81_FR_80223 81 FR 80003 - Medicaid Program; Covered Outpatient Drug; Delay in Change in Definitions of States and United States

81 FR 80003 - Medicaid Program; Covered Outpatient Drug; Delay in Change in Definitions of States and United States

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services

Federal Register Volume 81, Issue 220 (November 15, 2016)

Page Range80003-80005
FR Document2016-27423

The Covered Outpatient Drug final rule with comment period was published in the February 1, 2016 Federal Register. As part of that final rule with comment, we amended the regulatory definitions of ``States'' and ``United States'' to include the U.S. territories (American Samoa, the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the Virgin Islands) beginning April 1, 2017. This interim final rule with comment period delays the inclusion of the territories in the definition of ``States'' and ``United States'' until April 1, 2020.

Federal Register, Volume 81 Issue 220 (Tuesday, November 15, 2016)
[Federal Register Volume 81, Number 220 (Tuesday, November 15, 2016)]
[Rules and Regulations]
[Pages 80003-80005]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-27423]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 447

[CMS-2345-IFC]
RIN 0938-AT09


Medicaid Program; Covered Outpatient Drug; Delay in Change in 
Definitions of States and United States

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Interim final rule with comment period.

-----------------------------------------------------------------------

SUMMARY: The Covered Outpatient Drug final rule with comment period was 
published in the February 1, 2016 Federal Register. As part of that 
final rule with comment, we amended the regulatory definitions of 
``States'' and ``United States'' to include the U.S. territories 
(American Samoa, the Northern Mariana Islands, Guam, the Commonwealth 
of Puerto Rico, and the Virgin Islands) beginning April 1, 2017. This 
interim final rule with comment period delays the inclusion of the 
territories in the definition of ``States'' and ``United States'' until 
April 1, 2020.

DATES: Effective date: These regulations are effective on November 15, 
2016.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on January 17, 2017.

ADDRESSES: In commenting, please refer to file code CMS-2345-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed)
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2345-IFC, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2345-IFC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:  Wendy Tuttle, (410) 786-8690.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

A. Introduction

    The Covered Outpatient Drug final rule with comment period was 
published in the February 1, 2016 Federal Register (81 FR 5170). That 
final rule with comment period implemented provisions of section 1927 
of the Social Security Act (the Act) that were added by the Patient 
Protection and Affordable Care Act of 2010, as amended by the Health 
Care and

[[Page 80004]]

Education Reconciliation Act of 2010 (collectively referred to as the 
Affordable Care Act) pertaining to Medicaid reimbursement for covered 
outpatient drugs (CODs). That final rule with comment period also 
revised other requirements related to CODs, including key aspects of 
Medicaid coverage and payment and the Medicaid Drug Rebate (MDR) 
program under section 1927 of the Act. The rule became effective on 
April 1, 2016. However, the regulatory definitions of ``States'' and 
``United States'' under Sec.  447.502, included the U.S. territories 
(American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the 
Virgin Islands) beginning April 1, 2017.
    We stated in the preamble to the final rule with comment period 
that U.S. territories may use existing waiver authority to elect not to 
participate in the MDR program consistent with the statutory waiver 
standards. The Northern Mariana Islands and American Samoa may seek to 
opt out of participation under the broad waiver that has been granted 
to them in accordance with section 1902(j) of the Act. Puerto Rico, the 
Virgin Islands, and Guam may use waiver authority under section 
1115(a)(1) of the Act to waive section 1902(a)(54) of the Act, which 
requires state compliance with the applicable requirements of section 
1927 of the Act (81 FR 5203 through 5204).
    We also stated in the final rule with comment period that, 
effective with the change in the definition of ``United States,'' drug 
manufacturers would be required to include prices paid by entities 
located in one of the U.S. territories in the same manner in which they 
include prices paid by entities located in one of the 50 states and 
District of Columbia (81 FR 5224) in their calculations of average 
manufacturer price (AMP) and best price. This change requires 
manufacturers to include eligible sales and associated discounts, 
rebates, and other financial transactions that take place in the U.S. 
territories in their calculations of AMP and best price once the 
revised definitions of States and United States become effective, 
regardless of whether the U.S. territories seek to waive participation 
in the MDR program.

B. Impracticability of Implementation by April 1, 2017

    Based on discussions with the U.S. territories, it has become 
evident that interested U.S. territories could not be ready to 
implement the program by April 1, 2017, although a few territories have 
expressed interest in participating once they have made the necessary 
systems changes. Specifically, the territories need time to develop and 
change electronic claims processing systems to identify and report 
utilization (taking into account all of the complexities in tracking 
utilization by National drug code numbers) and to match utilization 
with the unit rebate amounts to generate rebate invoices. Further, 
these systems must be capable of collecting, reporting, validating and 
tracking drug utilization on an ongoing basis. In addition, they 
require extensive advance planning and budgeting. We received comments 
during the comment period of the proposed rule which requested that CMS 
delay the inclusion of the territories in the MDR program because the 
manufacturers and territories would need this additional time to 
implement provisions necessary to include territories in all aspects of 
the MDR program. We took these comments into consideration and in the 
final rule delayed the inclusion of the territories into the 
definitions of States and United States until 1 year after the 
effective date of the final rule (81 FR 5203, 5204). Despite this 1 
year delay, it has since become evident that we underestimated the 
timeline required, particularly in light of other demands on 
territorial systems development and the fact that the territories are 
at various stages of planning and development with respect to these 
systems. While the U.S. territories have the ability to seek a waiver 
from the requirements that they would have to meet when classified as 
``states,'' doing so would impose some burdens on a territory, 
particularly for those territories that are not included in the broad 
waiver authority under section 1902(j) of the Act. Moreover, waivers 
under section 1115 of the Act are limited to requirements applicable to 
states or territories under section 1902(a) of the Act, and would not 
apply to the requirements placed on drug manufacturers that sell in the 
territories. These manufacturers cannot be waived from the section 1927 
of the Act requirements under which manufacturers must include sales 
that take place in the U.S. territories when determining AMP and best 
price.
    We have heard from various stakeholders who have reiterated many of 
the concerns that were summarized in the final rule with comment (81 FR 
5224) that drug manufacturers will likely be prompted to increase drug 
prices, including prices paid by U.S. territory Medicaid programs. This 
would result in the U.S. territories that receive a waiver realizing an 
increase in their Medicaid drug costs without the offsetting benefit of 
receiving Medicaid rebates. Furthermore, the increase in Medicaid costs 
could adversely impact territories because of their Medicaid funding 
cap.

II. Provisions of the Interim Final Rule

    For the reasons discussed in the Background section, this interim 
final rule with comment period amends the regulatory definitions of 
``States'' and ``United States'' under Sec.  447.502 to include the 
U.S. territories (American Samoa, Northern Mariana Islands, Guam, 
Puerto Rico, and the Virgin Islands) beginning April 1, 2020 rather 
than April 1, 2017.

III. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and 
substances of the proposed rule or a description of the subjects and 
issues involved. This procedure can be waived, however, if an agency 
finds good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    As discussed in section I.B. of this interim final rule with 
comment period, in light of the longer time frames needed by 
territories for planning, budgeting and developing systems necessary to 
implement the Medicaid drug rebate program, the competing demand on 
system development resources, and the long time frames for manufacturer 
pricing determinations, we believe it is necessary to provide 
territories and manufacturers with advance notice of any change in the 
timing for the inclusion of territories in the Medicaid drug rebate 
program. Issuance of a proposed rule would be impracticable because it 
would result in a notice of the final rule without sufficient time for 
territories or manufacturers to adjust their actions to take into 
account the revised timing. Thus, we find good cause to waive the 
requirement for proposed rulemaking because the short time frame before 
the inclusion of territories would otherwise take effect does not 
permit sufficient time to both undertake proposed rulemaking and 
provide the necessary advance notice for territories and manufacturers 
to meaningfully adjust planning and systems development to accommodate 
the revised timing. Furthermore, we find good cause to waive the 
requirement for proposed rulemaking

[[Page 80005]]

because it would be contrary to public interest to delay notifying 
manufacturers of the change in the timing of the territorial inclusion 
in light of the potential that, absent sufficient advance notice, drug 
manufacturers may raise prices on drugs sold in the territories and 
thereby increase drug costs for both Medicaid and non-Medicaid 
consumers in the territories.
    Therefore, we find good cause to waive the notice of proposed 
rulemaking and to issue this final rule on an interim basis. We are 
providing a 60-day public comment period.

IV. Collection of Information Requirements

    This rule's delay in including the territories in the definitions 
of ``States'' and ``United States'' until April 1, 2020, does not 
impose any new or revised information collection, reporting, 
recordkeeping or third-party disclosure requirements or burden. 
Consequently, there is no need for review by the Office of Management 
and Budget under the authority of the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501 et seq.).

V. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

VI. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999) and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
This rule does not reach the economic threshold and thus is not 
considered a major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $7.5 million to $38.5 million in any 1 year. Individuals and 
states are not included in the definition of a small entity. We are not 
preparing an analysis for the RFA because we have determined, and the 
Secretary certifies, that this interim final rule with comment period 
will not have a significant economic impact on a substantial number of 
small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area for Medicare payment regulations and has fewer than 
100 beds. We are not preparing an analysis for section 1102(b) of the 
Act because we have determined, and the Secretary certifies, that this 
interim final rule with comment period will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2016, that 
threshold is approximately $146 million. This rule will have no 
consequential effect on state, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts state law, or otherwise has federalism 
implications. Since this regulation does not impose any costs on state 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs--health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 447--PAYMENTS FOR SERVICES

0
1. The authority citation for part 447 continues to read as follows:

    Authority:  Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).


0
2. Section 447.502 is amended by revising the definitions of ``States'' 
and ``United States'' to read as follows:


Sec.  447.502  Definitions.

* * * * *
    States means the 50 States and the District of Columbia and, 
beginning April 1, 2020, also includes the Commonwealth of Puerto Rico, 
the Virgin Islands, Guam, the Northern Mariana Islands and American 
Samoa.
    United States means the 50 States and the District of Columbia and, 
beginning April 1, 2020, also includes the Commonwealth of Puerto Rico, 
the Virgin Islands, Guam, the Northern Mariana Islands and American 
Samoa.
* * * * *

    Dated: October 5, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 8, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-27423 Filed 11-14-16; 8:45 am]
 BILLING CODE 4120-01-P



                                                                 Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Rules and Regulations                                               80003

                                                ■ 3. In appendix C to part 4022, Rate Set               Appendix C to Part 4022—Lump Sum
                                                278, as set forth below, is added to the                Interest Rates For Private-Sector
                                                table.                                                  Payments
                                                                                                        *        *      *      *         *

                                                                          For plans with a                                                                        Deferred annuities
                                                                           valuation date                 Immediate                                                   (percent)
                                                    Rate set                                             annuity rate
                                                                       On or                               (percent)
                                                                                         Before                                     i1                  i2                 i3                n1         n2
                                                                       after


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                                                      278            12–1–16             1–1–17                 0.75               4.00                4.00              4.00                7          8



                                                Judith Starr,                                              You may submit comments in one of                           If you intend to deliver your
                                                General Counsel, Pension Benefit Guaranty               four ways (please choose only one of the                    comments to the Baltimore address, call
                                                Corporation.                                            ways listed)                                                telephone number (410) 786–7195 in
                                                [FR Doc. 2016–27384 Filed 11–14–16; 8:45 am]               1. Electronically. You may submit                        advance to schedule your arrival with
                                                BILLING CODE 7709–02–P                                  electronic comments on this regulation                      one of our staff members.
                                                                                                        to http://www.regulations.gov. Follow                          Comments erroneously mailed to the
                                                                                                        the ‘‘Submit a comment’’ instructions.                      addresses indicated as appropriate for
                                                DEPARTMENT OF HEALTH AND                                   2. By regular mail. You may mail                         hand or courier delivery may be delayed
                                                HUMAN SERVICES                                          written comments to the following                           and received after the comment period.
                                                                                                        address ONLY: Centers for Medicare &                           For information on viewing public
                                                Centers for Medicare & Medicaid                         Medicaid Services, Department of                            comments, see the beginning of the
                                                Services                                                Health and Human Services, Attention:                       SUPPLEMENTARY INFORMATION section.
                                                                                                        CMS–2345–IFC, P.O. Box 8016,                                FOR FURTHER INFORMATION CONTACT:
                                                42 CFR Part 447                                         Baltimore, MD 21244–8016.                                   Wendy Tuttle, (410) 786–8690.
                                                [CMS–2345–IFC]                                             Please allow sufficient time for mailed                  SUPPLEMENTARY INFORMATION:
                                                                                                        comments to be received before the                             Inspection of Public Comments: All
                                                RIN 0938–AT09                                           close of the comment period.                                comments received before the close of
                                                                                                           3. By express or overnight mail. You                     the comment period are available for
                                                Medicaid Program; Covered Outpatient                    may send written comments to the                            viewing by the public, including any
                                                Drug; Delay in Change in Definitions of                 following address ONLY: Centers for                         personally identifiable or confidential
                                                States and United States                                Medicare & Medicaid Services,                               business information that is included in
                                                AGENCY:  Centers for Medicare &                         Department of Health and Human                              a comment. We post all comments
                                                Medicaid Services (CMS), HHS.                           Services, Attention: CMS–2345–IFC,                          received before the close of the
                                                ACTION: Interim final rule with comment                 Mail Stop C4–26–05, 7500 Security                           comment period on the following Web
                                                period.                                                 Boulevard, Baltimore, MD 21244–1850.                        site as soon as possible after they have
                                                                                                           4. By hand or courier. Alternatively,                    been received: http://regulations.gov.
                                                SUMMARY:    The Covered Outpatient Drug                 you may deliver (by hand or courier)                        Follow the search instructions on that
                                                final rule with comment period was                      your written comments ONLY to the                           Web site to view public comments.
                                                published in the February 1, 2016                       following addresses prior to the close of                      Comments received timely will be
                                                Federal Register. As part of that final                 the comment period:                                         also available for public inspection as
                                                rule with comment, we amended the                          a. For delivery in Washington, DC—                       they are received, generally beginning
                                                regulatory definitions of ‘‘States’’ and                Centers for Medicare & Medicaid                             approximately 3 weeks after publication
                                                ‘‘United States’’ to include the U.S.                   Services, Department of Health and                          of a document, at the headquarters of
                                                territories (American Samoa, the                        Human Services, Room 445–G, Hubert                          the Centers for Medicare & Medicaid
                                                Northern Mariana Islands, Guam, the                     H. Humphrey Building, 200                                   Services, 7500 Security Boulevard,
                                                Commonwealth of Puerto Rico, and the                    Independence Avenue SW.,                                    Baltimore, Maryland 21244, Monday
                                                Virgin Islands) beginning April 1, 2017.                Washington, DC 20201.                                       through Friday of each week from 8:30
                                                This interim final rule with comment                       (Because access to the interior of the                   a.m. to 4 p.m. To schedule an
                                                period delays the inclusion of the                      Hubert H. Humphrey Building is not                          appointment to view public comments,
                                                territories in the definition of ‘‘States’’             readily available to persons without                        phone 1–800–743–3951.
                                                and ‘‘United States’’ until April 1, 2020.              Federal government identification,                          I. Background
                                                DATES: Effective date: These regulations                commenters are encouraged to leave
                                                are effective on November 15, 2016.                     their comments in the CMS drop slots                        A. Introduction
                                                   Comment date: To be assured                          located in the main lobby of the                               The Covered Outpatient Drug final
                                                consideration, comments must be                         building. A stamp-in clock is available                     rule with comment period was
                                                received at one of the addresses                        for persons wishing to retain a proof of                    published in the February 1, 2016
mstockstill on DSK3G9T082PROD with RULES




                                                provided below, no later than 5 p.m. on                 filing by stamping in and retaining an                      Federal Register (81 FR 5170). That
                                                January 17, 2017.                                       extra copy of the comments being filed.)                    final rule with comment period
                                                ADDRESSES: In commenting, please refer                     b. For delivery in Baltimore, MD—                        implemented provisions of section 1927
                                                to file code CMS–2345–IFC. Because of                   Centers for Medicare & Medicaid                             of the Social Security Act (the Act) that
                                                staff and resource limitations, we cannot               Services, Department of Health and                          were added by the Patient Protection
                                                accept comments by facsimile (FAX)                      Human Services, 7500 Security                               and Affordable Care Act of 2010, as
                                                transmission.                                           Boulevard, Baltimore, MD 21244–1850.                        amended by the Health Care and


                                           VerDate Sep<11>2014   16:28 Nov 11, 2016   Jkt 241001   PO 00000     Frm 00013   Fmt 4700     Sfmt 4700   E:\FR\FM\15NOR1.SGM        15NOR1


                                                80004            Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Rules and Regulations

                                                Education Reconciliation Act of 2010      systems changes. Specifically, the                                  rebates. Furthermore, the increase in
                                                (collectively referred to as the          territories need time to develop and                                Medicaid costs could adversely impact
                                                Affordable Care Act) pertaining to        change electronic claims processing                                 territories because of their Medicaid
                                                Medicaid reimbursement for covered        systems to identify and report                                      funding cap.
                                                outpatient drugs (CODs). That final rule  utilization (taking into account all of the                         II. Provisions of the Interim Final Rule
                                                with comment period also revised other    complexities in tracking utilization by
                                                requirements related to CODs, including   National drug code numbers) and to                                     For the reasons discussed in the
                                                key aspects of Medicaid coverage and      match utilization with the unit rebate                              Background section, this interim final
                                                payment and the Medicaid Drug Rebate      amounts to generate rebate invoices.                                rule with comment period amends the
                                                (MDR) program under section 1927 of       Further, these systems must be capable                              regulatory definitions of ‘‘States’’ and
                                                the Act. The rule became effective on     of collecting, reporting, validating and                            ‘‘United States’’ under § 447.502 to
                                                April 1, 2016. However, the regulatory    tracking drug utilization on an ongoing                             include the U.S. territories (American
                                                definitions of ‘‘States’’ and ‘‘United    basis. In addition, they require extensive                          Samoa, Northern Mariana Islands,
                                                States’’ under § 447.502, included the    advance planning and budgeting. We                                  Guam, Puerto Rico, and the Virgin
                                                U.S. territories (American Samoa,         received comments during the comment                                Islands) beginning April 1, 2020 rather
                                                Northern Mariana Islands, Guam, Puerto    period of the proposed rule which                                   than April 1, 2017.
                                                Rico, and the Virgin Islands) beginning   requested that CMS delay the inclusion                              III. Waiver of Proposed Rulemaking
                                                April 1, 2017.                            of the territories in the MDR program
                                                  We stated in the preamble to the final                                                                         We ordinarily publish a notice of
                                                                                          because the manufacturers and
                                                rule with comment period that U.S.                                                                            proposed rulemaking in the Federal
                                                                                          territories would need this additional
                                                territories may use existing waiver                                                                           Register and invite public comment on
                                                                                          time to implement provisions necessary                              the proposed rule. The notice of
                                                authority to elect not to participate in  to include territories in all aspects of the
                                                the MDR program consistent with the                                                                           proposed rulemaking includes a
                                                                                          MDR program. We took these comments                                 reference to the legal authority under
                                                statutory waiver standards. The           into consideration and in the final rule
                                                Northern Mariana Islands and American                                                                         which the rule is proposed, and the
                                                                                          delayed the inclusion of the territories                            terms and substances of the proposed
                                                Samoa may seek to opt out of              into the definitions of States and United
                                                participation under the broad waiver                                                                          rule or a description of the subjects and
                                                                                          States until 1 year after the effective                             issues involved. This procedure can be
                                                that has been granted to them in          date of the final rule (81 FR 5203, 5204).
                                                accordance with section 1902(j) of the                                                                        waived, however, if an agency finds
                                                                                          Despite this 1 year delay, it has since                             good cause that a notice-and-comment
                                                Act. Puerto Rico, the Virgin Islands, and become evident that we underestimated
                                                Guam may use waiver authority under                                                                           procedure is impracticable,
                                                                                          the timeline required, particularly in                              unnecessary, or contrary to the public
                                                section 1115(a)(1) of the Act to waive    light of other demands on territorial
                                                section 1902(a)(54) of the Act, which                                                                         interest and incorporates a statement of
                                                                                          systems development and the fact that                               the finding and its reasons in the rule
                                                requires state compliance with the        the territories are at various stages of
                                                applicable requirements of section 1927                                                                       issued.
                                                                                          planning and development with respect                                  As discussed in section I.B. of this
                                                of the Act (81 FR 5203 through 5204).     to these systems. While the U.S.
                                                  We also stated in the final rule with                                                                       interim final rule with comment period,
                                                                                          territories have the ability to seek a                              in light of the longer time frames needed
                                                comment period that, effective with the
                                                                                          waiver from the requirements that they                              by territories for planning, budgeting
                                                change in the definition of ‘‘United
                                                                                          would have to meet when classified as                               and developing systems necessary to
                                                States,’’ drug manufacturers would be
                                                                                          ‘‘states,’’ doing so would impose some                              implement the Medicaid drug rebate
                                                required to include prices paid by
                                                                                          burdens on a territory, particularly for                            program, the competing demand on
                                                entities located in one of the U.S.
                                                territories in the same manner in which   those territories that are not included in                          system development resources, and the
                                                they include prices paid by entities      the broad waiver authority under                                    long time frames for manufacturer
                                                located in one of the 50 states and       section 1902(j) of the Act. Moreover,                               pricing determinations, we believe it is
                                                District of Columbia (81 FR 5224) in      waivers under section 1115 of the Act                               necessary to provide territories and
                                                their calculations of average             are limited to requirements applicable                              manufacturers with advance notice of
                                                manufacturer price (AMP) and best         to states or territories under section                              any change in the timing for the
                                                price. This change requires               1902(a) of the Act, and would not apply                             inclusion of territories in the Medicaid
                                                manufacturers to include eligible sales   to the requirements placed on drug                                  drug rebate program. Issuance of a
                                                and associated discounts, rebates, and    manufacturers that sell in the territories.                         proposed rule would be impracticable
                                                other financial transactions that take    These manufacturers cannot be waived                                because it would result in a notice of the
                                                place in the U.S. territories in their    from the section 1927 of the Act                                    final rule without sufficient time for
                                                calculations of AMP and best price once   requirements under which                                            territories or manufacturers to adjust
                                                the revised definitions of States and     manufacturers must include sales that                               their actions to take into account the
                                                United States become effective,           take place in the U.S. territories when                             revised timing. Thus, we find good
                                                regardless of whether the U.S. territoriesdetermining AMP and best price.                                     cause to waive the requirement for
                                                seek to waive participation in the MDR       We have heard from various                                       proposed rulemaking because the short
                                                program.                                  stakeholders who have reiterated many                               time frame before the inclusion of
                                                                                          of the concerns that were summarized                                territories would otherwise take effect
                                                B. Impracticability of Implementation by in the final rule with comment (81 FR                                does not permit sufficient time to both
                                                April 1, 2017                             5224) that drug manufacturers will                                  undertake proposed rulemaking and
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                                                  Based on discussions with the U.S.      likely be prompted to increase drug                                 provide the necessary advance notice
                                                territories, it has become evident that   prices, including prices paid by U.S.                               for territories and manufacturers to
                                                interested U.S. territories could not be  territory Medicaid programs. This                                   meaningfully adjust planning and
                                                ready to implement the program by         would result in the U.S. territories that                           systems development to accommodate
                                                April 1, 2017, although a few territories receive a waiver realizing an increase in                           the revised timing. Furthermore, we
                                                have expressed interest in participating  their Medicaid drug costs without the                               find good cause to waive the
                                                once they have made the necessary         offsetting benefit of receiving Medicaid                            requirement for proposed rulemaking


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                                                                 Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Rules and Regulations                                            80005

                                                because it would be contrary to public                  equity). A regulatory impact analysis                 the requirements of Executive Order
                                                interest to delay notifying                             (RIA) must be prepared for major rules                13132 are not applicable.
                                                manufacturers of the change in the                      with economically significant effects                   In accordance with the provisions of
                                                timing of the territorial inclusion in                  ($100 million or more in any 1 year).                 Executive Order 12866, this regulation
                                                light of the potential that, absent                     This rule does not reach the economic                 was reviewed by the Office of
                                                sufficient advance notice, drug                         threshold and thus is not considered a
                                                                                                                                                              Management and Budget.
                                                manufacturers may raise prices on drugs                 major rule.
                                                sold in the territories and thereby                        The RFA requires agencies to analyze               List of Subjects in 42 CFR Part 447
                                                increase drug costs for both Medicaid                   options for regulatory relief of small
                                                and non-Medicaid consumers in the                       entities. For purposes of the RFA, small                Accounting, Administrative practice
                                                territories.                                            entities include small businesses,                    and procedure, Drugs, Grant programs—
                                                   Therefore, we find good cause to                     nonprofit organizations, and small                    health, Health facilities, Health
                                                waive the notice of proposed                            governmental jurisdictions. Most                      professions, Medicaid, Reporting and
                                                rulemaking and to issue this final rule                 hospitals and most other providers and                recordkeeping requirements, Rural
                                                on an interim basis. We are providing a                 suppliers are small entities, either by               areas.
                                                60-day public comment period.                           nonprofit status or by having revenues                  For the reasons set forth in the
                                                IV. Collection of Information                           of less than $7.5 million to $38.5                    preamble, the Centers for Medicare &
                                                Requirements                                            million in any 1 year. Individuals and                Medicaid Services amends 42 CFR
                                                                                                        states are not included in the definition             chapter IV as set forth below:
                                                  This rule’s delay in including the                    of a small entity. We are not preparing
                                                territories in the definitions of ‘‘States’’            an analysis for the RFA because we have
                                                and ‘‘United States’’ until April 1, 2020,                                                                    PART 447—PAYMENTS FOR
                                                                                                        determined, and the Secretary certifies,              SERVICES
                                                does not impose any new or revised                      that this interim final rule with
                                                information collection, reporting,                      comment period will not have a
                                                recordkeeping or third-party disclosure                                                                       ■ 1. The authority citation for part 447
                                                                                                        significant economic impact on a
                                                requirements or burden. Consequently,                                                                         continues to read as follows:
                                                                                                        substantial number of small entities.
                                                there is no need for review by the Office                  In addition, section 1102(b) of the Act             Authority: Sec. 1102 of the Social Security
                                                of Management and Budget under the                      requires us to prepare a regulatory                   Act (42 U.S.C. 1302).
                                                authority of the Paperwork Reduction                    impact analysis if a rule may have a
                                                Act of 1995 (44 U.S.C. 3501 et seq.).                                                                         ■ 2. Section 447.502 is amended by
                                                                                                        significant impact on the operations of
                                                                                                                                                              revising the definitions of ‘‘States’’ and
                                                V. Response to Comments                                 a substantial number of small rural
                                                                                                        hospitals. This analysis must conform to              ‘‘United States’’ to read as follows:
                                                  Because of the large number of public
                                                comments we normally receive on                         the provisions of section 604 of the                  § 447.502   Definitions.
                                                Federal Register documents, we are not                  RFA. For purposes of section 1102(b) of
                                                                                                                                                              *     *     *     *    *
                                                able to acknowledge or respond to them                  the Act, we define a small rural hospital
                                                                                                        as a hospital that is located outside of                States means the 50 States and the
                                                individually. We will consider all
                                                                                                        a Metropolitan Statistical Area for                   District of Columbia and, beginning
                                                comments we receive by the date and
                                                                                                        Medicare payment regulations and has                  April 1, 2020, also includes the
                                                time specified in the DATES section of
                                                this preamble, and, when we proceed                     fewer than 100 beds. We are not                       Commonwealth of Puerto Rico, the
                                                with a subsequent document, we will                     preparing an analysis for section 1102(b)             Virgin Islands, Guam, the Northern
                                                respond to the comments in the                          of the Act because we have determined,                Mariana Islands and American Samoa.
                                                preamble to that document.                              and the Secretary certifies, that this                  United States means the 50 States and
                                                                                                        interim final rule with comment period                the District of Columbia and, beginning
                                                VI. Regulatory Impact Statement                         will not have a significant impact on the
                                                                                                                                                              April 1, 2020, also includes the
                                                   We have examined the impact of this                  operations of a substantial number of
                                                                                                                                                              Commonwealth of Puerto Rico, the
                                                rule as required by Executive Order                     small rural hospitals.
                                                                                                                                                              Virgin Islands, Guam, the Northern
                                                12866 on Regulatory Planning and                           Section 202 of the Unfunded
                                                                                                                                                              Mariana Islands and American Samoa.
                                                Review (September 30, 1993), Executive                  Mandates Reform Act of 1995 also
                                                Order 13563 on Improving Regulation                     requires that agencies assess anticipated             *     *     *     *    *
                                                and Regulatory Review (January 18,                      costs and benefits before issuing any                   Dated: October 5, 2016.
                                                2011), the Regulatory Flexibility Act                   rule whose mandates require spending                  Andrew M. Slavitt,
                                                (RFA) (September 19, 1980, Pub. L. 96–                  in any 1 year of $100 million in 1995
                                                                                                                                                              Acting Administrator, Centers for Medicare
                                                354), section 1102(b) of the Social                     dollars, updated annually for inflation.
                                                                                                                                                              & Medicaid Services.
                                                Security Act, section 202 of the                        In 2016, that threshold is approximately
                                                                                                        $146 million. This rule will have no                    Dated: November 8, 2016.
                                                Unfunded Mandates Reform Act of 1995
                                                (March 22, 1995; Pub. L. 104–4),                        consequential effect on state, local, or              Sylvia M. Burwell,
                                                Executive Order 13132 on Federalism                     tribal governments or on the private                  Secretary, Department of Health and Human
                                                (August 4, 1999) and the Congressional                  sector.                                               Services.
                                                Review Act (5 U.S.C. 804(2)).                              Executive Order 13132 establishes                  [FR Doc. 2016–27423 Filed 11–14–16; 8:45 am]
                                                   Executive Orders 12866 and 13563                     certain requirements that an agency                   BILLING CODE 4120–01–P
                                                direct agencies to assess all costs and                 must meet when it promulgates a
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                                                benefits of available regulatory                        proposed rule (and subsequent final
                                                alternatives and, if regulation is                      rule) that imposes substantial direct
                                                necessary, to select regulatory                         requirement costs on State and local
                                                approaches that maximize net benefits                   governments, preempts state law, or
                                                (including potential economic,                          otherwise has federalism implications.
                                                environmental, public health and safety                 Since this regulation does not impose
                                                effects, distributive impacts, and                      any costs on state or local governments,


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Document Created: 2016-11-15 00:48:22
Document Modified: 2016-11-15 00:48:22
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionInterim final rule with comment period.
ContactWendy Tuttle, (410) 786-8690.
FR Citation81 FR 80003 
RIN Number0938-AT09
CFR AssociatedAccounting; Administrative Practice and Procedure; Drugs; Grant Programs-Health; Health Facilities; Health Professions; Medicaid; Reporting and Recordkeeping Requirements and Rural Areas

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