescriber, pharmacy, or beneficiary.

(ii) If the sponsor changes the selection, the sponsor must provide the beneficiary with—

(A) At least 30 days advance written notice of the change; and

(B) A rationale for the change.

(11) Reasonable access. In making the selections under paragraph (f)(12) of this section, a Part D plan sponsor must ensure that the beneficiary continues to have reasonable access to frequently abused drugs, taking into account all relevant factors, including but not limited to—

(i) Geographic location;

(ii) Beneficiary preference;

(iii) The beneficiary's predominant usage of a prescriber or pharmacy or both;

(iv) The impact on cost-sharing;

(v) Reasonable travel time;

(vi) Whether the beneficiary has multiple residences;

(vii) Natural disasters and similar situations; and

(viii) The provision of emergency services.

(12) Selection of prescribers and pharmacies. (i) A Part D plan sponsor must select, as applicable—

(A) One, or, if the sponsor reasonably determines it necessary to provide the beneficiary with reasonable access, more than one, network prescriber who is authorized to prescribe frequently abused drugs for the beneficiary, unless the plan is a stand-alone PDP, or the selection of an out-of-network provider is necessary; and

(B) One, or, if the sponsor reasonably determines it necessary to provide the beneficiary with reasonable access, more than one, network pharmacy that may dispense such drugs to such beneficiary, unless the selection of an out-of-network pharmacy is necessary.

(ii)(A) For purposes of this paragraph (f)(12) of this section, in the case of a pharmacy that has multiple locations that share real-time electronic data, all such locations of the pharmacy must collectively be treated as one pharmacy.

(B) For purposes of this paragraph (f)(12) of this section, in the case of a group practice, all prescribers of the group practice must be treated as one prescriber.

(13) Confirmation of selections(s). (i) Before selecting a prescriber or pharmacy under this paragraph, a Part D plan sponsor must notify the prescriber or pharmacy, as applicable, that the beneficiary has been identified for inclusion in the drug management program for at-risk beneficiaries and that the prescriber or pharmacy or both is(are) being selected as the beneficiary's designated prescriber or pharmacy or both for frequently abused drugs. For prescribers, this notification occurs during case management as described in paragraph (f)(2) or when the prescriber provides agreement pursuant to paragraph (f)(4)(i)(B) of this section.

(ii) The sponsor must receive confirmation from the prescriber(s) or pharmacy(ies) or both, as applicable, that the selection is accepted before conveying this information to the at-risk beneficiary, unless the pharmacy has agreed in advance in a network agreement with the sponsor to accept all such selections and the agreement specifies how the pharmacy will be notified by the sponsor of its selection.

(14) Termination of identification as an at-risk beneficiary. The identification of an at-risk beneficiary as such must terminate as of the earlier of the following:

(i) The date the beneficiary demonstrates through a subsequent determination, including but not limited to, a successful appeal, that the beneficiary is no longer likely, in the absence of the limitation under this paragraph, to be an at-risk beneficiary; or

(ii)(A) The end of a one year period calculated from the effective date of the limitation, as specified in the notice provided under paragraph (f)(6) of this section, unless the limitation was extended pursuant to paragraph (f)(14)(ii)(B) of this section.

(B) The end of a two year period calculated from the effective date of the limitation, as specified in a notice provided under paragraph (f)(6) of this section, subject to the following requirements:

( 1 ) The plan sponsor determines at the end of the one year period that there is a clinical basis to extend the limitation;

( 2 ) Except in the case of a pharmacy limitation imposed pursuant to paragraph (f)(3)(ii)(B) of this section, the plan sponsor has obtained the agreement of a prescriber of frequently abused drugs for the beneficiary that the limitation should be extended.

( 3 ) The plan sponsor has provided another notice to the beneficiary in compliance with paragraph (f)(6) of this section.

( 4 ) If the prescribers were not responsive after 3 attempts by the sponsor to contact them within 10 business days, then the sponsor has met the requirement of paragraph (f)(14)((ii)(B)(2) of this section.

( 5 ) The sponsor may not extend a prescriber limitation implemented pursuant to paragraph (f)(3)(ii)(A) of this section if no prescriber was responsive.

(15) Data disclosure. (i) CMS identifies potential at-risk beneficiaries to the sponsor of the prescription drug plan in which the beneficiary is enrolled.

(ii) A Part D sponsor that operates a drug management program must disclose any data and information to CMS and other Part D sponsors that CMS deems necessary to oversee Part D drug management programs at a time, and in a form and manner specified by CMS. The data and information disclosures must do all of the following:

(A) Provide information to CMS within 30 days of receiving a report about a potential at-risk beneficiary from CMS.

(B) Provide information to CMS about any potential at-risk beneficiary that meets paragraph (1) of the definition in § 423.100 that a sponsor identifies within 30 days from the date of the most recent CMS report identifying potential at-risk beneficiaries;

(C) Provide information to CMS about any potential at-risk beneficiary or at-risk beneficiary that meets paragraph (2) of the definitions in § 423.100 that a sponsor identifies within 30 days from the date of the most recent CMS report identifying potential at-risk beneficiaries.

(D) Provide information to CMS as soon as possible but no later than 7 days from the date of the initial notice or second notice that the sponsor provided to a beneficiary, or as soon as possible but no later than 7 days of a termination date, as applicable, about a beneficiary-specific opioid claim edit or a limitation on access to coverage for frequently abused drugs.

(E) Transfer case management information upon request of a gaining sponsor as soon as possible but not later than 2 weeks from the gaining sponsor's request when—

( 1 ) An at-risk beneficiary or potential at-risk beneficiary disenrolls from the sponsor's plan and enrolls in another prescription drug plan offered by the gaining sponsor; and

( 2 ) The edit or limitation that the sponsor had implemented for the beneficiary had not terminated before disenrollment.

(16) Clinical guidelines. Potential at-risk beneficiaries and at-risk beneficiaries are identified by CMS or a Part D sponsor using clinical guidelines that—

(i) Are developed with stakeholder consultation;

(ii) Are based on:

(1) The acquisition of frequently abused drugs from multiple prescribers, multiple pharmacies, the level of frequently abused drugs used, or any combination of these factors; or

(2) Beginning January 1, 2022, a history of opioid-related overdose as determined by at least one recent claim that contains a principal diagnosis indicating opioid overdose, and at least one recent claim for an opioid medication other than an opioid used for medication assisted therapy (MAT).

(iii) Are derived from expert opinion and an analysis of Medicare data; and

(iv) Include a program size estimate.

(g) Prescription drug plan sponsors' access to Medicare Parts A and B claims data extracts. (1)(i) Beginning in plan year 2020, a PDP sponsor may submit a request to CMS for the data described in paragraph (g)(2) of this section about enrollees in its prescription drug plans.

(ii) CMS makes the data requested in paragraph (g)(1)(i) of this section available to eligible PDP sponsors, in accordance with all applicable laws. The data is provided at least quarterly on a specified release date, and in an electronic format to be determined by CMS.

(iii) If CMS determines or has a reasonable belief that the PDP sponsor has violated the requirements of this paragraph (g) or that unauthorized uses, reuses, or disclosures of the Medicare claims data have taken place, at CMS' sole discretion, the PDP sponsor may be denied further access to the data described in paragraph (g)(2) of this section.

(2) Data described. The data that may be requested under paragraph (g)(1) of this section are standardized extracts of claims data under Medicare parts A and B for items and services furnished under such parts to beneficiaries who are enrolled in a plan offered by the PDP sponsor at the time of the disclosure.

(3) Purposes. A PDP sponsor must comply with all laws that may be applicable to data received under this provision, including State and Federal privacy and security laws, and, furthermore subject to the limitations in paragraph (g)(4) of this section may only use or disclose the data provided by CMS under paragraph (g)(1) of this section for the following purposes:

(i) To optimize therapeutic outcomes through improved medication use, as such phrase is used in paragraph (d)(1)(i) of this section.

(ii) To improve care coordination so as to prevent adverse health outcomes, such as preventable emergency department visits and hospital readmissions.

(iii) For activities falling under paragraph (1) of the definition of “health care operations” under 45 CFR 164.501.

(iv) For activities falling under paragraph (2) of the definition of “health care operations” under 45 CFR 164.501.

(v) For “fraud and abuse detection or compliance activities” under 45 CFR 164.506(c)(4)(ii).

(vi) For disclosures that qualify as “required by law” disclosures at 45 CFR 164.103.

(4) Limitations. A PDP sponsor must comply with the following requirements regarding the data provided by CMS under this paragraph (g):

(i) The PDP sponsor will not use the data to inform coverage determinations under Part D.

(ii) The PDP sponsor will not use the data to conduct retroactive reviews of medically accepted indications determinations.

(iii) The PDP sponsor will not use the data to facilitate enrollment changes to a different prescription drug plan or an MA-PD plan offered by the same parent organization.

(iv) The PDP sponsor will not use the data to inform marketing of benefits.

(v) The PDP sponsor will contractually bind its contractors that have access to the Medicare claims data, and require their contractors to contractually bind any other potential downstream data recipients, to the terms and conditions imposed on the PDP sponsor under this paragraph (g).

(5) Ensuring the privacy and security of data. As a condition of receiving the requested data, the PDP sponsor must attest that it will adhere to the permitted uses and limitations on the use of the Medicare claims data listed in paragraphs (g)(3) and (4) of this section.

§ 423.154 Appropriate dispensing of prescription drugs in long-term care facilities under PDPs and MA-PD plans.

(a) In general. Except as provided in paragraph (b) of this section, when dispensing covered Part D drugs to enrollees who reside in long-term care facilities, a Part D sponsor must—

(1) Require all pharmacies servicing long-term care facilities, as defined in § 423.100 to—

(i) Dispense solid oral doses of brand-name drugs, as defined in § 423.4, to enrollees in such facilities in no greater than 14-day increments at a time;

(ii) Permit the use of uniform dispensing techniques for Part D drugs dispensed to enrollees in long-term care facilities under paragraph (a)(1)(i) of this section as defined by each of the long-term care facilities in which such enrollees reside; and

(2) Not penalize long-term care facilities' choice of more efficient uniform dispensing techniques described in paragraph (a)(1)(ii) of this section by prorating dispensing fees based on days' supply or quantity dispensed.

(3) Ensure that any difference in payment methodology among long-term care pharmacies incentivizes more efficient dispensing techniques.

(4) Collect and report information, in a form and manner specified by CMS, on the dispensing methodology used for each dispensing event described by paragraph (a)(1) of this section.

(b) Exclusions. CMS excludes from the requirements under paragraph (a) of this section—

(1) Solid oral doses of antibiotics; or

(2) Solid oral doses that are dispensed in their original container as indicated in the Food and Drug Administration Prescribing Information or are customarily dispensed in their original packaging to assist patients with compliance (for example, oral contraceptives).

(c) Waivers. CMS waives the requirements under paragraph (a) of this section, except paragraphs (a)(2) and (3) o this section, for pharmacies when they service intermediate care facilities for individuals with intellectual disabilities (ICFs/IID) and institutes for mental disease (IMDs) as defined in § 435.1010 and for I/T/U pharmacies (as defined in § 423.100).

(d) Applicability date. The applicability date for this section is January 1, 2013. Nothing precludes a Part D sponsor and pharmacy from mutually agreeing to an earlier implementation date.

(e) Unused drugs returned to the pharmacy. The terms and conditions that must be offered by a Part D sponsor under § 423.120(a)(5) must include provisions that address the disposal of drugs that have been dispensed to an enrollee in a long-term care facility but not used and which have been returned to the pharmacy, in accordance with Federal and State regulations, as well as whether return for credit and reuse is authorized where permitted under State law.

§ 423.156 Consumer satisfaction surveys.

Part D contracts with 600 or more enrollees as of July of the prior year must contract with approved Medicare Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey vendors to conduct the Medicare CAHPS satisfaction survey of Part D plan enrollees in accordance with CMS specifications and submit the survey data to CMS. Part D sponsors are not required to submit CAHPS data that would otherwise be required for the calculation of the 2021 Star Ratings.

§ 423.159 Electronic prescription drug program.

(a) Definitions. For purposes of this section, the following definitions apply:

Dispenser means a person or other legal entity licensed, registered, or otherwise permitted by the jurisdiction in which the person practices or the entity is located to provide drug products for human use by prescription in the course of professional practice.

Electronic media has the same meaning given this term in 45 CFR 160.103.

E-prescribing means the transmission using electronic media, of prescription or prescription-related information between a prescriber, dispenser, pharmacy benefit manager, or health plan, either directly or through an intermediary, including an e-prescribing network. E-prescribing includes, but is not limited to, two-way transmissions between the point of care and the dispenser.

Electronic prescription drug program means a program that provides for e-prescribing for covered Part D drugs prescribed for Part D eligible individuals.

Prescriber means a physician, dentist, or other person licensed, registered, or otherwise permitted by the U.S. or the jurisdiction in which he or she practices, to issue prescriptions for drugs for human use.

Prescription-related information means information regarding eligibility for drug benefits, medication history, or related health or drug information for Part D eligible individuals.

(b) [Reserved]

(c) Requirement. Part D sponsors must support and comply with electronic prescription standards relating to covered Part D drugs for Part D enrollees developed by CMS once final standards are effective.

(d) Promotion of electronic prescribing by MA-PD plans. An MA organization offering an MA-PD plan may provide for a separate or differential payment to a participating physician that prescribes covered Part D drugs in accordance with electronic prescription standards, including initial standards and final standards established by CMS once final standards are effective. Any payments must be in compliance with applicable Federal and State laws related to fraud and abuse, including the physician self-referral prohibition (section 1877 of the Act) and the Federal anti kickback statute (section 1128B(b) of the Act).

§ 423.160 Standards for electronic prescribing.

(a) General rules. (1) Part D sponsors must establish and maintain an electronic prescription drug program that complies with the applicable standards in paragraph (b) of this section when transmitting, directly or through an intermediary, prescriptions and prescription-related information using electronic media for covered Part D drugs for Part D eligible individuals.

(2) Except as provided in paragraph (a)(3) of this section, prescribers and dispensers that transmit, directly or through an intermediary, prescriptions and prescription-related information using electronic media (including entities transmitting prescriptions or prescription-related information where the prescriber is required by law to issue a prescription for a patient to a non-prescribing provider, such as a nursing facility, that in turn forwards the prescription to a dispenser), must comply with the applicable standards in paragraph (b) of this section when e-prescribing for covered Part D drugs for Part D eligible individuals.

(3)(i) Entities transmitting prescriptions or prescription-related information must utilize the NCPDP SCRIPT standard, consistent with paragraph (b)(1) of this section, in all instances other than temporary/transient network transmission failures.

(ii) Electronic transmission of prescriptions or prescription-related information by means of computer-generated facsimile is only permitted in instances of temporary/transient transmission failure and communication problems that would preclude the use of the NCPDP SCRIPT standard adopted by this section.

(iii) Entities may use either HL7 messages or the NCPDP SCRIPT standard to transmit prescriptions or prescription-related information internally when the sender and the recipient are part of the same legal entity. If an entity sends prescriptions outside the entity (for example, from an HMO to a non-HMO pharmacy), it must use the adopted NCPDP SCRIPT standard or other applicable adopted standards. Any pharmacy within an entity must be able to receive electronic prescription transmittals for Medicare beneficiaries from outside the entity using the adopted NCPDP SCRIPT standard. This exemption does not supersede any HIPAA requirement that may require the use of a HIPAA transaction standard within an organization.

(4) In accordance with section 1860D-4(e)(5) of the Act, the standards under this paragraph (b) of this section supersede any State law or regulation that—

(i) Is contrary to the standards or restricts the ability to carry out Part D of Title XVIII of the Act; and

(ii) Pertains to the electronic transmission of medication history and of information on eligibility, benefits, and prescriptions with respect to covered Part D drugs under Part D of Title XVIII of the Act.

(5) Beginning on January 1, 2021, prescribers must, except in the circumstances described in paragraphs (a)(5)(i) through (iii) of this section, conduct prescribing for at least 70 percent of their Schedule II, III, IV, and V controlled substances that are Part D drugs electronically using the applicable standards in paragraph (b) of this section, subject to the exemption in paragraph (a)(3)(iii) of this section. Prescriptions written for a beneficiary in a long-term care facility will not be included in determining compliance until January 1, 2028. Compliance actions against prescribers who do not meet the compliance threshold based on prescriptions written for a beneficiary in a long-term care facility will commence on or after January 1, 2028. Compliance actions against prescribers who do not meet the compliance threshold based on other prescriptions will commence on or after January 1, 2023. Prescribers will be exempt from this requirement in the following situations:

(i) Prescriber issues 100 or fewer controlled substance prescriptions for Part D drugs per calendar year as determined using CMS claims data with dates of service as of December 31st of the current year.

(ii) Prescriber has an address in PECOS in the geographic area of an emergency or disaster declared by a Federal, State, or local government entity. If a prescriber does not have an address in PECOS, prescriber has an address in NPPES in the geographic area of an emergency or disaster declared by a Federal, State, or local government entity. Starting in the 2024 measurement year, CMS will identify which emergencies or disasters qualify for this exception.

(iii) Prescriber has received a CMS-approved waiver because the prescriber is unable to conduct electronic prescribing of controlled substances (EPCS) due to circumstances beyond the prescriber's control.

(b) Standards —(1) Prescriptions, electronic prior authorization, and medication history. The communication of a prescription or prescription-related information must comply with a standard in 45 CFR 170.205(b) (incorporated by reference, see paragraph (c) of this section) for the following transactions, as applicable to the version of the standard in use:

(i)(A) GetMessage.

(B) Status.

(C) Error.

(D) RxChangeRequest and RxChangeResponse.

(E) RxRenewalRequest and RxRenewalResponse.

(F) Resupply.

(G) Verify.

(H) CancelRx and CancelRxResponse.

(I) RxFill.

(J) DrugAdministration.

(K) NewRxRequest.

(L) NewRx.

(M) NewRxResponseDenied.

(N) RxTransferInitiationRequest.

(O) RxTransfer.

(P) RxTransferConfirm.

(Q) RxFillIndicatorChange.

(R) Recertification.

(S) REMSInitiationRequest and REMSInitiationResponse.

(T) REMSRequest and REMSResponse.

(U) RxHistoryRequest and RxHistoryResponse.

(V) PAInitiationRequest and PAInitiationResponse.

(W) PARequest and PAResponse.

(X) PAAppealRequest and PAAppealResponse.

(Y) PACancelRequest and PACancelResponse.

(Z) PANotification.

(ii) [Reserved]

(2) Eligibility. Eligibility inquiries and responses between the Part D sponsor and prescribers and between the Part D sponsor and dispensers must comply with 45 CFR 162.1202.

(3) Formulary and benefits. The National Council for Prescription Drug Programs Formulary and Benefits Standard, Implementation Guide, Version 3, Release 0 (Version 3.0), (incorporated by reference, see paragraph (c)) of this section) or comply with a standard in 45 CFR 170.205(u) (incorporated by reference, see paragraph (c) of this section) for transmitting formulary and benefits information between prescribers and Part D sponsors. Beginning January 1, 2027, transmission of formulary and benefit information between prescribers and Part D sponsors must comply with a standard in 45 CFR 170.205(u) (incorporated by reference, see paragraph (c) of this section).

(4) Provider identifier. The National Provider Identifier (NPI), as defined at 45 CFR 162.406, to identify an individual health care provider to Medicare Part D sponsors, prescribers and dispensers, in electronically transmitted prescriptions or prescription-related materials for Medicare Part D covered drugs for Medicare Part D eligible individuals.

(5) Real-time benefit tools. Part D sponsors must implement one or more electronic real-time benefit tools (RTBT) that are capable of integrating with at least one prescriber's e-Prescribing (eRx) system or electronic health record (EHR) to provide complete, accurate, timely, clinically appropriate, patient-specific formulary and benefit information to the prescriber in real time for assessing coverage under the Part D plan. Such information must include enrollee cost-sharing information, clinically appropriate formulary alternatives, when available, and the formulary status of each drug presented including any utilization management requirements applicable to each alternative drug. Beginning January 1, 2027, Part D sponsors' RTBT must comply with a standard in 45 CFR 170.205(c) (incorporated by reference, see paragraph (c) of this section).

(c) Incorporation by reference. The material listed in this paragraph (c) is incorporated by reference into this section with the approval of the Director of the Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. All approved incorporation by reference (IBR) material is available for inspection at the Centers for Medicare & Medicaid Services (CMS) and at the National Archives and Records Administration (NARA). Contact CMS at: CMS 7500 Security Boulevard, Baltimore, Maryland 21244; phone: [phone] or [phone]; email: [email protected]. For information on the availability of this material at NARA, visit www.archives.gov/federal-register/cfr/ibr-locations or email [email protected]. The material may be obtained from National Council for Prescription Drug Programs (NCPDP), Incorporated, 9240 E Raintree Drive, Scottsdale, AZ 85260-7518; phone: [phone]; email: [email protected]; website: www.ncpdp.org.

(1) NCPDP Formulary and Benefit Standard, Implementation Guide, Version 3, Release 0 (Version 3.0), ANSI-approved January 28, 2011.

(2) NCPDP SCRIPT Standard, Implementation Guide Version 2017071, ANSI-approved July 28, 2017.

(3) NCPDP SCRIPT Standard, Implementation Guide Version 2023011, ANSI-approved January 17, 2023.

(4) NCPDP Real-Time Prescription Benefit Standard, Implementation Guide Version 13, ANSI-approved May 19, 2022.

(5) NCPDP Formulary and Benefit Standard, Implementation Guide Version 60, ANSI-approved April 12, 2023.

§ 423.162 Quality improvement organization activities.

(a) General rule. Quality improvement organizations (QIOs) are required to offer providers, practitioners, and Part D sponsors quality improvement assistance pertaining to health care services, including those related to prescription drug therapy, in accordance with contracts established with the Secretary.

(b) Collection of information. Information collected, acquired, or generated by a QIO in the performance of its responsibilities under this section is subject to the confidentiality provisions of part 480 of this chapter. Part D sponsors are required to provide specified information to CMS for distribution to the QIOs as well as directly to QIOs.

(c) Applicability of QIO confidentiality provisions. The provisions of part 480 of this chapter apply to Part D sponsors in the same manner as such provisions apply to institutions under part 480 of this chapter.

§ 423.165 Compliance deemed on the basis of accreditation.

(a) General rule. A Part D sponsor is deemed to meet all of the requirements of any of the areas described in paragraph (b) of this section if—

(1) The Part D sponsor is fully accredited (and periodically reaccredited) for the standards related to the applicable area under paragraph (b) of this section by a private, national accreditation organization approved by CMS; and

(2) The accreditation organization uses the standards approved by CMS for the purposes of assessing the Part D sponsor's compliance with Medicare requirements.

(b) Deemable requirements. The requirements relating to the following areas are deemable:

(1) Access to covered drugs, as provided under §§ 423.120 and 423.124.

(2) Drug utilization management programs, quality assurance measures and systems, and MTM programs as provided under § 423.153.

(3) Privacy, confidentiality, and accuracy of enrollee records, as provided under § 423.136.

(c) Effective date of deemed status. The date the Part D sponsor is deemed to meet the applicable requirements is the later of the following:

(1) The date the accreditation organization is approved by CMS.

(2) The date the Part D sponsor is accredited by the accreditation organization.

(d) Obligations of deemed Part D sponsors. A Part D sponsor deemed to meet Medicare requirements must—

(1) Submit to surveys by CMS to validate its accreditation organization's accreditation process; and

(2) Authorize its accreditation organization to release to CMS a copy of its most recent accreditation survey, together with any survey-related information that CMS may require (including corrective action plans and summaries of unmet CMS requirements).

(e) Removal of deemed status. CMS removes part or all of a Part D sponsor's deemed status for any of the following reasons—

(1) CMS determines, on the basis of its own investigation, that the Part D sponsor does not meet the Medicare requirements for which deemed status was granted.

(2) CMS withdraws its approval of the accreditation organization that accredited the Part D sponsor.

(3) The Part D sponsor fails to meet the requirements of paragraph (d) of this section.

(f) Authority. Nothing in this section limits CMS' authority under subparts K and O of this part, including, but not limited to the ability to impose intermediate sanctions, civil money penalties, and terminate a contract with a Part D plan sponsor.

§ 423.168 Accreditation organizations.

(a) Conditions for approval. CMS may approve an accreditation organization for a given standard under this part if the organization meets the following conditions:

(1) In accrediting Part D sponsors and Part D plans, it applies and enforces standards that are at least as stringent as Medicare requirements for the standard or standards in question.

(2) It complies with the application and reapplication procedures set forth in § 423.171.

(3) It ensures that—

(i) Any individual associated with it, who is also associated with an entity it accredits, does not influence the accreditation decision concerning that entity;

(ii) The majority of the membership of its governing body is not comprised of managed care organizations, Part D sponsors or their representatives; and

(iii) Its governing body has a broad and balanced representation of interests and acts without bias.

(b) Notice and comment —(1) Proposed notice. CMS publishes a notice in the Federal Register whenever it is considering granting an accreditation organization's application for approval. The notice-

(i) Announces CMS's receipt of the accreditation organization's application for approval;

(ii) Describes the criteria CMS uses in evaluating the application; and

(iii) Provides at least a 30-day comment period.

(2) Final notice. (i) After reviewing public comments, CMS publishes a final notice in the Federal Register indicating whether it has granted the accreditation organization's request for approval.

(ii) If CMS grants the request, the final notice specifies the effective date and the term of the approval that may not exceed 6 years.

(c) Ongoing responsibilities of an approved accreditation organization. An accreditation organization approved by CMS must undertake the following activities on an ongoing basis:

(1) Provide to CMS in written form and on a monthly basis all of the following:

(i) Copies of all accreditation surveys, together with any survey-related information that CMS may require including corrective action plans and summaries of unmet CMS requirements).

(ii) Notice of all accreditation decisions.

(iii) Notice of all complaints related to deemed Part D sponsors.

(iv) Information about any Part D sponsor against which the accrediting organization has taken remedial or adverse action, including revocation, withdrawal, or revision of the Part D sponsor's accreditation. (The accreditation organization must provide this information within 30 days of taking the remedial or adverse action.)

(v) Notice of any proposed changes in its accreditation standards or requirements or survey process. If the organization implements the changes before or without CMS approval, CMS may withdraw its approval of the accreditation organization.

(2) Within 30 days of a change in CMS requirements, submit the following to CMS—

(i) An acknowledgment of CMS's notification of the change.

(ii) A revised crosswalk reflecting the new requirements.

(iii) An explanation of how the accreditation organization plans to alter its standards to conform to CMS's new requirements, within the timeframes specified in the notification of change it receives from CMS.

(3) Permit its surveyors to serve as witnesses if CMS takes an adverse action based on accreditation findings.

(4) Within 3 days of identifying, in an accredited Part D sponsor, a deficiency that as determined by the accrediting organization poses immediate jeopardy to the plan's enrollees or to the general public, give CMS written notice of the deficiency.

(5) Within 10 days of CMS's notice of withdrawal of approval, give written notice of the withdrawal to all accredited Part D sponsors.

(6) On an annual basis, provide summary data specified by CMS that relate to the past year's accreditation activities and trends.

(d) Continuing Federal oversight of approved accreditation organizations. Specific criteria and procedures for continuing oversight and for withdrawing approval of an accreditation organization include the following:

(1) Equivalency review. CMS compares the accreditation organization's standards and its application and enforcement of those standards to the comparable CMS requirements and processes when—

(i) CMS imposes new requirements or changes its survey process;

(ii) An accreditation organization proposes to adopt new standards or changes in its survey process; or

(iii) The term of an accreditation organization's approval expires.

(2) Validation review. CMS or its agent may conduct a survey of an accredited organization, examine the results of the accreditation organization's own survey, or attend the accreditation organization's survey to validate the organization's accreditation process. At the conclusion of the review, CMS identifies any accreditation programs for which validation survey results indicate—

(i) A 20 percent rate of disparity between certification by the accreditation organization and certification by CMS or its agent on standards that do not constitute immediate jeopardy to patient health and safety if unmet;

(ii) Any disparity between certification by the accreditation organization and certification by CMS or its agent on standards that constitute immediate jeopardy to patient health and safety if unmet; or

(iii) That, regardless of the rate of disparity, there are widespread or systematic problems in an organization's accreditation process that accreditation no longer provides assurance that the Medicare requirements are met or exceeded.

(3) Onsite observation. CMS may conduct an onsite inspection of the accreditation organization's operations and offices to verify the organization's representations and assess the organization's compliance with its own policies and procedures. The onsite inspection may include, but is not limited to the following:

(i) Reviewing documents.

(ii) Auditing meetings concerning the accreditation process.

(iii) Evaluating survey results or the accreditation status decision-making process.

(iv) Interviewing the organization's staff.

(4) Notice of intent to withdraw approval. If an equivalency review, validation review, onsite observation, or CMS's daily experience with the accreditation organization suggests that the accreditation organization is not meeting the requirements of this subpart, CMS gives the organization written notice of its intent to withdraw approval.

(5) Withdrawal of approval. CMS may withdraw its approval of an accreditation organization at any time if CMS determines that—

(i) Deeming, based on accreditation, no longer guarantees that the Part D sponsor meets the requirements for offering qualified prescription drug coverage, and failure to meet those requirements may jeopardize the health or safety of Medicare enrollees and constitute a significant hazard to the public health; or

(ii) The accreditation organization has failed to meet its obligations under this section or under § 423.165 or § 423.171.

(6) Reconsideration of withdrawal of approval. An accreditation organization dissatisfied with a determination to withdraw CMS approval may request a reconsideration of that determination in accordance with subpart D of part 488 of this chapter.

§ 423.171 Procedures for approval of accreditation as a basis for deeming compliance.

(a) Required information and materials. A private, national accreditation organization applying for approval must furnish to CMS all of the following information and materials (when reapplying for approval, the organization need furnish only the particular information and materials requested by CMS):

(1) The types of Part D plans and sponsors that it reviews as part of its accreditation process.

(2) A detailed comparison of the organization's accreditation requirements and standards with the Medicare requirements (for example, a crosswalk).

(3) Detailed information about the organization's survey process, including the following:

(i) Frequency of surveys and whether surveys are announced or unannounced.

(ii) Copies of survey forms, and guidelines and instructions to surveyors.

(iii) Descriptions of—

(A) The survey review process and the accreditation status decision making process;

(B) The procedures used to notify accredited Part D sponsors of deficiencies and to monitor the correction of those deficiencies; and

(C) The procedures used to enforce compliance with accreditation requirements.

(4) Detailed information about the individuals who perform surveys for the accreditation organization, including the—

(i) Size and composition of accreditation survey teams for each type of plan reviewed as part of the accreditation process;

(ii) Education and experience requirements surveyors must meet;

(iii) Content and frequency of the in-service training provided to survey personnel;

(iv) Evaluation systems used to monitor the performance of individual surveyors and survey teams; and

(v) Organization's policies and practice for the participation, in surveys or in the accreditation decision process by an individual who is professionally or financially affiliated with the entity being surveyed.

(5) A description of the organization's data management and analysis system for its surveys and accreditation decisions, including the kinds of reports, tables, and other displays generated by that system.

(6) A description of the organization's procedures for responding to and investigating complaints against accredited organizations, including policies and procedures regarding coordination of these activities with appropriate licensing bodies and ombudsmen programs.

(7) A description of the organization's policies and procedures for the withholding or removal of accreditation for failure to meet the accreditation organization's standards or requirements, and other actions the organization takes in response to noncompliance with its standards and requirements.

(8) A description of all types (for example, full or partial) and categories (for example, provisional, conditional, or temporary) of accreditation offered by the organization, the duration of each type and category of accreditation, and a statement identifying the types and categories that serve as a basis for accreditation if CMS approves the accreditation organization.

(9) A list of all currently accredited Part D sponsors and MA organizations and the type, category, and expiration date of the accreditation held by each of them.

(10) A list of all full and partial accreditation surveys scheduled to be performed by the accreditation organization as requested by CMS.

(11) The name and address of each person with an ownership or control interest in the accreditation organization.

(b) Required supporting documentation. A private, national accreditation organization applying or reapplying for approval also must submit the following supporting documentation—

(1) A written presentation that demonstrates its ability to furnish CMS with electronic data in CMS compatible format.

(2) A resource analysis that demonstrates that it's staffing, funding, and other resources are adequate to perform the required surveys and related activities.

(3) A statement acknowledging that, as a condition for approval, it agrees to comply with the ongoing responsibility requirements of § 423.168(c).

(c) Additional information. If CMS determines that it needs additional information for a determination to grant or deny the accreditation organization's request for approval, it notifies the organization and allows time for the organization to provide the additional information.

(d) Onsite visit. CMS may visit the accreditation organization's offices to verify representations made by the organization in its application, including, but not limited to, review of documents and interviews with the organization's staff.

(e) Notice of determination. CMS gives the accreditation organization, within 210 days of receipt of its completed application, a formal notice that—

(1) States whether the request for approval is granted or denied;

(2) Gives the rationale for any denial; and

(3) Describes the reconsideration and reapplication procedures.

(f) Withdrawal. An accreditation organization may withdraw its application for approval at any time before it receives the formal notice specified in paragraph (e) of this section.

(g) Reconsideration of adverse determination. An accreditation organization that has received a notice of denial of its request for approval may request a reconsideration in accordance with subpart D of part 488 of this chapter.

(h) Request for approval following denial. (1) Except as provided in paragraph (h)(2) of this section, an accreditation organization that has received notice of denial of its request for approval may submit a new request if it—

(i) Has revised its accreditation program to correct the deficiencies on which the denial was based.

(ii) Can demonstrate that the Part D sponsors that it has accredited meet or exceed applicable Medicare requirements; and

(iii) Resubmits the application in its entirety.

(2) An accreditation organization that has requested reconsideration of CMS' denial of its request for approval may not submit a new request until the reconsideration is administratively final.

§ 423.180 Basis and scope of the Part D Prescription Drug Plan Quality Rating System.

(a) Basis. This subpart is based on sections 1851(d), 1852(e), 1853(o) and 1854(b)(3)(iii), (v), and (vi) of the Act and the general authority under section 1856(b) of the Act requiring the establishment of standards consistent with and to carry out Part D.

(b) Purpose. Ratings calculated and assigned under this subpart will be used by CMS for the following purposes:

(1) To provide comparative information on plan quality and performance to beneficiaries for their use in making knowledgeable enrollment and coverage decisions in the Medicare program.

(2) To provide quality ratings on a 5-star rating system.

(3) To provide a means to evaluate and oversee overall and specific compliance with certain regulatory and contract requirements by Part D plans, where appropriate and possible to use data of the type described in § 423.182(c).

(c) Applicability. Except for § 423.182(b)(3), the regulations in this subpart will be applicable beginning with the 2019 measurement period and the associated 2021 Star Ratings that are released prior to the annual coordinated election period for the 2021 contract year.

§ 423.182 Part D Prescription Drug Plan Quality Rating System.

(a) Definitions. In this subpart the following terms have the meanings:

Absolute percentage cap is a cap applied to non-CAHPS measures that are on a 0 to 100 scale that restricts movement of the current year's measure-threshold-specific cut point to no more than the stated percentage as compared to the prior year's cut point.

CAHPS refers to a comprehensive and evolving family of surveys that ask consumers and patients to evaluate the interpersonal aspects of health care. CAHPS surveys probe those aspects of care for which consumers and patients are the best or only source of information, as well as those that consumers and patients have identified as being important. CAHPS initially stood for the Consumer Assessment of Health Plans Study, but as the products have evolved beyond health plans the acronym now stands for Consumer Assessment of Healthcare Providers and Systems.

Case-mix adjustment means an adjustment to the measure score made prior to the score being converted into a Star Rating to take into account certain enrollee characteristics that are not under the control of the plan. For example age, education, chronic medical conditions, and functional health status that may be related to the enrollee's survey responses.

Categorical Adjustment Index (CAI) means the factor that is added to or subtracted from an overall or summary Star Rating (or both) to adjust for the average within-contract (or within-plan as applicable) disparity in performance associated with the percentages of beneficiaries who are dually eligible for Medicare and enrolled in Medicaid, beneficiaries who receive a Low Income Subsidy, or have disability status in that contract (or plan as applicable).

Clustering refers to a variety of techniques used to partition data into distinct groups such that the observations within a group are as similar as possible to each other, and as dissimilar as possible to observations in any other group. Clustering of the measure-specific scores means that gaps that exist within the distribution of the scores are identified to create groups (clusters) that are then used to identify the four cut points resulting in the creation of five levels (one for each Star Rating), such that the scores in the same Star Rating level are as similar as possible and the scores in different Star Rating levels are as different as possible. Technically, the variance in measure scores is separated into within-cluster and between-cluster sum of squares components. The clusters reflect the groupings of numeric value scores that minimize the variance of scores within the clusters. The Star Ratings levels are assigned to the clusters that minimize the within-cluster sum of squares. The cut points for star assignments are derived from the range of measure scores per cluster, and the star levels associated with each cluster are determined by ordering the means of the clusters.

Consolidation means when an MA organization that has at least two contracts for health and/or drug services of the same plan type under the same parent organization in a year combines multiple contracts into a single contract for the start of the subsequent contract year.

Consumed contract means a contract that will no longer exist after a contract year's end as a result of a consolidation.

Cut point cap is a restriction on the change in the amount of movement a measure-threshold-specific cut point can make as compared to the prior year's measure-threshold-specific cut point. A cut point cap can restrict upward movement, downward movement, or both.

Display page means the CMS website on which certain measures and scores are publicly available for informational purposes; the measures that are presented on the display page are not used in assigning Part C and D Star Ratings.

Domain rating means the rating that groups measures together by dimensions of care.

Dual-eligible (DE) means a beneficiary who is enrolled in both Medicare and Medicaid.

Guardrail is a bidirectional cap that restricts both upward and downward movement of a measure-threshold-specific cut point for the current year's measure-level Star Ratings as compared to the prior year's measure-threshold-specific cut point.

Health equity index means an index that summarizes contract performance among those with specified social risk factors (SRFs) across multiple measures into a single score.

Highest rating means the overall rating for MA-PDs, the Part C summary rating for MA-only contracts, and the Part D summary rating for PDPs.

Highly-rated contract means a contract that has 4 or more stars for its highest rating when calculated without the improvement measures and with all applicable adjustments in § 423.186(f).

Low-income subsidy (LIS) means the subsidy that a beneficiary receives to help pay for prescription drug coverage (see § 423.34 for definition of a low-income subsidy eligible individual).

Mean resampling refers to a technique where measure-specific scores for the current year's Star Ratings are randomly separated into 10 equal-sized groups. The hierarchal clustering algorithm is done 10 times, each time leaving one of the 10 groups out. By leaving out one of the 10 groups for each run, 9 of the 10 groups, which is 90 percent of the applicable measure scores, are used for each run of the clustering algorithm. The method results in 10 sets of measure-specific cut points. The mean cut point for each threshold per measure is calculated using the 10 values.

Measurement period means the period for which data are collected for a measure or the performance period that a measures covers.

Measure score means the numeric value of the measure or an assigned `missing data' message.

Measure star means the measure's numeric value is converted to a Star Rating. It is displayed to the nearest whole star, using a 1-5 star scale.

Overall rating means a global rating that summarizes the quality and performance for the types of services offered across all unique Part C and Part D measures.

Part C summary rating means a global rating that summarizes the health plan quality and performance on Part C measures.

Part D summary rating means a global rating that summarizes prescription drug plan quality and performance on Part D measures.

Plan benefit package (PBP) means a set of benefits for a defined MA or PDP service area. The PBP is submitted by Part D plan sponsors and MA organizations to CMS for benefit analysis, bidding, marketing, and beneficiary communication purposes.

Reliability means a measure of the fraction of the variation among the observed measure values that is due to real differences in quality (“signal”) rather than random variation (“noise”); it is reflected on a scale from 0 (all differences in plan performance measure scores are due to measurement error) to 1 (the difference in plan performance scores is attributable to real differences in performance).

Restricted range is the difference between the maximum and minimum measure score values using the prior year measure scores excluding outer fence outliers (first quartile −3*Interquartile Range (IQR) and third quartile + 3*IQR).

Restricted range cap is a cap applied to non-CAHPS measures that restricts movement of the current year's measure-threshold-specific cut point to no more than the stated percentage of the restricted range of a measure calculated using the prior year's measure score distribution.

Reward factor means a rating-specific factor added to the contract's summary or overall ratings (or both) if a contract has both high and stable relative performance.

Statistical significance assesses how likely differences observed in performance are due to random chance alone under the assumption that plans are actually performing the same.

Surviving contract means the contact that will still exist under a consolidation, and all of the beneficiaries enrolled in the consumed contract(s) are moved to the surviving contracts.

Traditional rounding rules mean that the last digit in a value will be rounded. If rounding to a whole number, look at the digit in the first decimal place. If the digit in the first decimal place is 0, 1, 2, 3 or 4, then the value should be rounded down by deleting the digit in the first decimal place. If the digit in the first decimal place is 5 or greater, then the value should be rounded up by 1 and the digit in the first decimal place deleted.

Tukey outer fence outliers are measure scores that are below a certain point (first quartile−3.0 × (third quartile−first quartile)) or above a certain point (third quartile + 3.0 × (third quartile−first quartile)).

(b) Contract ratings —(1) General. CMS calculates an overall Star Rating, Part C summary rating, and Part D summary rating for each MA-PD contract and a Part D summary rating for each PDP contract using the 5-star rating system described in this subpart. For PDP contracts, the Part D summary rating is the highest rating. Measures are assigned stars at the contract level and weighted in accordance with § 423.186(a). Domain ratings are the unweighted mean of the individual measure ratings under the topic area in accordance with § 423.186(b). Summary ratings are the weighted mean of the individual measure ratings for Part C or Part D in accordance with § 423.186(c), with the applicable adjustments provided in paragraph (f) of this section. Overall Star Ratings are calculated by using the weighted mean of the individual measure ratings in accordance with § 423.186(d), with the applicable adjustments provided in paragraph (f) of this section. CMS includes the Star Ratings measures in the overall and summary ratings that are associated with the contract type for the Star Ratings year.

(2) Plan benefit packages. All plan benefit packages (PBPs) offered under an MA contract or PDP plan sponsor have the same overall and/or summary Star Ratings as the contract under which the PBP is offered by the MA organization or PDP plan sponsor. Data from all the PBPs offered under a contract are used to calculate the measure and domain ratings for the contract.

(3) Contract consolidations. (i) In the case of contract consolidations involving two or more contracts for health and/or drug services of the same plan type under the same parent organization, CMS assigns Star Ratings for the first and second years following the consolidation based on the enrollment-weighted mean of the measure scores of the surviving and consumed contract(s) as provided in paragraph (b)(3)(ii) of this section.

(ii) The Star Ratings posted on Medicare Plan Finder for contracts that consolidate are as follows:

(A)( 1 ) For the first year after consolidation, CMS uses enrollment-weighted measure scores using the July enrollment of the measurement period of the consumed and surviving contracts for all measures, except survey-based measures, call center measures, and improvement measures. The survey-based measures will use enrollment of the surviving and consumed contracts at the time the sample is pulled for the rating year. The call center measures will use average enrollment during the study period. The Part C and D improvement measures are not calculated for first year consolidations.

( 2 ) For contract consolidations approved on or after January 1, 2022, if a measure score for a consumed or surviving contract is missing due to a data integrity issue as described in § 423.184(g)(1)(i) and (ii), CMS assigns a score of zero for the missing measure score in the calculation of the enrollment-weighted measure score.

(B)( 1 ) For the second year after consolidation, CMS uses the enrollment-weighted measure scores using the July enrollment of the measurement year of the consumed and surviving contracts for all measures except for CAHPS. CMS ensures that the CAHPS survey sample includes enrollees in the sample frame from both the surviving and consumed contracts.

( 2 ) For contract consolidations approved on or after January 1, 2022, for all measures except CAHPS if a measure score for a consumed or surviving contract is missing due to a data integrity issue as described in § 423.184(g)(1)(i) and (ii), CMS assigns a score of zero for the missing measure score in the calculation of the enrollment-weighted measure score.

(iii) This provision governing the Star Ratings of surviving contracts is applicable to contract consolidations that are approved on or after January 1, 2019.

(c) Data sources. (1) Part D Star Ratings measures reflect structure, process, and outcome indices of quality. This includes information of the following types: Beneficiary experiences, benefit administration information, clinical data, and CMS administrative data. Data underlying Star Ratings measures may include survey data, data separately collected and used in oversight of Part D plans' compliance with contract requirements, data submitted by plans, and CMS administrative data.

(2) Part D sponsors are required to collect, analyze, and report data that permit measurements of health outcomes and other indices of quality. Part D sponsors must provide unbiased, accurate, and complete quality data described in paragraph (c)(1) of this section to CMS on a timely basis as requested by CMS.

(3) For 2021 Star Ratings only, Part D sponsors are not required to submit CAHPS data that would otherwise be required for the calculation of the 2021 Star Ratings.

§ 423.184 Adding, updating, and removing measures.

(a) General. CMS adds, updates, and removes measures used to calculate the Star Ratings as provided in this section. CMS lists the measures used for a particular Star Rating each year in the Technical Notes or similar guidance document with publication of the Star Ratings.

(b) Review of data quality. CMS reviews the quality of the data on which performance, scoring and rating of a measure is based before using the data to score and rate performance or in calculating a Star Rating. This includes review of variation in scores among MA organizations and Part D plan sponsors, and the accuracy, reliability, and validity of measures and performance data before making a final determination about inclusion of measures in each year's Star Ratings.

(c) Adding measures. (1) CMS will continue to review measures that are nationally endorsed and in alignment with the private sector, such as measures developed by National Committee for Quality Assurance (NCQA) and the Pharmacy Quality Alliance (PQA) or endorsed by the National Quality Forum for adoption and use in the Part D Quality Ratings System. CMS may develop its own measures as well when appropriate to measure and reflect performance specific to the Medicare program.

(2) In advance of the measurement period, CMS will announce potential new measures and solicit feedback through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act and then subsequently will propose and finalize new measures through rulemaking.

(3) New measures added to the Part D Star Ratings program will be on the display page on www.cms.gov for a minimum of 2 years prior to becoming a Star Ratings measure.

(4) A measure will remain on the display page for longer than 2 years if CMS finds reliability or validity issues with the measure specification.

(d) Updating measures —(1) Non-substantive updates. For measures that are already used for Star Ratings, CMS will update measures so long as the changes in a measure are not substantive. CMS will announce non-substantive updates to measures that occur (or are announced by the measure steward) during or in advance of the measurement period through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act. Non-substantive measure specification updates include those that—

(i) Narrow the denominator or population covered by the measure;

(ii) Do not meaningfully impact the numerator or denominator of the measure;

(iii) Update the clinical codes with no change in the target population or the intent of the measure;

(iv) Provide additional clarifications:

(A) Adding additional qualifiers that would meet the numerator requirements;

(B) Clarifying documentation requirements;

(C) Adding additional instructions; or

(v) Add alternative data sources or expand modes of data collection.

(2) Substantive updates. For measures that are already used for Star Ratings, in the case of measure specification updates that are substantive updates not subject to paragraph (d)(1) of this section, CMS will propose and finalize these measures through rulemaking similar to the process for adding new measures. CMS will initially solicit feedback on whether to make substantive measure updates through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act. Once the update has been made to the measure specification by the measure steward, CMS may continue collection of the performance data for the legacy measure and include it in Star Ratings until the updated measure has been on display for 2 years. CMS will place the updated measure on the display page for at least 2 years prior to using the updated measure to calculate and assign Star Ratings as specified in paragraph (c) of this section.

(e) Removing measures. (1) CMS will remove a measure from the Star Ratings program as follows:

(i) When the clinical guidelines associated with the specifications of the measure change such that the specifications are no longer believed to align with positive health outcomes, or

(ii) A measure shows low statistical reliability.

(iii) The measure steward other than CMS retires a measure.

(2) CMS will announce in advance of the measurement period the removal of a measure based upon its application of this paragraph (e) through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act in advance of the measurement period.

(f) Improvement measure. CMS will calculate improvement measure scores based on a comparison of the measure scores for the current year to the immediately preceding year as provided in this paragraph (f); the improvement measure score would be calculated for Parts C and D separately by taking a weighted sum of net improvement divided by the weighted sum of the number of eligible measures.

(1) Identifying eligible measures. Annually, the subset of measures to be included in the Part D improvement measure will be announced through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act. CMS identifies measures to be used in the improvement measure if the measures meet all the following:

(i) CMS will include only measures available for the current and previous year in the improvement measures and that have numeric value scores in both the current and prior year.

(ii) CMS will exclude any measure for which there was a substantive specification change from the previous year.

(iii) The Part D improvement measure will include only Part D measure scores.

(iv) CMS excludes any measure that receives a measure-level Star Rating reduction for data integrity concerns for either the current or prior year from the improvement measure(s).

(2) Determining eligible contracts. CMS will calculate an improvement score only for contracts that have numeric measure scores for both years in at least half of the measures identified for use applying the standards in paragraphs (f)(1)(i) through (iii) of this section.

(3) Special rules for calculation of the improvement score. For any measure used for the improvement measure for which a contract received 5 stars in each of the years examined, but for which the measure score demonstrates a statistically significant decline based on the results of the significance testing (at a level of significance of 0.05) on the change score, the measure will be categorized as having no significant change and included in the count of measures used to determine eligibility for the measure (that is, for the denominator of the improvement measure score).

(4) Calculation of the improvement score. The improvement measure will be calculated as follows:

(i) The improvement change score (the difference in the measure scores in the 2-year period) will be determined for each measure that has been designated an improvement measure and for which a contract has a numeric score for each of the 2 years examined.

(ii) Each contract's improvement change score per measure will be categorized as a significant change or not a significant change by employing a two-tailed t-test with a level of significance of 0.05.

(iii) The net improvement per measure category (outcome, access, patient experience, process) would be calculated by finding the difference between the weighted number of significantly improved measures and significantly declined measures, using the measure weights associated with each measure category.

(iv) The improvement measure score will then be determined by calculating the weighted sum of the net improvement per measure category divided by the weighted sum of the number of eligible measures.

(v) The improvement measure scores will be converted to measure-level Star Ratings by determining the cut points using hierarchical clustering algorithms in accordance with § 423.186(a)(2)(i) through (iii).

(vi) The Part D improvement measure cut points for MA-PDs and PDPs will be determined using separate clustering algorithms in accordance with §§ 422.166(a)(2)(iii) and 423.186(a)(2)(iii).

(g) Data integrity. (1) CMS will reduce a contract's measure rating when CMS determines that a contract's measure data are inaccurate, incomplete, or biased; such determinations may be based on a number of reasons, including mishandling of data, inappropriate processing, or implementation of incorrect practices that have an impact on the accuracy, impartiality, or completeness of the data used for one or more specific measure(s).

(i) CMS will reduce measures based on data that a Part D organization must submit to CMS under § 423.514 to 1 star when a contract did not score at least 95 percent on data validation for the applicable reporting section or was not compliant with CMS data validation standards/sub-standards for data directly used to calculate the associated measure.

(ii) [Reserved]

(2) CMS will reduce a measure rating to 1 star for additional concerns that data inaccuracy, incompleteness, or bias have an impact on measure scores and are not specified in paragraphs (g)(1)(i) and (ii) of this section, including a contract's failure to adhere to CAHPS reporting requirements.

(h) Review of sponsors' data. (1) A Part D plan sponsor may request that CMS or the IRE review its' contract's appeals data provided that the request is received by the annual deadline set by CMS for the applicable Star Ratings year.

(2) A Part D plan sponsor may request that CMS review its' contract's Complaints Tracking Module (CTM) data provided that the request is received by the annual deadline set by CMS for the applicable Star Ratings year.

(i) [Reserved]

(3) Beginning with the 2025 measurement year (2027 Star Ratings), Part D sponsor may request that CMS review its contract's administrative data for Patient Safety measures provided that the request is received by the annual deadline set by CMS for the applicable Star Ratings year.

§ 423.186 Calculation of Star Ratings.

(a) Measure Star Ratings —(1) Cut points. CMS will determine cut points for the assignment of a Star Rating for each numeric measure score by applying either a clustering or a relative distribution and significance testing methodology. For the Part D measures, CMS will determine MA-PD and PDP cut points separately.

(2) Clustering algorithm for all measures except CAHPS measures.

(i) The method maximizes differences across the star categories and minimizes the differences within star categories using mean resampling with the hierarchal clustering of the current year's data. Effective for the Star Ratings issued in October 2023 and subsequent years, prior to applying mean resampling with hierarchal clustering, Tukey outer fence outliers are removed. Effective for the Star Ratings issued in October 2022 and subsequent years, CMS will add a guardrail so that the measure-threshold-specific cut points for non-CAHPS measures do not increase or decrease more than the value of the cap from 1 year to the next. The cap is equal to 5 percentage points for measures having a 0 to 100 scale (absolute percentage cap) or 5 percent of the restricted range for measures not having a 0 to 100 scale (restricted range cap). New measures that have been in the Part C and D Star Rating program for 3 years or less use the hierarchal clustering methodology with mean resampling with no guardrail for the first 3 years in the program.

(ii) In cases where multiple clusters have the same measure score value range, those clusters would be combined, leading to fewer than 5 clusters.

(iii) The clustering algorithm for the improvement measure scores is done in two steps to determine the cut points for the measure-level Star Ratings. Clustering is conducted separately for improvement measure scores greater than or equal to zero and those with improvement measure scores less than zero.

(A) Improvement scores of zero or greater would be assigned at least 3 stars for the improvement Star Rating.

(B) Improvement scores less than zero would be assigned either 1 or 2 stars for the improvement Star Rating.

(3) Relative distribution and significance testing for CAHPS measures. The method combines evaluating the relative percentile distribution with significance testing and accounts for the reliability of scores produced from survey data; no measure Star Rating is produced if the reliability of a CAHPS measure is less than 0.60. Low reliability scores are defined as those with at least 11 respondents, reliability greater than or equal to 0.60 but less than 0.75, and also in the lowest 12 percent of contracts ordered by reliability. The following rules apply:

(i) A contract is assigned 1 star if both of the criteria in paragraphs (a)(3)(i)(A) and (B) of this section are met plus at least one of the criteria in paragraphs (a)(3)(i)(C) or (D) of this section is met:

(A) Its average CAHPS measure score is lower than the 15th percentile; and

(B) Its average CAHPS measure score is statistically significantly lower than the national average CAHPS measure score;

(C) The reliability is not low; or

(D) Its average CAHPS measure score is more than one standard error below the 15th percentile.

(ii) A contract is assigned 2 stars if it does not meet the 1-star criteria and meets at least one of these three criteria:

(A) Its average CAHPS measure score is lower than the 30th percentile and the measure does not have low reliability; or

(B) Its average CAHPS measure score is lower than the 15th percentile and the measure has low reliability; or

(C) Its average CAHPS measure score is statistically significantly lower than the national average CAHPS measure score and below the 60th percentile.

(iii) A contract is assigned 3 stars if it meets at least one of these three criteria:

(A) Its average CAHPS measure score is at or above the 30th percentile and lower than the 60th percentile, and it is not statistically significantly different from the national average CAHPS measure score; or

(B) Its average CAHPS measure score is at or above the 15th percentile and lower than the 30th percentile, the reliability is low, and the score is not statistically significantly lower than the national average CAHPS measure score; or

(C) Its average CAHPS measure score is at or above the 60th percentile and lower than the 80th percentile, the reliability is low, and the score is not statistically significantly higher than the national average CAHPS measure score.

(iv) A contract is assigned 4 stars if it does not meet the 5-star criteria and meets at least one of these three criteria:

(A) Its average CAHPS measure score is at or above the 60th percentile and the measure does not have low reliability; or

(B) Its average CAHPS measure score is at or above the 80th percentile and the measure has low reliability; or

(C) Its average CAHPS measure score is statistically significantly higher than the national average CAHPS measure score and above the 30th percentile.

(v) A contract is assigned 5 stars if both of the following criteria in paragraphs (a)(3)(v)(A) and (B) of this section are met plus at least one of the criteria in paragraphs (a)(3)(v)(C) or (D) of this section is met:

(A) Its average CAHPS measure score is at or above the 80th percentile; and

(B) Its average CAHPS measure score is statistically significantly higher than the national average CAHPS measure score;

(C) The reliability is not low; or

(D) Its average CAHPS measure score is more than one standard error above the 80th percentile.

(4) 5-Star Scale. Measure scores are converted to a 5-star scale ranging from 1 (worst rating) to 5 (best rating), with whole star increments for the cut points.

(b) Domain Star Ratings. (1)(i) CMS groups measures by domains solely for purposes of public reporting the data on Medicare Plan Finder. They are not used in the calculation of the summary or overall ratings. Domains are used to group measures by dimensions of care that together represent a unique and important aspect of quality and performance.

(ii) The 4 domains for the Part D Star Ratings are: Drug Plan Customer Service; Member Complaints and Changes in the Drug Plan's Performance; Member Experience with the Drug Plan; and Drug Safety and Accuracy of Drug Pricing.

(2) CMS calculates the domain ratings as the unweighted mean of the Star Ratings of the included measures.

(i) A contract must have scores for at least 50 percent of the measures required to be reported for that contract type for that domain to have a domain rating calculated.

(ii) The domain ratings are on a 1 to 5 star scale ranging from 1 (worst rating) to 5 (best rating) in whole star increments using traditional rounding rules.

(c) Part D summary ratings. (1) CMS will calculate the Part D summary ratings using the weighted mean of the measure-level Star Ratings for Part D, weighted in accordance with paragraph (e) of this section and with the applicable adjustments provided in paragraph (f) of this section.

(2)(i) A contract must have scores for at least 50 percent of the measures required to be reported for the contract type to have a summary rating calculated.

(ii) The Part D improvement measure is not included in the count of the minimum number of rated measures.

(3) The summary ratings are on a 1 to 5 star scale ranging from 1 (worst rating) to 5 (best rating) in half-star increments using traditional rounding rules.

(d) Overall MA-PD rating. (1) The overall rating for a MA-PD contract will be calculated using a weighted mean of the Part C and Part D measure-level Star Ratings, weighted in accordance with paragraph (e) of this section and with the applicable adjustments provided in paragraph (f) of this section.

(2)(i) An MA-PD must have both Part C and Part D summary ratings and scores for at least 50 percent of the measures required to be reported for the contract type to have the overall rating calculated.

(ii) The Part C and D improvement measures are not included in the count of measures needed for the overall rating.

(iii) Any measures that share the same data and are included in both the Part C and Part D summary ratings will be included only once in the calculation for the overall rating.

(iv) The overall rating is on a 1 to 5 star scale ranging from 1 (worst rating) to 5 (best rating) in half-increments using traditional rounding rules.

(e) Measure weights —(1) General rules. Subject to paragraphs (e)(2) and (3) of this section, CMS will assign weights to measures based on their categorization as follows.

(i) Improvement measures receive the highest weight of 5.

(ii) Outcome and Intermediate outcome measures receive a weight of 3.

(iii) Through the 2025 Star Ratings, patient experience and complaint measures receive a weight of 4. Starting with the 2026 Star Ratings and subsequent Star Ratings years, patient experience and complaint measures receive a weight of 2.

(iv) Through the 2025 Star Ratings, access measures receive a weight of 4. Starting with the 2026 Star Ratings and subsequent Star Ratings years, access measures receive a weight of 2.

(v) Process measures receive a weight of 1.

(2) Rules for new and substantively updated measures. New measures to the Star Ratings program will receive a weight of 1 for their first year in the Star Ratings program. Substantively updated measures will receive a weight of 1 in their first year returning to the Star Ratings after being on the display page. In subsequent years, a new or substantively updated measure will be assigned the weight associated with its category.

(3) Special rule for Puerto Rico. Contracts that have service areas that are wholly located in Puerto Rico will receive a weight of zero for the Part D adherence measures for the summary and overall rating calculations and will have a weight of 3 for the adherence measures for the improvement measure calculations.

(f) Completing the Part D summary and overall rating calculations. CMS will adjust the summary and overall rating calculations to take into account the reward factor (if applicable) and the categorical adjustment index (CAI) as provided in this paragraph (f).

(1) Reward factor. Through the 2026 Star Ratings, this rating-specific reward factor is added to both the summary and overall ratings of contracts that qualify for this reward factor based on both high and stable relative performance for the rating level.

(i) The contract's performance will be assessed using its weighted mean and its ranking relative to all rated contracts in the rating level (overall for MA-PDs and Part D summary for MA-PDs and PDPs) for the same Star Ratings year. The contract's stability of performance will be assessed using the weighted variance and its ranking relative to all rated contracts in the rating type (overall for MA-PDs and Part D summary for MA-PDs and PDPs). The weighted mean and weighted variance are compared separately for MA-PD and standalone Part D contracts (PDPs). The measure weights are specified in paragraph (e) of this section. Since highly-rated contracts may have the improvement measure(s) excluded in the determination of their final highest rating, each contract's weighted variance and weighted mean will be calculated both with and without the improvement measures. For an MA-PD's Part C and D summary ratings, its ranking is relative to all other contracts' weighted variance and weighted mean for the rating type (Part C summary, Part D summary) with the improvement measure. For the 2022 Star Ratings only, since all contracts may have the improvement measure(s) excluded in the determination of their highest rating and summary rating(s), each contract's weighted variance and weighted mean are calculated both with and without the improvement measures.

(ii) Relative performance of the weighted variance (or weighted variance ranking) will be categorized as being high (at or above 70th percentile), medium (between the 30th and 69th percentile) or low (below the 30th percentile). Relative performance of the weighted mean (or weighted mean ranking) will be categorized as being high (at or above the 85th percentile), relatively high (between the 65th and 84th percentiles), or other (below the 65th percentile).

(iii) The combination of the relative variance and relative mean is used to determine the reward factor to be added to the contract's summary and overall ratings as follows:

(A) A contract with low variance and a high mean will have a reward factor equal to 0.4.

(B) A contract with medium variance and a high mean will have a reward factor equal to 0.3.

(C) A contract with low variance and a relatively high mean will have a reward factor equal to 0.2.

(D) A contract with medium variance and a relatively high mean will have a reward factor equal to 0.1.

(E) A contract with all other combinations of variance and relative mean will have a reward factor equal to 0.0.

(iv) The reward factor is determined and applied before application of the CAI adjustment under paragraph (f)(2) of this section; the reward factor is based on unadjusted scores.

(2) Categorical adjustment index. CMS applies the categorical adjustment index (CAI) as provided in this paragraph(f)(2) to adjust for the average within-contract disparity in performance associated with the percentages of beneficiaries who receive a low income subsidy or are dual eligible (LIS/DE) or have disability status. The factor is calculated as the mean difference in the adjusted and unadjusted ratings (overall, Part D for MA-PDs, Part D for PDPs) of the contracts that lie within each final adjustment category for each rating type.

(i) The CAI is added to or subtracted from the contract's overall and summary ratings and is applied after the reward factor adjustment described in paragraph (f)(1) of this section (if applicable).

(A) The adjustment factor is monotonic (that is, as the proportion of LIS/DE and disabled increases in a contract, the adjustment factor increases in at least one of the dimensions) and varies by a contract's categorization into a final adjustment category that is determined by a contract's proportion of LIS/DE and disabled beneficiaries.

(B) To determine a contract's final adjustment category, contract enrollment is determined using enrollment data for the month of December for the measurement period of the Star Ratings year.

( 1 ) For the first 2 years following a consolidation, for the surviving contract of a contract consolidation involving two or more contracts for health or drug services of the same plan type under the same parent organization, the enrollment data for the month of December for the measurement period of the Star Ratings year are combined across the surviving and consumed contracts in the consolidation.

( 2 ) The count of beneficiaries for a contract is restricted to beneficiaries that are alive for part or all of the month of December of the applicable measurement year.

( 3 ) A beneficiary is categorized as LIS/DE if the beneficiary was designated as full or partially dually eligible or receiving a LIS at any time during the applicable measurement period.

( 4 ) Disability status is determined using the variable original reason for entitlement (OREC) for Medicare using the information from the Social Security Administration and Railroad Retirement Board record systems.

(C) A MA-PD contract may be adjusted up to three times with the CAI: One for the overall Star Rating and one for each of the summary ratings (Part C and Part D).

(D) A PDP contract may be adjusted only once for the CAI for the Part D summary rating.

(E) The CAI values are rounded and displayed with 6 decimal places.

(ii) In determining the CAI values, a measure will be excluded from adjustment if the measure meets any of the following:

(A) The measure is already case-mix adjusted for socioeconomic status.

(B) The focus of the measurement is not a beneficiary-level issue but rather a plan or provider-level issue.

(C) The measure is scheduled to be retired or revised.

(D) The measure is applicable only to SNPs.

(iii) The Star Ratings measures that remain after the exclusion criteria, paragraph (f)(2)(ii) of this section, have been applied will be adjusted for the determination of the CAI. CMS will announce the measures identified for adjustment in the calculations of the CAI under this paragraph (f)(2) through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act.

(iv) The adjusted measures scores for the selected measures are determined using the results from regression models of beneficiary level measure scores that adjust for the average within-contract difference in measure scores for MA or PDP contracts.

(A) A logistic regression model with contract fixed effects and beneficiary level indicators of LIS/DE and disability status is used for the adjustment.

(B) The adjusted measure scores are converted to a measure-level Star Rating using the measure thresholds for the Star Ratings year that corresponds to the measurement period of the data employed for the CAI determination.

(v) The rating-specific CAI values will be determined using the mean differences between the adjusted and unadjusted Star Ratings (overall, Part D summary for MA-PDs and Part D summary for PDPs) in each final adjustment category.

(A) For the annual development of the CAI, the distribution of the percentages for LIS/DE and disabled (using the enrollment data that parallels the previous Star Ratings year's data) would be examined to determine the number of equal-sized initial groups for each attribute (LIS/DE and disabled).

(B) The initial categories are created using all groups formed by the initial LIS/DE and disabled groups.

(C) The mean difference between the adjusted and unadjusted summary or overall ratings per initial category would be calculated and examined. The initial categories would then be collapsed to form the final adjustment categories. The collapsing of the initial categories to form the final adjustment categories would be done to enforce monotonicity in at least one dimension (LIS/DE or disabled).

(D) The mean difference within each final adjustment category by rating-type (overall, Part D for MA-PD, and Part D for PDPs) would be the CAI values for the next Star Ratings year.

(vi) CMS develops the model for the modified contract-level LIS/DE percentage for Puerto Rico using the following sources of information:

(A) The most recent data available at the time of the development of the model of both 1-year American Community Survey (ACS) estimates for the percentage of people living below the Federal Poverty Level (FPL) and the ACS 5-year estimates for the percentage of people living below 150 percent of the FPL. The data to develop the model will be limited to the 10 states, drawn from the 50 states plus the District of Columbia with the highest proportion of people living below the FPL, as identified by the 1-year ACS estimates.

(B) The Medicare enrollment data from the same measurement period as the Star Rating's year. The Medicare enrollment data would be aggregated from MA contracts that had at least 90 percent of their enrolled beneficiaries with mailing addresses in the 10 highest poverty states.

(vii) A linear regression model is developed to estimate the percentage of LIS/DE for a contacts that solely serve the population of beneficiaries in Puerto Rico.

(A) The maximum value for the modified LIS/DE indicator value per contract would be capped at 100 percent.

(B) All estimated modified LIS/DE values for Puerto Rico would be rounded to 6 decimal places when expressed as a percentage.

(C) The model's coefficient and intercept are updated annually and published in the Technical Notes.

(3) Health equity index. Starting with the 2027 Star Ratings year and subsequent Star Ratings years, CMS applies a health equity index rating-specific factor to both the summary and overall ratings of contracts that qualify based on an assessment of contract performance on quality measures among enrollees with certain social risk factors (SRFs).

(i) The health equity index (HEI) is calculated separately for the overall rating for MA-PDs and cost contracts including the applicable Part C and D measures; Part C summary rating for MA-only, MA-PD, and cost contracts including the applicable Part C measures; Part D summary rating for MA-PDs and cost contracts including the applicable Part D measures; and Part D summary rating for PDPs including the applicable Part D measures.

(A) The SRFs included in the HEI are receipt of the low-income subsidy or being dually eligible for Medicare and Medicaid (LIS/DE), or having a disability. Enrollees will be identified as LIS/DE or as having a disability as specified in paragraph (f)(2)(i)(B) of this section. If a person meets the LIS/DE criteria for only one of the two measurement years included in the HEI, the data for that person for just that year are used. Measures that are case-mix adjusted in the Star Ratings are adjusted using all standard case-mix adjustors for the measure except for those adjusters that are the SRFs of interest in the index, are strongly correlated with the SRFs of interest, or are conceptually similar to the SRFs of interest.

(B) The HEI is calculated by combining measure-level scores for the subset of enrollees with SRFs of interest included in the HEI across the two most recent measurement years using a modeling approach that includes year as an adjustor to account for potential differences in performance across years and to adjust the data to reflect performance in the second of the 2 years of data used. Measure-level scores are used for contracts that have data for only the most recent of the 2 years, but measure-level scores are not used for contracts that have data for only the first of the 2 years.

(ii) In determining the HEI scores, a measure will be excluded from the calculation of the index if the measure meets any of the following:

(A) The focus of the measurement is not the enrollee but rather the plan or provider.

(B) The measure is retired, moved to display, or has a substantive specification change in either year of data used to construct the HEI.

(C) The measure is applicable only to SNPs.

(D) At least 25 percent of contracts are unable to meet the criteria specified in paragraph (f)(3)(iv) of this section. For Part D measures, this criterion is assessed separately for MA-PDs and cost contracts, and for PDPs.

(iii) The Star Ratings measures that remain after the exclusion criteria in paragraph (f)(3)(ii) of this section have been applied will be included in the calculation of the HEI. CMS will announce the measures being evaluated for inclusion in the calculation of the HEI under this paragraph (f)(3) of this section through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act.

(iv) For a measure to be included in the calculation of a contract's HEI score, the measure must meet both of the following criteria:

(A) The measure must have a reliability of at least 0.7 for the contract when calculated for the combined subset of enrollees with the SRF(s) specified in paragraph (f)(3)(i)(A) of this section across 2 years of data.

(B) The measure-specific denominator criteria must be met for the contract using only the combined subset of enrollees with the SRF(s) specified in paragraph (f)(3)(i)(A) of this section across 2 years of data.

(v) To calculate the rating-specific HEI score, the distribution of contract performance on each eligible measure for the subset of enrollees that have one or more of the specified SRFs will be assessed and separated into thirds, with the top third of contracts receiving 1 point, the middle third of contracts receiving 0 points, and the bottom third of contracts receiving −1 point. The rating-specific HEI will then be calculated as the weighted sum of points across all measures included in the index using the Star Ratings measure weight for each measure divided by the weighted sum of the number of eligible measures for the given contract. The measure weight for each measure is the weight used for the measure in the current Star Ratings year as specified in paragraph (e) of this section.

(vi) To have the HEI calculated, contracts must have at least 500 enrollees in the most recent measurement year used in the HEI and have at least half of the measures included in the HEI meet the criteria specified under paragraph (f)(3)(iv) of this section.

(vii) In order to qualify for the full HEI reward, contracts must have percentages of enrollees with the specified SRFs combined greater than or equal to the contract-level median in the most recent year of data used to calculate the HEI and a rating-specific minimum index score of greater than zero. In order to qualify for one-half of the HEI reward, contracts must have percentages of enrollees with SRFs greater than or equal to one-half of the contract-level median up to, but not including, the contract-level median percentage of enrollees with SRFs in the most recent year of data used to calculate the HEI and a rating-specific minimum index score of greater than zero. One-half of the contract-level median and the contract-level median enrollment percentages are assessed separately for contracts that offer Part C and stand-alone Part D contracts.

(A) For contracts with service areas wholly located in Puerto Rico, the percentage of enrollees that are LIS/DE or disabled is calculated by adding the number of DE/disabled enrollees to the estimated LIS percentage calculated by taking the percentage LIS/DE as calculated at §§ 422.166(f)(2)(vi) and (vii) and 423.186(f)(2)(vi) and (vii) and subtracting the percentage of DE enrollees.

(B) Contracts with service areas wholly located in Puerto Rico are excluded from the calculation of one-half of the contract-level median and the contract-level median.

(viii) For contracts that have percentages of enrollees with SRFs greater than or equal to the contract-level median enrollment percentage, the HEI reward added to the contract's summary and overall ratings will vary from 0 to 0.4 on a linear scale with a contract receiving 0 if the contract receives a score of 0 or less on the HEI and 0.4 if the contract receives a score of 1 on the HEI. For contracts that have percentages of enrollees with SRFs greater than or equal to one-half the median percentage of enrollees with SRFs up to, but not including, the contract-level median percentage of enrollees with SRFs, the HEI reward added to the contract's summary and overall ratings will vary from 0 to 0.2 on a linear scale, with a contract receiving 0 if the contract receives a score of 0 or less on the HEI and 0.2 if the contract receives a score of 1 on the HEI. The HEI reward is rounded and displayed with 6 decimal places. Contracts that cannot have a HEI score calculated (that is, contracts that are not scored on at least half of the measures included in the index) will not receive an HEI reward.

(A) In the case of contract consolidations involving two or more contracts for health or drug services of the same plan type under the same parent organization, CMS calculates the HEI reward for the surviving contract accounting for both the surviving and consumed contract(s). For the first year following a consolidation, the HEI reward for the surviving contract is calculated as the enrollment-weighted mean of the HEI reward of the consumed and surviving contracts using total contract enrollment from July of the most recent measurement year used in calculating the HEI reward. A reward value of zero is used in calculating the enrollment-weighted mean for contracts that do not meet the minimum percentage of enrollees with the SRF thresholds or the minimum performance threshold specified at paragraph (f)(3)(vii) of this section.

(B) For the second year following a consolidation when calculating the HEI score for the surviving contract, the patient-level data used in calculating the HEI score will be combined from the consumed and surviving contracts and used in calculating the HEI score.

(ix) The HEI reward is calculated separately for, and then added to, the overall rating, Part C rating for MA-PDs and MA-only contracts (and cost contracts), Part D rating for MA-PDs (and cost contracts), and Part D rating for PDPs after the addition of the CAI as specified in paragraph (f)(2) of this section and application of the improvement measures as specified in paragraph (g) of this section and before the final overall and Part C and D summary ratings are calculated by rounding to the nearest half star.

(g) Applying the improvement measure scores. (1) CMS runs the calculations twice for the highest level rating for each contract-type (overall rating for MA-PD contracts and Part D summary rating for PDPs), with the reward factor adjustment if applicable and the CAI adjustment, once including the improvement measure(s) and once without including the improvement measure(s). In deciding whether to include the improvement measures in a contract's final highest rating, CMS applies the following rules:

(i) If the highest rating for each contract-type is 4 stars or more without the use of the improvement measure(s) and with all applicable adjustments (CAI and the reward factor), a comparison of the highest rating with and without the improvement measure(s) is done. The higher rating is used for the rating.

(ii) If the highest rating is less than 4 stars without the use of the improvement measure(s) and with all applicable adjustments (CAI and the reward factor), the rating will be calculated with the improvement measure(s).

(2) The Part D summary rating for MA-PDs will include the Part D improvement measure.

(3) For 2022 Star Ratings only, CMS runs the calculations twice for the highest rating for each contract-type (overall rating for MA-PD contracts and Part D summary rating for PDPs) and Part D summary rating for MA-PDs with all applicable adjustments (CAI and the reward factor), once including the improvement measure(s) and once without including the improvement measure(s). In deciding whether to include the improvement measures in a contract's highest and summary rating(s), CMS applies the following rules:

(i) For MA-PDs and PDPs, a comparison of the highest rating with and without the improvement measure is done. The higher rating is used for the highest rating.

(ii) For MA-PDs, a comparison of the Part D summary rating with and without the improvement measure is done. The higher rating is used for the summary rating.

(h) Posting and display of ratings. For all ratings at the measure, domain, summary and overall level, posting and display of the ratings is based on there being sufficient data to calculate and assign ratings. If a contract does not have sufficient data to calculate a rating, the posting and display would be the flag “Not enough data available.” If the measurement period is prior to one year past the contract's effective date, the posting and display would be the flag “Plan too new to be measured”.

(1) Medicare Plan Finder performance icons. Icons are displayed on Medicare Plan Finder to note performance as provided in this paragraph (h)(1):

(i) High-performing icon. The high performing icon is assigned to a Part D plan sponsor for achieving a 5-star Part D summary rating and an MA-PD contract for a 5-star overall rating.

(ii) Low-performing icon. (A) A contract receives a low performing icon as a result of its performance on the Part C or Part D summary ratings. The low performing icon is calculated by evaluating the Part C and Part D summary ratings for the current year and the past 2 years. If the contract had any combination of Part C or Part D summary ratings of 2.5 or lower in all 3 years of data, it is marked with a low performing icon. A contract must have a rating in either Part C or Part D for all 3 years to be considered for this icon.

(B) CMS may disable the Medicare Plan Finder online enrollment function (in Medicare Plan Finder) for Medicare health and prescription drug plans with the low performing icon; beneficiaries will be directed to contact the plan directly to enroll in the low-performing plan.

(2) Plan preview of the Star Ratings. CMS will have plan preview periods before each Star Ratings release during which Part D plan sponsors can preview their Star Ratings data in HPMS prior to display on the Medicare Plan Finder.

(i) Extreme and uncontrollable circumstances. In the event of extreme and uncontrollable circumstances that may negatively impact operational and clinical systems and contracts' abilities to conduct surveys needed for accurate performance measurement, CMS calculates the Star Ratings as specified in paragraphs (i)(2) through (8) of this section for each contract that is an affected contract during the performance period for the applicable measures. We use the start date of the incident period to determine which year of Star Ratings could be affected, regardless of whether the incident period lasts until another calendar year.

(1) Identification of affected contracts. A contract that meets all of the following criteria is an affected contract:

(i) The contract's service area is within an “emergency area” during an “emergency period” as defined in section 1135(g) of the Act.

(ii) The contract's service area is within a county, parish, U.S. territory or tribal area designated in a major disaster declaration under the Stafford Act and the Secretary exercised authority under section 1135 of the Act based on the same triggering event(s).

(iii) As specified in paragraphs (i)(2) through (8) of this section, a certain minimum percentage (25 percent or 60 percent) of the enrollees under the contract must reside in a Federal Emergency Management Agency (FEMA)-designated Individual Assistance area at the time of the extreme and uncontrollable circumstance.

(2) CAHPS adjustments. (i) A contract, even if an affected contract, must administer the CAHPS survey unless exempt under paragraph (i)(2)(ii) of this section.

(ii) An affected contract with at least 25 percent of enrollees in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable circumstance is exempt from administering the CAHPS survey if the contract completes both of the following:

(A) Demonstrates to CMS that the required sample for the survey cannot be contacted because a substantial number of the contract's enrollees are displaced due to the FEMA-designated disaster identified in paragraph (i)(1)(iii) of this section in the prior calendar year.

(B) Requests and receives a CMS approved exemption.

(iii) An affected contract with an exemption described in paragraph (i)(2)(ii) of this section receives the contract's CAHPS measure stars and corresponding measure scores from the prior year.

(iv) For an affected contract with at least 25 percent of enrollees in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable circumstance, the contract receives the higher of the previous year's Star Rating or the current year's Star Rating (and corresponding measure score) for each CAHPS measure.

(v) When a contract is an affected contract with at least 25 percent of enrollees in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable circumstance with regard to separate extreme and uncontrollable circumstances that begin in successive years, it is a multiple year-affected contract. A multiple year-affected contract receives the higher of the current year's Star Rating or what the previous year's Star Rating would have been in the absence of any adjustments that took into account the effects of the previous year's disaster for each measure (using the corresponding measure score for the Star Ratings year selected).

(3) New measure adjustments. For affected contracts with at least 25 percent of enrollees in a FEMA-designated Individual Assistance area at the time of the extreme and uncontrollable circumstance, CMS holds the affected contract harmless by using the higher of the contract's summary or overall rating or both with and without including all of the applicable new measures.

(4) Other Star Ratings measure adjustments. (i) For all other Part D measures except those measures identified in this paragraph (i)(4)(ii) of this section, affected contracts with at least 25 percent of enrollees in a FEMA-designated Individual Assistance area at the time of the extreme and uncontrollable circumstance receive the higher of the previous or current year's measure Star Rating (and corresponding measure score).

(ii) CMS does not adjust the scores of the Star Ratings for the Part D Call Center—Foreign Language Interpreter and TTY Availability measure, unless the exemption listed in paragraph (i)(4)(iii) of this section applies.

(iii) CMS adjusts the measure listed in paragraph (i)(4)(ii) of this section using the adjustments listed in paragraph (i)(4)(i) of this section for contracts affected by extreme and uncontrollable circumstances where there are continuing communications issues related to loss of electricity and damage to infrastructure during the call center study.

(iv) When a contract is an affected contract with at least 25 percent of enrollees in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable circumstance with regard to separate extreme and uncontrollable circumstances that begin in successive years, it is a multiple year-affected contract. A multiple year-affected contract receives the higher of the current year's Star Rating or what the previous year's Star Rating would have been in the absence of any adjustments that took into account the effects of the previous year's disaster for each measure (using the corresponding measure score for the Star Ratings year selected).

(5) Exclusion from improvement measures. Any measure that reverts back to the data underlying the previous year's Star Rating due to the adjustments made in paragraph (i) of this section is excluded from both the count of measures and the applicable improvement measures for the current and next year's Star Ratings for the affected contract. Contracts affected by extreme and uncontrollable circumstances do not have the option of reverting to the prior year's improvement rating.

(6) Missing data. For an affected contract that has missing data in the current or previous year, the final measure rating comes from the current year unless an exemption described in paragraph (i)(2)(ii) of this section applies. Missing data includes data where there is a data integrity issue as defined at § 423.184(g)(1).

(7) Cut points for non-CAHPS measures. (i) Through the 2025 Star Ratings, CMS excludes the numeric values for affected contracts with 60 percent or more of their enrollees in the FEMA-designated Individual Assistance area at the time of the extreme and uncontrollable circumstance from the clustering algorithms described in paragraph (a)(2) of this section.

(ii) The cut points calculated as described in paragraph (i)(7)(i) of this section are used to assess all affected contracts' measure Star Ratings.

(8) Reward factor. (i) Through the 2025 Star Ratings, CMS excludes the numeric values for affected contracts with 60 percent or more of their enrollees in the FEMA-designated Individual Assistance area at the time of the extreme and uncontrollable circumstance from the determination of the performance summary and variance thresholds for the reward factor described in paragraph (f)(1) of this section.

(ii) All affected contracts are eligible for the Reward Factor based on the calculations described in paragraph (i)(8)(i) of this section.

(9) Special rules for the 2022 Star Ratings only. For the 2022 Star Ratings only, CMS will not apply the provisions in paragraph (i)(7) or (8) of this section and CMS will not exclude the numeric values for affected contracts with 60 percent or more of their enrollees in the FEMA-designated Individual Assistance area at the time of the extreme and uncontrollable circumstance from the clustering algorithms or from the determination of the performance summary and variance thresholds for the Reward Factor.

(j) Special rules for 2021 Star Ratings only. (1) For the 2021 Star Ratings:

(i) The measures calculated based on CAHPS data are calculated based on survey data collected from March through May 2019.

(ii) The measure-level change score calculation described at § 423.184(f)(4)(i) is not applied for CAHPS measures and the measure-level change score used for the 2020 Star Ratings is applied in its place for all CAHPS-based measures.

(iii) The provisions of § 423.184(g)(2) are not applied for failure to submit CAHPS-based measures.

(iv) [Reserved]

(2) [Reserved]

§ 423.251 Scope.

This section sets forth the requirements and limitations on submission, review, negotiation and approval of competitive bids for prescription drug plans and MA-PD plans; the calculation of the national average bid amount; and the determination of enrollee premiums.

§ 423.258 Definitions.

For the purposes of this subpart, the following definitions apply:

Full risk plan means a prescription drug plan that is not a limited risk plan or a fallback prescription drug plan.

Limited risk plan means a prescription drug plan that provides basic prescription drug coverage and for which the PDP sponsor includes a modification of risk level described in § 423.265(d) in its bid submitted for the plan. This term does not include a fallback prescription drug plan.

Standardized bid amount means, for a prescription drug plan that provides basic prescription drug coverage, the PDP approved bid; for a prescription drug plan that provides supplemental prescription drug coverage, the portion of the PDP approved bid that is attributable to basic prescription drug coverage; for a MA-PD plan, the portion of the accepted bid amount that is attributable to basic prescription drug coverage.

§ 423.265 Submission of bids and related information.

(a) Eligibility for bidding. An applicant may submit a bid to become a Part D plan sponsor.

(b) Bid submission —(1) General. Not later than the first Monday in June, each potential Part D sponsor must submit bids and supplemental information described in this section for each Part D plan it intends to offer in the subsequent calendar year.

(2) Substantial differences between bids —(i) General rule. Except as provided in paragraph (b)(2)(ii) of this section, potential Part D sponsors' bid submissions must reflect differences in benefit packages or plan costs that CMS determines to represent substantial differences relative to a sponsor's other bid submissions. In order to be considered “substantially different,” each bid must be significantly different from the sponsor's other bids with respect to beneficiary out-of-pocket costs or formulary structures.

(ii) Exception. A potential Part D sponsor's enhanced bid submission does not have to reflect the substantial differences as required in paragraph (b)(2)(i) of this section relative to any of its other enhanced bid submissions.

(3) Limit on number of plan offerings. Potential Part D sponsors' bid submissions may include no more than three stand-alone prescription drug plan offerings in a service area and must include only one basic prescription drug plan offering.

(4) Bid acceptance. CMS may decline to accept any or every bid submitted by a Part D sponsor or potential Part D sponsor.

(5) Limitations on changes. After a Part D sponsor is permitted to begin marketing prospective plan year offerings for the following contract year (consistent with § 423.2263(a)), the Part D sponsor must not change, and must provide the benefits described in its CMS-approved plan benefit package (PBP) (as defined at § 423.182) for the contract year without modification, except where a modification in benefits is required by law.

(c) Basic rule for bid. Each potential Part D sponsor must submit a bid and supplemental information in a format to be specified by CMS for each Part D plan it offers. Each bid must reflect a uniform benefit package, including premium (except as provided for the late enrollment penalty described in § 423.286(d)(3)) and all applicable cost sharing, for all individuals enrolled in the plan. Each bid must reflect the applicant's estimate of its average monthly revenue requirements to provide qualified prescription drug coverage (including any supplemental coverage) for a Part D eligible individual with a national average risk profile for the factors described in § 423.329(b)(1).

(1) Included costs. The bid includes costs (including administrative costs and return on investment/profit) for which the plan is responsible in providing basic and supplemental benefits.

(2) Excluded costs. The bid does not include costs associated with payments by the enrollee for deductible, co-payments, coinsurance, and liability above the plan allowance in the case of out-of-network claims, payments projected to be made by CMS for reinsurance, or any other costs for which the sponsor is not responsible.

(3) Actuarial valuation. The bid must be prepared in accordance with CMS actuarial guidelines based on generally accepted actuarial principles. A qualified actuary must certify the plan's actuarial valuation (which may be prepared by others under his or her direction or review), and must be a member of the American Academy of Actuaries to be deemed qualified. Applicants may use qualified outside actuaries to prepare their bids.

(d) Specific requirements for bids. The bid and supplemental information submission must include the following information:

(1) Coverage. A description of the coverage to be provided under the plan, including any supplemental coverage and the deductible and other cost sharing.

(2) Actuarial value of bid components. The applicant must provide the following information on bid components, as well as actuarial certification that the values are calculated according to CMS guidelines on actuarial valuation, including adjustment for the effect that providing alternative prescription drug coverage (rather than defined standard prescription drug coverage) has on drug utilization, if applicable.

(i) The actuarial value of the qualified prescription drug coverage to be offered under each plan for a Part D eligible individual with a national average risk profile for the factors described in § 423.329(b)(1) and the basis for the estimate.

(ii) The portion of the bid attributable to basic prescription drug coverage and the portion (if any) attributable to supplemental benefits.

(iii) The assumptions regarding reinsurance amounts payable under § 423.329(c) used in calculating the bid.

(iv) The assumptions regarding low-income cost-sharing payable under § 423.329(d) used in calculating the bid.

(v) The amount of administrative costs and return on investment or profit included in the bid.

(3) Service area. A description of the service area of the plan.

(4) Level of risk assumed. For a potential Part D sponsor, the level of risk assumed in the bid specified in paragraph (e) of this section.

(5) Plan Average Risk Score. An estimate of the plan's average prescription drug risk score (as established under § 423.329(b)) for all projected enrollees for purposes of risk adjusting any supplemental premium.

(6) Additional information. Additional information CMS requests to support bid amounts and facilitate negotiation.

(e) Special rule for PDP sponsors. Bids for all plans offered by a potential PDP sponsor in a region, but not those of potential MA organizations offering MA-PD plans, PACE organizations offering PACE plans including qualified prescription drug coverage, and cost-based HMOs or CMPs offering section 1876 cost plans including qualified prescription drug coverage, may include a uniform modification of the amount of risk assumed (based on a process to be specified) as described in one or more of the following paragraphs. Any such modification applies to all plans offered by the PDP sponsor in a PDP region.

(1) Increase in Federal percentage assumed in initial risk corridor. An equal percentage point increase in the percents applied for costs between the first and second threshold limits under § 423.336(b)(2)(i) and (b)(2)(ii)(A) and § 423.336 (b)(3)(i) and (b)(3)(ii)(A). This provision does not affect the application of a higher percentage for plans in 2006 or 2007 under § 423.336(b)(2)(iii).

(2) Increase in Federal percentage assumed in second risk corridor. An equal percentage point increase in the percents applied for costs above the second threshold upper limit or below the second threshold upper limit under paragraphs § 423.336(b)(2)(ii)(B) and (b)(3)(ii)(B).

(3) Decrease in size of risk corridors. A decrease in the size of the risk corridors by means of reductions in the threshold risk percentages specified in § 423.336(a)(2)(ii)(A) and/or (a)(2)(ii)(B).

(f) Special rule for fallback prescription drug plans. Fallback prescription drug plan bids are not subject to the rules in this section. They must follow requirements specified in § 423.863.

§ 423.272 Review and negotiation of bid and approval of plans submitted by potential Part D sponsors.

(a) Review and negotiation regarding information, terms and conditions. CMS reviews the information filed under § 423.265(c) in order to conduct negotiations regarding the terms and conditions of the proposed bid and benefit plan. In addition to its general negotiating authority under section 1860D-11(d)(2)(A) of the Act, CMS has authority similar to that of the Director of the Office of Personnel Management for health benefit plans under Chapter 89 of title 5, U.S.C.

(b) Approval of proposed plans. CMS approves the Part D plan only if the plan and the Part D sponsor offering the plan comply with all applicable CMS Part D requirements, including those related to the provision of qualified prescription drug coverage and actuarial determinations.

(1) Application of revenue requirements standard. CMS approves a bid submitted under § 423.265 only if it determines that the portions of the bid attributable to basic and supplemental prescription drug coverage are supported by the actuarial bases provided and reasonably and equitably reflect the revenue requirements (as used for purposes of section 1302(8)(C) of the Public Health Service Act) for benefits provided under that plan, less the sum (determined on a monthly per capita basis) of the actuarial value of the reinsurance payments under § 423.329(c).

(2) Plan design. (i) CMS does not approve a bid if it finds that the design of the plan and its benefits (including any formulary and tiered formulary structure) or its utilization management program are likely to substantially discourage enrollment by certain Part D eligible individuals under the plan.

(ii) If the design of the categories and classes within a formulary is consistent with the model guidelines (if any) established by the United States Pharmacopeia, the formulary categories and classes alone will not be found to discourage enrollment.

(iii) A plan that adopts the categories and classes discussed in paragraph (b)(2)(ii) of this section may nevertheless be found to discourage enrollment because it excludes specific drugs from the formulary.

(3) Substantial differences between bids —(i) General. CMS approves a bid only if it finds that the benefit package or plan costs represented by that bid are substantially different as provided under § 423.265(b)(2) of this subpart from the benefit package or plan costs represented by another bid submitted by the same Part D sponsor.

(ii) Transition period for PDP sponsors with new acquisitions. After a 2-year transition period, as determined by CMS, CMS approves a bid offered by a PDP sponsor (or by a parent organization to that PDP sponsor) that recently purchased (or otherwise acquired or merged with) another Part D sponsor if it finds that the benefit package or plan costs represented by that bid are substantially different from benefit packages or plan costs represented by another bid submitted by the same Part D sponsor (or parent organization to that Part D sponsor), as provided under § 423.265(b)(2).

(4) CMS may decline to approve a bid if the Part D sponsor proposes significant increases in cost sharing or decreases in benefits offered under the plan.

(c) Limited risk plans. (1) Application of limited risk plans. There is no limit on the number of full risk plans that CMS approves under paragraph (b) of this section. CMS approves a limited risk plan in accordance with paragraphs (c)(2) and (c)(3) of this section only if the access requirements under § 423.859 are not otherwise met for a PDP region.

(2) Maximizing assumption of risk. CMS gives priority in approval for those limited risk plans bearing the highest level of risk, but may take into account the level of the bids submitted by the plans and is not required to accept the limited risk plan with the highest assumption of risk. In no case does CMS approve a limited risk plan under which the modification of risk level provides for no (or a minimal) level of financial risk.

(3) Limited exercise of authority. CMS approves only the minimum number of limited risk plans needed to meet the access requirements.

(d) Special rules for private fee-for-service (PFFS) plans that offer prescription drug coverage. PFFS plans (as defined at § 422.4(a)(3)) choosing to offer prescription drug coverage are subject to all MA-PD bid submission and approval requirements applicable to MA-PD plans with the following exceptions:

(1) Exemption from negotiations. These plans are exempt from the review and negotiation process in paragraph (a) of this section, and are not held to the revenue requirements standard in paragraph (b)(1) of this section.

(2) Requirements regarding negotiated prices. These plans are not required to provide access to negotiated prices. However, if they do, they must meet the applicable requirements of § 423.104(h).

(3) Modification of pharmacy access standard and disclosure requirement. If the plan provides coverage for drugs purchased from all pharmacies, without charging additional cost sharing and without regard to whether they are network pharmacies, §§ 423.120(a) and 423.132 requiring certain network access standards and the disclosure of the availability of lower cost bioequivalent generic drugs does not apply to the plan.

(e) Special rule for plans with standardized bids sufficiently below the national average monthly bid to result in a negative premium. In the event of a negative premium, as described in § 423.286(d)(1), CMS negotiates the incorporation of the negative premium amount into the bid as either a reduction in the supplemental premium if the Part D plan already submitted a bid with an enhanced alternative benefit, or CMS requires the addition of new enhanced alternative benefit of no less value than the amount of the negative premium.

§ 423.279 National average monthly bid amount.

(a) Bids included. For each year (beginning with 2006) CMS computes a national average monthly bid amount from approved bids submitted under § 423.265 in order to calculate the base beneficiary premium, as provided in § 423.286(c). The national average monthly bid amount is equal to a weighted average of the standardized bid amounts for each prescription drug plan (not including fallbacks) and for each MA-PD plan described in section 1851(a)(2)(A)(i) of the Act. The calculation does not include bids submitted by MSA plans, MA private fee-for-service plans, specialized MA plans for special needs individuals, PACE programs under section 1894, and contracts under reasonable cost reimbursement contracts under section 1876(h) of the Act.

(b) Calculation of weighted average. (1) The national average monthly bid amount is a weighted average, with the weight for each plan equal to a percentage with the numerator equal to the number of Part D eligible individuals enrolled in the plan in the reference month (as defined in § 422.258(c)(1) of this chapter) and the denominator equal to the total number of Part D eligible individuals enrolled in a reference month in all Part D plans except MSA plans, fallbacks, MA private fee-for-service plans, specialized MA plans for special needs individuals, PACE programs under section 1894, and contracts under reasonable cost reimbursement contracts under section 1876(h) of the Act.

(2) For purposes of calculating the monthly national average monthly bid amount for 2006, CMS assigns equal weighting to PDP sponsors (other than fallback entities) and assigns MA-PD plans included in the national average bid a weight based on prior enrollment (new MA-PD plans are assigned zero weight).

(c) Geographic adjustment. (1) Upon the development of an appropriate methodology, the national average monthly bid amount for Part D plans will be adjusted to take into account differences in prices for Part D drugs among PDP regions.

(2) CMS does not apply any geographic adjustments if CMS determines that price variations among PDP regions are negligible.

(3) CMS applies any geographic adjustment in a budget neutral manner so as to not result in a change in the aggregate payments that may have been made if CMS had not applied an adjustment.

(4) CMS does not apply any geographic adjustment until an appropriate methodology is developed.

§ 423.286 Rules regarding premiums.

(a) General rule. Except as provided in paragraphs (d)(3), (d)(4), and (e) of this section, and with regard to employer group waivers, the monthly beneficiary premium for a Part D plan in a PDP region is the same for all Part D eligible individuals enrolled in the plan. The monthly beneficiary premium for a Part D plan is the base beneficiary premium, as determined in paragraph (c) of this section, adjusted as described in paragraph (d) of this section for the difference between the bid and the national average monthly bid amount, any supplemental benefits and for any late enrollment penalties.

(b) Beneficiary premium percentage. The beneficiary premium percentage for any year is a fraction, the—

(1) Numerator of which is 25.5 percent; and

(2) Denominator of which is as follows:

(i) 100 percent minus the percentage established in paragraph (b)(2)(ii) of this section.

(ii) The percentage established in this paragraph equals:

(A) The total reinsurance payments that CMS estimates will be paid under § 423.329(c) for the coverage year; divided by—

(B) The amount estimated under paragraph (b)(2)(ii)(A) of this section for the year plus total payments that CMS estimates will be paid to Part D plans that are attributable to the standardized bid amount during the year, taking into account amounts paid by both CMS and enrollees.

(c) Base beneficiary premium. The base beneficiary premium for a Part D plan for a month is equal to the product of the—

(1) Beneficiary premium percentage as specified in paragraph (b) of this section; and

(2) National average monthly bid amount (computed under § 423.279) for the month.

(d) Adjustments to base beneficiary premium. The base beneficiary premium may be adjusted to reflect any of the following scenarios, if applicable.

(1) Adjustment to reflect difference between bid and national average bid. If the amount of the standardized bid amount exceeds the adjusted national average monthly bid amount, the monthly base beneficiary premium is increased by the amount of the excess. If the amount of the adjusted national average monthly bid amount exceeds the standardized bid amount, the monthly base beneficiary premium is decreased by the amount of the excess. If the amount of the adjusted national average monthly bid amount exceeds the standardized bid amount by an amount greater than the base beneficiary premium and results in a negative premium, then the beneficiary premium is zero, and the excess amount is applied to supplemental Part D benefits as described in § 423.272(e).

(2) Increase for supplemental prescription drug benefits. The portion of the Part D plan approved bid that is attributable to supplemental prescription drug benefits increases the beneficiary premium. This supplemental portion of the bid may be adjusted to reflect the average risk of enrollees in the plan as determined based on negotiations between CMS and the Part D sponsor offering the plan.

(3) Increase for late enrollment penalty. The base beneficiary premium for a Part D enrollee subject to the late enrollment penalty is increased by the amount of any late enrollment penalty.

(i) Late enrollment penalty amount. The penalty amount for a Part D eligible individual for a continuous period of eligibility (as provided in § 423.46(a)) is the greater of—

(A) An amount that CMS determines is actuarially sound for each uncovered month in the same continuous period of eligibility; or

(B) 1 percent of the base beneficiary premium (computed under paragraph (c) of this section) for each uncovered month in the period.

(ii) Special rule for 2006 and 2007. In 2006 and 2007 the penalty amount discussed in paragraph (d)(3) of this chapter equals the amount referenced in paragraph (d)(3)(i)(B) of this section unless another amount is specified in a separate issuance based on available analysis or other information as determined by the Secretary.

(4) Increase for income-related monthly adjustment amount (Part D—IRMAA). Beginning January 1, 2011, Medicare beneficiaries enrolled in a Medicare Part D plan must pay an income-related monthly adjustment amount in addition to the Part D premium as determined under paragraph (c) of this section and adjusted under paragraph (d) of this section, if the enrollee's modified adjusted gross income exceeds the threshold amounts specified in 20 CFR 418.2115.

(i) Social Security Administration determination. (A) SSA determines which Part D enrollees are subject to the Part D—IRMAA and the amount each enrollee will have to pay.

(B) If an individual disagrees with SSA's determination that such individual is subject to the Part D—IRMAA, or about the amount the individual must pay, an individual may file an appeal or request a new initial determination consistent with 20 CFR part 418.

(ii) Calculating the income-related monthly adjustment amount. The income-related monthly adjustment is equal to the product of the standard base beneficiary premium, as determined under paragraph (c) of this section, and the ratio of the applicable premium percentage specified in 20 CFR 418.2120, reduced by 25.5 percent; divided by 25.5 percent (that is, premium percentage−25.5 percent)/25.5 percent).

(e) Decrease in monthly beneficiary premium for low-income assistance. The monthly beneficiary premium may be eliminated or decreased in the case of a subsidy-eligible individual under § 423.780.

(f) Special rules for fallback prescription drug plans. The monthly beneficiary premium charged under a fallback prescription drug plan is calculated under § 423.867(a) and not under this section, except that enrollees in fallback prescription drug plans are subject to late enrollment penalties under paragraph (d)(3) of this section and fallback prescription drug plan premiums are reduced or eliminated in the case of a subsidy-eligible individual, as described in paragraph (e) of this section.

§ 423.293 Collection of monthly beneficiary premium.

(a) General rules. Part D sponsors must—

(1) Charge enrollees a consolidated monthly Part D premium equal to the sum of the Part D monthly premium for basic prescription drug coverage (if any) and the premium for supplemental coverage (if any and if the beneficiary has enrolled in such supplemental coverage).

(2) Permit payment of monthly Part D premiums (if any) under the timing of payments established in § 422.262(e) of this chapter; and

(3) Permit each enrollee, at the enrollee's option, to make payment of premiums (if any) under this part to the sponsor using any of the methods listed in § 422.262(f) of this chapter.

(4) Retroactive collection of premiums. In circumstances where retroactive collection of premium amounts is necessary and the enrollee is without fault in creating the premium arrearage, the Part D sponsor shall offer the enrollee the option of payment by lump sum, by equal monthly installment spread out over at least the same period for which the premiums were due, or through other arrangements mutually acceptable to the enrollee and the Part D sponsor. For monthly installments, for example, if 7 months of premiums are due, the member would have at least 7 months to repay.

(b) Crediting of late enrollment penalty. CMS estimates and specifies the portion of the late enrollment penalty imposed under § 423.286(d)(3) attributable to increased actuarial costs assumed by the Part D sponsor and not taken into account through risk adjustment provided under § 423.329(b)(1) or through reinsurance payments under § 423.329(c)) as a result of the late enrollment.

(c) Collection of late enrollment penalty —(1) Collection through withholding. In the case of a late enrollment penalty that is collected by the government from a Part D eligible individual in the manner described in § 422.262(f)(1) of this chapter, CMS pays only the portion of the late enrollment penalty described in paragraph (b) of this section to the Part D sponsor offering the Part D plan in which the individual is enrolled.

(2) Collection by plan. In the case of a late enrollment penalty collected from a Part D eligible individual in a manner other than the manner described in § 422.262(f)(1) of this chapter, CMS reduces payments otherwise made to the Part D plan by an amount equal to the portion of the late enrollment penalty.

(d) Collection of the income-related monthly adjustment amount (Part D—IRMAA). (1) Collection through withholding. Where the Social Security Administration has determined the income-related monthly adjustment amount for an individual whose income exceeds the income threshold amounts specified at 20 CFR 418.2115, the Part D—IRMAA must be paid through withholding from the enrollee's Social Security benefit payments, or benefit payments by the Railroad Retirement Board (RRB) or the Office of Personnel Management (OPM) in the manner that the Part B premium is withheld.

(2) Collection through direct billing. In cases where an enrollee's benefit payment check is not sufficient to have the Part D—IRMAA withheld, or if an enrollee is not receiving such benefits, the beneficiary must be billed directly for the Part D—IRMAA. The beneficiary will have the option of paying the amount through an electronic funds transfer mechanism (such as automatic charges of an account at a financial institution or a credit or debit card account) or according to other means that CMS may specify.

(3) Failure to pay the income-related monthly adjustment amount: General rule. CMS will terminate Part D coverage for any individual who fails to pay the Part D—IRMAA as determined by the Social Security Administration. CMS will terminate an enrollee's Part D coverage as specified in § 423.44(e).

(e) Special rule for fallback plans. This section does not apply to fallback prescription drug plans. The fallback plans follow the requirements set forth in § 423.867(b).

(f) Prohibition on improper billing of premiums. Part D plan sponsors shall not bill an enrollee for a premium payment period if the enrollee has had the premium for that period withheld from his or her Social Security, Railroad Retirement Board or Office of Personnel Management check.

§ 423.294 Failure to collect and incorrect collections of premiums and cost sharing.

(a) Requirement to collect premiums and cost sharing. A Part D sponsor violates the uniform benefit provisions at § 423.104(b) if it fails to collect or incorrectly collects applicable cost sharing, or fails to collect or incorrectly collects premiums as required by § 422.262(e) of this chapter—

(1) In accordance with the timing of premium payments;

(2) At the time a drug is dispensed; or

(3) By billing the enrollee or another appropriate party after the fact.

(b) Refunds of incorrect collections—(1) Definitions. As used in this section the following definitions are applicable:

Amounts incorrectly collected. (A) Means amounts that exceed the monthly Part D enrollee premium limits under § 423.286 or exceed permissible cost-sharing or copayment amounts as specified in § 423.104(d) through (f), whether paid by or on behalf of the enrollee;

(B) Includes amounts collected with respect to an enrollee who was believed to be entitled to Medicare benefits but was later found not to be entitled; and

(C) Excludes de minimis amounts, as calculated per PDE transaction or per monthly premium billing.

De minimis amounts means an amount per PDE transaction for claims adjustments and per month for premium adjustments that does not exceed the de minimis amount determined for purposes of § 423.34(c)(2).

Other amounts due means amounts due to affected enrollees or others on their behalf (other than de minimis amounts) for covered Part D drugs that were—

(A) Accessed at an out-of-network pharmacy in accordance with the requirements at § 423.124; or

(B) Initially denied but, upon appeal, found to be covered Part D drugs the enrollee was entitled to have provided by the Part D plan.

(2) General rule. A Part D sponsor must make a reasonable effort to identify all amounts incorrectly collected and to pay any other amounts due during the timeframe for coordination of benefits as established at § 423.466(b). A Part D sponsor must issue a refund for an identified enrollee overpayment within the timeframe specified at § 423.466(a).

(3) Refund methods —(i) Lump-sum payment. The Part D sponsor must use lump-sum payments for the following:

(A) Amounts incorrectly collected as cost-sharing.

(B) Other amounts due.

(C) All amounts due if the Part D plan is going out of business or terminating its Part D contract for a prescription drug plan(s).

(ii) Premium adjustment, lump-sum payment, or both. If the amounts incorrectly collected were in the form of premiums, or included premiums as well as other charges, the Part D sponsor may refund by adjustment of future premiums or by a combination of premium adjustment and lump-sum payments.

(iii) Refund when enrollee has died or cannot be located. If an enrollee has died or cannot be located after reasonable effort, the Part D sponsor must make the refund in accordance with State law.

(4) Premium reduction and compliance. (i) If the Part D sponsor does not issue the refund as required under this section within the timeframe specified at § 423.466(a), CMS reduces the premium the Part D sponsor is allowed to charge a Part D enrollee by the amounts incorrectly collected or otherwise due.

(ii) The Part D plan may receive compliance notices from CMS or, depending on the extent of the non-compliance, be the subject of an intermediate sanction (for example, suspension of marketing and enrollment activities) in accordance with subpart O of this part.

(c) Collections of cost-sharing and premium amounts —(1) General rule. A Part D sponsor must make a reasonable effort to attempt to collect cost sharing from a beneficiary or to bill cost sharing or premiums to another appropriate party for all amounts other than de minimis amounts.

(2) Timeframe. Recovery notices must be processed and issued in accordance with the timeframe specified at § 423.466(a). A Part D sponsor must make a reasonable effort to attempt to collect these amounts during the timeframe for coordination of benefits as established at § 423.466(b).

(3) Retroactive collection of premiums. Nothing in this section alters the requirements of § 423.293(a)(4) of this part with respect to retroactive collection of premiums.

§ 423.301 Scope.

This subpart sets forth rules for the calculation and payment of CMS direct and reinsurance subsidies for Part D plans; the application of risk corridors and risk-sharing adjustments to payments; and retroactive adjustments and reconciliations to actual enrollment and interim payments. This subpart does not apply to fallback entities or fallback prescription drug plans.

§ 423.308 Definitions and terminology.

For the purposes of this subpart, the following definitions apply—

Actually paid means that the costs must be actually incurred by the Part D sponsor and must be net of any direct or indirect remuneration (including discounts, charge backs or rebates, cash discounts, free goods contingent on a purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price services, grants, or other price concessions or similar benefits offered to some or all purchasers) from any source (including manufacturers, pharmacies, enrollees, or any other person) that would serve to decrease the costs incurred under the Part D plan. Direct and indirect remuneration includes discounts, chargebacks or rebates, cash discounts, free goods contingent on a purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price services, grants, or other price concessions or similar benefits from manufacturers, pharmacies or similar entities obtained by an intermediary contracting organization with which the Part D plan sponsor has contracted, regardless of whether the intermediary contracting organization retains all or a portion of the direct and indirect remuneration or passes the entire direct and indirect remuneration to the Part D plan sponsor and regardless of the terms of the contract between the plan sponsor and the intermediary contracting organization.

Administrative costs means costs incurred by a Part D sponsor in complying with the requirements of this Part for a coverage year and that are not drug costs incurred to purchase or reimburse the purchase of Part D drugs. Administrative costs include amounts paid by the Part D sponsor to an intermediary contracting organization for covered Part D drugs dispensed to enrollees in the sponsor's Part D plan that differ from the amount paid by the intermediary contracting organization to a pharmacy or other entity that is the final dispenser of the covered Part D drugs. For example, any profit or loss retained by an intermediary contracting organization (through discounts, rebates, or other direct or indirect price concessions) when negotiating prices with dispensing entities is considered an administrative cost.

Allowable reinsurance costs means the subset of gross covered prescription drug costs actually paid that are attributable to basic prescription drug coverage for covered Part D drugs only and that are actually paid by the Part D sponsor or by (or on behalf of) an enrollee under the Part D plan. The costs for any Part D plan offering enhanced alternative coverage must be adjusted not only to exclude any costs attributable to benefits beyond basic prescription drug coverage, but also to exclude any costs determined to be attributable to increased utilization over the standard prescription drug coverage as the result of the insurance effect of enhanced alternative coverage in accordance with CMS guidelines on actuarial valuation.

Allowable risk corridor costs means—

(1) The subset of costs incurred under a Part D plan (not including administrative costs, but including dispensing fees) that are attributable to basic prescription drug coverage only and that are incurred and actually paid by the Part D sponsor to—

(i) A dispensing pharmacy or other dispensing provider (whether directly or through an intermediary contracting organization) under the Part D plan;

(ii) The parties listed in § 423.464(f)(1) of this part with which the Part D sponsor must coordinate benefits, including other Part D plans, as the result of any reconciliation process developed by CMS under § 423.464 of this part; or

(iii) An enrollee (or third party paying on behalf of the enrollee) to indemnify the enrollee when the reimbursement is associated with obtaining drugs under the Part D plan; and

(2) These costs must be based upon imposition of the maximum amount of copayments permitted under § 423.782 of this part. The costs for any Part D plan offering enhanced alternative coverage must be adjusted not only to exclude any costs attributable to benefits beyond basic prescription drug coverage, but also to exclude any prescription drug coverage costs determined to be attributable to increased utilization over standard prescription drug coverage as the result of the insurance effect of enhanced alternative coverage in accordance with CMS guidelines on actuarial valuation.

Coverage year means a calendar year in which covered Part D drugs are dispensed if the claim for those drugs (and payment on the claim) is made not later than 3 months after the end of the year

Gross covered prescription drug costs means those costs incurred under a Part D plan, excluding administrative costs, but including dispensing fees, during the coverage year. They equal the sum of the following:

(1) The share of actual costs (as defined by § 423.100 of this part) paid by the Part D plan that is received as reimbursement by the pharmacy, or other dispensing entity, reimbursement paid to indemnify an enrollee when the reimbursement is associated with an enrollee obtaining covered Part D drugs under the Part D plan, or payments made by the Part D sponsor to other parties listed in § 423.464(f)(1) of this part with which the Part D sponsor must coordinate benefits, including other Part D plans, or as the result of any reconciliation process developed by CMS under § 423.464 of this part.

(2) Nominal cost-sharing paid by or on behalf of an enrollee which is associated with drugs that would otherwise be covered Part D drugs, as defined in § 423.100 of this part, but are instead paid for, with the exception of said nominal cost-sharing, by a patient assistance program providing assistance outside the Part D benefit, provided that documentation of such nominal cost-sharing has been submitted to the Part D plan consistent with the plan processes and instructions for the submission of such information.

(3) All amounts paid under the Part D plan by or on behalf of an enrollee (such as the deductible, coinsurance, cost sharing, or amounts between the initial coverage limit and the out-of-pocket threshold) in order to obtain Part D drugs that are covered under the Part D plan. If an enrollee who is paying 100 percent cost sharing (as a result of paying a deductible or because the enrollee is between the initial coverage limit and the out-of-pocket threshold) obtains a covered Part D drug at a lower cost than is available under the Part D plan, such cost-sharing will be considered an amount paid under the plan by or on behalf of an enrollee under the previous sentence of this definition, if the enrollee's costs are incurred costs as defined under § 423.100 of this part and documentation of the incurred costs has been submitted to the Part D plan consistent with plan processes and instructions for the submission of such information. These costs are determined regardless of whether the coverage under the plan exceeds basic prescription drug coverage.

Reopening —(1) Global reopening means a reopening under § 423.346 in which CMS includes all Part D sponsor contracts that meet the inclusion criteria at § 423.346(g).

(2) Targeted reopening means a reopening under § 423.346 in which CMS includes one or more (but not all) Part D sponsor contracts that meet the inclusion criteria at § 423.346(g).

Target amount means the total amount of payments (from both CMS and by or on behalf of enrollees) to a Part D plan for the coverage year for all standardized bid amounts as risk adjusted under § 423.329(b)(1) of this part, less the administrative expenses (including return on investment) assumed in the standardized bids.

§ 423.315 General payment provisions.

(a) Source of payments. CMS payments under this section are made from the Medicare Prescription Drug Account.

(b) Monthly payments. CMS provides a direct subsidy in the form of advance monthly payments equal to the Part D plan's standardized bid, risk adjusted for health status as provided in § 423.329(b), minus the monthly beneficiary premium as determined in § 423.286.

(c) Reinsurance subsidies. CMS provides reinsurance subsidy payments described in § 423.329(c) on a monthly basis during a year based on either estimated or incurred allowable reinsurance costs as provided under § 423.329(c)(2)(i), and final reconciliation to actual allowable reinsurance costs as provided in § 423.343(c).

(d) Low-income subsidies. CMS makes payments for premium and cost sharing subsidies, including additional coverage above the initial coverage limit, on behalf of certain subsidy-eligible individuals as provided in §§ 423.780 and 423.782. CMS provides low-income cost-sharing subsidy payments described in § 423.782 through interim payments of amounts as provided under § 423.329(d)(2)(i) and reconciliation to actual allowable reinsurance costs as provided in § 423.343(d).

(e) Risk-sharing arrangements. CMS may issue lump-sum payments or adjust monthly payments in the following payment year based on the relationship of the Part D plan's adjusted allowable risk corridor costs to predetermined risk corridor thresholds in the coverage year as provided in § 423.336.

(f) Retroactive adjustments and reconciliations. CMS reconciles payment year disbursements with updated enrollment and health status data, actual low-income cost-sharing costs and actual allowable reinsurance costs as provided in § 423.343.

(g) Special rules for private fee-for-service plans —(1) Application of reinsurance. For private fee-for-service plans (as defined by § 422.4(a)(3) of this chapter) offering qualified prescription drug coverage, CMS determines the amount of reinsurance payments as provided under § 423.329(c)(3).

(2) Exemption from risk corridor provisions. The provisions of § 423.336 regarding risk sharing do not apply.

§ 423.322 Requirement for disclosure of information.

(a) Payment conditional upon provision of information. Payments to a Part D sponsor are conditioned upon provision of information to CMS that is necessary to carry out this subpart, or as required by law.

(b) Restrictions on use of information. (1) Officers, employees, and contractors of the Department of Health and Human Services may use the information disclosed or obtained in accordance with the provisions of this subpart for the purposes of, and to the extent necessary—

(i) In carrying out this subpart, including, but not limited to, determination of payments, and payment-related oversight and program integrity activities.

(ii) In conducting oversight, evaluation, and enforcement under Title XVIII of the Act.

(2) The United States Attorney General and the Comptroller General of the United States may use the information disclosed or obtained in accordance with the provisions of this subpart for purposes of, and to the extent necessary in, carrying out health oversight activities.

(3) The restrictions described in paragraphs (b)(1) and (2) of this section do not limit either of the following:

(i) OIG's authority to fulfill the Inspector General's responsibilities in accordance with applicable Federal law.

(ii) CMS' ability to use data regarding drug claims in accordance with section 1848(m) of the Act.

§ 423.325 PDE submission timeliness requirements.

(a) General PDE submission timeliness requirements. Unless paragraph (b) of this section applies, a Part D sponsor must submit PDE records to CMS as follows:

(1) Initial PDE records within 30 calendar days from the date the Part D sponsor (or its contracted first tier, downstream, or related entity) receives the claim.

(2) Adjustment or deletion PDE records within 90 calendar days of the Part D sponsor (or its contracted first tier, downstream, or related entity) discovering or receiving notification of an issue that requires a change to the previously submitted PDE record.

(3) Revised PDE records to resolve CMS rejected records within 90 calendar days of the rejection.

(b) Selected Drugs PDE submission timeliness requirement. A Part D sponsor must submit initial PDE records for selected drugs (as described at section 1192(c) of the Act) within 7 calendar days from the date the Part D sponsor (or its contracted first tier, downstream, or related entity) receives the claim.