Page Range | 5037-5363 | |
FR Document |
Page and Subject | |
---|---|
81 FR 5359 - White House Cancer Moonshot Task Force | |
81 FR 5106 - Sunshine Act Meetings | |
81 FR 5122 - Sunshine Act Meeting | |
81 FR 5121 - Sunshine Act Meeting | |
81 FR 5060 - Treatment of Certain Transfers of Property of Foreign Corporations; Hearing Correction | |
81 FR 5164 - Proposed Collection; Comment Request | |
81 FR 5098 - Hydrofluorocarbon Blends and Components Thereof From the People's Republic of China: Preliminary Determination of Sales at Less Than Fair Value, Affirmative Preliminary Determination of Critical Circumstances, in Part, and Postponement of Final Determination | |
81 FR 5139 - Request for Letters of Intent To Apply for 2016 Technology Initiative Grant Funding; Correction | |
81 FR 5122 - Submission for OMB Review; Advance Payments | |
81 FR 5101 - Pacific Fishery Management Council; Public Meetings and Hearings | |
81 FR 5106 - Agency Information Collection Activities Under OMB Review | |
81 FR 5102 - Pacific Fishery Management Council; Notice of Intent To Prepare an Environmental Impact Statement | |
81 FR 5105 - Agency Information Collection Activities Under OMB Review | |
81 FR 5102 - Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic; Snapper-Grouper Fishery Off the South Atlantic States; Amendment 36 | |
81 FR 5054 - Fisheries of the Exclusive Economic Zone Off Alaska; Atka Mackerel in the Bering Sea and Aleutian Islands Management Area | |
81 FR 5138 - Agency Information Collection Activities; Proposed eCollection eComments Requested; Extension of a Currently Approved Collection: OJP Standard Assurances | |
81 FR 5107 - Agency Information Collection Activities Under OMB Review | |
81 FR 5129 - Psychopharmacologic Drugs Advisory Committee; Notice of Meeting | |
81 FR 5054 - Fisheries of the Exclusive Economic Zone Off Alaska; Pollock in Statistical Area 630 in the Gulf of Alaska | |
81 FR 5129 - Agency Information Collection Activities; Proposed Collection; Public Comment Request | |
81 FR 5093 - The Refund of Duties Paid on Imports of Certain Wool Products | |
81 FR 5109 - Applications for New Awards; Predominantly Black Institutions Formula Grant Program | |
81 FR 5131 - Notice of Public Meeting of the Central California Resource Advisory Council | |
81 FR 5130 - Receipt of Application for Renewal of Incidental Take Permit for Ohlone Tiger Beetle; Low-Effect Habitat Conservation Plan for the Santa Cruz Gardens Unit 12 Project Site; Soquel, Santa Cruz County, California | |
81 FR 5132 - Notice of Public Meeting: Bureau of Land Management Nevada Resource Advisory Councils | |
81 FR 5132 - Notice of Public Meeting for the Glen Canyon Dam Adaptive Management Work Group | |
81 FR 5037 - Airworthiness Directives; Agusta S.p.A. Helicopters | |
81 FR 5131 - Notice of Public Meeting: Northern California Resource Advisory Council | |
81 FR 5093 - Office of Inspector General; Senior Executive Services (SES) Performance Review Board: Update | |
81 FR 5056 - Airworthiness Directives; Airbus Airplanes | |
81 FR 5085 - Procedures Related to Motions | |
81 FR 5107 - Notice of Public Hearing and Business Meeting: February 10 and March 16, 2016 | |
81 FR 5097 - Notice of New Fee Site Federal Lands Recreation Enhancement Act | |
81 FR 5096 - Superior Resource Advisory Committee | |
81 FR 5039 - Drawbridge Operation Regulation; Inner Harbor Navigation Canal, New Orleans, LA | |
81 FR 5041 - Drawbridge Operation Regulations; Inner Harbor Navigation Canal and Chef Menteur Pass, Both at New Orleans, LA | |
81 FR 5040 - Drawbridge Operation Regulation; Lake Pontchartrain, Near New Orleans, LA | |
81 FR 5094 - Agency Information Collection Activities: Proposed Collection; Comment Request-SNAP Performance Reporting System, Management Evaluation | |
81 FR 5133 - Porcelain-on-Steel Cooking Ware From China; Institution of a Five-Year Review | |
81 FR 5136 - Magnesium From China; Institution of a Five-Year Review | |
81 FR 5097 - Proposed Information Collection; Comment Request; Current Population Survey (CPS) Voting and Registration Supplement | |
81 FR 5108 - Agency Information Collection Activities; Comment Request; eZ-Audit: Electronic Submission of Financial Statements and Compliance Audits | |
81 FR 5123 - Proposed Data Collection Submitted for Public Comment and Recommendations | |
81 FR 5127 - Proposed Data Collections Submitted for Public Comment and Recommendations | |
81 FR 5124 - Proposed Data Collection Submitted for Public Comment and Recommendations | |
81 FR 5126 - Agency Forms Undergoing Paperwork Reduction Act Review | |
81 FR 5040 - Drawbridge Operation Regulation; Sloop Channel, Wantagh, NY | |
81 FR 5165 - Submission for OMB Review; Comment Request | |
81 FR 5148 - Proposed Collection; Comment Request | |
81 FR 5163 - Proposed Collection; Comment Request | |
81 FR 5139 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Amending the Fees for NYSE MKT Integrated Feed | |
81 FR 5149 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2 to Proposed Rule Change Amending NYSE Arca Equities Rule 8.600 To Adopt Generic Listing Standards for Managed Fund Shares | |
81 FR 5158 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Amending the Fees for NYSE Integrated Feed | |
81 FR 5143 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Amending the Fees for NYSE Order Imbalances and NYSE Alerts | |
81 FR 5162 - Proposed Collection; Comment Request | |
81 FR 5164 - Submission for OMB Review; Comment Request | |
81 FR 5061 - TRICARE; Mental Health and Substance Use Disorder Treatment | |
81 FR 5113 - Agency Information Collection Activities: Revision of the Employer Information Report (EEO-1) and Comment Request | |
81 FR 5096 - Correction To Request for Information: Software Vendors of State and Local Management Information Systems (MIS) and Other Technology Solutions for the National School Lunch and School Breakfast Programs | |
81 FR 5169 - Medicaid Program; Covered Outpatient Drugs | |
81 FR 5041 - Low Power Television Digital Rules | |
81 FR 5086 - Low Power Television Digital Rules |
Food and Nutrition Service
Forest Service
Census Bureau
International Trade Administration
National Oceanic and Atmospheric Administration
Centers for Disease Control and Prevention
Centers for Medicare & Medicaid Services
Food and Drug Administration
Coast Guard
Fish and Wildlife Service
Land Management Bureau
Reclamation Bureau
Federal Aviation Administration
Internal Revenue Service
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.thefederalregister.org and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions.
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule; request for comments.
We are publishing a new airworthiness directive (AD) for Agusta S.p.A. (Agusta) Model A109A and A109AII helicopters, which was sent previously to all known U.S. owners and operators of these helicopters. This AD requires checking and inspecting each main rotor blade (blade) for a crack and replacing any cracked blade before further flight. This AD is prompted by abnormal vibrations leading to a precautionary landing and a post-flight inspection finding of a crack in a blade. These actions are intended to detect a crack in a blade and prevent failure of a blade and subsequent loss of control of the helicopter.
This AD is effective February 16, 2016 to all persons except those persons to whom it was made immediately effective by Emergency AD 2015-22-51 issued on October 23, 2015, which contains the requirements of this AD.
We must receive comments on this AD by March 17, 2016.
You may send comments by any of the following methods:
•
•
•
•
You may examine the AD docket on the Internet at
For service information identified in this final rule, contact Agusta Westland, Product Support Engineering, Via del Gregge, 100, 21015 Lonate Pozzolo (VA) Italy, ATTN: Maurizio D'Angelo; telephone 39-0331-664757; fax 39-0331-664680; or at
Matt Fuller, Senior Aviation Safety Engineer, Safety Management Group, Rotorcraft Directorate, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone (817) 222-5110; email
This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments prior to it becoming effective. However, we invite you to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that resulted from adopting this AD. The most helpful comments reference a specific portion of the AD, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit them only one time. We will file in the docket all comments that we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this rulemaking during the comment period. We will consider all the comments we receive and may conduct additional rulemaking based on those comments.
On October 23, 2015, we issued Emergency AD 2015-22-51 to correct an unsafe condition for Agusta Model A109A and A109AII helicopters with certain part-numbered blades installed. Emergency AD 2015-22-51 requires inspecting each blade for a crack before further flight and then once each day, checking each blade for a crack before each flight, and replacing any cracked blade. The manufacturer's maintenance program specifies inspecting each blade every 25 hours time-in-service (TIS). The actions in Emergency AD 2015-22-51 were prompted by abnormal vibrations leading to a precautionary landing and a post-flight inspection finding of a crack in a blade. The crack extended from the trailing edge to the rear face of the spar at the joint between the spar and the body of the blade. This condition, if not detected, could result in failure of a blade and subsequent loss of control of a helicopter.
Emergency AD 2015-22-51 was prompted by AD No. 2015-0190-E, dated September 18, 2015, issued by EASA, which is the Technical Agent for the Member States of the European Union, to correct an unsafe condition for Agusta Model A109A and A109A II helicopters. EASA advises that abnormal vibrations were reported during a flight on a Model A109A II helicopter. During a post-flight inspection, a crack was found on a part number (P/N) 109-0103-01-9 blade. EASA AD 2015-0190-E requires pre-flight inspections and repetitive
These helicopters have been approved by the aviation authority of Italy and are approved for operation in the United States. Pursuant to our bilateral agreement with Italy, EASA, its technical representative, has notified us of the unsafe condition described in the EASA AD. We are issuing this AD because we evaluated all information provided by EASA and determined the unsafe condition exists and is likely to exist or develop on other helicopters of these same type designs.
We reviewed AgustaWestland Mandatory Alert Bollettino Tecnico No. 109-150, dated September 17, 2015 (ABT). The ABT specifies for blades with more than 500 flight hours, before the next flight and then before each flight, visually inspecting each affected blade for a crack in the area between the station at the end of the doublers and the station at the beginning of the abrasion strip (both top and bottom surfaces for a crack. The ABT also specifies inspecting the blades for a crack at every airworthiness check and, in case of doubt about a crack, dye penetrant inspecting each blade. If a crack is found, the ABT specifies replacing the blade with a serviceable one.
This AD requires for each blade P/N 109-0103-01-7, P/N 109-0103-01-9, or P/N 109-0103-01-115 that has 500 or more hours TIS:
• Before further flight and thereafter at intervals not exceeding 24 clock-hours, using a 3X or higher power magnifying glass, visually inspecting the top and bottom surface of each blade for a crack in the area between the station at the end of the doublers and the station at the beginning of the abrasion strip. If there is a crack, before further flight, replacing the blade with an airworthy blade.
• Before each flight, checking the top and bottom surface of each blade for a crack in the area between the station at the end of the doublers and the station at the beginning of the abrasion strip. This check may be performed by the owner/operator (pilot) holding at least a private pilot certificate and must be entered into the aircraft records showing compliance with this AD in accordance with 14 CFR 43.9 (a)(1) through (a)(4) and 14 CFR 91.417(a)(2)(v). The record must be maintained as required by 14 CFR 91.417, 121.380, or 135.439. This check is an exception to our standard maintenance regulations. If there is a crack, the blade must be inspected using a 3X or higher power magnifying glass.
This AD does not require a change to the Rotorcraft Flight Manual nor does it require a dye-penetrant inspection, whereas the EASA AD does. This AD requires the blade inspection before further flight, whereas the EASA AD allows an initial check prior to the inspection.
We consider this AD interim action. If final action is later identified, we might consider further rulemaking then.
We estimate that this AD affects 33 helicopters of U.S. registry. We estimate that operators may incur the following costs in order to comply with this AD. Labor costs are estimated at $85 per work-hour. We estimate 1 work-hour to inspect a blade at a cost of $85 per helicopter and $2,805 for the fleet. We estimate 4 work-hours to replace a blade at a cost of $340 per helicopter, and the required parts will cost $30,000 for a total of $30,340 per helicopter.
Providing an opportunity for public comments prior to adopting these AD requirements would delay implementing the safety actions needed to correct this known unsafe condition. Therefore, we found and continue to find that the risk to the flying public justifies waiving notice and comment prior to the adoption of this rule because the previously described unsafe condition can adversely affect the controllability of the helicopter and the required actions must be accomplished before each flight and daily.
Since it was found that immediate corrective action was required, notice and opportunity for prior public comment before issuing this AD were impracticable and contrary to public interest and good cause existed to make the AD effective immediately by issuing Emergency AD 2015-22-51 on October 23, 2015, to all known U.S. owners and operators of these helicopters. These conditions still exist and the AD is hereby published in the
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction; and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
We prepared an economic evaluation of the estimated costs to comply with this AD and placed it in the AD docket.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator,
49 U.S.C. 106(g), 40113, 44701.
This AD applies to Model A109A and A109AII helicopters with a main rotor blade (blade) part number (P/N) 109-0103-01-7, P/N 109-0103-01-9, or P/N 109-0103-01-115 that has 500 or more hours time-in-service installed, certificated in any category.
This AD defines the unsafe condition as a crack in a blade. This condition, if not detected, could result in failure of a blade and subsequent loss of control of the helicopter.
This AD becomes effective February 16, 2016 to all persons except those persons to whom it was made immediately effective by Emergency AD 2015-22-51, issued on October 23, 2015, which contains the requirements of this AD.
You are responsible for performing each action required by this AD within the specified compliance time unless it has already been accomplished prior to that time.
(1) Before further flight, and thereafter at intervals not to exceed 24 clock-hours, using a 3X or higher power magnifying glass, visually inspect the top and bottom surface of each blade for a crack in the area between the station at the end of the doublers and the station at the beginning of the abrasion strip. If there is a crack, before further flight, replace the blade with an airworthy blade.
(2) Before each flight, check the top and bottom surface of each blade for a crack in the area between the station at the end of the doublers and the station at the beginning of the abrasion strip. If there is a crack, inspect the blade in accordance with paragraph (e)(1) of this AD. The check required by this paragraph may be performed by the owner/operator (pilot) holding at least a private pilot certificate and must be entered into the aircraft records showing compliance with this AD in accordance with 14 CFR 43.9 (a)(1) through (a)(4) and 14 CFR 91.417(a)(2)(v). The record must be maintained as required by 14 CFR 91.417, 121.380, or 135.439.
A special flight permit may be permitted for the inspection in paragraph (e)(1) of this AD provided there is no crack in a blade.
(1) The Manager, Safety Management Group, FAA, may approve AMOCs for this AD. Send your proposal to: Matt Fuller, Senior Aviation Safety Engineer, Safety Management Group, Rotorcraft Directorate, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone (817) 222-5110; email:
(2) For operations conducted under a 14 CFR part 119 operating certificate or under 14 CFR part 91, subpart K, we suggest that you notify your principal inspector, or lacking a principal inspector, the manager of the local flight standards district office or certificate holding district office, before operating any aircraft complying with this AD through an AMOC.
(1) AgustaWestland Mandatory Alert Bollettino Tecnico No. 109-150, dated September 17, 2015, which is not incorporated by reference, contains additional information about the subject of this final rule. For service information identified in this final rule, contact AgustaWestland, Product Support Engineering, Via del Gregge, 100, 21015 Lonate Pozzolo (VA) Italy, ATTN: Maurizio D'Angelo; telephone 39-0331-664757; fax 39-0331-664680; or at
(2) The subject of this AD is addressed in European Aviation Safety Agency (EASA) AD No. 2015-0190-E, dated September 18, 2015. You may view the EASA AD on the Internet at
Joint Aircraft Service Component (JASC) Tracking Code: 6210 Main Rotor Blade.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the Senator Ted Hickey (Leon C. Simon Blvd./Seabrook) bascule bridge across the Inner Harbor Navigation Canal, mile 4.6, at New Orleans, Louisiana. The deviation is necessary to accommodate the New Orleans Endurance Festival event. This deviation allows the bridge to remain closed-to-navigation during the event.
This deviation is effective from 7 a.m. through 2 p.m. on April 3, 2016.
The docket for this deviation, [USCG-2016-0040] is available at
If you have questions on this temporary deviation, call or email Jim Wetherington, Bridge Administration Branch, Coast Guard, telephone (504)671-2128, email
Premier Event Management, through the Louisiana Department of Transportation and Development (LDOTD), requested a temporary deviation from the operating schedule of the Senator Ted Hickey (Leon C. Simon Blvd./Seabrook) bascule bridge across the Inner Harbor Navigation Canal, mile 4.6, at New Orleans, Louisiana. The deviation was requested to accommodate the New Orleans Endurance Festival event. The vertical clearance of the bascule span bridge is 46 feet above mean high water in the closed-to-navigation position and unlimited in the open-to-navigation position. The bridge is governed by 33 CFR 117.458(c).
This deviation is effective on April 3, 2016, from 7 a.m. through 2 p.m. This deviation allows the bridge to remain closed-to-navigation for seven hours on the day of the event.
Navigation on the waterway consists of small tugs with and without tows, commercial vessels, and recreational craft, including sailboats.
Vessels able to pass through the bridge in the closed-to-navigation
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the Wantagh Parkway Bridge across the Sloop Channel, mile 15.4, at Wantagh, New York. The deviation is necessary to accommodate the Jones Beach July 4th Fireworks. This deviation allows the bridge to remain in the closed position for approximately 3 hours.
This deviation is effective from 9 p.m. to midnight on July 4, 2016.
The docket for this deviation, [USCG-2016-0045] is available at
If you have questions on this temporary deviation, call or email Ms. Judy K. Leung-Yee, Project Officer, First Coast Guard District, telephone (212) 514-4330, email
New York State Office of Parks, Recreation and Historic Preservation requested this temporary deviation from the normal operating schedule to accommodate the Jones Beach July 4th Fireworks.
The Wantagh Parkway Bridge, mile 15.4, across the Sloop Channel has a vertical clearance in the closed position of 16 feet at mean high water and 19.5 feet at mean low water. The existing bridge operating regulations are found at 33 CFR 117.5.
The waterway is transited by commercial and recreation vessel traffic.
Under this temporary deviation, the Wantagh Parkway Bridge may remain in the closed position from 9 p.m. to midnight on July 4, 2016.
Vessels able to pass under the bridge in the closed position may do so at anytime. The bridge will not be able to open for emergencies and there is no immediate alternate route for vessels to pass.
The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessels can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the US 11 bascule bridge across Lake Pontchartrain, mile 4.75, between New Orleans and Slidell, Orleans and St. Tammany Parishes, Louisiana. The deviation is necessary to accommodate the Louisiana Paradise Bridge Run event. The deviation will allow the draw of the bridge to remain in the closed-to-navigation position during the event.
This deviation is effective from 6:45 a.m. through 8:45 a.m. on February 20, 2016.
The docket for this deviation, [USCG-2016-0038] is available at
If you have questions on this temporary deviation, call or email Jim Wetherington, Bridge Administration Branch, Coast Guard, telephone (504)671-2128, email
The Slidell Memorial Hospital Foundation, through the Louisiana Department of Transportation and Development (LDOTD), requested a temporary deviation from the operating schedule of the US 11 bascule bridge across Lake Pontchartrain, mile 4.75, between New Orleans and Slidell, Orleans and St. Tammany Parishes, Louisiana. The deviation was requested to allow the draw of the bridge to remain in the closed-to-navigation position during the Louisiana Paradise Bridge Run event. The vertical clearance of the vertical lift span bridge is 13 feet above mean high water in the closed-to-navigation position and 61 feet in the open-to-navigation position. The bridge is governed by 33 CFR 117.5.
This deviation is effective on February 20, 2016 from 6:45 a.m. through 8:45 a.m. The deviation will allow the draw of the bridge to remain in the closed-to-navigation position during the Bridge Run event.
Navigation on the waterway consists of small tugs with and without tows, commercial vessels, and recreational craft, including sailboats.
Vessels able to pass through the bridge in the closed-to-navigation position may do so at any time. The bridge will be able to open for emergencies, and there is no immediate alternate route. The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulations.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the Senator Ted Hickey (Leon C. Simon Blvd./Seabrook) bascule bridge across the Inner Harbor Navigation Canal, mile 4.6, at New Orleans, Louisiana, and the US 90 bridge at Chef Menteur Pass over Lake Catherine at Mile 2.8 at New Orleans, Orleans Parish, Louisiana. The deviation is necessary to accommodate the Ochsner Ironman 70.3 New Orleans event. This deviation allows the bridges to remain closed-to-navigation for a scheduled amount of time on the day of the event.
This deviation is effective from 7 a.m. through 5 p.m. on April 17, 2016.
The docket for this deviation, [USCG-2016-0039] is available at
If you have questions on this temporary deviation, call or email Jim Wetherington, Bridge Administration Branch, Coast Guard, telephone (504)671-2128, email
Premier Event Management, through the Louisiana Department of Transportation and Development (LDOTD), requested a temporary deviation from the operating schedule of the Senator Ted Hickey (Leon C. Simon Blvd./Seabrook) bascule bridge across the Inner Harbor Navigation Canal, mile 4.6, at New Orleans, Louisiana, and the US 90 Bridge at Chef Menteur Pass over Lake Catherine at Mile 2.8 at New Orleans, Orleans Parish, Louisiana. The deviation was requested to accommodate the Ochsner Ironman 70.3 New Orleans event. The vertical clearance of the Senator Ted Hickey (Leon C. Simon Blvd./Seabrook) bascule bridge is 46 feet above mean high water in the closed-to-navigation position and unlimited in the open-to-navigation position. The bridge is governed by 33 CFR 117.458(c). The vertical clearance of the US 90 swing-span bridge at Chef Menteur Pass over Lake Catherine is 11 feet above mean high water in the closed-to-navigation position and unlimited in the open-to-navigation position. The bridge is governed by 33 CFR 117.436.
This deviation is effective on April 17, 2016. The bridge over the Inner Harbor Navigation Canal will be closed to marine traffic from 8 a.m. through 5 p.m. and the bridge over Chef Menteur Pass will be closed from 7 a.m. through 1 p.m. This deviation allows the bridges to remain closed-to-navigation for the duration of the event as it impacts each bridge according to the schedule.
Navigation on the waterway consists of small tugs with and without tows, commercial vessels, and recreational craft, including sailboats.
Vessels able to pass through these bridges in the closed-to-navigation position may do so at anytime. The bridges will be able to open for emergencies, and there is no immediate alternate route. The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for each bridge to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), each drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Federal Communications Commission.
Final rule.
In this document, the Federal Communications Commission (Commission) adopted several measures to facilitate the final conversion of low power television (LPTV) and TV translator stations to digital service. The Commission also adopted proposals to mitigate the potential impact of the broadcast television spectrum incentive auction and the repacking process on LPTV and TV translator stations and to help preserve the important services they provide.
The rules will become effective March 2, 2016, except for § 74.800, which contain new or modified information collection requirements that require approval by the Office of Management and Budget under the Paperwork Reduction Act. The Commission will publish a document in the
Shaun Maher,
This is a summary of the Commission's
1. In this
2. To provide relief to analog LPTV and TV translator stations, the Commission extended the digital transition date to 12 months following the completion of the incentive auction 39-month post-auction transition period (or 51 months from the completion of the incentive auction and the release of the post-auction
3. The Commission disagreed with commenters that argued that it did not have “sufficient information” to set a new deadline now and that it should wait until after the conclusion of the incentive auction. Because it did not set a specific transition date as the Commission did in the past, but rather established a deadline that will provide a set period of time after the incentive auction and the post-auction transition process for stations to complete their digital transitions, regardless of when the auction is complete, the Commission found that there was no additional information needed to make a decision regarding the digital transition deadline. Moreover, it disagreed that lack of knowledge of the actual impact of the auction and the post-auction transition process on analog LPTV and TV translator stations should prevent it from establishing a new digital transition date at this time. The Commission concluded that it was setting a transition date far enough after the completion of the auction (51 months) and Post-Auction Transition Period (12 months) that stations should have more than a sufficient amount of time to react, coordinate, and complete their digital transition.
4. The Commission rejected LPTV Coalition's alternative proposal to adopt a series of different deadlines based upon differing station criteria. It concluded that such a proposal would be confusing for stations, which might have a difficult time determining their specific deadline. To avoid confusion and to provide for a coordinated, seamless digital transition and consumer education, it instead adopted a uniform deadline by which all analog LPTV and TV translator stations must complete their digital transition.
5. The Commission also modified its rules to provide that analog LPTV and TV translator stations experiencing delays in completing their digital facilities may seek one last extension of time, of not more than six months, to be filed not later than four months prior to the new transition date. The Commission delegated authority to the Media Bureau to process these applications and reminded those stations seeking this “last-minute” extension that, in completing the Form 2100—Schedule 337, they will be required to demonstrate that they meet the extension criteria set forth in section 74.788(c) of the rules. Under that rule, stations that have not completed construction of their digital facilities must show that the delay was due to circumstances that were either unforeseeable or beyond their control or due to financial hardship. Further, stations will need to demonstrate that they have taken all reasonable steps to resolve the problem expeditiously and must provide detailed information, financial or otherwise, as to why they will be unable to meet the new transition deadline.
6. In addition, after the four-month deadline for the submission of one last extension application, analog LPTV and TV translator stations seeking additional time to construct digital facilities will be able to obtain additional time to construct only through the tolling provisions in the rules. Extension applications will no longer be accepted at that time.
7. The Commission concluded that the new digital transition date must be a hard deadline. That is, all LPTV and TV translator stations must terminate all analog operations (including any analog companion channels) by 11:59 p.m. local time on the new transition date regardless of whether their digital facilities are operational. Those without operational digital facilities will be required to remain silent while they complete construction.
8. The Commission also extended the expiration dates of all valid construction permits for new digital LPTV and TV translator stations to the new digital transition date. All such construction permits are hereby extended to the new digital transition date. In addition, the Commission dismissed as moot all pending applications for extension of time to construct such construction permits. The Commission rejected WISPA's request that permittees of new digital LPTV and TV translator stations be required to continue to file individual extension applications every six months “in a manner consistent with Commission standards.” The Commission concluded that the potential impact of the incentive auction and repacking process warrants extension of the construction deadlines of all valid construction permits for new digital LPTV and TV translator stations to the new digital transition date, without the need for individual extension requests.
9. The Commission announced that permittees of new digital LPTV and TV translator stations may seek one last extension of time to complete construction, of not more than six months, to be filed not later than four months prior to the new digital
10. The Commission extended the opportunity for channel sharing to LPTV and TV translator stations. The Commission found that specific provisions of Title III of the Communications Act of 1934, as amended, provides ample authority to adopt rules for channel sharing between LPTV and TV translator stations, including section 303(g), which authorizes the Commission to “generally encourage the larger and more effective use of radio in the public interest,” and section 307(b), which directs the Commission to “provide a fair, efficient, and equitable distribution of radio service.” Consistent with these provisions, adopting channel sharing rules will serve the public interest by promoting the efficient use of spectrum and facilitating the continued operation of LPTV and TV translator stations.
11. The Commission found that permitting channel sharing has the potential to be greatly beneficial to the low power television community. For example, stations that are displaced by the incentive auction and repacking process that have difficulty finding available channels may be able to use channel sharing to team with other such stations in the same predicament. Two or more displaced LPTV or TV translator stations may file displacement applications proposing to share a single channel. Alternatively, a displaced LPTV or TV translator station could agree to share the channel of a non-displaced station. In this way, channel sharing may offer displaced LPTV and TV translator stations valuable opportunities to continue broadcasting and a sensible way for a greater amount of service to be preserved to local communities. Channel sharing agreements (CSAs) could also minimize the number of mutually exclusive applications filed in the post-incentive auction displacement window and free up valuable channels for use by other displaced stations. Displaced stations could thus use channel sharing as a means to prevent or settle the mutual exclusivity of their applications and avoid lengthy delays in the processing of their displacement applications.
12. In addition, the Commission found that channel sharing could provide potential cost-saving benefits to LPTV and TV translator stations through new programming and business arrangements. In the future, LPTV and TV translator stations, many of whom are small entities that operate on limited budgets, could reduce costs (such as tower leases, infrastructure, and others) by sharing facilities, and sharing could provide a source of income for stations that agree to utilize their channels to host other stations.
13. Moreover, the Commission concluded that channel sharing may also assist stations in meeting the digital transition deadline by allowing them to share the cost to construct a shared digital facility. The Commission rejected those comments questioning the potential benefits of channel sharing for LPTV and TV translator stations. The Commission concluded that channel sharing may not be right for all such stations, but the possibility that it may be a useful arrangement for some stations justifies adoption of new rules today.
14. The Commission announced that channel sharing by and between LPTV and TV translator stations will be “entirely voluntary.” It does not intend to take a role in matching licensees interested in channel sharing with potential partners. Rather, LPTV and TV translator stations will decide whether and with whom to enter into a channel sharing arrangement. The rules are also flexible and allow stations to structure their CSA in a manner that will allow a variety of different types of spectrum sharing to meet the individualized programming and economic needs of the parties involved. As with full power and Class A television channel sharing, the Commission will require each LPTV and TV translator station involved in a CSA to operate in digital on the shared channel and to retain spectrum usage rights sufficient to ensure at least enough capacity to operate one SD programming stream at all times. However, the Commission will not prescribe a fixed split of the capacity of the six megahertz channel between the stations from a technological or licensing perspective. All LPTV and TV translator channel sharing stations will be licensed for the entire capacity of the six megahertz channel, and stations will be allowed to determine the manner in which that capacity will be divided among themselves subject only to the minimum capacity requirement.
15. The Commission stated that it would apply its existing framework for the licensing and operation of channel sharing between full power and Class A stations to LPTV and TV translator stations. Under this framework, each sharing station will continue to be licensed separately, each will have its own call sign, and each licensee will separately be subject to all of the Commission's obligations, rules, and policies.
16. The Commission rejected OTI/PK's proposal that it require LPTV and TV translator stations to channel share under certain circumstances. OTI/PK asked that the Commission “analyze the feasibility of such a requirement in the 30 largest [Designated Market Areas], if it appears technically feasible for a substantial number of stations and markets” to channel share, seek further comment on implementing it. The Commission found no record support for OTI/PK's assertion that it should require stations to channel share because they are not using their spectrum efficiently. Because of their lower power and secondary nature, LPTV and TV translator stations have always been allowed to choose their channels. Changing course now and forcing LPTV and TV translator stations to share a channel would impede stations' ability to engineer their facilities to meet the needs of their viewers. Moreover, since adoption of our first channel sharing rules in 2012, the Commission has held that channel sharers, as business partners, should “have the ability to choose partners that satisfy their own criteria.”
17. The Commission adopted procedures for reviewing and licensing of LPTV and TV translator station CSAs, and will apply the 30-mile and contour overlap rules to station moves resulting from channel sharing. The Commission adopted a two-step process for implementing channel sharing between LPTV and TV translator stations. As the first step, if no technical changes are necessary for sharing, a channel sharing station relinquishing its channel will file an application for a digital construction permit for the same technical facilities as the sharer station, include a copy of the CSA as an exhibit, and cross reference the other sharing station(s). The sharer station will not need to seek Commission authorization at this time unless the CSA requires technical changes to the sharer station's facilities. If the CSA requires technical changes to the sharer station's facilities, each sharing station will be required to file an application for a construction permit for identical technical facilities proposing to share the channel, along with the CSA. As a second step, after the sharing stations have obtained the necessary construction permits, implemented their shared facility, and
18. The Commission announced that it will allow channel sharing LPTV and TV translator stations three years to implement their arrangements. Although it will require that channel sharing arrangements involving full power and Class A stations resulting from the incentive auction be implemented within six months after the relinquishing station receives its reverse auction proceeds to expedite the transition to the reorganized UHF band, these concerns do not apply to CSAs entered into outside the auction context. Some stations, such as those displaced by the repacking process, may be anxious to quickly implement their shared arrangement to avoid having to go silent. Such stations are free to begin channel sharing as soon as feasible. However, other stations, including those not facing this timing constraint, may want or need more time to implement a sharing agreement.
19. The Commission stated that, in cases where the sharer station has not been displaced, it will begin accepting applications for LPTV and TV translator channel sharing after completion of the incentive auction. In cases where the sharing stations were all displaced, it will begin accepting applications for LPTV and TV translator channel sharing at the initiation of the post-incentive auction displacement window. After that, applications may be submitted at any time on an ongoing basis.
20. The Commission stated that it would apply its existing 30-mile and contour overlap restrictions to station relocations resulting from proposed CSAs. Specifically, if requested in conjunction with a digital displacement application, a station relocation resulting from a proposed CSA may not be greater than 30 miles from the reference coordinates of the relocating station's community of license. In all other cases, a station relocating as a result of a proposed CSA (i) must maintain overlap between the protected contour of its existing and proposed facilities; and (ii) may not relocate greater than 30 miles from the reference coordinates of the relocating station's antenna location. Although it declined to eliminate the restrictions, the Commission announced that it will consider waivers for LPTV and TV translator stations to allow channel sharing modifications that do not comply with these limits. A displaced station proposing to channel share with a station located more than 30 miles from the reference coordinates of the displaced station's community of license will have to show: (1) That there are no channels available that comply with section 74.787(a)(4) of the rules; and (2) that the proposed sharer station is the station closest to the reference coordinates of the displaced station's community of license that is available for channel sharing. As for non-displacement, the Commission will apply a stricter standard because the proposed modification would be voluntary and the station would not be faced with going off the air if not permitted to channel share. In such cases, it will consider a waiver if the station seeking to relocate through channel sharing demonstrates: (1) That there is no other sharing partner that operates with a location that would comply with the contour overlap and 30-mile restrictions on the station seeking the waiver; and (2) the population in the relocating station's loss area is de minimis and/or well-served and/or would continue to receive the programming aired by the relocating station from another station.
21. The Commission adopted channel sharing operating rules that cover the terms of CSAs, the transfer or assignment of channel sharing licenses, and what occurs when a channel sharing station's license is terminated due to voluntary relinquishment, revocation, or failure to renew. The Commission will require that LPTV and TV translator CSAs contain provisions outlining each licensee's rights and responsibilities in the following areas: (1) Access to facilities, including whether each licensee will have unrestricted access to the shared transmission facilities; (2) allocation of bandwidth within the shared channel; (3) operation, maintenance, repair, and modification of facilities, including a list of all relevant equipment, a description of each party's financial obligations, and any relevant notice provisions; (4) transfer/assignment of a shared license, including the ability of a new licensee to assume the existing CSA; and (5) termination of the license of a party to the CSA, including reversion of spectrum usage rights to the remaining parties to the CSA. While channel sharing partners will be required to address these matters in their CSAs, they may craft provisions as they choose, based on marketplace negotiations, subject to pertinent statutory requirements and the Commission's rules and regulations.
22. A station seeking approval to channel share will submit a copy of its CSA along with its application for a digital construction permit. The Commission will review the CSA to ensure compliance with its rules and policies. However, the Commission announced that it will limit its review to confirming that the CSA contains the required provisions and that any terms beyond those related to sharing of bitstream and related technical facilities comport with its general rules and policies regarding licensee agreements. The Commission reserved the right to require modification of a CSA that does not comply with the rules and policies.
23. When an LPTV or TV translator sharing station's license is terminated due to voluntary relinquishment, revocation, failure to renew, or any other circumstance, its spectrum usage rights (but not its license) may revert to the remaining sharing partners if the partners so agree. In the event that only one station remains on the shared channel, that station may apply to change its license to non-shared status using FCC Form 2100—Schedule C. Alternatively, the station may enter into a CSA with another LPTV or TV translator station or permittee and resume shared operations, subject to Commission approval.
24. In addition, the Commission will allow rights under a CSA to be assigned or transferred, subject to the requirements of Section 310 of the Communications Act, the rules, and the requirement that the assignee or transferee comply with the applicable CSA. The Commission believes that secondary stations sharing with other secondary stations should have the flexibility to be able to determine the length of their CSAs.
25. To assist LPTV and TV translator stations displaced by the auction and repacking process, the Commission delegated to the Media Bureau authority to utilize the incentive auction optimization and repacking software to identify new channels for displaced stations. The Commission concluded that use of the repacking and optimization software for this purpose will expedite and ease the post-auction transition and help many low power stations find new channel homes.
26. Specifically, the Commission instructed the Media Bureau, prior to opening the post-auction LPTV and TV translator displacement window, to utilize the repacking and optimization software to identify channels that can be proposed by displaced LPTV and TV translator stations. The Commission
27. The Commission rejected suggestions to use our repacking and optimization software to designate LPTV and TV translator channel assignments that optimize channels for TV white space devices. Through use of the repacking and optimization software, the Media Bureau will identify potential channel assignments, but it will not “repack” LPTV and TV translator stations by requiring that they adhere to these assignments. Rather, the decision whether to seek the specific channel assignments identified by the Media Bureau will be voluntary. Stations will not be required to apply for possible channel assignments identified by the Media Bureau and will retain the flexibility to seek displacement channels that work best for their particular circumstances, so long as the channel selections comply with the licensing and technical rules.
28. The Commission also declined ATBA's and Liberman's suggestion that it make the repacking and optimization software available for outside use. First, the repacking software is not available at this time; the TVStudy software which will be used in the incentive auction and the repacking process, and which the Commission has made publicly available, will have to be modified to identify potential channels for displaced LPTV and TV translator stations. In addition, the optimization software incorporates proprietary software that is subject to restrictions against its release to the public, but is commercially available. The Commission also rejected LPTV Coalition's and Syncom's suggestion that it conduct a “mock” auction to see the effects on LPTV and translators. The effects on LPTV and translators depend in large part on broadcaster participation levels in the incentive auction and the amount of spectrum that the auction clears, and the individual channel reassignments made to repacked broadcasters. In light of Congress's decision that LPTV and translators are not to be protected in the repack, the Commission was not persuaded that the time and staff resources that would be required to study the potential effects are warranted in light of the hypothetical nature of any such analysis prior to the auction.
29. Given its decision to extend the digital transition date for analog LPTV and TV translator stations for one year after the post-auction transition period (51 months after the conclusion of the auction), the Commission concluded it is appropriate to retain the analog tuner requirement for a limited period. Specifically, it will sunset on August 31, 2017. The Commission believes that retaining the analog tuner requirement until that date will minimize disruption to viewers of analog LPTV and TV translator stations while at the same time providing certainty to manufacturers that choose to phase out analog tuners.
30. The Commission agreed with public broadcasters that it is still currently necessary for consumer equipment to include both analog and digital tuners to receive all signals, but the requirement will become less necessary as the new digital transition date for LPTV and TV translator stations approaches. Analog broadcasting is likely to continue until the new transition date because LPTV and TV translator stations do not want to “double build” their facilities: once for a digital transition and again for the repack. Although it sought to minimize disruption to consumers, the Commission also recognized that the analog tuner requirement imposes costs on television manufacturers that may be passed through to consumers. Significantly, sixty-two percent of low-power stations and seventy-eight percent of TV translator stations have already transitioned to digital, and these stations continue to make the transition. Therefore the vast majority of consumers no longer need to rely on devices with analog tuners and the number of consumers that still do will steadily decline as this percentage continues to grow. Given this, and the fact that devices with analog tuners will continue to be available in remaining retail inventory and on the secondary market, the Commission concluded that it is appropriate to phase out the obligation of manufacturers prior to the transition date. The Commission found that relieving manufacturers of the analog tuner obligation on August 31, 2017 reasonably balances the goals of reducing costs for manufacturers and consumers, while minimizing disruption to viewers of analog low power television.
31. The Commission announced that it will not require manufacturers or retailers to label devices, after the rule sunsets, to alert consumers that devices do not include analog tuners. Although it recognized the importance of providing education to consumers about the capability of their devices, the Commission believed that imposing a universal requirement that manufacturers notify consumers about the limitations of digital-only devices would be counterproductive after the sunset.
32. The Commission declined to adopt the various proposals to permit LPTV and TV translator stations to operate using alternative technical standards. For the success of the post-incentive auction displacement process and to ensure continued service to the public, the Commission concluded that it is imperative that all LPTV and TV translator stations continue to operate within the current technical rules and standards. Consideration of whether to adopt new or alternative technical standards or network architectures, such as ATSC 3.0, is premature as such standards have not yet been adopted by standard setting groups. Even if such standards were to be adopted in the near future, a plan for implementation would have to be considered and developed by the Commission through notice and comment rulemaking proceedings. The Commission found that such matters are outside of the scope of this proceeding and are better left for future proceedings.
33. The Commission declined to adopt proposals to allow LPTV and/or TV translators to obtain primary interference protection status so that they may avoid future displacement by primary users. However, the Commission stated that it may revisit the question of allowing additional LPTV and/or TV translators to obtain primary interference protection status in the future. Without reaching the legal issues, the Commission declined as a policy matter any proposal that would allow LPTV and/or TV translator
34. The Commission rejected proposals to provide displacement priorities in the post-auction LPTV and TV translator displacement window beyond those established in the
35. The Commission declined LPTV Coalition's proposal to extend the post-auction displacement window filing opportunity to holders of construction permits for new digital LPTV and TV translator stations. As decided in the
36. The Commission rejected proposals that would afford LPTV and TV translator stations more expansive cable carriage rights than those provided in the Communications Act. Commenters do not explain how such action would be within the Commission's statutory authority and, even assuming we had such authority, the Commission declined to grant must carry rights beyond those required by statute.
37. The Commission denied requests for other rule changes as unworkable or because of their potential to negatively affect the incentive auction or fall subject to other impracticalities. It announced that it will not adopt OTI/PK's proposal to permit white space devices to use the channels of licensed LPTV and TV translator stations when those stations are not broadcasting. The white space databases would have to collect additional information on the operating times of LPTV and TV translator stations on a real-time basis in order to implement OTI/PK's proposal. Because the databases are not currently designed to do so, it would not be feasible to adopt OTI/PK's proposal at this time.
38. The Commission rejected NTA's proposal to relax the limits on interference that LPTV and TV translator stations may cause to other LPTV and TV translator stations and to full-power and Class A stations. With the upcoming post-incentive auction transition process and the ongoing low power digital transition, the Commission concluded that this is not the appropriate time to allow additional interference. The costs resulting from the potential increase in interference and loss of service to viewers would outweigh the potential benefit of the slight increase in flexibility for LPTV and TV translator stations to engineer their displacement facilities. Once these transitions are complete, the Commission stated that it may consider whether to modify our rules to allow such additional flexibility.
39. The Commission rejected SEI's and Watch TV's request that it establish a general policy allowing any LPTV and TV translator station facing financial challenges to remain off the air until full power and Class A stations have been assigned new channels, even if that period exceeds 12 consecutive months. Section 312(g) of the Communications Act provides that the license of a station that is dark for any consecutive 12-month period expires automatically at the end of that period, except that the Commission can extend or reinstate such license “to promote equity and fairness.” The Commission announced that it will continue to consider individual requests from stations that remain dark for any consecutive 12-month period for reinstatement of their license and a waiver of the pertinent Commission rules, taking into account the individual circumstances of each case. Consideration of a blanket exception to Section 312(g) at this time would be premature as the impact of the auction and repacking process on LPTV and TV translator stations is not yet known.
40. The Commission declined St. Clair's request that it ask Congress to provide for reimbursement of costs incurred by displaced LPTV and TV translator stations. The decision whether to authorize such funding is Congress's prerogative. Congress in the Spectrum Act limited reimbursement from the TV Broadcaster Relocation Fund to only full power and Class A stations. While NTA recommends that the Commission “cooperate with NTIA” to help make funding available for displaced LPTV and TV translator stations, the Commission stated that it is not aware of any funding available from other agencies that could be used by displaced LPTV and TV translator stations. The Commission stated that it would cooperate as needed if LPTV and TV translator stations identify any funding opportunities.
41. The Commission announced that, as part of the cross-border coordination process it intends to make efforts to streamline the cross-border coordination processes so it will not delay the post-auction displacement application process for LPTV and TV translator stations.
42. The Commission rejected LPTV Coalition's request that it study the LPTV industry and “what is possible to both preserving the unique services and networks it currently provides, and all of the new ones in the digital future pipeline.” The Commission found that it had satisfied this request by conducting this proceeding considering ways to preserve the low power television service and the valuable programming and services they offer. The Commission announced that it will continue to assist LPTV and TV translator stations with the post-incentive auction displacement process and transition to digital operation and to
43. The Commission denied requests to reconsider matters previously raised in the incentive auction proceeding finding that each of these matters was fully considered in the incentive auction rulemaking proceeding and subsequent orders on reconsideration.
44. The Commission established a new digital-to-digital replacement translator service (DTDRT) to allow eligible full power television stations to recover lost digital “service area” that results from the reverse auction and repacking process. The Commission previously created a similar analog-to-digital replacement translator service (DRT) in 2009, as full power stations were transitioning from analog to digital operation, to assist full power stations to restore service to any loss areas that may have occurred as a result of the transition and to maintain “broadcast service that the public has come to depend upon and enjoy [in analog].” The Commission concluded that a similar replacement service may be needed for full power stations that are reassigned to new channels, either in the repacking process or through a winning UHF-to-VHF or high-VHF-to-low-VHF bid, if those full power stations discover that a portion of their existing pre-auction digital service area is lost after the station transitions to its new channel. There may be some instances in which a station may not be able to fully replicate its pre-auction digital service area. For example, a loss in pre-auction digital service area may occur as a result of a change in frequency. Moreover, like some stations transitioning to digital during the DTV transition, a station may be unable to build facilities to operate on its assigned channel at its current tower site as a result of technical or legal issues. In addition, broadcasters that voluntarily relocate to a different band may have difficulty maintaining their antenna pattern on the new channel and may experience unusual coverage problems.
45. The Commission disagreed with Venture that this new service will be unnecessary, finding that the circumstances outlined above could arise and result in full power television stations experiencing a loss of reception within their pre-auction digital service areas on initiation of their new channel facilities, despite Commission efforts to preserve coverage area and population served during the repacking process. To assist stations to overcome these potential challenges and to replace lost pre-auction digital service area resulting from new channel assignments, the Commission created a new DTDRT service.
46. The Commission will limit eligibility for DTDRTs to full power television stations reassigned in the repacking process that can demonstrate: (1) A loss of a portion of their pre-auction digital service area; and (2) that the proposed DTDRT will be used solely to fill in such loss areas, subject to an allowance for a de minimis expansion of the station's pre-auction digital service area. The Commission concluded that these requirements are consistent with the limited scope of its objective in proposing this new service: To assist full power television stations to maintain their pre-auction digital service areas following the completion of the repacking process and auction, but not to expand such service areas. The Commission declined to extend eligibility for DTDRTs, as suggested by Sinclair, to “[a]ny station that suffers loss of service as a result of repacking—from channel changes, power changes, site changes, or any other factors beyond the station's control.” The Commission decided to limit eligibility for new DTDRTs to only stations reassigned in the repacking process in order to preserve channels for use by other broadcasters, especially displaced LPTV and TV translators.
47. To implement this eligibility restriction, applicants for DTDRTs will be required to demonstrate a digital loss area through an engineering study that depicts the stations' pre- and post-incentive auction digital service areas and will be required to demonstrate that the loss resulted from the station's being repacked in conjunction with the incentive auction. The Commission defined the “pre-auction digital service area” as the geographic area within the full power station's noise-limited contour of its facility as set forth in the
48. To accommodate situations where it may be impossible to locate a translator that replaces digital loss areas without also slightly expanding the station's pre-auction digital service areas, the Commission announced it will allow applicants to propose de minimis expansions of pre-auction digital service areas based on the showing described below. The Commission defines de minimis on a case-by-case basis, consistent with the approach it took for processing DRT applications. Therefore, the Commission will require stations to show the need to site their DTDRT with a de minimis expansion of the station's pre-auction digital service area. The Commission declined Sinclair's suggestion that it adopt a more flexible approach and allow applicants to demonstrate that the site specified for their DTDRT is the most practical or cost-efficient option, that the de minimis expansion offsets other loss of service by the broadcaster that cannot be remedied by a DTDRT, or that the site better facilitates preservation of service by another reassigned broadcaster. Because there will be a more tightly packed broadcast band post-auction, the Commission concluded to strictly limit DTDRT's coverage to just what is needed.
49. The Commission will allow eligible stations to file for DTDRTs beginning with the opening of the post-auction LPTV and TV translator displacement window and ending one year after the completion of the incentive auction 39-month post-auction transition period. Pursuant to this plan, stations may begin applying for DTDRTs during the LPTV and TV translator displacement window and will then have one year beyond the completion of the Post-Auction Transition Period to identify the need and apply for a DTDRT. Full power television stations must have the flexibility to file for a DTDRT throughout the post-auction transition and for a brief period thereafter. A full power television station may identify the need for a DTDRT early in the post-auction transition or may not realize that it needs one until it completes construction of its new facilities and begins operating. Some stations may not identify the need for a DTDRT until a short time later when they begin receiving reports of loss of service from viewers. Accordingly, the Commission concluded that allowing full power stations to file for a DTDRT for one year after the completion of the Post-Auction Transition Period will provide sufficient time to identify any possible loss areas while also helping to limit this service to its proposed objective of recovering lost service area that results from the auction and repacking process.
50. The Commission will afford DTDRT applications co-equal processing priority with DRT displacement applications. Therefore, applications for new DTDRTs and displacement applications for existing DRTs will have processing priority over all other LPTV and TV translator applications including new, minor change, and displacement applications. Under this approach, the Commission will begin accepting applications for new DTDRTs commencing with the opening of the post-auction LPTV and TV translator displacement window. All
51. The Commission concluded that adoption of this processing priority is necessary to assist those full power stations that identify the need to implement a new DTDRT to quickly obtain an authorization and schedule construction of the DTDRT to coincide with the completion of their modified full-power facilities and thereby avoid disruption of service. Were it to not afford these applications a priority, they could become mutually exclusive with LPTV and TV translator applications filed in the post-incentive auction displacement window, greatly delaying their processing. This, in turn, could prevent full power television stations from completing construction of their DTDRTs until after the post-incentive auction transition, thus resulting in a loss of service. At the same time, the Commission established co-equal processing priority with displaced DRTs to ensure that full power stations with existing DRTs can construct on their new channel expeditiously to help preserve their existing service. The Commission concluded that it had authority to afford DTDRTs a co-equal processing priority under specific provisions of Title III of the Communications Act of 1934, as amended, including Section 303(c), which empowers the Commission to “assign frequencies for each individual station” in the public interest; Section 303(g), which authorizes the Commission to “generally encourage the larger and more effective use of radio in the public interest”; and Section 307(b), which directs the Commission to “provide a fair, efficient, and equitable distribution of radio service.” Consistent with these provisions, the processing priority will serve the public interest by assisting full power television stations to maintain their pre-auction digital service areas and help prevent loss of service following the completion of the repacking process and auction.
52. The Commission rejected Mako's claim that its grant of a processing priority to DTDRTs is contrary to section 1452(b), which provides for the UHF band reorganization. While Section 1452(b)(5) provides that “[n]othing in [section 1452(b)] shall be construed to alter the spectrum usage rights of low-power television stations,” it does not affect the Commission's broad authority outside of section 1452(b) to manage spectrum in the public interest, which provides the legal basis for the actions we take today. To the contrary, section 1452(i)(1) specifically preserves that authority by stating that nothing in section 1452(b) “shall be construed to . . . expand or contract the authority of the Commission, except as otherwise expressly provided.” There is no express provision in section 1452(b) prohibiting the Commission from granting DTDRT applications a processing priority. Further, adoption of a processing priority for applications for new DTDRTs is consistent with the 2009 decision to grant a similar priority for applications for DRTs.
53. The Commission also rejected arguments that its decision could negatively affect the ability of displaced LPTV and TV translator stations to find a new channel post-auction and force some stations off the air. While we recognize that many LPTV and TV translator stations will also be struggling to deal with the impact of the incentive auction and repacking process while constructing their digital facilities to meet the newly established digital transition date, the Commission concluded that the need to help full power stations prevent or restore lost service area outweighs the limited impact that the licensing of new DTDRTs will have on the availability of channels for displaced LPTV and TV translator stations.
54. The Commission also rejected LeSea's proposal that full power stations be required to identify the need for a DTDRT earlier, such as during the three-month period following the release of the Channel Reassignment PN when stations will submit applications for construction permits for their newly assigned channels. After the three-month period closes, LeSea suggests that applications for DTDRTs be accepted without the priority over other earlier-filed LPTV and TV translator applications. Some full power television stations, however, may not identify the need for a DTDRT until later in the transition when, for example, they begin testing or operating their completed modified facilities. Therefore, full power stations in such situations may need to obtain a DTDRT later in the transition. In these circumstances, priority processing will ensure that the application for DTDRT is quickly processed.
55. Finally, the Commission rejected Venture's proposal that applications for DTDRTs “be accepted only after existing licensed LPTV stations are successfully displaced to other channels.” Adoption of Venture's proposal could prevent full power television stations that identify the need to implement a new DTDRT early in the transition process to quickly obtain an authorization and schedule construction to coincide with the completion of their modified facilities.
56. In order to implement the new DTDRT service, the Commission adopted the following licensing and operating rules. The Commission will associate DTDRTs with the full power television station's main license. This is the same approach adopted for licensing DRTs. DTDRTs, therefore, may not be separately assigned or transferred and will be renewed, transferred, or assigned along with the main license. Applications for DTDRTs will be filed on FCC Form 2100—Schedule C, will be treated as minor change applications, and will be exempt from filing fees. DTDRTs will be licensed with “secondary” frequency use status. Under this approach, DTDRTs, like DRTs before them, will not be permitted to cause interference to, and must accept interference from, full power television stations, certain land mobile radio operations, and other primary services, and will be subject to the interference protections to land mobile station operations in the 470-512 MHz band set forth in our rules. The Commission will apply the existing rules associated with TV translator stations to DTDRTs, including the rules concerning power limits, out-of-channel emission limits, unattended operation, time of operation, and resolution of mutual exclusivity. The Commission will assign DTDRTs the same call sign as their associated full power television station and provided a full three-year construction period for full power television stations to build their DTDRTs.
57. The Commission announced that it was permanently discontinuing the acceptance of applications for new DRTs. In August 2014, following adoption of rules for the incentive auction, the Media Bureau placed a freeze on the filing of applications for DRTs because full power stations had more than five years to apply for this type of replacement translator following
As required by the Regulatory Flexibility Act of 1980, as amended (RFA),
On June 2, 2014, the Federal Communications Commission (Commission) released its
In order to mitigate the impact of the auction and repacking process on LPTV and TV translator stations, the Commission stated that it intended to initiate an LPTV/TV Translator rulemaking proceeding “to consider additional measures that may help alleviate the consequences of LPTV and TV translator station displacements resulting from the auction and repacking process.”
In the
The RFA directs the Commission to provide a description of and, where feasible, an estimate of the number of small entities that will be affected by the proposed rules, if adopted.
We note, however, that in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations must be included.
In addition, the Commission has estimated the number of licensed noncommercial educational (“NCE”) television stations to be 395.
There are also 2,344 LPTV stations, including Class A stations, and 3,689 TV translator stations.
The
To implement its proposed new digital-to-digital replacement translator service, the Commission will revise its existing replacement translator form, rules and collections and to expand the burden estimates.
These new reporting requirements will not differently affect small entities.
The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.
The Commission's licensing and operating rules for channel sharing between LPTV and TV translator stations were designed to minimize impact on small entities. The rules provide a streamlined method for reviewing and licensing channel sharing for these stations as well as a streamlined method for resolving cases where a channel sharing station loses its license on the shared channel. These rules were designed to reduce the burden and cost on small entities.
The Commission concluded that applications for digital-to-digital replacement translators should be given licensing priority over all other low power television and TV translator applications, except displacement applications for analog-to-digital replacement translators (for which they would have co-equal priority). The Commission could have adopted no such priority, but this would have resulted in many more mutually exclusive filings and delayed the implementation of this valuable service.
The Commission also decided to limit the eligibility for such service to any station that can demonstrate that it experienced a loss of digital service area as a result of the incentive auction or repacking process. Alternatively, the Commission could have allowed all interested parties to file for new translators, however such approach would also result in numerous mutually exclusive filings and would greatly delay implementation of this needed service.
The Commission further concluded that the service area of the replacement translator should be limited to only a demonstrated loss area and permitted stations to expand slightly its pre-incentive auction service area. Once again, the Commission could have allowed stations to file for expansion of their existing service areas but such an alternative could result in the use of valuable spectrum that the Commission seeks to preserve for other uses.
The Commission concluded that replacement digital television translator stations should be licensed with “secondary” frequency use status. The Commission could have decided that replacement translators be licensed on a primary frequency use basis, but this alternative was not adopted because it would result in numerous interference and licensing problems.
The Commission determined that, unlike other television translator licenses, the license for the replacement translator should be associated with the full power station's main license. Therefore, the replacement translator license may not be separately assigned or transferred and will be renewed or assigned along with the full-service station's main license. Alternatively, the Commission could have decided that the replacement translator license be separate from the main station's license, however this approach could result in licenses being sold or modified to serve areas outside of the loss area, and thus would undermine the purpose of this new service.
The Commission also concluded that the other rules associated with television translator stations will apply to the new replacement translator service, including those rules concerning the filing of applications, payment of filing fees, processing of applications, power limits, out-of-channel emission limits, call signs, unattended operation, and time of operation. The alternative could have been to design all new rules for this service, but that alternative was not adopted as it would adversely impact stations ability to quickly implement these new translators.
The Commission's conclusion to discontinue accepting applications for analog-to-digital replacement translators may impact small entities. However, the Commission determined that future analog-to-digital replacement translator applications are no longer necessary for stations to replace an analog loss area that occurred as a result of the digital transition over six years ago.
None.
Communications equipment.
Television.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR parts 15 and 73 as follows:
47 U.S.C. 154, 302, 303, 304, 307, 336, and 544A.
(b) Until August 31, 2017, TV broadcast receivers shall be capable of adequately receiving all channels allocated by the Commission to the television broadcast service. After August 31, 2017, TV broadcast receivers shall be capable of adequately receiving all channels allocated by the Commission to the television broadcast service that broadcast digital signals, buy they need not be capable of receiving analog signals.
47 U.S.C. 154, 303, 307, 309, 336 and 554.
(l) After 11:59 p.m. local time on September 1, 2015, Class A television stations may no longer operate any facility in analog (NTSC) mode.
(m) After 11:59 p.m. local time, 51 months following the release of the Channel Reassignment Public Notice announcing completion of the incentive auction conducted under Title VI of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96)), low power television and TV translator stations may no longer operate any facility in analog (NTSC) mode and all licenses for such analog operations shall automatically cancel at that time without any affirmative action by the Commission.
(a) * * *
(5)
(ii) Each original construction permit for the construction of a displacement analog-to-digital or new or displacement digital-to-digital replacement television translator station shall specify a period of three years from the date of issuance of the original construction permit within which construction shall be completed and application for license filed. The provisions of § 74.788(c) of this chapter shall apply for stations seeking additional time to complete construction of their displacement analog-to-digital or new or displacement digital-to-digital replacement television translator station.
(iii) Displacement applications for analog-to-digital replacement television translators shall be given processing priority over all other low power television and TV translator new, minor change, or displacement applications except applications for digital-to-digital replacement television translators with which they shall have co-equal priority. Applications for digital-to-digital replacement television translators shall be given processing priority over all low power television and TV translator new, minor change, or displacement applications, except displacement applications for analog-to-digital replacement translators with which they shall have co-equal priority.
(iv) Applications for new digital-to-digital replacement television translators and displacement applications for analog-to-digital and digital-to-digital replacement television translators shall be treated as an application for minor change. Mutually exclusive applications shall be resolved via the Commission's part 1 and broadcast competitive bidding rules, § 1.2100
(v) A license for a digital-to-digital replacement television translator will be issued only to a full-power television broadcast station licensee that demonstrates in its application a loss in the station's pre-auction digital service area as a result of the broadcast television spectrum incentive auction, including the repacking process, conducted under section 6403 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96). “Pre-auction digital service area” is defined as the geographic area within the full power station's noise-limited contour (as set forth in Public Notice, DA 15-1296, released November 12, 2015). The service area of the digital-to-digital replacement translator shall be limited to only the demonstrated loss area within the full power station's pre-auction digital service area, provided that an applicant for a digital-to-digital replacement television translator may propose a
(vi) The license for the analog-to-digital and digital-to-digital replacement television translator will be associated with the full power station's main license, will be assigned the same call sign, may not be separately assigned or transferred, and will be renewed with the full power station's main license.
(vii) Analog-to-digital and digital-to-digital replacement television translators may operate only on those television channels designated for broadcast television use following completion of the broadcast television spectrum incentive auction conducted under section 6403 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96).
(viii) The following sections are applicable to analog-to-digital and digital-to-digital replacement television translator stations:
(b) * * *
(2) Other facilities changes will be considered minor including changes made to implement a channel sharing arrangement provided they comply with the other provisions of this section.
(a) Except as indicated below, each original construction permit for the construction of a new digital low power television or television translator station shall specify a period of three years from the date of issuance of the original construction permit within which construction shall be completed and application for license filed. Construction permits for the construction of a new digital low power television or television translator station granted after the release of the LPTV DTV Third Report and Order, MB Docket No. 03-185 (FCC 15-175) shall specify the later of either the digital transition deadline or three years from the date of issuance of the original construction permit within which construction shall be completed and application for license filed.
(c)
(3) Applications for extension of time filed by Class A television stations shall be filed not later than May 1, 2015 absent a showing of sufficient reasons for late filing. Applications for extension of time filed by low power television and TV translator stations shall be filed not later than four months before the digital transition deadline set forth in § 74.731(l) of this subpart absent a showing of sufficient reasons for late filing.
(d) For Class A television digital construction deadlines occurring after September 1, 2015, the tolling provisions of § 73.3598 shall apply. For low power television and TV translator digital construction deadlines occurring after the digital transition deadline set forth in § 74.731(l) of this subpart, the tolling provisions of § 73.3598 shall apply.
(a)
(2) Each station sharing a single channel pursuant to this section shall continue to be licensed and operated separately, have its own call sign and be separately subject to all of the Commission's obligations, rules, and policies.
(b)
(c)
(d)
(i) Access to facilities, including whether each licensee will have unrestrained access to the shared transmission facilities;
(ii) Allocation of bandwidth within the shared channel;
(iii) Operation, maintenance, repair, and modification of facilities, including a list of all relevant equipment, a description of each party's financial obligations, and any relevant notice provisions;
(iv) Transfer/assignment of a shared license, including the ability of a new licensee to assume the existing CSA; and
(v) Termination of the license of a party to the CSA, including reversion of spectrum usage rights to the remaining parties to the CSA.
(2) CSAs must include provisions:
(i) Affirming compliance with the channel sharing requirements in paragraph (d)(1) of this section and all relevant Commission rules and policies; and
(ii) Requiring that each channel sharing licensee shall retain spectrum usage rights adequate to ensure a sufficient amount of the shared channel capacity to allow it to provide at least one Standard Definition program stream at all times.
(e) Upon termination of the license of a party to a CSA, the spectrum usage rights covered by that license may revert to the remaining parties to the CSA. Such reversion shall be governed by the terms of the CSA in accordance with paragraph (d)(1)(v) of this section. If upon termination of the license of a party to a CSA only one party to the CSA remains, the remaining licensee may file an application to change its license to non-shared status using FCC Form 2100, Schedule D.
(f) If the rights under a CSA are transferred or assigned, the assignee or the transferee must comply with the terms of the CSA in accordance with paragraph (d)(1)(iv) of this section. If the transferee or assignee and the licensees of the remaining channel sharing station or stations agree to amend the terms of the existing CSA, the agreement may be
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; modification of a closure.
NMFS is opening directed fishing for pollock in Statistical Area 630 of the Gulf of Alaska (GOA). This action is necessary to fully use the A season allowance of the 2016 total allowable catch of pollock in Statistical Area 630 of the GOA.
Effective 1200 hrs, Alaska local time (A.l.t.), January 29, 2016, through 1200 hrs, A.l.t., March 10, 2016. Comments must be received at the following address no later than 4:30 p.m., A.l.t., February 16, 2016.
You may submit comments on this document, identified by FDMS Docket Number NOAA-NMFS-2013-0147 by any of the following methods:
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•
Josh Keaton, 907-586-7228.
NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The A season allowance of the 2016 total allowable catch (TAC) of pollock in Statistical Area 630 of the GOA is 12,456 metric tons (mt) as established by the final 2015 and 2016 harvest specifications for groundfish of the GOA (80 FR 10250, February 25, 2015) and inseason adjustment (81 FR 188, January 5, 2016).
NMFS closed directed fishing for pollock in Statistical Area 630 of the GOA under § 679.20(d)(1)(iii) on January 27, 2016 (81 FR 4594, January 27, 2016).
As of January 25, 2016, NMFS has determined that approximately 11,700 metric tons of pollock remain in the A season directed fishing allowance for pollock in Statistical Area 630 of the GOA. Therefore, in accordance with § 679.25(a)(1)(i), (a)(2)(i)(C), and (a)(2)(iii)(D), and to fully utilize the A season allowance of the 2016 TAC of pollock in Statistical Area 630 of the GOA, NMFS is terminating the previous closure and is reopening directed fishing pollock in Statistical Area 630 of the GOA, effective 1200 hrs, A.l.t., January 29, 2016.
The Administrator, Alaska Region (Regional Administrator) considered the following factors in reaching this decision: (1) The current catch of pollock in Statistical Area 630 of the GOA and, (2) the harvest capacity and stated intent on future harvesting patterns of vessels in participating in this fishery.
This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the opening of directed fishing for pollock in Statistical Area 630 of the GOA. NMFS was unable to publish a document providing time for public comment because the most recent, relevant data only became available as of January 25, 2016.
The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
Without this inseason adjustment, NMFS could not allow the fishery for pollock in Statistical Area 630 of the GOA to be harvested in an expedient manner and in accordance with the regulatory schedule. Under § 679.25(c)(2), interested persons are invited to submit written comments on this action to the above address until February 16, 2016.
This action is required by § 679.25 and is exempt from review under Executive Order 12866.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; closure.
NMFS is prohibiting directed fishing for Atka mackerel in the Eastern Aleutian district and the Bering Sea subarea (BSEAI) of the Bering Sea and Aleutian Island management area (BSAI) by vessels participating in the BSAI trawl limited access fishery. This action is necessary to prevent exceeding the A season allowance of the 2016 Atka mackerel total allowable catch (TAC) in the BSEAI allocated to vessels participating in the BSAI trawl limited access fishery.
Effective 1200 hrs, Alaska local time (A.l.t.), January 27, 2016, through 1200 hrs, A.l.t., June 10, 2016.
Josh Keaton, 907-586-7228.
NMFS manages the groundfish fishery in the BSAI exclusive economic zone according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The A season allowance of the 2016 Atka mackerel TAC, in the BSEAI, allocated to vessels participating in the BSAI trawl limited access fishery was established as a directed fishing allowance of 1,216 metric tons by the final 2015 and 2016 harvest specifications for groundfish in the BSAI (80 FR 11919, March 5, 2015), and as adjusted by an inseason adjustment (81 FR 184, January 5, 2016)
In accordance with § 679.20(d)(1)(iii), the Administrator, Alaska Region, NMFS, finds that this directed fishing allowance has been reached. Consequently, NMFS is prohibiting directed fishing for Atka mackerel in the BSEAI by vessels participating in the BSAI trawl limited access fishery.
After the effective dates of this closure, the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.
This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA, (AA) finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such a requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the directed fishing closure of the Atka mackerel fishery in the BSEAI for vessels participating in the BSAI trawl limited access fishery. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of January 26, 2016. The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
This action is required by § 679.20 and is exempt from review under Executive Order 12866.
16 U.S.C. 1801
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to supersede Airworthiness Directive (AD) 2004-23-20 for certain Airbus Model A300 series airplanes and Model A300 B4-601, A300 B4-603, A300 B4-620, A300 B4-622, A300 B4-605R, A300 B4-622R, A300 F4-605R, and C4-605R Variant F airplanes. AD 2004-23-20 currently requires, for certain airplanes, repetitive inspections for cracking around certain attachment holes, installation of new fasteners for certain airplanes, and follow-on corrective actions if necessary. AD 2004-23-20 also requires modifying certain fuselage frames, which terminates certain repetitive inspections. Since we issued AD 2004-23-20, we received a report indicating that the material used to manufacture the upper frame feet was changed and negatively affected the fatigue life of the frame feet. This proposed AD would reduce the compliance times for the initial inspection and the inspection intervals. This proposed AD would also expand the applicability and require an additional repair on certain airplanes that have been modified. We are proposing this AD to prevent cracking of the center section of the fuselage, which could result in a ruptured frame foot and reduced structural integrity of the airplane.
We must receive comments on this proposed AD by March 17, 2016.
You may send comments by any of the following methods:
•
•
•
•
For service information identified in this NPRM, contact Airbus SAS, Airworthiness Office—EAW, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email
You may examine the AD docket on the Internet at
Dan Rodina, Aerospace Engineer, International Branch, ANM 116, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-2125; fax 425-227-1149.
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
On November 10, 2004, we issued AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004) for all Airbus Model A300 series airplanes and Model A300 B4-601, A300 B4-603, A300 B4-620, A300 B4-622, A300 B4-605R, A300 B4-622R, A300 F4-605R and A300 C4-605R Variant F airplanes. (That AD superseded AD 2001-06-10, Amendment 39-12157 (66 FR 17490, April 2, 2001)). AD 2004-23-20 requires actions intended to address an unsafe condition on the products listed above.
Since we issued AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004) we received a report indicating that a change in material for manufacturing the frame feet for certain airplanes negatively impacted the fatigue life of the frame feet.
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2013-0295, dated December 11, 2013 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for Airbus Model A300 B4-601, A300 B4-603, A300 B4-620, A300 B4-622, A300 B4-605R, A300 B4-622R, A300 F4-605R, and A300 C4-605R Variant F airplanes. The MCAI states:
During a scheduled inspection of the fuselage frame feet of an in-service A300-600 aeroplane, cracks were observed in Frame (FR) 43, FR 44, FR 45 and FR 46 between stringer (STGR) 24 and STGR 30.
This condition, if not detected and corrected, could affect the structural integrity of the aeroplane.
To address this unsafe condition, [Direction Generale de l'Aviation Civile] DGAC France issued [an] AD * * * to require repetitive inspections of the affected frames and stringers on both sides of the fuselage and, depending on findings, repairs, as specified in Airbus Service Bulletin (SB) A300-53-6122.
Subsequently, DGAC France issued AD F-2004-002 [
Since DGAC France AD F-2004-002 was issued, a fleet survey and updated Fatigue and Damage Tolerance analyses were performed in order to substantiate the second A300-600 Extended Service Goal (ESG2) exercise.
It was highlighted that the frame feet material change from 2024T3511 (A300B4) to 7175T7351 (A300-600) had an impact on the frame feet fatigue life duration. Airbus SB A300-53-6122 was revised accordingly to decrease the inspection thresholds and intervals. Subsequent SB revision introduced a second structural modification point (SMP2) for aeroplanes that embody Airbus SB A300-53-6125 (modification 12168).
For the reasons described above, this new [EASA] AD retains the requirements of DGAC France AD F-2004-002, which is superseded, but requires those actions within the new thresholds and intervals as specified in Revision 04 of Airbus SB A300-53-6122.
The retained requirements include rototest inspections for cracking in the area surrounding the frame feet attachment holes between fuselage FR 41 and FR 46 from stringers 24 to 28 on the left and right sides, and related investigative and corrective action if necessary. The related investigative actions include additional rotating probe inspections of the adjacent holes. The corrective actions include reaming out cracks, cold working fastener holes, and installing oversized fasteners, or repair. This proposed AD also expands the applicability to include airplanes on which Airbus Modification 12168 was done. You may examine the MCAI in the AD docket on the Internet at
Airbus has issued Service Bulletin A300-53-6122, Revision 04, dated February 27, 2012. The service information describes procedures for the repetitive inspections of certain frame feet attachment holes for cracks, installation of new fasteners, and repair of cracked areas.
In addition, Airbus has issued Service Bulletin A300-53-6125, Revision 01, dated June 13, 2003. The service information provides compliance times for certain airplanes to do the proposed modification.
Airbus has also issued Service Bulletin A300-53-6125, Revision 04, dated March 17, 2015. The service information describes procedures for the modification of certain upper frame feet fittings.
This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.
This proposed AD would retain all requirements of AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004). Since AD 2004-23-20 was issued the AD format has been revised, and certain paragraphs have been rearranged. As a result, the corresponding paragraph designators have changed in this proposed AD, as listed in the following table:
We have converted “TABLE 1.—SERVICE INFORMATION” in AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004) to text in paragraphs (j)(3)(i) and (j)(3)(ii) of this proposed AD for formatting purposes only.
We have also moved the service information acceptable for compliance if previously done from “TABLE 1.—SERVICE INFORMATION” in AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004) to paragraph (r)(2) of this proposed AD.
We estimate that this proposed AD affects 65 airplanes of U.S. registry.
The actions that are required by AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004), and retained in this proposed AD take about 90 work-hours per product, at an average labor rate of $85 per work-hour. Required parts cost about $4,000 per product. Based on these figures, the estimated cost of the actions that were required by AD 2004-23-20 is $11,650 per product.
We also estimate that it would take up to 109 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Required parts would cost up to $6,070 per product. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $996,775, or $15,335 per product.
We have received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in this proposed AD.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national
For the reasons discussed above, I certify this proposed regulation:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
3. Will not affect intrastate aviation in Alaska; and
4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
We must receive comments by March 17, 2016.
This AD replaces AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004).
This AD applies to Airbus Model A300 B2-1A, B2-1C, B2K-3C, B2-203, B4-2C, B4-103, and B4-203 airplanes; and Model A300 B4-601, A300 B4-603, A300 B4-620, A300 B4-622, A300 B4-605R, A300 B4-622R, A300 F4-605R and A300 C4-605R Variant F airplanes; certificated in any category, all manufacturer serial numbers.
Air Transport Association (ATA) of America Code 53, Fuselage.
This AD was prompted by a report indicating that the material used to manufacture the upper frame feet was changed and negatively affected the fatigue life of the frame feet. We are issuing this AD to prevent cracking of the center section of the fuselage, which could result in a ruptured frame foot and reduced structural integrity of the airplane.
Comply with this AD within the compliance times specified, unless already done.
This paragraph restates the requirements of paragraph (f) of AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004), with revised service information. For Model A300 B4-600 and A300 B4-600R series airplanes, and Model A300 C4-605R Variant F and A300 F4-605R airplanes, except those airplanes modified by Airbus Modification 12168: Perform a high-frequency eddy-current or rototest inspection to detect cracking in the area surrounding the frame feet attachment holes between fuselage frames (FR) 41 and FR 46 from stringers 24 to 28, left-and right-hand sides, in accordance with Airbus Service Bulletin A300-53-6122, dated February 9, 2000; or the Accomplishment Instructions of Airbus Service Bulletin A300-53-6122, Revision 04, dated February 27, 2012; at the applicable time specified in paragraph (g)(1) or (g)(2) of this AD. Accomplishing an inspection required by paragraph (m) of this AD terminates the inspections required by this paragraph.
(1) For airplanes on which Task 53-15-54 in Maintenance Review Board Document (MRBD), Revision 3, dated April 1998, has not been accomplished as of May 7, 2001 (the effective date of AD 2001-06-10, Amendment 39-12157 (66 FR 17490, April 2, 2001)): Perform the inspection at the later of the times specified in paragraphs (g)(1)(i) and (g)(1)(ii) of this AD.
(i) Prior to the accumulation of the total flight-cycle or flight-hour threshold, whichever occurs first, specified in paragraph 1.E. (“Compliance”) of Airbus Service Bulletin A300-53-6122, dated February 9, 2000; or
(ii) Within the applicable grace period specified in paragraph 1.E. (“Compliance”) of Airbus Service Bulletin A300-53-6122, dated February 9, 2000.
(2) For airplanes on which Task 53-15-54 in the MRBD, Revision 3, dated April 1998, has been accomplished as of May 7, 2001 (the effective date of AD 2001-06-10, Amendment 39-12157 (66 FR 17490, April 2, 2001)): Perform the next repetitive inspection at the later of the times specified in paragraphs (g)(2)(i) and (g)(2)(ii) of this AD.
(i) Within the flight-cycle or flight-hour interval, whichever occurs first, specified in paragraph 1.E. (“Compliance”) of Airbus Service Bulletin A300-53-6122, dated February 9, 2000, following the latest inspection accomplished as specified in MRBD, Revision 3, dated April 1998; or
(ii) Within the grace period specified in paragraph 1.E. (“Compliance”) of Airbus Service Bulletin A300-53-6122, dated February 9, 2000.
This paragraph restates the requirements of paragraph (g) of AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004), with revised service information. For airplanes on which no cracking is detected during the inspection required by paragraph (g) of this AD, prior to further flight, install new fasteners as applicable, in accordance with Airbus Service Bulletin A300-53-6122, dated February 9, 2000; or the Accomplishment Instructions of Airbus Service Bulletin A300-53-6122, Revision 04, dated February 27, 2012; and repeat the inspection required by paragraph (g) of this AD thereafter at intervals not to exceed the applicable intervals specified in paragraph 1.E. (“Compliance”) of Airbus Service Bulletin A300-53-6122, dated February 9, 2000; until the actions required by paragraph (j) or (o) of this AD have been done or the initial inspection required by paragraph (m) of this AD is done.
This paragraph restates the requirements of paragraph (h) of AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004), with revised service information. For airplanes on which cracking is detected during any inspection required by paragraph (g) of this AD: Prior to further flight, except as required by paragraph (k) of this AD, accomplish corrective actions (
This paragraph restates the requirements of paragraph (i) of AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004), for certain airplanes, with no changes. For Model A300 series airplanes: Within the compliance times specified in paragraph 1.E. (“Compliance”) of Airbus Service Bulletin A300-53-0271, Revision 03, dated June 13, 2003, modify the fuselage frames, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A300-53-0271, Revision 03, dated June 13, 2003. For airplanes that have exceeded their design service goal, as specified in NOTE (01) of paragraph 1.E. (“Compliance”) of Airbus Service Bulletin A300-53-0271, Revision 03, dated June 13, 2003; this AD requires compliance within the earlier of the flight-cycle and flight-hour grace periods specified in Airbus Service Bulletin A300-53-0271, Revision 03, dated June 13, 2003.
This paragraph restates the requirements of paragraph (j) of AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004), with specific delegation approval language. During any inspection required by paragraphs (g), (h), (i), or (j) of this AD, if the applicable service information specified in paragraphs (g), (h), (i), and (j) of this AD specifies to contact the manufacturer for appropriate instructions: Before further flight, perform all applicable corrective actions in accordance with a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the Direction Generale de l'Aviation Civile (DGAC) (or its delegated agent); or the European Aviation Safety Agency (EASA); or Airbus's EASA Design Organization Approval (DOA).
For the purpose of this AD, use the parameters specified in paragraphs (l)(1), (l)(2), and (l)(3) of this AD to determine the applicable AFT for the actions required by paragraph (m) and compliance times required by paragraph (n) of this AD.
(1) The initial inspection compliance time, as the total accumulated flight hours counted from take-off to touch-down, divided by the total accumulated flight cycles as of the effective date of this AD.
(2) The first repetitive inspection interval, as the total accumulated flight hours divided by the total accumulated flight cycles at the time of the inspection.
(3) The second inspection interval and subsequent, as the flight hours divided by the flight cycles between the last two inspections.
(1) At the applicable time specified in paragraph (n)(1) of this AD, do a rotating probe inspection for discrepancies of the frame feet attachment holes from FR 41 through FR 46, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A300-53-6122, Revision 04, dated February 27, 2012. Repeat the inspections thereafter at intervals not to exceed those specified in paragraph (n)(2) of this AD. Accomplishment of this inspection terminates the inspections required by paragraph (g)(2) of this AD.
(2) If any discrepancy (
(3) Corrective actions, as required by paragraph (m)(2) of this AD, do not constitute terminating action for the repetitive inspections required by paragraph (m)(1) of this AD.
(1) Do the initial rotating probe inspection required by paragraph (m)(1) of this AD at the applicable times specified in paragraphs (n)(1)(i), (n)(1)(ii), and (n)(1)(iii) of this AD; or within 1,000 flight cycles after the effective date of this AD; whichever occurs later.
(i) For airplanes on which the modification specified in Airbus Service Bulletin A300-53-6125 has not been done as of the effective date of this AD: At the applicable times specified in paragraph (n)(1)(i)(A) or (n)(1)(i)(B) of this AD.
(A) If the AFT is greater than 1.5 flight hours/flight cycles: Within 14,800 flight hours or 6,800 flight cycles, whichever occurs first, since the airplane's first flight.
(B) If the AFT is less than or equal to 1.5 flight hours/flight cycles: Within 11,100 flight hours or 7,400 flight cycles, whichever occurs first, since the airplane's first flight.
(ii) For airplanes on which the modification specified in Airbus Service Bulletin A300-53-6125 has been done as of the effective date of this AD, except as provided by paragraph (n)(1)(iii) of this AD: At the applicable times specified in paragraph (n)(1)(ii)(A) or (n)(1)(ii)(B) of this AD.
(A) If the AFT is greater than 1.5 flight hours/flight cycles: Within 56,400 flight hours or 26,100 flight cycles, whichever occurs first, after doing the modification specified in Airbus Service Bulletin A300-53-6125.
(B) If the AFT is less than or equal to 1.5 flight hours/flight cycles: Within 42,300 flight hours or 28,200 flight cycles, whichever occurs first, after doing the modification specified in Airbus Service Bulletin A300-53-6125.
(iii) For airplanes on which the additional modification required by paragraph (p) of this AD has been done: At the applicable times in paragraph (n)(1)(iii)(A) or (n)(1)(iii)(B) of this AD.
(A) If the AFT is greater than 1.5 flight hours/flight cycles: Within 69,400 flight hours or 32,100 flight cycles, whichever occurs first, after doing the modification specified in Airbus Service Bulletin A300-53-6125.
(B) If the AFT is less than or equal to 1.5 flight hours/flight cycles: Within 52,000 flight hours or 34,700 flight cycles, whichever occurs first, after doing the modification specified in Airbus Service Bulletin A300-53-6125.
(2) Do the repetitive rotating probe inspections required by paragraph (m)(1) of this AD at intervals not to exceed those specified in paragraph (n)(2)(i) or (n)(2)(ii) of this AD, as applicable.
(i) If the AFT is greater than 1.5 flight hours/flight cycles: 7,800 flight hours or 3,600 flight cycles, whichever occurs first.
(ii) If the AFT is less than or equal to 1.5 flight hours/flight cycles: 5,800 flight hours or 3,900 flight cycles, whichever occurs first.
(1) For Model A300 B4-601, A300 B4-603, A300 B4-620, A300 B4-622, A300 B4-605R, A300 B4-622R, A300 F4-605R and A300 C4-605R Variant F airplanes, except those modified in production before the effective date of this AD by Airbus Modification 12168 or those on which the modification (
(i) For airplanes with an AFT greater than 1.5 flight hours/flight cycles as of the effective date of this AD: At the later of the times in paragraphs (o)(1)(i)(A) and (o)(1)(i)(B) of this AD:
(A) Within 18,200 flight hours or 8,400 flight cycles, whichever occurs first, since the airplane's first flight; or
(B) At the earlier of the times specified in paragraphs (o)(1)(i)(B)
(ii) For airplanes with an AFT less than or equal to 1.5 flight hours/flight cycles as of the effective date of this AD: At the later of the times in paragraphs (o)(1)(ii)(A) and (o)(1)(ii)(B) of this AD:
(A) Within 13,700 flight hours or 9,100 flight cycles, whichever occurs first, since the airplane's first flight; or
(B) At the earlier of the times specified in paragraphs (o)(1)(ii)(B)
(2) For the affected Model A300 B4-600 series airplanes: Accomplishment of the modification specified in Airbus Service Bulletin A300-53-6125 before the effective date of this AD terminates the requirements of paragraphs (g), (h), and (i) of this AD.
(3) For Model A300 B2 and A300 B4 series airplanes: Accomplishment of the modification specified in Airbus Service Bulletin A300-53-6125 terminates certain repetitive inspections required by AD 2007-04-11, Amendment 39-14943 (72 FR 8604, February 27, 2014),
(1) For Model A300 B4-601, A300 B4-603, A300 B4-620, A300 B4-622, A300 B4-605R, A300 B4-622R, A300 F4-605R and A300 C4-605R Variant F airplanes modified in production before the effective date of this AD by Airbus Modification 12168, or modified before the effective date of this AD by accomplishment of the reinforcement of the upper frame feet fittings specified in the service information identified in paragraph (p)(1)(i), (p)(1)(ii), or (p)(1)(iii) of this AD: Within 360 flight cycles prior to reaching the applicable compliance time specified in paragraph (p)(2)(i) or (p)(2)(ii) of this AD, contact the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Airbus's EASA DOA; for modification instructions and within the applicable compliance time specified in paragraph (p)(2) of this AD, do the modification using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Airbus's EASA DOA.
(i) Airbus Service Bulletin A300-53-6125, dated November 8, 2000.
(ii) Airbus Service Bulletin A300-53-6125, Revision 01, dated June 13, 2003,
(iii) Airbus Service Bulletin A300-53-6125, Revision 02, dated February 25, 2005.
(2) Do the modification required by paragraph (p)(1) of this AD at the applicable time specified below.
(i) For airplanes with an AFT greater than 1.5 flight hours/flight cycles as of the effective date of this AD: Within 32,100 flight cycles after the modification was completed.
(ii) For airplanes with an AFT less than or equal to 1.5 flight hours/flight cycles as of the effective date of this AD: Within 34,700 flight cycles after the modification was completed.
Accomplishment of the modification specified in paragraph (o) or (p) of this AD does not constitute terminating action for the repetitive inspections required by paragraph (m)(1) of this AD.
(1) For Model A300 B4-600 and B4-600R series airplanes, and Model A300 C4-605R Variant F and A300 F4-605R airplanes: This paragraph provides credit for inspections and corrective actions required by paragraphs (g), (h), and (i) of this AD, if those actions were performed before the effective date of this AD using the applicable service information specified in paragraphs (r)(1)(i), (r)(1)(ii), and (r)(1)(iii) of this AD.
(i) Airbus Service Bulletin A300-53-6122, Revision 01, dated September 5, 2001, which is not incorporated by reference in this AD.
(ii) Airbus Service Bulletin A300-53-6122, Revision 02, dated June 17, 2002, which is not incorporated by reference in this AD.
(iii) Airbus Service Bulletin A300-53-6122, Revision 03, dated August 25, 2011, which is not incorporated by reference in this AD.
(2) This paragraph restates the credit for Airbus Model A300 series airplanes for previous actions as provided by Table 1 of AD 2004-23-20, Amendment 39-13875 (69 FR 68779, November 26, 2004). For Airbus Model A300 series airplanes: This paragraph provides credit for actions required by paragraph (j) of this AD, if those actions were performed before January 3, 2005 (the effective date of AD 2004-23-20) using the service information specified in paragraph (r)(2)(i), (r)(2)(ii), or (r)(2)(iii) of this AD.
(i) Airbus Service Bulletin A300-53-0271, dated September 10, 1991, which is not incorporated by reference in this AD.
(ii) Airbus Service Bulletin A300-53-0271, Revision 01, dated February 16, 1993, which is not incorporated by reference in this AD.
(iii) Airbus Service Bulletin A300-53-0271, Revision 02, dated July 13, 2000, which is not incorporated by reference in this AD.
The following provisions also apply to this AD:
(1)
(i) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office. The AMOC approval letter must specifically reference this AD.
(ii) AMOCs approved previously for AD 96-13-11, Amendment 39-9679 (61 FR 35122, July 5, 1996), and AD 2001-06-10, Amendment 39-12157, April 2, 2001), are approved as AMOCs for the corresponding requirements of this AD.
(2)
(1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2013-0295, dated December 11, 2013, for related information. This MCAI may be found in the AD docket on the Internet at
(2) For service information identified in this AD, contact Airbus SAS, Airworthiness Office—EAW, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email
Internal Revenue Service (IRS), Treasury.
Correction to a notice of public hearing on proposed rulemaking.
This document corrects a notice of public hearing on proposed regulations that published in the
The public hearing is being held on Monday, February 8, 2016 at 10 a.m. The IRS must now receive outlines of the topics to be discussed at the public hearing by Thursday, February 4, 2016.
The public hearing is being held in the IRS Auditorium, Internal Revenue Service Building, 1111 Constitution Avenue NW., Washington, DC 20224. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building.
Send Submissions to CC:PA:LPD:PR (REG-139483-13), Room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday to CC:PA:LPD:PR (REG-139483-13), Couriers Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC 20224 or sent electronically via the Federal eRulemaking Portal at
Concerning the regulations, Ryan A. Bowen at (202) 317-6937; concerning submissions of comments, the hearing and/or to be placed on the building access list to attend the hearing Regina Johnson at (202) 317-6901 (not toll-free numbers).
The notice of public hearing on a proposed rulemaking that is the subject of this document is under sections 367 and 482 of the Internal Revenue Code.
As published, the notice of public hearing on proposed rulemaking contains an omission in its summary that may prove to be misleading and is in need of clarification.
Accordingly, the notice of public hearing on proposed rulemaking (REG-139483-13), that are subject to FR Doc. 2016-00961, is corrected as follows:
On page 3069, in the preamble, second column, under the caption
Office of the Secretary, Department of Defense (DoD).
Proposed rule.
This rulemaking proposes comprehensive revisions to the TRICARE regulation to reduce administrative barriers to access to mental health benefit coverage and to improve access to substance use disorder (SUD) treatment for TRICARE beneficiaries, consistent with earlier Department of Defense and Institute of Medicine recommendations, current standards of practice in mental health and addiction medicine, and governing laws. This proposed rule has four main objectives: (1) To eliminate quantitative and qualitative treatment limitations on SUD and mental health benefit coverage and align beneficiary cost-sharing for mental health and SUD benefits with those applicable to medical/surgical benefits; (2) to expand covered mental health and SUD treatment under TRICARE, to include coverage of intensive outpatient programs and treatment of opioid use disorder; (3) to streamline the requirements for mental health and SUD institutional providers to become TRICARE authorized providers; and (4) to develop TRICARE reimbursement methodologies for newly recognized mental health and SUD intensive outpatient programs and opioid treatment programs.
Written comments received at the addresses indicated below will be considered for possible revisions to this rule in development of the final rule. Comments must be received on or before April 1, 2016.
You may submit comments identified by docket number and or Regulatory Information Number (RIN) number and title, by either of the following methods:
•
•
Dr. Patricia Moseley, Defense Health Agency, Clinical Support Division, Condition-Based Specialty Care Section, 703-681-0064.
This proposed rule seeks to comprehensively update TRICARE mental health and substance use disorder benefits, consistent with earlier Department of Defense and Institute of Medicine recommendations, current standards of practice in mental health and addiction medicine, and our governing laws. The Department of Defense remains intently focused on ensuring the mental health of our service members and their families, as this continues to be a top priority. The Department is also working to further de-stigmatize mental health treatment and expand the ways by which our beneficiaries can access authorized mental health services. This proposed regulatory action is in furtherance of these goals and imperative in order to eliminate requirements that may be viewed as barriers to medically necessary and appropriate mental health services.
The requirements of the Mental Health Parity Act (MHPA) of 1996 and the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008, as well as the plan benefit provisions contained in the Patient Protection and Affordable Care Act (PPACA) do not apply to the TRICARE program. The provisions of MHPAEA and PPACA serve as models for TRICARE in proposing changes to existing benefit coverage. These changes intend to reduce administrative barriers
Section 703 of the National Defense Authorization Act (NDAA) National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2015, signed into law December 19, 2014, amends section 1079 of title 10 of the U.S.C. to remove prior existing statutory limits and requirements on TRICARE coverage of inpatient mental health services. This proposed rule is necessary to conform the regulation to provisions in the recently enacted law. Specifically, TRICARE coverage is no longer subject to an annual limit on stays in inpatient mental health facilities of 30 days for adults and 45 days for children. In addition, TRICARE coverage is no longer subject to a 150-day annual limit for stays at Residential Treatment Centers (RTCs) for eligible beneficiaries.
In addition to the elimination of these statutory inpatient day limits, and corresponding waiver provisions, the proposed rule also seeks to eliminate other regulatory quantitative and qualitative treatment limitations, consistent with principles of mental health parity and our governing laws. These include the 60-day partial hospitalization program limitation; annual and lifetime limitations on SUD treatment; presumptive limitations on outpatient services including the number of psychotherapy sessions per week and family therapy sessions for the treatment of SUD per benefit period; and limitations on the smoking cessation program. While there are clear waiver provisions in place for all of the existing quantitative treatment benefit limitations in order to ensure that beneficiaries have access to medically or psychologically necessary and appropriate care, these presumptive limitations may serve as an administrative barrier and thus disincentive to continued care regardless of the continued medical necessity of such care.
Additionally, this rulemaking proposes to remove the categorical exclusion on treatment of gender dysphoria. This proposed change will permit coverage of all non-surgical medically necessary and appropriate care in the treatment of gender dysphoria, consistent with the program requirements applicable for treatment of all mental or physical illnesses. Surgical care remains prohibited by statute at 10 U.S.C. 1079(a)(11), as discussed further below.
Finally, following the recent repeal (section 703 of the NDAA for FY 15) of the statutory authority (previously codified at 10 U.S.C. 1079(i)(2)) for separate beneficiary financial liability for mental health benefits, the proposed rule revises the cost-sharing requirements for mental health and SUD benefits to be consistent with those that are applicable to TRICARE medical and surgical benefits.
Currently, TRICARE benefits do not fully reflect the full range of contemporary SUD treatment approaches (
An amendment to the regulation is necessary to authorize TRICARE benefit coverage of medically and psychologically necessary services and supplies which represent appropriate medical care and that are generally accepted by qualified professionals to be reasonable and adequate for the diagnosis and treatment of mental disorders. Office-based individual outpatient treatment is an effective, empirically-validated level of treatment for substance use disorder endorsed by The ASAM Criteria: Treatment Criteria for Addictive, Substance-Related, and Co-Occurring Conditions, Third Edition, 2013. Furthermore, TRICARE coverage of medication assisted treatment (MAT) for opioid use disorder, extended through regulatory revisions, as published in the
The current TRICARE certification requirements for institutional mental health and SUD providers were implemented over 20 years ago and designed to create comprehensive, stand-alone standards to address the full spectrum of requirements and expectations for mental health facilities and providers, rather than as mere supplements to the standards employed by the Joint Commission, which at the time had moved toward a more general set of facility standards. Over the last several decades, the accreditation process for institutional providers has evolved, and these standards are now monitored through a number of industry-accepted accrediting bodies. While TRICARE's comprehensive certification standards were once considered necessary to ensure quality and safety, these comprehensive certification requirements are now proving to be overly restrictive and at times inconsistent with current industry-based institutional provider standards and organization. There are currently several geographic areas that are inadequately served because providers in those regions do not meet TRICARE certification requirements, even though they may meet the industry standard. The proposed rule seeks to streamline TRICARE regulations to be consistent with industry standards for authorization of qualified institutional providers of mental health and SUD treatment. It is anticipated that these revisions will result in an increase in the number and geographic coverage areas of participating institutional providers of mental health and SUD treatment for TRICARE beneficiaries.
Along with recognition of several new categories of TRICARE authorized providers, the proposed rule establishes reimbursement methodologies for these providers. Specifically, new reimbursement methodologies have been proposed for IOPs for mental health and SUD treatment as well as OTPs, as these providers have not
This regulation is proposed under the authorities of 10 U.S.C., section 1073, which authorizes the Secretary of Defense to make decisions concerning TRICARE and to administer the medical and dental benefits provided in title 10 U.S.C., chapter 55. The Department is authorized to provide medically necessary and appropriate medical care for mental and physical illnesses, injuries and bodily malfunctions, including hospitalization, outpatient care, drugs, and treatment of mental conditions under 10 U.S.C. 1077(a)(1) through (3) and (5). Although section 1077 identifies the types of health care to be provided in military treatment facilities (MTFs) to those authorized such care under section 1076, these same types of health care (with certain specified exceptions) are authorized for coverage within the civilian health care sector for ADFMs under section 1079 and for retirees and their dependents under section 1086. In general, the scope of TRICARE benefits covered within the civilian health care sector and the TRICARE authorized providers of those benefits are found at 32 CFR 199.4 and 199.6, respectively.
TRICARE beneficiary cost-sharing is governed by statute and regulation based upon both the beneficiary category and TRICARE option being utilized. Pursuant to 10 U.S.C. 1079(b)(1), dependents of members of the uniformed services utilizing TRICARE Standard are responsible for a $25 beneficiary cost-share for each covered inpatient admission to a hospital, or the amount the beneficiary or sponsor would have been charged had the inpatient care been provided in a Uniformed Service hospital, whichever is greater. Section 1079(i)(2) permits the Secretary to prescribe separate payment requirements for the provision of mental health services and, under this authority, the Secretary did prescribe different copays for mental health versus medical/surgical benefits for active duty family members under the TRICARE Standard option as well as for retirees, their family members, and survivors under the TRICARE Prime option.
Under TRICARE Standard, an inpatient cost-sharing amount for mental health services of $20 per day for each day of inpatient admission was established by regulation (32 CFR 199.4(f)(2)(ii)(D)) and applies to admissions to any hospital for mental health services, any residential treatment facility, any substance use rehabilitation facility, and any partial hospitalization program (PHP) providing mental health services.
Section 731 of the NDAA for FY 1994 (Pub. L. 103-160) directed the Secretary of Defense to implement a health benefit option modelled on health maintenance organization plans offered in the private sector. This uniform health maintenance organization (HMO) benefit is known as TRICARE Prime and was implemented through regulation (32 CFR 199.17 and 199.18). Pursuant to 10 U.S.C. 1097(e), the Secretary of Defense is authorized to prescribe by regulation a premium, deductible, copayment, or other charge for health care for Prime beneficiaries. The specific cost-sharing requirements for Prime are found at 32 CFR 199.18. Under TRICARE Prime, the regulation (32 CFR 199.18(f)(3)(ii) and (e)(3)) established an outpatient copay of $25 per mental health visit and $17 per group outpatient mental health visit and $40 per diem charge for inpatient mental health for retirees, their family members, and survivors. In establishing TRICARE Prime, these separate and higher copayments for mental health services were determined to be necessary to preserve the distinct treatment of mental health services as authorized by law in effect at the time.
Section 703 of the NDAA for FY 2015 enacted a statutory amendment to 10 U.S.C. 1079, effective December 19, 2014. This action removed the authority for separate patient cost-sharing of mental health services and necessitates regulatory changes to re-classify partial hospitalization services as outpatient services for purposes of cost-sharing and to bring the active duty family member Standard inpatient cost-sharing regulations into alignment with the statute. The proposed regulatory changes further equalize the retiree and dependent mental health copay amounts to the medical/surgical copay amounts under TRICARE Prime.
With respect to institutional provider reimbursement, pursuant to 10 U.S.C. 1079(i)(2), the Secretary is required to publish regulations establishing the amount to be paid to any provider of services, including hospitals, comprehensive outpatient rehabilitation facilities, and any other institutional facility providing services for which payment may be made. The amount of such payments shall be determined, to the extent practicable, in accordance with the same reimbursement rules as apply to payments to providers of services of the same type under Medicare. TRICARE provider reimbursement methods are found at 32 CFR 199.14. When it is not practicable to adopt Medicare's methods or Medicare has no established reimbursement methodology (
The proposed rule makes a number of comprehensive revisions to the TRICARE mental health and SUD treatment coverage. In an effort to further de-stigmatize SUD care, treatment of SUDs is no longer separately identified as a limited special benefit under 32 CFR 199.4(e) but rather has now been incorporated into the general mental health provisions in § 199.4(b) governing institutional benefits and § 199.4(c) governing professional service benefits. Further, this proposed rule seeks to eliminate a number of mental health and SUD quantitative and qualitative treatment limitations, and corresponding waiver provisions, instead relying on determinations of medical necessity and appropriate utilization management tools, as are used for all other medical and surgical benefits. Proposed revisions include eliminating:
• All inpatient mental health day limits, following the statutory revisions to 10 U.S.C. 1079;
• The 60-day partial hospitalization and SUDRF residential treatment limitations;
• Annual and lifetime limitations on SUD treatment;
• Presumptive limitations on outpatient services including the six-hours per year limit on psychological testing; the limit of two sessions per week for outpatient therapy; and limits for family therapy (15 visits) and outpatient therapy (60 visits) provided in free-standing or hospital based SUDRFs;
• The limit of two smoking cessation quit attempts in a consecutive 12 month period and 18 face-to-face counseling sessions per attempt; and
• The regulatory prohibition that categorically excludes all treatment of gender dysphoria.
The rule also proposes changes to cost-sharing for mental health treatment for TRICARE Prime and Standard/Extra
The proposed regulatory language defines and authorizes new services by TRICARE authorized institutional and individual providers of SUD care outside of SUDRF settings at §§ 199.2 and 199.6. Revisions to treatment benefits at § 199.4 and § 199.6 would allow intensive outpatient programs (IOPs) for mental health and SUD treatment; care in opioid treatment programs (OTPs); and outpatient SUD treatment (
Significant revisions to 32 CFR 199.6 are proposed in order to eliminate the administratively burdensome provider certification process and streamline approval for institutional mental health and SUD providers to become TRICARE authorized providers. In multiple regions providers may meet industry standards but do not meet TRICARE certification requirements. Consequently providers in these regions are unable to serve TRICARE beneficiaries. The applicable provisions for residential treatment centers, psychiatric and SUD partial hospitalization programs, and SUDRFs, have been rewritten in their entirety to address institutional provider eligibility, organization and administration, participation agreement requirements and any other requirements for approval as a TRICARE authorized provider. The requirement and formal process of certification is proposed for elimination. Similarly, new regulatory provisions have been proposed for the newly recognized categories of institutional providers, namely IOPs and OTPs.
Finally, amendments to 32 CFR 199.14, which specifies provider reimbursement methods, are proposed to establish allowable all-inclusive per diem payment rates for psychiatric and SUD PHP, IOP and OTP services.
The proposed amendment is not anticipated to have an annual effect on the economy of $100 million or more. An independent government cost estimate found that this proposed rule is estimated to have a net increase in costs of approximately $55 million. The government's regulatory impact analysis based on this cost estimate can be found in the docket folder associated with this proposed rule at
Elimination of the statutory day limits for inpatient psychiatric and Residential Treatment Center (RTC) care for children (to comply with section 703 of the NDAA for FY15) will only minimally increase costs. This is because these previously published presumptive day limits were also subject to waivers and TRICARE had been reimbursing for medically necessary inpatient stays with waivers when continued medical necessity was supported. Eliminating the limit of two sessions per week for outpatient therapy is estimated to incur an increased cost ($7.5 million), but this is based on the conservative assumption that the proportion of NADD beneficiaries who will pursue three psychotherapy sessions per week is comparable to the proportion of Active Duty Service Members (ADSMs) who do so (17%), even though ADSMs incur no cost-sharing and most receive psychotherapy within MTFs instead of civilian providers. Eliminating other limits (
Creating additional levels, providers, and types of mental health care (
Streamlining requirements for institutional providers to become TRICARE authorized providers of
TRICARE implemented both financial and treatment controls to manage care, ensure quality, and control costs for medically or psychologically necessary and appropriate mental health and substance use care. In part, these controls have been implemented in response to Congressional concerns. In the National Defense Authorization Act for Fiscal Year 1991 and the Defense Appropriations Act for Fiscal Year 1991, Congress addressed the problem of spiraling costs for mental health services under the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). As stated by the House Armed Services Committee:
The cost of mental health and substance abuse is of particular concern to the committee. While CHAMPUS expenditures have generally increased by 50 percent between 1986 and 1989, CHAMPUS mental health expenditures have more than doubled. Last year mental health costs accounted for about one-quarter of CHAMPUS's total spending far above the typical proportion in private employers' health care plans. These statutes established: (1) The new day limits for inpatient mental health services: 30 days for acute care for patients 19 years of age and older, 45 days for acute care for patients under 19 years of age, and 150 days of residential treatment-each of these limits subject to waiver that takes into account the level, intensity and availability of the care needs of the patient; and (2) mandated prior authorization for all nonemergency inpatient mental health admissions.
Additionally, in the early 1990s, two Comptroller General Reports highlighted the need for mental health program reform within the Civilian Health and Medical Program of the Uniform Services (CHAMPUS). At the time, there were widespread concerns with the quality of mental health care within CHAMPUS as well as fraud and abuse. The Reports highlighted weaknesses within the benefit that resulted in unnecessary hospital admissions, excessive inpatient stays and sometimes, inadequate quality of care. The first of these two reports, “Defense Health Care: Additional Improvements Needed in CHAMPUS's Mental Health Program,” GAO/HRD-93-34, May 1993, stated that, although DoD has taken actions to improve the program, several problems persist.” A second Comptroller General Report, “Psychiatric Fraud and Abuse: Increased Scrutiny of Hospital Stays is Needed to Lessen Federal Health Program Vulnerability,” (GAO/HRD-93-92, September 1993) called for improvements in the CHAMPUS mental health program to include reversing the financial incentives to use inpatient care by introducing larger copayments for CHAMPUS inpatient care.
In response to these concerns, the certification standards for mental health facilities as well as treatment limits and cost-sharing requirements applicable to mental health and SUD services under the TRICARE program were implemented in a 1995 Final Rule, “Civilian Health and Medical Program of the Uniformed Services (CHAMPUS): Mental Health Services.” These standards, limits, and requirements have remained in place over the last 20 years.
In 1996, Congress enacted the Mental Health Parity Act of 1996 (MHPA 1996) which required employment-related group health plans and health insurance coverage offered in connection with group health plans to provide parity in aggregate lifetime and annual dollar limits for mental health benefits and medical and surgical benefits. In October 2008, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) was signed into law as part of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008. The changes made by MHPAEA consist of new requirements, including parity for substance use disorder benefits, as well as amendments to the existing mental health parity provisions enacted in MHPA. This law requires group health insurance plans that provide both medical/surgical and mental health or substance use disorder benefits to meet parity standards. Specifically, financial requirements (
In July 2011, DoD issued a Report to Congress entitled, “Comprehensive Plan on Prevention, Diagnosis, and Treatment of Substance Use Disorders and Disposition of Substance Use Offenders in the Armed Forces,” in which the Department identified to Congress the need to revise certain aspects of TRICARE regulatory language governing SUD treatment services to provide a benefit that takes into account generally accepted standards of practice. The report is available for download at
The Department seeks to revise and streamline TRICARE regulations to be consistent with industry standards, as well as to incorporate applicable recommendations from the July 2011 Congressional report, the IOM 2012 study, and evidence-based practices delineated by the U.S. Department of Veterans Affairs (VA) and DoD clinical
There are existing waiver provisions for all of the quantitative treatment benefit limitations to ensure beneficiaries have access to medically or psychologically necessary and appropriate treatment. However, these limitations, which were designed to contain costs and address abuses decades ago, along with differential financial cost-sharing requirements relative to medical/surgical care are currently viewed as barriers to coverage of mental health services.
This proposed rule seeks to remove a number of quantitative and qualitative limits for coverage of mental health and SUD care under the TRICARE Program, including:
• All inpatient mental health day (30 days maximum for adults and 45 days maximum for children at 32 CFR 199.4(b)(9)) and annual day limits (150 days at 32 CFR 199.4(b)(8)) for RTC care for beneficiaries 21 years and younger, following the statutory revisions to 10 U.S.C. 1079;
• The 60-day limitation on partial hospitalization (32 CFR 199.4(b)(10)(iv)) and SUDRF residential treatment (32 CFR 199.4(e)(4)(ii)(A));
• Annual (60 days in a benefit period) and lifetime (three treatment episodes—32 CFR 199.4(e)(4)(ii)) limitations on SUD treatment;
• Presumptive limitations on outpatient services including the six-hour per year limit on psychological testing (32 CFR 199.4(c)(3)(ix)(A)(5)) and the limit of two sessions per week for outpatient therapy (32 CFR 199.4(c)(3)(ix)(B));
• Limits on family therapy (15 visits (32 CFR 199.4(e)(4)(ii)(C)) and outpatient therapy (60 visits—(32 CFR 199.4(e)(4)(ii)(B)) provided in free-standing or hospital based SUDRFs; and
• The limit of two smoking cessation quit attempts in a consecutive 12 month period and 18 face-to-face counseling sessions per attempt (32 CFR 199.4(e)(30)).
This proposed rule will allow coverage of outpatient treatment that is medically or psychologically necessary, including family therapy and other covered diagnostic and therapeutic services, by a TRICARE authorized institutional provider or by authorized individual mental health providers without limits on the number of treatment sessions. The removal of these limitations also recognizes that SUDs are chronic conditions with periodic phases of relapse and readmission, often requiring multiple interventions over several years to achieve full remission. All claims submitted for services under TRICARE remain subject to review for quality and appropriate utilization in accordance with the Quality and Utilization Review Peer Review Organization Program, under 10 U.S.C. 1079(n) and 32 CFR 199.15.
The proposed rule also removes certain regulatory exclusions for the treatment of gender dysphoria for TRICARE beneficiaries who are diagnosed by a TRICARE authorized, qualified mental health professional, practicing within the scope of his or her license, to be suffering from a mental disorder, as defined in 32 CFR. 199.2. It is no longer justifiable to categorically exclude and not cover currently accepted medically and psychologically necessary treatments for gender dysphoria (such as psychotherapy, pharmacotherapy, and hormone replacement therapy) that are not otherwise excluded by statute. (Section 1079(a)(11) of title 10, U.S.C., excludes from CHAMPUS coverage surgery which improves physical appearance but is not expected to significantly restore functions, including mammary augmentation, face lifts, and sex gender changes.)
Following the recent repeal of statutory authority for separate beneficiary financial liability for mental health benefits, the proposed rule eliminates any differential in cost-sharing between mental health and SUD benefits and medical/surgical benefits. The following regulatory changes to 32 CFR 199.4(f) and 32 CFR 199.18 will reduce financial barriers to both outpatient and inpatient mental health and SUD benefits while, consistent with statutory requirements, minimizing out-of-pocket risk for those beneficiaries.
Active duty family members enrolled in TRICARE Prime pay no copayment for inpatient or outpatient services. Currently, retirees and their dependents enrolled in Prime pay higher copays for inpatient and outpatient mental health services than for other similar non-mental health services. Retirees and all other non-active duty dependents enrolled in Prime would see the following changes:
• The co-pay for individual outpatient mental health visits would be reduced from $25 to $12.
• The co-pay for group outpatient mental health visits would be reduced from $17 to $12.
The per diem charge of $40 for mental health and SUD inpatient admissions would be reduced to the non-mental health per diem rate of $11, with a minimum charge of $25 per admission.
Currently, active duty family members (ADFMs) utilizing TRICARE Standard/Extra pay a higher per diem for mental health inpatient care than for other inpatient stays. ADFMs would see the following change:
• The per diem cost-share for inpatient mental health services would be reduced from $20/day to the daily charge ($18/day for FY16) that would have been charged had the inpatient care been provided in a Uniformed Services hospital.
Retirees and their dependents who are not enrolled in Prime but use non-network providers (Standard) for mental health care are generally required to pay 25% of the allowable charges for inpatient care (for inpatient services subject to the DRG-based payment system or mental health per diem payment system, beneficiaries pay the lesser of the per diem amount (which is equivalent to 25% of the CHAMPUS-determined allowable costs) or 25% of the hospital's billed charges). This would not change. Retirees and their dependents using Standard and Extra are currently responsible for their outpatient deductible and outpatient cost-sharing of 25% (Standard)/20% (Extra) of the CHAMPUS-determined allowable costs. This also would not change.
It is also being proposed that cost-sharing for partial hospitalization programs (PHPs) be changed from inpatient to outpatient to more accurately reflect the services being rendered, ensure consistency with the applicable statutes governing cost-sharing, and to further ensure parity between the surgical/medical and mental health benefit. The definition of partial hospitalization, by its very nature, is inconsistent with the definition of inpatient care. Notwithstanding, in a final rule (58 FR 35403) published on July 1, 1993, and pursuant to the authority granted to the Secretary to establish different cost-
Realigning cost-sharing of partial hospitalization program services from inpatient to outpatient will impact ADFMs utilizing TRICARE Standard/Extra. Specifically, for ADFMs, the current inpatient per diem charge of $20/day (with a minimum $25 charge per admission) for partial hospitalization program services would instead be subject to the applicable outpatient deductible and cost-sharing of 20% (Standard)/15% (Extra) of the PHP per diem rate. For example, if the full-day PHP per diem rate is $382, the cost-sharing for ADFMs would be $57.30 under Extra and $76.40 under Standard. However, these ADFMs would still retain the option of enrolling in TRICARE Prime/Prime Remote, where the cost-sharing is $0 (
In an analysis to evaluate the potential financial impact on non-Prime ADFMs (
Conversion of PHP cost-sharing from inpatient to outpatient would more accurately reflect the services being provided. Further, Congress revoked the statutory authority granted to the Secretary to establish different cost-shares for mental health care. These factors provide the impetus for adoption of outpatient cost-sharing for PHPs.
Substance Use Disorder IOP services are currently not identified as separate levels of care from partial hospitalization in TRICARE regulations. Although hospital-based and free-standing facilities that are TRICARE authorized to offer partial hospitalization services can provide less intensive IOP, covered at the half-day partial hospitalization rate, the existing TRICARE certification requirements for these programs restrict the typical SUD IOP from being recognized as a separate program and provider type in its own right. SUD IOPs offer a validated level of care endorsed by ASAM, and the provision of IOP services through institutional providers also would have the potential benefit of expanding the volume of TRICARE participating providers and improving access to care.
While TRICARE beneficiaries may currently receive treatment for SUD or psychiatric disorders at a TRICARE authorized PHP, the proposed rule clearly authorizes IOP care as a covered benefit for treatment of SUD and psychiatric disorders. This proposed rule would authorize IOP care by a new class of institutional provider, which will provide a less restrictive setting than an inpatient or partial hospital setting. IOP care institutional providers will be required to be accredited by an accrediting body approved by the Director, Defense Health Agency, and meet the proposed requirements outlined in 32 CFR 199.6(b)(4)(xviii) in order to become TRICARE authorized.
Similar to IOPs for SUD treatment, psychiatric IOPs are not currently explicitly reimbursed by TRICARE. This lack of authorization for IOP psychiatric care has restricted coverage options for TRICARE beneficiaries who may require step-down services from an inpatient stay or a PHP. As described regarding SUD IOP, psychiatric IOP services are considered separate levels of care from psychiatric partial hospitalization. Although current regulatory language defines partial hospitalization broad enough to permit coverage of IOP treatment conducted under the auspices of partial hospitalization, the absence of explicit IOP treatment coverage, along with the requirement that all IOP level of care be rendered by a TRICARE certified PHP, has limited access to this level of care and has led to confusion regarding TRICARE coverage of these services. The proposed regulatory language explicitly authorizing IOP treatment and establishing an authorized provider category will resolve these issues.
This rule proposes expanded treatment of opioid use disorder, with the provision of medication assisted treatment (MAT), through both TRICARE authorized institutional and individual providers. In addition to SUD IOPs, this rule proposes TRICARE coverage of opioid treatment programs (OTPs), with the inclusion of a definition of OTPs in 32 CFR 199.2 and the requirements for OTPs to become TRICARE authorized institutional providers outlined in 32 CFR 199.6(b)(4)(xix). Additionally, this rule proposes coverage of OBOT, as defined in 32 CFR 199.2, and coverage of MAT on an outpatient basis as extended in 32 CFR 199.4(c)(3)(ix)(A)(
By current regulation, reimbursement for office-based SUD outpatient treatment provided by TRICARE authorized individual mental health providers, as specified in 32 CFR 199.6, is not permitted. Such outpatient SUD treatment services currently must be provided by a TRICARE approved institutional provider (
The 2007 report of the DoD Task Force on Mental Health (recommendation 5.3.4.8) stated, “TRICARE should allow outpatient substance abuse care to be provided by qualified professionals, regardless of whether they are affiliated with a day hospital or residential treatment program, including standard individual or group outpatient care.” The DoD Task Force recommendation is consistent with the American Psychiatric Association, ASAM, and SAMHSA endorsement of individual therapies as an accepted and recommended clinical practice, also endorsed by National Institute on Drug Abuse, National Quality Forum, and VA/DoD CPG for Management of Substance Use Disorders. These proposed changes to the regulation would remove barriers to coverage of care for beneficiaries who are appropriate for treatment in an outpatient office setting, but who would otherwise only be able to access care at a SUDRF as required by current regulations.
This proposed rule also covers services of TRICARE authorized individual mental health providers, within the scope of their licensure or certification, offering medically or psychologically necessary SUD treatment services (including outpatient and family therapy) outside of a SUDRF, to include MAT and treatment of opioid use disorder by a TRICARE authorized physician delivering OBOT on an outpatient basis.
Nearly two decades ago, the Final Rule: “Civilian Health and Medical Program of the Uniformed Services (CHAMPUS): Mental Health Services,” as published in 60 FR 12419, March 7, 1995, reformed quality of care standards and reimbursement methods for inpatient mental health services. In the 1995 Final Rule, standards were developed to address identified problems of quality of care, fraud, and abuse in RTCs, SUDRFs, and PHPs. They were developed to provide “clear [and] specific standards for psychiatric facilities on staff qualifications, clinical practices, and all other aspects directly impacting the quality of care.”
Since publication of the 1995 Final Rule, several organizations that accredit various forms of healthcare delivery have developed strong standards to protect patient care in mental health facilities. There are now a number of industry-accepted accrediting bodies with standards that meet or exceed the current TRICARE-established standards (
This proposed rule simplifies the regulation to account for existing industry-wide accepted accreditation standards for TRICARE institutional providers of mental health care, including RTCs, freestanding PHPs, and freestanding SUDRFs. Requirements for TRICARE certification beyond industry-accepted accreditation, while once considered necessary to ensure quality and safety, are now proving to be unnecessarily restrictive and inconsistent with current institutional provider standards and organization. Specifically, the proposed rule streamlines procedures and requirements for SUDRFs, RTCs, PHPs, IOPs and OTPs to qualify as TRICARE authorized providers, relying primarily on accreditation by a national body approved by the Director, as opposed to detailed, lengthy, stand-alone TRICARE requirements (
Furthermore, given that there are now a growing number of accrediting bodies established for institutional providers of mental health care and industry standards that are widely accepted, the proposed rule eliminates by name references to specific accrediting bodies (
The newly recognized IOPs and methadone OTPs established in this rule will be reimbursed using bundled per diem amounts based on the intensity, frequency and duration of services and/or drugs provided in these well-established treatment programs. Since IOPs provide a step-down in services from an inpatient stay or full-day PHP (
OTPs that administer methadone as a treatment for SUD will be reimbursed a bundled weekly per diem payment to include the cost of the medication, along with integrated psychosocial and medical treatment support services. When buprenorphine or naltrexone is administered, OTPs will, on the other hand, be reimbursed on a fee-for-service
Under current regulatory provisions [32 CFR 199.14(a)(2)(ix)(C)], the maximum per diem payment amount for a full-day partial hospitalization program (minimum of six hours) is 40 percent of the average per diem amount per case established under the TRICARE mental health per diem reimbursement system for both high and low volume psychiatric hospitals and units. Likewise, PHPs less than six hours (with a minimum of three hours) are paid a per diem rate at 75 percent of the rate for a full-day program. In analysis of the reimbursement methodology to be used for reimbursement of IOPs, it became apparent that the step-down in intensity, frequency and duration of treatment designated as half-day PHPs, were in fact, intensive outpatient services provided within a PHP authorized setting. While there is some variability in the intensity, frequency and duration of treatment under both programs (that is, less than six hours per day with a minimum of three hours for half-day PHPs; and two to five times per week, two to five hours per day for IOPs), it appears that both the services rendered and the professional provider categories responsible for providing the services are quite similar. As a result of this observation/analysis, a decision has been made to use the IOP designation in lieu of half-day PHP for treatment of less than six hours per day—with a minimum of two hours per day—rendered in a PHP authorized setting. While the minimum hours have been reduced from three to two hours per day for coverage/reimbursement, they are still within the acceptable range for IOP services typically provided in a PHP. Since intensive outpatient services can be provided in either a PHP or newly authorized IOP setting, and IOP services are essentially the same as half-day PHP services, it is only logical that IOP per diems be set at 75 percent of the full-day PHP per diem. This would be the case regardless of whether the IOP services were provided in a PHP or IOP.
As defined in this proposed rule, OTPs are outpatient settings for opioid treatment that use a therapeutic maintenance drug for a drug addiction when medically or psychologically necessary and appropriate for the medical care of a beneficiary undergoing supervised treatment for a SUD. The program includes an initial assessment, along with integrated psychosocial and medical treatment and support services. Since OTPs are individually tailored programs of medication therapy, separate reimbursement methodologies are being established based on the particular medication being administered for treatment of the SUD. By far the most common medication used in OTPs is methadone. Methadone OTP care includes initial medical intake/assessment, urinalysis and drug dispensing and screening as part of the bundled rate, as well as ongoing counseling services. Based on a preliminary review of industry billing practices, the proposed weekly bundled per diem for administration of methadone will include a daily drug cost of $3, along with a $15 per day cost for integrated psychosocial and medical support services. The daily projected per diem costs ($18/day) will be converted to a weekly per diem rate of $126 ($18/day × 7 days) and billed once a week to TRICARE using the Healthcare Common Procedure Coding System (HCPCS) code H0020, “Alcohol and/or drug services; methadone administration and/or service.” The bundled per diem rate is how Medicaid and other third-party payers typically reimburse for methadone treatment in OTPs. The methadone OTP rate will be updated annually by the Medicare update factor used for other mental health care services rendered (
While the other two medications (buprenorphine and naltrexone) are more likely to be prescribed and administered in an OBOT setting, OTP reimbursement methodologies are being established for both medications to allow OTPs the full range of medications currently available for treatment of SUDs. Since the reimbursement of buprenorphine and naltrexone administered in OTPs are not conducive to the bundled per diem methodology due to variations in dosage and frequency of the drug and the non-drug services (
Naltrexone, unlike methadone and buprenorphine, is not an agonist or partial agonist, but an inhibitor designed to block the brain's opiate receptors, diminishing the urges and cravings for alcohol, heroin, and prescription painkillers such as oxycodone. Due to the extreme cost of
The Director will have discretionary authority in establishing the reimbursement methodologies for new drugs and biologicals that may become available for the treatment of SUDs in OTPs. The type of reimbursement (
While TRICARE provider reimbursement methods are normally tied to Medicare reimbursement, there were no Medicare reimbursement rules applicable to the above providers of services. As a result, DoD particularly invites public comment on these proposed reimbursement methodologies in an effort to ensure they bear a reasonable relationship to the cost of providing such services.
Under current regulatory provisions [32 CFR 199.4(f)(3)(ii)(B) and 32 CFR 199.14(a)(2)(iv)(C)(
There are a number of additional proposed revisions that are more technical and administrative in nature that we would like to highlight here to ensure the public is made aware of these changes and the purpose for the proposed changes. Within 32 CFR 199.2, the definition of “adequate medical documentation, mental health records” is revised to eliminate specific reference to Joint Commission standards and instead reference “standards of an accrediting organization approved by the Director” consistent with the changes in accreditation requirements as part of the proposed streamlining of TRICARE approval of institutional providers. The definition of “mental disorder” has been revised to include SUD. The definition of “Director” has been revised to incorporate the Director of the Defense Health Agency, consistent with DoD's current organizational structure. Additionally, throughout the proposed revisions, the term “Director” has been substituted for all other terms such as “Director, CHAMPUS” and “Director, TRICARE Management Activity.” A definition of “qualified mental health provider” has been added for easy reference (as it was previously discussed in 32 CFR 199.4 but not specifically defined), and the definitions of “Case managers” and “Consultants” have been amended to include qualified mental health providers. Additionally, the elimination of quantitative limitations has also necessitated a number of revisions to other sections of the regulation that referenced these limits, including 32 CFR 199.4(e)(2), 32 CFR 199.7(e)(2) and 32 CFR 199.15(a)(6). Also, 32 CFR 199.14(a)(2)(iv)(C)(
Executive Orders 13563 and 12866 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, distribute impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Subsequently, the Department completed an Independent Government Cost Estimate and the results are referenced in C. Cost and Benefits. This proposed rule has been designated a “significant regulatory action,” although not economically significant, under section 3(f) of Executive Order 12866. Accordingly, the proposed rule has been reviewed by the Office of Management and Budget (OMB).
Under the Congressional Review Act, a major rule may not take effect until at least 60 days after submission to Congress of a report regarding the rule. A major rule is one that would have an annual effect on the economy of $100 million or more or have certain other impacts. This proposed rule is not a major rule under the Congressional Review Act.
The Regulatory Flexibility Act requires that each Federal agency analyze options for regulatory relief of small businesses if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small
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 one year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $140 million. This proposed rule will not mandate any requirements for state, local, or tribal governments or the private sector.
This rulemaking does not contain a “collection of information” requirement, and will not impose additional information collection requirements on the public under Public Law 96-511, “Paperwork Reduction Act” (44 U.S.C. chapter 35).
This proposed rule has been examined for its impact under E.O. 13132, and it does not contain policies that have federalism implications that would have substantial direct effects on the States, on the relationship between the national Government and the States, or on the distribution of powers and responsibilities among the various levels of Government. Therefore, consultation with State and local officials is not required.
This rulemaking is being issued as a proposed rule. DoD invites public comments on all provisions of the proposed rule. All submissions will be considered for possible revision to be included in the final rule.
Claims, Dental health, Health care, Health insurance, Individuals with disabilities, Mental health, Mental health parity, Military personnel, Substance use disorder treatment.
For the reasons stated in the preamble, the Department of Defense proposes to amend 32 CFR part 199 as set forth below:
5 U.S.C. 301; 10 U.S.C. chapter 55.
The revisions and additions read as follows:
(b) * * *
Staff consultations required by rules and regulations of the medical staff of a hospital or other institutional provider do not qualify as consultation.
The revisions and additions read as follows:
(a) * * *
(1)(i)
(12)
(14) Confidentiality of substance use disorder treatment. Release of any patient identifying information, including that required to adjudicate a claim, must comply with the provisions of section 543 of the Public Health Service Act, as amended, (42 U.S.C. 290dd-2), and implementing regulations at 42 CFR part 2, which governs the release of medical and other information from the records of patients undergoing treatment of substance use disorder. If the patient refuses to authorize the release of medical records which are, in the opinion of the Director, Defense Health Agency, or a designee, necessary to determine benefits on a claim for treatment of substance use disorder, the claim will be denied.
(b) * * *
(1) * * *
(vi)
(B)
(2) * * *
(xix)
(xx)
(3) * * *
(xvi)
(xvii)
(7)
(8)
(ii)
(A) The patient has been diagnosed with a substance use disorder.
(B) The patient is experiencing withdrawal symptoms or potential symptoms severe enough to require inpatient care and physician management, or who have less severe symptoms that require 24-hour inpatient monitoring or the patient's addiction-related symptoms, or concomitant physical and emotional/behavioral problems reflect persistent dysfunction in several major life areas.
(iii)
(A)
(B)
(C)
(D)
(iv)
(v)
(vi)
(9)
(ii)
(A) The patient is suffering significant impairment from a mental disorder (as defined in § 199.2) which interferes with age appropriate functioning or the patient is in need of rehabilitative services for the management of withdrawal symptoms from alcohol, sedative-hypnotics, opioids, or stimulants that require medically-monitored ambulatory detoxification, with direct access to medical services and clinically intensive programming of rehabilitative care based on individual treatment plans.
(B) The patient is unable to maintain himself or herself in the community, with appropriate support, at a sufficient level of functioning to permit an adequate course of therapy exclusively on an outpatient basis, to include outpatient treatment program, outpatient office visits, or intensive outpatient services (but is able, with appropriate support, to maintain a basic level of functioning to permit partial hospitalization services and presents no substantial imminent risk of harm to self or others). These patients require medical support; however, they do not require a 24-hour medical environment.
(C) The patient is in need of crisis stabilization, acute symptom reduction, treatment of partially stabilized mental health disorders, or services as a transition from an inpatient program.
(D) The admission into the partial hospitalization program is based on the development of an individualized diagnosis and treatment plan expected to be effective for that patient and
(iii)
(A)
(B)
(C)
(D)
(iv)
(v)
(vi)
(vii)
(viii)
(10)
(ii)
(A) The patient is suffering significant impairment from a mental disorder, to include a substance use disorder (as defined in § 199.2), which interferes with age appropriate functioning. Patients receiving a higher intensity of treatment may be experiencing moderate to severe instability, exacerbation of severe/persistent disorder, or dangerousness with some risk of confinement. Patients receiving a lower intensity of treatment may be experiencing mild instability with limited dangerousness and low risk for confinement.
(B) The patient is unable to maintain himself or herself in the community, with appropriate support, at a sufficient level of functioning to permit an adequate course of therapy exclusively in an outpatient treatment program or an outpatient office basis (but is able, with appropriate support, to maintain a basic level of functioning to permit a level of intensive outpatient treatment and presents no substantial imminent risk of harm to self or others).
(C) The patient is in need of stabilization, symptom reduction, and prevention of relapse for chronic mental illness. The goal of maintenance of his or her functioning within the community cannot be met by outpatient office visits, but requires active treatment in a stable, staff-supported environment;
(D) The admission into the intensive outpatient program is based on the development of an individualized diagnosis and treatment plan expected to be effective for that patient and permit treatment at a less intensive level.
(iii)
(A)
(B)
(iv)
(v)
(vi)
(11)
(ii) Criteria for determining medical or psychological necessity of an opioid treatment program are set forth in 42 CFR part 8.
(iii)
(A)
(B)
(iv)
(c) * * *
(3) * * *
(ix)
(A)
(
(
(
(
(
(
(
(
(
(B)
(
(C)
(D)
(e) * * *
(8) * * *
(ii) * * *
(A) For purposes of CHAMPUS, dental congenital anomalies such as absent tooth buds or malocclusion specifically are excluded.
(D) Any procedures related to sex gender changes, except as provided in paragraph (g)(29) of this section, are excluded.
(iv) * * *
(Q) Penile implant procedure for psychological impotency or as related to sex gender changes, as prohibited by section 1079 of title 10, United States Code.
(R) Insertion of prosthetic testicles as related to sex gender changes, as prohibited by section 1079 of title 10, United States Code.
(11)
(13) * * *
(i) * * *
(B)
(f) * * *
(2) * * *
(ii)
Note: The Secretary of Defense (after consulting with the Secretary of Health and Human Services and the Secretary of Transportation) prescribes the fair charges for inpatient hospital care provided through Uniformed Services medical facilities. This determination is made each fiscal year.
(3) * * *
(ii)
(g) * * *
(1)
(29)
(73)
(b) * * *
(4) * * *
(iv) * * *
(B) In order for the services of a psychiatric hospital to be covered, the hospital shall comply with the provisions outlined in paragraph (b)(4)(i) of this section. All psychiatric hospitals shall be accredited under an accrediting organization approved by the Director, in order for their services to be cost-shared under CHAMPUS. In the case of those psychiatric hospitals that are not accredited because they have not been in operation a sufficient period of time to be eligible to request an accreditation survey, the Director, or a designee, may grant temporary
(D) Although psychiatric hospitals are accredited under an accrediting organization approved by Director, their medical records must be maintained in accordance with accrediting organization's current standards manual, along with the requirements set forth in § 199.7(b)(3). The hospital is responsible for assuring that patient services and all treatment are accurately documented and completed in a timely manner.
(vii)
(A)
(
(
(
(
(
(
(
(
(B) Participation agreement requirements. In addition to other requirements set forth in paragraph (b)(4)(vii), of this section in order for the services of an RTC to be authorized, the RTC shall have entered into a Participation Agreement with OCHAMPUS. The period of a participation agreement shall be specified in the agreement, and will generally be for not more than five years. In addition to review of a facility's application and supporting documentation, an on-site inspection by OCHAMPUS authorized personnel may be required prior to signing a Participation Agreement. Retroactive approval is not given. In addition, the Participation Agreement shall include provisions that the RTC shall, at a minimum:
(
(
(
(
(
(C)
(xii)
(A)
(
(
(
(
(B) Participation agreement requirements. In addition to other requirements set forth in paragraph (b)(4)(xii) of this section, in order for the services of a PHP to be authorized, the PHP shall have entered into a Participation Agreement with OCHAMPUS. A single consolidated participation agreement is acceptable for all units of the TRICARE authorized facility granted that all programs meet the requirements of this part. The period of a Participation Agreement shall be specified in the agreement, and will generally be for not more than five years. The PHP shall not be considered to be a CHAMPUS authorized provider and CHAMPUS payments shall not be made for services provided by the PHP until the date the participation agreement is signed by the Director. In addition to review of a facility's application and supporting documentation, an on-site inspection by OCHAMPUS authorized personnel may be required prior to signing a participation agreement. The Participation Agreement shall include at least the following requirements:
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(C)
(
(
(xiv)
(A)
(
(
(
(
(
(
(
(
(
(
(B) Participation agreement requirements. In addition to other requirements set forth in paragraph (b)(4)(xiv) of this section, in order for the services of an inpatient rehabilitation center for the treatment of substance use disorders to be authorized, the center shall have entered into a Participation Agreement with OCHAMPUS. A single
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(C) Other requirements applicable to substance use disorder rehabilitation facilities.
(
(
(
(xviii)
(A)
(
(
(
(
(B)
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(C) Other requirements applicable to Intensive Outpatient Programs (IOP).
(
(
(
(xix)
(A)
(
(
(
(B) Participation agreement requirements. In addition to other requirements set forth in paragraph (b)(4)(xix) of this section, in order for the services of an OTP to be authorized, the OTP shall have entered into a Participation Agreement with TRICARE. A single consolidated participation agreement is acceptable for all units of a TRICARE authorized facility. The period of a Participation Agreement shall be specified in the agreement, and will generally be for not more than five years. In addition to review of a facility's application and supporting documentation, an on-site inspection by DHA authorized personnel may be required prior to signing a participation agreement. The Participation Agreement shall include at least the following requirements:
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(C)
(
(
(a) * * *
(2) * * *
(iv) * * *
(C) * * *
(
(
(ix)
(
(
(
(
(
(B
The revisions read as follows:
(d) * * *
(2) * * *
(ii) The per visit fee provided in paragraph (d)(2)(i) of this section shall also apply to partial hospitalization services, intensive outpatient treatment, and opioid treatment program services. The per visit fee shall be applied on a per day basis on days services are received, with the exception of opioid treatment program services reimbursed in accordance with § 199.14(a)(2)(ix)(A)(
(e) * * *
(2)
(3)
Postal Regulatory Commission.
Proposed rulemaking.
The Commission is proposing rules which standardize the procedure and timeframe by which interested parties file motions with the Commission as they relate to mail preparation changes and their compliance with the price cap rules. The Commission invites public comment on the proposed rules.
David A. Trissell, General Counsel, at 202-789-6820.
The Commission initiates this proposed rulemaking to request comments on a procedural rule for motions concerning mail preparation changes that require compliance with the price cap rules.
The primary purpose of the rulemaking is to ensure that the Postal Service properly accounts for the rate effects of mail preparation changes under § 3010.23(d)(2) of this chapter in accordance with the Commission's standard articulated in Order No. 3047.
In Docket No. R2013-10R, the Commission issued Order No. 3047 and articulated a clear standard to determine when mail preparation changes require compliance with § 3010.23(d)(2).
However, despite this affirmative burden, the possibility exists that the Postal Service may not recognize or account for all mail preparation changes that have rate effects. In that case, the current regulations do not provide a specific mechanism or timeframe by which interested parties can alert the Commission to mail preparation changes that they conclude have rate effects requiring compliance with § 3010.23(d)(2). Although the Commission's general motion rules would provide an avenue for motions concerning mail preparation changes, the rules do not set a timeframe by which motions must be made and the Commission believes the proposed rule is better suited to handle the specific issue at hand. In light of the complexity of administering the price cap, the timeframe set forth in the proposed rule is intended to promote certainty for the Postal Service and users of the mail when making operational changes.
In Order No. 3047 setting forth the standard, the Commission indicated that it would propose procedures whereby interested parties could submit motions concerning mail preparation changes that have rate effects. As a result, the proposed rule is intended to clarify and streamline the process by which mail preparation changes that have rate effects may be reviewed by the Commission for compliance with the price cap rules.
The rule proposed in this notice of proposed rulemaking adds to the current § 3001.21. Proposed § 3001.21(d) requires interested parties to file a motion with the Commission upon actual or constructive notice of a mail preparation change that has a rate effect requiring compliance with § 3010.23(d)(2). This proposed section establishes a 30-day timeframe within which interested parties may file a motion concerning a mail preparation change, after which the Commission will either institute a proceeding or consider the motion within an ongoing matter.
The Commission proposes permitting interested parties to file a motion concerning a mail preparation change if the parties, in good faith, demonstrate that the change has a rate effect and requires compliance with the price cap rules. The proposed procedure is triggered by actual or constructive notice of the mail preparation change. Actual or constructive notice will occur when an interested party becomes aware of or should have reasonably become aware of the mail preparation change. The Commission intends for actual or constructive notice to occur when the Postal Service publishes written notice of the implementation of the mail preparation change. For example, the Postal Service commonly publishes notice of mail preparation changes in the
The proposed procedure also ties notice to the “implementation date of the change.” The Commission intends this provision to cover changes where the Postal Service either immediately implements a mail preparation change or provides published notice that it intends to implement a mail preparation change on a date certain. For example,
The Full Service IMb change serves as an example of how the proposed 30-day timeframe would work. The Full Service IMb change was published as a revision to the Postal Service's Domestic Mail Manual and set forth in a
The proposed procedure is intended to provide a reasonable but definite timeframe by which interested parties may challenge a mail preparation change where the Postal Service has failed to indicate that it would be subject to the price cap rules. The Commission intends for the proposed rule to encourage the Postal Service to affirmatively designate only those changes that require compliance with § 3010.23(d)(2). For example, in a
The procedure is also intended to allow the Postal Service to implement mail preparation changes with limited disruption. The proposed rule is not intended to stay implementation of any mail preparation change required by the Postal Service, rather it is intended to set forth a reasonable timeframe by which users of the mail may file a motion with the Commission where such mail preparation changes may have rate effects. The proposed rule does not change the Postal Service's burden to first determine whether the mail preparation change has a rate effect under the Commission's standard articulated in Order No. 3047. The proposed rule also does not change the Postal Service's obligation to comply with the rules regarding the price cap, which require the Postal Service to adjust for the effects of mail preparation changes that result in the introduction, deletion, or redefinition of a rate cell. Rather, the proposed rule provides an avenue for interested parties to raise the possibility that the Postal Service may have erred by failing to account for the price cap impact of a mail preparation change.
Interested persons are invited to provide written comments concerning the proposed rule. Comments are due no later than 30 days after the date of publication of this notice in the
Pursuant to 39 U.S.C. 505, Kenneth E. Richardson is appointed to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in the above-captioned docket.
It is ordered:
1. Docket No. RM2016-6 is established for the purpose of receiving comments on the proposed change to part 3001, as discussed in this Order.
2. Interested persons may submit comments no later than 30 days from the date of the publication of this notice in the
3. Pursuant to 39 U.S.C. 505, Kenneth E. Richardson is appointed to serve as the Public Representative in this proceeding.
4. The Secretary shall arrange for publication of this Order in the
By the Commission.
Administrative practice and procedure, Postal Service.
For the reasons discussed in the preamble, the Commission proposes to amend chapter III of title 39 of the Code of Federal Regulations as follows:
39 U.S.C. 404(d); 503; 504; 3661.
(d)
Federal Communications Commission.
Proposed rule.
In this document, the Federal Communications Commission (Commission) seeks comment on additional issues relating to channel sharing outside of the auction context and announces that it intends to resolve all of the outstanding issues regarding channel sharing outside the incentive auction context, including those raised in a prior notice, in a forthcoming decision.
Comments Due: February 22, 2016. Reply Comments Due: March 3, 2016.
You may submit comments, identified by MB Docket No. 03-185, GN Docket No. 12-268 and ET Docket No. 14-175 and/or FCC 15-175, by any of the following methods:
•
•
•
•
For detailed instructions for submitting comments and additional information on the rulemaking process, see the
Shaun Maher,
This is a summary of the Commission's
1. In this
2. The Commission sought comment on whether it would be appropriate for a secondary station to be permitted to obtain “de facto” interference protection by sharing with a primary station. It also sought comment on whether it would be appropriate to allow a secondary station to obtain the coverage area of a primary station through channel sharing. In addition, it sought comment on whether the benefits of channel sharing between a primary station and a secondary station could be obtained alternatively by the primary station entering into a commercial agreement to air the secondary station's programming as a multicast stream. The Commission announced that it intended to resolve all of the outstanding issues regarding channel sharing outside the incentive auction context in a single decision, based on the record developed in both proceedings. This approach will also ensure consistency and promote efficient decision-making regarding these issues, without unduly delaying their final resolution.
3. For both primary-secondary and secondary-secondary sharing, the Commission proposed to adopt rules pertaining to the term length of channel sharing agreements (CSAs) and MVPD notice consistent with what we have proposed in the
As required by the Regulatory Flexibility Act of 1980, as amended (“RFA”)
In the
The authority for the action proposed in this rulemaking is contained in sections 1, 4, 301, 303, 307, 308, 309, 310, 316, 319, 338, 403, 614 and 615 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154, 301, 303, 307, 308, 309, 310, 316, 319, 338, 403, 614 and 615.
The RFA directs the Commission to provide a description of and, where feasible, an estimate of the number of small entities that will be affected by the proposed rules, if adopted.
We note, however, that in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations must be included.
In addition, the Commission has estimated the number of licensed noncommercial educational (“NCE”) television stations to be 395.
There are also 2,344 LPTV stations, including Class A stations, and 3689 TV translator stations.
The
To implement channel sharing between primary and secondary stations, stations will follow a two-step process proposed by the Commission—first filing an application for construction permit and then application for license. Stations terminating operations to share a channel would be required to submit a termination notice pursuant to the existing Commission rule. These existing forms and collections will need to be revised to accommodate these new channel-sharing related filings and to expand the burden estimates. In addition, the Commission proposes that channel sharing stations submit their channel sharing agreements (CSAs) with the Commission and be required to include certain provisions in their CSAs. In addition, if upon termination of the license of a party to a CSA only one party to the CSA remains, the remaining licensee may file an application to change its license to non-shared status. The existing collection concerning the execution and filing of CSAs will need to be revised.
Finally, the Commission proposes to require channel sharing stations to notify affected MVPDs.
The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.
The (FNPRM)proposes rules pertaining to primary and secondary station channel sharing outside the context of the incentive auction. The Commission has previously concluded that channel sharing can help broadcasters, including existing small, minority-owned, and niche stations, to reduce operating costs and provide broadcasters with additional net income to strengthen operations and improve programming services. Thus, the proposals in the Fourth Notice may help smaller broadcasters conserve resources. In addition, channel sharing is voluntary and only those stations that determine that channel sharing will be advantageous will enter into this arrangement. With respect to LPTV and TV translator stations specifically, channel sharing will allow such stations that are displaced by the incentive auction reorganization of spectrum to reduce the cost of having to build a new facility to replace the one that was displaced; could minimize the number of mutually exclusive applications filed in the post-incentive auction displacement window, thereby freeing up valuable channels for use by other displaced stations; and could be used as a means to prevent or settle the mutual exclusivity of applications and avoid lengthy delays in the processing of their displacement applications. In addition, the (FNPRM)proposes licensing and operating rules for channel sharing that are designed to minimize the burden and cost on small entities. The Commission will consider all comments submitted in connection with the
The rules to provide notice to MVPDs were also designed to minimize impact on small entities. Very few stations will be impacted because very few LPTV and TV translator stations have carriage rights and will be subject to the notice requirement.
None.
Television.
For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 73 as follows:
47 U.S.C. 154, 303, 334, 336 and 339.
(a) * * *
(3) Other changes will be considered minor including changes made to implement a channel sharing arrangement provided they comply with the other provisions of this section and provided, until October 1, 2000, proposed changes to the facilities of Class A TV, low power TV, TV translator and TV booster stations, other than a change in frequency, will be considered minor only if the change(s) will not increase the signal range of the Class A TV, low power TV or TV booster in any horizontal direction.
(a)
(2) Each station sharing a single channel pursuant to this section shall continue to be licensed and operated separately, have its own call sign, and be separately subject to all applicable Commission obligations, rules, and policies.
(b)
(c)
(d)
(i) Access to facilities, including whether each licensee will have unrestrained access to the shared transmission facilities;
(ii) Operation, maintenance, repair, and modification of facilities, including a list of all relevant equipment, a description of each party's financial obligations, and any relevant notice provisions; and
(iii) Transfer/assignment of a shared license, including the ability of a new licensee to assume the existing CSA; and
(iv) Termination of the license of a party to the CSA, including reversion of spectrum usage rights to the remaining parties to the CSA.
(2) Channel sharing agreements submitted under this section must include a provision affirming compliance with the channel sharing requirements in this section including a provision requiring that each channel sharing licensee shall retain spectrum usage rights adequate to ensure a sufficient amount of the shared channel capacity to allow it to provide at least one Standard Definition (SD) program stream at all times.
(e)
(f)
(i) No longer will be required to carry the station because of the relocation of the station;
(ii) Currently carry and will continue to be obligated to carry a station that will change channels; or
(iii) Will become obligated to carry the station due to a channel sharing relocation.
(2) The notice required by this section must contain the following information:
(i) Date and time of any channel changes;
(ii) The channel occupied by the station before and after implementation of the CSA;
(iii) Modification, if any, to antenna position, location, or power levels;
(iv) Stream identification information; and
(v) Engineering staff contact information.
(3) Sharee stations (those relinquishing a channel in order to share) must provide notice as required by this section at least 30 days prior to terminating operations on the sharee's channel. Sharer stations (those hosting a sharee as part of a channel sharing agreement) and sharee stations must provide notice as required by this section at least 30 days prior to initiation of operations on the sharer channel. Should the anticipated date to either cease operations or commence channel sharing operations change, the stations must send a further notice to affected MVPDs informing them of the new anticipated date(s).
(4) Notifications provided to cable systems pursuant to this section must be either mailed to the system's official address of record provided in the cable system's most recent filing in the FCC's Cable Operations and Licensing System (COALS) Form 322, or emailed to the system if the system has provided an email address. For all other MVPDs, the letter must be addressed to the official corporate address registered with their State of incorporation.
(a)
(2) Each station sharing a single channel pursuant to this section shall continue to be licensed and operated separately, have its own call sign, and be separately subject to all of the Commission's obligations, rules, and policies.
(b)
(c)
(i) Access to facilities, including whether each licensee will have unrestrained access to the shared transmission facilities;
(ii) Operation, maintenance, repair, and modification of facilities, including a list of all relevant equipment, a description of each party's financial obligations, and any relevant notice provisions; and
(iii) Termination or transfer/assignment of rights to the shared
(2) Channel sharing agreements submitted under this section must include a provision affirming compliance with the channel sharing requirements in this section including a provision requiring that each channel sharing licensee shall retain spectrum usage rights adequate to ensure a sufficient amount of the shared channel capacity to allow it to provide at least one Standard Definition (SD) program stream at all times.
(e)
(f) Notice to MVPDs. (1) Stations participating in channel sharing agreements must provide notice to MVPDs that:
(i) No longer will be required to carry the station because of the relocation of the station;
(ii) Currently carry and will continue to be obligated to carry a station that will change channels; or
(iii) Will become obligated to carry the station due to a channel sharing relocation.
(2) The notice required by this section must contain the following information:
(i) Date and time of any channel changes;
(ii) The channel occupied by the station before and after implementation of the CSA;
(iii) Modification, if any, to antenna position, location, or power levels;
(iv) Stream identification information; and
(v) Engineering staff contact information.
(3) Sharee stations (those relinquishing a channel in order to share) must provide notice as required by this section at least 30 days prior to terminating operations on the sharee's channel. Sharer stations (those hosting a sharee as part of a channel sharing agreement) and sharee stations must provide notice as required by this section at least 30 days prior to initiation of operations on the sharer channel. Should the anticipated date to either cease operations or commence channel sharing operations change, the station(s) must send a further notice to affected MVPDs informing them of the new anticipated date(s).
(4) Notifications provided to cable systems pursuant to this section must be either mailed to the system's official address of record provided in the cable system's most recent filing in the FCC's Cable Operations and Licensing System (COALS) Form 322, or emailed to the system if the system has provided an email address. For all other MVPDs, the letter must be addressed to the official corporate address registered with their State of incorporation.
Revised notice.
This notice is hereby given of the appointment of members of the updated U.S. Agency for International Development, Office of Inspector General's Senior Executive Service Performance Review Board.
January 15, 2016.
Robert S. Ross, Assistant Inspector General for Management, Office of Inspector General, U.S. Agency for International Development, 1300 Pennsylvania Avenue NW., Room 8.08-029, Washington, DC 20523-8700; telephone 202-712-0010; FAX 202-216-3392; Internet Email address:
5 U.S.C. 4314(b)(c) requires each agency to establish, in accordance with regulations prescribed by the Office of Personnel Management at 5 CFR part 430, subpart C and Section 430.307 thereof in particular, one or more SES Performance Review Boards. The board shall review and evaluate the initial appraisal of each USAID OIG senior executive's performance by his or her supervisor, along with any recommendations to the appointing authority relative to the performance of the senior executive. This notice updates the membership of the USAID OIG's SES Performance Review Board as it was last published on December 19, 2014.
Approved: January 15, 2016.
The following have been selected as regular members of the SES Performance Review Board of the U.S. Agency for International Development, Office of Inspector General:
Foreign Agricultural Service, USDA.
Notice.
The Foreign Agricultural Service (FAS) announces that it will accept affidavits from individuals or firms to substantiate eligibility for distributions from the Refund of Duties Paid on Imports of Certain Wool Products program (the Refund program) authorized under Section 12315 of the Agricultural Act of 2014 (Pub. L. 113-79) (the Act).
For calendar year 2016 distributions, affidavits must be electronically filed with FAS no later than March 1, 2016.
Affidavits, supporting documentation, and claims for distribution from the Trust Fund must be sent electronically to the Import Policies and Export Reporting Division, Office of Trade Programs, Foreign Agricultural Service, USDA using the following email address:
Peter Burr at (202) 720-3274, or via email at:
Section 12315 transferred the Refund program to the U.S. Department of Agriculture in FY 2016, from Customs and Border Protection, Department of Homeland Security. The Refund program is one of several programs authorized by Congress within the Agriculture Wool Apparel Manufacturers Trust Fund for each of calendar years 2016 through 2019. The purpose of the Refund program is to compensate wool manufacturers of men's and boy's wool suits, suit type jackets, or trousers of imported worsted wool fabrics of the kind described in heading 9902.51.11 or 9902.51.12; manufacturers of worsted wool fabrics who import wool yarn of the kind described in heading 9902.51.13; and manufacturers of wool yarn or fabric who import wool fiber or top of the kind described in heading 9902.51.14 of the Harmonized Tariff Schedule of the United States for customs duties paid on imported wool in 2000, 2001 and 2002. To claim a distribution from the Refund program manufacturers are directed to submit an affidavit that follows the statutory procedures specified under Section 12315(b) of the Act, and also as described on the FAS Web site at
Section 12315 of Act (Pub. L. 113-79) is set forth below in its entirety, followed by information about how to apply for a distribution from the Refund program.
“Sec. 12315 AGRICULTURE WOOL APPAREL MANUFACTURERS TRUST FUND.
(a) ESTABLISHMENT OF TRUST FUND.—There is established in the Treasury of the United States a trust fund to be known as the “Agriculture Wool Apparel Manufacturers Trust Fund” (in this section referred to as the “Trust Fund”), consisting of such amounts as may be transferred to the Trust Fund pursuant to subsection (f), and to be used for the purpose of reducing the injury to domestic manufacturers resulting from tariffs on wool fabric that are higher than tariffs on certain apparel articles made of wool fabric.
(b) DISTRIBUTION OF FUNDS.
(1) IN GENERAL.—From amounts in the Trust Fund, the Secretary may make payments annually beginning in calendar year 2014 for calendar years 2010 through 2019 as follows:
(A) To each eligible manufacturer under paragraph (3) of section 4002(c) of the Wool Suit and Textile Trade Extension Act of 2004 (Public Law 108-429; 118 Stat. 2600), as amended by section 1633(c) of the Miscellaneous Trade and Technical Corrections Act of 2006 (Public Law 109-280; 120 Stat. 1166) and section 325(b) of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (division C of Public Law 110-343; 122 Stat. 3875), and any successor-in-interest to such a manufacturer as provided for under paragraph (4) of such section 4002(c), that submits an affidavit in accordance with paragraph (2) for the year of the payment—
(i) for calendar years 2010 through 2015, payments that, when added to any other payments made to the manufacturer or successor-in-interest under paragraph (3) of such section 4002(c) in such calendar years, equal the total amount of payments authorized to be provided to the manufacturer or successor-in-interest under that paragraph, or the provisions of this section, in such calendar years; and
(ii) for calendar years 2016 through 2019, payments in amounts authorized under that paragraph.
(B) To each eligible manufacturer under paragraph (6) of such section 4002(c)(i) for calendar years 2010 through 2014, payments that, when added to any other payments made to eligible manufacturers under that paragraph in such calendar years, equal the total amount of payments authorized to be provided to the manufacturer under that paragraph, or the provisions of this section, in such calendar years; and
(ii) for calendar years 2015 through 2019, payments in amounts authorized under that paragraph.
(2) SUBMISSION OF AFFIDAVITS.—An affidavit required by paragraph (1)(A) shall be submitted
(A) in each of calendar years 2010 through 2015, to the Commissioner responsible for U.S. Customs and Border Protection not later than April 15; and
(B) in each of calendar years 2016 through 2019, to the Secretary, or as directed by the Secretary, and not later than March 1.
(c) PAYMENT OF AMOUNTS.—The Secretary shall make payments to eligible manufacturers and successors-in-interest described in paragraphs (1) and (2) of subsection (b)
(1) for calendar years 2010 through 2014, not later than 30 days after the transfer of amounts from the Commodity Credit Corporation to the Trust Fund under subsection (f); and
(2) for calendar years 2015 through 2019, not later than April 15 of the year of the payment.
(d) MEMORANDA OF UNDERSTANDING.—The Secretary shall, as soon as practicable after the date of the enactment of this Act, negotiate memoranda of understanding with the Commissioner responsible for U.S. Customs and Border Protection and the Secretary of Commerce to establish procedures pursuant to which the Commissioner and the Secretary of Commerce will assist in carrying out the provisions of this section.
(e) INCREASE IN PAYMENTS IN THE EVENT OF EXPIRATION OF DUTY SUSPENSIONS.
(1) IN GENERAL.—In any calendar year in which the suspension of duty on wool fabrics provided for under headings 9902.51.11, 9902.51.13, 9902.51.14, 9902.51.15, and 9902.51.16 of the Harmonized Tariff Schedule of the United States are not in effect, the amount of any payment described in subsection (b)(1) to a manufacturer or successor-in-interest shall be increased by an amount the Secretary, after consultation with the Secretary of Commerce, determines is equal to the amount the manufacturer or successor-in-interest would have saved during the calendar year of the payment if the suspension of duty on wool fabrics were in effect.
(2) NO APPEAL OF DETERMINATIONS.—A determination of the Secretary under this subsection shall be final and not subject to appeal or protest.
(f) FUNDING.
(1) IN GENERAL.—Of the funds of the Commodity Credit Corporation, the Secretary shall transfer to the Trust Fund for each of calendar years 2014 through 2019 an amount equal to the lesser of
(A) the amount the Secretary determines to be necessary to make payments required by this section in that calendar year; or
(B) $30,000,000.
(2) AVAILABILITY.—Amounts transferred to the Trust fund under paragraph (1) shall remain available until expended.”
PROCEDURES FOR CLAIMING A DISTRIBUTION UNDER THE STATUTE: Eligible claimants seeking a distribution under the Refund program are directed to submit an affidavit to FAS, following the statutory procedures specified in section 12315(b)(2) of the Act and on the FAS Web site. All claimants must also provide FAS with an Internal Revenue Service form W-9 to indicate and certify their taxpayer identification number and a direct deposit sign-up form 1199A to facilitate any electronic transfer of funds. Note that claimants must maintain any documentation as they have affirmed to exist in their respective affidavits.
DEADLINES FOR CLAIM/AFFIDAVIT SUBMISSON: All affidavits, W-9, and 1199A forms by eligible claimants for calendar year 2016 distributions must be sent to FAS no later than March 1, 2016.
ADDRESS: The USDA agency charged with administering the Trust Fund is the Foreign Agricultural Service, Office of Trade Programs, Import Policies and Export Reporting Division. This office is physically located at: 1400 Independence Ave, SW., Room 5526-S, Mail Stop 1021, Washington, DC 20250. Affidavits for distribution from the Trust Fund, including supporting W-9 and 1199A forms, and any other documentation that may be subsequently requested by FAS, must be submitted electronically to the following email address:
Food and Nutrition Service (FNS), USDA.
Notice.
In accordance with the Paperwork Reduction Act of 1995, this notice invites the general public and other public agencies to comment on this proposed information collection. This collection is an extension of a currently approved collection under OMB No. 0584-0010 which is due to expire May 31, 2016.
Written comments must be received on or before April 1, 2016.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the
Comments may be sent to: Sarah Goldberg, Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park Center Drive, Room 8-42, Alexandria, VA 22302. Comments may also be submitted via fax to the attention of Sarah Goldberg at 703-305-4397 or via email to
All responses to this notice will be summarized and included in the request for Office of Management and Budget approval. All comments will be a matter of public record.
Requests for additional information or copies of this information collection should be directed to Sarah Goldberg at 703-305-4397.
Per Title 7, Code of Federal Regulations (CFR) Part 275, each State agency is required to submit one Management Evaluation (ME) review schedule every one, two, or three years, depending on the project area make-up of the State, unless the State receives approval for an alternative Management Evaluation review schedule.
Under 7 CFR part 275, each State must establish a system for analysis and evaluation of all data available to the State. Data analysis and evaluation is an ongoing process that facilitates the development of effective and prompt corrective action.
Under 7 CFR part 275, State agencies must prepare a corrective action plan (CAP) addressing identified deficiencies. The State agencies must develop a system for monitoring and evaluating corrective action and submit CAP updates, as necessary.
See the table below for estimated total annual burden for each type of respondent.
The total estimated annual reporting burden is as follows:
Food and Nutrition Service (FNS), USDA.
Notice correction.
This notice was republished in error on January 13, 2016 at 81 FR 1599. This notice was originally published on February 25, 2015 at 80 FR 10047. The comment period remains closed and no further comments are being accepted at this time.
This notice was republished in error on January 13, 2016 at 81 FR 1599. No additional comments are being accepted.
Requests for additional information should be directed to Lynnette Thomas at
This notice was republished in error on January 13, 2016 at 81 FR 1599. This notice was originally published on February 25, 2015 at 80 FR 10047. The comment period remains closed and no further comments are being accepted at this time.
Forest Service, USDA.
Notice of meeting.
The Superior Resource Advisory Committee (RAC) will meet in Duluth, Minnesota. The committee is authorized under the Secure Rural Schools and Community Self-Determination Act (the Act) and operates in compliance with the Federal Advisory Committee Act. The purpose of the committee is to improve collaborative relationships and to provide advice and recommendations to the Forest Service concerning projects and funding consistent with Title II of the Act. RAC information can be found at the following Web site:
The meeting will be held March 1, 2016, at 10:00 a.m.
All RAC meetings are subject to cancellation. For status of meeting prior to attendance, please contact the person listed under
The meeting will be held at the Superior National Forest Supervisor's Office, Jim Sanders Conference Room, 8901 Grand Avenue Place, Duluth, Minnesota. To attend via teleconference, please contact the person listed under
Written comments may be submitted as described under
Lisa Radosevich-Craig, RAC Coordinator, by phone at 218-626-4336 or via email at
Individuals who use telecommunication devices for the deaf
The purpose of the meeting is to review project proposals submitted for Secure Rural Schools Title II funding.
The meeting is open to the public. The agenda will include time for people to make oral statements of three minutes or less. Individuals wishing to make an oral statement should request in writing by February 24, 2016, to be scheduled on the agenda. Anyone who would like to bring related matters to the attention of the committee may file written statements with the committee staff before or after the meeting. Written comments and requests for time for oral comments must be sent to Lisa Radosevich-Craig, RAC Coordinator, 8901 Grand Avenue Place, Duluth, Minnesota 55808; by email to
Flathead National Forest, USDA Forest Service.
Notice of new fee site Anna Creek Cabin.
The Flathead National Forest is proposing to charge a $75 fee for the overnight rental for the Anna Creek Cabin. This site has not been available for recreation use prior to this date. Rentals of other cabins on the Flathead National Forest have shown that people appreciate and enjoy the availability of historic rental lookouts and cabins. Funds from the rentals will be used for the operations and maintenance of the Anna Creek Cabin. This fee is only proposed and will be determined upon further analysis and public comment.
Send any comments about this fee proposal by March 18, 2016 so comments can be compiled, analyzed and shared with the Western Montana Recreation Resource Advisory Committee. Anna Creek Cabin will become available for rent no earlier than six months after publication of this notice.
Chip Weber, Forest Supervisor, Flathead National Forest, 650 Wolfpack Way, Kalispell, MT 59901 or Email to
Chris Prew, Recreation Staff, Hungry Horse Ranger District at 406-387-3800 or
The Federal Recreation Lands Enhancement Act (Title VII, Pub. L. 108-447) directed the Secretary of Agriculture to publish a six month advance notice in the
This new fee will be reviewed by the Western Montana Recreation Resource Advisory Committee prior to a final decision and implementation.
The Flathead National Forest currently has fourteen other cabin rentals; however, this will be the first rental opportunity on Hungry Horse Reservoir, a popular recreation destination. These rentals are often fully booked throughout their rental season. A business analysis of the Anna Creek Cabin has shown that people desire having this sort of recreation experience on the Flathead National Forest, as well as surrounding Forests. A market analysis indicates that the $75/per night fee is both reasonable and acceptable for this sort of unique recreation experience.
Once approved this rental opportunity will be available through the National Recreation Reservation Service, at
U.S. Census Bureau, Commerce.
Notice.
The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.
To ensure consideration, written comments must be submitted on or before April 1, 2016.
Direct all written comments to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce, Room 6616, 14th and Constitution Avenue NW., Washington, DC 20230 (or via the Internet at
Requests for additional information or copies of the information collection instrument(s) and instructions should be directed to Kyra Linse, U.S. Census Bureau, 7H045, Washington, DC 20233-8400 at (301) 763-9280.
The U.S. Census Bureau plans to request clearance for the collection of data concerning the Voting and Registration Supplement to be conducted in conjunction with the November 2016 CPS and November 2018 CPS. The Census Bureau sponsors the supplement questions, which were previously collected in November biennially since 1964.
This survey has provided statistical information for tracking historical trends of voter and nonvoter characteristics in each Presidential or Congressional election since 1964. The data collected from the November supplement relates demographic characteristics (age, sex, race, education, occupation, and income) to voting and nonvoting behavior. The November CPS supplement is the only source of data that provides a comprehensive set of voter and nonvoter characteristics distinct from independent surveys, media polls, or other outside agencies. Federal, state, and local election officials use these data to formulate
The voting and registration information will be collected by both personal visit and telephone interviews in conjunction with the regular November CPS interviewing. All interviews are conducted using computer-assisted interviewing.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (the Department) preliminarily determines that hydrofluorocarbon blends and components thereof (HFCs) from the People's Republic of China (PRC) are being, or are likely to be, sold in the United States at less than fair value (LTFV), as provided in section 733 of the Tariff Act of 1930, as amended (the Act). The period of investigation (POI) is October 1, 2014, through March 31, 2015. The estimated margins of sales at LTFV are shown in the “Preliminary Determination” section of this notice. The final determination will be issued 135 days after publication of this preliminary determination in the
Dennis McClure or Elizabeth Eastwood, AD/CVD Operations, Office II, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-5973 or (202) 482-3874, respectively.
The Department initiated this investigation on July 22, 2015.
The products covered by this investigation are HFCs. For a full description of the scope of this investigation,
Certain interested parties commented on the scope of the investigation as it appeared in the
The Department conducted this investigation in accordance with section 731 of the Act. We calculated export prices in accordance with section 772 of the Act. Because the PRC is a non-market economy within the meaning of section 771(18) of the Act, normal value (NV) was calculated in accordance with section 773(c) of the Act.
For a full description of the methodology underlying our conclusions,
On November 30, 2015, the petitioner timely filed an amendment to the petition, pursuant to section 733(e)(1) of the Act and 19 CFR 351.206(c)(2)(i), alleging that critical circumstances exist with respect to imports of the merchandise under consideration.
In the
The preliminary weighted-average antidumping duty (AD) margin percentages are as follows:
We intend to disclose the calculations performed to parties in this proceeding within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b). Case
Interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, filed electronically at Enforcement and Compliance's electronic records system, ACCESS. An electronically-filed document must be received successfully in its entirety by the Department's electronic records system, ACCESS, by 5:00 p.m. Eastern Standard Time, within 30 days after the date of publication of this notice.
In accordance with section 733(d)(2) of the Act, the Department will instruct U.S. Customs and Border Protection (CBP) to suspend liquidation of all entries of HFCs from the PRC, as described in Appendix I of this notice, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Section 733(e)(2) of the Act provides that, given an affirmative determination of critical circumstances, any suspension of liquidation shall apply to unliquidated entries of merchandise entered, or withdrawn from warehouse, for consumption on or after the later of (a) the date which is 90 days before the date on which the suspension of liquidation was first ordered, or (b) the date on which notice of initiation of the investigation was published. We preliminarily find that critical circumstances exist for imports of HFCs from the PRC produced or exported by the T.T. International Co., Ltd. and the PRC-wide entity. Accordingly, for T.T. International Co., Ltd. and the PRC-wide entity, in accordance with section 733(e)(2)(A) of the Act, the suspension of liquidation shall apply to unliquidated entries of merchandise entered, or withdrawn from warehouse, for consumption on or after the date which is 90 days before the publication of this notice.
Pursuant to section 733(d)(1)(B) of the Act and 19 CFR 351.205(d), the Department will instruct CBP to require a cash deposit
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. 19 CFR 351.210(e)(2) requires that requests by respondents for postponement of a final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
Respondents Dongyue and T.T. International requested that, in the event of an affirmative preliminary determination in this investigation, the Department postpone its final determination by 60 days (
In accordance with section 735(a)(2)(A) of the Act and 19 CFR 351.210(b)(2)(ii), because (1) our preliminary determination is affirmative; (2) the requesting exporters account for a significant proportion of exports of the subject merchandise; and (3) no compelling reasons for denial exist, we are postponing the final determination until no later than 135 days after the publication of this notice in the
In accordance with section 733(f) of the Act, we are notifying the ITC of our affirmative preliminary determination of sales at LTFV. Section 735(b)(2) of the Act requires the ITC to make its final determination as to whether the domestic industry in the United States is materially injured, or threatened with material injury, by reason of imports of HFCs, or sales (or the likelihood of sales) for importation, of the merchandise under consideration before the later of 120 days after the date of this preliminary determination or 45 days after our final determination. Because we are postponing the deadline for our final determination to 135 days from the date of publication of this preliminary determination, as discussed above, the ITC will make its final determination no later than 45 days after our final determination.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The products subject to this investigation are blended hydrofluorocarbons (HFCs) and single HFC components of those blends thereof, whether or not imported for blending. HFC blends covered by the scope are R-404, a zeotropic mixture consisting of 52 percent 1,1,1 Trifluoroethane, 44 percent Pentafluoroethane, and 4 percent 1,1,1,2-Tetrafluoroethane; R-407A, a zeotropic mixture of 20 percent Difluoromethane, 40 percent Pentafluoroethane, and 40 percent 1,1,1,2-Tetrafluoroethane; R-407C, a zeotropic mixture of 23 percent
The single component HFCs covered by the scope are R-32, R-125, and R-143a. R-32 or Difluoromethane has the chemical formula CH2F2, and is registered as CAS No. 75-10-5. It may also be known as HFC-32, FC-32, Freon-32, Methylene difluoride, Methylene fluoride, Carbon fluoride hydride, halocarbon R32, fluorocarbon R32, and UN 3252. R-125 or 1,1,1,2,2- Pentafluoroethane has the chemical formula CF3CHF2 and is registered as CAS No. 354-33-6. R-125 may also be known as R-125, HFC-125, Pentafluoroethane, Freon 125, and Fc-125, R-125. R-143a or 1,1,1-Trifluoroethane has the chemical formula CF3CH3 and is registered as CAS No. 420-46-2. R-143a may also be known as R-143a, HFC-143a, Methylfluoroform, 1,1,1-Trifluoroform, and UN2035.
Excluded from this investigation are blends of refrigerant chemicals that include products other than HFCs, such as blends including chlorofluorocarbons (CFCs) or hydrochlorofluorocarbons (HCFCs).
Also excluded from this investigation are patented HFC blends, such as ISCEON® blends, including MO99
HFC blends covered by the scope of this investigation are currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) at subheadings 3824.78.0020 and 3824.78.0050. Single component HFCs are currently classified at subheadings 2903.39.2035 and 2903.39.2045, HTSUS.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of opportunities to submit public comments.
The Pacific Fishery Management Council (Pacific Council) has announced its annual preseason management process for the 2016 ocean salmon fisheries. This notice informs the public of opportunities to provide comments on the 2016 ocean salmon management measures.
Written comments on the salmon management alternatives adopted by the Pacific Council at its March 2016 meeting, and described in Preseason Report II, received electronically or in hard copy by 11:59 p.m. Pacific Time, April 3, 2016, will be considered in the Pacific Council's final recommendation for the 2016 management measures.
Documents will be available from Ms. Dorothy Lowman, Chair, Pacific Fishery Management Council, 7700 NE Ambassador Place, Suite 101, Portland, OR 97220-1384, and posted on the Pacific Council Web site at
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• Comments can also be submitted via email to
Mr. Mike Burner, Pacific Council, telephone: 503-820-2414. For information on submitting comments via the Federal e-Rulemaking portal, contact Peggy Mundy, NMFS, telephone: 206-526-4323.
The Pacific Council has published its annual notice of availability of reports, public meetings, and hearings for the 2016 ocean salmon fisheries (80 FR 81806, December 31, 2015). The Pacific Council will adopt alternatives for 2016 ocean salmon fisheries at its meeting, March 8-14, 2016, at the DoubleTree by Hilton in Sacramento, CA. Details of this meeting are available on the Pacific Council's Web site (
All public hearings begin at 7 p.m. at the following locations:
• March 28, 2016: Chateau Westport, Beach Room, 710 West Hancock, Westport, WA 98595, telephone 360-268-9101.
• March 28, 2016: Red Lion Hotel, South Umpqua Room, 1313 North Bayshore Drive, Coos Bay, OR 97420, telephone 541-267-4141.
• March 29, 2016: Motel 6, Convention Room, 400 South Main St, Fort Bragg, CA 95437, telephone 707-964-4761.
Comments on the alternatives the Pacific Council adopts at its March 2016 meeting, and described in Preseason Report II, may be submitted in writing or electronically as described under
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice announcing the preparation of an environmental assessment (EA).
NMFS, Southeast Region, in collaboration with the South Atlantic Fishery Management Council (Council), is preparing an EA for Amendment 36 to the Fishery Management Plan (FMP) for the Snapper-Grouper Fishery of the South Atlantic Region (Amendment 36). Amendment 36 considers alternatives to implement special management zones (SMZs) in the exclusive economic zone of the South Atlantic. This notice is intended to inform the public of the change from the preparation of a draft environmental impact statement (DEIS) to an EA for Amendment 36.
Rick DeVictor, NMFS Southeast Regional Office, telephone: 727-824-5305, or email:
An NOI to prepare a DEIS for Amendment 36 was published in the
Through Amendment 36, the Council is considering modifications to the SMZ process and framework procedures to include the consideration of SMZs that would protect locations where snapper-grouper species are likely to spawn and natural habitats that support spawning fish. Protecting locations where fish spawn and protecting natural habitats that support spawning fish may act as an effective strategy when managing a sustainable fish population. In the EA, the Council is also considering the implementation of SMZs to protect spawning snapper-grouper species in the South Atlantic region, in addition to specifying the anchoring, transit, and sunset provisions. Sunset provisions designate the date that the SMZs would be removed from the regulations unless retained through action by the Council and NMFS.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of intent to prepare an environmental impact statement (EIS); request for comments.
NMFS and the Pacific Fishery Management Council (Council) announce their intent to prepare an environmental impact statement (EIS) in accordance with the National Environmental Policy Act (NEPA) of 1969 to analyze the short- and long-term impacts on the human (biological, physical, social, and economic) environment of Amendment 28 to the Pacific Coast Groundfish Fishery Management Plan (FMP). This notice also requests written comment.
Public scoping will be conducted through this notice. Written comments must be received by 5 p.m. Pacific Standard Time on March 2, 2016 (see
You may submit comments on issues and alternatives by any of the following methods:
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Dr. John Stadler, Essential Fish Habitat Coordinator, NMFS West Coast Region at 360-534-9328 or
There are more than 90 species managed under the Pacific Coast Groundfish Fishery Management Plan (Groundfish FMP). These groundfish stocks support an array of commercial, recreational, and tribal fishing interests in state and Federal waters off the coasts of Washington, Oregon, and California. In addition, groundfish are also harvested incidentally in non-groundfish fisheries, most notably, the trawl fisheries for pink shrimp and California halibut.
Amendment 28 to the FMP is intended to accomplish three goals: (1) Revise the essential fish habitat (EFH) components of the FMP; (2) make adjustments to the trawl Rockfish Conservation Areas (RCAs); and (3) use the discretionary authorities in the Magnuson-Stevens Fishery Conservation and Management Act (MSA) to protect benthic habitats, including deep sea corals, from the adverse effects of fishing. These actions are described in detail below.
The MSA mandates that each regional fishery management council designate EFH for the species that they manage. EFH is defined as “those waters and substrate necessary to fish for spawning, breeding, feeding or growth to maturity.” The regulations implementing the EFH provisions of the MSA (50 CFR 600.815) require or, in some cases, recommend that fishery management plans include the following components:
1. A description and identification of EFH, including habitat information for each managed species and life stage;
2. A description of the MSA fishing activities that may adversely affect EFH and management measures to minimize those effects to the extent practicable;
3. A description of the non-MSA fishing activities that may adversely affect EFH, for example, those managed by state agencies;
4. A description of the non-fishing activities that may adversely affect;
5. and analysis, if feasible, of how the cumulative effects of fishing and non-fishing activities affect the function of EFH on an ecosystem or watershed scale;
6. A description of conservation and enhancement measures that encourage the conservation of EFH, including recommended options to avoid, minimize, or compensate for the adverse effects of fishing and non-fishing activities;
7. Identification of the major prey species of each species;
8. Identification of habitat areas of particular concern (HAPCs); and
9. Identification of research and information needs that the Council and NMFS view as necessary to improve upon the description and identification of EFH, the identification of threats to EFH from fishing and other activities, and the development of conservation and enhancement measures for EFH;
10. A procedure for reviewing and revising, if warranted, the EFH components of the FMP.
The PFMC designated EFH for Pacific Coast groundfish in 2005, and established the EFH components described above in Amendment 19 to the Groundfish FMP. In particular, the Council identified a number of EFH Conservation Areas (EFHCAs) where certain types of bottom-contact gear are prohibited to minimize the adverse effects of the groundfish fishery on EFH. Maps of the EFHCAs are available at:
Subsequently, and in accordance with the regulations, NMFS and the Council completed a review of the information available in 2013, and the Council issued a request for proposals on changes to these 10 components. The Council received eight proposals, two of which were later withdrawn by the sponsors. Although these proposals covered a number of the EFH components, the Council determined that revisions were warranted for these five components: The essential fish habitat descriptions for each species and life stage; the description of the adverse effects of fishing on groundfish EFH and management measures to minimize those effects (
Trawl RCAs are areas that are closed to bottom-trawl gear to protect overfished species, primarily several species of rockfishes, and were first implemented in 2002. The trawl RCAs extend along the entire West Coast and is bounded by lines approximating particular depth contours. In recent years, the Council also considered modifications to control the bycatch of several non-overfished species (
Although the trawl RCAs were implemented to control bycatch of overfished species, the habitats within them have been largely protected from bottom-trawl gear since their inception in 2002, even though trawling for pink shrimp has occurred in some areas. Because of the habitat protections afforded by the RCAs, the habitats that have not been trawled for pink shrimp have recovered, at least partially, from the effects of past bottom trawling. Therefore the Council will evaluate adjustments to the RCA at the same time they are considering revisions to the EFHCAs.
When the Council adopted Amendment 19 to the groundfish FMP, it attempted to close waters deeper than 3500 meters to bottom trawling to minimize the effects of the fishery on groundfish EFH. However, because EFH did not extend beyond 3500 meters, NMFS disapproved that section of the amendment. The MSA contains several discretionary authorities that the Council may use to close these waters, regardless of their designation as EFH [MSA sections 303(b)(2)(A), 303(b)(2)(B), and 303(b)(12)]. The Council is considering using those authorities to prohibit all bottom-contact gear in waters deeper than 3500 meters unless an exempted fishing permit is issued. At the present time, fishing with such gear at these depths is neither technically nor economically feasible; however, the Council and
NEPA requires that agencies evaluate, in addition to the preferred alternative, a range of reasonable alternatives that addresses the purpose of and need for the agency action. The Council adopted a preliminary range of alternatives for analysis and public review at its meeting in September 2015 and is scheduled to review that range at its April 9-14, 2016, meeting.
1. Monterey Bay National Marine Sanctuary—a proposal that addresses EFHCAs within the Sanctuary.
2. Gulf of the Farallones National Marine Sanctuary (now the Greater Farallones National Marine Sanctuary)—a proposal that addresses EFHCAs within the Sanctuary.
3. Fishermen's Marketing Association—a proposal to make a small change to the EFHCAs adjacent to the Eel River Canyon.
4. Oceana, National Resources Defense Council, and Ocean Conservancy—a coast-wide proposal for modifying the EFHCAs.
5. Marine Conservation Institute—a coast-wide proposal for modifying the EFHCAs.
6. Greenpeace—a coast-wide proposal for modifying the EFHCAs.
7. Northern and Central Collaborative Working Groups—a coast-wide proposal for modifying the EFHCAs.
In addition to these seven proposals, the Council preliminarily identified other action alternatives for analysis. They are:
8. Reopening those areas identified in the seven proposals described above. This alternative would not designate new areas for closure to bottom trawling. This is a coast-wide alternative.
9. Designating new EFHCAs within the current trawl RCAs, based on priority habitats. This is a coast-wide alternative.
10. Each of the six coast-wide alternatives (4 through 9) include changes to the EFHCAs within the usual and accustomed fishing areas (U&As) of the four Coastal Treaty Tribes in Washington (Ho, Makah, Quileute, and Quinault). These tribes are co-managers of the fishery resources within their U&As, and NMFS has a treaty-trust responsibility to address their concerns regarding our management decisions. Therefore, for each of these alternatives listed above (numbers 4-9), another alternative will be analyzed that excludes changes in the U&As.
The remaining EFH components each have a single action alternative. They are:
• Use the best scientific information available to revise the descriptions of the habitat requirements for each species and life stage in Appendix B to the FMP (
• Use the best scientific information available to revise the description of the adverse effects of fishing on EFH in Appendix C, part 2, to the FMP (
• Use the best scientific information available to revise the description of the non-fishing activities that may adversely affect EFH, and potential conservation measures to avoid, minimize, or mitigate those adverse effects in Appendix D to the FMP (
• Update the research and information needs for understanding the EFH requirements of the species managed under this FMP.
• Update the process to review and revise the groundfish EFH components of the FMP.
• Make minor clarifications and corrections to the EFH language in the FMP.
1. Complete removal of the existing RCAs. This alternative would remove the RCAs along the entire West Coast, restoring access to all of the areas that were previously closed to minimize the bycatch of overfished species.
2. Retaining a subset of the existing RCAs to protect overfished species. This alternative would restore access to some, but not all, of the areas that were closed to minimize bycatch of overfished species. The specific areas that would remain closed have not yet been identified.
3. Retaining a larger subset of the existing RCAs to protect overfished species and act as a catch-control mechanism for non-overfished species of groundfishes. The specific areas that would remain closed have not yet been identified.
A principal objective of the scoping and public input process is to identify potentially significant impacts to the human environment that should be analyzed in depth in the EIS. If, during the preparation of this EIS, NMFS determines that a finding of no significant impact can be supported, it may prepare an Environmental Assessment (EA) and issue a retraction of this notice. Alternatively, NMFS may still continue with the preparation of an EIS. Information and analysis prepared for this action also may be used when scoping future groundfish actions to help decide whether to prepare an EA or EIS.
NMFS provides this notice to: (1) Advise the public and other agencies of its plans to analyze effects related to the action, and (2) obtain suggestions and information that may be useful to the scope of issues and the full range of alternatives to include in the EIS.
NMFS invites comment from all interested parties to ensure that the full range of issues related to Amendment 28 is identified. NMFS is specifically inviting comments on the proposed alternatives described above. In addition, NMFS invites comments on the types of habitats that should be prioritized for protection from the adverse effects of fishing gear. Comments should be as specific as possible.
Written comments concerning the proposed action and the environmental review should be directed to NMFS as described above (see
Public scoping will be conducted through this notice. Further participation by the public will occur throughout the Council's decision-making process. All decisions during the Council process benefit from written and oral public comments delivered prior to or during the Council meeting. These public comments are considered integral to scoping for developing this EIS. Council meetings that offer opportunities for public involvement include the April 9-14, 2016, meeting in Vancouver, Washington (Hilton Vancouver Washington, 301 W. 6th Street, Vancouver, WA 98660). Future opportunities for public involvement have yet to be determined but will be posted in the Council Briefing Book (on the Council's Web site (
The Council meetings are physically accessible to people with disabilities.
Requests for sign language interpretation or other auxiliary aids should be directed to Kris Kleinschmidt at
16 U.S.C. 1801
Commodity Futures Trading Commission.
Notice.
In compliance with the Paperwork Reduction Act of 1995 (“PRA”), this notice announces that the Information Collection Request (“ICR”) abstracted below has been forwarded to the Office of Management and Budget (“OMB”) for review and comment. The ICR describes the nature of the information collection and its expected costs and burden.
Comments must be submitted on or before March 2, 2016.
Comments regarding the burden estimated or any other aspect of the information collection, including suggestions for reducing the burden, may be submitted directly to the Office of Information and Regulatory Affairs (“OIRA”) in OMB, within 30 days of the notice's publication, by email at
Comments may also be mailed to: Christopher Kirkpatrick, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581 or by Hand Delivery/Courier at the same address.
A copy of the supporting statements for the collection of information discussed above may be obtained by visiting
Jacob Chachkin, Special Counsel, Division of Swap Dealer and Intermediary Oversight, Commodity Futures Trading Commission, (202) 418-5496, email:
44 U.S.C. 3501
10:00 a.m., Friday, February 5, 2016.
Three Lafayette Centre, 1155 21st Street NW., Washington, DC, 9th Floor Commission Conference Room.
Closed.
Surveillance, enforcement, and examinations matters. In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission's Web site at
Christopher Kirkpatrick, 202-418-5964.
Commodity Futures Trading Commission.
Notice.
In compliance with the Paperwork Reduction Act of 1995 (“PRA”), this notice announces that the Information Collection Request (“ICR”) abstracted below has been forwarded to the Office of Management and Budget (“OMB”) for review and comment. The ICR describes the nature of the information collection and its expected costs and burden.
Comments must be submitted on or before March 2, 2016.
Comments regarding the burden estimated or any other aspect of the information collection, including suggestions for reducing the burden, may be submitted directly to the Office of Information and Regulatory Affairs in OMB, within 30 days of publication of the notice, by email at
Comments may also be mailed to: Christopher Kirkpatrick, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581, or by Hand Delivery/Courier at the same address.
A copy of the supporting statements for the collection of information discussed above may be obtained by visiting
Tom Guerin, Division of Market Oversight, Commodity Futures Trading Commission, (202) 734-4194, email:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The
Commission staff estimate that approximately 30,125 entities, including swap dealers, major swap participants, and swap counterparties that are neither swap dealers nor major swap participants, are affected by this ICR. The Commission did not receive any comments regarding the burden estimate or any other aspect of this ICR.
Commodity Futures Trading Commission.
Notice.
In compliance with the Paperwork Reduction Act of 1995 (“PRA”), this notice announces that the Information Collection Request (“ICR”) abstracted below has been forwarded to the Office of Management and Budget (“OMB”) for review and comment. The ICR describes the nature of the information collection and its expected costs and burden.
Comments must be submitted on or before March 2, 2016.
Comments regarding the burden estimated or any other aspect of the information collection, including suggestions for reducing the burden, may be submitted directly to the Office of Information and Regulatory Affairs (“OIRA”) in OMB, within 30 days of the notice's publication, by email at
Comments may also be mailed to: Christopher Kirkpatrick, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581 or by Hand Delivery/Courier at the same address.
A copy of the supporting statements for the collection of information discussed above may be obtained by visiting
Adam Kezsbom, Special Counsel, Division of Swap Dealer and Intermediary Oversight, Commodity Futures Trading Commission, (202) 418-5372, email:
44 U.S.C. 3501
Notice is hereby given that the Delaware River Basin Commission will hold a public hearing on Wednesday, February 10, 2016. A business meeting will be held the following month, on Wednesday, March 16, 2016. The hearing and business meeting are open to the public and will be held at the Washington Crossing Historic Park Visitor Center, 1112 River Road, Washington Crossing, Pennsylvania.
The list of projects scheduled for hearing, including project descriptions, will be posted on the Commission's Web site,
Written comments on matters scheduled for hearing on February 10 will be accepted through 5:00 p.m. on
The public is advised to check the Commission's Web site periodically prior to the hearing date, as items scheduled for hearing may be postponed if additional time is deemed necessary to complete the Commission's review, and items may be added up to ten days prior to the hearing date. In reviewing docket descriptions, the public is also asked to be aware that project details commonly change in the course of the Commission's review, which is ongoing.
There will be no opportunity for additional public comment for the record at the March 16 business meeting on items for which a hearing was completed on February 10 or a previous date. Commission consideration on March 16 of items for which the public hearing is closed may result in approval of the item (by docket or resolution) as proposed, approval with changes, denial, or deferral. When the Commissioners defer an action, they may announce an additional period for written comment on the item, with or without an additional hearing date, or they may take additional time to consider the input they have already received without requesting further public input. Any deferred items will be considered for action at a public meeting of the Commission on a future date.
Department of Education (ED), Federal Student Aid (FSA).
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before April 1, 2016.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Ti Baker, 202-377-3156.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Office of Postsecondary Education, Department of Education.
Notice.
Predominantly Black Institutions (PBI) Formula Grant Program
Notice inviting applications for new awards for fiscal year (FY) 2016.
Catalog of Federal Domestic Assistance (CFDA) Number: 84.031P.
Applications Available: February 1, 2016.
Deadline for Transmittal of Phase I of Applications: March 2, 2016.
Deadline for Transmittal of Phase II of Applications: April 1, 2016.
Title III, part A, section 318 of the Higher Education Act of 1965, as amended (HEA) (20 U.S.C. 1059e).
If the amount appropriated for this program for a fiscal year is not sufficient to pay the minimum allotment to eligible institutions, then the amount of the minimum allotment must be ratably reduced, in accordance with section 318(e) of the HEA (20 U.S.C. 1059e(e)(4)).
Grant amounts to PBIs are awarded according to the following formula:
(1) Federal Pell Grant basis—From the amount appropriated for this program for any fiscal year, the Secretary allots to each PBI with an approved application a sum that bears the same ratio to one-half of that amount as the number of Federal Pell Grant recipients in attendance at such institution at the end of the academic year preceding the beginning of that fiscal year, bears to the total number of Federal Pell Grant recipients at all such institutions at the end of such academic year.
(2) Graduates basis—From the amount appropriated for this program for any fiscal year, the Secretary allots to each PBI with an approved application a sum that bears the same ratio to one-fourth of that amount as the number of graduates for such academic year at such institution, bears to the total number of graduates for such academic year at all such institutions.
(3) Graduates seeking a higher degree basis—From the amount appropriated for this program for any fiscal year, the Secretary allots to each PBI with an approved application a sum that bears the same ratio to one-fourth of that amount as the percentage of graduates from such institution who are admitted to and in attendance at, not later than two years after graduation with an associate's degree or a baccalaureate degree, a baccalaureate degree-granting institution or a graduate or professional school in a degree program in disciplines in which Black American students are underrepresented, bears to the percentage of such graduates for all such institutions.
The Department is not bound by any estimates in this notice.
1.
(a) Have an enrollment of needy undergraduate students as defined in section 318(b)(2) of the HEA (20 U.S.C. 1059e(b)(2));
(b) Have an average educational and general expenditure that is low, per full-time equivalent undergraduate student, in comparison with the average educational and general expenditure per full-time equivalent undergraduate student of institutions that offer similar instruction, except that the Secretary may apply the waiver requirements described in section 392(b) of the HEA (20 U.S.C. 1068a(b)) to this subparagraph in the same manner as the Secretary applies the waiver requirements to section 312(b)(1)(B) of the HEA (20 U.S.C. 1058(b)(1)(B));
(c) Have an enrollment of undergraduate students that is not less than 40 percent Black American students (section 318(b)(1)(C) of the HEA; 20 U.S.C. 1059e (b)(1)(C));
(d) Be legally authorized to provide, and provide, within the State, an educational program for which the institution of higher education awards a baccalaureate degree or, in the case of a junior or community college, an associate's degree (section 318(b)(1)(D) of the HEA; 20 U.S.C. 1059e(b)(1)(D));
(e) Be accredited by a nationally recognized accrediting agency or association determined by the Secretary to be a reliable authority as to the quality of training offered or is, according to such an agency or
(f) Not be receiving funds under any other provision of part A or part B of title III of the HEA or part A of title V of the HEA (sections 318(b)(1)(F) and 318(i) of the HEA; 20 U.S.C. 1059e(b)(1)(F) and 1059e(i)).
To be eligible for a grant under the PBI Formula Grant Program, an applicant must also meet the definition of a
(i) That is an eligible institution with not less than 1,000 undergraduate students;
(ii) At which not less than 50 percent of the undergraduate students enrolled at the eligible institution are low-income individuals or first-generation college students; and
(iii) At which not less than 50 percent of the undergraduate students are enrolled in an educational program leading to a bachelor's or associate's degree that the eligible institution is licensed to award by the State (defined as each of the 50 States and the District of Columbia) in which the eligible institution is located.
The notice announcing the FY 2016 process for designation of eligible institutions, and inviting applications for waiver of eligibility requirements, was published in the
2.
1.
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-800-877-8339.
Individuals with disabilities can obtain a copy of the application package in an accessible format (
2.
Requirements concerning the content of an application, together with the forms you must submit, are in the application package for this program. The application process for this program has two phases: Phase I will require submitting 2014-2015 data used to run the funding formula; Phase II will require submission of the narrative project plan and standard forms. The deadline dates for submitting Phases I and II of the application are listed in this notice. Other requirements concerning the content of an application, together with the forms you must submit, are in the application package for this program.
3.
Applications Available: February 1, 2016.
Deadline for Transmittal of Phase I of Applications: March 2, 2016.
Deadline for Transmittal of Phase II of Applications: April 1, 2016.
Applications for grants under this program must be submitted electronically as an email attachment to
We do not consider an application that does not comply with the deadline requirements.
Individuals with disabilities who need an accommodation or auxiliary aid in connection with the application process should contact the person listed under
4.
5.
6.
a. Have a Data Universal Numbering System (DUNS) number and a Taxpayer Identification Number (TIN);
b. Register both your DUNS number and TIN with the System for Award Management (SAM) (formerly the Central Contractor Registry), the Government's primary registrant database;
c. Provide your DUNS number and TIN on your application; and
d. Maintain an active SAM registration with current information while your application is under review by the Department and, if you are awarded a grant, during the project period.
You can obtain a DUNS number from Dun and Bradstreet at the following Web site:
A DUNS number can be created within one to two business days.
If you are a corporate entity, agency, institution, or organization, you can obtain a TIN from the Internal Revenue Service. If you are an individual, you can obtain a TIN from the Internal Revenue Service or the Social Security Administration. If you need a new TIN, please allow two to five weeks for your TIN to become active.
The SAM registration process can take approximately seven business days, but may take upwards of several weeks, depending on the completeness and accuracy of the data you enter into the SAM database. Thus, if you think you might want to apply for Federal financial assistance under a program administered by the Department, please allow sufficient time to obtain and register your DUNS number and TIN. We strongly recommend that you register early.
If you are currently registered with SAM, you may not need to make any changes. However, please make certain that the TIN associated with your DUNS number is correct. Also note that you will need to update your registration annually. This may take three or more business days.
Information about SAM is available at
7.
a.
Applications for grants under the Predominantly Black Institutions Formula Grant Program, CFDA number 84.031P, must be submitted electronically via email to
We will reject your application if you submit it in paper format unless, as described elsewhere in this section, you qualify for one of the exceptions to the electronic submission requirement
You may access the electronic grant application for the PBI Program at
Please note the following:
• You must complete the electronic submission of your grant application by 4:30:00 p.m., Washington, DC time, on the application deadline date. We will not accept an application for this program after 4:30:00 p.m., Washington, DC time, on the application deadline date. Therefore, we strongly recommend that you do not wait until the application deadline date to begin the application process.
• You will not receive additional point value because you submit your application in electronic format, nor will we penalize you if you qualify for an exception to the electronic submission requirement, as described elsewhere in this section, and submit your application in paper format.
• You must submit all documents electronically, including all information you typically provide on the following forms: The Application for Federal Assistance (SF 424), the Department of Education Supplemental Information for SF 424, Budget Information—Non-Construction Programs (ED 524), and all necessary assurances and certifications.
• You must attach any narrative sections of your application as files in a .DOC (document), .RTF (rich text), or .PDF (Portable Document) format. If you upload a file type other than the three file types specified in this paragraph or submit a password protected file, we will not review that material.
• Your electronic application must comply with any page limit requirements described in this notice.
• Prior to submitting your electronic application, you may wish to print a copy of it for your records.
• Within three working days after submitting Phase II of your electronic application, fax a signed copy of the SF 424 to the Application Control Center after following these steps:
(1) Print SF 424 from e-Application.
(2) The applicant's Authorizing Representative must sign this form.
(3) Place the PR/Award number in the upper right hand corner of the hard-copy signature page of the SF 424.
(4) Fax the signed SF 424 to the Application Control Center at (202) 245-6272.
• We may request that you provide us original signatures on other forms at a later date.
• You do not have access to the Internet;
• No later than two weeks before the application deadline date (14 calendar days or, if the fourteenth calendar day before the application deadline date falls on a Federal holiday, the next business day following the Federal holiday), you mail or fax a written statement to the Department, explaining that you do not have access to the Internet.
If you mail your written statement to the Department, it must be postmarked no later than two weeks before the application deadline date. If you fax your written statement to the Department, we must receive the faxed statement no later than two weeks before the application deadline date.
Address and mail or fax your statement to: Bernadette D. Miles, OPE, Institutional Service, U.S. Department of Education, 400 Maryland Avenue SW., Room 7E311, Washington, DC 20202. FAX: (202) 205-0063.
Your paper application must be submitted in accordance with the mail or hand delivery instructions described in this notice.
b.
If you qualify for an exception to the electronic submission requirement, you may mail (through the U.S. Postal Service or a commercial carrier) your application to the Department. You must mail the original and two copies of your application, on or before the application deadline date, to the Department at the following address:
You must show proof of mailing consisting of one of the following:
(1) A legibly dated U.S. Postal Service postmark.
(2) A legible mail receipt with the date of mailing stamped by the U.S. Postal Service.
(3) A dated shipping label, invoice, or receipt from a commercial carrier.
(4) Any other proof of mailing acceptable to the Secretary of the U.S. Department of Education.
If you mail your application through the U.S. Postal Service, we do not accept either of the following as proof of mailing:
(1) A private metered postmark.
(2) A mail receipt that is not dated by the U.S. Postal Service.
The U.S. Postal Service does not uniformly provide a dated postmark. Before relying on this method, you should check with your local post office.
We will not consider applications postmarked after the application deadline date.
c.
If you qualify for an exception to the electronic submission requirement, you (or a courier service) may deliver your paper application to the Department by hand. You must deliver the original and two copies of your application by hand, on or before the application deadline date, to the Department at the following address:
The Application Control Center accepts hand deliveries daily between 8:00 a.m. and 4:30:00 p.m., Washington, DC time, except Saturdays, Sundays, and Federal holidays.
If you mail or hand deliver your application to the Department—
(1) You must indicate on the envelope and—if not provided by the Department—in Item 11 of the SF 424 the CFDA number, including suffix letter, if any, of the competition under which you are submitting your application; and
(2) The Application Control Center will mail to you a notification of receipt of your grant application. If you do not receive this notification within 15 business days from the application deadline date, you should call the U.S. Department of Education
1.
(1) Determine grant awards based on the formula in section 318(e) of the HEA (20 U.S.C. 1059e(e)); and
(2) Ensure that all activities proposed in the application are allowable under section 318(d) of the HEA (20 U.S.C. 1059e(d)).
We remind potential applicants that in reviewing applications in any discretionary grant competition, the Secretary may consider, under 34 CFR 75.217(d)(3), the past performance of the applicant in carrying out a previous award, such as the applicant's use of funds, achievement of project objectives, and compliance with grant conditions. The Secretary may also consider whether the applicant failed to submit a timely performance report or submitted a report of unacceptable quality.
In addition, in making a grant award, the Secretary requires various assurances including those applicable to Federal civil rights laws that prohibit discrimination in programs or activities receiving Federal financial assistance from the Department of Education (34 CFR 100.4, 104.5, 106.4, 108.8, and 110.23).
2.
Consistent with 2 CFR 200.205, before awarding grants under this program, the Department conducts a review of the risks posed by applicants. Under 2 CFR 3474.10, the Secretary may impose special conditions and, in appropriate circumstances, high-risk conditions on a grant if the applicant or grantee is not financially stable; has a history of unsatisfactory performance; has a financial or other management system that does not meet the standards in 2 CFR part 200, subpart D; has not fulfilled the conditions of a prior grant; or is otherwise not responsible.
1.
If your application is not evaluated or not selected for funding, we notify you.
2.
We reference the regulations outlining the terms and conditions of an award in the
3.
(b) At the end of your project period, you must submit a final performance report, including financial information, as directed by the Secretary. If you receive a multiyear award, you must submit an annual performance report that provides the most current performance and financial expenditure information as directed by the Secretary under 34 CFR 75.118. The Secretary may also require more frequent performance reports under 34 CFR 75.720(c). For specific requirements on reporting, please go to
(C) Under 34 CFR 75.250(b), the Secretary may provide a grantee with additional funding for data collection analysis and reporting. In this case the Secretary establishes a data collection period.
4.
(a) Enrollment Rate: The percentage change of the number of full-time degree-seeking undergraduate students enrolled at PBIs. Note that this is a long-term measure, which will be used to periodically gauge performance.
(b) Persistence Rate—four-year institutions: The percentage of first-time, full-time degree-seeking undergraduate students at four-year PBIs who were in their first year of postsecondary enrollment in the previous year and are enrolled in the current year at the same four-year PBI.
(c) Persistence Rate—two-year institutions: The percentage of first-time, full-time degree-seeking undergraduate students at two-year PBIs who were in their first year of postsecondary enrollment in the previous year and are enrolled in the current year at the same two-year PBI.
(d) Completion Rate—four-year institutions: The percentage of first-time, full-time degree-seeking undergraduate students enrolled at four-year PBIs who graduate within six years of enrollment.
(e) Completion Rate—two-year institutions: The percentage of first-time, full-time degree-seeking undergraduate students enrolled at two-year PBIs who graduate within three years of enrollment.
(f) Efficiency Measure: Cost per successful program outcome: Federal cost per undergraduate degree at PBIs.
5.
In making a continuation award, the Secretary also considers whether the grantee is operating in compliance with the assurances in its approved application, including those applicable to Federal civil rights laws that prohibit discrimination in programs or activities receiving Federal financial assistance from the Department (34 CFR 100.4, 104.5, 106.4, 108.8, and 110.23).
Bernadette D. Miles, OPE, Institutional Service, U.S. Department of Education, 400 Maryland Avenue SW., Room 7E311, Washington, DC 20202. Telephone: (202) 502-7616, or by email:
If you use a TDD or a TTY, call the FRS, toll free, at 1-800-877-8339.
You may also access documents of the Department published in the
Equal Employment Opportunity Commission.
Proposed revision of the employer information report (EEO-1) and comment request.
In accordance with the Paperwork Reduction Act (PRA), the Equal Employment Opportunity Commission (EEOC or Commission) announces that it intends to submit to the Office of Management and Budget (OMB) a request for a three-year PRA approval of a revised Employer Information Report (EEO-1) data collection. This revised data collection has two components. Component 1 collects the same data that is gathered by the currently approved EEO-1: Specifically, data about employees' ethnicity, race, and sex, by job category. Component 2 collects data on employees' W-2 earnings and hours worked, which EEO-1 filers already maintain in the ordinary course of business. For the 2016 reporting cycle, all EEO-1 filers would submit the data under Component 1. Starting in 2017, filers with 100 or more employees (both private industry and Federal contractor) would submit data in response to both Components 1 and 2. Contractors with 50 to 99 employees would only submit data for Component 1. In this notice, the EEOC solicits public comment on the utility and burden of collecting pay and hours-worked data through the EEO-1 data collection process.
Written comments on this notice must be submitted on or before April 1, 2016.
Pursuant to 42 U.S.C. 2000e-8(c), a public hearing concerning the proposed changes to the EEO-1 will be held at a place and time to be announced. To request an opportunity to present your views orally at the hearing, please submit a written request to the EEOC's Executive Secretariat (street address below) no later than February 22, 2016 to be assured of consideration. Please include your contact information.
Comments on this notice may be submitted to the EEOC in three ways; please use only one.
Comments and attachments may be submitted online at
Hard copy comments and all requests to participate in the hearing may be submitted to Bernadette Wilson, Acting Executive Officer, Executive Secretariat, Equal Employment Opportunity Commission, 131 M Street NE., Washington, DC 20507.
The Executive Secretariat also will accept documents totaling six or fewer pages by facsimile (“fax”) machine. This limitation is necessary to assure access to the equipment. The telephone number of the fax receiver is (202) 663-4114. (This is not a toll-free number.) Receipt of fax transmittals will not be acknowledged, except that the sender may request confirmation of receipt by calling the Executive Secretariat staff at (202) 663-4070 (voice) or (202) 663-4074 (TTY). (These are not toll-free telephone numbers.)
Subject to the conditions noted above, the EEOC will post online at
For reference when commenting on this notice, the current EEO-1 (and proposed Component 1) can be found at
Ronald Edwards, Director, Program Research and Surveys Division, Equal Employment Opportunity Commission, 131 M Street NE., Room 4SW30F, Washington, DC 20507; (202) 663-4949 (voice) or (202) 663-7063 (TTY). Requests for this notice in an alternative format should be made to the Office of Communications and Legislative Affairs at (202) 663-4191 (voice) or (202) 663-4494 (TTY).
Section 709(c) of Title VII of the Civil Rights Act of 1964 (Title VII) requires employers to make and keep records relevant to the determination of whether unlawful employment practices have been or are being committed, to preserve such records, and to produce reports as the Commission prescribes by regulation or order.
In 1964, Congress enacted Title VII of the Civil Rights Act, as amended, 42 U.S.C. 2000e,
In 2010, the EEOC joined other federal agencies, including the DOL, as members of the President's National Equal Pay Task Force to identify ways to improve enforcement of federal laws prohibiting pay discrimination. The Task Force recommended, among other things, that the EEOC engage the National Academy of Sciences (NAS) to conduct a study assessing how to most effectively collect pay data to support its wage discrimination law enforcement efforts. The EEOC accordingly commissioned a study, and the NAS convened a Panel on
Following the NAS Report recommendation, the EEOC commissioned an independent Pilot Study to identify the most efficient means to collect pay data. The Pilot Study, completed in September 2015, assisted the EEOC in formulating this proposal and will guide the development of analytic techniques to make full use of the data to be collected.
Separately, the EEOC sought input about updating all the EEO surveys, including adding pay data, when its staff held a two-day meeting in March 2012 with employer representatives, statisticians, human resources information systems (HRIS) experts, and information technology specialists
On April 8, 2014, the Presidential Memorandum, “Advancing Pay Equality Through Compensation Data Collection” was issued. It directed the Secretary of Labor to develop a compensation data collection proposal.
Public comments submitted to OFCCP about the proposed Equal Pay Report and rule argued for, among other things, the need to improve interagency coordination and decrease employer burden for reporting compensation data by using the EEO-1, rather than a new OFCCP data collection, as well as the need to protect privacy and data confidentiality. The instant proposal responds to these concerns.
The following discussion explains the justification for each component of the proposed EEO-1 pay data collection. As stated above, this proposal does not compel employers to collect new data but rather requires the reporting of pay data that employers maintain in the normal course of business. This notice proposes a collection that will maximize the utility of the pay data while balancing respondent concerns about confidentiality and the burden of the collection.
For the 2016 EEO-1 reporting cycle, to ease the transition, all employers will submit information that is identical to the information collected by the currently approved EEO-1 (Component 1). Starting in 2017, employers that are subject to the EEO-1 reporting requirement
Currently, employers must collect EEO-1 data from any pay period occurring in the months of July through September of the current survey year. The EEO-1 must be filed by September 30th of the same year. These deadlines would continue after the addition of pay data, to minimize employers' burden by folding the new collection into long-established deadlines. As explained below regarding the utility and burden of using W-2 data to describe pay, requiring filers to report W-2 data as of a pay period occurring in the months of July through September should not be burdensome given the capabilities of HRIS software.
Beginning in 2017, all filers will be required to submit the proposed EEO-1 report electronically. Automated electronic data collection promotes the utility of the EEO-1 survey by reducing the number of inadvertent human errors in the data. Electronic data collection also is less burdensome for employers than assigning staff to complete the survey. As of 2014, all but three of the 67,146 EEO-1 filers already used electronic data submission.
In selecting total W-2 earnings as the measure of pay, the focus was on maximizing utility of the EEO-1 pay data while minimizing the burden on employers to collect and report it. With respect to maximizing utility, the goal was to identify a measure of compensation that encompasses as much employer-paid income earned by individuals as possible. With respect to minimizing burden, the focus was on finding a measure that is well-defined and compatible with the data elements in employers' existing human resources and pay systems. Consideration also was given to the sample Equal Pay Report proposed in OFCCP's 2014 Notice of Proposed Rulemaking, which used W-2 earnings.
Five different measures of earnings now used by federal data collection systems were considered. The first three were from the U.S. Bureau of Labor Statistics (BLS): The Occupation Employment Statistics (OES);
Of these five options, the focus was on the relative strengths and weaknesses of the OES and the W-2 definitions because they are best known to employers. The NAS Study recommended the use of OES' wage definition because it is based on widespread surveys,
By contrast, the W-2 definition provides a more comprehensive report of earnings at the employee level than the OES definition. W-2 gross income includes wages, salaries, fees, commissions, tips, taxable fringe benefits, and elective deferrals. Amounts withheld for taxes, including but not limited to income tax, Social Security, and Medicare taxes, are considered “received” and are included as gross income of the given year they are withheld.
Using the W-2 definition is less likely to be burdensome for most respondents than using the OES wage definition. Federal law requires all employers to generate W-2s for each of their employees. Although W-2 data may not be routinely compiled until the end of the calendar year, and EEO-1 reports are due on September 30th, several approaches are possible. First, because payroll records are cumulative, generating reports at any given point in time should not be complicated for employers with automated payroll systems. The W-2 data can be imported into a HRIS, and a data field can be established to accumulate W-2 data for the EEO-1. Alternatively, employers could obtain this pay information by utilizing quarterly payroll reports for the previous four quarters. Employers that do their payroll in-house will be able to report this data utilizing most major payroll software systems or by using off-the-shelf payroll software that is preprogrammed to compile data for generating W-2s. For employers that outsource their payroll, there would be a one-time burden of writing custom programs to import the data from their payroll companies into their HRIS systems.
In determining how employers would be required to organize and report their employees' W-2 data, the focus was on collectability, burden, confidentiality, and data utility.
Options for collecting aggregate pay data include using pay rates (calculated by employer), range of pay with a maximum and minimum provided by employer, total pay, and average or median pay. There are disadvantages to each of these approaches. Total pay could be impractical and would be dependent on the number of employees. Average pay by occupation would provide limited information about variation. Collecting the range of pay or average pay could produce biased estimates as pay is often distributed in a manner where a few individuals are paid much more than others. This might create misleading data when ranges or means are used as a measure. Simply gathering rates of pay, without standard deviation measures, would not assist in parity/disparity analysis, and asking employers to calculate standard deviations would not only be burdensome but also would risk a higher rate of inaccuracy.
Using pay bands appears to be more likely to generate reliable data while being less burdensome for employers than other reporting alternatives. Therefore, Component 2 of the revised EEO-1 will collect aggregate W-2 data in 12 pay bands for the 10 EEO-1 job categories. Employers will simply count and report the number of employees in each pay band. For example, a filer will report on the EEO-1 that it employs 3 African American women as professionals in the highest pay band. As to data utility, pay bands will allow the EEOC to compute within-job-category variation, across-job-category variation, and overall variation, which would support the EEOC's ability to discern potential discrimination while preserving confidentiality.
By choosing to use pay bands, the EEOC also is adopting a methodology that will limit employer burden. HRIS software developers already are familiar with using pay bands on the EEO-4 survey, which collects pay data from state and local government employers.
Consistent with the recommendations of the Pilot Study, Component 2 of the revised EEO-1 will collect the total number of hours worked by the employees included in each EEO-1 pay band cell. This data will allow analysis of pay differences while considering aggregate variations in hours. The total hours worked also will permit an analysis that accounts for periods when the employees were not employed, thus reflecting part-time work.
The EEOC seeks employer input with respect to how to report hours worked for salaried employees. One approach would be for employers to use an estimate of 40 hours per week for full-time salaried workers. The EEOC is not proposing to require an employer to begin collecting additional data on actual hours worked for salaried workers, to the extent that the employer does not currently maintain such
Generally, however, the initial conclusion is that requiring employers to provide the total number of hours worked would impose a minimal burden. Employers will report only data that they already maintain. The panel of HRIS experts convened for the Pilot Study reported that “total hours worked” data is maintained by almost all payroll systems. The information is available for the previous quarter, the previous four quarters, and the calendar year. For employers that outsource payroll, this variable could be added to the one-time reporting query that is written to download income data.
Statistical tests will be used as an initial check of the W-2 data to be collected on the EEO-1, specifically, statistical significance tests that do not rely on an assumption of a normal distribution. The Pilot Study recommended several statistical techniques to test within-job categories and then suggested further examining companies and establishments with low probabilities that the differences between examined groups, such as men and women, occurred by chance.
The EEOC and OFCCP plan to develop a software tool that will allow their investigators to conduct an initial analysis by looking at W-2 pay distribution within a single firm or establishment, and by comparing the firm's or establishment's data to aggregate industry or metropolitan-area data.
The EEOC and OFCCP jointly collect the data on the EEO-1 report through their Joint Reporting Committee, which has represented the two agencies for the purpose of administering the EEO-1 since the reporting requirement began. All data is initially submitted to the Joint Reporting Committee housed at the EEOC and then provided to OFCCP. EEOC is required to hold its EEO-1 data confidential under Section 709(e) of Title VII, which forbids “any [EEOC] officer or employee” from making “public in any manner whatever any information obtained by the Commission . . . prior to the institution of any [Title VII] proceeding . . . involving such information.” 42 U.S.C. 2000e-8(e). Any EEOC officer or employee who violates this prohibition is guilty of a misdemeanor.
The EEOC publishes aggregate EEO-1 data in a manner that does not reveal any particular employer's data, consistent with Section 709(e). For example, the EEOC has published aggregate EEO-1 data at the national, regional, and industry levels.
After collecting and reconciling EEO-1 data, the Joint Reporting Committee at the EEOC provides a database to OFCCP. OFCCP holds confidential the data for contractor filers to the maximum extent permitted by law, in accordance with Exemption 4 of the Freedom of Information Act and the Trade Secrets Act.
The EEOC intends to submit to OMB a request for a three-year PRA approval of a revised EEO-1. The revised EEO-1 data collection has two components. The first component (Component 1) will collect information identical to that collected by the currently approved EEO-1. The second component (Component 2) will collect data on employees' W-2 pay and hours worked. Component 1 can be found at
For the 2016 reporting cycle, EEO-1 filers would only submit the Component 1 data. Beginning with the 2017 reporting cycle, the EEOC proposes to
The burden on these contractor filers is estimated as follows:
•
The burden imposed on all private industry employer filers and contractor filers with 100 or more employees as a result of the proposed collection of W-2 pay data is estimated as follows:
•
•
Further, the EEOC estimates that the addition of W-2 pay data to the EEO-1 will raise its internal staffing cost by $290,478 due to the increased staff time needed to process the additional data.
The reporting hour burden calculations in this notice reflect a departure from the manner in which the EEOC traditionally has estimated reporting burden. In the past, the EEOC estimated the reporting hour burden based on the number of total cells in the report(s) that a firm had to complete. This approach viewed each report filed by a firm as a separate reporting requirement, analogous to a paper report. In reporting year 2014, however, the number of paper reports declined to just three. In addition, employers now rely extensively on automated HRIS to generate the information they submit on the EEO-1 report.
The EEOC seeks employer input on this burden calculation. The EEOC reviewed OFCCP's ANPRM and NPRM and the public comments relating to the burden calculation for OFCCP's proposal to collect pay data and consulted with OFCCP about burden estimates.
Solicitation of Public Comment: Pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35, and OMB regulation 5 CFR 1320.8(d)(1), the Commission solicits public comment to enable it to:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the Commission's functions, including
2. Improve the accuracy of the Commission's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are required to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
This notice summarizes the EEOC's proposal to submit a revised EEO-1 to OMB for 3-year PRA approval to require private employer filers, as well as most federal government contractor filers, to submit data on employee pay starting with the 2017 reporting cycle. This data collection would meet the statistical needs of both the EEOC and OFCCP. It would also enable employers to self-assess their pay practices and policies and thereby support voluntary compliance. In developing this PRA proposal, the EEOC has balanced enforcement objectives with the burden and confidentiality concerns of respondents.
For the Commission.
The Federal Communications Commission will hold an Open Meeting on the subjects listed below on Thursday, January 28, 2016, which is scheduled to commence at 10:30 a.m. in Room TW-C305, at 445 12th Street SW., Washington, DC.
The Commission will consider the following subjects listed below as a consent agenda and these items will not be presented individually:
The meeting site is fully accessible to people using wheelchairs or other mobility aids. Sign language interpreters, open captioning, and assistive listening devices will be provided on site. Other reasonable accommodations for people with disabilities are available upon request. In your request, include a description of the accommodation you will need and a way we can contact you if we need more information. Last minute requests will be accepted, but may be impossible to fill. Send an email to:
Additional information concerning this meeting may be obtained from the Office of Media Relations, (202) 418-0500; TTY 1-888-835-5322. Audio/Video coverage of the meeting will be broadcast live with open captioning over the Internet from the FCC Live Web page at
For a fee this meeting can be viewed live over George Mason University's Capitol Connection. The Capitol Connection also will carry the meeting live via the Internet. To purchase these services, call (703) 993-3100 or go to
Federal Election Commission.
Thursday, January 28, 2016 at 10:00 a.m.
999 E Street NW., Washington, DC (ninth floor).
This meeting will be open to the public.
The January 28, 2016 meeting has been cancelled.
Judith Ingram, Press Officer, Telephone: (202) 694-1220.
Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Notice of request for public comments regarding an extension to an existing OMB clearance.
Under the provisions of the Paperwork Reduction Act, the Regulatory Secretariat Division will be submitting to the Office of Management and Budget (OMB) a request to review and approve an extension of a previously approved information collection requirement concerning advance payments. A notice was published in the
Submit comments on or before March 2, 2016.
Submit comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden to: Office of Information and Regulatory Affairs of OMB, Attention: Desk Officer for GSA, Room 10236, NEOB, Washington, DC 20503. Additionally submit a copy to GSA by any of the following methods:
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Ms. Kathy Hopkins, Procurement Analyst, Office of Governmentwide Acquisition Policy, GSA 202-969-7226 or email
Advance payments may be authorized under Federal contracts and subcontracts. Advance payments are the least preferred method of contract financing and require special determinations by the agency head or designee. Specific financial information about the contractor is required before determinations by the agency head or designee can be made, and before such payments can be authorized (see FAR 32.4 and 52.232-12). The information is used to determine if advance payments should be provided to the contractor.
Public comments are particularly invited on: Whether this collection of information is necessary for the proper performance of functions of the Federal Acquisition Regulations (FAR), and whether it will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing efforts to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed revision of the National Program of Cancer Registries Cancer Surveillance System information collection, which provides useful data on cancer incidence and trends.
Written comments must be received on or before April 1, 2016.
You may submit comments, identified by Docket No. CDC-2016-0013 by any of the following methods:
All public comment should be submitted through the Federal eRulemaking portal (Regulations.gov) or by U.S. mail to the address listed above.
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact the Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE., MS-D74, Atlanta, Georgia 30329; phone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
National Program of Cancer Registries Cancer Surveillance System (NPCR CSS, OMB No. 0920-0469, exp. 5/31/2016)—Revision—National Center for Chronic Disease Prevention and Health
In 2012, the most recent year for which complete information is available, more than 580,000 people died of cancer and more than 1.5 million were diagnosed with cancer. It is estimated that 13.8 million Americans are currently alive with a history of cancer (2). In the U.S., state-based cancer registries are the only method for systematically collecting and reporting population based information about cancer incidence and outcomes such as survival. These data are used to measure the changing incidence and burden of each cancer; identify populations at increased or increasing risk; target preventive measures; and measure the success or failure of cancer control efforts in the U.S.
In 1992, Congress passed the Cancer Registries Amendment Act which established the National Program of Cancer Registries (NPCR). The NPCR provides support for state-based cancer registries that collect, manage and analyze data about cancer cases. The state-based cancer registries report information to CDC through the National Program of Cancer Registries Cancer Surveillance System (NPCR CSS), (OMB No. 0920-0469 5/31/2016). CDC plans to request OMB approval to continue collecting this information for three years. Data definitions will be updated to reflect changes in national standards for cancer diagnosis and coding, but the number of respondents and the burden per respondent will not change.
The NPCR CSS allows CDC to collect, aggregate, evaluate and disseminate cancer incidence data at the national level. The NPCR CSS is the primary source of information for
The NPCR CSS also allows CDC to monitor cancer trends over time, describe geographic variation in cancer incidence throughout the country, and provide incidence data on racial/ethnic populations and rare cancers. These activities and analyses further support CDC's planning and evaluation efforts for state and national cancer control and prevention. In addition, datasets can be made available for secondary analysis.
Respondents are NPCR-supported central cancer registries (CCR) in 45 U.S. states, 2 territories, and the District of Columbia. Thirty-eight CCRs submit data elements specified for the Standard NPCR CSS Report. Ten specialized CCRs submit data elements specified for the Enhanced NPCR CSS Report, which includes additional information about treatment and follow-up for cases of breast, colorectal, and chronic myeloid leukemia cases diagnosed in 2011. Each CCR is asked to transmit two data files to CDC per year. The first file, submitted in January, is a preliminary report consisting of one year of data for the most recent year of available data. CDC evaluates the preliminary data for completeness and quality and provides a report back to the CCR. The second file, submitted by November, contains cumulative cancer incidence data from the first diagnosis year for which the cancer registry collected data with the assistance of NPCR funds (
The burden for each file transmission is estimated at two hours per response. Because cancer incidence data are already collected and aggregated at the state level the additional burden of reporting the information to CDC is small.
All information is transmitted to CDC electronically. Participation is required as a condition of the cooperative agreement with CDC. There are no costs to respondents except their time.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing efforts to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collect project entitled “
Written comments must be received on or before April 1, 2016.
You may submit comments, identified by Docket No. CDC-2016-0012 by any of the following methods:
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•
All public comment should be submitted through the Federal eRulemaking portal (Regulations.gov) or by U.S. mail to the address listed above.
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact the Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE., MS-D74, Atlanta, Georgia 30329; phone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; to develop, acquire, install and utilize technology and systems for the purpose of collecting, validating and verifying information, processing and maintaining information, and disclosing and providing information; to train personnel and to be able to respond to a collection of information, to search data sources, to complete and review the collection of information; and to transmit or otherwise disclose the information.
Evaluation of Enhancing HIV Prevention Communication and Mobilization Efforts through Strategic Partnerships—New—National Center for HIV/AIDS, Viral Hepatitis, STD, and TB Prevention (NCHHSTP), Centers for Disease Control and Prevention (CDC).
In an effort to refocus attention on domestic HIV and AIDS, CDC launched the Act Against AIDS (AAA) initiative in 2009 with the White House and the U.S. Department of Health and Human Services. AAA is a multifaceted national communication initiative that supports reduction of HIV incidence in the U.S. through multiple, concurrent communication and education campaigns for a variety of audiences including, the general public, populations most affected by HIV and health care providers. All campaigns support the comprehensive HIV prevention efforts of CDC and the National HIV/AIDS Strategy (NHAS).
Within this context, the CDC's Division of HIV/AIDS Prevention (DHAP) is implementing various partnership activities to increase HIV awareness among the general public, reduce new HIV infections among disproportionately impacted populations, and improve health outcomes for people living with HIV and AIDS in the United States and its territories.
For example, DHAP is funding the “Enhancing HIV Prevention Communication and Mobilization Efforts through Strategic Partnerships” program. Partners funded under the partnership program will (1) support the dissemination of Act Against AIDS (AAA) campaign materials, messaging, and other CDC resources that support HIV prevention and (2) implement national engagement efforts focusing on HIV prevention and awareness. Partners represent civil, media, and LGBT-focused organizations.
In addition, DHAP will continue to support the Business Responds to AIDS (BRTA) program. Founded in 1992, the purpose of the BRTA program is to engage and support the private sector in promoting HIV education, awareness, and policies in the workplace. This partnership between CDC, business, labor, and the public health sector aims to encourage businesses to implement HIV/AIDS policies and education programs in the workplace with the overarching goal of increasing public understanding of, involvement in, and support for HIV prevention. Other partnership efforts serve the same purpose: To increase HIV awareness among the general public, reduce new HIV infections among disproportionately impacted populations, and improve health outcomes for people living with HIV and AIDS in the United States and its territories.
The project will evaluate the extent to which activities implemented by partners meet the initiative's goals for disseminating, communicating, and engaging the public in HIV prevention and education activities. We will collect information from partners on their activities for disseminating HIV messages through materials distribution at national and local events, media and advertising, HIV testing facilitation, and formation and coordination of strategic partnerships; barriers and facilitators to implementation of these activities, and factors that may help contextualize their progress towards meeting the initiative's goals; and their involvement in promoting HIV education, awareness, and policies in their organization. We will collect this information through these five sources: (a) Metrics Database: Partners will be required to report quarterly data to CDC and CDC's evaluation contractor through a metrics database. (b) Biannual key informant interviews: The point of contacts from some partner organizations will be interviewed twice yearly via telephone. (c) Interim Progress Reports: Partners will complete a standardized progress report on a biannual basis via a user-friendly electronic form. The progress reports will gather information on key successes, facilitators and barriers, and major achievements. (d) Partner Survey: Partners will complete a brief online
The information obtained from the proposed study will be used by federal policy makers to assess the effectiveness of the partnership activities and the appropriateness of continued or expanded funding of partnership projects.
There is no cost to participants other than their time. The total estimated annualized burden hours are 5,200.
The Centers for Disease Control and Prevention (CDC) has submitted the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. The notice for the proposed information collection is published to obtain comments from the public and affected agencies.
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address any of the following: (a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) Enhance the quality, utility, and clarity of the information to be collected; (d) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570 or send an email to
Developing a Self-Management Tool for Individuals with Systemic Lupus Erythematosus—New—National Center for Chronic Disease Preventions and Health Promotion (NCCDPHP), Centers for Disease Control and Prevention (CDC).
Systemic Lupus Erythematosus (SLE) is an autoimmune disease in which the immune system produces antibodies to cells within the body leading to widespread inflammation and tissue damage. SLE has a variety of clinical manifestations and can affect joints, skin, the brain, lungs, kidneys, and blood vessels.
Effective SLE management depends not only upon clinical interventions, but also on self-management— those things done on a day-to-day basis to manage SLE. SLE self-management requires gaining essential knowledge, skills, and confidence to manage the condition.
CDC previously launched a two-year project called “Filling a Gap: Creating Educational Program, Tools, or Materials to Enhance Self-Management in Systemic Lupus Erythematosus” to identify and address the needs of lupus patients in practicing effective self-management. The purpose of this project is to develop a SLE self-management tool to improve the ability of people living with lupus to manage their condition.
The proposed information collection will assess a prototype CDC SLE self-management tool that is in development to ensure that the tool is usable and useful to members of the target audience. The tool is expected to be comprised of multiple SLE self-management resources that may include, but are not limited to: Education resources about fatigue management, pain management, healthy diet, and exercise; symptom trackers; medication trackers; appointment calendars; resources about communication with family, friends, and co-workers about SLE; and strategies for coping with depression and anxiety.
CDC plans to make the tool available in an electronic format (web-based or a native mobile application) and will
The information collection will also gauge the needs of the target audience(s), tool format and delivery method(s), and the tool's clarity, relevance, salience and appeal. A series of focus groups with women with a diagnosis of SLE, and one-on-one telephone interviews with men with a diagnosis of SLE will be conducted to assess the tool. The same discussion guide will be used for all information collections.
The estimated burden per response for participating in a focus group discussion is two hours. The estimated burden per response for a discussion conducted via telephone interview is 45 minutes. Respondent burden also includes two hours for reviewing the prototype CDC SLE Self-management Tool in advance of the focus group meeting or telephone interview.
OMB approval is requested for one year. Participation is voluntary and there are no costs to respondents other than their time.
The total estimated burden hours are 646.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing efforts to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. This notice invites comment on proposed revisions of the information collection entitled
Written comments must be received on or before April 1, 2016.
You may submit comments, identified by Docket No. CDC-2016-0014 by any of the following methods:
All public comment should be submitted through the Federal eRulemaking portal (Regulations.gov) or by U.S. mail to the address listed above.
Leroy A. Richardson, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE., MS-D74, Atlanta, Georgia 30329; phone: 404-639-7570.
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the
Application for Training (OMB Control No. 0920-0017, Expiration 05/31/2016)—Revision—Division of Scientific Education and Professional Development (DSEPD), Center for Surveillance, Epidemiology and Laboratory Services (CSELS), Centers for Disease Control and Prevention (CDC).
CDC offers public health training to professionals worldwide. Employees of hospitals, universities, medical centers, state and local health departments, and federal agencies apply for training to learn up-to-date public health and healthcare practices. CDC is accredited by multiple accreditation organizations to award continuing education (CE) for public health and healthcare professions.
CDC requires health professionals seeking continuing education (learners) to use the Training and Continuing Education Online (TCEO) system to establish an account by completing the TCEO New Participant Registration form. CDC/CSELS relies on this form to collect information needed to coordinate learner registration for training activities including classroom study, conferences, and e-learning.
The TCEO Proposal is a form course developers will use the TCEO system to apply for their training activities to receive continuing education accreditation through CDC. Introduction of this mechanism will allow course developers to electronically complete and submit continuing education proposals.
CDC requests OMB approval to (1) continue to collect information through the TCEO New Participant Registration form to grant public health professionals the continuing education they need to maintain professional licenses and certifications, create a transcript or summary of training at the participant's request, generate management reports, and maintain training statistics; and (2) establish a new electronic information collection that allows CDC or CDC partner course developers to electronically submit training and continuing education proposals for accreditation.
CDC's TCEO system provides an efficient and effective way for CDC to comply with accreditation organization requirements. Accreditation organizations require a method of tracking participants who complete an education activity and several require collection of profession-specific data. Some accrediting organizations require a permanent record that includes the participant's name, address, and phone number to facilitate retrieval of historical information about when a participant completed a course or several courses during a time period. These data provide the basis for a transcript or for determining whether a person is enrolled in more than one course. CDC uses the email address to verify the participant's electronic request for transcripts, verify course certificates, and send confirmation that a participant is registered for a course. Collection of demographic and profession-specific data through the TCEO New Participant Registration allows CDC to comply with accreditation organization requirements.
The TCEO Proposal will expedite submission, review, and accreditation processes and provide CDC with the information necessary to meet accreditation organization requirements, accredit, and effectively manage training activities. Examples of data to be collected for CDC to process continuing education proposals and meet accreditation organization requirements includes name, email address, phone number, and organization name.
These forms do not duplicate request for information from participants or course developers. Data are collected only once per new registration or once per course.
These information collection instruments have provided, and will continue to provide CDC with the information necessary to manage and conduct training activities pertinent to its mission to strengthen the skills of the current workforce through quality, accredited, competency-based training.
The annual burden table has been updated to reflect (1) discontinuance of the National Laboratory Training Network Registration form, (2) an increase in learners seeking continuing education, particularly through e-learning activities (16,667 burden hours), (3) the introduction of the new TCEO Proposal (600 burden hours), for a total of 17,267 burden hours. There are no costs to respondents.
Food and Drug Administration, HHS.
Notice.
This notice announces a forthcoming meeting of a public advisory committee of the Food and Drug Administration (FDA). The meeting will be open to the public.
FDA intends to make background material available to the public no later than 2 business days before the meeting. If FDA is unable to post the background material on its Web site prior to the meeting, the background material will be made publicly available at the location of the advisory committee meeting, and the background material will be posted on FDA's Web site after the meeting. Background material is available at
Persons attending FDA's advisory committee meetings are advised that the Agency is not responsible for providing access to electrical outlets.
FDA welcomes the attendance of the public at its advisory committee meetings and will make every effort to accommodate persons with disabilities. If you require accommodations due to a disability, please contact Kalyani Bhatt at least 7 days in advance of the meeting.
FDA is committed to the orderly conduct of its advisory committee meetings. Please visit our Web site at
Notice of this meeting is given under the Federal Advisory Committee Act (5 U.S.C. app. 2).
Office of the Secretary, HHS.
Notice.
In compliance with section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995, the Office of the Secretary (OS), Department of Health and Human Services, announces plans to submit a new Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB). Prior to submitting the ICR to OMB, OS seeks comments from the public regarding the burden estimate, below, or any other aspect of the ICR.
Comments on the ICR must be received on or before April 1, 2016.
Submit your comments to
Information Collection Clearance staff,
When submitting comments or requesting information, please include the document identifier HHS-OS-0990-XXXX-60D for reference.
OS specifically requests comments on (1) the necessity and utility of the proposed information collection for the proper performance of the agency's functions, (2) the accuracy of the estimated burden, (3) ways to enhance the quality, utility, and clarity of the information to be collected, and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
Fish and Wildlife Service, Interior.
Notice of receipt of permit renewal application; request for comments.
We, the U.S. Fish and Wildlife Service (Service), have received an application from HPH Properties, L.P. (applicant), for a renewal of incidental take permit TE189382-1 under the Endangered Species Act of 1973, as amended (Act). The applicant has requested a renewal that will extend permit expiration by 6 years from the date the permit is reissued. The applicant has agreed to follow all of the existing low-effect habitat conservation plan (HCP) conditions. If renewed, no additional take will be authorized. The permit would authorize take of the federally endangered Ohlone tiger beetle (
Written comments should be received on or before March 2, 2016.
Lena Chang, Fish and Wildlife Biologist, Ventura Fish and Wildlife Office, at the above address or by calling (805) 644-1766.
We have received an application from HPH Properties, L.P., for a renewal of incidental take permit TE189382-1 for the endangered Ohlone tiger beetle under the Act. The applicant has requested a renewal that will extend the permit expiration by 6 years. The applicant has agreed to follow all of the existing HCP conditions. If the permit is renewed, no additional take will be authorized. The permit would authorize take of the federally endangered Ohlone tiger beetle, incidental to otherwise lawful activities associated with the Santa Cruz Gardens Unit 12 residential development. In addition to the Ohlone tiger beetle, the HCP includes two plants: The federally threatened Santa Cruz tarplant (
The Ohlone tiger beetle was listed by the U.S. Fish and Wildlife Service as endangered on October 3, 2001. Section 9 of the Act (16 U.S.C. 1531
On July 21, 2014, incidental take permit TE189382-0 was transferred from the original permittee, Porter-Livingston Development, Inc. and O'Hara-Balfour LP, to a new permittee, HPH Properties, L.P. Subsequently, a new permit number, TE189382-1, was issued. HPH Properties, L.P. has applied for renewal of a permit for the incidental take of the endangered Ohlone tiger beetle. The potential taking would occur incidental to development of nine new single-family residences at an undeveloped 58.6-acre project site
The Service has made a preliminary determination that renewal of the permit is neither a major Federal action that will significantly affect the quality of the human environment within the meaning of section 102(2)(C) of the National Environmental Policy Act (NEPA), nor will it individually or cumulatively have more than a negligible effect on the species covered in the HCP. Therefore, the permit renewal qualifies for a categorical exclusion under NEPA as provided by the Department of the Interior Manual (516 DM 2, Appendix 1 and 516 DM 8.5).
If you wish to comment on the permit applications, plans, and associated documents, you may submit comments by any one of the methods in
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment, including your personal identifying information, may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public view, we cannot guarantee that we will be able to do so.
We provide this notice under section 10 of the Act (16 U.S.C. 1531
Bureau of Land Management, Interior
Notice of public meeting
In accordance with the Federal Land Policy and Management Act of 1976 (FLPMA), and the Federal Advisory Committee Act of 1972 (FACA), the U. S. Department of the Interior, Bureau of Land Management (BLM), Northern California Resource Advisory Council will meet as indicated below.
The meeting will be held Thursday and Friday, April 7 and 8, 2016, at the Bureau of Land Management Eagle Lake Field Office, 2550 Riverside Drive, Susanville, California. On April 7, the council will convene at 9 a.m. and depart for a field tour focusing on wild horse and burro herd management on public lands. Members of the public are welcome. They must provide their own transportation in a high-clearance four-wheel-drive vehicle, meals and beverages. On April 8, the council will convene a business meeting at 8 a.m. in conference room at the BLM office. The meeting is open to the public. Public Comments will be accepted at 11 a.m.
BLM Northern California District Manager Nancy Haug, (530) 224-2160; or Public Affairs Officer Joseph J. Fontana, (530) 252-5332. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at (800) 877-8339, to contact the above individual during normal business hours. The FIRS is available 24 hours a day, 7 days a week, to leave a message or question with the above individual. You will receive a reply during normal business hours.
The 15-member council advises the Secretary of the Interior, through the BLM, on a variety of planning and management issues associated with public land management on BLM-administered lands in northern California and far northwest Nevada. At this meeting the RAC will discuss development of the Northern California Integrated Resource Management Plan, hear an overview of the BLM's management of wild horses and burros, hear an update on implementation of conservation plans for greater sage-grouse and receive update reports from BLM Northern California District Field Offices. All meetings are open to the public. Members of the public may present written comments to the council. Each formal council meeting will have time allocated for public comments. Depending on the number of persons wishing to speak, and the time available, the time for individual comments may be limited. Members of the public are welcome on field tours, but they must provide their own transportation and meals. Individuals who plan to attend and need special assistance, such as sign language interpretation and other reasonable accommodations, should contact the BLM as provided above.
Bureau of Land Management, Interior.
Notice of public meeting.
In accordance with the Federal Land Policy and Management Act and the Federal Advisory Committee Act of 1972, the U.S. Department of the Interior, Bureau of Land Management (BLM) Central California Resource Advisory Council (RAC) will meet as indicated below.
A business meeting will be held Friday, March 18, 2016, at the Federal Building public meeting room, 2800 Cottage Way, Sacramento, CA, from 8 a.m. to 3 p.m. Time for public comment is reserved from 9 a.m. to 10 a.m.
BLM Central California District Manager Este Stifel, (916) 978-4626; or BLM Public Affairs Officer David Christy, (916) 941-3146.
The 12-member council advises the Secretary of the Interior, through the BLM, on a variety of planning and management issues associated with public land management in the Central California District, which includes the Bishop, Bakersfield, Hollister, Ukiah and Mother Lode Field Offices.
The meeting will include consideration by the RAC of proposed campground fee increases for the Bishop Field Office. The RAC charter states:
Upon the request of the Designated Federal Official (DFO), the Council may make recommendations regarding a standard amenity recreation fee or an expanded recreation amenity fee, whenever the recommendations related to public concerns in the State or region covered by the council regarding:
(A) The implementation of a standard amenity recreation fee or an expanded amenity recreation fee or the establishment of a specific recreation fee site;
(B) The elimination of a standard amenity recreation fee or an expanded amenity recreation fee; or
(C) The expansion or limitation of the recreation fee program.
The Council may make these recommendations for the BLM when the BLM's amenity recreation fees are at issue and it would facilitate implementation of the REA (Federal Lands Recreation Enhancement Act). With the concurrence of the Forest Service (FS) when their amenity recreation fees are at issue, the Council may also make these recommendations for the BLM and/or FS if that would facilitate the effective implementation of the REA.
The RAC will meet from 8 a.m. to 3 p.m. There will be a presentation on the fee proposal at 8:30 a.m. There will be a time for public comment on that and other issues from 9 a.m. to 10 a.m.
Information on the proposed fee increase is available on the web at
Additional ongoing business will be discussed by the council. All meetings are open to the public. Members of the public may present written comments to the council. Each formal council meeting will have time allocated for public comments. Depending on the number of persons wishing to speak, and the time available, the time for individual comments may be limited. The meeting is open to the public. Individuals who plan to attend and need special assistance, such as sign language interpretation and other reasonable accommodations, should contact the BLM as provided above.
Bureau of Land Management, Interior.
Notice of public meeting.
In accordance with the Federal Land Policy and Management Act and the Federal Advisory Committee Act of 1972 (FACA), the Department of the Interior, Bureau of Land Management (BLM) Nevada will hold a joint meeting of its three Resource Advisory Councils (RACs), the Sierra Front-Northwestern Great Basin RAC, the Northeastern Great Basin RAC, and the Mojave-Southern Great Basin RAC in Las Vegas, Nevada. The meeting is open to the public and a public comment period is scheduled for February 11.
The three RACs will meet on Wednesday, February 10, from 8 a.m. to 3:15 p.m. and Thursday, February 11, from 8 a.m. to 4:30 p.m. A public comment period will be held on Thursday, February 11, at 3:30 p.m. The agenda and additional information and will be posted at
Chris Rose, telephone: (775) 861-6480, email:
The three 15-member Nevada RACs advise the Secretary of the Interior, through the BLM Nevada State Director, on a variety of planning and management issues associated with public land management in Nevada. The meeting will be held at the Alexis Park Resort, 375 E. Harmon Ave., Las Vegas, Nevada. Agenda topics include an update on sage grouse, grazing and wild horses and burros; closeout reports of the three RACs; breakout meetings of the three RACs; and scheduling meetings of the individual RACs for the upcoming year. The public may provide written comments to the three RAC groups or to an individual RAC.
Comments may also be submitted by email to
Individuals who plan to attend and need further information about the meeting or need special assistance such as sign language interpretation or other reasonable accommodations may contact Chris Rose at the phone number or email address above.
Bureau of Reclamation, Interior.
Notice.
The Glen Canyon Dam Adaptive Management Work Group (AMWG) makes recommendations to the Secretary of the Interior concerning Glen Canyon Dam operations and other management actions to protect resources downstream of Glen Canyon Dam, consistent with the Grand Canyon Protection Act. The AMWG meets two to three times a year.
The meeting will be held on Wednesday, February 24, 2016, from approximately 9:30 a.m. to approximately 5:30 p.m.; and Thursday, February 25, 2016, from approximately 8 a.m. to approximately 3 p.m.
The meeting will be held at the Embassy Suites Phoenix-Tempe, 4400 S. Rural Road, Tempe, Arizona, 85282.
Beverley Heffernan, Bureau of Reclamation, telephone (801) 524-3712;
The Glen Canyon Dam Adaptive Management Program (GCDAMP) was implemented as a result of the Record of Decision on the Operation of Glen Canyon Dam Final Environmental Impact Statement to comply with consultation requirements of the Grand Canyon Protection Act (Pub. L. 102-575) of 1992. The GCDAMP includes a Federal advisory committee, the AMWG, a technical work group (TWG), a Grand Canyon Monitoring and Research Center, and independent review panels. The TWG is a subcommittee of the AMWG and provides technical advice and recommendations to the AMWG.
To view a copy of the agenda and documents related to the above meeting, please visit Reclamation's Web site at
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted a review pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping duty order on porcelain-on-steel cooking ware from China would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission;
Mary Messer (202-205-3193), Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
(1)
(2) The
(3) The
(4) The
(5) An
Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on this matter, contact Carol McCue Verratti, Deputy Agency Ethics Official, at 202-205-3088.
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping duty order on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping or countervailing duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (OPTIONAL) A statement of whether you agree with the above definitions of the
This proceeding is being conducted under authority of Title VII of the
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted a review pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping duty order on magnesium from China would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission;
Mary Messer (202-205-3193), Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
(1)
(2) The
(3) The
(4) The
(5) An
Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and email address of the certifying official.
(2) A statement indicating whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping duty order on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping or countervailing duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (Optional) A statement of whether you agree with the above definitions of the
This proceeding is being conducted under authority of Title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.61 of the Commission's rules.
By order of the Commission.
Office of Justice Programs, Department of Justice.
60-day notice.
The Department of Justice (DOJ), Office of Justice Programs will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. The proposed information collection is published to obtain comments from the public and affected agencies.
Comments are encouraged and will be accepted for 30 days until March 2, 2016.
If you have additional comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact Maria Swineford, Office of Audit, Assessment, and Management, 810 7th Street NW., Washington, DC 20531. (Phone: 202-514-2000.)
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
(1)
(2)
(3)
(4)
(5)
(6)
The estimated total public burden associated with this information is 3,500.
If additional information is required contact: Jerri Murray, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE., 3E.405B, Washington, DC 20530.
Legal Services Corporation.
Correction Notice.
On January 20, 2016, the Legal Services Corporation (LSC) published a notice in the
This correction is effective January 20, 2016
Mark Freedman, Senior Associate General Counsel, Legal Services Corporation, 3333 K Street NW., Washington, DC 20007; (202) 295-1500;
The title should read “Request for Letters of Intent to Apply for 2016 Technology Initiative Grant Funding.”
Pursuant to Section 19(b)(1)
The Exchange proposes to amend the fees for NYSE MKT Integrated Feed to establish a multiple data feed fee. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend the fees for NYSE MKT Integrated Feed market data product,
Additionally, the various fees applicable to NYSE MKT Integrated Feed, other than the Multiple Data Feed Fee, became operative on January 1,
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The fees are also equitable and not unfairly discriminatory because they will apply to all data recipients that choose to subscribe to NYSE MKT Integrated Feed.
The Exchange believes that it is reasonable to require data recipients to pay a modest additional fee taking a data feed for a market data product in more than two locations, because such data recipients can derive substantial value from being able to consume the product in as many locations as they want. In addition, there are administrative burdens associated with tracking each location at which a data recipient receives the product. The Multiple Data Feed Fee is designed to encourage data recipients to better manage their requests for additional data feeds and to monitor their usage of data feeds. The proposed fee is designed to apply to data feeds received in more than two locations so that each data recipient can have one primary and one backup data location before having to pay a multiple data feed fee. The Exchange notes that this pricing is consistent with similar pricing adopted in 2013 by the Consolidated Tape Association (“CTA”).
The Exchange notes that NYSE MKT Integrated Feed is entirely optional. The Exchange is not required to make NYSE MKT Integrated Feed available or to offer any specific pricing alternatives to any customers, nor is any firm required to purchase NYSE MKT Integrated Feed. Firms that do purchase NYSE MKT Integrated Feed do so for the primary goals of using it to increase revenues, reduce expenses, and in some instances compete directly with the Exchange (including for order flow); those firms are able to determine for themselves whether NYSE MKT Integrated Feed or any other similar products are attractively priced or not.
Firms that do not wish to purchase NYSE MKT Integrated Feed have a variety of alternative market data products from which to choose,
The decision of the United States Court of Appeals for the District of Columbia Circuit in
In fact, the legislative history indicates that the Congress intended that the market system `evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed' and that the SEC wield its regulatory power `in those situations where competition may not be sufficient,' such as in the creation of a `consolidated transactional reporting system.'
As explained below in the Exchange's Statement on Burden on Competition, the Exchange believes that there is substantial evidence of competition in the marketplace for proprietary market data and that the Commission can rely upon such evidence in concluding that the fees established in this filing are the product of competition and therefore satisfy the relevant statutory standards. In addition, the existence of alternatives to these data products, such as consolidated data and proprietary data from other sources, as described below, further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can select such alternatives.
As the
For these reasons, the Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. An exchange's ability to price its proprietary market data feed products is constrained by actual competition for the sale of proprietary market data products, the joint product nature of exchange platforms, and the existence of alternatives to the Exchange's proprietary data.
The market for proprietary data products is currently competitive and inherently contestable because there is fierce competition for the inputs necessary for the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with one another for listings and order flow and sales of market data itself, providing ample opportunities for entrepreneurs who wish to compete in any or all of those areas, including producing and distributing their own market data. Proprietary data products are produced and distributed by each individual exchange, as well as other entities, in a vigorously competitive market. Indeed, the U.S. Department of Justice (“DOJ”) (the primary antitrust regulator) has expressly acknowledged the aggressive actual competition among exchanges, including for the sale of proprietary market data. In 2011, the DOJ stated that exchanges “compete head to head to offer real-time equity data products. These data products include the best bid and offer of every exchange and information on each equity trade, including the last sale.”
Moreover, competitive markets for listings, order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products and therefore constrain markets from overpricing proprietary market data. Broker-dealers send their order flow and transaction reports to multiple venues, rather than providing them all to a single venue, which in turn reinforces this competitive constraint. As a 2010 Commission Concept Release noted, the “current market structure can be described as dispersed and complex” with “trading volume . . . dispersed among many highly automated trading centers that compete for order flow in the same stocks” and “trading centers offer[ing] a wide range of services that are designed to attract different types of market participants with varying trading needs.”
If an exchange succeeds in competing for quotations, order flow, and trade executions, then it earns trading revenues and increases the value of its proprietary market data products because they will contain greater quote and trade information. Conversely, if an exchange is less successful in attracting quotes, order flow, and trade executions, then its market data products may be less desirable to customers in light of the diminished content and data products offered by competing venues may become more attractive. Thus, competition for quotations, order flow, and trade executions puts significant pressure on an exchange to maintain both execution and data fees at reasonable levels.
In addition, in the case of products that are also redistributed through market data vendors, such as Bloomberg and Thompson Reuters, the vendors themselves provide additional price discipline for proprietary data products because they control the primary means of access to certain end users. These vendors impose price discipline based upon their business models. For example, vendors that assess a surcharge on data they sell are able to refuse to offer proprietary products that their end users do not or will not purchase in sufficient numbers. Vendors will not elect to make available NYSE MKT Integrated Feed unless their customers request it, and customers will not elect to pay the proposed fees unless NYSE MKT Integrated Feed can provide value by sufficiently increasing revenues or reducing costs in the customer's business in a manner that will offset the fees. All of these factors operate as constraints on pricing proprietary data products.
Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, proprietary market data and trade executions are a paradigmatic example of joint products with joint costs. The decision of whether and on which platform to post an order will depend on the attributes of the platforms where the order can be posted, including the execution fees, data availability and quality, and price and distribution of data products. Without a platform to post quotations, receive orders, and execute trades, exchange data products would not exist.
The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's platform for posting quotes, accepting orders, and executing transactions and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs.
Moreover, an exchange's broker-dealer customers generally view the costs of transaction executions and market data as a unified cost of doing business with the exchange. A broker-dealer will only choose to direct orders to an exchange if the revenue from the transaction exceeds its cost, including the cost of any market data that the broker-dealer chooses to buy in support of its order routing and trading decisions. If the costs of the transaction are not offset by its value, then the broker-dealer may choose instead not to purchase the product and trade away from that exchange. There is substantial
Other market participants have noted that proprietary market data and trade executions are joint products of a joint platform and have common costs.
Analyzing the cost of market data product production and distribution in isolation from the cost of all of the inputs supporting the creation of market data and market data products will inevitably underestimate the cost of the data and data products because it is impossible to obtain the data inputs to create market data products without a fast, technologically robust, and well-regulated execution system, and system and regulatory costs affect the price of both obtaining the market data itself and creating and distributing market data products. It would be equally misleading, however, to attribute all of an exchange's costs to the market data portion of an exchange's joint products. Rather, all of an exchange's costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products.
As noted above, the level of competition and contestability in the market is evident in the numerous alternative venues that compete for order flow, including 11 equities self-regulatory organization (“SRO”) markets, as well as various forms of alternative trading systems (“ATSs”), including dark pools and electronic communication networks (“ECNs”), and internalizing broker-dealers. SRO markets compete to attract order flow and produce transaction reports via trade executions, and two FINRA-regulated Trade Reporting Facilities compete to attract transaction reports from the non-SRO venues.
Competition among trading platforms can be expected to constrain the aggregate return that each platform earns from the sale of its joint products, but different trading platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. For example, some platforms may choose to pay rebates to attract orders, charge relatively low prices for market data products (or provide market data products free of charge), and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market data products, and setting relatively low prices for accessing posted liquidity. For example, BATS Global Markets (“BATS”) and Direct Edge, which previously operated as ATSs and obtained exchange status in 2008 and 2010, respectively, provided certain market data at no charge on their Web sites in order to attract more order flow, and used revenue rebates from resulting additional executions to maintain low execution charges for their users.
The large number of SROs, ATSs, and internalizing broker-dealers that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO, ATS, and broker-dealer is currently permitted to produce and sell proprietary data products, and many currently do, including but not limited to the Exchange, NYSE, NYSE Arca, NASDAQ OMX, BATS, and Direct Edge.
The fact that proprietary data from ATSs, internalizing broker-dealers, and vendors can bypass SROs is significant in two respects. First, non-SROs can compete directly with SROs for the production and sale of proprietary data products. By way of example, BATS and NYSE Arca both published proprietary data on the Internet before registering as exchanges. Second, because a single order or transaction report can appear in an SRO proprietary product, a non-SRO proprietary product, or both, the amount of data available via proprietary products is greater in size than the actual number of orders and transaction reports that exist in the marketplace. With respect to NYSE MKT Integrated Feed, competitors offer close substitute products.
Those competitive pressures imposed by available alternatives are evident in the Exchange's proposed pricing.
In addition to the competition and price discipline described above, the market for proprietary data products is also highly contestable because market entry is rapid and inexpensive. The history of electronic trading is replete with examples of entrants that swiftly grew into some of the largest electronic trading platforms and proprietary data producers: Archipelago, Bloomberg Tradebook, Island, RediBook, Attain, TrackECN, BATS Trading and Direct Edge. As noted above, BATS launched as an ATS in 2006 and became an exchange in 2008, while Direct Edge
In determining the proposed changes to the fees for NYSE MKT Integrated Feed, the Exchange considered the competitiveness of the market for proprietary data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all users. The existence of numerous alternatives to the Exchange's products, including proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if the attendant fees are not justified by the returns that any particular vendor or data recipient would achieve through the purchase.
Finally, the Exchange believes that the proposed rule change, with respect to the removal of text from the Fee Schedule, is consistent with the provisions of Section 6 of the Act,
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B)
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to section 19(b)(1)
The Exchange proposes to amend the fees for NYSE Order Imbalances and NYSE Alerts to establish a multiple data feed fee. The Exchange also proposes to amend the fees for the NYSE Order Imbalances to discontinue fees relating to managed non-display. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend the fees for NYSE Order Imbalances
• Establish a multiple data feed fee for NYSE Order Imbalances and for NYSE Alerts; and
• Discontinue fees relating to managed non-display for NYSE Order Imbalances.
The Exchange proposes to establish a new monthly fee, the “Multiple Data Feed Fee,” that would apply to data recipients that take a data feed for a market data product in more than two locations. Data recipients taking NYSE Order Imbalances and NYSE Alerts in more than two locations would be charged $200 per product per additional location per month. No new reporting would be required.
Non-Display Use of NYSE market data means accessing, processing, or consuming NYSE market data delivered via direct and/or Redistributor
The Exchange proposes to discontinue the fees related to Managed Non-Display Services because of the limited number of Redistributors that have qualified for Managed Non-Display Services and the administrative burdens associated with the program in light of the limited number of Redistributors that have qualified for Managed Non-Display Services. As proposed, all data recipients currently using NYSE Order Imbalances on a managed non-display basis would continue to be subject to an access fee of $500 per month, and the same non-display services fees,
Data recipients that subscribe to NYSE Order Imbalances are currently charged an access fee of $500 per month. The Exchange currently charges an access fee of $5,000 per month to each NYSE OpenBook data feed recipient. The access fee for NYSE OpenBook allows recipients of NYSE OpenBook to also receive NYSE Order Imbalances and NYSE BBO without separately paying additional access fees for these products.
The Exchange believes that the proposed rule change is consistent with
The fees are also equitable and not unfairly discriminatory because they will apply to all data recipients that choose to subscribe to NYSE Order Imbalances and NYSE Alerts.
The Exchange believes that it is reasonable to require data recipients to pay a modest additional fee taking a data feed for a market data product in more than two locations, because such data recipients can derive substantial value from being able to consume the product in as many locations as they want. In addition, there are administrative burdens associated with tracking each location at which a data recipient receives the product. The Multiple Data Feed Fee is designed to encourage data recipients to better manage their requests for additional data feeds and to monitor their usage of data feeds. The proposed fee is designed to apply to data feeds received in more than two locations so that each data recipient can have one primary and one backup data location before having to pay a multiple data feed fee. The Exchange notes that this pricing is consistent with similar pricing adopted in 2013 by the Consolidated Tape Association (“CTA”).
The Exchange believes that it is reasonable to discontinue Managed Non-Display Fees. The Exchange determined in 2013 that its fee structure, which was then based primarily on counting both display and non-display devices, was no longer appropriate in light of market and technology developments.
The Exchange believes that it is reasonable to make the changes proposed to the application of access fees for NYSE Order Imbalances. Specifically, data recipients that take the NYSE Order Imbalances, or any other data feed, receive value from each product they choose to take. A data recipient that chooses to take multiple products (no recipient is required to take any of products [sic], or any specific combination of them) uses each product in a different way and therefore obtains different value from each. Applying an access fee to each product would bring consistency to the Exchange's application of access fees to each product. The Exchange believes that each product has a separate and distinct value that is appropriate to reflect in a separate access fee. Finally, the requirement to pay separate access fees for each market data product is equitable and not unfairly discriminatory because it would apply to all data recipients and appropriately reflects the value of each product to those who choose to use them.
The Exchange notes that NYSE Order Imbalances and NYSE Alerts are entirely optional. The Exchange is not required to make NYSE Order Imbalances or NYSE Alerts available or to offer any specific pricing alternatives to any customers, nor is any firm required to purchase NYSE Order Imbalances or NYSE Alerts. Firms that do purchase these products do so for the primary goals of using them to increase revenues, reduce expenses, and in some instances compete directly with the Exchange (including for order flow); those firms are able to determine for themselves whether these products or any other similar products are attractively priced or not.
The decision of the United States Court of Appeals for the District of Columbia Circuit in
In fact, the legislative history indicates that the Congress intended that the market system `evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed' and that the SEC wield its regulatory power `in those situations where competition may not be sufficient,' such as in the creation of a `consolidated transactional reporting system.'
As explained below in the Exchange's Statement on Burden on Competition, the Exchange believes that there is substantial evidence of competition in the marketplace for proprietary market
As the
For these reasons, the Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. An exchange's ability to price its proprietary market data feed products is constrained by actual competition for the sale of proprietary market data products, the joint product nature of exchange platforms, and the existence of alternatives to the Exchange's proprietary data.
The market for proprietary data products is currently competitive and inherently contestable because there is fierce competition for the inputs necessary for the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with one another for listings and order flow and sales of market data itself, providing ample opportunities for entrepreneurs who wish to compete in any or all of those areas, including producing and distributing their own market data. Proprietary data products are produced and distributed by each individual exchange, as well as other entities, in a vigorously competitive market. Indeed, the U.S. Department of Justice (“DOJ”) (the primary antitrust regulator) has expressly acknowledged the aggressive actual competition among exchanges, including for the sale of proprietary market data. In 2011, the DOJ stated that exchanges “compete head to head to offer real-time equity data products. These data products include the best bid and offer of every exchange and information on each equity trade, including the last sale.”
Moreover, competitive markets for listings, order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products and therefore constrain markets from overpricing proprietary market data. Broker-dealers send their order flow and transaction reports to multiple venues, rather than providing them all to a single venue, which in turn reinforces this competitive constraint. As a 2010 Commission Concept Release noted, the “current market structure can be described as dispersed and complex” with “trading volume . . . dispersed among many highly automated trading centers that compete for order flow in the same stocks” and “trading centers offer[ing] a wide range of services that are designed to attract different types of market participants with varying trading needs.”
If an exchange succeeds in competing for quotations, order flow, and trade executions, then it earns trading revenues and increases the value of its proprietary market data products because they will contain greater quote and trade information. Conversely, if an exchange is less successful in attracting quotes, order flow, and trade executions, then its market data products may be less desirable to customers in light of the diminished content and data products offered by competing venues may become more attractive. Thus, competition for quotations, order flow, and trade executions puts significant pressure on an exchange to maintain both execution and data fees at reasonable levels.
In addition, in the case of products that are also redistributed through market data vendors, such as Bloomberg and Thompson Reuters, the vendors themselves provide additional price discipline for proprietary data products because they control the primary means of access to certain end users. These vendors impose price discipline based upon their business models. For example, vendors that assess a surcharge on data they sell are able to refuse to offer proprietary products that their end users do not or will not purchase in sufficient numbers. Vendors will not elect to make available NYSE Order Imbalances and NYSE Alerts unless their customers request them, and customers will not elect to pay the proposed fees unless these products can provide value by sufficiently increasing revenues or reducing costs in the customer's business in a manner that will offset the fees. All of these factors operate as constraints on pricing proprietary data products.
Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, proprietary market data and trade executions are a paradigmatic example of joint products with joint costs. The decision of whether and on which platform to post an order will depend on the attributes of the platforms where the order can be posted, including the execution fees, data availability and quality, and price and distribution of data products. Without a platform to post quotations, receive orders, and execute trades, exchange data products would not exist.
The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's platform for posting quotes, accepting orders, and executing transactions and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs.
Moreover, an exchange's broker-dealer customers generally view the costs of transaction executions and market data as a unified cost of doing business with the exchange. A broker-dealer will only choose to direct orders to an exchange if the revenue from the transaction exceeds its cost, including the cost of any market data that the broker-dealer chooses to buy in support of its order routing and trading decisions. If the costs of the transaction are not offset by its value, then the broker-dealer may choose instead not to purchase the product and trade away from that exchange. There is substantial evidence of the strong correlation between order flow and market data purchases. For example, in September 2015, more than 80% of the transaction volume on each of NYSE and NYSE's affiliates NYSE Arca and NYSE MKT was executed by market participants that purchased one or more proprietary market data products (the 20 firms were not the same for each market). A supra-competitive increase in the fees for either executions or market data would create a risk of reducing an exchange's revenues from both products.
Other market participants have noted that proprietary market data and trade executions are joint products of a joint platform and have common costs.
Analyzing the cost of market data product production and distribution in isolation from the cost of all of the inputs supporting the creation of market data and market data products will inevitably underestimate the cost of the data and data products because it is impossible to obtain the data inputs to create market data products without a fast, technologically robust, and well-regulated execution system, and system and regulatory costs affect the price of both obtaining the market data itself and creating and distributing market data products. It would be equally misleading, however, to attribute all of an exchange's costs to the market data portion of an exchange's joint products. Rather, all of an exchange's costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products.
As noted above, the level of competition and contestability in the market is evident in the numerous alternative venues that compete for order flow, including 11 equities self-regulatory organization (“SRO”) markets, as well as various forms of alternative trading systems (“ATSs”), including dark pools and electronic communication networks (“ECNs”), and internalizing broker-dealers. SRO markets compete to attract order flow and produce transaction reports via trade executions, and two FINRA-regulated Trade Reporting Facilities compete to attract transaction reports from the non-SRO venues.
Competition among trading platforms can be expected to constrain the aggregate return that each platform earns from the sale of its joint products, but different trading platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. For example, some platforms may choose to pay rebates to attract orders, charge relatively low prices for market data products (or provide market data products free of charge), and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market data products, and setting relatively low prices for accessing posted liquidity. For example, BATS Global Markets (“BATS”) and Direct Edge, which previously operated as ATSs and obtained exchange status in 2008 and 2010, respectively, provided certain market data at no charge on their Web sites in order to attract more order flow, and used revenue rebates from resulting additional executions to maintain low execution charges for their users.
The large number of SROs, ATSs, and internalizing broker-dealers that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO, ATS, and broker-dealer is currently permitted to produce and sell proprietary data products, and many currently do, including but not limited to the Exchange, NYSE MKT, NYSE
The fact that proprietary data from ATSs, internalizing broker-dealers, and vendors can bypass SROs is significant in two respects. First, non-SROs can compete directly with SROs for the production and sale of proprietary data products. By way of example, BATS and NYSE Arca both published proprietary data on the Internet before registering as exchanges. Second, because a single order or transaction report can appear in an SRO proprietary product, a non-SRO proprietary product, or both, the amount of data available via proprietary products is greater in size than the actual number of orders and transaction reports that exist in the marketplace. Because market data users can find suitable substitutes for most proprietary market data products, a market that overprices its market data products stands a high risk that users may substitute another source of market data information for its own.
Those competitive pressures imposed by available alternatives are evident in the Exchange's proposed pricing.
In addition to the competition and price discipline described above, the market for proprietary data products is also highly contestable because market entry is rapid and inexpensive. The history of electronic trading is replete with examples of entrants that swiftly grew into some of the largest electronic trading platforms and proprietary data producers: Archipelago, Bloomberg Tradebook, Island, RediBook, Attain, TrackECN, BATS Trading and Direct Edge. As noted above, BATS launched as an ATS in 2006 and became an exchange in 2008, while Direct Edge began operations in 2007 and obtained exchange status in 2010.
In determining the proposed change to the fees for NYSE Order Imbalances and NYSE Alerts, the Exchange considered the competitiveness of the market for proprietary data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all users. The existence of numerous alternatives to the Exchange's products, including proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if the attendant fees are not justified by the returns that any particular vendor or data recipient would achieve through the purchase.
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change is effective upon filing pursuant to section 19(b)(3)(A)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under section 19(b)(2)(B)
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 17e-1 (17 CFR 270.17e-1) under the Investment Company Act of 1940 (15 U.S.C. 80a-1
Based on an analysis of fund filings, the staff estimates that approximately 320 funds enter into subadvisory agreements each year.
Based on an analysis of fund filings, we estimate that approximately 1,696 funds use at least one affiliated broker. Based on staff experience and conversations with fund representatives, the staff estimates approximately 40 percent of transactions (and thus, 40% of funds) that occur under the rule 17e-1 would be exempt from its recordkeeping and review requirements. This would leave approximately 1,018 funds
Estimates of average burden hours are made solely for the purposes of the Paperwork Reduction Act and are not derived from a comprehensive or even a representative survey or study of the costs of Commission rules and forms. The collection of information under rule 17e-1 is mandatory. The information provided under rule 17e-1 will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the Commission's estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
Please direct your written comments to Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email to:
On November 6, 2015, NYSE Arca, Inc. (“Exchange” or “NYSE Arca”) filed with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Pursuant to section 19(b)(1) of the Act
The Exchange proposes to amend NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares. Under the Exchange's current rules, a proposed rule change must be filed with the Securities and Exchange Commission (“SEC” or “Commission”) for the listing and trading of each new series of Managed Fund Shares. The Exchange believes that it is appropriate to codify certain rules within Rule 8.600 that would generally eliminate the need for such proposed rule changes, which would create greater efficiency and promote uniform standards in the listing process.
Rule 8.600 sets forth certain rules related to the listing and trading of Managed Fund Shares.
(a) Represents an interest in a registered investment company (“Investment Company”) organized as an open-end management investment company or similar entity, that invests in a portfolio of securities selected by the Investment Company's investment adviser (hereafter “Adviser”) consistent with the Investment Company's investment objectives and policies;
(b) is issued in a specified aggregate minimum number in return for a deposit of a specified portfolio of securities and/or a cash amount with a value equal to the next determined net asset value; and
(c) when aggregated in the same specified minimum number, may be redeemed at a holder's request, which holder will be paid a specified portfolio of securities and/or cash with a value equal to the next determined net asset value.
Effectively, Managed Fund Shares are securities issued by an actively-managed open-end Investment Company (
All Managed Fund Shares listed and/or traded pursuant to Rule 8.600 (including pursuant to unlisted trading privileges) are subject to the full panoply of Exchange rules and procedures that currently govern the trading of equity securities on the Exchange.
In addition, Rule 8.600(d) currently provides for the criteria that Managed Fund Shares must satisfy for initial and continued listing on the Exchange, including, for example, that a minimum number of Managed Fund Shares are required to be outstanding at the time of commencement of trading on the Exchange. However, the current process for listing and trading new series of Managed Fund Shares on the Exchange requires that the Exchange submit a proposed rule change with the Commission. In this regard, Commentary .01 to Rule 8.600 specifies that the Exchange will file separate proposals under section 19(b) of the Act (hereafter, a “proposed rule change”) before listing and trading of shares of an issue of Managed Fund Shares.
The Exchange would amend Commentary .01 to Rule 8.600 to specify that the Exchange may approve Managed Fund Shares for listing and/or trading (including pursuant to unlisted trading privileges) pursuant to SEC Rule
The Exchange would also specify within Commentary .01 to Rule 8.600 that components of Managed Fund Shares listed pursuant to SEC Rule 19b-4(e) must satisfy on an initial and continued basis certain specific criteria, which the Exchange would include within Commentary .01, as described in greater detail below. As proposed, the Exchange would continue to file separate proposed rule changes before the listing and trading of Managed Fund Shares with components that do not satisfy the additional criteria described below or components other than those specified below. For example, if the components of a Managed Fund Share exceeded one of the applicable thresholds, the Exchange would file a separate proposed rule change before listing and trading such Managed Fund Share. Similarly, if the components of a Managed Fund Share included a security or asset that is not specified below, the Exchange would file a separate proposed rule change.
The Exchange would also add to the criteria of Rule 8.600(c) to provide that the Web site for each series of Managed Fund Shares shall disclose certain information regarding the Disclosed Portfolio, to the extent applicable. The required information includes the following, to the extent applicable: Ticker symbol, CUSIP or other identifier, a description of the holding, identity of the asset upon which the derivative is based, the strike price for any options, the quantity of each security or other asset held as measured by select metrics, maturity date, coupon rate, effective date, market value and percentage weight of the holding in the portfolio.
In addition, the Exchange would amend Rule 8.600(d) to specify that all Managed Fund Shares must have a stated investment objective, which must be adhered to under normal market conditions.
Finally, the Exchange would also amend the continued listing requirement in Rule 8.600(d)(2)(A) by changing the requirement that a Portfolio Indicative Value for Managed Fund Shares be widely disseminated by one or more major market data vendors at least every 15 seconds during the time when the Managed Fund Shares trade on the Exchange to a requirement that a Portfolio Indicative Value be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session (as defined in NYSE Arca Equities Rule 7.34).
The Exchange is proposing standards that would pertain to Managed Fund Shares to qualify for listing and trading pursuant to SEC Rule 19b-4(e). These standards would be grouped according to security or asset type. The Exchange notes that the standards proposed for a Managed Fund Share portfolio that holds U.S. Component Stocks, Non-U.S. Component Stocks, Derivative Securities Products and Index-Linked Securities are based in large part on the existing equity security standards applicable to Units in Commentary .01 to Rule 5.2(j)(3). The standards proposed for a Managed Fund Share portfolio that holds fixed income securities are based in large part on the existing fixed income security standards applicable to Units in Commentary .02 to Rule 5.2(j)(3). Many of the standards proposed for other types of holdings in a Managed Fund Share portfolio are based on previous proposed rule changes for specific series of Managed Fund Shares.
Proposed Commentary .01(a) would describe the standards for a Managed Fund Share portfolio that holds equity securities, which are defined to be U.S. Component Stocks,
As proposed in Commentary .01(a)(1) to Rule 8.600, the component stocks of the equity portion of a portfolio that are U.S. Component Stocks shall meet the following criteria:
(1) Component stocks (excluding Derivative Securities Products and Index-Linked Securities) that in the aggregate account for at least 90% of the equity weight of the portfolio (excluding such Derivative Securities Products and Index-Linked Securities) each must
(2) Component stocks (excluding Derivative Securities Products and Index-Linked Securities) that in the aggregate account for at least 70% of the equity weight of the portfolio (excluding such Derivative Securities Products and Index-Linked Securities) each must have a minimum monthly trading volume of 250,000 shares, or minimum notional volume traded per month of $25,000,000, averaged over the last six months;
(3) The most heavily weighted component stock (excluding Derivative Securities Products and Index-Linked Securities) must not exceed 30% of the equity weight of the portfolio, and, to the extent applicable, the five most heavily weighted component stocks (excluding Derivative Securities Products and Index-Linked Securities) must not exceed 65% of the equity weight of the portfolio;
(4) Where the equity portion of the portfolio does not include Non-U.S. Component Stocks, the equity portion of the portfolio shall include a minimum of 13 component stocks; provided, however, that there shall be no minimum number of component stocks if (a) one or more series of Derivative Securities Products or Index-Linked Securities constitute, at least in part, components underlying a series of Managed Fund Shares, or (b) one or more series of Derivative Securities Products or Index-Linked Securities account for 100% of the equity weight of the portfolio of a series of Managed Fund Shares;
(5) Except as provided in proposed Commentary .01(a), equity securities in the portfolio must be U.S. Component Stocks listed on a national securities exchange and must be NMS Stocks as defined in Rule 600 of Regulation NMS;
(6) For Derivative Securities Products and Index-Linked Securities, no more than 25% of the equity weight of the portfolio could include leveraged and/or inverse leveraged Derivative Securities Products or Index-Linked Securities; and
(7) American Depositary Receipts (“ADRs”) may be sponsored or unsponsored. However no more than 10% of the equity weight of the portfolio shall consist of unsponsored ADRs.
As proposed in Commentary .01(a)(2) to Rule 8.600, the component stocks of the equity portion of a portfolio that are Non-U.S. Component Stocks shall meet the following criteria:
(1) Non-U.S. Component Stocks each shall have a minimum market value of at least $100 million;
(2) Non-U.S. Component Stocks each shall have a minimum global monthly trading volume of 250,000 shares, or minimum global notional volume traded per month of $25,000,000, averaged over the last six months;
(3) The most heavily weighted Non-U.S. Component Stock shall not exceed 25% of the equity weight of the portfolio, and, to the extent applicable, the five most heavily weighted Non-U.S. Component Stocks shall not exceed 60% of the equity weight of the portfolio;
(4) Where the equity portion of the portfolio includes Non-U.S. Component Stocks, the equity portion of the portfolio shall include a minimum of 20 component stocks; provided, however, that there shall be no minimum number of component stocks if (i) one or more series of Derivative Securities Products or Index-Linked Securities constitute, at least in part, components underlying a series of Managed Fund Shares, or (ii) one or more series of Derivative Securities Products or Index-Linked Securities account for 100% of the equity weight of the portfolio of a series of Managed Fund Shares;
(5) Each Non-U.S. Component Stock shall be listed and traded on an exchange that has last-sale reporting.
The Exchange notes that it is not proposing to require that any of the equity portion of the equity portfolio composed of Non-U.S. Component Stocks be listed on markets that are either a member of the Intermarket Surveillance Group (“ISG”) or a market with which the Exchange has a comprehensive surveillance sharing agreement (“CSSA”).
Proposed Commentary .01(a)(3) would provide that the portfolio may hold rights and warrants, provided that the common stock underlying such rights or warrants must be U.S. Component Stocks or Non-U.S. Component Stocks that meet the criteria set forth in paragraph (a)(1) or paragraph (a)(2) of Commentary .01.
Proposed Commentary .01(b) would describe the standards for a Managed Fund Share portfolio that holds fixed income securities, which are debt securities
(1) Components that in the aggregate account for at least 75% of the fixed income weight of the portfolio each shall have a minimum original principal amount outstanding of $100 million or more;
(2) No component fixed-income security (excluding Treasury Securities and GSE Securities) could represent more than 30% of the fixed income weight of the portfolio, and the five most heavily weighted component fixed income securities in the portfolio must not in the aggregate account for more than 65% of the fixed income weight of the portfolio;
(3) An underlying portfolio (excluding exempted securities) that includes fixed income securities must include a minimum of 13 non-affiliated issuers; provided, however, that there shall be no minimum number of non-affiliated issuers required for fixed income securities if at least 70% of the weight of the portfolio consists of equity securities as described in proposed Commentary .01(a).
(4) Component securities that in aggregate account for at least 90% of the fixed income weight of the portfolio must be either (a) from issuers that are required to file reports pursuant to Sections 13 and 15(d) of the Act; (b) from issuers that have a worldwide market value of its outstanding common equity held by non-affiliates of $700 million or more; (c) from issuers that have outstanding securities that are notes, bonds debentures, or evidence of indebtedness having a total remaining principal amount of at least $1 billion; (d) exempted securities as defined in section 3(a)(12) of the Act; or (e) from issuers that are a government of a foreign country or a political subdivision of a foreign country; and
(5) Non-agency, non-GSE and privately-issued mortgage-related and other asset-backed securities components of a portfolio shall not account, in the aggregate, for more than 20% of the weight of the fixed income portion of the portfolio.
(6) Any convertible security must be convertible into an equity security that meets the criteria set forth in paragraph (a)(1) or paragraph (a)(2) of Commentary .01.
Proposed Commentary .01(c) would describe the standards for a Managed Fund Share portfolio that holds cash and cash equivalents.
(1) U.S. Government securities, including bills, notes and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. Government agencies or instrumentalities;
(2) certificates of deposit issued against funds deposited in a bank or savings and loan association;
(3) bankers' acceptances, which are short-term credit instruments used to finance commercial transactions;
(4) repurchase agreements and reverse repurchase agreements;
(5) bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest;
(6) commercial paper, which are short-term unsecured promissory notes; and
(7) money market funds.
Proposed Commentary .01(d) would describe the standards for a Managed Fund Share portfolio that holds listed derivatives, including futures, options and swaps on commodities, currencies and financial instruments (
Proposed Commentary .01(f) would provide that, to the extent that listed or OTC derivatives are used to gain exposure to individual equities and/or fixed income securities, or to indexes of equities and/or fixed income securities, such equities and/or fixed income securities, as applicable, shall meet the criteria set forth in Commentary .01(a) and .01(b) to Rule 8.600, respectively.
The Exchange believes that the proposed standards would continue to ensure transparency surrounding the listing process for Managed Fund Shares. Additionally, the Exchange believes that the proposed portfolio standards for listing and trading Managed Fund Shares, many of which track existing Exchange rules relating to Units, are reasonably designed to promote a fair and orderly market for such Managed Fund Shares.
In support of this proposal, the Exchange represents that:
(1) The Managed Fund Shares will continue to conform to the initial and continued listing criteria under Rule 8.600;
(2) the Exchange's surveillance procedures are adequate to continue to properly monitor the trading of the Managed Fund Shares in all trading sessions and to deter and detect violations of Exchange rules. Specifically, the Exchange intends to utilize its existing surveillance procedures applicable to derivative products, which will include Managed Fund Shares, to monitor trading in the Managed Fund Shares;
(3) prior to the commencement of trading of a particular series of Managed Fund Shares, the Exchange will inform its Equity Trading Permit (“ETP”) Holders in a Bulletin of the special characteristics and risks associated with trading the Managed Fund Shares, including procedures for purchases and redemptions of Managed Fund Shares, suitability requirements under NYSE Arca Equities Rule 9.2(a), the risks involved in trading the Managed Fund Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated, information regarding the Portfolio Indicative Value and the Disclosed Portfolio, prospectus delivery requirements, and other trading information. In addition, the Bulletin will disclose that the Managed Fund Shares are subject to various fees and expenses, as described in the applicable registration statement, and will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. Finally, the Bulletin will disclose that the net asset value for the Managed Fund Shares will be calculated after 4 p.m. ET each trading day; and
(4) the issuer of a series of Managed Fund Shares will be required to comply with Rule 10A-3 under the Act for the initial and continued listing of Managed Fund Shares, as provided under NYSE Arca Equities Rule 5.3.
The Exchange notes that the proposed change is not otherwise intended to address any other issues and that the Exchange is not aware of any problems that ETP Holders or issuers would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,
The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest because it would facilitate the listing and trading of additional Managed Fund Shares, which would enhance competition among market participants, to the benefit of investors and the marketplace. Specifically, after more than six years under the current process, whereby the Exchange is required to file a proposed rule change with the Commission for the listing and trading of each new series of Managed Fund Shares, the Exchange believes that it is appropriate to codify certain rules within Rule 8.600 that would generally eliminate the need for separate proposed rule changes. The Exchange believes that this would facilitate the listing and trading of additional types of Managed Fund Shares that have investment portfolios that are similar to investment portfolios for Units, which have been approved for listing and trading, thereby creating greater efficiencies in the listing process for the Exchange and the Commission. In this regard, the Exchange notes that the standards proposed for Managed Fund Share portfolios that include U.S. Component Stocks, Non-U.S. Component Stocks, Derivative Securities Products, and Index-Linked Securities are based in large part on the existing equity security standards applicable to Units in Commentary .01 to Rule 5.2(j)(3) and that the standards proposed for Managed Fund Share portfolios that include fixed income securities are based in large part on the existing fixed income standards applicable to Units in Commentary .02 to Rule 5.2(j)(3). Additionally, many of the standards proposed for other types of holdings of series of Managed Fund Shares are based on previous proposed rule changes for specific series of Managed Fund Shares.
With respect to the proposed addition to the criteria of Rule 8.600(c) to provide that the Web site for each series of Managed Fund Shares shall disclose certain information regarding the Disclosed Portfolio, to the extent applicable, the Exchange notes that proposed rule changes approved by the Commission for previously-listed series of Managed Fund Shares have similarly included disclosure requirements with respect to each portfolio holding, as
With respect to the proposed criteria applicable to U.S. Component Stocks, the Exchange notes that such criteria are similar to those in Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3) relating to criteria applicable to an index or portfolio of U.S. Component Stocks. In addition, Non-U.S. Component Stocks also will be required to meet criteria similar to certain generic listing standards in Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3) relating to criteria applicable to an index or portfolio of U.S. Component Stocks and Non-U.S. Component Stocks underlying a series of Units to be listed and traded on the Exchange pursuant to Rule 19b-4(e) under the Act.
With respect to the proposed requirement in Commentary .01(a)(1)(G) that no more than 10% of the equity weight of the portfolio shall consist of unsponsored ADRs, the Exchange notes that such requirement will ensure that unsponsored ADRs, which are traded OTC and which generally have less market transparency than sponsored ADRs, could account for only a small percentage of the equity weight of a portfolio. Further, the requirement is consistent with representations made in proposed rule changes for issues of Managed Fund Shares previously approved by the Commission.
With respect to the proposed requirement in Commentary .01(a)(3) that a the common stock underlying rights or warrants in a portfolio must be U.S. Component Stocks or Non-U.S. Component Stocks that meet the criteria set forth in paragraph (a)(1) or paragraph (a)(2) of Commentary .01, such requirement would assure that common stocks underlying an issue of rights or warrants meet the liquidity and other criteria in Commentary .01 applicable to U.S. Component Stocks and Non-U.S. Component Stocks.
Similarly, with respect to the proposed requirement in Commentary .01(b)(6) that any convertible security must be convertible into an equity security that meets the criteria in paragraph (a)(1) or paragraph (a)(2) of Commentary .01, such requirement would assure that the equity securities into which a convertible security could be converted meet the liquidity and other criteria in Commentary .01 applicable to such equity securities (
With respect to the proposed amendment to the continued listing requirement in Rule 8.600(d)(2)(A) to require dissemination of a Portfolio Indicative Value at least every 15 seconds during the Core Trading Session (as defined in NYSE Arca Equities Rule 7.34), such requirement conforms to the requirement applicable to the dissemination of the Intraday Indicative Value for Units in Commentary .01(c) and Commentary .02 (c) to NYSE Arca Equities Rule 5.2(j)(3). In addition, such dissemination is consistent with representations made in proposed rule changes for issues of Managed Fund Shares previously approved by the Commission.
With respect to the proposed requirement in Commentary .01(b)(3) to Rule 8.600 that an underlying portfolio (excluding exempted securities) that includes fixed income securities must include a minimum of 13 non-affiliated issuers, but that there would be no minimum number of non-affiliated issuers required for fixed income securities if at least 70% of the weight of the portfolio consists of equity securities, the Exchange notes that such requirement is consistent with proposed Commentary .01(b)(2). The Exchange further notes that Commentary .02 (a)(4) to Rule 5.2(j)(3) currently provides that a single fixed income security can represent up to 30% of the weight of an index underlying a series of Units. Proposed Commentary .01(b)(3) to Rule 8.600, therefore, provides for a maximum weighting of a fixed income security in a fund's portfolio comparable to existing rules applicable to Units based on fixed income indexes.
With respect to the proposed requirement in Commentary .01(b)(5) that non-agency, non-GSE and privately-issued mortgage-related and other asset-backed securities components of a portfolio shall not account, in the aggregate, for more than 20% of the weight of the fixed income portion of the portfolio, the Exchange notes that such requirement is consistent with representations made in proposed rule changes for issues of Managed Fund Shares previously approved by the Commission.
With respect to the proposed amendment to Commentary .01(c) relating to cash and cash equivalents, while there is no limitation on the amount of cash and cash equivalents that can make up the portfolio, such instruments are short-term, highly liquid, and of high credit quality, making them less susceptible than other asset classes both to price manipulation and volatility. Further, the requirement is consistent with representations made in proposed rule changes for issues of Managed Fund Shares previously approved by the Commission.
With respect to proposed Commentary .01(d)(1) to Rule 8.600 relating to listed derivatives, the Exchange believes that it is appropriate that there be no limit to the percentage of a portfolio invested in such holdings, provided that, in the aggregate, at least 90% of the weight of such holdings
With respect to proposed Commentary .01(e) to Rule 8.600 relating to OTC derivatives, the Exchange believes that the limitation to 20% of assets for non-centrally cleared derivatives would assure that the preponderance of fund investments would not be in derivatives that are not listed and centrally cleared. The Exchange believes that such a limitation is sufficient to mitigate the risks associated with price manipulation because a 20% cap on OTC derivatives will ensure that any series of Managed Fund Shares will be sufficiently broad-based in scope to minimize potential manipulation associated with OTC derivatives and because the remaining 80% of the portfolio will consist of instruments subject to numerous restrictions designed to prevent manipulation, including equity securities (which, as proposed, would be subject to market cap, trading volume, and diversity requirements, among others), fixed income securities (which, as proposed, would be subject to principal amount outstanding, diversity, and issuer requirements, among others), cash and cash equivalents (which, as proposed, would be limited to short-term, highly liquid, and high credit quality instruments), and/or listed derivatives (which, as proposed, 90% of the weight of such listed derivatives will be futures, options and swaps whose principal market is a member of ISG).
With respect to proposed Commentary .01(f) to Rule 8.600 relating to a fund's use of listed or OTC derivatives to gain exposure to individual equities and/or fixed income securities, or to indexes of equities and/or indexes of fixed income securities, the Exchange notes that such exposure would be required to meet the numerical and other criteria set forth in proposed Commentary .01(a) and .01(b) to Rule 8.600 respectively. The Exchange notes that, for purposes of this proposal, a portfolio's investment in OTC derivatives will be calculated as the amount of any margin required by a counterparty for the purchase of a derivative by a fund.
Quotation and other market information relating to listed futures and options is available from the exchanges listing such instruments as well as from market data vendors. With respect to centrally-cleared swaps
With respect to security-based swaps regulated by the Commission, the Commission has adopted Regulation SBSR under the Act implementing requirements for regulatory reporting and public dissemination of security-based swap transactions set forth in title VII of the Dodd-Frank Act. Regulation SBSR provides for the reporting of security-based swap information to registered security-based swap data repositories (“Registered SDRs”) or the Commission, and the public dissemination of security-based swap transaction, volume, and pricing information by Registered SDRs.
Price information relating to forwards and OTC options will be available from major market data vendors.
The Exchange notes that a fund's investments in derivative instruments would be subject to limits on leverage imposed by the 1940 Act. Section 18(f) of the 1940 Act and related Commission guidance limit the amount of leverage an investment company can obtain. A fund's investments would be consistent with its investment objective and would not be used to enhance leverage. To limit the potential risk associated with a fund's use of derivatives, a fund will segregate or “earmark” assets determined to be liquid by a fund in accordance with the 1940 Act (or, as permitted by applicable regulation, enter into certain offsetting positions) to cover its obligations under derivative instruments. A fund's investments will not be used to seek performance that is the multiple or inverse multiple (
The proposed rule change is also designed to protect investors and the public interest because Managed Fund Shares listed and traded pursuant to
The proposed rule change is also designed to protect investors and the public interest as well as to promote just and equitable principles of trade in that any Non-U.S. Component Stocks will each meet the following criteria initially and on a continuing basis: (1) Have a minimum market value of at least $100 million; (2) have a minimum global monthly trading volume of 250,000 shares, or minimum global notional volume traded per month of $25,000,000, averaged over the last six months; (3) most heavily weighted Non-U.S. Component Stock shall not exceed 25% of the equity weight of the portfolio, and, to the extent applicable, the five most heavily weighted Non-U.S. Component Stocks shall not exceed 60% of the equity weight of the portfolio; and (4) each Non-U.S. Component Stock shall be listed and traded on an exchange that has last-sale reporting. The Exchange believes that such quantitative criteria are sufficient to mitigate any concerns that may arise on the basis of a series of Managed Fund Shares potentially holding 100% of its assets in Non-U.S. Component Stocks that are neither listed on members of ISG nor exchanges with which the Exchange has in place a CSSA because, as stated above, such criteria are either the same or more stringent than the portfolio requirements for Index Fund Shares that hold Non-U.S. Component Stocks and there are no such requirements related to such securities being listed on an exchange that is a member of ISG or with which the Exchange has in place a CSSA. Further, the Exchange has not encountered and is not aware of any instances of manipulation or other negative impact in any series of Index Fund Shares that has occurred by virtue of the Index Fund Shares holding such Non-U.S. Component Stocks. As such, the Exchange believes that there should be no difference in the portfolio requirements for Managed Fund Shares and Index Fund Shares as it relates to holding Non-U.S. Component Stocks that are not listed on an exchange that is a member of ISG or with which the Exchange has in place a CSSA.
The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices because the Managed Fund Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in Rule 8.600. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Managed Fund Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. FINRA, on behalf of the Exchange, or the regulatory staff of the Exchange, will communicate as needed regarding trading in Managed Fund Shares with other markets that are members of the ISG, including all U.S. securities exchanges and futures exchanges on which the components are traded. In addition, the Exchange may obtain information regarding trading in Managed Fund Shares from other markets that are members of the ISG, including all U.S. securities exchanges and futures exchanges on which the components are traded, or with which the Exchange has in place a CSSA.
The Exchange also believes that the proposed rule change would fulfill the intended objective of Rule 19b-4(e) under the Act by allowing Managed Fund Shares that satisfy the proposed listing standards to be listed and traded without separate Commission approval. However, as proposed, the Exchange would continue to file separate proposed rule changes before the listing and trading of Managed Fund Shares that do not satisfy the additional criteria described above.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with section 6(b)(8) of the Act,
No written comments were solicited or received with respect to the proposed rule change.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment No. 2 to proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to section 19(b)(1)
The Exchange proposes to amend the fees for NYSE Integrated Feed to establish a multiple data feed fee. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend the fees for NYSE Integrated Feed market data product,
Additionally, the various fees applicable to NYSE Integrated Feed, other than the Multiple Data Feed Fee, became operative on January 1, 2016.
The Exchange believes that the proposed rule change is consistent with the provisions of section 6 of the Act,
The fees are also equitable and not unfairly discriminatory because they will apply to all data recipients that choose to subscribe to NYSE Integrated Feed.
The Exchange believes that it is reasonable to require data recipients to pay a modest additional fee taking a data feed for a market data product in more than two locations, because such data recipients can derive substantial value from being able to consume the product in as many locations as they want. In addition, there are administrative burdens associated with tracking each location at which a data recipient receives the product. The Multiple Data Feed Fee is designed to encourage data recipients to better manage their requests for additional data feeds and to monitor their usage of data feeds. The proposed fee is designed to apply to data feeds received in more than two locations so that each data recipient can have one primary and one backup data location before having to pay a multiple data feed fee. The Exchange notes that this pricing is consistent with similar pricing adopted in 2013 by the Consolidated Tape Association (“CTA”).
The Exchange notes that NYSE Integrated Feed is entirely optional. The Exchange is not required to make NYSE Integrated Feed available or to offer any specific pricing alternatives to any customers, nor is any firm required to purchase NYSE Integrated Feed. Firms that do purchase NYSE Integrated Feed do so for the primary goals of using it to increase revenues, reduce expenses, and in some instances compete directly with the Exchange (including for order flow); those firms are able to determine
Firms that do not wish to purchase NYSE Integrated Feed have a variety of alternative market data products from which to choose,
The decision of the United States Court of Appeals for the District of Columbia Circuit in
In fact, the legislative history indicates that the Congress intended that the market system `evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed' and that the SEC wield its regulatory power `in those situations where competition may not be sufficient,' such as in the creation of a `consolidated transactional reporting system.'
As explained below in the Exchange's Statement on Burden on Competition, the Exchange believes that there is substantial evidence of competition in the marketplace for proprietary market data and that the Commission can rely upon such evidence in concluding that the fees established in this filing are the product of competition and therefore satisfy the relevant statutory standards. In addition, the existence of alternatives to these data products, such as consolidated data and proprietary data from other sources, as described below, further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can select such alternatives.
As the
For these reasons, the Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. An exchange's ability to price its proprietary market data feed products is constrained by actual competition for the sale of proprietary market data products, the joint product nature of exchange platforms, and the existence of alternatives to the Exchange's proprietary data.
The market for proprietary data products is currently competitive and inherently contestable because there is fierce competition for the inputs necessary for the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with one another for listings and order flow and sales of market data itself, providing ample opportunities for entrepreneurs who wish to compete in any or all of those areas, including producing and distributing their own market data. Proprietary data products are produced and distributed by each individual exchange, as well as other entities, in a vigorously competitive market. Indeed, the U.S. Department of Justice (“DOJ”) (the primary antitrust regulator) has expressly acknowledged the aggressive actual competition among exchanges, including for the sale of proprietary market data. In 2011, the DOJ stated that exchanges “compete head to head to offer real-time equity data products. These data products include the best bid and offer of every exchange and information on each equity trade, including the last sale.”
Moreover, competitive markets for listings, order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products and therefore constrain markets from overpricing proprietary market data. Broker-dealers send their order flow and transaction reports to multiple venues, rather than providing them all to a single venue, which in turn reinforces this competitive constraint. As a 2010 Commission Concept Release noted, the “current market structure can be described as dispersed and complex” with “trading volume . . . dispersed among many highly automated trading centers that compete for order flow in the same stocks” and “trading centers offer[ing] a wide range of services that are designed to attract different types of market participants with varying trading
If an exchange succeeds in competing for quotations, order flow, and trade executions, then it earns trading revenues and increases the value of its proprietary market data products because they will contain greater quote and trade information. Conversely, if an exchange is less successful in attracting quotes, order flow, and trade executions, then its market data products may be less desirable to customers in light of the diminished content and data products offered by competing venues may become more attractive. Thus, competition for quotations, order flow, and trade executions puts significant pressure on an exchange to maintain both execution and data fees at reasonable levels.
In addition, in the case of products that are also redistributed through market data vendors, such as Bloomberg and Thompson Reuters, the vendors themselves provide additional price discipline for proprietary data products because they control the primary means of access to certain end users. These vendors impose price discipline based upon their business models. For example, vendors that assess a surcharge on data they sell are able to refuse to offer proprietary products that their end users do not or will not purchase in sufficient numbers. Vendors will not elect to make available NYSE Integrated Feed unless their customers request it, and customers will not elect to pay the proposed fees unless NYSE Integrated Feed can provide value by sufficiently increasing revenues or reducing costs in the customer's business in a manner that will offset the fees. All of these factors operate as constraints on pricing proprietary data products.
Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, proprietary market data and trade executions are a paradigmatic example of joint products with joint costs. The decision of whether and on which platform to post an order will depend on the attributes of the platforms where the order can be posted, including the execution fees, data availability and quality, and price and distribution of data products. Without a platform to post quotations, receive orders, and execute trades, exchange data products would not exist.
The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's platform for posting quotes, accepting orders, and executing transactions and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs.
Moreover, an exchange's broker-dealer customers generally view the costs of transaction executions and market data as a unified cost of doing business with the exchange. A broker-dealer will only choose to direct orders to an exchange if the revenue from the transaction exceeds its cost, including the cost of any market data that the broker-dealer chooses to buy in support of its order routing and trading decisions. If the costs of the transaction are not offset by its value, then the broker-dealer may choose instead not to purchase the product and trade away from that exchange. There is substantial evidence of the strong correlation between order flow and market data purchases. For example, in September 2015, more than 80% of the transaction volume on each of NYSE and NYSE's affiliates NYSE Arca, Inc. (“NYSE Arca”) and NYSE MKT LLC (“MKT”) was executed by market participants that purchased one or more proprietary market data products (the 20 firms were not the same for each market). A supra-competitive increase in the fees for either executions or market data would create a risk of reducing an exchange's revenues from both products.
Other market participants have noted that proprietary market data and trade executions are joint products of a joint platform and have common costs.
Analyzing the cost of market data product production and distribution in isolation from the cost of all of the inputs supporting the creation of market data and market data products will inevitably underestimate the cost of the data and data products because it is impossible to obtain the data inputs to create market data products without a fast, technologically robust, and well-regulated execution system, and system and regulatory costs affect the price of both obtaining the market data itself and creating and distributing market data products. It would be equally misleading, however, to attribute all of an exchange's costs to the market data portion of an exchange's joint products. Rather, all of an exchange's costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products.
As noted above, the level of competition and contestability in the market is evident in the numerous alternative venues that compete for order flow, including 11 equities self-regulatory organization (“SRO”) markets, as well as various forms of alternative trading systems (“ATSs”), including dark pools and electronic communication networks (“ECNs”), and internalizing broker-dealers. SRO markets compete to attract order flow and produce transaction reports via trade executions, and two FINRA-regulated Trade Reporting Facilities compete to attract transaction reports from the non-SRO venues.
Competition among trading platforms can be expected to constrain the aggregate return that each platform earns from the sale of its joint products, but different trading platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. For example, some platforms may choose to pay rebates to attract orders, charge relatively low prices for market data products (or provide market data products free of charge), and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market data products, and setting relatively low prices for accessing posted liquidity. For example, BATS Global Markets (“BATS”) and Direct Edge, which previously operated as ATSs and obtained exchange status in 2008 and 2010, respectively, provided certain market data at no charge on their Web sites in order to attract more order flow, and used revenue rebates from resulting additional executions to maintain low execution charges for their users.
The large number of SROs, ATSs, and internalizing broker-dealers that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO, ATS, and broker-dealer is currently permitted to produce and sell proprietary data products, and many currently do, including but not limited to the Exchange, NYSE MKT, NYSE Arca, NASDAQ OMX, BATS, and Direct Edge.
The fact that proprietary data from ATSs, internalizing broker-dealers, and vendors can bypass SROs is significant in two respects. First, non-SROs can compete directly with SROs for the production and sale of proprietary data products. By way of example, BATS and NYSE Arca both published proprietary data on the Internet before registering as exchanges. Second, because a single order or transaction report can appear in an SRO proprietary product, a non-SRO proprietary product, or both, the amount of data available via proprietary products is greater in size than the actual number of orders and transaction reports that exist in the marketplace. With respect to NYSE Integrated Feed, competitors offer close substitute products.
Those competitive pressures imposed by available alternatives are evident in the Exchange's proposed pricing.
In addition to the competition and price discipline described above, the market for proprietary data products is also highly contestable because market entry is rapid and inexpensive. The history of electronic trading is replete with examples of entrants that swiftly grew into some of the largest electronic trading platforms and proprietary data producers: Archipelago, Bloomberg Tradebook, Island, RediBook, Attain, TrackECN, BATS Trading and Direct Edge. As noted above, BATS launched as an ATS in 2006 and became an exchange in 2008, while Direct Edge began operations in 2007 and obtained exchange status in 2010.
In determining the proposed changes to the fees for NYSE Integrated Fed, the Exchange considered the competitiveness of the market for proprietary data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all users. The existence of numerous alternatives to the Exchange's products, including proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if the attendant fees are not justified by the returns that any particular vendor or data recipient would achieve through the purchase.
Finally, the Exchange believes that the proposed rule change, with respect to the removal of text from the Fee Schedule, is consistent with the provisions of section 6 of the Act,
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change is effective upon filing pursuant to section 19(b)(3)(A)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission (the “Commission”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval.
Rule 17a-8 (17 CFR 270.17a-8) under the Investment Company Act of 1940 (the “Act”) (15 U.S.C. 80a) is entitled “Mergers of affiliated companies.” Rule 17a-8 exempts certain mergers and similar business combinations (“mergers”) of affiliated registered investment companies (“funds”) from prohibitions under section 17(a) of the Act (15 U.S.C. 80a-17(a)) on purchases and sales between a fund and its affiliates. The rule requires fund directors to consider certain issues and to record their findings in board minutes. The rule requires the directors of any fund merging with an unregistered entity to approve procedures for the valuation of assets received from that entity. These procedures must provide for the preparation of a report by an independent evaluator that sets forth the fair value of each such asset for which market quotations are not readily available. The rule also requires a fund being acquired to obtain approval of the merger transaction by a majority of its outstanding voting securities, except in certain situations, and requires any surviving fund to preserve written records describing the merger and its terms for six years after the merger (the first two in an easily accessible place).
The average annual burden of meeting the requirements of rule 17a-8 is estimated to be 7 hours for each fund. The Commission staff estimates that each year approximately 766 funds rely on the rule. The estimated total average annual burden for all respondents therefore is 5,362 hours.
The average cost burden of preparing a report by an independent evaluator in a merger with an unregistered entity is estimated to be $15,000. The average net cost burden of obtaining approval of a merger transaction by a majority of a fund's outstanding voting securities is estimated to be $100,000. The Commission staff estimates that each year approximately 0 mergers with unregistered entities occur and approximately 15 funds hold shareholder votes that would not otherwise have held a shareholder vote. The total annual cost burden of meeting these requirements is estimated to be $1,500,000.
The estimates of average burden hours and average cost burdens are made solely for the purposes of the Paperwork Reduction Act, and are not derived from a comprehensive or even a representative survey or study. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Written comments are requested on: (a) Whether the collection of information is necessary for the proper performance of the functions of the Commission, including whether the information has practical utility; (b) the accuracy of the Commission's estimate of the burdens of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
Please direct your written comments to Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email to:
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (“PRA”) (44 U.S.C. 3501
On December 14, 2012, the Commission found it necessary or appropriate in the public interest and consistent with the protection of investors to grant the conditional exemptions discussed in the Order. Among other things, the Order requires dually-registered broker-dealer and futures commission merchants (“BD/FCMs”) that elect to offer a program to commingle and portfolio margin customer positions in credit default swaps (“CDS”) in customer accounts maintained in accordance with Section 4d(f) of the Commodity Exchange Act (“CEA”) and rules thereunder, to obtain certain agreements and opinions from its customers regarding the applicable regulatory regime, and to make certain disclosures to its customers before receiving any money, securities, or property of a customer to margin, guarantee, or secure positions consisting of cleared CDS, which include both swaps and security-based swaps, under a program to commingle and portfolio margin CDS. The Order also requires BD/FCMs that elect to offer a program to commingle and portfolio margin CDS positions in customer accounts maintained in accordance with Section 4d(f) of the CEA and rules thereunder, to maintain minimum margin levels using a margin methodology approved by the Commission or the Commission staff.
When it adopted the Order, the Commission discussed the burden hours and costs associated with complying with certain provisions of the Order that contain “collection of information requirements” within the meaning of the PRA.
The Commission estimates that 45 firms may seek to avail themselves of the conditional exemptive relief provided by the Order and therefore would be subject to the information collection.
The Commission further estimates that each respondent will incur a one-time cost of $8,000 in outside legal cost expenses per firm, calculated as follows: (200 hours to obtain opinions of counsel from affiliate cleared credit default swap customers under paragraph IV(b)(2)(iii) of the Order) × ($400 per hour for outside legal counsel) = $8,000, for an aggregate burden of $360,000, calculated as follows: ($8,000 in external legal costs per firm) × (45 firms) = $360,000. Amortized over three years, the annualized capital external cost would be $2,667 per firm, or a total of $120,000 for all 45 firms.
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number.
Please direct your written comments to: Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549, or send an email to:
The Department of the Treasury will submit the following information collection requests to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, Public Law 104-13, on or after the date of publication of this notice.
Comments should be received on or before March 2, 2016 to be assured of consideration.
Send comments regarding the burden estimates, or any other aspect of the information collections, including suggestions for reducing the burden, to (1) Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for Treasury, New Executive Office Building, Room 10235, Washington, DC 20503, or email at
Copies of the submissions may be obtained by emailing
Departmental Offices, Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to comment on an extension of an existing information collection, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). Currently, the Office of the Fiscal Assistant Secretary, within the Department of the Treasury, is soliciting comments concerning grants to states for low-income housing projects in lieu of tax credits.
Written comments should be received on or before April 1, 2016 to be assured of consideration.
Send comments regarding the burden estimate, or any other aspect of the information collection, including suggestions for reducing the burden, to Sustanchia Gladden, Department of the Treasury, 1500 Pennsylvania Avenue NW., Room 1050, Washington, DC 20020 or to
Requests for additional information should be directed to Sustanchia Gladden, Department of the Treasury, 1500 Pennsylvania Avenue NW., Room 1050, Washington, DC 20020 or to
The Department of the Treasury will submit the following information collection requests to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, Public Law 104-13, on or after the date of publication of this notice.
Comments should be received on or before March 2, 2016 to be assured of consideration.
Send comments regarding the burden estimates, or any other aspect of the information collections, including suggestions for reducing the burden, to (1) Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for Treasury, New Executive Office Building, Room 10235, Washington, DC 20503, or email at
Copies of the submissions may be obtained by emailing
Under section 148(f), interest on a state or local bond is not tax exempt unless the issuer of the bond rebates to the United States arbitrage profits earned from investing proceeds of the bond in higher yielding nonpurpose investments. Form 8038-T is used to pay the arbitrage rebate to the United States and to pay penalty in lieu of rebates. Burden for the form is being reported under 1545-1219.
Issuers are also required to keep records of certain interest rate hedges so that the hedges are taken into account in determining arbitrage profits. Under TD 8718, the scope of interest rate hedging transactions covered by the arbitrage regulations was broadened by requiring that hedges entered into prior to the sale date of the bonds are covered as well.
The collection of information in the proposed regulation (REG-138526-14) is in § 1.148-1(f)(2)(ii) which contains a requirement that the issuer obtain certifications and supporting documentation regarding the underwriter's sales of the issuer's bonds.
Centers for Medicare & Medicaid Services (CMS), HHS.
Final rule with comment period.
This final rule implements provisions of the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act) pertaining to Medicaid reimbursement for covered outpatient drugs (CODs). This final rule also revises other requirements related to CODs, including key aspects of their Medicaid coverage and payment and the Medicaid drug rebate program.
In commenting, please refer to file code CMS-2345-FC. 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.
2.
Please allow sufficient time for mailed comments to be received before the close of the comment period.
3.
4.
(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.)
If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.
Ruth Blatt, (410) 786-1767, for issues related to the definition of covered outpatient drug, including drug category, and rebates for line extensions.
Brian Du, (410) 786-6814, for issues related to the offset of rebates and collection of information.
Emeka Egwim (410-786-1092), for issues related to 340B and the Federal Upper Limits.
Lisa Ferrandi, (410) 786-5445, for issues related to 340B, rebates for drugs dispensed by Medicaid managed care organizations, requirements for states, the Collection of Information Requirements, and the Regulatory Impact Analysis.
Renee Hilliard, (410) 786-2991, for issues related to the definitions of states and United States.
Christine Hinds, (410) 786-4578, for issues related to authorized generics, nominal price, blood clotting factor, and exclusively pediatric drugs.
Gail Sexton, (410) 786-4583, for issues related to Federal upper limits and the definitions of actual acquisition cost and professional dispensing fee.
Terry Simananda, (410) 786-8144, or Wendy Tuttle, (410) 786-8690, for issues related to the determination of Average Manufacturer Price (AMP), identification of 5i drugs, the determination of Best Price, and manufacturer reporting requirements.
Andrea Wellington, (410) 786-3490 for issues related to the Regulatory Impact Analysis.
Wendy Tuttle, (410) 786-8690, for all other inquiries.
Comments received timely will also be 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.
To assist readers in referencing sections contained in this document, we are providing the following Table of Contents.
Because of the many organizations and terms to which we refer by acronym in this final rule, we are listing these acronyms and their corresponding terms in alphabetical order below:
Under the Medicaid program, states may provide coverage of prescribed drugs as an optional service under section 1905(a)(12) of the Social Security Act (the Act). Section 1903(a) of the Act provides for federal financial participation (FFP) in state expenditures for these drugs. Section 1927 of the Act governs the Medicaid Drug Rebate (MDR) Program and payment for covered outpatient drugs (CODs), which are defined in section 1927(k)(2) of the Act. In general, for payment to be made available under section 1903(a) of the Act for CODs, manufacturers must enter into a National rebate agreement (agreement) as set forth in section 1927(a) of the Act. Section 1927 of the Act provides specific requirements for rebate agreements, drug pricing submission and confidentiality requirements, the formulas for calculating rebate payments, and requirements for states for CODs.
This final rule implements changes to section 1927 of the Act made by sections 2501, 2503, and 3301(d)(2) of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148, enacted on March 23, 2010), and sections 1101(c) and 1206 of the Health Care and Education Reconciliation Act of 2010 (HCERA) (Pub. L. 111-152, enacted on March 30, 2010) (collectively referred to as the Affordable Care Act). It also implements changes to section 1927 of the Act as set forth in section 202 of the Education Jobs and Medicaid Assistance Act (Pub. L. 111-226, enacted on August 10, 2010). As discussed in the proposed rule published in the February 2, 2012
Section 2501(a) of the Affordable Care Act amended section 1927(c) of the Act by increasing the minimum rebate percentage for most single source and innovator multiple source drugs from 15.1 percent of the average manufacturer price (AMP) to 23.1 percent of AMP. Section 2501(a) of the Affordable Care Act also amended section 1927(c) of the Act by establishing a minimum rebate percentage of 17.1 percent of AMP for certain single source and innovator multiple source clotting factors and single source and innovator multiple source drugs approved by the Food and Drug Administration (FDA) exclusively for pediatric indications. Section 2501(a) of the Affordable Care Act also added section 1927(b)(1)(C) to the Act to make changes to the non-Federal share of rebates by specifying that the amounts attributable to the increased rebate percentages be remitted to the
Section 2501(b) of the Affordable Care Act amended section 1927(c) of the Act by increasing the rebate percentage for noninnovator multiple source drugs from 11 percent of AMP to 13 percent of AMP, effective January 1, 2010.
Section 2501(c) of the Affordable Care Act amended section 1903(m)(2)(A) of the Act by specifying new conditions for managed care organization (MCO) contracts, including that CODs dispensed to individuals eligible for medical assistance under Title XIX of the Act who are enrolled with a Medicaid MCO shall be subject to the same rebate required by the rebate agreement authorized under section 1927 of the Act. The Affordable Care Act also amended section 1903(m)(2)(A) of the Act to establish that MCO capitation rates shall be based on actual cost experience related to rebates and subject to federal regulations at 42 CFR 438.6 regarding actuarial soundness of capitation payments. The legislation also provided that MCOs are responsible for reporting to the state certain utilization data and such other data as the Secretary determines necessary for the state to access the rebates authorized by this provision.
Section 2501(c) of the Affordable Care Act also made conforming amendments to section 1927(b)(1)(A) of the Act by requiring manufacturers that participate in the MDR program to provide rebates for drugs dispensed to individuals enrolled with a MCO, if the MCO is responsible for coverage of such drugs. It also amended section 1927(b)(2)(A) of the Act by requiring states to include information on drugs paid for by Medicaid MCOs under the state plan during the rebate period when requesting rebates from manufacturers. Finally, section 2501(c) modified section 1927(j)(1) of the Act to specify that CODs are not subject to the rebate requirements if such drugs are both subject to discounts under the 340B of the Public Health Service Act (PHSA) and dispensed by health maintenance organizations (HMOs), including Medicaid MCOs. The amendments made by section 2501(c) were effective March 23, 2010.
Section 2501(d) of the Affordable Care Act added a new section 1927(c)(2)(C) of the Act effective for drugs paid for by a state on or after January 1, 2010. This provision modifies the unit rebate amount (URA) calculation for a drug that is a line extension (new formulation) of a single source or innovator multiple source drug that is an oral solid dosage form.
Section 2501(e) of the Affordable Care Act amended section 1927(c)(2) of the Act by adding a new subparagraph (D) and establishing a maximum on the total rebate amount for each single source or innovator multiple source drug at 100 percent of AMP, effective January 1, 2010.
Section 2501(f) of the Affordable Care Act made conforming amendments to section 340B of the PHSA, but those amendments are not addressed in this final rule.
Section 2503(a)(1) of the Affordable Care Act amended section 1927(e) of the Act by revising the Federal upper reimbursement limit (FUL) to be no less than 175 percent of the weighted average (determined on the basis of utilization) of the most recently reported monthly AMPs for pharmaceutically and therapeutically equivalent multiple source drug products that are available for purchase by retail community pharmacies on a nationwide basis. Additionally, it specifies that the Secretary shall implement a smoothing process for AMP which shall be similar to the smoothing process used in determining the average sales price (ASP) of a drug or biological product under Medicare Part B. Section 2503(a)(2) of the Affordable Care Act amended section 1927(k) of the Act by revising the definition of AMP to now mean the average price paid to the manufacturer for the drug in the United States by wholesalers for drug distribution to retail community pharmacies and retail community pharmacies that purchase drugs directly from the manufacturer.
Section 2503(a)(3) of the Affordable Care Act also amended the definition of multiple source drug to specify in the definition that the sales of such drugs shall be specifically within the United States. Section 2503(a)(4) of the Affordable Care Act added to section 1927(k) of the Act definitions of retail community pharmacy and wholesaler for purposes of section 1927 of the Act.
Section 2503(b) of the Affordable Care Act amended section 1927(b) of the Act by establishing a requirement that manufacturers report, not later than 30 days after the last day of each month of a rebate period under the agreement, on the manufacturer's total number of units that are used to calculate the monthly AMP for each COD. It also amended the preexisting requirement that the Secretary disclose AMPs to instead require the Secretary to post, on a Web site accessible to the public, the weighted average of the most recently reported monthly AMPs and the average retail survey price determined for each multiple source drug in accordance with section 1927(f) of the Act. The amendments made by section 2503(b) of the Affordable Care Act were effective October 1, 2010.
Section 2503(c) of the Affordable Care Act amended section 1927(f) of the Act by clarifying that the survey of retail prices described in such subsection applies to retail community pharmacies. Section 2503(d) of the Affordable Care Act specified that the amendments made by section 2503 of the Affordable Care Act were effective October 1, 2010. Section 2503(d) of the Affordable Care Act further specified that the amendments made by section 2503 shall take effect without regard to whether final regulations to carry out such amendments have been issued by October 1, 2010.
Section 3301(d)(2) of the Affordable Care Act included a conforming amendment to the definition of best price (BP) under Medicaid at section 1927(c)(1)(C)(i)(VI) of the Act. This amendment provides that any discounts provided by manufacturers under the Medicare coverage gap discount program under section 1860D-14A of the Act are exempt from a manufacturer's best price calculation, effective for drugs dispensed on or after July 1, 2010.
Section 7101(a) of the Affordable Care Act expanded the drug pricing program under section 340B of the PHSA to include certain children's hospitals, freestanding cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals.
Section 204 of the Medicaid Extenders Act of 2010 (Pub. L. 111-309) revised section 340B of the PHSA by removing children's hospitals from the orphan drug exclusion described in section 2302 of HCERA.
Section 1101(c) of HCERA also includes a conforming amendment to the definition of AMP under Medicaid at section 1927(k)(1)(B)(i) of the Act by providing that discounts provided by manufacturers under the Medicare coverage gap discount program under section 1860D-14A are excluded from a manufacturer's determination of AMP, effective March 30, 2010.
This final rule also implements other miscellaneous provisions pertaining to CODs. It implements changes to section 1927 of the Act as set forth in section 221 of Division F, Title II, of the Omnibus Appropriations Act, 2009, (Pub. L. 111-8, enacted on March 11, 2009) (the Appropriations Act). It
The proposed rule for implementing the requirements of section 1927 of the Act, as revised by the Affordable Care Act, and the requirements related to coverage and payment for CODs, was published on February 2, 2012 (77 FR 5318). As discussed in the proposed rule, we specifically proposed provisions that would revise the MDR program (77 FR 5320), including the calculation of AMP (77 FR 5326), drug rebate payments (77 FR 5338), and upper limits for multiple source drugs (77 FR 5345).
We received approximately 425 comments from drug manufacturers, membership organizations, law firms, pharmacy benefit managers, state Medicaid agencies, advocacy groups, not-for-profit organizations, consulting firms, health care providers, employers, health insurers, health care associations, as well as individual citizens. The comments ranged from general support or opposition to the proposed provisions to very specific questions or comments regarding the proposed changes.
The following summarizes comments about the proposed rule, in general, or about issues not addressed in the proposed regulations:
Section 2501(c) of the Affordable Care Act established new requirements for manufacturers that participate in the MDR program to pay rebates for drugs dispensed to individuals enrolled with a Medicaid MCO, if the MCO is responsible for coverage of such drugs. To effectuate those changes, we proposed to add § 447.500(a)(4), to specify sections 1903(m)(2)(A)(xiii) and 1927(b) of the Act as the basis for requiring that manufacturers provide rebates for CODs dispensed to individuals eligible for medical assistance who are enrolled in Medicaid MCOs (77 FR 5320). We proposed to add § 447.500(a)(5) which would add section 1902(a)(30)(A) as an additional statutory basis for calculating payments for CODs. We received no comments concerning the proposals to add § 447.500(a)(4) and (5), and therefore, for the reasons we noted, we are finalizing these provisions as proposed. We note that the comments and responses pertaining to the proposed requirements regarding the calculation of rebates for drugs dispensed through Medicaid MCOs are discussed later in the Medicaid Drug Rebates (§ 447.509) section (section II.G.3.) of this final rule.
Section 202 of the Education, Jobs and Medicaid Assistance Act (Pub. L. 111-226), enacted on August 10, 2010 and effective on October 1, 2010, amended the definition of AMP under section 1927(k)(1)(B)(i)(IV) of the Act to include sales for inhalation, infusion, instilled, implanted, or injectable drugs that are not generally dispensed through retail community pharmacies.
Given this amendment, we included a proposed definition, which defined a “5i drug” to mean an inhalation, infusion, instilled, implanted, or injectable drug that is not generally dispensed through a retail community pharmacy (77 FR 5359). We did not receive any comments specific to this proposed definition of 5i drug, but we received a number of comments concerning the identification of such drugs for purposes of the calculation of AMP. We address comments pertaining to the identification of and other 5i drug issues in section II.C. of this final rule.
At this time, we do not believe a definition of 5i drug is necessary and therefore we are not finalizing any definition for 5i drug that was proposed in § 447.502 (77 FR 5359). However, we note that the acronym “5i drug” has already been widely adopted in the nomenclature of many stakeholders, including drug manufacturers, retail community pharmacies, consulting firms and even CMS as simply a convenient way to condense the list of the five specific drug types (inhalation, infusion, instilled, implanted, or injectable drugs). Therefore, we will use the “5i drug” acronym to refer to all inhalation, infusion, instilled, implanted, or injectable drugs when discussing the identification of such drugs. Therefore, for the reasons discussed in this section, we have decided not to finalize in § 447.502 the definition of 5i drug that was proposed (77 FR 5359).
In proposed § 447.502, we proposed to replace the term, “estimated acquisition cost” (EAC) with “actual acquisition cost” (AAC) and to define AAC as the agency's determination of the pharmacy providers' actual prices paid to acquire drug products marketed or sold by specific manufacturers (77 FR 5320 and 5359). As discussed in the proposed rule, we believe that this definition provides a more accurate estimate of the prices available in the marketplace, while assuring sufficient beneficiary access, consistent with section 1902(a)(30)(A) of the Act (77 FR 5320 through 5321). We received the following comments concerning the proposed revised definition of AAC:
Furthermore, as discussed in the State Plan Requirements, Findings and Assurances section (section II.M.) of this final rule, we have revised § 447.518(d) of this final rule such that when states are proposing changes to either the ingredient cost reimbursement or the professional dispensing fee reimbursement, they will be required to evaluate their proposed changes in accordance with the requirements of this final rule to ensure that total reimbursement to the pharmacy provider complies with the requirements of section 1902(a)(30)(A) of the Act. States are responsible for providing adequate information to support any proposed changes to either or both of the components of the reimbursement methodology.
As we stated in the proposed rule (77 FR 5321 and 5350), we realize that states may have difficulty determining the actual price of each drug at the time it was purchased. However, as states have flexibility to establish a methodology to determine AAC, we decline to include a specific methodology for calculating AAC in the definition.
Another commenter stated that the language in the proposed rule is confusing regarding the cost of the product, and that the proposal to replace EAC with AAC seems to create a mandate for states to move to a reimbursement mechanism that uses a close estimate of the pharmacy's AAC, but is not clear in that respect.
For the reasons we articulated, we are finalizing the definition of AAC at § 447.502 as proposed (77 FR 5359).
We proposed moving the definition of “Authorized generic drug” from § 447.506(a) to § 447.502 (discussed in more detail at 77 FR 5321). However, we did not propose any revisions to the definition presently set forth at § 447.506(a). To clarify, for purposes of the MDR program, we define an authorized generic drug as any drug sold, licensed, or marketed under a New Drug Application (NDA) approved by the FDA under section 505(c) of the Federal Food, Drug and Cosmetic Act (FFDCA) that is marketed, sold, or distributed under a different labeler code, product code, trade name, trademark, or packaging (other than repackaging the listed drug for use in institutions) than the brand name drug. We did not receive any comments concerning the proposal to move the definition of authorized generic drug. Therefore, we are finalizing the definition of authorized generic drug in § 447.502 as it was proposed.
In proposed § 447.502, we proposed to revise the definition of bona fide service fee to mean fees paid by a manufacturer to wholesalers or retail community pharmacies that represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement; and that is not passed on in whole or in part to a client or customer of an entity, whether or not the entity takes title to the drug. The fee includes, but is not limited to, distribution service fees, inventory management fees, product stocking allowances, and fees associated with administrative service agreements and patient care programs (such as medication compliance programs and patient education programs) (77 FR 5321 and 5359).
We received the following comments concerning the proposed revision to the definition of bona fide service fee:
However, many commenters expressed their concerns regarding the proposed definition of bona fide service fee because it contains a recipient limitation. The proposed definition limited the application of the bona fide service fee exclusion to fees paid by manufacturers to only wholesalers and retail community pharmacies and does not account for other direct purchase customers further recognized in the calculation of AMP under the proposed regulation and statute. One commenter indicated that CMS proposed to include in the AMP transaction many other entities, such as those CMS view as “conducting business as” wholesalers or retail community pharmacies, secondary manufacturers for authorized generics, and a wide spectrum of entities that dispense 5i drugs not generally dispensed through retail community pharmacies; and while the commenter does not believe all these transactions should be included in the calculation of AMP, to the extent transactions with other entities are included in AMP, any bona fide service fees paid to those entities should also be excluded.
Several commenters stated that the Congress did not amend the statute to define “bona fide service fee,” but amended the AMP provision of the statute to provide examples of bona fide service fees. Many of the commenters stated that in light of those amendments, the revised reference from “an entity” to “wholesalers and retail community pharmacies” was a drafting error by CMS, and does not make sense for AMP calculations for 5i drugs not generally dispensed through retail community pharmacies and best price determinations because such calculations include transactions to other direct customers other than retail community pharmacies and wholesalers. Other commenters believed there was a drafting error in the proposed definition at § 447.502 because in proposed § 447.505, the proposed rule expressly included fees paid to group purchasing organizations (GPOs), which are not wholesalers or retail community pharmacies. Another commenter provided, as an example, that if a manufacturer was to purchase “pharmaco-economic data” from a health plan at fair market value and the arrangement otherwise satisfied the four-part test for bona fide service fees, it would not make sense to treat this payment as a discount merely because it was not paid to a wholesaler or a retail community pharmacy.
One commenter noted that including bona fide service fees paid by manufacturers to any entity in AMP for 5i drugs not generally dispensed through retail community pharmacies and including bona fide service fees in best price as discounts or price concessions would result in an artificially low AMP for such 5i drugs calculation and a lower best price determination for all single source or innovator multiple source drugs. Another commenter indicated that limiting the definition would be operationally difficult to do since manufacturers would need to recognize the same fee as a discount/price concession in some government pricing programs, but as a legitimate fee for service in others.
Several commenters also noted that under the existing regulation (definition of bona fide service fee at § 447.502 based on the 2007 AMP final rule (72 FR 39240)) bona fide service fee is defined in relevant part to mean, “fees paid by a manufacturer to an entity” and that the reference to “an entity” from this current rule has been replaced with “wholesalers and retail community pharmacies.” The commenters stated that “an entity” language is more appropriate for purposes of defining bona fide service fee because the definition applies not only to the calculation of AMP, but also to the calculation of AMP for 5i drugs not generally dispensed through retail community pharmacies and best price determinations as well. One commenter stated that CMS's proposed definition was unreasonable in that fees would need to be treated as discounts because the customer, while included in the AMP and best price calculation, did not qualify as a wholesaler or retail community pharmacy.
A commenter also provided that it is not clear why the decision of the service provider to pass on all, or a portion of, the service fee to a client should have any bearing on the determination as to whether a service was provided in return for the fee. One commenter agreed with CMS that the 2007 “four-part test” remains a definitive test to qualify a payment as a bona fide service fee and the four-part test should be applied to all agreements, regardless of the agreements referenced in the Affordable Care Act. The commenter requested that CMS establish the same
Therefore, if a manufacturer has determined that a fee paid meets the other elements of the definition of bona fide service fee, then the manufacturer may presume, in the absence of any evidence or notice to the contrary, that the fee paid is not passed on to a client or customer of any entity.
Several commenters urged CMS to replace these three definitions with one uniform bona fide service fee definition. The commenters specifically recommended using the proposed definition from the definitions section which includes the traditional four-part criteria, as well as the statutory examples of bona fide service fee. Some commenters recommended that CMS simplify the definition of bona fide service fee to mean the fair market value for services performed, and should eliminate the other requirements of the bona fide service fee definition. Another commenter stated that regardless of who receives a bona fide service fee, the payment is fair market value compensation for work done and not a price concession.
One commenter recommended that an initial stocking allowance not be considered a bona fide service fee, as it is normally a one-time event, is intended to promote the sales of products, and does not meet the definition of either bona fide service fee or a customary prompt pay discount. Commenters also suggested that the cost of providing data management services should be identified in the regulations text as being bona fide service fee eligible. The commenter also stated that because AMP will play a role in reimbursement for multiple source drugs, it is necessary for the final rule to acknowledge that the sales and marketing services wholesalers provide to generic manufacturers are also candidates for bona fide service fee treatment.
One commenter believed that the lists of bona fide service fees in the Affordable Care Act are examples, rather than an exhaustive list, and was pleased that the proposed rule concurs with that assessment. This commenter stated that attempting to specify all bona fide service fees in regulations text would limit future flexibility and hamper innovation in a highly competitive marketplace.
One commenter stated that language in the preamble regarding potential fraud concerns may have the effect of increasing manufacturers' concerns over possible litigation regarding alleged inflation of the prices reported for Medicaid rebates. Another commenter stated that without clear guidance on fair market value, some manufacturers will continue using unrealistic, overly restrictive fair market value assumptions that could undermine the industry's fee-based distribution business model and inappropriately complicate negotiations over service fees that permit wholesalers to provide appropriate services to manufacturers and bring efficiencies to the supply channel.
Several commenters encouraged CMS to provide guidance on the concept of fair market value, stating that without more specificity about what CMS considers reasonable it may encourage some manufacturers to adopt unrealistic restrictive fair market value assumptions. Further, CMS should supplement the definition in the final rule by clarifying how manufacturers are expected to determine fair market value to increase uniformity in price reporting between manufacturers. Another commenter stated that CMS should establish more specific grounds for establishing fair market value when service fees for a variety of services are combined and stated as a percentage of sales payment. Finally, another commenter encouraged CMS to acknowledge that many or most of the fee arrangements that are common in the industry tend to be percentage based agreements and that manufacturers can establish a fair market value rationale for a percentage based fee through industry benchmarking by comparing types of specific services outlined in an agreement with ranges of payments observed throughout the industry.
Furthermore, we are not responsible for establishing such safe harbors, as the OIG of the U.S. Department of Health and Human Services is responsible for issuing such advisory opinions related to health care fraud and abuse under section 1128D(b) of the Act.
Another commenter encouraged CMS to consider ways to facilitate such reporting if CMS elects not to affirmatively continue the not-passed through presumption. One commenter stated that administrative fees paid to pharmacy benefit manufacturers (PBMs) under the national rebate agreement should be presumed to be retained by the PBM and not intended to adjust the purchase price, unless there is evidence that the PBM intends to pass them through. Additionally, the commenter believed that a rule that treats these types of fees paid to non-purchasers as distinct from discounts provided to the beneficiaries of their services is consistent with the Medicaid statute and safe harbors, and is far easier to administer through manufacturers' drug price reporting systems.
Therefore, for the calculation of AMP and best price, we are now allowing that if a manufacturer has determined that a fee paid meets the other elements of the definition of bona fide service fee, then the manufacturer may presume, in the absence of any evidence or notice to the contrary, that the fee paid is not passed on to a client or customer of any entity. However, when a manufacturer does have specific knowledge that a fee is being passed on in whole or in part, it must be accurately accounted for in the determination of AMP and best price.
Furthermore, fees, including but not limited to, distribution service fees, inventory management fees, product stocking allowances, fees associated with administrative service agreements and patient care programs (such as medication compliance programs and patient education programs) and other fees paid to GPOs that meet the definition of bona fide service fees as defined in this final rule, are excluded from the calculation of AMP and best price. If a manufacturer has an agreement with the GPO that any of these fees are passed on to the GPO's members or customers, they would be considered price concessions and not excluded as bona fide service fees. When there is evidence or knowledge that the fee or other price concession is passed on to the GPO's member or customers (for example, the contract between the manufacturer and GPO or other service provider may contain a provision that indicates the fee be used by the provider to further discount the price paid by the wholesaler or retail community pharmacy), the manufacturer must account for such fee or price concession in its calculation of AMP as described elsewhere in this final rule. This is consistent with the statutory requirement at section 1927(k)(1)(B)(ii) of the Act which specifies, in part, that any other discounts, rebates, payment or other financial transactions that are received by, paid by, or passed through to, retail community pharmacies shall be included in the AMP for a COD.
Therefore, in light of the comments and for the reasons we articulated in this section, in this final rule we are finalizing the definition of bona fide service fee and replacing the specific reference to “wholesalers or retail community pharmacies” with “an entity” under § 447.502.
In proposed § 447.502, we proposed to revise the bundled sale definition by reformatting its structure to separate the additional clarifying characteristics of bundled sales from the main definition. This was accomplished by creating two paragraphs at the end of the definition that provided further clarification regarding characteristics of a bundled sale. We also proposed, in response to prior manufacturer questions, to add the phrase “including but not limited to those discounts resulting from a contingent arrangement” to paragraph (1) to clarify which discounts should be allocated under the bundled arrangement (as discussed in more detail at 77 FR 5321). We received the following comments concerning the proposed bundled sales revised definition:
One commenter stated that the preamble language intended to clarify that, where discounts for different products in a single contract are each determined independently and with no contingencies across products, a bundled sale does not exist and no discount allocations across products are required. However, this is inconsistent with CMS's proposed regulations text and CMS needs to make its final regulations text consistent with this approach.
One commenter indicated that if CMS's intent to have the new paragraph on non-contingent sales specifically require the allocation of non-contingent discounts on drugs that are part of a bundled sale along with any contingent discounts on these drugs, it is important for CMS to recognize that this may require a change to the discount allocation method some manufacturers have implemented based on the current definition. Furthermore, if this
Several commenters provided reasons why we should not require that a non-contingent discount be considered as part of a bundled arrangement and allocated across the entire bundled sale, such as AMP and/or best price reporting uncertainties, 340B ceiling price calculation uncertainties, and reduction in Medicaid rebate liabilities. Several commenters provided detailed mathematical equations and examples (with very similar scenarios) to demonstrate that the including but not limited to language should be removed.
In one of these examples, the commenter provided that it does not make sense to treat a discount as bundled when it is not contingent and included the following examples: If 3 drugs are part of the same contract, and a contingent discount is offered on drug A and B if they are placed on a preferred formulary tier and a non-contingent discount is offered on drug C, drug C should not be considered as part of the drug A and B bundled arrangement simply because drug C is covered by the same contract as Drug A and B. Another example provided if 2 drugs are part of the same contract and 5 percent discount is offered on Drug A if X volume is purchased and/or 5 percent discount is offered on Drug A if Drug A and B are both placed on a preferred formulary tier, the volume discount should not be considered as part of any bundled arrangement with Drug B simply because the non-contingent volume discount is included in the same contract as the contingent formulary discount. The commenter requested that CMS remove the including but not limited language to clarify that in the first scenario only drugs A and B should be considered a bundle arrangement and not Drugs A, B and C, and that in the second scenario only the formulary tier discount should be considered a part of a bundled arrangement and not the volume discount.
A few commenters believed that, absent changes in common contract terms, the new definition would require the incorporation of complex manual steps into the calculation of monthly AMPs and complicate the difficult process of completing these calculations in compliance with applicable timelines. The commenters were worried about the economic waste associated with having to renegotiate a large number of contracts if they cannot manage the manual process that the bundled sale aggregation and allocation would require. The penalties for late AMP filing adds to these concerns and the commenters encouraged CMS to forego implementing the changed definition of bundled sales.
A few commenters stated that the revised definition of bundled sales in the proposed rule could complicate the aggregation and allocation of discounts associated with sales of multiple source products to large customers including wholesalers and retail community pharmacies.
For the reasons we articulated in this section, we are finalizing our proposed definition of bundled sales at § 447.502, except that, in response to the comments, we are omitting “but not limited” in paragraph (1); and have revised paragraph (2) to add “or products” before “in the bundle” at the end of the paragraph.
Section 2501(a) of the Affordable Care Act established a minimum rebate percentage of 17.1 percent of AMP for a single source drug or an innovator multiple source drug that is a clotting factor for which a separate furnishing payment is authorized under section 1842(o)(5) of the Act and which is included on a list of such factors specified and updated regularly by the Secretary. We proposed a definition of clotting factor consistent with these provisions in proposed § 447.502 (77 FR 5321 and 5359).
We did not receive any comments about the proposed definition of clotting factor under § 447.502, so we are finalizing it as proposed, except to remove the word “the” prior to the first reference to CMS. This technical revision is not intended to change the meaning of this definition.
In accordance with section 1927 of the Act, manufacturers that have entered into a rebate agreement with the Secretary are responsible for paying rebates to states for their CODs for which payment has been made under the state plan. Manufacturers are responsible for submitting certain drug product data for each of their CODs. As discussed in the proposed rule (77 FR 5321 through 5323, 5359 through 5360), we proposed to add a definition of COD to § 447.502. We proposed that a drug is considered a COD when the drug may be dispensed only upon prescription (except as discussed later in this section for certain non-prescription drugs), and it meets at least one of the criteria as described in section 1927(k)(2) of the Act.
Consistent with section 1927(k)(3) of the Act, we proposed (77 FR 5322 and 5360) that except as discussed later in this preamble section, a drug, biological product, or insulin would not be considered a COD when that drug or product is billed as a bundled service with, and provided as part of or incident to and in the same setting as, any of the following services (and payment is made as part of that service instead of as a direct reimbursement for the drug):
• Inpatient Hospital Services;
• Hospice Services;
• Dental Services, except that drugs for which the State plan authorizes direct reimbursement to the dispensing dentist are CODs;
• Physician services;
• Outpatient hospital services;
• Nursing facility and services provided by an intermediate care facility for individuals with intellectual disabilities;
• Other laboratory and x-ray services; or
• Renal dialysis.
Additionally, in accordance with section 1927(k)(2) of the Act and the requirements of section 510 of the FFDCA, we proposed that a drug would only be treated as a COD if the drug is required to have a National Drug Code (NDC) and is listed electronically with FDA (77 FR 5322). We further proposed that manufacturers submit any relevant FDA approved application numbers for drugs reported to the MDR program (77 FR 5322). For drugs that are CODs that do not have an approved application number, we proposed that the manufacturer must provide evidence demonstrating that its drug meets the statutory definition of a COD (77 FR 5323). These additional standards were designed to ensure compliance with the definition of COD in section 1927(k) of the Act.
We received the following comments concerning the proposal to add a definition of COD to § 447.502:
However, we are clarifying that manufacturers are responsible for submitting accurate data to CMS. We also note that for CMS to be able to verify that NDCs reported to the MDR program meet the definition of a COD, we will be using drug information listed with FDA such as Marketing Category and Drug Type, for example, to verify that an NDC meets the statutory definition in section 1927(k) of the Act. Additionally, when a drug is electronically listed with FDA, we have the ability to consult with FDA staff regarding the regulatory status of the drug. Therefore, manufacturers should ensure that their NDCs are listed with FDA (
Further, we appreciate the comments concerning our use of the FDA listing to verify if a product meets the definition of COD for purposes of our program. Given the statutory definition of COD under section 1927(k)(2) of the Act, we have used that listing as a basis to seek additional information from manufacturers regarding product submissions. For example, we have previously published a file containing products that were not listed with FDA (the non-listed product file) on Medicaid.gov at
We have updated the non-listed product file on Medicaid.gov and we have also notified manufacturers that report products to CMS that are not listed with FDA. If we are not able to verify if a product meets the definition of a COD, we will delete these products from the MDR file after providing notice to manufacturers of these products and to states. A deleted drug may be reinstated into the MDR program once we are able to verify that the drug meets the statutory definition of a COD. In such situations, we will use information submitted by the manufacturer (for example, letter of approval from FDA or
Additionally, we appreciate the commenters' concerns about relying on FDA's electronic database. We recognize that the electronic database is not published for the purposes of the MDR program. As discussed in this section, we use FDA's electronic database to consider manufacturer submissions and seek additional information, if necessary, to confirm that products meet the COD definition in section 1927(k) of the Act.
Another commenter asked who, such as CMS or pharmaceutical professionals, will decide if the evidence provided is sufficient to prove a product's status as a COD. Several commenters also asked for detailed guidance, or a protocol, on what information to submit as evidence. One of these commenters asked if, in the case of OTC products, quoting an OTC monograph would be sufficient evidence. Another commenter suggested that when a manufacturer reports a product to CMS as a COD and the manufacturer certifies that product data, the certification could serve as the evidence that the product meets the definition of a COD.
We also appreciate the comments concerning our authority to require information that demonstrates that a product is not a new drug. As noted previously, although we are not finalizing the requirement that a drug be listed electronically with the FDA to meet the definition of COD, we will use the FDA listing to verify that the product meets that definition; however, manufacturers have other options to demonstrate that their products meet the definition of COD in section 1927 of the Act. In addition to the broad list of COD Status codes that manufacturers can select from to support how their drugs meet the definition, manufacturers could submit the FDA application number or other information (for example, approval letter) to demonstrate that their products meet the COD definition if the list of COD Status codes does not provide enough information. Manufacturers can also email CMS at
Finally, we disagree with the commenter that specifically asked us to withdraw the proposal to submit evidence that a drug is not a new drug or a COD. As discussed previously in this section, manufacturers are responsible for submitting product data regarding CODs as defined in section 1927(k) of the Act. The submission of evidence requested in the proposed rule was designed to address this responsibility and to establish that a drug satisfies the criteria in section 1927(k)(2) of the Act. We are also clarifying that CMS does not make determinations regarding whether or not a drug is legally marketed, but only determines whether the products reported to the MDR program meet the statutory definition of a COD.
We note that we do not intend to usurp FDA's role regarding whether or not a drug is legally marketed. Rather, we are only requesting that manufacturers submit information needed for CMS to make a determination regarding coverage under the MDR program. We believe that the clarifications provided in this final rule will address the commenters' concerns.
Manufacturers are responsible for reporting pricing information on OTC drugs and calculating a URA based on the statutory and regulatory requirements. This information is included in the MDR drug product data file posted on Medicaid.gov. Drugs listed on the drug product data file, which may be accessed by states through the DDR system or on Medicaid.gov, have been reported and certified by manufacturers for inclusion in the MDR program.
Another commenter stated that CMS needs to provide more specific guidance on how radiopharmaceuticals would be reported for purposes of the administration of the MDR program. Generally, the commenters noted challenges that would occur in the reporting of radiopharmaceuticals to the MDR program.
Further, radiopharmaceuticals approved under section 505 of the FFDCA used in compounding patient-ready doses are also considered CODs because they are required to be assigned NDCs, as well as meet the other requirements in section 1927(k) of the Act to be considered CODs. Unlike radiopharmaceuticals, APIs are not approved as drugs under section 505 of the FFDCA, or as biological products, or insulin. In addition, they are not otherwise covered as described in section 1927(k)(4) of the Act. Therefore, APIs, the individual bulk ingredients used to prepare other compounded prescriptions, are not similar to radiopharmaceuticals, which are subject to FDA's approval process.
Finally, we are aware that several manufacturers have identified potential challenges in reporting product and pricing information for radiopharmaceuticals to the rebate program. We have been working with the radiopharmaceutical manufacturers to address questions and concerns regarding the reporting of these drugs. If a manufacturer has a specific question regarding certain aspects of the reporting requirements specific to radiopharmaceuticals, they should contact CMS for further discussion. We will continue to be available to assist manufacturers with questions on these drugs.
Another commenter requested confirmation that if the drug is bundled together with the service for billing purposes, then the drug is not subject to rebates. The commenter believed that if the drugs are paid for under the Medicare ESRD bundled payment rate, and a state Medicaid program paid for any portion of that bundled rate, then the drugs included in the bundled payment rate do not qualify as CODs, and are, therefore, not rebate-eligible.
We note, however, that section 1881(b)(14)(A)(i) of the Act provides that for services furnished on or after January 1, 2011, payments by Medicare for ESRD renal dialysis services, including certain drugs, generally are made under a bundled payment system. We have interpreted these provisions to provide that manufacturers are not required to pay rebates for drugs that are included in the bundled payment, regardless of the state payment. For more information please refer to Manufacturer Release #85 (October 26, 2012).
Another commenter expressed concern that the narrow interpretation of the term COD may deny coverage of prescription prenatal vitamins and fluoride. The commenter asked CMS to clarify that prescription prenatal vitamins and fluoride meet the definition of a COD.
Based on the comments received, and for the reasons discussed, we are finalizing the definition of COD in § 447.502 as specified in the proposed rule with the following changes. In addition, in light of the discussion in the innovator multiple source drug definition (section II.B.9. of this final rule), we are deleting the reference to NDA and ANDA from the final definition of COD, and instead are tracking the language of the statutory definition.
• The addition of “of this definition” at the end of the parenthetical clause “(except as provided in paragraphs (2) and (3))” to ensure this exception is appropriately identified.
• The replacement of “and also” with “or” in paragraph (1)(i). This change is technical in nature and not intended to alter the meaning or intent of the definition.
• The deletion of the phrases “where the manufacturer has obtained a NDA” and “where the manufacturer has obtained an ANDA” from paragraph (1)(i) to more closely mirror the statutory definition of covered outpatient drug at section 1927(k)(2) of the Act. This final change is not intended to alter the meaning or intent of the definition.
• The addition of “used or” in paragraph (1)(ii) to more closely mirror the statutory definition of COD at section 1927(k)(2) of the Act.
• The change in paragraph (2) of the regulatory text from “and for which payment is made as part of that service . . .” to “and for which payment may be made as part of that service . . .”
• The change in terminology in paragraph(2)(vi) from “mentally retarded” to “individuals with intellectual disabilities” as there has been a change in terminology since the publication of the proposed rule, and the phrase “mentally retarded” has been replaced with “individuals with intellectual disabilities.”
• The deletion of proposed paragraph (3)(ii) from the regulatory text, which excluded any drug product that is not listed electronically with the FDA from the definition, and renumbering paragraphs (3)(iii), 3(iv), and (3)(v) to 3(ii), (3)(iii), and (3)(iv), respectively.
• The replacement of the term “biologic product” with “biological product” as we want to be consistent with the statutory definition of covered outpatient drug, which at section 1927(k)(2) of the Act uses the term “biological product”. This change is technical in nature and not intended to alter the meaning or intent of the definition.
We proposed to add a definition of customary prompt pay discount to ensure consistent application of such discounts among manufacturers when calculating AMP (77 FR 5323 and 5360). In proposed § 447.502, we proposed to define customary prompt pay discounts as any discount off of the purchase price of a drug routinely offered by the manufacturer to a wholesaler for prompt payment of purchased drugs within a specified timeframe and consistent with its customary business practices for payment (77 FR 5360). We received no comments concerning the proposed definition of customary prompt pay discount, and therefore, we are finalizing the definition under § 447.502 as proposed. Comments pertaining to the application of customary prompt pay discounts to the determination of AMP can be found in section II.C.6. of this rule.
As currently defined in § 447.502, an innovator multiple source drug means a multiple source drug that was originally marketed under an original NDA approved by FDA, including an authorized generic drug. It also includes a drug product marketed by any cross-licensed producers, manufacturers, or distributors operating under the NDA and a COD approved under a product license approval (PLA), establishment license approval (ELA), or antibiotic drug approval (ADA). In the proposed rule (77 FR 5323 and 5360), we proposed to add multiple source drugs originally marketed under a Biologics License Application (BLA), as the BLA approval process is a successor to the PLA and ELA, and drugs sold under a BLA are explicitly referenced in the proposed regulatory definition of single source drug (77 FR 5326 and 5361).
In addition, we proposed to clarify that, for purposes of the MDR program, an original NDA is equivalent to an NDA filed by the manufacturer for approval under section 505 of the FFDCA for purposes of approval by FDA for safety and effectiveness (77 FR 5323 and 5360). In light of this definition, we also proposed to use the term “NDA” when addressing such application types for brand name drugs and not use the term “original NDA” when referring to such drugs throughout the proposed rule (77 FR 5323).
We received many comments that provided concerns regarding the term “original NDA” as well as a few comments regarding products approved under a BLA. The issues in these comments are relevant to both the proposed definitions of single source drug and innovator multiple source drug. Given the overlap of these issues (they are not unique to either definition), we have decided to address the comments relating to the term “original NDA” and products approved under a BLA in the innovator multiple source definition section of this final rule (and we will provide a cross-reference to this section in the single source drug definition regarding these comments). We also addressed in this section additional comments we received that were specific to the definition of innovator multiple source drug, including older drug approvals, the timing of the changes, as well as the effect of the revised definition of innovator multiple source drug on manufacturers. We received the following comments:
Another commenter stated that there is no justification why manufacturers of certain “generics” must pay higher rebates only because they are approved under an NDA. The commenter stated that many NDAs are as “abbreviated” as ANDAs are, and it is those NDAs that are not original. One commenter stated that the Congress included the word “original” because it intended for only the first NDA for that drug to be considered a “brand.” Another commenter stated that the term “original new drug application” is unique to section 1927(k)(7)(A) of the Act and nowhere else where an NDA is discussed is the term “original NDA” used as a synonym for NDA. The commenter stated, therefore, that the word “original” must have meaning, especially because the word is used in a provision of the statute that is intended to clarify the meaning of statutory terms. The commenter also stated that the term “original NDA” clarifies the concept of an innovator drug by clarifying the distinction Congress made between innovator and generic drugs and not the less meaningful and sometimes non-existent difference between drugs approved in NDAs and ANDAs. Additionally, the commenter stated that if Congress merely wanted to differentiate between NDA and ANDA, they would have used only those terms, like they did elsewhere and they would not have introduced the term “original NDA.”
Another commenter stated that the intent of the MDR statute is to impose a higher rebate liability on new chemical entities, marketed for the first time under the NDA process, and which received some form of market protection. Another commenter stated that actions that will be required by manufacturers, based on the proposed definition of original NDA, including the reevaluation of their drug categories and having to utilize the higher rebate percentage to calculate URAs, will result in a substantial financial burden without adequate justification or consideration within the economic analysis of the proposed rule.
Section 1927(k)(7)(A) of the Act provides a definition for each of the drug categories that are used in the MDR program to identify the rebate percentage used to calculate the URA for each drug. Specifically, section 1927(k)(7) of the Act defines drugs to include single source drugs, innovator multiple source drugs, and noninnovator multiple source drugs. Section 1927(k)(7)(A)(iv) of the Act defines a single source drug, in part, to mean a covered outpatient drug produced or distributed under an original NDA, including a drug product marketed by any cross-licensed producers or distributors operating under the NDA. Our understanding is that a single source drug is typically the first drug on the market; it has been produced or distributed under an NDA, other than an ANDA, approved by the FDA for the drug and has no therapeutic equivalents. Similarly, our understanding is that an innovator multiple source drug is a drug that was initially marketed under an NDA, other than an ANDA, approved by FDA but is rated therapeutically equivalent to at least one other product in the FDA's `Approved Drug Products with Therapeutic Equivalence Evaluations' (Orange Book) that is sold or marketed in the United States during the rebate period. Section 1927(k)(7)(A)(iii) of the Act defines noninnovator multiple source drugs as multiple source drugs that are not innovator multiple source drugs, which are typically marketed under an ANDA, as opposed to an NDA, approved by FDA. In accordance with these provisions, we disagree with the commenter that Congress needed to use the specific terms NDA and ANDA to differentiate between those drugs which are to be considered single source drugs or innovator multiple source drugs and those which are to be considered noninnovator multiple source drugs. Therefore, in light of the comments received and in accordance with the statutory definitions of innovator multiple source and single source drugs, when read in context with the statutory scheme, we believe that the term “original NDA” is designed typically to mean an NDA (including an NDA filed under section 505(b)(1) or (2) of the FFDCA), other than an ANDA, which is approved by the FDA for marketing.
There may be very limited circumstances where, for the purposes of the Medicaid Drug Rebate (MDR) program, certain drugs might be more appropriately treated as if they were approved under an ANDA and classified as a noninnovator multiple source drug. For example, certain parenteral drugs in plastic immediate containers, for which FDA required that an NDA be filed, might be more appropriately treated, for purposes of the MDR program, as if they are marketed under an ANDA and classified as a noninnovator multiple source drug. Likewise, certain drugs approved under a paper NDA prior to the enactment of the Hatch-Waxman Amendments of 1984 or under certain types of literature-based 505(b)(2) NDA approvals after the Hatch-Waxman Amendments of 1984 might be more appropriately treated as if they were approved under an ANDA and classified as a noninnovator multiple source drug, depending on the unique facts and circumstances of the particular situation. We plan on issuing additional guidance on the scope of these very limited circumstances in the future. In the meantime, we remind manufacturers that these limited circumstances constitute very narrow exceptions to the rule that drugs marketed under NDAs (including section 505(b)(2) NDAs), other than ANDAs, should be classified as either single source or innovator multiple source drugs. For example, the narrow exception will not be considered applicable to drugs marketed under NDAs that were not approved under either the paper NDA process prior to 1984 or under certain types of literature-based 505(b)(2) approvals, or for drugs that received patent protection or statutory exclusivity.
Drugs reported to the MDR program for the first time on or after the effective date of the final rule, including drugs newly marketed under an NDA, other than an ANDA; and drugs previously marketed under an NDA, other than an ANDA, and are reported to the MDR program because, (1) the drug was not reported previously, or (2) the manufacturer receives a new rebate agreement on or after the effective date of the final rule, should be classified as single source or innovator multiple source drugs. If a manufacturer believes that a drug marketed under an NDA, other than an ANDA, and reported to the MDR program on or after the effective date of the final rule should qualify for the narrow exception referenced above because it was approved under the paper NDA process prior to 1984 or an NDA approved under certain types of literature-based 505(b)(2) approvals after 1984 and the unique facts and circumstances warrant reclassification, the manufacturer should submit materials to CMS demonstrating the basis of how the drug might be subject to the narrow exception to classify the drug as a noninnovator multiple source drug. CMS will review these materials and: (1) Confirm in writing that this narrow
For drugs marketed under an NDA and reported currently to MDR program as noninnovator multiple source drugs, manufacturers are reminded of their statutory and regulatory reporting obligations to report such drugs as innovator multiple source drugs or single source drugs, as applicable. However, manufacturers of such drugs will have up to four quarters after the effective date of the final rule to apply for an exception and, if applicable, make the required data changes to bring their reporting efforts into statutory and regulatory compliance before CMS takes any administrative action, if appropriate, against such manufacturers. To the extent any such manufacturer believes that a drug should qualify for the narrow exception, allowing such drugs to be reported as noninnovator multiple source, that manufacturer may also submit materials to CMS demonstrating the basis of how the drug may be subject to the narrow exception to classify the drug as a non-innovator multiple source drug. CMS will review these materials and: (1) Confirm in writing that this narrow exception does apply to the drug at issue; or (2) state that the exception does not apply, and the manufacturer must report the drug as either a single source or innovator multiple source drug. To the extent a manufacturer has previously reported a drug marketed under an NDA, other than an ANDA, as a noninnovator multiple source drug, or believes it has approval from CMS to do so, that manufacturer must submit materials and receive a written determination from CMS as described above pursuant to this final rule.
Therefore, while drugs marketed under an ANDA are noninnovator multiple source drugs, drugs marketed under an NDA, other than an ANDA, approved by the FDA are innovator multiple source or single source drugs, unless the narrow exception has been determined by CMS to apply. CMS's decision to allow manufacturers up to four quarters to come into compliance before taking administrative action in no way relieves manufacturers of other potential liability.
Our interpretation regarding original NDA results in consistent treatment of multiple source drugs, such that those multiple source drugs, which were initially approved for marketing by the FDA under an original NDA, as opposed to an ANDA, would be considered innovator multiple source drugs. For these reasons, and after considering the comments, we have revised the proposed definitions of single source drug and innovator multiple source drug that are found in the proposed rule at 77 FR 5360 and 5361. We are finalizing a change to the definitions of single source drug and innovator multiple source drug by including a reference to an original NDA. With regard to the meaning of the term “original NDA” within the definitions of single source drug and innovator multiple source drug under the MDR program, in this final rule we have revised the proposed definition of “original NDA” to reference an NDA, other than an ANDA, approved by the FDA for marketing, unless the narrow exception discussed above applies (which requires the manufacturer's written submission to CMS, and CMS's response confirming that the exception applies).
We agree with the commenter that NDAs that were approved prior to 1962 were approved for safety only, and not efficacy. We do not believe that section 1927(k)(7) of the Act provides that the definition of single source drug and innovator multiple source drug should be limited to only those drugs approved in 1962 or later. Therefore, in addition to the previously discussed modification, we are further modifying the regulatory definitions of innovator multiple source drug and single source drug. Specifically, in this final rule, we are finalizing the definitions for single source drug and innovator multiple source drug under § 447.502 by eliminating the proposed language “approval under section 505 of the FFDCA for the purposes of approval by the FDA for safety and effectiveness” to clarify that single source and innovator multiple source drugs are not limited to only those drugs approved in 1962 or later.
As discussed above, drug products marketed under NDAs, other than ANDAs, should be classified by manufacturers as either single source or innovator multiple source drugs for the purposes of the MDR program unless the narrow exception applies, as discussed above pursuant to this final rule. If the manufacturer believes that a drug approved under an NDA prior to 1962, including a drug approved under one of the NDA processes to which the commenter refers, should be classified as a noninnovator multiple source drug, the manufacturer should submit materials to CMS demonstrating why a drug should be classified as a noninnovator multiple source drug. CMS will review these materials and: (1) Confirm in writing that this narrow exception does apply to the drug at issue and the manufacturer must report the drug as a noninnovator multiple source drug; or (2) state that the exception does not apply, and the manufacturer must report the drug as either a single source or innovator multiple source drug.
Another commenter stated that the proposed rule provides that pre-1962 drugs that were originally marketed without an NDA as noninnovator multiple source drugs and, prior to the effective date of this rule, were reviewed by FDA and received an NDA under FDA's section 505(b)(2) provision, would continue to be treated as noninnovator multiple source drugs, per the guidance found in the preamble to CMS's proposed rule (60 FR 48453), published in 1995. The commenter additionally stated that they believe CMS intends for pre-1962 drugs that receive an NDA subsequent to the effective date of this rule would have their status changed to innovator multiple source drugs. The commenter concluded that if the section 505(b)(2) application was submitted as a supplement or change to an innovator multiple source drug, then the drug should be treated as an innovator multiple source drug; however, if the section 505(b)(2) application did not reference an innovator multiple source drug, it should be treated as a noninnovator multiple source drug. The commenter indicated that if their interpretation of CMS's intent was correct, that CMS would be eliminating the statutory requirement that an innovator multiple source drug be originally marketed under an original NDA.
We disagree with the commenter that there will be different treatment regarding drug category determinations of previously unapproved drugs that subsequently received FDA approval, depending on whether the FDA approval occurred before or after the effective date of this final rule. Section 1927(k)(7) of the Act provides definitions for single source drugs, innovator multiple source drugs, and noninnovator multiple source drugs. It is possible that based on the approval of a previously unapproved drug, that drug may require a change in reported drug category. Additionally, the portion of the proposed 1995 rule referred to by the commenter was not finalized and is not determinative. In the final rule published on July 17, 2007, we provided, in part, that due to changes in the prescription drug industry, we do not plan to finalize the provision from the proposed 1995 rule to which the commenter refers (72 FR 39143). If a manufacturer believes that a drug marketed under a section 505(b)(2) NDA is subject to this narrow exception discussed above, the manufacturer should submit materials to CMS outlining the basis for classifying the drug as a noninnovator multiple source drug. CMS will review these materials and: (1) Confirm in writing that this narrow exception does apply to the drug at issue and the manufacturer must report the drug as a noninnovator multiple source; or (2) state that the exception does not apply, and the manufacturer must report the drug as either a single source or innovator multiple source drug.
All drugs marketed under an NDA, other than an ANDA, regardless of when they were approved, should be categorized as single source or innovator multiple source drugs, unless CMS determines that a narrow exception applies as discussed above pursuant to this final rule. The final rule does not release manufacturers from any reporting liabilities. If a manufacturer determines a drug category change is needed, the manufacturer is responsible for contacting CMS to request that change.
Accordingly, we have modified the definition of innovator multiple source drug in the proposed regulatory text (77 FR 5360) to include the term “originally marketed.” Specifically, in this final rule, in response to comments and as discussed in this section, we are finalizing the definition of innovator multiple source drug under § 447.502 to provide that an innovator multiple source drug means a multiple source drug that was originally marketed under an original NDA approved by FDA, including an authorized generic drug, unless the narrow exception discussed above applies (which requires the manufacturer's written submission to CMS, and CMS's response confirming that the exception applies).
Manufacturers are responsible for reporting drugs that were marketed under an original NDA as single source or innovator multiple source drugs, unless the narrow exception applies as noted previously. We understand that some manufacturers may need to make operational changes to their pricing systems, such as calculating a base date AMP and best price for a drug that should be categorized as innovator drugs. Therefore, we are allowing manufacturers up to 4 quarters after the effective date of the final rule to make the necessary data changes before CMS takes any administrative action, if appropriate.
Several commenters stated that simply because the ANDA process of approval was not utilized, and instead an alternative approval process was utilized, this should not be the basis of determining a drug to be an innovator multiple source drug. One commenter stated that FDA sometimes requests that a manufacturer submit a 505(b)(2) application or other short-form application for approval of an older generic drug which, the commenter concluded, cannot reasonably be viewed as an innovator multiple source drug. The commenter stated that CMS should provide some flexibility regarding the classification of these drugs. Several commenters cited an FDA-proposed rule that referred to pre-Hatch-Waxman NDAs as “duplicate” drugs and commented that if a drug is a duplicate of another, then it should be considered to be a noninnovator product.
Regarding a grandfathered drug, or a drug that was previously marketed without approval and subsequently received approval of an NDA, as opposed to an ANDA, that drug should be reported as a single source drug or innovator multiple source drug, whichever is applicable, unless the narrow exception discussed above applies. The final rule does not release manufacturers from any reporting liabilities. If a manufacturer determines a drug category change is needed, the manufacturer is responsible for contacting CMS to request that change.
The final rule does not release manufacturers from any reporting liabilities. If a manufacturer determines a drug category change is needed, the manufacturer is responsible for contacting CMS to request that change. The statute requires a different rebate formula for single source and innovator multiple source drugs, which results in higher rebates owed for those drugs than for noninnovator multiple source drugs. We encourage manufacturers to properly classify their drugs for rebate calculation purposes.
The draft guidance states, in part, that section 505(b)(2) and (j) of the FFDCA replaced FDA's paper NDA policy. The draft guidance also states that “enactment of the generic drug approval provision of the Hatch-Waxman amendments ended the need for approvals of duplicate drugs through the paper NDA process.” Specifically, section 505(j) of the FFDCA allows for approval of duplicates of approved NDAs on the basis of chemistry and bioequivalence data. Section 505(b)(2) of the FFDCA allows for approval of applications other than those for duplicate products. The draft guidance also states that a section 505(b)(2) application is an NDA submitted under section 505(b)(1) and approved under section 505(c) of the FFDCA.
As FDA indicated in the draft guidance, two types of approvals replaced FDA's paper NDA policy—one for duplicates of approved NDAs (now approved under section 505(j)) and one for applications other than those for duplicate products (now approved under section 505(b)(2)). Accordingly, it follows that not all products that were approved under FDA's paper NDA policy can be considered noninnovator products.
Therefore, even though a duplicate of a drug approved under an NDA may have historically been approved under FDA's paper NDA policy, if it would now be approved under section 505(j) and result in an ANDA approval, it would be classified as a noninnovator multiple source drug. However, drugs which are not such duplicates, although they may have historically been approved under the paper NDA policy, but which are now approved under section 505(b)(2) and receive an NDA approval should be classified as either a single source drug or innovator multiple source drug, unless the narrow exception discussed above applies (which requires the manufacturer's written submission to CMS, and CMS's response confirming that the narrow exception applies).
For the reasons we noted in this section, and based on the comments received and detailed in this section, we are finalizing the definition of innovator multiple source drug under § 447.502 by:
• Revising the introductory sentence to add “that was originally” prior to the word “marketed” and to delete “a” and replace it with “an original” prior to the phrase “new drug application.”
• Adding the word “also” between the words “It” and “includes” in the second sentence. This change is technical in nature and not intended to alter the meaning or intent of the definition.
• Revising the final sentence to specify that for purposes of this definition and the MDR program, an original NDA means an NDA, other than an Abbreviated New Drug Application (ANDA), approved by the FDA for marketing, unless CMS determines that a narrow exception applies.
• Replacing the word “approval” with “application” in the three instances in which it is used in this definition as the correct terminology is “Product License Application (PLA)”, “Establishment License Application (ELA)”, and “Antibiotic Drug Application (ADA)”. These changes are technical in nature and not intended to alter the meaning or intent of the definition.
• Changing the word “biologic” to “biologics” as the correct terminology is “Biologics License Application (BLA)”.
The Affordable Care Act established a separate calculation for the URA for a drug that is a line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form. Section 1927(c)(2)(C) of the Act, added by section 2501(d) of the Affordable Care Act, defines line extension to mean a new formulation of a drug, such as an extended release formulation. We proposed to define line extension as a single source or innovator multiple source drug that is an oral solid dosage form that has been approved by FDA as a change to the initial brand name listed drug in that it represents a new version of the previously approved listed drug, such as new ester, new salt or other noncovalent derivative; a new formulation of a previously approved drug; a new combination of two or more drugs; or a new indication of an already marketed drug. We additionally proposed that regardless of whether the drug is approved under an NDA or a supplemental NDA, if the change to the drug is assigned to one of the above changes, it will be considered a line extension drug (77 FR 5323).
We received numerous comments regarding our proposed definition of line extension drug. The comments addressed reasons that various changes to drugs should not be included in the definition of a line extension drug. For example, comments addressed why new combinations, new indications and new ester, new salt or other noncovalent derivatives should not be included in the definition of a line extension. Other comments included concerns that our definition was too broad and not supported by legislative history and suggestions for alternative definitions of line extension drugs.
We appreciate the comments that were provided, however, at this time we have decided not to finalize the proposed regulatory definition of line extension drug at § 447.502. Instead, we are requesting additional comments on the definition of line extension drug as we may consider addressing this in future rulemaking.
For purposes of the MDR program, we proposed to clarify our current definition of manufacturer by revising it to state that a manufacturer means any entity that holds the NDC for a COD or biological product (77 FR 5324, 5360). We received no comments concerning the proposed revision to the manufacturer definition under § 447.502, and therefore, are finalizing it as proposed, except to add the phrase “meets the following criteria:” after the word “and” in the introduction in order to provide further clarity as to the criteria to be met. This edit is not intended to change the meaning of the definition.
In accordance with section 1927(k) of the Act, as amended by the Affordable Care Act, we proposed to define multiple source drug in proposed § 447.502 as a COD for which there is at least one other drug product which—
• Is rated as therapeutically equivalent as reported in FDA's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations” which is available at
• Is pharmaceutically equivalent and bioequivalent, as determined by FDA; and
• Is sold or marketed in the United States during the rebate period.
This proposal is discussed in more detail at 77 FR 5324. We received the following comments concerning the proposed definition of multiple source drug:
• We are adding the phrase “meets the following criteria:” after the word “and” in the introduction in order to provide further clarity as to the criteria to be met.
Other comments received about multiple source drugs, as they relate to the calculation of the FUL are discussed in detail in the Upper limits for multiple source drugs section (section II.K.) of this final rule.
We proposed to revise the definition of NDC to mean the numerical code maintained by FDA that includes the labeler code, product code, and package code. For purposes of this subpart, the NDC is considered to be an 11-digit code, unless otherwise specified in this subpart as being without regard to package size (that is, the 9-digit numerical code) (discussed in more detail at 77 FR 5324). We did not receive any comments concerning the proposed definition of NDC at § 447.502; therefore, for the reasons we noted, we are finalizing the definition as proposed.
We proposed to amend the definition of a noninnovator multiple source drug to also include other drugs that have not gone through an FDA approval process but otherwise meet the definition of
After considering the public comments, and for the reasons we articulated, we are finalizing the definition of noninnovator multiple source drug under § 447.502, except—
• As noted earlier, we are deleting paragraph (5) (Any noninnovator drug that is not therapeutically equivalent) from the regulatory text and renumbering paragraph (6) to paragraph (5); and
• In the new paragraph (5), we are making a technical correction to state that if any of the drug products listed in this definition of a noninnovator multiple source drug subsequently receives an NDA or ANDA approval from FDA, the product's drug category changes to correlate with the new product application type. This change is technical in nature and not intended to alter the meaning or intent of the definition.
We proposed to interpret oral solid dosage form in accordance with FDA regulation at 21 CFR 206.3, which defines solid oral dosage form to mean capsules, tablets, or similar drug products intended for oral use. In addition, we also proposed to further interpret an oral route of administration as any drug that is intended to be taken by mouth. The proposed definition is discussed in more detail at 77 FR 5324 through 5325. We received the following comments regarding this definition:
We proposed to add a definition of OTC drugs to clarify which products would be treated as OTC drugs in the Medicaid program (77 FR 5325). We proposed to define OTC drugs as drugs that are appropriate for use without the supervision of a health care professional such as a physician, and which can be purchased by a consumer without a prescription (77 FR 5360 through 5361). These proposed revisions are discussed in more detail at 77 FR 5325. We received no comment concerning the proposed OTC drug definition at § 447.502. For the reasons we noted in
Section 2501(a) of the Affordable Care Act established a minimum rebate percentage of 17.1 percent of AMP for single source and innovator multiple source drugs approved by FDA exclusively for pediatric indications. To implement this requirement, we proposed to clarify which drugs would be subject to this minimum rebate percentage (77 FR 5325). We proposed to apply this definition at proposed § 447.502 only to drug products whose FDA-approved labeling includes indications only for children from birth through 16 years of age or a subset of this group (77 FR 5325 through 5326). We also proposed to apply such a definition only when this specific pediatric population age cohort appears in the “Indication and Usage” section of FDA-approved labeling. We received the following comments concerning the definition of pediatric indication:
A few commenters indicated that CMS should not redefine terms that are inconsistent with FDA's application of what it interprets as pediatric so as to obtain additional Medicaid rebates. The commenters referenced debates leading up to the 2002 reauthorization of the Best Pharmaceuticals for Children Act (BPCA), Representative Stupak was quoted in the Congressional Record (Cong. Record p. 147562 (Oct. 31, 2001)) as saying that, “we created the pediatric exclusivity bill to make sure an opportunity was provided to have more studies done to make sure the proper dosage, the amount and the type of drug would be beneficial to young people, those under 18 years of age.” The commenter discussed a drug which initially was approved by the FDA on the condition that the manufacturer perform pediatric studies under the Pediatric Research Equity Act (PREA) on pediatric patients 13 to 17 years and stated that the FDA approved a second product for the same indication but required three post marketing studies in the pediatric population up to age 17. This commenter, as well as other commenters stated that FDA has approved drugs for “pediatric use” up to 18 years of age and CMS should be consistent with these approvals.
A few commenters also stated that the proposed rule, if finalized, undermines the incentives the Congress created (under BPCA and PREA) to encourage development of drugs for children and adolescents. The commenters also noted that CMS's interpretation of pediatric indication, which uses a lower age limit, results in a manufacturer incurring a higher rebate obligation while FDA's higher age limit imposes more stringent testing requirements on the same manufacturer.
Another commenter stated that FDA regulations cited by CMS were not designed to identify products approved “exclusively for pediatric indications” but rather used by the FDA to define the pediatric population for the purpose of distinguishing it from the adult population in which a product may be studied and approved. This commenter noted that although the FDA labeling regulations seem to establish the criteria of pediatric population to include up to age 16 that is not how the regulations have been applied by the FDA when it comes to setting age criteria for required clinical trials.
And finally, a commenter noted that adopting this definition of pediatric would not be consistent with the definition of pediatric patients in other CMS programs and rules, including the Pediatric Vaccine Distribution Program (definition of child as “an individual 18 years of age or younger”), CMS-Supported Pediatric Renal Facilities (“pediatric facility . . . a renal facility at least 50 percent of whose patient are individuals under age 18 years of age”), and the Medicare Hospital Inpatient Prospective Payment System interpreting “pediatric” (up to the age of 18).
Furthermore, we recognize that commenters referenced examples of when the FDA has required certain manufacturers to perform certain studies in pediatric patients, which includes populations' ages 13 to 17 years of age, or up to 18 years of age, consistent with the requirements of PREA and BPCA. While FDA may have required an individual manufacturer to perform studies in age groups over the age of 16, we believe such decisions are driven by FDA's clinical and scientific reasoning (see “Draft Guidance for Industry and Review Staff, Pediatric Information Incorporated Into Human Prescription Drug and Biological Products Labeling,” dated February 2013) that the drug be evaluated in groups beyond age 16. While FDA may have required such studies, FDA has not revised Part 201's definitions of pediatric populations.
We believe that adopting a definition of pediatric indication in this rule that contains the pediatric age groups specified in FDA's prescription drug labeling regulations is consistent with the statute at section 1927(c)(1)(B)(iii)(II)(bb) of the Act, which provides for the application of a minimum rebate percentage to drugs approved by the FDA exclusively for pediatric indications. We further believe that while some commenters noted that FDA and other HHS programs may have referred to a pediatric age group to include a population up to, and including, the age of 21, we do not agree that such a definition should be used in the MDR program. We see no reason to adopt a definition which would include age populations through 21 years of age; doing so would be inconsistent with the FDA regulations discussed previously.
Therefore, we are finalizing our proposal to adopt a specific age range within our definition of pediatric indication in this final rule to indicate that the product is approved exclusively for use by the pediatric population age group, meaning the drug's label references from birth through 16 years of age, or a subset of this group, as specified in the “Indication and Usage” section of the FDA approved labeling, or an explanation elsewhere in the labeling that makes it clear that the drug is approved for use only in the pediatric age group, or a subset of this group.
Another commenter believed that requiring the “Indications and Usage” section to contain an explicit age range is too rigid, when FDA approved a drug to prevent serious lower respiratory disease in children at high risk of developing that disease. The commenter noted that the FDA approved labeling states elsewhere that this product “is not for adults or for children older than 24 months of age,” thus supporting that an age-specific reference is not required in the indication statutorily.
Another commenter provided an example of a product where in its “Indications and Usage” section, there were dosages for several different indications; however, there was no upper age limit, only “X” years and older. The dosage and administration section showed the higher strength product for use in 15 years and older. This commenter suggested that CMS revise the proposed definition to include the full product labeling, including, but not limited to the “Dosage and Administration” section to read “pediatric indication means a specifically stated indication for use by the pediatric age group, meaning from birth through 16 years of age, or a subset of this group, as specified in the full FDA approved labeling.”
A few commenters expressed dissatisfaction with CMS's proposed definition of Pediatric Indication, because it would exclude many strengths of a drug approved for pediatric indications and would potentially evaluate drugs at a different level than the level at which URAs are calculated. The commenter included labeling information for a few products and explained that one product had both adult and pediatric indications in the “Indications and Usage” section, noting that the pediatric products were approved under a separate NDA. However, there is only one label approved for all of the various dosage forms and age groups. The commenter referenced another product label which had separate adult and pediatric indications at the product level but does not specify which dosage forms apply to which age groups. The commenter stated that since these products are within the same product codes that were approved under a separate NDA, those products should be approved as exclusively for pediatric indication by CMS.
After consideration of the public comments, and for the reasons we explained previously in this section, we are revising the proposed definition of pediatric indication under § 447.502 to align with the FDA's interpretation of pediatric population to mean a specifically stated indication for use by the pediatric age group, from birth through 16 years of age, or a subset of this group, as specified in the “Indication and Usage” section of the FDA approved labeling or in an explanation elsewhere in the labeling that makes it clear that the drug is for use only in the pediatric age group, or a subset of this group.
We proposed in § 447.502 to replace the term “dispensing fee” with “professional dispensing fee” as the drug ingredient cost is only one component of the two-part formula used to reimburse pharmacies for prescribed drugs dispensed to Medicaid beneficiaries (77 FR 5361). We also proposed to require states to reconsider the dispensing fee methodology consistent with the revised requirements (discussed in more detail at 77 FR 5326). We received the following comments concerning professional dispensing fee provisions:
Another commenter stated that CMS should reflect congressional intent to provide adequate pharmacy reimbursement for retail pharmacies participating in the Medicaid fee-for-service (FFS) program by ensuring that states are adhering to an economically rational reimbursement methodology. Another commenter added that CMS recognizes this by stating in the proposed rule that both ingredient cost and professional dispensing fee need to be looked at in the total and this is why CMS is encouraging states to move toward an AAC payment with a corresponding higher professional dispensing fee (where appropriate) to cover costs and overhead.
After considering the comments and for the reasons we discussed in this section, we are finalizing the definition of professional dispensing fee in § 447.502 as proposed (77 FR 5361).
As currently defined in § 447.502, a single source drug refers to a COD that is produced or distributed under an original NDA approved by FDA, including a drug product marketed by any cross-licensed producers or distributors operating under the NDA. It also includes a COD approved under a BLA, PLA, ELA, or ADA.
In the proposed rule (77 FR 5326, 5361), we proposed to define single source drug to mean a COD that is produced or distributed under an NDA approved by FDA and has an approved NDA number issued by FDA, including a drug product marketed by any cross-licensed producers or distributors operating under the NDA. It also includes a COD approved under a BLA, PLA, ELA, or ADA. We also proposed that for purposes of the MDR program, an original NDA is equivalent to BLA, PLA, ELA, or ADA. Additionally, proposed was that for purposes of the MDR program, an original NDA is equivalent to an NDA filed by the manufacturer for approval under section 505 of the FFDCA for purposes of approval by FDA for safety and effectiveness. These proposed provisions are discussed in more detail at 77 FR 5326.
We received some comments regarding the definition of single source drug which included comments about the interpretation of the phrase “original NDA” as well as comments regarding products approved under a BLA. However, the comments received regarding the proposed definition of
Based on the comments received about the meaning of the term “original NDA” that apply to the definition of single source and as summarized in the innovator multiple source drug definition section of this final rule, and for the reasons we articulated in our response to the comments about the meaning of that term in the innovator multiple source drug definition, we are finalizing the definition of single source drug under § 447.502 by:
• Inserting the term “original” before the initial reference to “NDA” in the introductory sentence of the definition.
• Revising the final sentence to specify that for purposes of this definition and the MDR program, an original NDA means an NDA, other than an ANDA, approved by the FDA for marketing, unless CMS determines that a narrow exception applies.
• Replacing the word “approval” with “application” in the three instances in which it is used in this definition as the correct terminology is “Product License Application (PLA)”, “Establishment License Application (ELA)”, and “Antibiotic Drug Application (ADA)”. These changes are technical in nature and not intended to alter the meaning or intent of the definition.
• Changing the word “biological” to “biologics” as the correct terminology is “Biologics License Application (BLA)”. This change is technical in nature and not intended to alter the meaning or intent of the definition.
We proposed to revise the definition of states to include the 50 states, the District of Columbia, and the territories (defined as the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa), as discussed in more detail at 77 FR 5326, 5361. We also proposed to add a definition of United States to include the 50 states, the District of Columbia, and the territories (the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa) (77 FR 5326, 5361). Because the effect of these two definitions is essentially the same for purposes of the MDR program, we are responding to the comments we received on them together as detailed in this section. Specifically, we received the following comments concerning the proposed definitions:
One commenter requested that CMS provide the legal basis and rationale for this expansion prior to requiring companies to undergo extensive contract and pricing adjustments that would be necessary; stating that CMS should substantively demonstrate the need for this expansion beyond a generalized belief that doing so will benefit the territories. A few commenters also stated that a statutory change would be a prerequisite to expanding the MDR program to the territories. One commenter stated that this policy should be considered as part of a new rulemaking that sets forth detailed criteria for the operation of the Medicaid rebate program in the territories.
In addition, in light of the comments and as discussed more in this section, we have decided to delay including the territories in the definitions of states and United States until 1 year after the final rule becomes effective. We also will consider allowing a territory to use existing waiver authority to elect not to participate in the MDR program consistent with the statutory waiver standards. For example, the Northern Mariana Islands and American Samoa may opt out under the broad waiver that has been granted to them in accordance with section 1902(j) of the Act. Puerto Rico, 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 applicable requirements of section 1927 of the Act.
We further note that should a territory exercise its waiver option not to participate in the MDR program, the definitions of states and United States would still include the territories 1 year after the effective date of the final rule. We appreciate the comments; however, we continue to note that it is consistent with the definitions in section 1101(a) of the Act to include the territories in the definition of states under the MDR program.
Similarly, several commenters noted that the proposed rule recognizes that the territories will need additional time to come into compliance with MDR program requirements but the proposed rule does not address that manufacturers may need similar lead time as the territories to implement aspects of this provision. Several commenters stated that the completion timeline for manufacturers to comply with CMS requirement should be 6 to 12 months after the approval of the ruling.
Several commenters further stated that CMS should require that manufacturers are obligated to pay rebates on territory utilization on a prospective basis only as of the effective date. In addition, a few commenters stated that the proposed rule does not address the potential for territories to implement rebate liability on manufacturers on a voluntary basis and on an earlier timetable than the proposed rule's timeline, which could result in manufacturers facing the possibility that territories could submit rebate claims to them faster than the manufacturers are able to accomplish systems upgrades. Another commenter asked if CMS would provide manufacturers with drug utilization estimates if the territories are not prepared to do so by the time of the effective date.
Many commenters also stated that the collection of data concerning drug sales in the territories require significant time for manufacturers and territories to revise, set up, and to operationalize price reporting policies and systems to collect, report, validate, test, track and perfect pricing data collections from those sales which are necessary to calculate and pay rebates for CODs utilized in the territories. Commenters further noted that lead time is needed to amend contracts, and implement software changes.
As a result, the related requirements we are adopting in this final rule, including the Requirements for States in § 447.511, will not apply to the territories until 1 year after the definitions for states and United States go into effect. As a result of using a later implementation date for the inclusion of the territories into the definitions of states and United States, the related requirements concerning these revised definitions that apply to the manufacturers, including the Determination of AMP in § 447.504, the Determination of Best Price in § 447.505, MDRs in § 447.509, and the Requirements for Manufacturers in § 447.510, will not immediately be applicable to the territories (the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa) as of the effective date of the final rule.
In addition, we also disagree with the comment concerning the dangerous precedent that our definitions could set. As discussed previously in this section, our definitions are based on our reexamination of the applicable provisions and what we consider to be an appropriate definition of states and United States in light of the statute.
One commenter noted concerns with the territories' ability to capture accurate utilization data and the feasibility of a disputes process. Manufacturers' systems are not designed to process sales data generated in the territories, making compliance with the program very difficult. The commenter stated that the territories' foreign pricing structures would require an operational change in their Medicaid price reporting system and the calculations from which the URA is derived. The commenter also stated that many of the entities that sell in the territories do not conduct business in the United States; therefore, the commenter would need to purchase systems necessary to generate accurate indirect sales data to ensure the integrity of the data from foreign entities.
Another commenter expressed concerns that the claims received from these newly included territories will not be valid or verifiable under the current sophisticated MDR reporting system. The commenter stated that combining the domestic and foreign operations for purposes of reporting sales in the territories would also require new databases for the manufacturers and additional staff to manage expanded reporting obligations.
After considering the comments, we are finalizing the definition of states under § 447.502 to mean the 50 states and the District of Columbia and beginning April 1, 2017, also includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa.
We are also finalizing the definition of United States to mean the 50 States and the District of Columbia and beginning April 1, 2017, also include the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa.
Given the definition of “wholesaler” in section 1927(k)(11) of the Act, as added by the Affordable Care Act, we proposed to define wholesaler to mean a drug wholesaler that is engaged in wholesale distribution of prescription drugs to retail community pharmacies,
Several commenters indicated that the definition of wholesaler should include the requirement for wholesaler to be licensed by the state. Commenters indicated that they did not understand why CMS would not require wholesaler licensure just because it is not in the statute and that licensure as a wholesaler should be considered when determining the status of an entity whose business is an intermediary between the original manufacturer of a drug and the dispensing pharmacy. Another commenter stated that chain pharmacy distribution centers are generally licensed as wholesalers in the states in which they are located.
One commenter stated that reporting AMPs for products distributed through unlicensed wholesalers would not be reflective of prices that are available to retail community pharmacies from licensed wholesalers. The commenter recommended that manufacturer sales to unlicensed wholesalers should not be included in AMP, or alternatively, CMS should exclude manufacturer's transactions with unlicensed wholesalers for purposes of calculating FULs.
A few commenters indicated that state licensure should permit a manufacturer to conclude that an entity does qualify as a wholesaler and asked that CMS confirm that state licensure is a reasonable basis for determining that an entity is a wholesaler for purposes of the MDR program.
After considering the comments, and for the reasons we articulated in this section and in the proposed rule, we are finalizing the definition of wholesaler under § 447.502 without modification.
In proposed § 447.502, we included the existing definitions, without modification, for Brand Name Drug, Consumer Price Index-Urban, Lagged Price Concession, National Drug Rebate Agreement, Nominal Price, and Rebate period (77 FR 5359 through 5361). We did not receive any comments and we are finalizing these definitions in § 447.502.
The Omnibus Budget Reconciliation Act of 1990 (OBRA '90) (Pub. L. 101-508) added section 1927 to the Act, which established the MDR program and defined the AMP for a COD of a manufacturer for a rebate period as the average unit price paid to the manufacturer for the drug in the United States by wholesalers for drugs distributed to the retail pharmacy class of trade. Manufacturers who entered into and had in effect a rebate agreement with CMS were required to report AMP on a quarterly basis. The AMP was used to calculate the rebates paid by manufacturers to the states for drugs dispensed to their Medicaid beneficiaries for which payments were made under their state plans.
The DRA of 2005 made significant changes to the Medicaid prescription drug provisions of the Act. In particular, the DRA amended section 1927(k)(1) of the Act to revise the definition of AMP to exclude customary prompt pay discounts to wholesalers, effective January 1, 2007. The DRA defined AMP, in part, to mean, for a COD of a manufacturer for a calendar quarter, the average price paid to the manufacturer for the drug in the United States by wholesalers for drugs distributed to the retail pharmacy class of trade. CMS published the Medicaid Program; Prescription Drugs final rule (the AMP final rule) on July 17, 2007 (72 FR 39142) to implement the provisions of the Deficit Reduction Act of 2005 (DRA) pertaining to prescription drugs under the Medicaid Program.
Following the enactment of the Affordable Care Act, in the November 15, 2010
On March 23, 2010, the Affordable Care Act was enacted. Section 2503 of the Affordable Care Act revised the definition of AMP in section 1927(k) of the Act to eliminate the reference to retail pharmacy class of trade and to identify specific entities that manufacturers should include or exclude when calculating AMP. In the proposed rule, we proposed a new § 447.504 “Determination of AMP,” (discussed in more detail at 77 FR 5327), based on section 1927(k)(1) of the Act, as amended by the Affordable Care Act, and further amended by section 202 of the Education Jobs and Medicaid Assistance Act.
We received comments concerning the proposal to require manufacturers to report AMP based upon their actual sales to retail community pharmacies or wholesalers for drugs distributed to retail community pharmacies, the definition of retail community pharmacy, other terms used in the determination of AMP, the entities proposed for inclusion in and exclusion from AMP, and our proposed policy regarding the treatment of inhalation, infusion, instilled, implanted, or injectable drugs (also referred to as 5i drugs) that are not generally dispensed through a retail community pharmacy in the determination of AMP.
We note that commenters used a variety of terms to distinguish AMP calculated for 5i drugs that are not generally dispensed through retail community pharmacies. With regard to the calculation of AMP and drugs generally dispensed through retail community pharmacies, some commenters referred to the “standard AMP” methodology, “the non-5i methodology,” “the retail community pharmacy methodology” or the “regular AMP methodology.” Commenters also referred to “5i AMP” methodology, “non-retail community pharmacy AMP” methodology, and the “alternate” or “alternative AMP” methodology when discussing the AMP methodology used to calculate AMP for 5i drugs that are not generally dispensed through retail community pharmacies.
As discussed earlier in the definition of “5i drug” in section II.B., we have been using the term “5i drug” as an acronym to refer to all inhalation, infusion, instilled, implanted, or injectable drugs, regardless of whether they are or are not generally dispensed through a retail community pharmacy. Furthermore, we note that section 1927 of the Act only authorizes one AMP and we did not propose more than one AMP calculation. Therefore, for purposes of summarizing comments and providing responses to comments, when appropriate, we will specifically refer to AMP for 5i drugs not generally dispensed through retail community pharmacies when making a distinction
The following are general comments we received pertaining to the determination of AMP section:
Another commenter noted that using reasonable assumptions is preferred because manufacturers are accustomed to using this approach for their current AMP reporting; small manufacturers often lack sophisticated customer master systems but generally are able to utilize reasonable assumptions that meet their business purposes and comply with the spirit of AMP rules; and the features and functions of healthcare providers are continually changing and the inherent flexibility of reasonable assumptions is appropriate for this reality.
Another commenter stated that manufacturers' assumptions should address the categorization of companies that plausibly could fall into two or more classes of trade. For example, there are pharmacies that provide retail pharmacy services, compounding pharmacy services, infusion services, medical equipment and respiratory services so the class of trade will depend on the particular product. Therefore, the commenter suggested that CMS should confirm in the final rule the important role a manufacturer's documented reasonable assumptions have in making decision rules for class of trade issues.
We proposed that, consistent with section 1927(k)(1)(A) of the Act, sales to wholesalers for drugs distributed to retail community pharmacies are to be included in the determination of AMP (77 FR 5330). As part of the discussion in the preamble to the proposed definition of retail community pharmacy within the Determination of AMP section, we considered two approaches manufacturers may take for determining which sales are included in AMP when such sales are made to wholesalers for drugs distributed to retail community pharmacies (77 FR 5328). One approach, referred to as the “presumed inclusion” approach, is that the manufacturer presumes, in the absence of adequate documentation to the contrary, that certain prices paid to manufacturers by wholesalers are for drugs distributed to retail community pharmacies, without data concerning that actual distribution (77 FR 5329). The other approach for determining AMP is when the manufacturer only includes in its AMP calculation those prices where there is adequate, verifiable documentation showing that the drug was actually distributed to a retail community pharmacy, either directly or indirectly through the wholesaler (77 FR 5330). This approach is referred to as the “buildup” methodology. We sought comments regarding these approaches in the proposed rule.
In response to our request, we received numerous comments requesting CMS's continued support of the presumed inclusion approach. These comments and our responses are summarized in this section. We note that commenters used a variety of terms to distinguish between these two approaches for calculating AMP. Some commenters referred to the “presumed inclusion” methodology as “the default rule,” “the top down approach” or the “gross to net method” for calculating AMP. Commenters also referred to the CMS “buildup” methodology as the “bottom up,” and the “presumed exclusion” approach. For purposes of summarizing comments and providing responses, we will refer to either the
We also appreciate the insight that commenters provided regarding the financial impact and operational
We agree that inasmuch as the commenters urged a policy that would have the potential to raise their AMPs, their statements reflect the realities of the marketplace where data required by the buildup approach is not typically available to the manufacturer. Therefore, in light of the concerns raised and as discussed previously, we have decided not to require that manufacturers adopt the buildup approach when calculating AMP.
Further, commenters noted that there is no commercially available data set which would provide sufficient information regarding wholesaler customers and stated that while there are commercial services that attempt to estimate blinded data concerning customer sales, their methodologies vary, resulting in different manufacturers potentially using different data standards, creating inconsistencies among the AMP calculations from manufacturer to manufacturer. A few commenters had concerns that the verification of reseller sales would require access to proprietary and confidential information that would be difficult if not impossible to obtain and could raise legal issues as well.
Commenters also stated that CMS lacks the legal authority to require manufacturers to purchase data to participate in the Medicaid program and that such a requirement would reduce the reliability, stability, and accuracy of reported AMPs and cause a host of operational problems with no satisfactory solution. A few commenters believed this requirement to purchase data is not authorized by the Medicaid rebate statute and would be considered arbitrary and capricious and thus improper under the APA. Commenters were also concerned that intermediaries with access to the data would have significant negotiation leverage and could charge excessive fees for the data which would place manufacturers in a difficult position regarding government price reporting and federal and state fraud and abuse laws if they are required to purchase data that could readily exceed an objectively determined fair market value.
Other commenters identified challenges to utilizing third party data for calculating AMP, including differentiating returns from sales because both returns and product transfers between wholesaler locations look like sales; fields on wholesaler records, which differ by wholesalers; and the classes of trade assigned by wholesalers do not always align with those of the manufacturer.
Another commenter stated that it would not be necessary to establish a regulatory category for specialty pharmacies to have an AMP for oral drugs that are not dispensed primarily through retail community pharmacies if the presumed inclusion rule was retained because there would be some sales to wholesalers at WAC which would not be subsequently identified as excludable. These wholesaler WAC sales would form the basis for calculating AMP. The commenter believed that this solution, although imperfect, is less imperfect than using the buildup approach and establishing a new category of pharmacy not consistently recognized across the industry and directly contrary to a statutory mandate.
Another commenter noted that with a presumed inclusion calculation these non-retail sales would have been included in the gross sales for the product and once chargeback detail from a doctor, clinic, or hospital was processed, a manufacturer could then remove those sales using a 12-month lagged calculation as ineligible sales. While theoretically there would never be an eligible sale, the lagged removal allows an AMP calculation to take place. If the buildup method is finalized, the commenter asked how manufacturers are to remain in compliance with reporting AMP for physician administered products that do not have any retail sales and are not 5i drugs as defined in the proposed rule (77 FR 5328).
Other commenters noted that the non-Federal Average Manufacturer Price (non-FAMP) also uses a presumed inclusion approach and requiring a manufacturer to implement an entirely different approach for a similar price point is the type of unnecessarily inconsistent and duplicative regulation that agencies are directed to avoid. Another commenter noted that the buildup model would result in an unknown and unanticipated impact on the 340B prices.
Therefore, the commenter suggested that CMS require manufacturers to submit their AMP calculations to CMS using both the presumed inclusion method and the buildup method before the rule is made final as this would allow CMS to better understand the pros and cons of both approaches. Another commenter asked CMS to extend the comment period on the adoption or rejection of the buildup methodology requirement until such time a better assessment of indirect sales data can be determined.
After consideration of the comments and for the reasons discussed previously, we have decided not to make changes to the regulations text to require that manufacturers calculate AMP based on the buildup methodology.
The following is a discussion of the specific terms associated with AMP calculations that we proposed to define at proposed § 447.504(a) (77 FR 5327, 5330 through 5334):
We proposed a new definition of AMP based on section 1927(k)(1) of the Act, as amended by section 2503 of the Affordable Care Act (77 FR 5327). Consistent with the statutory definition, we proposed to define AMP to mean, for a COD of a manufacturer (including those sold under an NDA approved under section 505(c) of the FFDCA)) the average price paid to the manufacturer for the drug in the United States by wholesalers for drugs distributed to retail community pharmacies and retail community pharmacies that purchase drugs directly from the manufacturer (77 FR 5361). While we received comments, which are discussed in detail in this section, about which sales, discounts, rebates and other financial transactions are included in and excluded from AMP, we did not receive specific comments about the proposed definition itself. Therefore, we are finalizing the definition of AMP at § 447.504(a), consistent with the statutory definition.
We proposed to define average unit price to mean a manufacturer's quarterly sales included in AMP less all required adjustments divided by the total units sold and included in AMP by the manufacturer in a quarter (77 FR 5328, 5361). We did not receive any comments concerning the proposed definition of average unit price. Since AMP is calculated and reported to CMS on a per unit basis (for example, tablet, capsule, gram, milliliter) we believed it was important to include in the regulatory text the definition of average unit price to ensure consistent AMP reporting across all manufacturers and therefore, we are finalizing the definition at § 447.504(a) as proposed.
For the purposes of this subpart, we proposed to define charitable and not-for-profit pharmacies as organizations exempt from federal taxation as defined by section 501(c)(3) of the Internal Revenue Code of 1986 (77 FR 5328, 5361). We proposed to define charitable and not-for-profit pharmacies using specific definitions in the Internal Revenue Code. These terms are referenced in the definition of retail community pharmacy at section 1927(k)(10) of the Act and we established these definitions to ensure that AMP is calculated consistently across all manufacturers in accordance with the definition of AMP in section 1927(k)(1) of the Act. We received no comments concerning the proposed definition of charitable and not-for-profit pharmacies. Therefore, we are finalizing the definition at § 447.504(a) as proposed.
As discussed in the proposed rule, the Affordable Care Act referenced the term “insurers” in section 1927(k)(1)(B)(IV) of the Act (77 FR 5328). Therefore, for the purposes of this subpart, we proposed to define insurers as entities that are responsible for payment of drugs dispensed to the insurer's members, and do not take actual possession of these drugs or pass on manufacturer discounts or rebates to pharmacies (77 FR 5328, 5361). We received no comments concerning the proposed definition of insurers and for the reasons we noted, we are finalizing the definition at § 447.504(a) as proposed.
In the preamble to the proposed rule, we proposed to define net sales to mean quarterly gross sales revenue to wholesalers for drugs distributed to retail community pharmacies and retail community pharmacies that purchase drugs directly from manufacturers less cash discounts allowed, and other price reductions (other than rebates under section 1927 of the Act or price reductions specifically excluded by statute or regulation) which reduce the amount received by the manufacturer (77 FR 5328). We note that we included language in the proposed regulations text which, while not identical to the preamble language, was designed to codify that proposal (77 FR 5361). Specifically, in the proposed regulatory text (77 FR 5361) we did not include the phrase “to wholesalers for drugs distributed to retail community pharmacies and retail community pharmacies that purchase drugs directly from manufacturers” which was erroneously included in the preamble discussion. We did not receive any comments concerning the proposed definition of net sales and thus we are finalizing the regulatory definition as proposed. In addition, because net sales for 5i drugs is calculated to include sales in addition to sales to wholesalers and retail community pharmacies, it would not be appropriate to limit the gross sales from which the net sales are determined to only wholesalers and retail community pharmacies, as discussed in the preamble to the proposed rule (77 FR 5328). Therefore, we have not included such language in the final rule and are finalizing the definition at § 447.504(a) as proposed in the regulatory text.
We proposed to define retail community pharmacy to mean an independent pharmacy, a chain pharmacy, a supermarket pharmacy, or a mass merchandiser pharmacy that is licensed as a pharmacy by the state and that dispenses medications to the general public at retail prices (77 FR 5361). We further proposed to incorporate the requirement set forth in
However, we believe that there is a distinction between an entity that owns a retail community pharmacy and a mail order pharmacy and a retail community pharmacy that provides a delivery service. In those instances when a retail community pharmacy has a home delivery service, which is an additional service offered by the retail community pharmacy to send prescriptions directly to the patient's home, and the pharmacy does not offer prescriptions primarily through the mail, such drug sales would be included in AMP. However, if a single entity owns both a retail community pharmacy and a mail order pharmacy where medication is dispensed primarily through the mail, it is appropriate that manufacturers exclude the sales to the mail order pharmacy when determining AMP, and include the mail order sales when they are calculating AMP for a 5i drug not generally dispensed through retail community pharmacies. We further believe it is appropriate for the manufacturer to make reasonable assumptions that a pharmacy is a retail community pharmacy when the majority of the drugs are not dispensed through the mail. Should business models evolve to the extent that we need to address this in the future, we will issue additional guidance or engage in rulemaking, if needed.
One commenter stated that CMS included these entities as a way to provide a means of securing rebates for oral CODs that would not otherwise have an AMP because they do not have a 5i route of administration and are not generally dispensed through retail community pharmacies. The commenter stated that CMS must identify an alternate means to address AMP calculations for these products as its proposal to include specialty pharmacies, home infusion pharmacies and home health care providers in the definition of retail community pharmacy relies on a distorted understanding of the business practices of these entities and is contrary to congressional intent. The commenter stated that by proposing the amendment to section 2503 of the Affordable Care Act, Congress recognized that its own definition of retail community pharmacy excluded sales to specialty pharmacies, home infusion pharmacies and home health care providers and the commenter believed that CMS must do the same. Furthermore, the commenter stated that the agency's proposed interpretation of retail community pharmacy (including specialty pharmacies, home infusion pharmacies, and home health care providers) cannot be sustained under the APA and US Supreme Court precedent that specifies when the statute's language is plain it must be interpreted and enforced according to its terms. Furthermore, the Congress excluded from the definition of retail community pharmacy any pharmacy that “dispenses prescriptions primarily through the mail” therefore the commenter believed this demonstrates another reason why specialty pharmacies do not meet the definition of retail community pharmacy because they in particular
Yet another commenter stated that if all sales to these entities are included in AMP calculations, AMP based FULs may be insufficient to cover the purchasing cost of retail community pharmacies. The commenter stated that whether or not a rebate will continue to be calculated for a particular drug does not provide CMS with the authority to disregard the intent of Congress and that CMS should be clear that a “retail community pharmacy” is limited to the statutory definition.
Retail community pharmacy is defined to mean an independent, chain, supermarket, or a mass merchandiser pharmacy that is licensed as a pharmacy by the state, dispenses medications to the general public at retail prices, and it does not include a pharmacy that dispenses prescription medications to patients primarily through the mail. Section 1927(k)(10) of the Act further excludes nursing home pharmacies, long-term care facility pharmacies, hospital pharmacies, clinics, charitable and not-for-profit pharmacies, government pharmacies, and pharmacy benefit managers. Nowhere in this list of exclusions are specialty pharmacies, home health care pharmacies or home infusion pharmacies specifically excluded by name. Therefore, specialty, home health care or home infusion pharmacies could meet the definition of retail community pharmacy at section 1927(k)(10) of the Act given such pharmacies are not primarily mail order pharmacies and may dispense medications to the general public. In those situations, where the business model is designed so that the pharmacy does not dispense medications primarily through the mail, the pharmacy may qualify as a retail community pharmacy to the extent that the pharmacy operates as an independent, chain, supermarket, or a mass merchandiser pharmacy that is licensed as a pharmacy by the state and that dispenses medications to the general public at retail prices. When these pharmacies do meet the definition of retail community pharmacy, sales to these pharmacies should be included in the manufacturer's calculation of AMP.
For example, in those situations when a specialty, home infusion, or home health care pharmacy is an independent, chain pharmacy, or a mass merchandizer pharmacy that is licensed as a pharmacy by the state and dispenses medications to the general public at retail prices, and does not dispense drugs primarily through the mail, it meets the statutory definition of a retail community pharmacy and its sales should be included when calculating AMP. However, for example, if a specialty, home infusion, or home health care pharmacy does not dispense medications to the general public or provides medications to patients primarily through the mail, sales to such entities should be excluded from AMP. Further discussion as to which entities are included as retail community pharmacies or wholesalers for purposes of AMP can be found in sections II.C.5. and II.C.7. of this rule.
We also do not agree with the commenter that we adopt the same classification of retail pharmacy as established by the NUCC. The purpose of NUCC is to establish universal provider claim standards as it relates to third party reimbursement, whereas the statutory definition of retail community pharmacy at section 1927(k)(10) of the Act is specifically for the purpose of manufacturers' determination of AMP. As stated previously, the definition does not specifically exclude home infusion pharmacies. Therefore, to the extent home infusion pharmacies meet the statutory definition of retail community pharmacy at section 1927(k)(10) of the Act, sales to such pharmacies shall be included in the calculation of AMP.
For the reasons we articulated, we are finalizing the definition of retail community pharmacy at § 447.504(a) to mean an independent pharmacy, a chain pharmacy, a supermarket pharmacy, or a mass merchandiser pharmacy that is licensed as a pharmacy by the state and that dispenses medications to the general public at retail prices. Such term does not include a pharmacy that dispenses prescription medications to patients primarily through the mail, nursing home pharmacies, long-term care facility pharmacies, hospital pharmacies, clinics, charitable or not-for-profit pharmacies, government pharmacies, or pharmacy benefit managers.
In proposed § 447.504(b), we proposed to identify specific sales, nominal price sales, discounts, rebates, payments, and other financial transactions to include in the determination of AMP (77 FR 5330, 5361). The following comments pertain to general observations regarding the regulatory text at proposed § 447.504(b) and (c).
At § 447.504(c), we similarly are revising the heading to include Sales, nominal price sales, and associated
Therefore, after considering the comments, and for the reasons discussed in this section, we are finalizing the heading and introductory text of § 447.504(b) and (c) to more clearly specify the type of rebates and transactions that are included in or excluded from the calculation of AMP.
Comments regarding sales excluded from AMP are discussed in more detail later in this section.
Based on the definition of AMP in section 1927(k)(1) of the Act, as amended by the Affordable Care Act, we proposed that sales to wholesalers for drugs distributed to retail community pharmacies are to be included in the determination of AMP (77 FR 5330 and 5361). We received the following comment concerning this proposed provision:
After considering the comments, for the reasons discussed in this section, we are finalizing § 447.504(b)(1), as proposed.
We proposed at § 447.504(b)(2) that sales to other manufacturers who act as wholesalers are to be included in the determination of AMP to the extent that such sales are for drugs distributed to retail community pharmacies, and noted that this provision should be read in concert with the definition of wholesaler in section 1927(k)(11) of the Act (77 FR 5330). We received a few comments concerning sales to manufacturers, but these comments focused on sales between primary and secondary manufacturers of authorized generic drugs. Therefore, we have included our responses to such comments in the discussion concerning authorized generic drugs at section II.E. of this final rule. Therefore, we are finalizing § 447.504(b)(2) as proposed which requires manufacturers to include their sales of CODs to other manufacturers in AMP when such manufacturers are acting as wholesalers in accordance with the definition of wholesaler at section 1927(k)(11) of the Act.
We proposed to include in the determination of AMP, sales, discounts, rebates (other than rebates under section 1927 of the Act), payments, or other
After considering the comments received and for the reasons we discussed, we are finalizing § 447.504(b)(3) consistent with the revisions we are making to the introductory paragraph of § 447.504(b) (to add “associated with” as discussed in this section), and is not intended to change the general meaning of this provision; rather, to provide clarification and consistency throughout this section.
In light of section 1927(k)(1)(B)(i)(IV) of the Act, we proposed that sales to entities that conduct business as wholesalers or retail community pharmacies should be included in the determination of AMP (77 FR 5330, 5361). We proposed that manufacturers include in the determination of AMP the sales, as well as the associated discounts, rebates, payments, or other financial transactions that are received by, paid by, or passed through to entities conducting business as
Some commenters requested that CMS provide a separate definition of “conducting business as” for wholesaler entities and retail entities. Another commenter favored adopting regulatory definitions that are flexible enough to accommodate changes in the industry, and indicated that manufacturers should be permitted to establish their own assumptions regarding what it means to conduct business as a wholesaler or retail community pharmacy.
Additionally, we believe that the definition of retail community pharmacy in both the statute and regulation can accommodate potential changes to the pharmacy provider industry so that it ensures manufacturers' AMPs reflect the sales of their products in the retail community pharmacy market. In other words, by not specifying an exhaustive list of pharmacy providers which fall under the definition of retail community pharmacy, manufacturers must consider its sales to other types of pharmacy providers and wholesaler entities that should be reflected in AMP. And, as previously stated, manufacturers may make reasonable assumptions, in the absence of guidance and adequate documentation to the contrary, that prices paid to manufacturers by wholesalers are for drugs distributed to retail community pharmacies, provided those assumptions are consistent with the requirements and intent of section 1927 of the Act and federal regulations.
Some commenters encouraged CMS to clarify in the final rule whether the instruction to include specialty pharmacy sales in AMP always overrules the instruction to exclude mail order sales or whether manufacturers are to capture only those specialty pharmacy sales that do not involve mail delivery. The commenters noted that failure to provide such a clarification will exacerbate problems with AMP variability because manufacturers will make different reasonable assumptions. The commenters also stated that the same consideration also arises in the context of sales to certain chain warehouses that distribute products to both the chain's retail outlets and its mail-order operations. One commenter noted that mail-order pharmacies (which do act as specialty pharmacies) generally do not have store front operations where a patient could walk in and fill a prescription but instead provide home delivery. The commenter also stated that the provision falsely assumes that unless sales to specialty pharmacies are included in AMP, there would be certain drugs that would have no AMP at all. However, the commenter believed that all but a few drugs either are dispensed by retail community pharmacies or would be in the category of 5i drugs; both of which clearly have an AMP calculation.
Conversely, some commenters supported the conclusion that specialty pharmacies take precedence over its mail order status when determining that pharmacy's AMP eligibility, because such a conclusion acts to ensure that non-5i products that are dispensed through the mail order specialty pharmacies have a base of sales to use in AMP calculation. One commenter urged CMS to include these mail-order sales and discounts in AMP as these entities are conducting business as retail community pharmacies and it would help ensure that all non-5i drugs that are dispensed through mail-order specialty pharmacies have a base of sales to use in calculating AMP. The commenter also stated that manufacturers should not have to evaluate the nature of every specialty pharmacy's business to which they sell to determine if they dispense primarily through the mail.
Several commenters supported CMS's efforts to ensure that all CODs have AMP-eligible sales by including sales to specialty pharmacies, home infusion pharmacies, and home health care providers as entities that conduct business as retail community pharmacies. One commenter also noted that this policy should have no effect on retail community pharmacies because the types of products that are sold through specialty pharmacies are specialty drugs (medications with
As to the commenter's concern regarding the potential for underpayment to pharmacies, we believe that our decision to include sales to home infusion, specialty, and home health care pharmacies when such pharmacies meet the definition of retail community pharmacies in section 1927(k)(10) of the Act will reflect the prices available in the retail marketplace for these drugs and will not lead to the underpayment of retail community pharmacies. Therefore, we are not convinced that including sales to such entities (such as specialty, home health care and home infusion pharmacies, where such entities qualify as retail community pharmacies) in the calculation of AMP will lead to the underpayment of retail community pharmacies. Furthermore, while it may be true that some 5i drugs will not have FULs because such drugs are typically single source innovator products, it may not be the case for all 5i drugs. For further discussion of the FULs please refer to section II.K. of this final rule.
Another commenter encouraged CMS to clarify in the final rule that only those sales and discounts for oral CODs approved by FDA that are required by a REMS to be dispensed to patients by specialty certified pharmacies, resulting in manufacturers utilizing a restricted network of certified specialty and home infusion pharmacies to dispense those drugs to patients are included. Yet another commenter stated that if CMS does include these classes of trade in the AMP calculation, it should only do so in the cases where the oral COD would not otherwise have an AMP and cannot have an AMP for 5i drugs not generally dispensed through retail community pharmacies because of its route of administration. Finally, one commenter stated that the proposed language at § 447.504(b)(4) could be interpreted as including all of the sales the rest of the rule excludes or at least leaving manufacturers with significant doubt as to the includable and excludable entities. The commenter indicated that the final rule should more clearly implement CMS's intent and eliminate conflict and confusion of the scope of sales included within AMP and suggested revisions to § 447.504(b)(4) to add that an exemption to the exclusion when the conditions of FDA restrict sales of a product solely to certain entities that would not otherwise be deemed a Retail Community Pharmacy.
Furthermore, we are not applying a different standard for certain drugs not generally dispensed to retail community pharmacies (for example, oral drugs with REMS) to permit the inclusion of sales to a specialty, home infusion or home health care pharmacy for those drugs, because, as noted previously, we are not finalizing that manufacturers, when calculating AMP, include entities that conduct business as retail community pharmacies. Instead, we are
By making these changes in the final rule, we recognize that there are other entities that may meet the definition of a retail community pharmacy or wholesaler, which will affect which manufacturer sales shall be included in AMP. The effect of this final change to the regulations text on whether manufacturer sales of oral drugs dispensed by specialty pharmacies will depend upon whether such pharmacies meet the definition of retail community pharmacy at section 1927(k)(10) of the Act.
Conversely, several commenters requested that CMS provide additional guidance and define specialty pharmacy. One commenter noted that most state boards of pharmacy do not have a separate regulatory category for specialty pharmacy; and while there is no common definition of specialty pharmacy that can be used to normalize classifications across the industry, if manufacturers are to include specialty pharmacy sales in AMP, CMS has to provide an appropriate definition to ensure consistent treatment across AMP calculations for all manufacturers and all products. Another commenter noted that the term “specialty pharmacy” is a term of art in the industry and is characterized by a pharmacy (mail or retail) that serves a very small patient population with chronic, rare and/or life threatening conditions and can dispense medications through the mail, as well as retail and provides patients with the tools to care for themselves at home when clinically appropriate. The commenter further contended that patient support is also provided 24 hours a day, 7 days a week via home visits or telephone consultation with health professional.
One commenter noted that third party data companies that collate and provide information on sales channels segregate retail and mail order pharmacies but do not have a separate category for specialty pharmacies; instead, specialty pharmacies are generally included with mail order pharmacies. The commenter stated that without a consistent and specific definition of specialty pharmacy applied to all industry stakeholders, the inclusion of these transactions in AMP would be inconsistent. Furthermore, the commenter stated that CMS cannot override a statutory directive to exclude mail order pharmacies with a regulatory directive to include a subset of pharmacies that are mail order in nature. Another commenter provided the Utilization Review Accreditation Commission's (URAC) definition of specialty pharmacy and noted that because of their complexities, specialty pharmaceuticals flow through a variety of distribution channels, and these channels may vary according to a product's administration requirements, a payer's benefit design, and a provider's service availability. Additionally, manufacturers may control distribution through select distributors due to limited production capacity and special handling requirements.
Therefore, for the reasons discussed previously in this section, we have decided not to finalize § 447.504(b)(4). To the extent that home health care, home infusion, or specialty pharmacies qualify as retail community pharmacies in light of the statutory definition of retail community pharmacy, sales to such entities should be included in AMP; however, where they do not qualify as retail community pharmacies, manufacturers should not include such sales in AMP.
Section 1927(k)(1)(B) of the Act excludes a number of prices, sales, discounts, rebates, payments and other financial transactions from AMP. Section II.C.6.a. includes a discussion of which prices, sales, nominal price sales, applicable discounts, rebates, payments, or other financial transactions we proposed to exclude from the determination of AMP at proposed § 447.504(c), as well as a summary the issues raised in the comments we received and our responses. These proposed exclusions from the determination of AMP are discussed in more detail in the proposed rule (77 FR 5330 through 5334).
We proposed that prices to federal programs, including the Indian Health Service (IHS), the Department of Veterans Affairs (DVA), a state home receiving funds under 38 U.S.C. 741, the Department of Defense (DoD), the Public Health Service (PHS), a covered entity described in section 1927(a)(5)(B) of the Act (including inpatient prices charged to hospitals described in section 340B(a)(4)(L) of the PHSA), the FSS of the General Services Administration (GSA); or any depot prices (including TRICARE) and single award contract prices of any agency of the federal government should be excluded from AMP (77 FR 5331, 5361). We received the following comments concerning the prices to other federal programs including TRICARE.
Therefore, for the reasons discussed in this section and the proposed rule that prices available to federal programs do not reflect prices paid by retail community pharmacies or wholesalers for drugs distributed to retail community pharmacies (77 FR 5331), we are finalizing the provisions in § 447.504(c)(1) through (3) as proposed (77 FR 5331 and 5361).
The proposed definition of “states” in § 447.502 was expanded to mean the 50 states, the District of Columbia and the territories (the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa). We also proposed to add a definition of “United States” that would mean the 50 states, the District of Columbia and the territories (the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa) (77 FR 5326). Therefore, in proposed § 447.504(c)(4), we proposed that sales to entities outside the 50 states, the
Therefore, after considering the comments received and for the reasons we previously discussed in this section, we are finalizing § 447.504(c)(4), as proposed.
Section 1927(k)(1)(B)(i)(IV) of the Act specifically excludes from the determination of AMP, payments received from and rebates or discounts provided to hospitals. Therefore, we proposed at § 447.504(c)(5) that direct and indirect sales to hospitals are excluded from AMP calculations (77 FR 5362). We stated in the preamble discussion that such sales include direct and indirect sales where the drug is used in either the inpatient setting or the outpatient setting (77 FR 5331). We received no comments specific to the exclusion of sales to hospitals; however, as discussed earlier in this section, commenters did note that CMS has not been consistent in the use of terminology in the determination of AMP section of the regulatory text. Therefore, based on these general comments discussed earlier in this section, as well as the statutory requirement to exclude hospital transactions from the determination of AMP we have revised § 447.504(c)(5) to include the phrase “Sales to hospitals” rather than “Direct and indirect sales to hospitals,” as we proposed. This change to the regulatory text is not meant to be substantive nor meant to change the meaning of the text.
We proposed at proposed § 447.504(c)(6) that sales to HMOs and MCOs, including sales and associated rebates and discounts to HMO/MCO operated pharmacies, are excluded from the determination of AMP (77 FR 5331, 5362) and received the following comment concerning our proposal.
Therefore, consistent with section 1927(k)(1)(B)(i)(IV) of the Act and the exclusion of payments received from and rebates or discounts provided to MCOs and HMOs, we are finalizing § 447.504(c)(6) as it was proposed.
We proposed at proposed § 447.504(c)(7) that consistent with the exclusions from AMP at section 1927(k)(1)(B)(i)(IV) of the Act, sales and associated rebates and discounts to long-term care providers, including nursing facility pharmacies, nursing home pharmacies, long-term care facilities, long-term care facilities pharmacies, contract pharmacies for the nursing facility where these sales can be identified with adequate documentation, and other entities where the drugs are dispensed through a nursing facility pharmacy, such as assisted living facilities, be excluded from the determination of AMP (77 FR 5331, 5362). We further note that the exclusion of such nursing home and long-term care facility pharmacies is consistent with the entities specifically excluded from the definition of retail community pharmacy at section 1927(k)(10) of the Act. We received the following comment concerning our proposal to exclude sales to long-term care facility pharmacies.
Therefore, in regards to the exclusion of sales to long-term care facility pharmacies, for the reasons discussed in this section, and in compliance with sections 1927(k)(1)(B)(i)(IV) and 1927(k)(10) of the Act, we are finalizing § 447.504(c)(7), as proposed.
We proposed at proposed § 447.504(c)(8) that sales to mail order pharmacies are excluded from the determination of AMP (77 FR 5331, 5362) consistent with sections 1927(k)(1)(B)(i)(IV) and 1927(k)(10) of the Act, which exclude such pharmacies from the definition of AMP and retail community pharmacies. We received the following comment on our proposal:
Therefore, in regards to the exclusion of sales to mail order pharmacies from the AMP calculation, we are finalizing § 447.504(c)(8) as proposed because such sales are excluded from the definition of AMP in section 1927(k)(1)(B)(i)(IV) of the Act and the definition of retail community pharmacies in section 1927(k)(10) of the Act.
As discussed in the proposed rule, we proposed at proposed § 447.504(c)(9) to exclude sales and associated rebates and discounts to clinics and outpatient facilities from the determination of AMP (77 FR 5331 and 5362). We received no comments pertaining to this provision and because section 1927(k)(1)(B)(i)(IV) of the Act specifically excludes clinics from the calculation of AMP, we are finalizing § 447.504(c)(9) as proposed.
We proposed at proposed § 447.504(c)(10) to exclude sales to government pharmacies from the determination of AMP (77 FR 5331 through 5332 and 5362) since government pharmacies are specifically excluded from the definition of retail community pharmacies as defined at section 1927(k)(10) of the Act. We received no comments pertaining to this provision. Because section 1927(k)(1)(A) of the Act specifies that AMP shall include sales to wholesalers for drugs distributed to retail community pharmacies and retail community pharmacies that purchase drugs directly from the manufacturer; and because government pharmacies are excluded from the definition of retail community pharmacies as defined at section 1927(k)(10) of the Act, we are finalizing § 447.504(c)(10) as proposed.
We proposed to exclude sales to charitable and not-for-profit pharmacies from the determination of AMP (77 FR 5332) because such pharmacies are specifically excluded from the definition of retail community pharmacies as defined at section 1927(k)(10) of the Act. We received the following comments concerning sales to charitable and not-for-profit pharmacies:
Therefore, in regards to the exclusion of sales to charitable and not-for-profit pharmacies, we are finalizing the provisions in § 447.504(c)(11) and (12) as proposed since section 1927(k)(10) of the Act specifically excludes charitable and not-for-profit pharmacies from the definition of retail community pharmacy and in light of that exclusion, such sales, as well as applicable rebates, discounts, or other transactions to charitable and not-for-profit pharmacies are excluded from the determination of AMP as specified at section 1927(k)(1) of the Act.
Section 1927(k)(1)(B)(i)(IV) of the Act specifically excludes payments received from and rebates or discounts provided to insurers from the determination of AMP. Therefore, at proposed § 447.504(c)(13), we proposed to exclude from the determination of AMP sales to payments received from, and any rebates, discounts, or payments that are provided directly to insurers and that are not passed on to retail community pharmacies (77 FR 5332). We received the following comments concerning insurers.
Therefore, in regards to the exclusion of sales, associated rebates, discounts, or other price concessions paid directly to insurers, we are finalizing § 447.504(c)(13) as proposed since it is consistent with the exclusion provisions in section 1927(k)(1)(B)(i)(IV) of the Act regarding payments received from and rebates or discounts provided to insurers.
We proposed at proposed § 447.504(c)(14) that bona fide service fees paid by manufacturers to wholesalers, retail community pharmacies, or any other entity that conducts business as a wholesaler or retail community pharmacy should be excluded from the calculation of AMP (77 FR 5332, 5362). Furthermore, we proposed that such fees include, but are not limited to, inventory management fees, product stocking allowances, and fees associated with administrative agreements and patient care programs (such as medication compliance programs and patient education programs), including bona fide service fees paid to GPOs. We also proposed that to the extent that fees to GPOs meet the definition of “bona fide service fee,” such fees should be excluded from the determination of AMP and are not considered price concessions (77 FR 5332, 5362). We received the following comments regarding the exclusion of bona fide service fees.
As discussed in detail in section II.C.7.d. of this final rule, we have addressed those discounts, rebates and payments included in, and excluded from, the determination of AMP for 5i drugs not generally dispensed through retail community pharmacies (§ 447.504(d) and (e)).
Furthermore, as discussed in the Definitions section (section II.B.4.) of this final rule, based on comments we received, we have replaced the limiting phrase “to wholesalers or retail community pharmacies” with “an entity” in the definition of bona fide service fee at § 447.502. In response to comments and to be consistent with the definition of AMP and the sales included in and excluded from that definition, as set forth in section 1927(k)(1)(B)(i)(II) of the Act, in this final rule we are revising § 447.504(c)(14) and amending § 447.504(e) to add a new paragraph (5) to clarify that the bona fide service fees, as defined in § 447.502, are excluded from the AMP calculation. We believe these changes provide clarification and consistency to the application of bona fide service fees in the determination of AMP. We further discuss the determination of best price and the effect of bona fide service fees on a manufacturer's determination of best price in section II.D.3. of this final rule.
One commenter requested that CMS provide guidance as to how manufacturers should properly value the “benefit” that wholesalers may receive by being in possession of inventory that has undergone a price increase as a discount in their calculation. The commenter further noted that manufacturers do not generally issue actual credits to wholesalers for inventory/price appreciation. This commenter provided examples to illustrate their concerns with the operational issues surrounding this obligation.
One commenter agreed that price appreciation credits do not qualify as bona fide service fees and indicated that CMS misrepresented price appreciation credits as retroactive price appreciation credits. The commenter specified that retroactive price appreciation credits do not impact prices to customers and urged CMS to review or remove the incorrect statements regarding retroactive price appreciation credits from the final rule.
After consideration of comments received and for the reasons discussed in this section, we have revised § 447.504(c)(14) to specify that bona fide service fees, as defined in § 447.502, paid by manufacturers to wholesalers or retail community pharmacies are excluded from AMP.
We proposed at proposed § 447.504(c)(15) that, consistent with section 1927(k)(1)(B)(i)(I) of the Act, customary prompt pay discounts extended to wholesalers should be excluded from the determination of AMP (77 FR 5332, 5362). We received the following comments regarding customary prompt pay discounts:
Therefore, after considering the comments and for the reasons we explained, we are finalizing § 447.504(c)(15) as proposed (77 FR 5362).
In the proposed rule, we proposed to incorporate the statutory requirement found at section 1927(k)(1)(B)(i)(III) of the Act at § 447.504(c)(16) which requires that reimbursement by manufacturers for recalled, damaged, expired, or otherwise unsalable returned goods, including (but not limited to) reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics and drug destruction be excluded from AMP. We further proposed that such reimbursement would be excluded only to the extent it covers only the costs associated with the returned goods, handling, and processing (77 FR 5332, 5362). We did not define the terms recalled, damaged, expired or unsalable, but we did request comments regarding whether we should define these terms or further define how these industry standards for these terms should be set. We also requested examples of what would qualify as unsalable. We received the following comments concerning our proposal.
We recognize that there may be extenuating circumstances that precipitate the need for products to be returned. If such a return does not manipulate prices, the manufacturer would exclude those return-related prices from the AMP calculation for the cost of goods and any costs associated with the return, consistent with section 1927(k)(1)(B)(i)(III) of the Act. Furthermore, if a manufacturer allows for goods to be returned within 3 to 6 months of the expiration date, we would agree that such returns, when not intended to manipulate pricing, may be excluded from AMP and best price.
As a result of comments received and for the reasons we explained in this section, in this final rule we are adopting § 447.504(c)(16) as proposed to specify that reimbursement for recalled, damaged, expired or otherwise unsalable returned goods, including (but not limited to) reimbursement for the costs of goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction but only to the extent that such payment covers only those costs are excluded from AMP.
We proposed that discounts, rebates or other price concessions provided under the Medicare coverage gap discount program should be excluded from AMP (77 FR 5333, 5362) consistent with section 1927(k)(1)(B)(i)(V) of the Act which requires the calculation of AMP exclude discounts provided by manufacturers under section 1860D-14A of the Act. We received no comments pertaining to this provision, and in compliance with section 1927(k)(1)(B)(i)(V) of the Act, we are finalizing § 447.504(c)(17) as proposed.
We proposed at § 447.504(c)(18) to exclude from the calculation of AMP, sales to PBMs including their mail order pharmacy's purchases (77 FR 5333, 5362) consistent with section 1927(k)(1)(B)(i)(IV) of the Act which excludes payments received from, and rebates or discounts provided to pharmacy benefit managers (PBMs) and mail order pharmacies (77 FR 5333). We received the following comments concerning PBM and PBM mail order sales and price concessions:
Therefore, for the reasons we discussed in this section, we are finalizing § 447.504(c)(18) to refer only to payments received from, and rebates and discounts provided to PBMs instead of sales to PBMs.
We proposed to exclude rebates under the national rebate agreement or a CMS-authorized state supplemental rebate agreement paid to state Medicaid agencies from the determination of AMP (77 FR 5333) consistent with section 1927(k)(1)(A) of the Act. In addition, we have excluded such rebates because section 1927(k)(1)(B)(ii) of the Act requires inclusion of other discounts and rebates when such rebates are received by, paid by, or passed through to retail community pharmacies. Medicaid rebates are paid by manufacturers directly to the states and are not passed through to retail community pharmacies. We received no comments pertaining to this provision and for the reason stated previously, we are finalizing § 447.504(c)(19) as proposed.
We proposed to exclude inpatient and outpatient hospice sales from the determination of AMP (77 FR 5333) since the definition of AMP at section 1927(k)(1) of the Act includes only those sales from the manufacturer to a retail community pharmacy as defined at section 1927(k)(10) of the Act or a wholesaler as defined at section 1927(k)(11) of the Act. We received no comments pertaining to this provision and for the reasons specified previously, we are finalizing § 447.504(c)(20) as proposed.
We proposed to exclude sales to prisons from the determination of AMP (77 FR 5333) since the definition of AMP at section 1927(k)(1) of the Act includes only sales from the manufacturer to a retail community pharmacy as defined at section 1927(k)(10) of the Act or a wholesaler as defined at section 1927(k)(11) of the Act. Prisons do not dispense medications to the general public and therefore do not meet the statutory definition of retail community pharmacy. Nor is a prison engaged in the wholesale distribution of drugs to retail community pharmacies. We received no comments pertaining to this provision and for the reasons stated previously, we are finalizing § 447.504(c)(21) as proposed.
We proposed that direct sales to physicians be excluded from the determination of AMP (77 FR 5333) since the definition of AMP at section 1927(k)(1) of the Act includes only sales from the manufacturer to a retail community pharmacy as defined at section 1927(k)(10) of the Act or a wholesaler as defined at section 1927(k)(11) of the Act and sales to a physician does not meet either of these statutory definitions. We received one comment pertaining to sales to physicians in the context of AMP for 5i drugs not generally dispensed through retail community pharmacies.
Therefore, for the reasons noted, we are finalizing § 447.504(c)(22) to specify that it is “Sales to physicians” that are excluded from the calculation of AMP.
We proposed that direct sales to patients be excluded from the determination of AMP (77 FR 5333) since the definition of AMP at section 1927(k)(1) of the Act includes only sales from the manufacturer to a retail community pharmacy as defined at section 1927(k)(10) of the Act or a wholesaler as defined at section 1927(k)(11) of the Act and direct sales to patients do not meet either of these statutory definitions. We received the following comments concerning direct sales to patients:
Therefore, because AMP is defined, in part, as the average price paid to manufacturers by wholesalers and retail community pharmacies and patients are not included in the definitions of retail community pharmacy at section 1927(k)(10) of the Act or wholesaler at section 1927(k)(11) of the Act, we are finalizing § 447.504(c)(23), as proposed.
We proposed that when a drug or any other item is given away, but not
We proposed that five categories of discounts or benefits to patients are to be excluded from the determination of AMP (77 FR 5333 through 5334, 5362). Because such discounts or benefits are not passed through to retail community pharmacies, we proposed in accordance with section 1927(k)(1)(B)(ii) of the Act that: (1) Manufacturer coupons to a consumer redeemed by the manufacturer, agent, pharmacy, or another entity acting on behalf of the manufacturer should be excluded from AMP, but only to the extent that the full value of the coupon is passed on to the consumer and the pharmacy, agent or other entity does not receive any price concession; (2) manufacturer vouchers should be excluded from the determination of AMP; (3) prices negotiated under manufacturer-sponsored drug discount programs should be excluded from the determination of AMP; (4) goods provided free of charge under manufacturer-sponsored patient refund or rebate programs should be excluded from the determination of AMP; and (5) goods provided free of charge under manufacturer copayment assistance programs and patient assistance programs should be excluded from the determination of AMP (77 FR 5362). As discussed in the preamble, such discounts or benefits are excluded only to the extent that the full value of the discount/coupon is passed on to the customer, and the pharmacy, agent or other entity does not receive any price concession (77 FR 5333 through 5334).
We have grouped the comments and responses for these five categories together as many of the comments we received pertained to more than one of the categories and thus they are interrelated. We received the following comments concerning these programs that provide discounts or benefits for patients:
For Patient Refund/Rebate Programs, the commenter stated that the inconsistency between the preamble and the regulatory text makes the regulatory text read like it only involves free goods, but in the preamble it reads like payments to reimburse some or all of a patient's out-of-pocket costs. Furthermore, the commenter noted that the language describing the copayment and Patient Assistance Programs (PAPs) in the regulatory text leaves out part of the details described in the preamble and stated that CMS should clarify that discounts or benefits provided under manufacturer-sponsored copayment and PAPs are excluded from AMP even if they do not involve goods provided free of charge (as long as the program benefits are provided entirely to the patient).
Similarly, the commenter noted that the proposed regulatory text for manufacturer coupons excludes coupons “but only to the extent the full value is passed on to the consumer and the pharmacy, agent, or other entity [that redeems the coupon] does not receive any price concession,” but does not specify that the pharmacy must not receive price concessions in describing the manufacturer vouchers, drug discount card programs or patient refund/rebate programs. By contrast the preamble does specify that the pharmacy not receive price concessions in discussing all four categories of programs. With regard to Voucher Programs and Drug Discount Card Programs, the commenter noted that the preamble provides details not included in the regulatory text regarding the qualifications for discounts or benefits provided under vouchers and Drug Discount Card Programs to be excluded from AMP.
The commenter recommended that CMS clear up the discrepancies in the final rule and suggested that CMS adopt a simple provision specifying that “discounts or benefits to patients are excluded from AMP and best price.” The commenter explained that because patients are not AMP-eligible or best price-eligible customers, one general exclusion is appropriate and further complexity should be avoided. However, the commenter stated that if CMS wished to adopt a more complex approach with multiple exclusions related to patient discounts, then the commenter encouraged CMS to specify in the regulatory text all of the conditions that must be satisfied to make discounts or benefits provided under a particular program excluded and to describe them consistently in the final rule's regulatory text and preamble. Furthermore, CMS should define these programs so that manufacturers can be sure what conditions for exclusion apply to a particular arrangement, otherwise a manufacturer may have difficulty determining under which rules a certain arrangement should be evaluated. Additionally, the commenter requested that CMS clarify the circumstances in which a discount, rebate, or price concession is “received” by a retail community pharmacy. The commenter stated that a benefit provided to a patient at the pharmacy counter is not “received by” the pharmacy even though it may be temporarily channeled through the pharmacy and therefore is excluded from AMP and best price.
First, we are finalizing proposed § 447.504(c)(25) which pertains to manufacturer coupons as it was proposed, except we are adding AMP eligible before the term “entity” to clarify to which types of entities we are referring since similar changes are being made to proposed § 447.504(c)(26) through (29), as described in detail in this section.
Second, we removed reference to Patient Assistance Programs (PAPs) from proposed § 447.504(c)(29) and have grouped them with vouchers at § 447.504(c)(26). We have grouped these types of programs together because they are specifically designed to offer free goods. Additionally, we are clarifying that the voucher or benefit provided by the PAPs or other manufacturer-sponsored program must not be contingent on any other purchase requirement to be consistent in our treatment of free goods within AMP. We recognize that we included some discussion in the proposed rule regarding future purchase contingencies associated with patient assistance programs (77 FR 5333); however, we see no reason that we should establish a different standard for discounts or benefits provided under such programs. As discussed previously, we proposed and are finalizing at § 447.504(c)(24) that AMP shall exclude free goods, not contingent upon any purchase requirement. Therefore, we have included a similar standard with these manufacturer-sponsored programs because we see no reason that manufacturers should treat the free goods provided under these patient assistance and voucher programs any differently from how such goods are treated in § 447.504(c)(24). Furthermore, we are clarifying that for the discount or benefit of the voucher or manufacturer-sponsored program to be excluded from AMP, then the full value of the voucher or benefit of the manufacturer-sponsored program must be passed on to the consumer, and that the retail community pharmacy, its agent, or other AMP eligible entity must not receive any price concession. These changes are designed to provide clarification and consistency in the regulatory text as was requested by the commenters, as well as to ensure manufacturer compliance with section 1927(k)(1)(B)(ii) of the Act, which essentially requires that any price adjustments passed on to retail community pharmacies be included in AMP. Similar changes are being made to the AMP for 5i drugs not generally dispensed through retail community pharmacies exclusions at § 447.504(e)(14), as well as the best price exclusions at § 447.505(c)(12) to ensure consistency in the treatment of these programs.
Third, proposed § 447.504(c)(27), which pertains to discounts or benefits provided under manufacturer-sponsored drug discount card programs, has been revised to add the contingency that the full value of the discount is passed on to the consumer, and the pharmacy, its agent or other AMP-eligible entity does not receive any price concession. We also removed the reference to “prices negotiated under” to reduce redundancy in this section of the rule. These changes are being made to provide clarification and consistency in the regulatory text, as was requested by the commenters, as well as to ensure manufacturer compliance with section 1927(k)(1)(B)(ii) of the Act which essentially requires that any other price adjustments passed on to retail community pharmacies shall be included in AMP. Similar changes are being made to the AMP for 5i drugs exclusions at § 447.504(e)(15), as well as the best price exclusions at § 447.505(c)(8) to ensure consistency in the treatment of these programs.
Fourth, we have revised proposed § 447.504(c)(28), in light of the comment about the inconsistency between the proposed regulatory text reference to goods provided free of charge (77 FR 5362) and the preamble reference to full or partial refunds of a patient's out-of-pocket costs (77 FR 5333). Additional discussion regarding this discrepancy and the subsequent revision is provided in this section in the response to other comments. However, we wish to acknowledge here that we agree with the commenters that manufacturer-sponsored patient refund/rebate programs typically offer refunds or discounts, not free goods to patients, and therefore, we have revised § 447.504(c)(28), to remove the language “provided free of charge.” Furthermore, we have added to the regulatory text of § 447.504(c)(28), the contingency included in the preamble reference (77 FR 5333) that the manufacturer may exclude the discount or benefit provided under such refund/rebate programs where the manufacturer provides a full or partial refund or rebate to the patient for out-of-pocket costs and the pharmacy, agent, or other AMP-eligible entity does not receive any price concessions. While this condition was discussed in the preamble regarding the exclusion of manufacturer-sponsored patient refund/rebate programs, it was inadvertently omitted from the regulatory text of the proposed rule (77 FR 5333 and 5362).
As indicated from the preamble discussion in the proposed rule (77 FR 5333), it was our intention that this contingency language apply to the exclusion of the discount or benefit provided under manufacturer-sponsored patient refund/rebate programs, but as noted by the commenters the proposed regulatory text did not provide the same level of detail (77 FR 5362). Therefore, we are adding this detailed language to the regulatory text of this final rule to provide clarification about the exclusion of the discount or benefit provided under manufacturer-sponsored patient refund/rebate programs from the determination of AMP to ensure compliance with section 1927(k)(1)(B)(ii) of the Act, which as discussed previously, essentially requires that any price adjustments passed on to retail community pharmacies shall be included in AMP. Similar changes are being made to the AMP for 5i drugs not generally dispensed through retail community pharmacies exclusions at § 447.504(e)(16), as well as the best price exclusions at § 447.505(c)(11) to ensure consistency in the treatment of these programs.
Fifth, § 447.504(c)(29), now pertains solely to discounts or benefits provided under Manufacturer copayment assistance programs because we are moving Patient Assistance Programs to § 447.504(c)(26) as discussed in this section. Proposed section § 447.504(c)(29) was also revised to remove the language “provided free of charge” as these types of programs typically offer copayment assistance, which may or may not result in free goods to patients and to include discussion from the preamble discussion in the proposed rule that discounts or benefits provided under such programs may only be excluded from AMP to the extent that the pharmacy, agent, or other AMP eligible entity does not receive any price concession (77 FR 5333 through 5334). Additional discussion regarding this discrepancy and the subsequent revision is provided in this section in the response to other comments.
Furthermore, we have added the contingency, consistent with section 1927(k)(1)(B)(ii), that the program benefits are provided entirely to the patient, and that the pharmacy, its agent, or other AMP-eligible entity does not receive any price concessions. As pointed out by the commenter, this condition was discussed in the preamble regarding the exclusion of discounts or benefits provided under Manufacturer copayment assistance programs, but it was inadvertently omitted from the regulatory text of the proposed rule (77 FR 5333 and 5362). As indicated in the preamble discussion in the proposed rule (77 FR 5333 through 5334), it was our intention that this contingency language apply to the exclusion of discounts or benefits provided under Manufacturer copayment assistance programs, but as noted by the commenters the proposed regulatory text did not provide the same level of detail (77 FR 5362). Therefore, we are adding this detailed language to the regulatory text of final rule to provide clarification about the exclusion of discounts or benefits provided under Manufacturer copayment assistance programs from the determination of AMP to ensure manufacturer compliance with section 1927(k)(1)(B)(ii) of the Act, which requires, essentially, that any price adjustments passed on to retail community pharmacies shall be included in AMP. Similar changes are being made to the AMP for 5i drugs not generally dispensed through retail community pharmacies exclusions at § 447.504(e)(17), as well as the best price exclusions at § 447.505(c)(10) to ensure consistency in the treatment of these programs.
In addition, we do not agree with the commenter's request that we define each of these programs, because there is no one industry standard definition for each of these types of programs. Instead we believe that the level of specificity that we have added to the regulatory text provides sufficient detail for manufacturers to be able to determine under which “program” their manufacturer specific program should be categorized. Once a manufacturer has made that determination, it will need to determine if the discounts or benefits provided under its program meets the specific regulatory requirements as set forth in § 447.504(c) to be excluded from the determination of AMP.
As to the commenter's request that CMS clarify the circumstances in which a discount, rebate or price concession is “received” by a retail community pharmacy, we agree with the commenters assessment that a benefit provided to a patient, even if it is provided at the pharmacy counter, is not a discount, rebate, payment or other financial transactions received by or passed through to the retail community pharmacy that must be included in AMP in accordance with section 1927(k)(1)(B)(ii) of the Act. As stated in this section, once the manufacturer determines under which “program” their manufacturer specific program should be categorized, the manufacturer must then determine if the discounts or benefits provided under the program meets the specific regulatory requirements of § 447.504(c) to be excluded from the determination of AMP or best price.
Furthermore, we want to ensure consistent treatment of discounts or benefits provided under manufacturer-sponsored programs that provide free goods or subsidies to patients in the calculation of AMP and best price, such as those described in the AMP exclusions at § 447.504(c)(26), § 447.504(e)(14), as well as the best price exclusions at § 447.505(c)(12).
We intend to issue guidance to provide consistency among manufacturers treatment of the “any purchase requirement” of the free goods provision and to ensure that the discounts or benefits provided under programs being excluded from AMP and best price are programs that are designed to benefit or assist only the patient, without any purchase contingencies, rather than designed to increase manufacturer sales or profits.
We received comments about other patient assistance programs that are established by entities other than manufacturers. Specifically, we received comments pertaining to SPAPs and have chosen to address the comment in this section because SPAPs can be a form of patient assistance programs.
Therefore, in response to comments and for the reasons discussed in this section, we are finalizing the provisions pertaining to patient assistance programs as follows:
• Proposed § 447.504(c)(25) pertaining to manufacturer coupons is finalized as proposed, except to add “AMP eligible” before the term “entity” to clarify to which types of entities we are referring.
• Proposed § 447.504(c)(26) is revised to include a reference to manufacturer-sponsored programs that provide free goods and patient assistance programs, but only to the extent that the voucher or benefit of such a program is not contingent on any other purchase requirement; the full value of the
• Proposed § 447.504(c)(27) is revised to delete the reference to “prices negotiated under” and to include a reference to the requirements that the full value of the discount is passed on to the consumer, and that the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
• Proposed § 447.504(c)(28) is revised to delete the reference to “goods provided free of charge” and to include a reference to the requirements that the manufacturer provides a full or partial refund or rebate to the patient for out-of-pocket costs, and that the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
• Proposed § 447.504(c)(29) is revised to delete the reference “to goods provided free of charge” and “patient assistance programs”, and to include a reference to the requirements that the program benefits are provided entirely to the patient and that the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
• Adding § 447.504(c)(30) to clarify that rebates, discounts, or price concessions paid to designated SPAPs are excluded from the calculation of AMP.
We proposed to add a definition of 5i drug in the regulatory text of § 447.502 and we proposed to add new § 447.507 (Identification of 5i drugs) to indicate how 5i drugs are to be identified and how the term “not generally dispensed” is to be interpreted for 5i drugs. We also proposed to add § 447.504(d) to specify which sales, associated discounts, rebates, payments, and other financial transactions should be included in the determination of AMP for 5i drugs. These proposed provisions are discussed in more detail at 77 FR 5327, 5334 through 5336, 5359, 5362, and 5363. As discussed in more detail in the definition section of this final rule (section II.B.), we have decided not to finalize the definition of 5i drug that was proposed in the definition section of the proposed rule (77 FR 5359). Instead, we will use the acronym of “5i drug” to refer to inhalation, infusion, instilled, implanted, or injectable drugs. We received numerous comments concerning the proposed 5i drug provisions. These comments and responses are detailed later in this section.
At § 447.507(a), we proposed to use FDA's Routes of Administration posted on the CMS Web site to identify 5i drugs (77 FR 5334 and 5363). We received the following comments pertaining to this proposal.
Furthermore, since manufacturers are knowledgeable as to how their drug is administered, manufacturers will have the flexibility to determine whether their drug is a 5i drug based on reasonable assumptions. They may make such determinations, using resources such as the manufacturer's prescribing information, drug package insert, or the FDA SPL Routes of Administration; however, we will not mandate the use of any specific resource. As discussed previously, manufacturers may continue to make reasonable assumptions in the calculation of AMP, provided such assumptions are consistent with the requirements and intent of section 1927 of the Act and federal regulations, and a written or electronic record outlining these assumptions is maintained.
Additionally, we note that manufacturers are responsible for reporting AMP and AMP for 5i drugs that are not generally dispensed through a retail community pharmacy on a monthly basis. We will provide such information to states to ensure that they have current information regarding such drugs.
Therefore, we are revising proposed § 447.507(a) to specify that manufacturers must identify to CMS each COD that qualifies as a 5i drug, and are removing the specific reference to the list of FDA's Routes of Administration.
We do not believe a formal dispute resolution process regarding the identification of 5i drugs is necessary because we decided to reconsider our proposed policy that manufacturers identify 5i drugs using the FDA SPL Routes of Administration file referenced in the proposed rule (77 FR 5334 and 5363).
After consideration of the comments and for the reasons discussed in this section, we have revised proposed § 447.507 to remove the reference in § 447.507(a) that manufacturers use the list of FDA's Routes of Administration posted on the CMS Web site, to insert a requirement that manufacturers must identify their 5i drugs to CMS, and to delete the first paragraph in this provision.
Section 1927(k)(1)(B)(i)(IV) of the Act provides, in part, that manufacturers are to exclude from the determination of AMP for a COD for a rebate period, payments received from, and rebates or discounts provided, to any other entity that does not conduct business as a wholesaler or retail community pharmacy. Section 202 of the Education, Jobs and Medicaid Funding Act (Pub. L. 111-226), enacted on August 10, 2010 and effective on October 1, 2010, amended this provision to include sales for 5i drugs that are not generally dispensed through retail community pharmacies. This provision was added to ensure that an AMP could be calculated and Medicaid rebates could be collected from manufacturers for 5i drugs that are not generally dispensed through retail community pharmacies, as discussed in the proposed rule (77 FR 5334 through 5336, 5363). To effectuate this provision, we proposed in § 447.507(b)(1) to use a 90 percent standard to determine when a drug is not generally dispensed through a retail community pharmacy. We received the following comments pertaining to this proposal.
One commenter was troubled by the 90/10 rule for products which barely qualify for AMP treatment because too few transactions would be included in the AMP calculation to generate reliable results and the commenter stated that if the proposed rule were to be finalized as drafted, they would expect the AMPs for some 5i drugs not generally dispensed through retail community pharmacies to be lower than the AMP currently being reported. The commenter also stated that Congress, by amending the statute to provide an alternative AMP calculation, sought to improve the accuracy of AMP calculations, and the proposal to adopt a 90 percent standard would undercut this aim. One commenter believed that CMS's interpretation of “not generally dispensed” goes beyond the plain reading of the statute and a lower percentage of such sales would be more appropriate.
Several commenters suggested that CMS establish thresholds at the 80/20, 75/25, 70/30, 65/35, or 51/49 because these levels would minimize fluctuation and promote stability as products tend to consistently be above or below the threshold. A few of these commenters specifically stated that a 75/25 or 70/30 threshold would be a more appropriate interpretation of the statutory language, and would ensure there are an adequate number of sales in the appropriate category to support the calculation of a reasonably accurate AMP. One of these commenters performed an analysis of the proposed threshold and alternative thresholds and found that a 75 percent threshold would minimize fluctuation and promote stability as products tend to consistently be above or below the threshold. The commenter further indicated that its analysis of the proposed 90 percent threshold caused more frequent variation in whether or not a product met the threshold. Another one of the commenters indicated that using the 90/10 threshold would cause many of its 5i drugs to flip-flop between the two AMP calculations on a month-to-month basis. The commenter further indicated that its history showed that a 70-75/30-25 threshold would provide a more consistent pattern.
Other commenters suggested that CMS should allow manufacturers the flexibility to consider qualitative factors when making the determination of whether a 5i drug is not generally dispensed through retail community pharmacies and indicated that CMS should permit manufacturers to make reasonable assumptions on whether a particular product is subject to the AMP calculation for 5i drugs not generally dispensed through retail community pharmacies. The commenters believed that a qualitative approach consisting of documented reasonable assumptions would ensure that more accurate AMPs are calculated for each product, without imposing the significant burden and costs that would result if manufacturers had to obtain potentially incomplete or otherwise inaccurate data to comply with the proposed policy.
Another commenter stated that allowing manufacturers flexibility to make reasonable assumptions for the inclusion of drugs in this quantitative standard, based on objective drug characteristics, could further reduce AMP volatility.
We recognize, in light of the comments, that the 90 percent threshold is overly restrictive and sets a threshold that is indicative of instances when most, if not all, of the sales would be to entities other than retail community pharmacies. However, as discussed in the proposed rule (77 FR 5335), we have concerns about setting a lower threshold, such as 50 percent because half of the manufacturer's sales would have been to retail community pharmacies.
Therefore, to address the concerns of commenters for more flexibility, to reduce volatility of AMP, and to ensure sufficient sales to be included in AMP while at the same time appropriately restricting the inclusion of 5i drugs to those that are not generally dispensed through retail community pharmacies, we have decided to adopt the suggestion of the commenters and establish the threshold at 70 percent. Based on the comments received including the analyses performed by the commenters, we believe that a threshold of 70 percent of sales to entities other than retail community pharmacies is more likely than a 90 percent threshold to allow for an AMP calculation based on a sufficient number of sales, which would promote stability and consistency in the AMP calculation, consistent with section 1927(k) of the Act. Thus, a 5i drug would be considered not generally dispensed through a retail community pharmacy when the manufacturer determined that 70 percent or more of its sales, in units (the choice of “unit” is discussed later in this section), are to entities other than retail community pharmacies. However, we will continue to consider this issue and will issue additional guidance or rulemaking, if needed, regarding any concerns with implementation of this standard.
Furthermore, as discussed later in this section, we are permitting manufacturers to make reasonable assumptions, and include a smoothing process to determine if the percent of sales (in units) were sufficient to meet the “not generally dispensed” threshold.
Furthermore, for the reasons discussed in the proposed rule regarding our consideration of the Part B methodology (77 FR 5335), we have decided not to adopt a requirement to use all ASP-eligible products in determining if a drug should be included in the calculation of AMP for 5i drugs not generally dispensed through retail community pharmacies, because we believe that under this methodology some 5i drugs which are generally dispensed through retail community pharmacies would inappropriately be included in the calculation of AMP for such 5i drugs.
A complete discussion of the sales, discounts, rebates and other financial transactions to be included in or excluded from AMP for 5i drugs is provided in section II.C.7.d., including additional discussion about sales to 340B entities and rebates or discounts provided to government programs.
Another commenter believed it is reasonable to construe the AMP calculation rules and the “not generally dispensed” 5i status rules differently. By adopting an approach that includes specialty pharmacy sales in AMP but excludes them from the “not generally dispensed” test, the commenter believed that CMS will be doing less harm than if it were to adopt an erroneous interpretation of two statutory provisions rather than one. The commenter recognized that CMS is in a predicament because the current statutory definitions leave some products without sales necessary to calculate AMP, and the commenter cautions CMS not to use flawed reasoning to rectify the problem.
One commenter indicated that if the “not generally dispensed” evaluation were extended to include specialty pharmacies, home infusion pharmacies, and home health care providers, the exception that Congress created for 5i drugs would be effectively nullified, particularly if CMS adopts the proposed 90 percent standard. One commenter stated that neither the proposed rule nor the statute require manufacturers to consider sales to entities conducting business as retail community pharmacies under proposed § 447.504(b)(4) in the “not generally dispensed” determination.
Another commenter noted that if a manufacturer calculated the base date AMP believing the drug is (or is not) a 5i drug, and the status of the drug changes for a particular quarter, the calculation of the additional rebate would be based on a comparison of a base date AMP and a current-quarter AMP based on different methodologies. A few commenters expressed concern because it does not appear that manufacturers can maintain both two base date AMPs. Even if they were able to do so, the commenter noted that such an option would require major changes to manufacturer's government pricing systems and CMS's DDR system and it would be impossible to implement because manufacturers do not have data needed to establish the missing baseline information. One commenter noted that because the proposed rule only contemplates a product having one baseline AMP calculated in one way,
In addition, we believe it will not be necessary for manufacturer establishment of two base date AMPs because a manufacturer may make certain reasonable assumptions when determining AMP and has the option to use a smoothing process for determining when a drug is not generally dispensed through retail community pharmacies. We believe such options will result in more stable AMPs since the calculation methodology for 5i drugs should remain relatively consistent from month-to-month and quarter-to-quarter. The establishment of the base date AMP and the effect of the 5i drug statutory provisions on the base date AMP is further discussed in section II.H.3. of this final rule.
Therefore, we agree that if the drug in the commenter's example meets the definition of a COD at section 1927(k)(2) of the Act, and the manufacturer of the drug has signed an agreement to participate in the MDR program, then the manufacturer must report the AMP (and/or best price) for the drug and be responsible for paying rebates on the units dispensed of the drug. As discussed previously, manufacturers have the option to make reasonable assumptions, which we expect will allow manufacturers to make AMP and best price calculations consistent with the requirements and intent of section 1927(b) of the Act.
After considering the comments and for the reasons we discussed previously in this section, we have decided to revise proposed § 447.507(b)(1) to remove the references to 90 percent and during the reporting period and to insert references to 70 percent and to note that the determination is based on units at the NDC-9 level.
At § 447.507(b)(2), we proposed that the determination of a 5i drug's status as not generally dispensed through a retail community pharmacy will be evaluated by a manufacturer on a monthly and quarterly basis (77 FR 5336). We received the following comments on this proposal.
Many commenters recommended that CMS allow manufacturers to designate a 5i product not generally dispensed through retail community pharmacies for a minimum period of at least 1 year to reduce burdens on manufacturers, particularly those with large numbers of NDCs, as well as reduce the risk of AMP volatility. Many commenters recommended CMS allow manufacturers to adopt specific procedures when determining whether a 5i drug is not generally dispensed through retail community pharmacies, for example, if the 5i drug's retail distribution percentage is within 5 percent of the not generally dispensed threshold during an annual review, the manufacturer could maintain the current classification of the drug instead of switching to a new AMP calculation.
As to the commenters question regarding how to calculate quarterly AMP for quarters when the drug flips between AMP and AMP for 5i drugs not generally dispensed through retail community pharmacies within the months of that quarter, we note that the quarterly AMP is reported as a weighted average of the 3 monthly AMPs reported by the manufacturer; thus, manufacturers are to calculate the quarterly AMP as a weighted average of the 3 monthly AMPs irrespective of the methodology used to calculate each monthly AMP. We expect to issue operational guidance in the future providing additional instructions clarifying how manufacturers may identify and calculate monthly AMPs for 5i drugs not generally dispensed through retail community pharmacies. Until that guidance is issued, as noted previously, manufacturers may continue to make reasonable assumptions consistent with the requirements and intent of section 1927 of the Act and federal regulations.
As discussed previously, manufacturers may also use a smoothing process, where manufacturers may use a 12-month rolling average of their monthly sales (in units) to determine whether a 5i drug is not generally dispensed through a retail community pharmacy. As previously discussed in this section, we believe that since manufacturers may use data from a longer period of time other than the current month to make this determination and make reasonable assumptions consistent with the requirements and intent of section 1927 of the Act and federal regulations, we believe the monthly determination will not be overly burdensome on manufacturers, as suggested by the commenters.
We do not agree with the commenter's suggestion that CMS allow manufacturers to maintain the current classification of the drug instead of switching to a new AMP calculation if the retail distribution percentage is within 5 percent of the threshold. Again, we believe that the option to use the smoothing process and our decision not to finalize the buildup methodology but instead allow manufacturers to make reasonable assumptions in the calculation of AMP will contribute to more stable AMPs and that once a drug is determined to be generally dispensed, or not generally dispensed through retail community pharmacies, it will not flip-flop between the 5i and AMP methodologies.
Therefore, for the reasons discussed in this section, we are revising proposed § 447.507(b)(2) to remove the reference to determinations on a “quarterly” basis and to insert a requirement that a manufacturer is responsible for determining “and reporting to CMS” whether a 5i drug is not generally dispensed through a retail community pharmacy on a monthly basis.
In proposed § 447.504(d), we discussed the specific sales, discounts, rebates, payments and other transactions that we proposed to include in the determination of AMP for 5i drugs not generally dispensed through retail community pharmacies. These proposed provisions are discussed at 77 FR 5334 through 5336 of the proposed rule. We received the following comments on this provision.
At § 447.504(e) we similarly are revising the heading to include sales, nominal price sales, and associated discounts, rebates, payments, or other transactions excluded from AMP for 5i drugs that are not generally dispensed through retail community pharmacies. In the introductory text of § 447.504(e), we specify that AMP excludes the following sales, nominal price sales, and associated discounts, rebates, payments, or other financial transactions listed in § 447.504(e)(1) through (17). As stated in this section, it is our intention that the addition of the term “associated” clarifies that it is the sales or prices themselves, as well as the discounts, rebates, payment or other financial transactions associated with those prices or sales specified in § 447.504(e) that are excluded from the AMP calculation for 5i drugs that are not generally dispensed through retail community pharmacies.
First, government programs, and charitable and not-for-profit pharmacies are not included in the list of entities identified in section 1927(k)(1)(B)(i)(IV) of the Act, and we do not believe that they qualify as the additional entities (which do not conduct business as wholesalers or retail community pharmacies), which as discussed previously we have defined to include physicians and hospices. Therefore, based upon the comments and our reading of section 1927(k)(1)(B)(i)(IV) of the Act, we are excluding sales to these government, charitable, and not-for-profit pharmacies by adding these pharmacies to the exclusions at § 447.504(e)(18) through (20).
In addition, as we discussed in the proposed rule (77 FR 5328-5331), manufacturers are required to calculate AMP to reflect net sales, which is calculated, in part, based on prices paid and discounts provided to, retail community pharmacies and wholesalers, as defined in sections 1927(k)(10) and 1927(k)(11) of the Act. Manufacturers that provide discounts or rebates to government programs and payers generally do not make these discounts or rebates available to retail community pharmacies or wholesalers that distribute to retail community pharmacies, as those terms are defined in section 1927(k) of the Act. Therefore, the manufacturer's determination of AMP shall exclude the payments received from, as well as the discounts or rebates provided to government programs and payers, because they are not retail community pharmacies or wholesalers that distribute drugs to retail community pharmacies, in accordance with section 1927(k)(1) of the Act. We see no reason that manufacturers should adopt a different policy for 5i drugs not generally dispensed through retail community pharmacies. Prices, including manufacturer rebates and discounts, provided to government programs and payers do not represent the type of payments received from, and rebates or discounts provided to the entities listed at section 1927(k)(1)(B)(i)(IV) of the Act because, as discussed previously, government programs and payers are not included in the list of entities identified in section 1927(k)(1)(A) or 1927(k)(1)(B)(i)(IV) of the Act, and we do not believe that they qualify as the additional entities which do not conduct business as wholesalers or retail community pharmacies. Therefore, we have revised proposed § 447.504(e) to exclude prices provided to government programs, pharmacies, charitable pharmacies, and not-for-profit pharmacies from the determination of AMP for 5i drugs not generally dispensed through retail community pharmacies.
Therefore, we are revising proposed § 447.504(e) to clarify which prices should be excluded from the calculation of AMP for 5i drugs not generally dispensed through retail community pharmacies. Specifically, given our reading of section 1927(k) of the Act, as discussed previously, we have revised proposed § 447.504(e)(1) to provide for the exclusion of any prices on or after October 1, 1992, to the IHS, the DVA, a State home receiving funds under 38 U.S.C. 1741, the DoD, the PHS, or a covered entity described in section 1927(a)(5)(B) of the Act (including inpatient prices charged to hospitals described in section 340B(a)(4)(L) of the PHSA). We have also revised proposed § 447.504(e)(2) to provide for the exclusion of prices charged under the FSS and proposed § 447.504(e)(3) to provide for the exclusion of any depot prices (including TRICARE) and single award contract prices, as defined by the Secretary, of any agency of the federal government.
We are also revising proposed § 447.504(d)(10) to include prices paid by wholesalers when the wholesaler distributes drugs to entities other than retail community pharmacies, by including a reference to “any entity” that does not conduct business as a wholesaler. As indicated in the comment, the statute is ambiguous regarding the inclusion of prices in AMP for 5i drugs paid by wholesalers when drugs are distributed by the wholesaler to non-retail community pharmacy customers, such as those entities listed at section 1927(k)(1)(B)(i)(IV) of the Act (for example, hospitals, clinics, and long-term care pharmacies). The term wholesaler is defined at section 1927(k)(11) of the Act to mean a drug wholesaler engaged in the wholesale distribution of prescription drugs to retail community pharmacies. Section 1927(k)(1)(B)(i)(IV) of the Act provides that a manufacturer calculate an AMP for 5i drugs not generally dispensed through retail community pharmacies to include sales to entities that do not conduct business as a wholesaler. Therefore, we have interpreted the phrase “not conducting business as a wholesaler” to provide that manufacturers shall include sales to a wholesaler that is engaged in wholesale distribution of prescription drugs to the listed entities in section 1927(k)(1)(B)(i)(IV) of the Act, as implemented in § 447.504(d), to be included in AMP for 5i drugs not generally dispensed through retail community pharmacies. It is our position, in light of these provisions, that the sales that manufacturers should include in AMP for such 5i drugs are the sales to the wholesaler when distributing drugs to those listed entities, because that wholesaler is not conducting business as a wholesaler as defined in section 1927(k)(11) of the Act. Therefore, for the purposes of calculating the AMP for such 5i drugs, sales to wholesalers distributing to the entities at section 1927(k)(1)(B)(i)(IV) of the Act, as implemented in § 447.504(d), shall be included.
Accordingly, as discussed previously, we are revising § 447.504(d)(10) to include a reference to “manufacturers, or any other entity, that does not conduct business as a wholesaler or a retail community pharmacy” to clarify that such entities are included in the calculation of AMP for such 5i drugs.
The payments from those entities listed in section 1927(k)(1)(B)(i)(IV) of the Act as implemented in § 447.504(d), which include payments by, and discounts or rebates provided to, PBMs, MCOs, HMOs, insurers, hospitals, clinics, mail order pharmacies, long term care providers, manufacturers, or any other entity that does not conduct business as a wholesaler or a retail community pharmacy are included in AMP for 5i drugs not generally dispensed through retail community pharmacies. As discussed previously, we have also identified those sales, rebates, and discounts that should be excluded from the AMP calculation for such 5i drugs, which consistent with our interpretation of section 1927(k)(1) of the Act, shall continue to exclude customary prompt payments to wholesalers; bona fide service fees to retail community pharmacies and wholesalers; reimbursement for recalled, damaged, expired, or otherwise unsalable returned goods; and discounts provided under the Medicare Coverage Gap Discount program. Therefore, we have revised proposed § 447.504(e) to provide that manufacturers shall continue to exclude from AMP calculations for such 5i drugs, those prices, rebates, or discounts provided to federal government payers and programs (such as the 340B program, TRICARE, SPAPs), non-contingent free goods, patient assistance programs, because such prices, rebates, or discounts do not represent the type of prices, discounts and rebates contemplated in section 1927(k)(1)(B)(i)(IV) of the Act.
We further note that because manufacturers should exclude such service fees and bona fide service fees from their AMP calculations, the AMP calculated for such 5i drugs would not be reduced by such fees. Therefore, we believe the commenters' concern about AMP substitution for Medicare's ASP, which would likely occur if the manufacturer included such fees as discounts in AMP, is addressed by the fee exclusion. Furthermore, because these payments are not included in the AMP calculation for such 5i drugs, there is no need to add a specific exclusion of such service fees to the regulatory text.
Therefore, as discussed previously, we have moved the paragraph on “Further clarification of AMP calculation” to § 447.504(f) and have created a separate provision to identify those sales, rebates, discounts, and other financial transactions excluded from AMP for 5i drugs not generally dispensed through retail community pharmacies at § 447.504(e)(1) through (21), which include specific exclusions for any prices charged by Part D plans
For the reasons discussed in this section, we have revised proposed § 447.504(d) and (e) to provide as follows:
• Proposed § 447.504(d) has been revised to more clearly specify the sales, nominal price sales, and associated discounts, rebates, payments, or other financial transactions
• The paragraph on “Further clarification of AMP calculation” has been moved from proposed § 447.504(e) to § 447.504(f).
• Proposed § 447.504(e) has been revised to specify the sales, nominal price sales, and associated discounts, rebates, payments or other financial transactions excluded from AMP for 5i drugs not generally dispensed through retail community pharmacies at § 447.504(e)(1) through (20).
We received several comments regarding the calculation of AMP for certain oral drugs that meet the definition of a COD, but are not generally dispensed through retail community pharmacies, nor included in the AMP for 5i drugs not generally dispensed at retail community pharmacies.
We proposed to include proposed § 447.504(e)(1) through (3) to provide further clarification of AMP calculation. As discussed in a previous response in section II.C.7. of this rule, in this final rule we are moving this provision on “Further clarification of AMP calculation” from proposed § 447.504(e)(1) through (3) to § 447.504(f)(1) through (3).
We proposed that AMP would include cash discounts, except customary prompt pay discounts extended to wholesalers, free goods that are contingent on any purchase requirement, volume discounts, chargebacks that can be identified with
Another commenter stated that while CMS parenthetically excludes fees that constitute bona fide service fees in the preamble, the proposed regulatory language creates no such exception and implies that administrative, service and distribution fees are in fact discounts. CMS should clarify that all these fees will not be included in AMP as long as they qualify as bona fide service fee or in the case of GPO services meet the anti-kickback safe harbor. Alternatively, CMS could clarify that such fees will be included in AMP to the extent they do not qualify as bona fide service fees or meet the GPO safe harbor.
For the reasons discussed in this section, we are finalizing the provisions originally at proposed § 447.504(e)(1), redesignated at § 447.504(f)(1), except as noted, to add the phrase “other than bona fide service fees.”
We proposed at § 447.504(e)(2) that quarterly AMP is to be calculated as a weighted average of monthly AMPs in the quarter (discussed in more detail at 77 FR 5336). We received the following comments concerning quarterly AMP provisions.
Therefore, for the reasons stated in this section, we are finalizing the provisions pertaining to the calculation of quarterly AMP as proposed, at redesignated § 447.504(f)(2).
To account for discounts, rebates or other price concessions that may not be available during the rebate reporting period (meaning they are available on a lagged basis), we provided at proposed § 447.504(e)(3) that the manufacturer must adjust the AMP for the applicable rebate period if cumulative discounts, rebates, or other arrangements subsequently adjust the prices actually realized, to the extent that these discounts, rebates or arrangements are
We proposed to codify the definitions for the terms “best price” and “provider” under proposed § 447.505(a) (77 FR 5336, 5362). Additionally, we proposed to revise the definition of the term “best price” at § 447.505(a) so that it is consistent with the definition of best price found in section 1927(c)(1)(C) of the Act (77 FR 5336, 5362). We received no comments regarding our proposal to codify and define “best price” and “providers.” Therefore, we are including these definitions under § 447.505(a) and finalizing the definition of “provider” as proposed. We are also finalizing the definition of best price as proposed, except that we are including a reference to “an authorized generic drug” and deleting the phrase “for any such drug of a manufacturer that is sold under an NDA approved under section 505(c) of the FFDCA,” to be consistent with the definition of authorized generic drug that we are finalizing at § 447.502. This technical modification is designed to simplify the reference to those drugs sold under an NDA approved under section 505(c) of the FFDCA (for example, authorized generic drugs); it is not designed to substantively change the proposed definition of best price that we are finalizing.
We proposed the “Prices included in best price” section, currently located at § 447.505(c)(1) through (11), be redesignated to proposed § 447.505(b) and that it be revised to remove the list of prices included in best price, so that the definition is consistent with the statute. As discussed in the proposed rule, we believe this revision provides sufficient detail as to the prices included in best price (as discussed in more detail at 77 FR 5336). We received the following comments concerning the proposed redesignation and revisions to the rule to remove the list of prices included in best price:
Commenters recommended that CMS revise the proposed language in paragraph (b) to clarify that the prices described in paragraph (b) are eligible for consideration in best price only if they are prices to one of the best price-eligible entities listed in paragraph (a). The commenters suggested that CMS revise paragraph (b) to state, “Best price for CODs includes all prices and associated rebates, discounts, or other transactions that adjust prices either directly or indirectly, provided to any entity described in paragraph (a), unless such prices are otherwise excluded as provided in paragraph (c) of this section.” The commenters believed this revision is necessary to ensure that the rule does not unlawfully expand the statutory definition to include prices to entities other than those identified in the statutory definition of best price.
A few commenters stated that to be consistent with the statute and the definition in proposed § 447.505(a), the proposed language at § 447.505(b) should include “to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity or government entity” after “. . . that adjusted prices . . .” and before “either directly or indirectly.” Otherwise, the commenter believed that the proposed language at § 447.505 could be read to include in best price sales to non-entities such as patients.
Another commenter was concerned that the proposed rule would redefine best price to include within a single price to a particular customer all rebates and payments “associated” with that transaction. The commenter believed this to be a vague term which does not clearly state that the associated payment must be provided to the same entity to which the product is sold. The commenter further noted that this would be a significant change to the definition of best price in statute and the national rebate agreement. Therefore, the commenter objected to the definition as it would require manufacturers to include in the best price available to one customer, as a price concession to that customer, a payment made to a completely different entity and the commenter believed this was a significant change to the statutory and contract definition.
Furthermore, the requirement to include all discounts that subsequently adjust the price available from the manufacturer is also consistent with the provisions we are finalizing in this rule at § 447.505(c)(17), which specifies that best price includes PBM rebates, discounts or other financial transactions, including their mail order pharmacy purchases, where such rebates, discounts or price concessions are designed to adjust prices at the retail or provider level. In addition, we are finalizing, as proposed, at § 447.505(d)(3), that manufacturers must adjust the best price if cumulative discounts, rebates, or other arrangements subsequently adjust the prices available from the manufacturer. We do not believe it is necessary to specify the degree of the relationship between two separate but related entities since the manufacturer's price concessions or discounts that are passed on to best price-eligible entities are not predicated upon a relationship existing between the two entities.
We also do not believe it is necessary that this regulation detail every arrangement that may subsequently adjust the prices available from the manufacturer. With the recent introduction of value based purchasing arrangements in the pharmaceutical marketplace, we recognize the value of such arrangements especially when they benefit patients. We are also interested in assuring that states and Medicaid programs have clarity as to how these arrangements might exist in Medicaid. Therefore, since these arrangements are unique, we are considering how to provide more specific guidance on this matter, including how such arrangements affect a manufacturer's best price.
While we are making some minor revisions, as discussed in this section, there are no substantive changes being adopted in this final rule regarding a manufacturer's treatment of financial transactions that subsequently adjust prices to best price-eligible entities.
In response to the comments and for the reasons discussed in this section, we are revising proposed § 447.505(b) to delete the reference to “associated” rebate and discounts, and to insert a reference to “applicable discounts, rebates” and to the best price-eligible entities listed in § 447.505(a). Specifically, we have revised § 447.505(b) to provide that the best price for CODs includes all prices, including applicable discounts, rebates or other transactions that adjust prices either directly or indirectly to the best price-eligible entities listed in § 447.505(a).
For consistency, we proposed to apply the same methodology to best price that we are applying to AMP, where applicable (77 FR 5336). To do so, we proposed the “Prices excluded from best price” section, currently located at § 447.505(d)(1) through (13), be revised and redesignated to § 447.505(c)(1) through (18) (as discussed in more detail at 77 FR 5336). We also proposed in the regulatory text to expand the list of prices excluded from best price to include manufacturer copayment assistant programs (§ 447.505(c)(10)), manufacturer-sponsored patient refund/rebate programs (§ 447.505(c)(11)), manufacturer vouchers (§ 447.505(c)(12)), reimbursement by the manufacturer for recalled, damaged, expired, or otherwise unsalable returned goods (§ 447.505(c)(14)), and sales outside the United States (§ 447.505(c)(18)) to apply the same methodology to best price that is used for the determination of AMP (77 FR 5336, 5363). We also proposed to redesignate § 447.505(e) “Further clarification of best price” to proposed § 447.505(d). Because we did not propose changes to the current language of § 447.505(e), the proposed redesignation was only proposed in the regulatory text and not discussed in the preamble (77 FR 5363). Therefore, in this section we address comments regarding the proposed exclusions from best price section (§ 447.505(c)), as well as the proposed further clarification of best price (§ 447.505(d)). Some of these changes were proposed to provide consistency between the AMP and best price sections, while others were retained from the rule finalized with the AMP final rule in 2007. For example, in the preamble to the proposed rule (77 FR 5336), we proposed to expand the list of prices excluded from best price that were not identified previously in regulations to more closely mirror the exclusions from AMP, where applicable, consistent with section 1927(c)(1)(C) of the Act; including vouchers, manufacturer-sponsored patient refund/rebate programs, and sales outside of the United States. In the proposed rule (77 FR 5363), we also proposed to expand the list of prices excluded from best price to include manufacturer copayment assistant programs (§ 447.505(c)(10)) and reimbursement by the manufacturer for recalled, damaged, expired, or otherwise unsalable returned goods (§ 447.505(c)(14). In some instances, commenters generalized their comments so that they were applicable to both AMP and best price. In those cases we have chosen to respond to the comments in the Determination of AMP section (section II.C.) of this final rule and have noted, where applicable, any changes to best price that are being finalized as a result of comments within the AMP section of this final rule. We are therefore not repeating those comments that were specific to both AMP and best price within this section of the final rule. Please note that when referring to AMP in the context of AMP methodology applied to best price, we are referring to AMP in general and are not making any distinctions between AMP for 5i drugs versus AMP for non-5i drugs. We received the following comments related to the best price calculation:
Therefore, we are revising § 447.505(c)(12) to exclude from the best price calculation manufacturer-sponsored programs that provide free goods, including but not limited to vouchers and patient assistance programs, but only to the extent that the voucher or benefit of such a program is not contingent on any other purchase requirement; the full value of the voucher or benefit of such a program is passed on to the consumer; and the pharmacy, agent, or other entity does not receive any price concession. These revisions ensure that the treatment of these programs are in line with the statutory requirements at section 1927(c)(1)(C)(ii)(I) of the Act and provides consistency between AMP and best price.
Furthermore, as discussed in more detail in the Determination of AMP section of the final rule (II.C.6.v) we have also made the following revisions to best price to accurately reflect the exclusion of patient programs from best price. First, proposed § 447.505(c)(8), which pertains to manufacturer-sponsored drug discount card programs, has been revised to add the contingency that the full value of the discount is passed on to the consumer and the pharmacy, agent or other entity does not receive any price concession. These changes are being made to provide clarification and consistency as was requested by the commenters, as well as to more accurately describe all of the conditions that must be satisfied to make a particular program excluded from AMP and best price, consistent with sections 1927(k) and 1927(c)(1)(C) of the Act, as applicable. Additional discussion of this revision is provided in the Determination of AMP section of this final rule (section II.C.6.v.).
Second, we have revised proposed § 447.505(c)(10) to pertain solely to Manufacturer copayment assistance programs because Patient Assistance Programs have been moved to § 447.505(c)(12), as discussed previously in this section and the Determination of AMP section (II.C.6) of this final rule. We have also revised proposed § 447.505(c)(10) to remove the language “provided free of charge” because these types of programs typically offer copayment assistance, which may or may not result in free goods to patients. Additional discussion of this revision is provided in the Determination of AMP section of this final rule (section II.C.6.v.). Furthermore, we have revised proposed § 447.505(c)(10) to add the contingency that the program benefits are provided entirely to the patient, and the pharmacy, agent, or other entity does not receive any price concessions. These changes are being made to provide clarification and consistency, as well as to more accurately describe all of the conditions that must be satisfied to make a particular program excluded from AMP and best price, consistent with sections 1927(k) and 1927(c)(1)(C) of the Act, as applicable.
Third, proposed § 447.505(c)(11), which pertains to manufacturer-sponsored patient refund/rebate programs, has been revised to remove the language “provided free of charge” because these types of programs typically offer discounts that may or may not result in patients receiving the drug for free. Additional discussion of this revision is provided in the Determination of AMP section of this final rule (section II.C.6.v.). Furthermore, we have added the contingency that the manufacturer provides a full or partial refund or rebate to the patient for out-of-pocket costs and the pharmacy, agent, or other entity does not receive any price concessions. These changes are being made to provide clarification and consistency, as well as to more accurately describe all of the conditions that must be satisfied to make a particular program excluded from AMP and best price, consistent with sections 1927(k) and 1927(c)(1)(C) of the Act, as applicable. Furthermore, we are finalizing § 447.505(c)(13) to provide that free goods, not contingent upon any purchase requirement, are excluded from best price. Additionally, manufacturers must include the value of the discount, coupon, rebate, or voucher in the determination of best price if the program generates a price concession to a best price-eligible entity. Finally, we are also finalizing § 447.505(c)(9) pertaining to manufacturer coupons, as it was proposed (77 FR 5363), since no comments were received on this proposal and it remains unchanged from the present regulations.
A few commenters noted that it seems illogical to exclude a bona fide service fee paid to GPOs from AMP and best price but not apply the exclusion to other entity types such as PBMs and insurers that, like GPOs, are outside the supply chain in that they do not purchase prescription drugs. One commenter stated, in certain instances, the change in definition of bona fide service fee could require manufacturers to stack PBM or MCO service fees with rebates when determining best price. The commenter maintained the likely unintended consequences of this type of stacking requirement would be a reduction in the fees and/or rebates that manufacturers would be willing to offer insurers and their agents for formulary placement, which could lead to increases in insurance premium or brand copayments to the commercially insured public. The commenter also noted that long term care and mail order pharmacies, like retail community pharmacies, do on occasion provide services to manufacturers that deserve
Therefore, we have revised proposed § 447.505(c)(16) to specify that the bona fide service fees, as defined in § 447.502 are excluded from the determination of best price and we have removed the specific references to wholesalers, retail community pharmacies, entities that conduct business as wholesalers or retail community pharmacies, and GPOs. As discussed in the definition of Bona Fide Service Fee in section II.B.4. of this final rule, we are no longer specifically referencing GPOs in the regulatory text because we do not believe it is necessary with the revised definition of bona fide service fee. We believe this revision will maintain CMS's current policy which provides for a broad exclusion of bona fide service fees for purposes of the best price calculation. In addition, we have revised proposed § 447.505(d)(1) by adopting the reference to bona fide service fee in current § 447.505(e)(1). Specifically, we have revised proposed § 447.505(d)(1) by adding the parenthetical reference “except bona fide service fees” to clarify that such fees should be excluded from best price calculations.
Therefore, for the reasons discussed in this section, we are finalizing proposed § 447.505(c) and (d), including the following revisions:
• Proposed § 447.505(c)(4) is revised to specify that “any prices, rebates or discounts” provided to designated SPAPs are excluded from best price.
• Proposed § 447.505(c)(8) is revised to specify that manufacturer-sponsored drug discount card programs, but only to the extent that the full value of the discount is passed on to the consumer and the pharmacy, agent, or other entity does not receive any price concession are excluded from best price.
• Proposed § 447.505(c)(10) is revised to specify that Manufacturer copayment assistance programs, to the extent that the program benefits are provided entirely to the patient and the pharmacy, agent, or other entity does not receive any price concession are excluded from best price.
• Proposed § 447.505(c)(11) is revised to specify that manufacturer-sponsored patient refund or rebate programs, to the extent that the manufacturer provides a full or partial refund or rebate to the patient for out-of-pocket costs and the pharmacy, agent, or other entity does not receive any price concession are excluded from best price.
• Proposed § 447.505(c)(12) is revised to specify that manufacturer-sponsored programs that provide free goods, including but not limited to vouchers and patient assistance programs, but only to the extent that the voucher or benefit of such a program is not contingent on any other purchase requirement; the full value of the voucher or benefit of such program is passed on to the consumer; and the pharmacy, agent, or entity does not receive any price concession are excluded from best price.
• Proposed § 447.505(c)(14) is revised to replace “it only covers these costs” with “such payment covers only these costs” to further ensure consistency in how returns are treated in AMP and best price.
• Proposed § 447.505(c)(15) is revised to remove the reference to “of this subpart” given the regulatory cite is specified (§ 447.508) within the paragraph.
• Proposed § 447.505(c)(16) is revised to reference bona fide service fees “as defined at § 447.502,” and to delete language from the proposed rule describing types of fees (inventory fees, distribution service fees, etc.) because such fees are included in the definition of bona fide service fee at § 447.502.
• We have added direct patient sales to the list of sales excluded from best price at § 447.505(c)(19).
• Proposed § 447.505(d)(1) is revised to delete the reference to “returns” and to include “except bona fide service fees” after the reference to “service fees” and before distribution fees.
In accordance with sections 1927(a)(5)(B) and 1927(c) of the Act, we proposed at § 447.505(c)(2) that manufacturers should exclude from best price the prices charged under the 340B program to a covered entity described in section 1927(a)(5)(B) of the Act and any inpatient prices charged to hospitals described in section 340B(a)(4)(L) of the PHSA (77 FR 5363). In accordance with section 340B(a)(4) of the PHSA, we proposed to clarify how manufacturers are to treat orphan drugs sold to new covered entities described in sections 340B(a)(4)(M), (N), and (O) of the PHSA for best price. These requirements were proposed at new § 447.505(c)(2)(i) and (ii) (see 77 FR 5337 for additional information). We received the following comments concerning these provisions:
Another commenter stated that this broad exception to best price has been enshrined in the statute and has governed the intersection of Medicaid and 340B since the 340B program's inception.
The commenters noted that without clarity, manufacturers would likely interpret the provision differently and some could be putting themselves at risk for best price restatements and potentially False Claims liability. One of these commenters stated that without effectively explaining in the preamble or regulatory text how to interpret the concept, CMS would place restrictions on the prices excluded from best price that are extended to 340B entities.
Another commenter stated that because the statutory 340B best price exclusion applies to covered entities and not CODs, the commenter believed the orphan drug exclusion does not impact the best price exclusion. The commenter further stated that a voluntary 340B price on an orphan drug to an entity affected by the orphan drug exclusion is still a price to the 340B covered entities, which is the statutory requirement for best price exclusion.
Another commenter stated that CMS should clarify that manufacturers can exclude “prices charged under the 340B Drug Pricing Program” so long as the covered entity is listed as participating in the program on the 340B Web site for the relevant period.
Many commenters urged CMS not to adopt this proposal because it would place a burden on manufacturers because it unreasonably shifts the responsibility for monitoring covered entity compliance with 340B program requirements from HRSA to manufacturers, which is beyond the scope of CMS's authority.
A few commenters stated that such a shift in in burden on the manufacturers would discourage manufacturers from offering such price concessions to these entities, which runs counter to the general policy behind the 340B Drug Pricing Program.
Another commenter stated that the 340B covered entities may not “double dip” (purchase at a 340B price and then submit for reimbursement that would give rise to a manufacturer Medicaid rebate). The covered entities are also prohibited from reselling or transferring any drug purchased at 340B pricing to a patient who is not a patient of the covered entity.
Manufacturers should be able to determine which entities qualify as covered entities by accessing HRSA's online database of covered entities that is publically accessible on the HRSA Web site at
Therefore, based on the comments received, and for the reasons discussed in this section, we are revising proposed § 447.505(c)(2) to delete the phrase in § 447.505(c)(2)(i) “under the 340B drug pricing program,” to delete proposed § 447.505(c)(2)(ii), and to include a reference in § 447.505(c)(2) to provide that any prices charged to a covered entity described in section 1927(a)(5)(B) of the Act (including inpatient prices charged to hospitals described in section 340B(a)(4)(L) of the PHSA) shall be excluded from a manufacturer's determination of best price.
The Discount Program established under section1860D-14A of the Act makes manufacturer discounts available to applicable Medicare beneficiaries receiving applicable covered Part D drugs while in the coverage gap. In general, as discussed in the proposed rule (77 FR 5337), the discount on each applicable covered Part D drug is 50 percent of an amount that is equal to the negotiated price. In accordance with the section 1927(c)(1)(C)(i)(VI) of the Act, we proposed that manufacturer discounts attributed to the Discount Program should be excluded from the determination of best price, in proposed § 447.505(c)(6) (77 FR 5337, 5363). We did not receive any comments concerning this best price exemption and therefore, for the reasons stated in this section, we are finalizing the provision as proposed.
In § 447.505(a), we also proposed a definition of “provider”; and in § 447.505(d)(2) we proposed that best price is to be determined on a unit basis without regard to package size, special packaging, labeling, or identifiers on the dosage form or product or packaging and did not receive any comments on these provisions. Thus, for the reasons discussed in the proposed rule (77 FR 5336-5337), and consistent with section 1927(c)(1)(C) of the Act, we are finalizing those provisions, as proposed.
We proposed to move the definition of authorized generic drugs from § 447.506(a) to proposed § 447.502 (Definitions) (77 FR 5337), as discussed in the proposed rule.
In proposed § 447.506(a), we proposed to define the term “Primary manufacturer” to mean a manufacturer that holds the NDA of the authorized generic drug (77 FR 5337, 5363). We also proposed to define the term “Secondary manufacturer of an authorized generic drug” to mean a manufacturer that is authorized by the primary manufacturer to sell the drug but does not hold the NDA. We proposed at proposed § 447.506(b) to specify that sales of an authorized generic should be included in the AMP calculation of the primary manufacturer holding title to the NDA when the drug is sold directly to a wholesaler, or to a secondary manufacturer when that secondary manufacturer is acting as a wholesaler (77 FR 5363). In proposed § 447.506(c), as discussed in the preamble to the proposed rule (77 FR 5337), we proposed to specify that a primary manufacturer holding the NDA must include the best price of an authorized generic drug in its computation of best price for a single source or an innovator multiple source drug during a rebate period to any manufacturer, wholesaler, retailer, provider, HMO, non-profit entity, or governmental entity in the United States, only when such drugs are being sold by the manufacturer holding the NDA (77 FR 5363). We also proposed to add § 447.506(d), which specifies that a secondary manufacturer must provide a rebate based on its sales of the authorized generic drug (77 FR 5363). The secondary manufacturer must calculate AMP and best price consistent with the requirements in proposed §§ 447.504 and 447.505 (77 FR 5363). We received the following comments:
However, a few commenters indicated that CMS does not explain when the secondary manufacturer would be viewed as “acting as a wholesaler.” A commenter supported CMS's position allowing manufacturer flexibility in determining whether the services performed by another manufacturer qualify that manufacturer to be “acting as a wholesaler” for purposes of the AMP calculation and the authorized generic provisions by not limiting the wholesaler definition at § 447.502 to only those entities licensed as wholesalers in the state.
And finally, we note that as discussed previously, since CMS may not be able to address every arrangement that exists among manufacturers, manufacturers may continue to make reasonable assumptions regarding their AMP and best price calculations, provided their assumptions are consistent with the requirements and intent of section 1927 of the Act and federal regulations.
Another commenter believed that CMS should not include the transfer prices paid by the secondary
As for best price, the transfer price paid by the secondary manufacturer (except for those prices specifically excluded from best price in section 1927(c)(1)(C) of the Act) will be included in the primary manufacturer's determination of best price since 1927(c)(1)(C)(ii)(IV) of the Act provides that in the case of a manufacturer that approves, allows, or otherwise permits any other drug of the manufacturer to be sold under a new drug application approved under section 505(c) of the Federal Food Drug, and Cosmetic Act, best price shall be inclusive of the lowest price for such authorized drug available from the manufacturer during the rebate period to any manufacturer, wholesaler, retailer, provider, HMO, nonprofit entity, or governmental entity with the United States.
We further agree with the commenter that if a primary manufacturer automatically presumes that the secondary manufacturer is acting as a wholesaler, it is likely the primary manufacturer's AMP for the drug will be lower which in turn may impact FULs. However, as provided earlier in this response, we believe it is the primary manufacturer's responsibility to determine whether the transfer price associated with the authorized generic sale to the secondary manufacturer is an AMP or best price eligible sale.
For the reasons discussed in this section and in the proposed rule, we are finalizing the provisions in proposed § 447.506, Authorized Generic Drugs, as proposed (77 FR 5337 and 5363) with the following revisions:
• In response to comments received, we are adding language at § 447.506(b) to further clarify the reference to “acting as a wholesaler” to read “acting as a wholesaler for drugs distributed to retail
• While we proposed in the preamble of the proposed rule (77 FR 5337) that a primary manufacturer holding the NDA must include the best price of an authorized generic in its computation of best price for “a single source or an innovator multiple source drug during a rebate period to any manufacturer . . . .,” we inadvertently deleted the reference to “a single source or” in proposed § 447.506(c) (77 FR 5363), which was not our intention. Therefore, consistent with the discussion in the preamble (77 FR 5337) and the statute at section 1927(c)(1)(c)(i) of the Act, we are adding “a single source or” to § 447.506(c) after “for” and before “innovator.”
• As a technical edit, we are removing the reference to “of this subpart” from proposed § 447.506(d) as the reference is not necessary given the regulatory citations.
Section 1927(c)(1)(C)(ii)(III) of the Act excludes from best prices those prices that are merely nominal in amount. Section 1927(c)(1)(D)(i) of the Act identifies certain entities to whom sales at nominal prices of CODs are made from manufacturers for purposes of best price. To update our regulations text to reflect the changes set forth in section 221 of Division F, Title II, of the Omnibus Appropriations Act, 2009, (Pub. L. 111-8), enacted on March 11, 2009, we proposed to revise § 447.508(a) by adding proposed § 447.508(a)(4) and (5) to reflect the two categories of entities added to the list of entities that are eligible for manufacturers to sell drugs at nominal prices and have those sales excluded from best price (77 FR 5364). Specifically, in proposed § 447.508(a)(5), we proposed to add entities that are defined by Internal Revenue Service (IRS) in section 501(c)(3) of the Internal Revenue Code of 1986 (Code) and exempt from tax under section 501(a) of the Code, or are State-owned or operated entities; and are providing the same services to the same type of populations as section 340B(a)(4) entities of the PHSA but not funded as such (77 FR 5337, 5364). In proposed § 447.508(a)(4), we proposed to add a public or nonprofit entity, or a facility at an institution of higher learning whose primary purpose is to provide health care services to students of that institution and family planning services described in section 1001(a) of the PHSA (77 FR 5337, 5364).
We also proposed to add the “Rule of Construction” at proposed § 447.508(c) to provide, in accordance with section 1927(c)(1)(D)(iv) of the Act, that nothing in section 1927(c)(1)(D) of the Act should be construed in any way to alter any existing statutory or regulatory prohibition on services for entities described in § 447.508(a), including the prohibition set forth in section 1008 of the PHSA (77 FR 5338, 5364). Additionally, in the proposed rule, we declined to identify any further entities for which manufacturer nominally priced sales would be exempt from best price (77 FR 5338).
We received the following comments concerning the proposed revisions to § 447.508:
For the reasons articulated in the response to comments in this section and in the proposed rule, and to implement changes to section 1927 of the Act set forth in section 221 Division F, Title II of the Omnibus Appropriations Act, 2009 (Pub. L. 111-8), enacted March 11, 2009, we are finalizing proposed § 447.508 (Exclusions from best price of certain sales at a nominal price), except for the changes discussed in this section, to exclude the following nominal price drug sales from best price for:
• A covered entity as described in section 340B(a)(4) of the PHSA.
• An ICF/IID providing services as set forth in § 440.150.
• A State-owned or operated nursing facility providing services as set forth in § 440.155.
• A public or non-profit entity, or an entity based at an institution of higher learning whose primary purpose is to provide health care services to students of that institution, that provides family planning services described under section of 1001(a) of PHSA to conform with section 1927(c)(1)(D)(i)(IV) of the Act.
• An entity that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of that Act or is state-owned or operated; and, is providing the same services to the same type of population as a covered entity described in section 340B(a)(4) of the PHSA but does not receive funding under a provision of law referred to in such section.
In this final rule, we are also revising proposed paragraph (c) to state that nothing in the section is construed to alter any existing statutory or regulatory prohibition on services for an entity described paragraph (a)(5) of the section, including the prohibition set forth in section 1008 of the PHSA.
In proposed § 447.509, we proposed to incorporate provisions of the statute concerning the rebate calculation, including the formulas used to calculate rebates for CODs in the MDR program as specified under section 1927(c) of the Act, the requirements for drugs dispensed by Medicaid MCOs under section 1927(b)(1)(A) of the Act, and the federal offset of rebates under section 1927(b)(1)(B) of the Act (77 FR 5338, 5364).
In proposed § 447.509(a)(1) through (3), we proposed provisions regarding the determination of the basic rebate amount for single source and innovator multiple source drugs, as well as clotting factor products for which a separate furnishing payment is made under section 1842(o)(5) of the Act, and drugs approved exclusively for pediatric indications; the additional rebate for single source and innovator multiple source drugs; and the total rebate amount for single source and innovator multiple source drugs. In proposed § 447.509(a)(5) we proposed a limit on the rebate amount such that in no case will the total rebate amount exceed 100 percent of the AMP of the drug. In proposed § 447.509(a)(6) we proposed provisions regarding the determination of rebates for noninnovator multiple source drugs (77 FR 5338, 5364). The following is a summary of the comments received concerning the proposed provisions in § 447.509(a)(1) through (3), (5), and (6).
• The quarter in which the labeler's Medicaid drug rebate agreement was optionally effective (that is, the earliest date states, at their option, can cover the drug);
• the product's Market Date quarter;
• the product's Purchased Product Date quarter (if applicable); or,
• the first quarter 2010 (that is, the quarter in which the minimum rebate percentage under ACA was effective).
In accordance with section1927(c)(1)(B)(iii)(II)(aa) of the Act, which was effective on January 1, 2010, the 17.1 percent rebate is applicable to products identified by Medicare Part B as clotting factors for such products on the market anytime within or before the first quarter of 2010. If the product was marketed on or after April 1, 2010, then the 17.1 rebate percentage is applied as of the market date quarter. Prior verification by CMS is not needed before the lower 17.1 percent rebate is applied. Therefore, when new products are introduced to the market on or after April 1, 2010, regardless of when CMS confirms such products are clotting factors, the effective date of the application of the 17.1 percent rebate will the product's market date quarter.
After considering the comments, and for the reasons we set forth in this section and in the proposed rule, we are finalizing § 447.509(a)(1) through (3), (5), and (6) as proposed (77 FR 5338, 5364).
Section 1927(c)(2)(C) of the Act, as added by section 2501(d) of the Affordable Care Act, establishes a separate formula for calculating the URA for a drug that is a line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form. For such line extension drugs, section 1927(c)(2)(C) of the Act provides that the rebate amount shall be the amount computed under section 1927 of the Act or, if greater, the product of the AMP for the line extension; the highest additional rebate (calculated as a percentage of the AMP) under section 1927 of the Act for any strength of the original single source drug or innovator multiple source drug; and the total number of units of each dosage form and strength of the line extension product paid for under the state plan in the rebate period. Section 1927(c)(2)(C) of the Act defines a line extension for purposes of the rebate calculation as a new formulation of a drug, such an extended release formulation.
We proposed to include a definition for line extension drug in proposed § 447.502 (77 FR 5323 through 5324, 5360). In proposed § 447.502, we proposed to define a line extension drug as a single source or innovator multiple source drug that is in an oral solid dosage form that has been approved by the FDA as a change to the initial brand name listed drug in that it represents a new version of the previously approved listed drug, such as a new ester, a new salt, or other noncovalent derivative; a new formulation of a previously approved drug; a new combination of two or more drugs; or a new indication for an already marketed drug (77 FR 5323, 5360). We also proposed to include the statutory definition of “line extension” at proposed § 447.509(a)(4)(ii) (77 FR 5364). Based on FDA's publicly available drug information and data files, we proposed to use FDA's Chemical Type classification, which classifies drugs when an NDA is approved according to the type of change made to an initial brand name listed drug (77 FR 5339). As we discussed in the proposed rule, the Chemical Type may identify a drug as new or related to the active ingredient of another drug that has already been approved (77 FR 5339). We proposed to use FDA's assigned Chemical Types 2, 3, 4, and 6 to identify line extension drugs and Chemical Type 1 to identify an initial brand name listed drug. These proposed provisions are discussed in more detail in the proposed rule at 77 FR 5339 through 5341. Since the writing of the proposed rule, FDA has changed the assigned numbers and meaning of some of the Chemical Types. The current list of Chemical Types and their meanings can be found on the FDA Web site at
In regard to the proposed definition of line extension, we noted that we did not plan to exclude reformulations of existing products that incorporate abuse deterrent technologies from the definition of line extension, as discussed at 77 FR 5338. We also proposed not to exclude single source or innovator multiple source drugs that receive 3-year exclusivity, pediatric exclusivity, or 7-year orphan drug exclusivity from the definition of line extension (77 FR 5340). We also proposed to exclude a new strength of the initial brand name listed drug from the definition of a line extension drug (77 FR 5338).
Additionally, we proposed to include provisions concerning the rebate calculation for line extension drugs, including the method to calculate the URA for such drugs in proposed § 447.509(a)(4)(i) (77 FR 5340, 5364). For the purpose of calculating the URA under section 1927(c)(2)(C) of the Act, we proposed that both the initial brand name listed drug and the line extension drug have to be an oral solid dosage form (77 FR 5338). We also proposed to provide and update a master list that identifies new initial brand name listed drugs and new line extension drugs quarterly for the initial three quarters from the effective date of the final rule (77 FR 5340).
We received numerous comments regarding our proposal on line extensions. The comments addressed our proposed definition and identification of line extension drugs, including the use of FDA's Chemical Types, both as a general concept as well as why specific Chemical Types should not be included in the definition of a line extension. Other comments included concerns that our definition was too broad and not supported by legislative history, suggestions for alternative methods to identify line extension drugs, general rulemaking concerns, and concerns regarding the operational aspect of calculating the rebate amount for line extension drugs. Many comments addressed the inclusion of abuse deterrent formulations (ADFs) in the definition of line extension and described how the inclusion of ADFs is contrary to policies being promulgated to address the nation's drug abuse crisis.
We also received comments that disagreed with inclusion of drugs that receive certain kinds of exclusivity or drugs that were required to undergo certain types of clinical trials. Some commenters indicated there was a disincentive for manufacturers to proceed with innovative products if our proposals were finalized.
We appreciate the comments that were provided; however, at this time, we have decided not to finalize the proposed definitions of line extension drug at proposed §§ 447.502 and 447.509(a)(4)(ii). We will continue to consider the issues commenters raised on the definition of a line extension drug, as well as the scope of the definition as it applies to ADFs or drugs that received certain types of exclusivity. Additionally, we are not finalizing proposed § 447.509(a)(4)(iii), which proposed the process by which line extension drugs would be identified by the FDA's list of certain Chemical Types. Because we are not utilizing FDA's Chemical Types, we will not provide nor update the master list that identifies new initial brand name listed drugs and new line extension drugs for the initial three quarters from the effective date of the final rule.
Although we are taking into consideration the comments we received on the proposed rule for these topics, we are requesting additional comments on the definition of line extension drug and the identification of new formulations as we may consider addressing these in future rule making. Therefore, at this time, manufacturers are to rely on the statutory definition of line extension at section 1927(c)(2)(C) of the Act, and where appropriate, are permitted to use reasonable assumptions in their determination of whether their drug qualifies as a line extension drug. Furthermore, as discussed later in this section, we are finalizing § 447.509(a)(4)(i), which provides the rebate calculation for line extension drugs, including the method to calculate the URA and UROA for such drugs.
We received the following comments concerning operational aspects of proposed § 447.509(a)(4)(i) and the sharing of manufacturer pricing data regarding the alternative rebate calculation:
Many commenters noted that manufacturers will be harmed, unfairly penalized, or have proprietary information compromised by the implementation of the line extension provisions. Several commenters stated that the proposed rule, if finalized, would subject products to higher rebate obligations without consideration of the substantial time and financial resource investments associated with the manufacturing of the line extension product.
Several commenters noted that the provisions would make the rebate calculations more burdensome. Several commenters stated that the proposed rule, if finalized, would require the sharing of information between competing manufacturers. One commenter asked if, in the case of a Chemical Type 6 (new indication) product, the manufacturer would need to compare the AMP of its line extension product to the AMP of the original product if both products are currently being marketed by different manufacturers. The commenter stated that if so, the manufacturer would encounter great difficulty because pricing data are proprietary and confidential.
Another commenter stated that data sharing is problematic from both an operational and legal perspective. Competitors are reluctant to share pricing data with a direct competitor and there were no rules regarding such sharing given in the proposed rule, thereby creating barriers for data sharing. Several other commenters stated that the sharing of pricing information is problematic because such information is confidential. One commenter stated that unless the same labeler owns and markets both the initial reference drug and the line extension drug, the alternative URA should not come into play. Another commenter stated that the line extension company has no control or insight into the pricing of the original product. The commenter stated that it makes little sense to apply the line extension provision if the products are marketed by different manufacturers because it would only penalize the manufacturer of the line extension drug and there would be no concern in this case that the original manufacturer was attempting to “game the system.”
Several commenters expressed concern regarding the use of a formula that relies on the additional rebate of the original drug of another manufacturer who could manipulate the original price to generate higher rebate liability for the line extension company. Another commenter stated that a line extension manufacturer needs pricing data from the original manufacturer to estimate rebate obligations as part of their financial forecasting when deciding whether or not to market a line extension drug. The commenter stated that the original manufacturer is unlikely to supply such data before the line extension drug goes to market.
One commenter noted that if the line extension drug was manufactured by a different company than the initial product, then the manufacturer would have to obtain pricing data from a competitor to calculate a URA and that this would be unworkable and the proposal must be dropped. Another commenter noted that a line extension company could utilize the initial manufacturer's URA information to their competitive advantage. One commenter suggested that CMS narrow and revise the definition such that a new formulation sold by a distinct, unrelated, and competing manufacturer would not be subject to the alternative URA calculation.
Several commenters noted that CMS did not provide any mechanism for manufacturers to rely on each other's data and only stated that it is the manufacturer's responsibility to obtain pricing information. One commenter noted that the data sharing requirements were not defined in the proposed rule and the cost burden associated with gathering such data was not provided. Additionally, some manufacturers may want even more information from the initial manufacturer to verify the additional rebate amount supplied by the original manufacturer. Another commenter stated that requiring manufacturers to share pricing data may require costly indemnification agreements between manufacturers to cover civil liability.
One commenter stated that manufacturers might have to stop selling a line extension drug if they could not obtain data from the manufacturer of the initial reference drug. They noted that a manufacturer may be unable to divest a line extension drug because a potential buyer would know that it could not obtain the information necessary to comply with the line extension provisions. One commenter envisioned scenarios under which one company would only handle the distribution of an authorized generic of a line extension drug. This commenter was concerned by CMS's assumption that any manufacturer marketing a line extension drug can obtain the pricing data from the manufacturer of the original product.
Section 1927(c)(2)(C) of the Act provides that the rebate obligation for a line extension drug shall be the amount computed under section 1927 of the Act for the line extension product or if greater, the product of the AMP of the line extension drug, the highest additional rebate (calculated as a
Additionally, we do not see any reason to exclude a new strength of a line extension drug from being a line extension drug as the drug itself is a new formulation, and note that section 1927(c)(2)(C) of the Act specifically provides that the alternative URA calculation include the highest additional rebate under this section for any strength of the original single source drug or innovator multiple source drug. For the purposes of the alternative URA calculation, the same initial brand name listed drug should be reported to CMS and used in the alternative URA calculation for all strengths of the line extension drug.
Several commenters stated if CMS proceeds with requiring manufacturers to make calculations based on data of other parties, we should require that data sharing for line extension calculations be a condition of a manufacturer's participation in the MDR program, impose deadlines for providing data, require that the original manufacturer provide NDC numbers and CPI-U penalty percentages, and that the original manufacturer must certify the data. Several commenters noted that the methodology for AMP calculations used by the original company may be different from the methodology of the line extension drug manufacturer. As many facts of the AMP calculation rely on reasonable assumptions, the resultant AMP comparisons would not be an equivalent comparison.
One commenter noted that CMS will need to amend the certification language to reflect that the alternative URA is a product of another manufacturer's data and the calculations are beyond the control of the certifier. One commenter noted that these provisions would require significant changes in DDR, and such changes have historically taken a long time. The commenter discouraged CMS from adopting new regulations that would require process and system changes related to confirming products with data from FDA databases. If CMS does proceed, they ask that manufacturers be provided with enough time to update their own systems.
We believe that our policy as revised in this final rule will address the concerns and operational burden for both the manufacturer of the initial brand name listed drug and the manufacturer of the line extension drug. We also believe that this process will allay concerns as to the accuracy and consistency of the data since information sharing will only be required between manufacturers that have a corporate relationship. We are currently drafting system requirements for the line extension provision and expect to issue guidance to manufacturers regarding the reporting of rebate information for line extension drugs consistent with the requirements of the statute. We also expect to issue guidance to states regarding the reconciliation and reporting of the UROA for line extension drugs.
We appreciate the comments regarding the possibility that different manufacturers may make different reasonable assumptions in their AMP calculations; however, this final rule sets forth requirements regarding how manufacturers are to calculate AMP. We expect the statute, as well as this final rule, will prevent any significant differences in AMP methodologies between manufacturers.
We expect to issue future guidance to manufacturers regarding the additional data fields that will be necessary for CMS to calculate quarterly URAs for line extension drugs. We will also issue guidance to states regarding the reconciliation and reporting of the UROA for line extension drugs.
Several commenters stated that the states expect a large unit rebate offset amount (UROA) for line extension drugs and that due to changes in the Affordable Care Act states have experienced and/or projected manufacturers reducing or eliminating supplement rebates to the state. A commenter indicated that this loss of supplemental rebates is not included in the proposed rule's Economic Analysis.
a. If the URA is greater than 100 percent of AMP, then the URA = AMP consistent with section 1927(c)(2)(D) of the Act.
b. If the URA is less than 100 percent of AMP, then use the calculated URA.
Below is an example of calculating the URA and UROA for a line extension drug.
Step 1: Calculate Standard URA = Greater of
a. AMP × 23.1% = 300.00 × 23.1% = 69.30 or
b. AMP—best price = 300.00−250.00 = 50.00.
The greater of the two results (69.30 or 50.00) is 69.30.
Basic Rebate Amount for the line extension drug = 69.30.
117.65 is less than 300.00; then, 117.65 is subtracted from 300.00, 300.00−117.65 = 182.35
Additional Rebate Amount under section 1927 of the Act = 182.35
Step 2: Calculate the Alternative URA
Step 3: URA of the line extension drug = the greater of
(1) Standard URA = 251.65 or
(2) Alternative URA = 214.29
Step 4: Determine if the URA is greater than 100 percent of AMP.
Step 5: UROA calculation
(1) Standard URA = 251.65 or
(2) Alternative URA = 214.29
Alternative URA is NOT greater than Standard URA, thus no line extension UROA.
UROA for this NDC drug is only the basic UROA portion = 19.3
IF the Alternative URA and the Standard URA values were reversed:
(1) Standard URA = 214.29 or
(2) Alternative URA = 251.65
The alternative URA is greater than the standard URA, and the UROA for this line extension drug is = 251.65−214.29 = 37.36. Consistent with CMS's reading of the statutory offset provision, we have calculated the offset amount to reflect the amount attributable to the increase in the percentages affected by the Affordable Care Act amendments. In this scenario, this NDC would have both a basic UROA (19.3) and a line extension UROA (37.36).
A few other commenters objected to the application of the line extension provisions to formulations which existed prior to the enactment of the Affordable Care Act. They stated that if CMS limits the provisions to formulations that are new after the enactment date, then some of the problems with acquisition of information about the original drug will be limited. Another commenter stated that applying the line extension provision to formulations existing prior
One commenter noted that the requirements for line extension drugs should not apply to drugs approved by FDA prior to the effective date of the Affordable Care Act line extension provisions because these requirements were not part of the law when the drugs were approved. They stated that this could be seen as retroactive rulemaking by changing AMP in a period that predates the effective date of the statute. Additionally, since CMS has issued guidance that manufacturers should use reasonable assumptions to implement the provisions prior to the final rule, the specific provisions should apply only after the rule is finalized.
One commenter stated that their reading of the proposed rule is that the line extension provision is not retroactive to 2010 and they request confirmation. They stated that if it was to be implemented retroactively, that states could be subject to a significant liability.
To summarize, based on the comments received and for the reasons discussed in this section, § 447.509(a)(4) is being finalized as follows:
• We are finalizing proposed § 447.509(a)(4)(i) without modification.
• We are not finalizing the definition of the term line extension proposed in § 447.509(a)(4)(ii).
• We have decided that the alternative rebate is required to be calculated if the manufacturer of the line extension drug also manufactured the initial brand name listed drug or if the manufacturer of the line extension drug has a corporate relationship with the manufacturer of the initial brand name listed drug and are including this requirement in the final regulation at revised § 447.509(a)(4)(ii).
• We are not finalizing our proposal to identify line extension drugs by FDA Chemical Types in § 447.509(a)(4)(iii).
Effective March 23, 2010, section 1927(b) of the Act, as amended by section 2501(c) of the Affordable Care Act, requires manufacturers that participate in the MDR program to pay rebates for drugs dispensed to individuals enrolled with a Medicaid MCO if the MCO is responsible for coverage of such drugs. Therefore, to address these revisions, we proposed a new § 447.509(b) (77 FR 5341, 5364). In § 447.509(b)(1), we proposed to require participating manufacturers to pay rebates for CODs dispensed to individuals enrolled in Medicaid MCOs if the MCO is contractually required to provide such drugs. In proposed § 447.509(b)(2), we proposed that manufacturers are exempt from the requirement in proposed paragraph (b)(1) if such drugs are dispensed by HMOs, including MCOs that contract under section 1903(m) of the Act, and subject to discounts under section 340B of the PHSA. In § 447.509(b)(3), we proposed that a Medicaid MCO that contractually provides CODs dispensed to Medicaid beneficiaries must submit, within 30 days of the end of each quarter, a report containing specific data, including the MCO identifier, the NDC, the period covered, the product FDA list name, the total units, the total number of prescriptions and the amount reimbursed, for the state to access the rebates authorized by the revisions to sections 1927(b) and 1903(m)(2)(A) of the Act (77 FR 5341 through 5342, 5364). We received the following comments concerning rebates for drugs dispensed to individuals enrolled in MCOs:
Another commenter stated that the reporting of data from the MCOs must be timely and reflect the same required data elements in the same required units as is required for fee-for-service data. The commenter noted that encounter data from MCOs has lacked the robust quality component necessary to sustain rebate challenge. Other commenters appreciate the need to clarify Medicaid MCO reporting requirements to promote consistency, but encouraged CMS to allow more flexibility in reporting content and timing.
One commenter indicated that many states are using their encounter data to develop reports that include information needed for the collection of rebates that meets states' needs and has
Other commenters requested that CMS require states, when invoicing, to provide MCO data separately from FFS data, or a single invoice for quarterly Medicaid MCO rebates, but to reflect each MCOs data separately on that one invoice. The commenter continued that some states meet this condition, but many others issue separate invoices for each MCO, which is detrimental to efforts to promptly, and accurately, validate the data on these invoices and process the related rebates.
Several commenters recommended that CMS add specific language to the proposed § 447.509(b), or through a statement in formal guidance or regulation, that incorporates the importance of the actuarial soundness requirement from section 1903(m)(2)(A)(xiii)(II) of the Act. The commenters believed that it is essential that actual state and MCO rebate experience be taken into consideration to provide an accurate basis for rate development and avoid any unintended adverse impact such as provider access issues. Other commenters stated that actuarial soundness is at the core of retaining the viability of Medicaid managed care as a sound alternative to Medicaid FFS delivery system and states need to be held accountable. Other commenters noted that manufacturers have responded to the changes under the Affordable Care Act by reducing or eliminating rebates to Medicaid MCOs thus increasing plans' pharmacy expenditures.
The commenters also requested that CMS create a mechanism, preferably a pharmacy-friendly mechanism, which states can use to avoid collecting rebates on 340B MCO drugs. Another commenter continued that if it is necessary to prevent the collection of rebates on 340B MCO drugs, the state should assume responsibility for management and oversight of this policy.
A commenter noted that manufacturers would be exempt from paying rebates on MCO drugs when drugs are dispensed by MCOs and continued that this will have a huge impact on the little revenue that MCOs currently pay a local county. Commenters further claim that passing through the 340B cost to the MCO would be administratively burdensome on pharmacy operations.
We will continue to work with states to ensure they comply with this requirement regarding the prevention of duplicate discounts on MCO drugs purchased through the 340B program.
Another commenter stated that it is unclear from the list of data elements to be reported by the state at proposed § 447.511(a) how a state (or a manufacturer) could know whether a drug paid for by a Medicaid MCO had
For the reasons we articulated in the response to comments in this section, we have decided to not finalize the MCO reporting requirements that we proposed in § 447.509(b)(3) in this final rule. We have chosen to address the requirements for states with regard to the data they report to manufacturers, including the data pertaining to MCO utilization, in § 447.511 of this final rule. We have revised § 447.509(b)(1) to replace the words “pay rebates” with the words “provide a rebate” as this more accurately describes the actions of the manufacturers in this transaction. This edit is technical in nature and is not intended to change the policy being finalized.
In addition, for the reasons discussed in response to comments in this section, we are finalizing the requirements in § 447.509(b)(1) and (2) as proposed (77 FR 5341, 5364), with the exception of minor technical edits to proposed § 447.509(b)(2) to add the words “are the following” to end of the sentence after the word “drugs” and replaced the period at the end of § 447.509(b)(2)(i) with a semicolon and the word “and” to clarify that manufacturers are exempt from providing rebates for drugs that are dispensed by HMOs “and” discounted under section 340B. These edits are made to effectuate section 1927(j) of the Act and do not change the policy being finalized.
Section 2501(a)(2) of the Affordable Care Act added section 1927(b)(1)(C) of the Act, which provides that, effective January 1, 2010, the amount of the savings resulting from the increases in the rebate percentages effected by certain provisions of the Affordable Care Act (which are described more fully in the proposed rule (77 FR 5342)) will be remitted to the federal government. These offset amounts are in addition to the amounts applied as a reduction under section 1927(b)(1)(B) of the Act. We proposed to calculate the offset as described in the proposed rule (77 FR 5342). Comments regarding line extension offsets are addressed under the Treatment of New Formulations (§ 447.509(a)(4)) section II.G.2. of this final rule. We received the following comments concerning the federal offset of MDRs:
Therefore, after considering the comments we received, and for the reasons discussed in this section and in the proposed rule, we are finalizing proposed § 447.509(c) (federal offset of rebates), with the following technical edits:
• We are adding the word “following” to the introductory sentence of § 447.509(c). This edit is technical in nature and is not intended to change the meaning of the provision but rather provides further clarity.
• We are removing the phrase “for the following” from the end of paragraph (c)(1). This edit is technical in nature and is not intended to change the meaning of the provision.
• We are removing the phrase “for the following” from the end of paragraph (c)(2). This edit is technical in nature and is not intended to change the meaning of the provision.
To update our regulations to include references to the AMP rule, we proposed to revise the manufacturer reporting requirements in § 447.510(a)(1), § 447.510(c)(2)(i), and § 447.510(d)(2) to reference § 447.504 (Determination of AMP) (77 FR 5342, 5365).
We also proposed revising § 447.510(g) to clarify that CMS will designate the electronic format in which the product and pricing data is submitted. These proposed provisions are discussed in more detail at 77 FR 5342 through 5343 of the proposed rule. We received no comments on these revisions, and therefore, we are finalizing them as proposed, except we are making a technical edit and removing the reference to “of this subpart” from § 447.510(a)(1), (c)(2)(i), and (d)(2) because the reference is unnecessary given the regulatory citation.
We also included proposed § 447.510(a)(2), (a)(3), (a)(4), (d)(1), (d)(4), (d)(5), and (e)(1) through (4) without modification (77 FR 5365 through 5366). We did not receive any comments and are finalizing § 447.510(a)(2), (a)(3), (a)(4), (d)(1), (d)(4), (d)(5) and (e)(1) through (4), except to remove the words “of this subpart” from the proposed regulatory text of paragraphs (a)(2) and (4) because the reference is unnecessary given the regulatory citation.
In proposed § 447.510(f), we included the existing language pertaining to recordkeeping requirements, with minor changes to the paragraph formatting structure but no modification to the content of paragraph (f) (77 FR 5366). We did not receive any comments and are finalizing § 447.510(f).
We proposed, in accordance with the statutory requirements at section 1927(b)(3)(C)(i) of the Act, that a manufacturer that fails to submit and certify a quarterly AMP to CMS for a product by the 30th day after the end of each quarter will be reported to the OIG and be subject to a civil monetary penalty (CMP) for each product not reported on the 31st day (77 FR 5343). We also proposed, in accordance with the statutory requirements at section 1927(b)(3)(C)(i) of the Act, that a manufacturer that fails to submit and certify a monthly AMP and AMP units to CMS for a product by the 30th day after the end of each month will be reported to the OIG and be subject to a CMP for each product not reported on the 31st day (77 FR 5344 through 5345). We also invited public comments on appropriate terms and procedures for suspension and termination from the MDR program (77 FR 5343, 5345). We received the following comments concerning failure to report quarterly and monthly AMP and monthly AMP units:
A few commenters stated that CMS should value accuracy of AMP over timeliness and not penalize for lateness in cases where manufacturers are making adjustments or corrections to ensure accuracy. One commenter stated that CMS should clarify that no CMPs will be imposed where CMS is the cause for any delay in manufacturer access to the DDR system. Another commenter believed the penalty should be applied only in situations where the manufacturer has a history of noncompliance that suggests repeated late filings are purposeful. One commenter requested that CMS clarify if the CMPs will apply to a manufacturer when pricing is late one time, a couple of times, or for repeat offenders.
However, based on the comments received, we now recognize that the proposed language implied the automatic imposition of such CMPs. Since OIG is responsible for decisions concerning the imposition of such CMPs, we have decided that we will not be finalizing these proposed changes at this time. However, given the statutory requirements set forth in section 1927(b)(3)(C) of the Act, we will continue to refer to the OIG manufacturers that do not report their monthly or quarterly AMP data and/or that report their monthly or quarterly
A few commenters noted that if CMS chooses to finalize the buildup methodology proposal for calculating AMP, manufacturers' AMP calculations will be even more dependent on third party data. Another commenter noted that if CMS requires manufacturers to purchase end-user data from third parties to use in AMP calculations, it would substantially reduce manufacturers' control over the AMP calculation process and late submission may be more of an issue. Commenters expressed concerns that in such cases it would not be appropriate to impose CMPs automatically on manufacturers. Another commenter noted that if CMS finalizes a plan to abandon the presumed inclusion while retaining its strict certification requirements, the commenter believed that CMS will essentially guarantee that no manufacturer would be able to comply with program requirements, thus exposing the industry to unnecessary legal liability.
A few commenters encouraged CMS to provide guidance on administrative appeals process that would allow an opportunity for appeal and reconsideration before sanctions such as suspension or termination apply, but did not provide any substantive comments on the appropriate terms and procedures.
For the reasons discussed in this section, we have decided not to finalize proposed § 447.510(a)(5) and (d)(7).
We proposed to revise the 12-quarter time limitation set forth in § 447.510(b) (77 FR 5343). Specifically, we proposed at proposed § 447.510(b)(1) That a manufacturer could submit a request to revise its pricing data (that is, AMP, best price, customary prompt pay discount, or nominal price) calculations outside of the 12-quarter filing deadline, if the revision request fell within one of the following categories: (1) The change is a result of a drug category change or a market date change; (2) the change is an initial submission for a product; (3) the change is due to termination of a manufacturer from the MDR Program for failure to submit pricing data and must submit pricing data to reenter the program; (4) the change is due to a technical correction (such as a keying error), that is, not based on any changes in sales transactions or pricing adjustments from such transactions; or (5) the change is to address specific underpayments to states, or potential liability regarding those underpayments, as required by CMS, applicable law or regulations, or an OIG or DOJ investigation (77 FR 5343, 5365). Please note that any reference to pricing data mentioned in this section is intended to refer to AMP, best price, customary prompt pay discounts, or nominal prices.
We also proposed at § 447.510(b)(2) an option for manufacturers to submit a recalculation request outside of the 12-quarter time limit based on good cause, which would permit a manufacturer to revise its methodology for calculating AMP, best price, customary prompt pay discounts, or nominal prices (77 FR 5365). We proposed a good cause option to extend the time limit for a manufacturer to submit a recalculation request, similar to that used in Medicare (77 FR 5343, 5365). These proposed provisions are discussed in more detail at 77 FR 5343 of the proposed rule.
While these two provisions were proposed separately, many of the comments we received pertained to confusion commenters had in distinguishing the difference between what CMS was proposing in the restatement for underpayment exception at § 447.510(b)(1)(v) and the good cause exception at § 447.510(b)(2). Due to the nature of the comments received we have chosen to address both proposed provisions in this section.
We received the following comments concerning reporting revised monthly and quarterly AMP, best price, customary prompt pay discounts, or nominal prices, as well as the option for manufacturers to submit a recalculation request outside of the 12-quarter time limit based on good cause:
Another commenter requested that CMS clarify if the resulting liability changes across all of a manufacturer's products for a period or several periods is a net overpayment, but some products have been underpaid, whether the manufacturer is liable for the entire underpayment but may not recoup the overpayment or whether the manufacturer while liable for the underpayment is also able to recoup the overpayment. One commenter urged CMS, when determining if a restatement results in an underpayment to the states, to consider the net impact of any overpayment that may also occur as a result of the restatement. Another commenter appreciated CMS's recognition of manufacturers needs to restate these metrics; shared states' desires to settle past periods for rebate liability; and thought that the provisions in proposed § 447.510(b)(1)(v) accomplish these goals. However, the commenter asked that in determining whether revised pricing metrics would correct an “underpayment” to the states, CMS considers the totality of all changes resulting from the revised metrics. The commenter stated that some errors that prompt revisions of these metrics impact multiple drugs, such as with some drugs increasing in rebate liability and other drugs decreasing in rebate liability.
Several commenters indicated that CMS should not be able to selectively accept a subset of data that would maximize the manufacturer's rebate liability, but instead the proposed revisions should be accepted or rejected as a whole (unless part of the proposed revision is incorrect). One commenter stated that when a manufacturer identifies an error in a historic pricing submission, CMS should allow or reject a statement outside of the normal 12-quarter period based on its interest in promoting accuracy and the integrity of data. The commenter stated that if granting a request would improve accuracy, it should be allowed. One commenter supported the development of the good cause exception to the 12-quarter limitation on the manufacturer's right to restate AMP and best price. However, the commenter was concerned about automatic restatement rights beyond the 12-quarter window as a result of CMS or OIG determinations that an underpayment of rebates has occurred. The commenter indicated that CMS has always allowed manufacturers to offset rebate underpayments with identified rebate overpayments and does not see why that should not continue to be the case regardless of the period being restated. One commenter noted that limiting a manufacturer's ability to restate pricing resulting from overpayments would prevent manufacturers from restating 340B prices and refunding 340B entities for overcharges on 340B purchases.
Since we understand that any change in pricing data could potentially lead to either a net underpayment or overpayment to states, and in light of the comments received, we are revising § 447.510(b)(1)(v) to specify that the change in pricing data outside of the 12-quarter rule would be considered if the change is to address specific rebate adjustments to states by manufacturers, as required by CMS or court order, or under an internal investigation, or an OIG or DOJ investigation. This change we are finalizing in wording is intended to reflect that the change request will be considered in cases where there is an underpayment or an overpayment to the state by the manufacturer that is discovered outside of the 12-quarter filing limit, and the adjustment to pricing data is determined to be required by CMS or court order, or is an internal investigation, or an OIG or DOJ investigation.
We also want to clarify, in response to comments concerning the impact of revisions on multiple drugs, that the exception to allow for a revision outside of the 12-quarter rule applies to each
Another commenter requested that CMS amend the language to specify minimum and maximum timeframes for manufacturer adjustments. The commenter believed it is contrary to the programmatic goals of achieving efficiency, economy, and quality of care to allow indefinite changes to pricing, rebates and other calculations. Conversely, another commenter recommended that CMS extend this period because 12 quarters is often too limiting. The commenter indicated that this is especially true when companies acquire other companies or acquire products and there is a chance that the acquiring company will discover errors in AMP and best price that occurred before the acquisition. The commenter stated that in many cases this can happen outside of the 12-quarter window. The commenter recommended that CMS afford companies flexibility to restate outside the window in those circumstances to address net underpayments.
Furthermore, as specified in this section, manufacturers do not need to notify CMS if they have a revision within the 12-quarter timeframe, as they may submit pricing data without prior review or approval by CMS. However, any revision within the 12-quarter timeframe must be consistent with the statute and regulations and manufacturers must retain appropriate records pertaining to the revision. In addition, while we appreciate the comment suggesting that CMS consider a bar of materiality, we did not propose such a standard, and do not believe it would be in the best interest of the MDR program at this time to establish such a materiality standard. Instead, for requests that fall outside the 12-quarter time frame, the manufacturer is responsible for demonstrating that its request satisfies one of the criteria we are finalizing in § 447.510(b)(1).
Therefore, for the reasons stated in this section, we are finalizing § 447.510(b)(1)(i) through (iv) as proposed. In addition, for the reasons stated in this section and in response to comments, we are finalizing § 447.510(b)(1)(v) to include the change is to address specific rebate adjustments to States by manufacturers, as required by CMS or court order, or under an internal investigation, or an OIG or DOJ investigation. We have decided not to finalize § 447.510(b)(2), and as a result, we are redesignating proposed § 447.510(b)(3) as § 447.510(b)(2) and finalizing it without any additional changes in this final rule.
We proposed to revise § 447.510(c)(1) and (2) by inserting “DRA” before base date AMP where it occurs (77 FR 5343, 5365). We also proposed to correct the regulation by removing the notation “[OFR: insert publication date of the final rule]” and replacing it with “July 17, 2007” in § 447.510(c)(1). To reflect the changes to AMP as set forth in the Affordable Care Act, we proposed to allow manufacturers to recalculate base date AMP in accordance with the definition of AMP in proposed § 447.504. We further proposed to allow manufacturers the option to report a recalculated base date AMP based on the Affordable Care Act definition of AMP or continue to use their existing base date AMP. We also proposed that manufacturers would have the option to report the Affordable Care Act base date AMP for a period of 4 full calendar quarters beginning with the first full quarter after the publication of the final rule. These proposed provisions, and our reasons for these proposals, are discussed in more detail at 77 FR 5343 through 5344 of the proposed rule. We received the following comments concerning the base date AMP:
One commenter recommended that CMS consider the base date AMP impact and the likelihood of manufacturers being able to perform a base date AMP restatement with a buildup methodology. One commenter thought that it is also highly unlikely that manufacturers could reasonably obtain information about sales to Puerto Rico and the other territories, which were formerly exempt from AMP and best price. Another commenter noted that the proposed buildup methodology for calculating AMP departs from historical practice and to restate under the buildup methodology would cause manufacturers to be dependent upon information from third parties that may or may not have retained the information. Furthermore, even if the information were obtained, the commenter believes it would not be verifiable by the manufacturer. Another commenter indicated that the data necessary to recalculate the base date AMP, specifically historical off-contract sales data and customer information that are needed to identify sales to retail community pharmacies, are likely to never have existed. Even if the data do exist, they would be prohibitively expensive to obtain or recreate, which would leave companies in a position of having to pay a penalty based on inconsistent definitions of prices that are not directly related to price increases. The commenter stated that if CMS were to adopt the buildup methodology, CMS should be very clear that the recalculated Affordable Care Act base date AMP must reflect AMP changes made by the Affordable Care Act but need not reflect changes in AMP calculations that are not required by the Affordable Care Act.
Another commenter asked that CMS specify in the final rule that the revised Affordable Care Act base date AMP may be calculated using the presumed inclusion methodology rather than requiring a manufacturer to trace prior non-contracted sales to retail community pharmacies by using third party vendors, if such data were even available. The commenter indicated that it would be impossible for manufacturers to certify that such third party data reflected actual and verifiable pricing records and this would render the recalculation option meaningless.
We also believe that while manufacturers may use a presumed inclusion policy to calculate AMP and base date AMP, they must maintain actual and verifiable documentation that otherwise supports such calculations. Furthermore, we have adopted the same standard we used with the DRA base date AMP calculation and see no reason to change that standard. In addition, we would expect manufacturers to have historical data available to them in light of the recordkeeping requirement established in § 447.510(f).
In regards to the commenter's concern about whether manufacturers could obtain sales information from the territories, it is our position that for any time prior to the inclusion of the territories in the definitions of state and United States, manufacturers are not required to consider such sales to territories given the prospective nature of this rule.
Furthermore, as discussed in this section, we believe that while manufacturers may use a presumed inclusion policy to calculate AMP and base date AMP, they must maintain actual and verifiable documentation that otherwise supports such calculations. We have adopted the standard used with the DRA base date AMP calculation and see no reason to change that standard. In addition, we would
Additionally, we see no reason to adopt a 3-year time period for such revisions, given that manufacturers will be responsible for recalculating the Affordable Care Act base date AMP using their historical data. In contrast, manufacturers may need additional time to report revised pricing information because the information they are revising concerns current prices, which may need revision as pricing data are received from various sources. Therefore, we do not believe it is necessary to change the time frame which we established in regulations (72 FR 39243) for the DRA base date AMP change.
One commenter indicated that for single source or innovator multiple source 5i drugs launched after the effective date of this rule, CMS should require manufacturers to calculate and report two distinct base date AMPs (one for each of the methodologies). Additionally, for innovator 5i drugs launched prior to the effective date of the final rule, CMS should allow manufacturers to recalculate and report a distinct base date AMP associated with each methodology. Another commenter noted that manufacturers of innovator drugs pay inflation penalties if their current period AMP exceeds the inflation rate since the establishment of the base date AMP at the time of market introduction. If the base date AMP is based on the 5i AMP method, and it crosses the 10 percent threshold in a quarter, so that the standard AMP applies, the resulting exclusion of discounts and rebates to non-retail customers would create the appearance of a price increase, thereby triggering the additional rebate inflation penalty.
One commenter urged CMS to add a field in DDR for identifying whether the 5i or standard AMP methodology was used in a given quarter for any 5i innovator product so that the appropriate base date AMP could be used to calculate the additional rebate applied. Another commenter indicated that CMS should establish dual base Date AMP records in DDR so that manufacturers can recalculate the base date AMP using both the 5i and the standard AMP methodologies for all 5i products to ensure the appropriate base date AMP is used in the additional rebate calculation.
In addition, based on the statutory definition of the base date AMP found at sections 1927(c)(2)(A) through (B) of the Act, manufacturers are responsible for reporting one base date AMP for a COD, whether that base date AMP is calculated using the 5i methodology or not, as the statute references the same methodology. Section 1927(c)(2)(A)(ii)(II) of the Act specifies that for drugs originally marketed before the inception of the rebate program, the base date AMP means the AMP for the 7/1/90 to 9/30/90 quarter. For those drugs approved by FDA after October 1, 1990, section 1927(c)(2)(B) of the Act specifies that the base date AMP should be calculated based on the AMP for the first full calendar quarter after the day on which the drug was first marketed. Based on these statutory provisions, we do not believe that a drug can have two distinct base date AMPs. Therefore, in accordance with these statutory provisions, the base date AMP for a drug, whether it is a 5i or a non-5i drug, shall be based on the sales of the drug for the 7/1/90 to 9/30/90 quarter for drugs approved prior to the inception of the rebate program or the first full calendar quarter after the day on which the drug was first marketed for drugs approved after the October 1, 1990.
For new products that are introduced after the effective date of the final rule, the base date AMP will be calculated in accordance with the current policy on calculating the base date AMP (the AMP for the first full calendar quarter after the day on which the drug was first marketed). That is, if a 5i drug in the first full calendar quarter after the day the drug is first marketed meets the “not generally dispensed” threshold, the manufacturer is responsible for calculating the base date AMP using the 5i AMP methodology. If a 5i drug in the first full calendar quarter after the day in which the drug is first marketed does not meet the “not generally dispensed” threshold, manufacturer is responsible for calculating the base date AMP using the standard AMP methodology.
A few commenters indicated that CMS should establish an effective date for the base date AMP to provide clarity to manufacturers regarding their additional rebate obligation. One commenter requested clarification that the recalculated Affordable Care Act base date AMP will be effective as of the effective date of the final rule even if a company's recalculated base date AMP is not submitted until after the effective date. Another commenter noted that this would be consistent with CMS's approach regarding base date AMPs that occurred due to the DRA and implemented in the 2007 final rule.
We did not receive any comments on the remaining provisions of § 447.510(c). Therefore, for the reasons stated in this section, we are finalizing the provisions at § 447.510(c)(1) through (4) as proposed, with the exception of the following technical and clarifying edits:
We are making a technical revision to § 447.510(c)(1) by changing “DRA” to “Deficit Reduction Act (DRA)” since this is the first time the reference to the DRA is used within the regulatory text. We are also making a technical revision to § 447.510(c)(2)(i) by removing the reference to “of this subpart” because we believe the reference is unnecessary. And we are adding “in effect from October 1, 2007 to December 14, 2010” to the end of the sentence in § 447.510(c)(2)(i) to make clear that the AMP methodology applicable to the DRA base date AMP calculation is the AMP methodology that was finalized in the 2007 AMP final rule rather than the AMP methodology being finalized in this final rule as a result of the Affordable Care Act amendments.
Given the requirement for a smoothing process for AMP under section 1927(e)(5) of the Act, we proposed in § 447.510(d)(2) that manufacturers would be required to use a 12-month rolling percentage to estimate the value of lagged price concessions in their calculation of the monthly AMP (77 FR 5365). We also proposed that a manufacturer's monthly AMP is to be calculated based on the weighted average of the prices for all the manufacturer's package sizes of each COD sold by the manufacturer during a month (77 FR 5365). These proposals are discussed in more detail in the proposed rule (77 FR 5344).
We received the following comments concerning the calculation of monthly AMP:
One commenter noted that the ASP calculation uses the presumed inclusion approach and therefore its 12-month rolling average estimation methodology was developed based on a presumed inclusion methodology as well. Since the AMP smoothing methodology is statutorily required to be similar to the ASP methodology, the commenter indicated that it is unclear what effect the 12-month rolling average estimation methodology under a buildup methodology would have on the accuracy of AMP. Therefore, the commenter urged CMS to retain the presumed inclusion approach and permit the smoothing process to work as intended.
We have also added paragraph (iv) and (v) to § 447.510(d)(2) which further clarify the methodology used to calculate lagged price concessions by explaining that the manufacturer multiplies the applicable percentage by the total in dollars for the sales subject to the AMP reporting requirement (after adjusting for sales excluded from AMP) for the month being submitted. The result of this multiplication is then subtracted from the total in dollars for the sales subject to the AMP reporting requirement (after adjusting for sales excluded from AMP) for the month being submitted. The manufacturer uses the result of the calculation described in this section as the numerator and the number of units sold in the month (after adjusting for sales excluded from AMP) as the denominator to calculate the manufacturer's AMP for the NDC for the month being submitted. This is consistent with the calculation of lagged price concessions for ASP at § 414.804(a)(3)(ii) through (iii).
Additionally, we agree with commenters who requested that we include the same level of specificity in regulatory text of the monthly AMP smoothing process as is included in the regulatory text of ASP smoothing process, and therefore, we have also added paragraph (vi) to § 447.510(d)(2) which provides an example of the methodology described in the rule. The example in § 447.510(d)(2)(vi) is modeled from that which is provided in § 414.804(a)(3)(iv), except that it has been modified to conform with the terminology used in the calculation of lagged price concessions for AMP rather than the calculation of lagged price concessions for ASP.
We believe this level of detail in the regulatory text will help ensure consistency across the industry by providing more specificity to the
As defined in proposed § 447.502, a lagged price concession means “any discount or rebate that is realized after the sale of the drug but does not include customary prompt pay discounts.” Therefore, manufacturers may use the 12-month rolling percentage to estimate lagged price concession data (for example, using actual data on past rebate accruals to estimate rebates expected to be earned or paid for the calculation period) rather than only including estimates of future rebates in their monthly AMP calculation.
Another commenter believed that manufacturers should be permitted to quantify and back out indirect ineligible sales identified through lagged price concession data (chargebacks and rebates) in AMP to avoid unnecessary volatility across reporting periods, while still ensuring that only eligible sales remain in the calculation. Furthermore, the commenter stated that determining and backing out lagged indirect ineligible sales is an important part of an AMP calculation that employs a presumed inclusion methodology. Another commenter suggested that CMS clarify that manufacturers may also estimate indirect ineligible sales using the method that manufacturers use for their ASP calculation and if the manufacturer does not report ASP for its products, then the manufacturer should be able to use any 12-month rolling average approach that is consistent with the lagged price concession ratio proposed by CMS.
Therefore, in response to comments and for the reasons discussed in this section, we are finalizing § 447.510(d)(2) with the following modifications:
• We are making a technical revision to § 447.510(d)(2) by removing the reference to “of this subpart” as the reference is not necessary given the regulatory cite.
• We have added paragraphs (A) and (B) to § 447.510(d)(2)(iii), as well as paragraphs (iv) and (v) to § 447.510(d)(2) which provide the detailed methodology that manufacturers must use to estimate the AMP-eligible lagged price concessions for drugs with at least 12 months of AMP eligible sales and those with less than 12 months of AMP eligible sales.
• We have also added paragraph (vi) to § 447.510(d)(2) which provides an example of the methodology described in the preceding paragraphs.
Based on the requirements set forth in section 2503(b) of the Affordable Care Act, we proposed that the manufacturer report on a monthly basis, the total number of units that are used to calculate the monthly AMP for each COD no later than 30 days after the last day of each prior month. We also proposed that the monthly units should be of the unit type used in the quarterly and monthly AMP calculation for each NDC to ensure consistency in the calculation as well as the reporting of monthly and quarterly AMP and the AMP units (77 FR 5344 and 5365). These proposals are discussed in more detail at 77 FR 5344. We received the following comments concerning the manufacturer reported AMP units.
Therefore, for the reasons discussed in this section, we are finalizing the requirements at § 447.510(d)(6) regarding the reporting of AMP units as proposed.
Consistent with section 1927(b)(2)(A) of the Act, we proposed a new § 447.511 to clarify the reporting requirements for states (77 FR 5345, 5366). In § 447.511(a), we proposed to list the data that the state must provide to participating drug manufacturers within 60 days of the end of each quarter. In § 447.511(b) we proposed that states must submit this same data to CMS on a quarterly basis. In § 447.511(c), we proposed that states that have participating MCOs, which include CODs in their contracts, must report data pertaining to drugs dispensed through those MCOs separately from the data pertaining to drugs dispensed on a FFS basis. In light of the proposed change in definition to “State,” we also proposed that the requirements of § 447.511 would not be effective for the territories until 1 year after the first day of the first full calendar quarter after the publication of the final rule. (The proposed change in definition of “States” is discussed in the definition section of this final rule (section II.B.25.)). These proposals are discussed in more detail at 77 FR 5345. We received the following comments concerning the proposed requirements for states:
One commenter believed that the statutory time limit should become effective upon publication of the final rule and that states should be prohibited from submitting any further rebate claims for quarters that precede the specified period. The commenter referenced the preamble to CMS's September 19, 1995 proposed rule, in which CMS indicated that although the statute requires states to meet the 60-day requirement, CMS did not believe that the statute limited manufacturers' liability for rebates if states were unable to report utilization data by the deadline. The commenter indicated that CMS did not provide any explanation or statutory support for this policy, nor did it adopt the policy through formal notice-and-comment rulemaking. However, proposed § 447.511 expressly sets forth the requirement that within 60 days of the end of each quarter, the state must bill participating drug manufacturers an invoice, which includes, at a minimum, certain drug utilization data as specified in the regulations text. The commenter suggested that CMS should clarify that, consistent with the statute, this deadline is a firm obligation for states and that manufacturers are not obliged to pay Medicaid rebates for claims that do not meet the state's reporting requirement.
One commenter stated that a policy establishing a maximum time frame during which a manufacturer is obliged to pay rebates to the states would not only be consistent with the statute, but a firm deadline also would shorten the time between the date the utilization occurs and the date the manufacturer initiates any dispute with the state regarding that utilization. The commenter noted that it is inefficient and burdensome for both manufacturers and states to attempt to substantiate rebate claims to resolve disputes months or even years after the drug is utilized. The commenter stated that manufacturers also frequently use information about past utilization to project their future rebate obligations, and these projections are rendered less accurate when there are delays in reconciling sales data.
Section 1927(b)(2)(B) of the Act, in turn, contemplates the provision of rebates regardless of when the state data is revised or adjusted following audit of such data. It provides that manufacturers shall provide adjustments to rebates to the extent that the state provides information per an audit (without any indication as to when that audit takes place) to the extent that information indicates that utilization is greater or less than information previously submitted. Accordingly, consistent with these provisions, manufacturers are responsible for complying with the requirements to pay rebates based on utilization data even when the state may be late in providing that data. Although we recognize that utilization data is a critical element for manufacturers to calculate rebates, we will not absolve manufacturers for liability of late state submissions.
Further, while we recognize that states and MCOs may have initially encountered systems issues regarding timely submission of MCO utilization, we are not planning to set a specific deadline beyond the deadlines already established in section 1927(b)(2)(A) of the Act which states, in part, that MCO invoice submissions are subject to the same 60-day deadline as for Medicaid FFS.
One commenter stated that to assist in preventing violations of the double-discounting prohibition, CMS should emphasize to the states that they are responsible for ensuring that the utilization information that is reported on rebate invoices does not include drugs purchased under the 340B program. In addition, CMS should require that all Medicaid utilization data that the states submit to manufacturers, including both FFS and MCO utilization data, contain the “pharmacy identifier” field so that manufacturers have the ability to verify that the data has been properly screened for duplicate discounts. The utilization data must also include the 340B identification data element developed by NCPDP. The commenter noted that states will only be able to meet these reporting obligations by requiring that pharmacies or other providers that dispense or administer drugs to Medicaid FFS or MCO enrollees include all these same data elements on their claims to the state or to a Medicaid MCO.
One commenter stated that the Medicaid statute requires states to report to manufacturers on CODs utilized not later than 60 days after the end of each rebate period and the commenter noted that the Affordable Care Act extended this reporting requirement to include information reported by each Medicaid MCO, without altering the statutory 60-day time limit. The commenter stated that CMS should clarify that even though states that have participating Medicaid MCOs are required to report the drug utilization data for Medicaid MCOs separately, the same statutory deadline of within 60 days of the end of each quarter applies to those reports as well.
One commenter stated that the proposed rule implements the requirement that a state promptly transmit a copy of the drug utilization data reported to manufacturers to CMS but the proposed rule does not clearly specify a timeframe for that submission. The commenter also noted that the proposed rule does not address whether, to the extent that the data initially submitted to the manufacturer and CMS subsequently are revised, the state is obligated to revise the data previously submitted to CMS and in a timely matter. The commenter stated that CMS should require states to provide prompt updates to correct the utilization data previously submitted to CMS.
Therefore, after considering the comments and for the reasons discussed in this section and in the proposed rule, we are finalizing § 447.511 (Requirements for States) as we proposed (77 FR 5366), except to make a grammatical edit to the last sentence to delete the word “This” and replace it with “These” as the data being referenced in this sentence is plural. Furthermore, given the delayed effective date for the inclusion of the territories in the definition of “States” to 1 year after the effective date of the final rule, we are finalizing our proposal to delay the applicability of the requirements of § 447.511 to the territories by 1 year; however, we inadvertently indicated in our proposal that the delay would be 1 year after the publication of the final rule, but we intend it to be 1 year after the effective date of the final rule.
In the “Medicaid Program; Withdrawal of Determination of Average Manufacturer Price, Multiple Source Drug Definition, and Upper Limits for Multiple Source Drugs” final rule (75 FR 69591), we made conforming amendments to § 447.512 (Drugs: Aggregate upper limits of payment) to remove references to § 447.514 (Upper limits for multiple source drugs) as this section (§ 447.514) was removed from regulation. In the proposed rule, we proposed regulatory amendments to add references to § 447.514 (Upper limits for multiple source drugs) in § 447.512 (Drugs: Aggregate upper limits of payment) (77 FR 5345). At § 447.512(b)(1), we proposed to replace the term “EAC” with the term “AAC” to conform with our proposal to replace “estimated acquisition cost” with “actual acquisition cost.” As discussed in the proposed rule, we believe that using AAC to determine the drug ingredient cost is more reflective of actual prices paid rather than EAC, which is often based on published compendia pricing, which does not reflect actual prices that providers pay for acquiring drugs (77 FR 5345). Further, we proposed to add the word “professional” to the description of dispensing fee in this section. These proposed provisions are discussed in more detail at 77 FR 5345 of the proposed rule. We received many comments regarding the need for adequate Medicaid pharmacy reimbursement, both ingredient costs and professional dispensing fees. Those comments and our responses are discussed later in this section.
In addition, as discussed in Section II.M. of this final rule, we are revising the proposed § 447.518(d) to require states to consider both the ingredient cost reimbursement and the professional dispensing fee reimbursement when proposing changes to either or both of these components of the reimbursement for Medicaid covered drugs to ensure that total reimbursement to the pharmacy provider is in accordance with requirements of section 1902(a)(30)(A) of the Act.
To the extent that entities have concerns with prices established under a state's AAC methodology, those concerns should be raised to the state, especially given that states are responsible for setting payment rates and complying with a public notice process when setting those rates.
Another commenter noted that extra services and expenses associated with services provided to Medicaid clients, including pickup and delivery services, make it possible for clients to remain living independently and not be institutionalized, which would add dramatic cost to the Medicaid program. Another commenter stated that increasing the professional dispensing fee will save money in health care by reducing medication related adverse events.
Several commenters stated that CMS must require that states can only use AAC if they increase their dispensing fees to reflect pharmacy's cost to dispense. Another commenter stated that the use of the new AMP-based FULs or any version of AAC should be limited to those states than can provide evidence of adequate professional dispensing fees based on services rendered. Another commenter stated that unless dispensing fees are raised at or prior to the time that AMP-based FULs are finalized, pharmacies will be reimbursed at less than their total cost. Another commenter was concerned that a move to require states to use AAC for brand drugs without a requirement that dispensing fees be increased will negatively impact patient access.
We have no reason to believe that pharmacies will be forced to leave the Medicaid program or that patient care will suffer as a result of the revised requirements in § 447.512(b), and note that several states are already paying based on an AAC methodology without causing pharmacies to leave the Medicaid program or other adverse effects on patient care. However, we will continue to monitor the issue. Furthermore, as discussed in section II.K. of this final rule, and in our proposed rule (77 FR 5345 through 5347), the FUL is designed as an aggregate upper limit. Therefore, states have the discretion to adjust
Therefore, after considering the comments and for the reasons discussed in this section and in the proposed rule, we are finalizing the provisions in proposed § 447.512 Drugs: Aggregate upper limits of payment, with minor changes to remove the words “of this subpart” from the proposed regulatory text at § 447.512(a), (b), and (c)(1) as the reference is not necessary given the regulatory citations. This minor editorial change is not intended to change the meaning or intent of this regulatory text.
Section 2503(a) of the Affordable Care Act revised the definition of multiple source drug established in section 1927(k)(7)(A) of the Act. As discussed in the proposed rule, we proposed that the definition of “multiple source drug” be included in § 447.502 “Definitions” (77 FR 5345). In accordance with section 1927(e)(4) of the Act, we proposed in § 447.514(a)(1) that a FUL be calculated for each multiple source drug for which the FDA has rated three or more products therapeutically and pharmaceutically equivalent (77 FR 5346, 5366). We also proposed that the FUL will be calculated, in accordance with section 1927(e)(4) of the Act, using only therapeutically and pharmaceutically equivalent drugs (77 FR 5346, 5366). Additionally, we proposed to calculate the FUL as an aggregate upper limit at 175 percent of the weighted average of monthly AMPs, to use the most recently reported monthly AMPs and AMP units, and to eliminate single source drugs from the FUL calculation (77 FR 5346). We also considered various approaches, but did not propose a specific methodology for smoothing the FULs (77 FR 5349). These proposed provisions are discussed in more detail in the proposed rule (77 FR 5345 through 5350).
We received comments concerning our proposed upper limit for multiple source drugs section which include comments pertaining to the proposed upper limits calculation methodology, the impact of terminated drug products, the impact of the proposed buildup methodology for calculating AMP, and national availability. The comments and our responses are as follows:
Another commenter stated, referring to the draft AMP-based FULs, that a large number of generic drugs are so low cost that even with a 175 percent markup and a traditional dispensing fee, the reimbursement will fall short of a retail pharmacy's cost to dispense, and suggested that either a minimum FUL value or a higher percentage markup should be applied to these drug groups. Several commenters stated that the multiplier should be set at a level that will incentivize generic utilization given the overall cost savings to the system with increased use of generic drug products. One commenter stated that flexibility to set the FULs at levels greater than 175 percent of the weighted average of AMP should ensure adequate pharmacy reimbursement and limit the extreme volatility in monthly weighted AMPs and FULs.
Another commenter noted that the FULs multiplier needs flexibility to ensure that any FUL is set at the NADAC value, given that NADAC values will not be used by states if they are higher than the FUL. Yet, another commenter noted that CMS may be able to use the monthly survey data it is planning to publish for the NADAC to identify FULs that are too low. The commenter noted that CMS's proposal to limit the FUL to 175 percent of the weighted average of AMP may be inadequate if a substantial number of FULs yield a reimbursement lower than the NADAC or other state AAC based payment reimbursement.
Several commenters stated that Congress provided CMS with broad authority to increase the multiplier in certain justifiable cases, and commenters cited examples when the multiplier should be increased, including for certain specialty drug products, drugs subject to shortages, drugs that experience market inflation or plummet as a result of discounts. One commenter stated that initially, CMS may need to increase the multiplier for calculating all FULs on a frequent basis, and then if FULs begin to more closely approximate acquisition cost over time, there still may be cases (listed previously) where a higher multiplier should still be used.
In light of these concerns, we agree with the commenters about the need for some flexibility in establishing the FUL multiplier. Therefore, upon consideration of the comments and as a result of our ongoing analysis of the draft FULs in comparison with the monthly NADAC pricing files, we agree with the suggestion to establish a revised process using a higher multiplier to calculate the FULs for certain multiple source drugs. Specifically, in this final rule, we are making an exception to calculate the FUL at an amount equal to 175 percent of the weighted average of the most recently reported monthly AMPs for pharmaceutically and therapeutically equivalent multiple source drugs, except where that amount is less than the average retail community pharmacies' acquisition cost for such drug products as determined by the most current national survey of such costs. In situations where the FUL is less than the average retail community pharmacies' acquisition cost, we will establish the FUL using a higher multiplier so that the FUL amount would equal the most current average retail community pharmacies' acquisition cost as determined by the most current national survey of such costs. This revised process by which a higher multiplier is used, is codified in § 447.514(b)(1) and (2) of this final rule. To implement this revision when we calculate the FULs each month, we intend to use the most current monthly NADAC pricing file values, as we believe that such values represent the best data available to estimate the average retail community pharmacies' acquisition cost. We may consider using other values in the future if such data become available and issuing additional rulemaking, if needed.
We note that, as discussed previously and in the proposed rule (77 FR 5347), this final rule is not designed to mandate state payment rates. Therefore, states have the discretion to adjust reimbursement on a drug-by-drug basis using pricing benchmarks, such as the NADAC pricing file, or other reliable data, to adjust reimbursement, as long as such payments are consistent with the state plan.
In accordance with section 1927(e)(5) of the Act, as revised by section 2503(a) of the Affordable Care Act, we further proposed that the specific FUL will be calculated using a multiplier equal to 175 percent of the weighted average of the most recently reported monthly AMPs for therapeutically and pharmaceutically equivalent multiple source drugs (77 FR 5349, 5366). We proposed that the weighted average will be determined on the basis of manufacturer reported utilization of the most recently reported innovator and noninnovator pharmaceutically and therapeutically equivalent multiple source drugs available for purchase by retail community pharmacies on a nationwide basis (77 FR 5346). We also proposed that the determination of the weighted average will not include utilization from single source drugs (77 FR 5346). We proposed to use the most recently reported monthly AMP and utilization data submitted by the manufacturer in the calculation of the weighted AMP (77 FR 5346). We also proposed to calculate the FUL based on the nine-digit NDC, which is specific to the product code, combining all package sizes of a drug into the same computation of AMP (77 FR 5346). We proposed to exclude the AMP of a terminated NDC in calculating the FUL beginning with the first day of the month after the termination date reported by the manufacturer to CMS, and to calculate the FUL using a multiplier of 175 percent of the weighted average of the most recently reported monthly AMPs using manufacturer submitted utilization data (77 FR 5346, 5366). The proposals put forth in the proposed rule (77 FR 5345 through 5347, 5366) regarding the FUL calculation were detailed for stakeholders to consider and comment upon accordingly. We have established a revised process by which a multiplier higher than 175 percent will be used to calculate the FUL, by comparing the FUL established using the 175 percent multiplier to the average retail community pharmacies' acquisition cost and, where necessary, using a higher percentage markup to ensure that the FUL is not lower than such average retail community pharmacies' acquisition costs. As discussed previously in this section, we have not revised our proposed methodology to base the FUL calculation on the weighted average of the most recently reported monthly AMPs for pharmaceutically and therapeutically multiple source drug products.
In the draft FUL reimbursement files, which are available on the Medicaid.gov Web site at
A few commenters stated that CMS's proposal does not appear to exempt 5i drugs from the calculation of a FUL, and noted that such an exemption is necessary in that the alternative AMP calculation for such drugs consists of non-retail community pharmacy transactions. One commenter stated that calculating FULs based on weighted AMPs which include these transactions (such as physicians, PBMs, HMO, hospitals, clinics, outpatient facilities, mail order, LTC, and hospice transactions) include sales and discounts not available to retail community pharmacies, and will likely result in below cost reimbursement, and run afoul of Congressional intent. Several commenters requested that CMS exempt 5i drugs from the calculation of FULs for the above reasons.
Several commenters noted that the FUL for infusion and injectable drugs should be calculated using a percent of the AMP that is higher than 175 percent. One commenter noted that the FUL should be increased due to the non-retail pharmacy drug sources that are included in the AMP calculation. The commenter noted that the proposed FUL calculation would result in insufficient reimbursement for infusion and injectable drugs due to the inclusion of sales, rebates, discounts and other financial transactions for very large and very small buyers within the alternate calculation of AMP for infusion drugs. The commenter noted that CMS should ensure that the reimbursement levels resulting from the proposed rule will be sufficient for home infusion therapy pharmacies to provide infusion and injectable drugs to Medicaid beneficiaries. Several commenters recommended that CMS should reach out to the infusion community to develop a more appropriate percentage to be used to calculate the FUL for injectable and infusion drugs. Another commenter stated that there should be a tiered structure for calculating FULs based on buying power; thus, CMS should ensure that even small buyers receive reasonable reimbursement that reflects their acquisition costs.
In addition, manufacturers are required to report and certify data regarding the termination date of a product to the CMS MDR program via the DDR system. We use the data reported and certified by the manufacturer to determine the termination date of the drug product. We also rely, in part, on the reported monthly AMP and AMP unit data from drug manufacturers to determine the availability of three therapeutically and pharmaceutically equivalent multiple source drugs before we calculate a FUL.
One commenter stated that the FULs would not be negatively impacted by continuing the presumed inclusion
Finally, several commenters stated that without the presumed inclusion model, a lag in data availability would occur as manufacturers would not be able to count any sale until they are able to trace data over time, which would reduce the number of identifiable AMP-eligible units in some periods, and would result in an AMP that would be calculated likely using both a lower net price numerator and a lower units denominator. The commenters noted that this would yield variable measurements that would increase what they see as already unacceptable levels of period-to-period volatility in AMPs, weighted AMPs, and FULs.
Several commenters stated that the proposed rule did not suggest a process to determine national availability. Some commenters suggested that an adequate survey should be used to determine when a drug product is available for purchase by retail pharmacies on a nationwide basis. One commenter proposed a possible test for national availability that is dependent on whether the product is generally and widely available for purchase by all pharmacies in the United States, such as when it is available from the national wholesalers and stated that a drug that is only available in one state or region cannot be nationally available as the statute requires. Another commenter proposed that a product be considered nationally available when it is stocked by two of the three national wholesalers in sufficient quantities to supply most retail community pharmacies. Several commenters encouraged CMS to address national availability by using its contractor under section 1927(f)(1)(A) of the Act to determine product availability to appropriately apply FULs. The commenters noted that despite CMS having a contractor to conduct NADAC surveys, it does not appear that the agency has engaged a contractor to assess product availability. The contractor, when conducting monthly pharmacy surveys to permit CMS distribution of NADAC data to the states, could alert CMS to drug supply issues.
We are aware that in cases of shortages, various market forces, which may include supply and demand, or competition in the market by multiple generic manufacturers (or lack thereof) may result in changes in product supply, may cause AMPs to fluctuate, and may affect the prices of drug products paid by retail community pharmacies. However, we believe that our revised process by which a higher multiplier will be used to calculate the FUL will address concerns regarding the calculation of a FUL for such drugs. Specifically, as discussed previously, we will calculate the FUL at an amount equal to 175 percent of the weighted average of the most recently reported monthly AMPs, except where the FUL calculated using the 175 percent multiplier is less than the average retail community pharmacies' acquisition cost, as determined by the most current national survey of such costs incurred by retail community pharmacies. In these instances we will use a higher multiplier to calculate the FUL to equal the average retail community pharmacies' acquisition cost incurred by retail community pharmacies as determined by such survey.
In addition, as noted previously, manufacturers are responsible for reporting drug termination dates timely to CMS via the DDR system and the AMP of such terminated NDCs will not be used to calculate the FUL, beginning with the first day of the month after the termination date is reported to CMS by the manufacturer. We also plan to regularly monitor the availability of drugs by reviewing the FDA drug shortage list for drugs that have a FUL calculated, but are not likely to have enough supply in the market to meet current demand. Further, we plan to monitor weekly pricing changes available to us in the most current national survey of pricing to consider changes to the multiplier used to calculate the FULs, based on average retail community pharmacies' acquisition costs. We also note that CMS currently publishes a monthly and weekly file of NADAC pricing values, which states can use to monitor those changes in average retail community pharmacies' acquisition costs as they apply the FUL aggregate reimbursement. We will not calculate a FUL for a given drug if we determine that there is a lack of availability of that drug to retail community pharmacies on a nationwide basis.
One commenter noted that the shortcomings of CMS's proposal are exemplified in an analysis of NDCs in
One commenter stated that since the Congress required nationwide availability for three equivalent products, each of the three products should be available for purchase by any pharmacy in the nation. Several commenters also noted that CMS should create a policy to suspend the FUL when the drug product is no longer nationally available. One commenter noted that if an NDC is inactive but remains in the marketplace, CMS could freeze the reimbursement rate at the current FUL until the product is no longer available in the market. A few commenters also recommended that a process be put in place when factors such as environmental or natural disasters that cause material constraints result in decreases in FUL values.
The commenters added that when disruptions occur that limit availability of drug products, the WAC should be used for reimbursement until the constraints are resolved. One commenter stated that CMS should not just assume that all products are available nationwide and then place the burden of this determination on pharmacies, states, manufacturers or others. One commenter stated that CMS is improperly counting repackagers and authorized generic drug products toward the minimum of three FDA-rated equivalent drug products required to calculate a FUL under the Affordable Care Act.
One commenter would like CMS to clarify whether the qualification that drugs are “available for purchase by retail community pharmacies” include specialty pharmacies, home infusion centers and home health care centers, and if so, will it only include these providers that conduct business as retail community pharmacies.
We are aware that in cases of shortages, various market forces (supply and demand), or competition in the market by multiple generic manufacturers (or lack thereof) may result in changes in product supply, may cause AMPs to fluctuate, and may affect the prices of drug products paid by retail community pharmacies. These are factors and circumstances over which CMS has no control. However, we believe that the revised process of calculating the FULs using a higher multiplier should operate to ensure beneficiary access to medications given that the FUL calculated using the 175 percent multiplier will be increased under the exception we are finalizing at § 447.514(b)(2), to equal the most current average acquisition cost paid by retail community pharmacies as determined by the most current national survey.
The FUL is designed as an aggregate upper limit. Therefore, states have the flexibility to address price fluctuations due to shortages and other market forces. States have the discretion to adjust reimbursements on a drug-by-drug basis to the extent that such adjustments are consistent with the state plan and the state ensures that the total amount reimbursed to pharmacy providers for all drugs for which there is a FUL does not exceed the aggregate upper limit. We also note to the extent that pharmacy providers have concerns with payment amounts; they should raise those concerns with the state.
Furthermore, as discussed in the above response, we have plans in place to regularly monitor the availability of drugs by reviewing the FDA drug shortage list, as well as to monitor weekly pricing changes available to us in the most current national survey of pricing to consider changes to the multiplier used to calculate the FULs, based on average retail community pharmacies' acquisition costs. We will not calculate a FUL for a drug if we determine that the drug does not meet the criteria to have a FUL calculated.
In light of our experience with the implementation of section 1927 of the Act and managing the MDR program, a listed drug in the FDA Orange Book is generally one that is sold or marketed in the United States. We disagree with commenters that drugs listed in the FDA's Orange Book are not typically available as multiple source drugs. Additionally, we disagree that a multiple source drug should be considered nationally available when it is generally and widely available for purchase by all pharmacies in all states nationwide and in sufficient quantities for independent pharmacies to buy from national wholesalers. While we recognize the importance of the availability of multiple source drugs, we note that the statutory definition of multiple source drug in section 1927(k)(7) of the Act does not require that such a drug meet any threshold of availability from national wholesalers in a given geographic area relative to another but rather, such drug is sold or marketed in the United States during the given rebate period.
Furthermore, neither provision, that is, section 1927(e)(5) or (k)(7) of the Act references any threshold of relative regional availability before we calculate a FUL for a drug; however, we will continue to monitor the market for the availability of multiple source drugs, as well as pricing trends and we welcome feedback from providers, wholesalers, manufacturers, and states regarding the availability, or shortages, of drug products. We will continue to consider the issue of national availability and will issue additional guidance or rulemaking, if necessary.
Several commenters stated that there must be procedures in place for lifting FUL caps on product reimbursement after they have verified pharmacy complaints about access issues. One commenter also noted that when there are cases that applying a markup of 175 percent to the weighted AMP results in a FUL that is considerably low, CMS should have the ability to expeditiously
We believe that this option to use a higher multiplier should operate to ensure access given that the FUL calculated using the 175 percent multiplier will be increased under the exception we are finalizing at § 447.514(b)(2), to equal the most current average acquisition cost paid by retail community pharmacies as determined by the most current national survey.
Another commenter encouraged CMS to give states an opportunity to review the draft AMP-based FUL files before the agency processes it through a pricing vendor, and noted that state review may prevent overpayment for drugs. The commenter stated that portions of the file could create state challenges as the states seek to utilize the files for reimbursement on a claim or an NDC level. The commenter asked how CMS would address inconsistencies and changes in published AMP-based FULs for drug groups. One commenter claimed that about 20 percent of the NDC's with a reported AMP, (published in November 2011, based on September 2011 monthly reported data), had supply issues, and stated that the existence of an NDC does not demonstrate national availability, including national availability to retail community pharmacies.
Another commenter stated that problems with the draft AMP-based FUL files included the treatment of authorized generic drugs and repackaged drugs (as they are included in the FUL product groups), supply issues, fluctuating prices, and drug products that may have not been placed in the appropriate product groups. Further, several commenters stated that because the repackaged product is competitively distinct from non-repackaged products, CMS should establish product groups for repackaged products separate from the product groups for the non-repackaged products.
Another commenter noted that if a pharmacy was reimbursed for a specific
We note that the draft AMP-based FULs can experience price variations, and we note that these changes can and do occur due to changes in supply and demand, including drug shortages or manufacturing issues. The FULs are designed as an aggregate upper limit to give states flexibility to establish payment rates and adjust those rates for individual drugs consistent with those aggregate limits. Furthermore, the revised process we are adopting in this final rule for calculating the FUL, whereby the FUL will not be calculated lower than the average retail community pharmacies' acquisition cost for such drug product, as determined by the most current national survey of such costs incurred by retail community pharmacies should address concerns raised regarding these fluctuations.
We released draft AMP-based FUL files, beginning in September 2011, to give states, pharmacies, and other stakeholders an opportunity to review and provide comment on the FULs and the methodology we use to calculate the FULs, prior to the finalization of the FULs. Once the FULs are issued in final, we do not believe that we should continue to issue draft FUL prices to the states for review on a monthly basis prior to the FULs becoming effective. Section 1927(e)(5) of the Act does not require a process for issuance of draft FULs prior to finalization on a monthly basis.
In accordance with section 1927(e)(5) of the Act, a FUL is calculated where the FDA has rated three or more products therapeutically and pharmaceutically equivalent. To the extent that an authorized generic drug or a repackaged drug is rated by the FDA as therapeutically and pharmaceutically equivalent, we will include those drugs in the calculation of the FUL.
We have taken steps to ensure that there were not any inconsistencies regarding the data in the draft FUL files. For example, we have verified the correct placement of multiple source drugs into the appropriate FUL group; performed internal review of duplicate FUL groupings; and ensured that drugs that have the same ingredient, route of administration, strength, and dosage but different therapeutic equivalence ratings (for example, AB1 and AB2 ratings), are not placed in the same FUL group. We believe that these steps will alleviate some of the fluctuations that may have previously existed in the some of the draft files.
As noted earlier in this section, we believe that our decision to adopt a revised process by which the FUL can be calculated using a multiplier higher than 175 percent of the weighted average of the most recently reported AMPs, so that the FUL will not be lower than the average retail community pharmacies' acquisition cost for such drug product, as determined by the most current national survey of such costs incurred by retail community pharmacies will also address the concerns regarding the adequacy of the draft AMP-based FULs we posted on the Medicaid.gov Web site, as we believe that this option to use a higher multiplier should operate to ensure access given that it is based on actual invoice data.
Nearly all states currently have a SMAC program in place; however, we believe that the notification previously issued by CMS that the FULs would not be finalized until this final rule is published, should have provided the few states that do not currently have a SMAC program in place to develop and implement a program to meet the FUL aggregate requirement, if they choose to do so.
A few commenters noted that implementing a defective FUL process with extreme period-to-period volatility will undermine the move to AAC and destroy any confidence that industry providers have in AAC. The commenters requested clarification on whether a state will override an AAC that was based on provider survey data with a lower FUL, and they noted that this “lesser of” logic could undermine both the AAC and the FUL. One commenter noted that the comparison of the draft AMP-based FULs to Alabama AAC values showed that a number of draft AMP-based FULs are below the reimbursement benchmark of 175 percent, and the analysis did not take into account that the dispensing fee in Alabama is $10.64, compared with the nation average Medicaid dispensing fee of $4.50. One commenter stated that to ensure the adequacy of AAC amounts when brand drugs have price increases, the procedures should include a mechanism for pharmacies to resubmit claims that were previously under reimbursed. One commenter stated CMS should use an appropriate measure of pharmacy acquisition cost to determine reimbursement and when the weighted
We did not propose that states establish procedures for the resubmission of claims that may have been under-reimbursed, as we believe that a process for pharmacies to re-submit claims is a state function, and these issues should be raised to the state.
Furthermore, in response to comments that CMS consider pharmacy acquisition costs when calculating the FUL, as discussed previously, we have adopted a revised process by which the FUL can be calculated using a multiplier higher than 175 percent of the weighted average of the most recently reported monthly AMPs, when the FUL calculated at 175 percent of the weighted average of the most recently reported monthly AMPs is lower than the average retail community pharmacies' acquisition cost for such drug product, as determined by the most current national survey of such costs incurred by retail community pharmacies. This revised process considers pharmacy acquisition cost to establish a higher multiplier, such that, the resulting FUL is no less than the average retail community pharmacies' acquisition cost.
In the case where a drug product is not being manufactured, and the drug product has no utilization, it will not be included in the calculation of the FUL. Sections 1927(e)(4) and (5) of the Act do not include any exceptions for calculating a FUL when a drug is in shortage, provided the drug is available on a nationwide basis. Therefore, as discussed previously, a FUL will only be established for those multiple source drugs for which the FDA has rated three or more products therapeutically and pharmaceutically equivalent that are available for purchase by retail community pharmacies on a nationwide basis.
Further, the states have had longstanding processes in place to address and respond to reimbursement issues, and to the extent that pharmacy providers have concerns with payment amounts, the pharmacy providers should raise those concerns with the state.
Therefore, after considering the comments and for the reasons articulated in this section and in the proposed rule, we are finalizing proposed § 447.514 (Upper limits for multiple source drugs), except for the following revisions:
• Proposed § 447.514(a)(1) is revised to remove the third instance of the word “therapeutically,” which appeared prior to the word “equivalent” in the last sentence, given the earlier reference, in the same sentence, to the phrase “pharmaceutically and therapeutically equivalent.” This was a technical error in the proposed rule that we are correcting and is not intended to change the general meaning of this provision.
• We are adding a period to the end of the sentence in § 447.514(a)(1) as it was omitted from the proposed regulatory text.
• Section 447.514(b) is revised to create two paragraphs.
• Paragraph (b)(1) includes the language from the proposed § 447.514(b), except that it is revised to replace the phrase “drug entity” with the phrase “pharmaceutically and therapeutically equivalent multiple source drug product,” and is not intended to change the general meaning of this provision; rather, this terminology more closely matches the statutory language in section 1927(e)(4) of the Act.
• Paragraph (b)(2) addresses the exceptions process.
In proposed § 447.516, we included, without any modification, the existing upper limit provision (77 FR 5367), which we had previously finalized in the AMP final rule (72 FR 39244). We received no comments on this section and are finalizing the provision in § 447.516 (Upper limits for drugs furnished as part of services).
In the “Medicaid Program; Withdrawal of Determination of Average Manufacturer Price, Multiple Source Drug Definition, and Upper Limits for Multiple Source Drugs” final rule (75 FR 69591) we made conforming amendments to § 447.518 (“State plan requirements, findings, and assurances) to remove reference to § 447.514 (“Upper limits for multiple source drugs”) as this section was removed from regulation. In the proposed rule, we proposed regulatory amendments to add back in references to § 447.514 “Upper limits for multiple source drugs” to § 447.518 “State plan requirements, findings, and assurances” (77 FR 5350). In addition, to conform with the proposed change from “estimated acquisition cost” to “actual acquisition cost,” we proposed in § 447.518(d) to require states to provide data to support proposed changes in reimbursement using AAC and specified that this supporting data could include, but is not limited to, a state or national survey of retail community pharmacy providers, or other reliable data which reflects the pharmacy's price to acquire a drug (77 FR 5350, 5367). We also proposed to add a new requirement that states must describe their payment methodology for drugs dispensed by a covered entity described in section 1927(a)(5)(B) of the Act, a contract pharmacy under contract with a covered entity described in section 1927(a)(5)(B) of the Act, and an Indian Health Service, tribal and urban Indian pharmacy. These provisions are discussed in more detail at 77 FR 5350 through 5351 of the proposed rule. Furthermore, we invited comments on the practicality of requiring each state to conduct a survey, the frequency of such a survey, and how closely we would expect the state to conform to the survey results in the reimbursement rates they propose in their SPA, including the use of acquisition cost averaging, AMPs as a basis for reimbursement, including the application of an appropriate markup factor or other methods of determining the ingredient cost (77 FR 5350). We received the following comments concerning proposed § 447.518 (the state plan, requirements, findings, and assurances).
The following comments pertain to pharmacy reimbursement using AAC.
Another commenter stated that the cost of dispensing survey should be conducted at least annually and that this should be included in the final rule. Another commenter noted that annual surveys are necessary as a pharmacy's cost to dispense will have some regional variation and will change periodically due to the costs of regulatory compliance and patient needs. Another commenter stated that cost of dispensing studies need to be repeated on a timely basis and utilize the results in pharmacy reimbursement, as pharmacy costs change over time as drug costs do, yet rate changes for dispensing costs have not occurred with similar frequency, and many times come under negative pressure, as in the case of Oregon, whenever budgets are tight. Many commenters stated that if a survey is not done annually to support the dispensing fee, then an annual adjustment must be made. Commenters suggested that adjustments should be made on a standard such as the one used to adjust Medicare Part D co-pays and state payments, or the medical care component of the CPI for urban areas.
Off-invoice rebates and incentives are pricing concessions that are generally extended to pharmacy providers on a case-by-case basis under specific contracting arrangements with wholesalers, and CMS does not require states to include these pricing concessions in a survey of pharmacy prices. Further, we believe that survey prices that do not reflect off-invoice rebates and incentives tend to benefit pharmacy providers. In accordance with the requirements in § 447.518(d) of this final rule, states must provide data to support any changes to reimbursement, and have the proposed changes reviewed under the formal SPA review process. Under this process, states are responsible to ensure that total reimbursement to the pharmacy provider is in accordance with requirements of section 1902 (a)(30)(A) of the Act. States must also provide public notice of that change, in accordance with § 447.205, before it can be implemented. Therefore, the state's proposed methodology to establish an
Another commenter recognized the need for alternative metrics for pharmacy acquisition costs to support state Medicaid reimbursement rates. The commenter is concerned that industry stakeholders do not yet have the necessary information or guidance to make the change to AAC-based reimbursement in a responsible and practical manner. Therefore the commenter stated that any new type of pricing data requires further review before it can serve as the basis for reimbursement.
Another commenter stated that CMS should forego requiring states to adopt ingredient cost payment based upon survey-derived measures of AAC as the accuracy of these unpublished and untested measures of AAC could have an unpredictable impact on pharmacy reimbursement. Another commenter expressed concern about encouraging states, without more specific guidance, to conduct and implement an AAC which could create inadequate reimbursement, with risk to access and patient care. One commenter stated that some states may believe that the NADAC doesn't represent cost to pharmacies in their state if they have a disproportionate share of independent pharmacies in their state. One commenter stated that CMS and state Medicaid programs should first issue draft ingredient cost for comment before implementing AAC, as this transparency is essential for pharmacy provider feedback.
We disagree with the commenters about the reliability of the data which states may use to calculate ingredient costs. A notification for the retail price survey collection was placed in the
On a monthly basis, our contracted vendor collects acquisition cost data from a random sample of pharmacies selected from all 50 states and the District of Columbia. Pharmacy entities surveyed include independent and chain retail community pharmacies. A national pharmacy compendia file containing information on retail pharmacies throughout the country is used to determine the pool of pharmacies eligible for each survey. The Methodology for Calculating the NADAC, found at
The draft NADAC files and the draft Methodology for Calculating the NADAC were made available on the Medicaid.gov Web site as of October 2012, and were finalized in November 2013. Further information on the survey of retail prices can be found at
We also disagree with the commenters concerning the reliability of AMP-based prices. In accordance with the requirements of section 1927(b)(3) of the Act and § 447.510, manufacturers are required to submit and certify the accuracy of all of the pricing data they report to CMS, including monthly and quarterly AMP data. As discussed previously in this section, we have reviewed manufacturers' submissions to ensure that manufacturers calculate their AMPs consistently. We also note that while states may use AMP data, which is based on the prices paid by both retail community pharmacies and wholesalers, they are responsible for demonstrating that using AMP-based prices as a reimbursement methodology will ensure that pharmacies are reimbursed at a price that reflects AAC.
Therefore, we believe that we have given the states sufficient time and opportunity to review the NADAC pricing files and AMPs, and we expect that state Medicaid agencies should be able to use this data, if they choose to do so, to establish payment rates consistent with section 1902(a)(30)(A) of the Act.
One commenter stated that CMS should take into account different entities such as specialty pharmacy products, and thus, the surveys should be well-designed to focus effectively on the specifics of the products and the customers involved such as vulnerable populations and those with rare diseases. One commenter stated that specialty products should be excluded from the methodology as they are unique and costly. Another commenter stated that independent pharmacies need special consideration as they do not have the advantage of ordering in large quantities, so it is more difficult for them to make a profit. Another commenter stated that AAC could vary with each pharmacy's contractual prices from their primary wholesaler. Several commenters stated that if CMS uses a survey to determine AAC, the survey should be conducted at the enrolled pharmacy location level, and in the case of chain pharmacies, individual pharmacies, and not retail chain distribution centers are most reflective of drug acquisition cost and should be used in surveying these entities.
Another commenter stated that CMS's proposal to use the NADAC survey as a basis to calculate AAC does not currently provide sufficient assurances that it will lead to accurate or adequate reimbursements for the more complex and costly specialty pharmacy products. The commenter expressed concerns that CMS and the states are unsure even how to identify specialty pharmacies, which do not typically receive a separate license for state pharmacy purposes. The commenter added that it is unclear that the NADAC survey will provide adequate data to accurately calculate AAC for specialty pharmacies.
We agree with the commenter that the NADAC files may not address the more complex and costly specialty pharmacy products. In regard to specialty pharmacies that have products primarily delivered through the mail, these pharmacies are not included in the NADAC survey at this time. However, specialty drug products purchased through retail community pharmacies are included in the NADAC files. If states choose to use the NADAC pricing files in their reimbursement methodologies, they will be responsible for determining AAC for specialty drugs dispensed through specialty pharmacies.
Another commenter stated that an analysis of historical ingredient cost survey results available to many states establish that WAC is reasonable, and noted that WAC and AWP will likely still play a role in pharmacy reimbursement as there will be occasions where a drug product will not have an AAC. In these cases, the commenter suggested the use of WAC plus an appropriate multiplier to take into account the wholesaler's markup before a drug product is sold to a pharmacy. Another commenter stated that if AAC is not available, there must be an acceptable surrogate for interim pricing, and suggests that using an escalator such as the medical care component of the CPI for urban areas would provide a methodology for an EAC when AAC is not immediately available. One commenter stated that, at a minimum, WAC should be used until an AMP is submitted to CMS, similar to the current Part B methodology, which states that during the initial period when the prices for a drug are not sufficiently available from a manufacturer, the Secretary can base reimbursement off of the WAC. One commenter recommended that states should have the option of using WAC as an alternative to determine their reimbursement for single source drugs as some states may not believe the NADAC is appropriate for their state and may not have the resources to contract for their own AAC survey.
One commenter stated that several states currently base ingredient cost reimbursement on manufacturer reported (published compendia) data, and the commenter believed this is not the appropriate source for acquisition cost data. The commenter stated that pharmacies, not manufacturers, are in the best position to monitor and report the prices at which pharmacies acquire drugs, as wholesalers could be providing discounts or reselling to pharmacies at a premium.
We note that, in establishing NADAC file pricing, the WAC is used to update brand drug prices, and on a weekly basis, the NADACs for brand drugs are reviewed and adjusted if necessary based on changes in published prices. The NADAC pricing files, including the weekly changes to the NADAC files can be found at
The following comments pertain to pharmacy reimbursement based on AMP:
AMP, which is addressed in detail in section II.C., is based on actual sales data and reported and certified by drug manufacturers on a monthly and quarterly basis. As discussed in the proposed rule (77 FR 5350), states that consider using AMP-based pricing as a reimbursement metric could determine the relationship between AMP and wholesaler markup, to cover the cost of distribution and other service charges by the wholesaler, to determine a reasonable reimbursement that would appropriately compensate pharmacies in accordance with the requirements of this final rule. As specified previously in this section, states are responsible for submitting SPAs with adequate data to
Another commenter stated that AMP data is confidential and proprietary and it is unclear how states could use AMP data to set publicly-available payment rates without disclosing proprietary information. The commenter stated that by law, the AMP data for individual single source drugs may not be disclosed. The commenter stated that not only would using AMP as a pharmacy reimbursement metric make it more difficult to establish an accurate AAC, but it would also contravene the statute. The commenter continued that the Federal Trade Commission and the CBO have both cautioned that disclosing confidential price information could have adverse effects, ultimately leading to higher prescription costs.
Along with a SPA submission, states must also provide public notice of that change in accordance with § 447.205 prior to proposing any changes; therefore, the public notice process shall address any transparency concerns. States are not limited in regard to conducting retail pharmacy surveys and CMS is not finalizing any such requirement in this final rule. We further emphasize that states must establish rates that ensure beneficiary access in accordance with the requirements of section 1902(a)(30) of the Act. We also note that to the extent that pharmacies have concerns regarding the adequacy of the payment rates, they should present these concerns to the state.
The following comments pertain to pharmacy reimbursement for 340B entities, IHS, Tribal, and Urban Indian Organization Pharmacies.
We agree that there may be unique circumstances for 340B covered entities that states should consider when establishing their professional dispensing fees for these providers and that states must express the rationale for the reimbursement methodologies being proposed in their state plans. We also believe that it is important the providers are reimbursed adequately for the provision of care to beneficiaries. Therefore, we will require states to substantiate how their dispensing fee reimbursement to pharmacy providers, including 340B providers, is consistent with section 1902(a)(30)(A) of the Act. We note that states may decide to use different professional dispensing fee rates for different entities and providers. While we do not mandate any specific professional dispensing fee methodologies that states must use, states are required to provide data which indicates that the methodology is consistent with the regulation and ensures access.
The formula for calculating the 340B ceiling price is generally defined in section 340B(a)(1) of the PHSA as AMP minus the URA, and these data are available for states in DDR. AMP minus URA is then calculated by the Package Size to ultimately determine the 340B ceiling price paid. We are aware that 340B entities are often able to negotiate discounts below the statutory 340B ceiling price for 340B drugs. However, in consideration of the fact that information regarding these discounts (or subceiling prices) for 340B drugs may not be accessible to states, where states are unable to determine the prices at which 340B providers actually acquired their drugs, we would consider a methodology that reimburses at the statutory 340B ceiling price for the ingredient cost component of reimbursement in addition to an adequate professional dispensing fee to be compliant with the AAC payment criteria. We believe that if states reimburse 340B providers for the ingredient cost at their actual purchase price, then those providers must be adequately reimbursed a professional dispensing fee that is representative of the cost to dispense the drug. Specifically, the dispensing fee should not be earmarked as an offset for ingredient cost reimbursements set at AAC. Instead, it should reflect the pharmacist's professional services and costs associated with ensuring that possession of the appropriate COD is transferred to a beneficiary.
Additionally, we continue to encourage states to develop clear reimbursement policies for 340B covered entities in their state plans which detail measures that ensure that reimbursements will reflect the ingredient costs at their AAC and that providers will be reimbursed a professional dispensing fee. States will be required to submit SPAs consistent with the regulations, including those requirements in §§ 447.502 and 447.512 finalized in this rulemaking, detailing
Reimbursing providers based on the ingredient cost representative of the cost of the drug alone and a dispensing fee representative of the cost to dispense the drug to the patient is in keeping with section 1902(a)(30)(A) of the Act. We do not expect the implementation of AAC-based reimbursement would result in unrealistic administrative burdens being placed on the covered entities. Instead, we believe that states establishing a methodology that provides reimbursement based on costs would not lead to a reduced commitment by 340B covered entities, in part, because this shift to an AAC-based reimbursement model will ensure that 340B covered entities are provided with payment for their drugs consistent with Medicaid requirements.
Some commenters indicated that some states are not interpreting the 340B MCO exception in a manner compatible with the intent of the law and one of the commenters recommended that CMS prohibit states from requiring a 340B entity to carve out Medicaid MCO drugs. The commenter further requested that CMS create a mechanism that states can use to avoid collecting rebates on 340B MCO drugs. Another commenter indicated that the impact on their health plan, if they were required to carve-out drug costs, could negatively impact their budget and supported the creation of a pharmacy-friendly mechanism that states can use to prevent the collection of rebates on 340B MCO drugs.
Another commenter urged CMS to publicly reject the path taken by a particular state which enacted a law that prohibits 340B covered entities from carving out Medicaid drugs and requires them to bill and be reimbursed at no more than their 340B acquisition cost plus a dispensing fee that is far too low to cover the costs of serving this population.
In requiring that states establish methodology consistent with AAC, we are not requiring that states determine the AAC for every drug dispensed by every pharmacy in their state. Rather, states can establish an AAC using aggregate data obtained based on surveys or other reliable data sources, and in the case of 340B covered entities, they can use the 340B ceiling price, given that these prices are generally representative of acquisition costs for such entities. Some covered entities (that is, tribal facilities), may be able to purchase CODs under the FSS and seek Medicaid payment. For states to determine AAC in these cases, they can access FSS pricing via the Department of Veterans Affairs Web site at
Another commenter noted that claims processing in 340B pharmacies are entirely different from claims processing in outpatient clinics, and each system requires a different mechanism for identifying 340B claims and excluding them from rebate requests. Therefore, the commenter encouraged CMS to require states to describe in SPAs their 340B duplicate discount prevention processes, including how the states require 340B pharmacies to identify 340B claims in the retail setting.
Upon the effective date of this final rule, when proposing changes to either the ingredient cost reimbursement or professional dispensing fee reimbursement, states are required to evaluate their proposed changes in accordance with the requirements of this subpart, and states must consider both the ingredient cost reimbursement and the professional dispensing fee reimbursement when proposing such changes to ensure that total reimbursement to the pharmacy provider is in accordance with requirements of section 1902(a)(30)(A) of the Act. States must provide data to support proposed changes in reimbursement through the SPA process. Examples of such supporting data include, but are not limited to, a national or state survey of retail community pharmacy providers, or other reliable data other than a survey to support any proposed changes to either or both of the components of the reimbursement methodology.
One commenter supported transparency of reimbursement rates to all providers, but was particularly concerned with understanding the processes by which states eliminate 340B utilization from their rebate requests so as not to request a duplicate discount.
Several commenters were concerned that the proposed methodology and the information to be reported are not sufficient to prohibit duplicate discounts. The commenter stated that none of the proposed information in the MCO utilization reports would help identify products that were subject to 340B pricing and therefore alert the state that Medicaid rebates should not be sought for these products. The commenter also urged CMS to require that the MCO utilization report contain data that will clearly identify when a product was subject to a discount under the 340B program so that MCOs, CMS, states, and manufacturers can easily and clearly identify 340B priced products and ensure that Medicaid rebates are not requested nor paid for such products.
We did not propose any specific requirements in this final rule regarding the submission of claims level data in rebate invoices states send to manufacturers; however, we encourage states and 340B entities to work together to ensure they take necessary measures to prevent duplicate discounts. At this time, we have not finalized requirements concerning the need to include 340B identifiers in the list of required data elements for Medicaid rebate claims since each individual state is responsible for establishing billing instructions necessary to identify 340B claims. In addition, we are not requiring that states include 340B identifiers on rebate invoices given the prohibition on states seeking Medicaid rebates on drugs purchased through the 340B program.
While we encourage states and manufacturers to work cooperatively in verifying these rebate claims, we believe those actions are best handled at the state level and do not plan to add further reporting or auditing mechanisms at the federal level at this time.
One commenter acknowledged that the NCPDP 340B identifier is not in wide use today, but believed it is within CMS's discretion to require participants in the Medicaid pharmacy program to include this identifier. The commenter stated that further data sharing is needed to ensure compliance with the 340B statute so that Medicaid receives the benefit of the 340B prices and that manufacturers are not forced to pay deep discounts twice on the same prescription. The commenter believed that to eliminate the double discounting, states would need patient de-identified, specific, prescription level information, including claim level data for both MCO and Medicaid FFS prescriptions, instead of just the aggregate-level data shared under the proposed rule. These additional data fields would allow for verification that the data has been properly screened for duplicate discounts.
Therefore, after considering the comments and for the reasons discussed in this section and in the proposed rule, we are finalizing the provisions of § 447.518 State plan requirements, findings and assurances, but making the following revisions in response to comments and for the reasons discussed in detail in this section:
• We are revising § 447.518 by renumbering § 447.518(a) to add a new paragraph (a)(2) to specify that the state's payment methodology described in paragraph (a)(1) must be in accordance with the definition of AAC in § 447.502.
• Because of the renumbering configuration, proposed § 447.518(a)(1), (2), and (3) are being renumbered and finalized as § 447.518(a)(1)(i), (ii), and (iii) respectively.
• We are revising § 447.518(d) to provide that, when states are proposing changes to either the ingredient cost reimbursement or professional dispensing fee reimbursement, they are required to evaluate their proposed changes in accordance with the revised requirements of this subpart, and states must consider both the ingredient cost reimbursement and the professional dispensing fee reimbursement when proposing such changes to ensure that total reimbursement to the pharmacy provider is in accordance with requirements of section 1902 (a)(30)(A) of the Act. States must provide adequate data such as a state or national survey of retail pharmacy providers or other reliable data other than survey data to support any proposed changes to either or both of the components of the reimbursement methodology. States must submit to CMS the proposed change in reimbursement and the supporting data through a SPA through the formal review process.
• We are removing the words “of this subpart” from the proposed regulatory text of § 447.518(b) as the reference is not necessary as given the regulatory citations.
In the regulatory text of the proposed rule (77 FR 5367), we proposed to retain the current § 447.520 (FFP: Conditions relating to physician-administered drugs) without modification. We received the following comment specific to this section.
We received no other relevant comments to this section. Accordingly, we are finalizing § 447.520 (FFP: Conditions relating to physician-administered drugs) without modification.
We proposed to add § 447.522 to clarify that states may, at their option, provide coverage of investigational drugs and may only pay for and receive FFP for these drugs when they are reimbursed in accordance with FDA final rules 21 CFR part 312 and 316 as amended by the final rules published in the August 13, 2009
After considering the comments, and for the reasons we discussed in this section and in the proposed rule, we are finalizing the provisions at § 447.522, with the following revisions that do not change the substance of the proposed language.
• At § 447.522(a) we are replacing “has been indicated by FDA for human trials” to “is the subject of an investigational new drug application (IND) that has been allowed by FDA to proceed” because the terminology is not technically accurate in its representation of how FDA allows for the use of investigational drugs and is not intended to change the meaning of the provision.
• At § 447.522(c), we are removing reference to 21 CFR part 316 as it is specific to orphan drugs, which at the time that the proposed rule was drafted, was not yet finalized. We are also simplifying the structure of the paragraph. This is not intended to change the meaning of the provision.
• We are not finalizing the proposed language at § 447.522(d) about being listed electronically with FDA given that, as discussed previously in the definition of COD at section II.B. of this final rule, we are not finalizing such a requirement under the definition of COD.
• We are clarifying at § 447.522(d), that Medicaid coverage of other drugs may be provided, at state option if they are not eligible to be covered as CODs in the MDR program.
Under the Paperwork Reduction Act of 1995 (PRA), we are required to provide 60-day notice in the
• The need for the information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
In the February 2, 2012, proposed rule (77 FR 5318) we solicited public comment on each of these issues for the following information collection requirements (ICRs). Comments were received and have been summarized below along with our response.
Based on internal review and the most current data, we have revised our estimated number of drug manufacturers that participate in the MDR program from 600 to 610. We have also revised our cost estimates by using the most current U.S. Bureau of Labor Statistics' wage estimates. Additional changes are discussed, where applicable, throughout this Collection of Information section.
To derive average costs, we used data from the U.S. Bureau of Labor Statistics' May 2014 National Occupational Employment and Wage Estimates for all salary estimates (
As indicated, we are adjusting our employee hourly wage estimates by a factor of 100 percent. This is necessarily a rough adjustment, both because fringe benefits and overhead costs vary significantly from employer to employer, and because methods of estimating these costs vary widely from study to study. Nonetheless, there is no practical alternative and we believe that doubling the hourly wage to estimate total cost is a reasonably accurate estimation method.
For CMS to be able to verify that reported products meet the definition of “covered outpatient drug” in § 447.502, this rule requires that drug manufacturers must report the FDA application number (issued by FDA when the product is approved) and, if applicable, the COD status code as part of their product data information via DDR for each product.
In the proposed rule, drug manufacturers would have been required to submit evidence demonstrating that the product meets the definition of a COD if the product does not have an FDA application number (77 FR 5323). Based on public comments (see section II.B.9. of this final rule) we revised this provision such that this final rule clarifies that drug manufacturers may submit evidence supporting whether the product meets the definition of a COD by way of reporting the COD status for each of their products.
For instance, if the product does not currently have an FDA application number, we will accept the COD status as evidence demonstrating that the product is otherwise a COD. The FDA application number and COD status should not be difficult for the drug manufacturer to determine since the drug manufacturer should already know the FDA application number when the product was approved by FDA, or the reason it qualifies as a COD, if there is no application number.
The requirements and burden to report the FDA application number and, if applicable, the COD status code are approved by OMB under control number 0938-0578 (CMS-367). Although the requirements and burden were set out in the February 2, 2012, proposed rule, the ICR was submitted to OMB for review and approval (April 11,
In § 447.507, drug manufacturers are required to identify—for the purpose of calculating AMP—inhalation, infusion, instilled, implanted, and injectable drugs (5i), when not generally dispensed through retail community pharmacies. Using the methodology described at § 447.504 and under section II.C.7. of this final rule, a drug manufacturer is required to identify and determine the AMP of these drugs. We estimate that these requirements apply to approximately 610 drug manufacturers that participate in the MDR program. The burden associated with the initial reporting of the 5i drugs is the time and the effort it takes each drug manufacturer to identify these drugs using reasonable assumptions as described earlier in section II.C.7. of this final rule.
Section II.C.7. of this final rule, sets forth our understanding that each drug manufacturer should be knowledgeable about how its drugs are administered; therefore, we are not finalizing the requirement that drug manufacturers use the Route of Administration list we proposed (77 FR 5334). Instead, drug manufacturers will have the flexibility to determine whether their drug is a 5i drug based on reasonable assumptions and use any resource that they deem appropriate to make their assumptions. While such assumptions must be consistent with the requirements and intent of section 1927 of the Act and with federal regulations, a written or electronic record outlining these assumptions must be maintained by the drug manufacturer. Once the drug manufacturer has established its initial list of 5i drugs, it is required (on a monthly basis) to determine which of those drugs are not generally dispensed through a retail community pharmacy.
The burden for the one-time reporting requirement for all drug manufacturers to identify 5i drugs and the ongoing monthly burden to report whether the 5i drugs are not generally dispensed through a retail community pharmacy to CMS through the DDR system are approved by OMB under control number 0938-0578 (CMS-367). Although the requirements and burden were set out in the February 2, 2012, proposed rule, the ICR was submitted to OMB for review and approval (April 11, 2014; 79 FR 20209) under our authority in section 1927(k) of the Act, as revised by section 2503 of the Affordable Care Act and section 202 of the Education Jobs and Medicaid Assistance Act. This was noted in that package's Supporting Statement.
As noted in section II.C.7. of this final rule, based on comments received, we have revised proposed § 447.507(b)(2) by removing the reference to a quarterly basis. In accordance with § 447.507(b)(1) of this final rule, the drug manufacturer is required to determine whether the percentage of sales for the 5i drugs has met the threshold to be considered not generally dispensed through a retail community pharmacy only on a monthly basis. We estimate that it will take a Computer System Analyst 5 hours at $83.96/hr, a General and Operations Manager 5 hours at $112.70/hr, a Training and Development Manager 10 hours at $106.76/hr, and an Operations Research Analyst 10 hours at $79.76/hr for each drug manufacturer to identify which 5i drugs are not generally dispensed through a retail community pharmacy and report the status to CMS. This equates to an annual burden of 360 additional hours (30 hr/response x 12 responses/year) per drug manufacturer. In aggregate, we estimate 219,600 hours (610 drug manufacturers participating in the MDR program × 360 hr) at a cost of $20,851,020. The requirements and burden estimates will be submitted to OMB for approval under control number 0938-0578 (CMS-367).
We received the following PRA-related comments regarding the identification of 5i drugs. A summary of the comments along with our response follow.
Under § 447.509(a)(4), drug manufacturers participating in the rebate program that have line extension drugs are required to compute an alternative rebate calculation for certain drugs. To compute the alternative rebate calculation for a line extension drug of a brand name that is an oral solid dosage form, the drug manufacturer must first identify the line extension drug and the initial brand name listed drug that has the highest additional rebate ratio (calculated as a percentage of AMP) for any strength of the initial brand name listed drug. Drug manufacturers also must calculate the URA for the line extension drug on a quarterly basis. However, as discussed in sections II.B. and II.G. of this final rule, at this time we are not finalizing the regulatory definition of a line extension drug. Instead, manufacturers will rely on the statutory definition of line extension at section 1927(c)(2)(C) of the Act and, where appropriate, are permitted to use reasonable assumptions in their determination of whether their drug qualifies as a line extension drug. Additionally, as discussed in section II.G. of this final rule, we are finalizing the requirements of § 447.509(a)(4)(i), which specifies the rebate calculation requirements for line extension drugs, and we are also finalizing revised § 447.509(a)(4)(ii) to require the alternative rebate be calculated if there is a corporate relationship between the manufacturer of the line extension drug and the
We estimate that this requirement affects the approximately 610 drug manufacturers participating in the MDR program. The one-time burden associated with the reporting of the Line Extension Drug Indicator is the time and effort it will take each drug manufacturer to identify whether each drug is a line extension product.
We estimate that it will take a Computer System Analyst 10 hours at $83.96/hr, a General and Operations Manager 5 hours at $112.70/hr, a Training and Development Manager 1 hour at $106.76/hr, and an Operations Research Analyst 10 hours at $79.76/hr (for a one-time total cost of $2,307.46 across all four positions) to complete the reporting of the Line Extension Drug Indicator. The one-time burden for the 610 drug manufacturers participating in the MDR program is estimated to be 15,860 hours (610 drug manufacturers × 1 response) with a cost of $1,407,550.60. The requirements and burden estimates will be submitted to OMB for approval under control number 0938-0578 (CMS-367).
In addition, for the drugs that have been determined to be a line extension product, the burden associated with the quarterly reporting of the initial brand name listed drug and the line extension drug is the time and effort it takes each drug manufacturer to calculate the URA for the line extension drug.
We estimate that it will take a Computer System Analyst 5 hours at $83.96/hr, a General and Operations Manager 5 hours at $112.70/hr, a Training and Development Manager 5 hours at $106.76/hr, and an Operations Research Analyst 5 hours at $79.76/hr to complete the new reporting requirements to calculate the URA for the line extension drug on a quarterly basis. The annual burden for the 610 drug manufacturers participating in the MDR program is estimated to be 48,800 hours (610 drug manufacturers × 20 hr/response × 4 responses/year) with a cost of $4,675,528. The requirements and burden estimates will be submitted to OMB for approval under control number 0938-0578 (CMS-367).
As discussed in the preamble to the proposed rule (77 FR 5319), section 2501(c) of the Affordable Care Act amended section 1903(m) of the Act by specifying new conditions for MCO contracts, including that CODs dispensed to individuals eligible for medical assistance under Title XIX of the Act who are enrolled with a Medicaid MCO shall be subject to the same rebate required by the rebate agreement authorized under section 1927 of the Act.
Section 447.509(b) adds requirements that drug manufacturers pay rebates for drugs dispensed to individuals enrolled in Medicaid MCOs. It also requires that states remit to the federal government the amount of the savings resulting from the increases in the rebate percentages. States are required to report the total quarterly rebate offset amount (on the CMS-64 form) that they are remitting to the federal government for the FFS rebates they currently receive from drug manufacturers and for the Medicaid MCO rebates they will receive from drug manufacturers. The information collection requirements and burden associated with CMS-64 are approved by OMB under control number 0938-1265 (CMS-10529). Since this final rule does not impose any new or revised burden or reporting or recordkeeping requirements concerning CMS-64, a revised PRA package is not applicable.
We received the following PRA-related comments regarding Medicaid drug rebates. A summary of the comments along with our response follow.
Consistent with § 447.510, drug manufacturers currently must report (electronically) product and quarterly pricing information to CMS not later than 30 days after the end of the rebate period. Monthly pricing and units are due no later than 30 days after the end of the month. In addition, customary prompt pay discounts and nominal prices must be reported quarterly.
This final rule significantly revises the definitions of AMP and best price. Consequently, drug manufacturers must reconfigure their pricing systems to correctly calculate AMP and best price. In addition, drug manufacturers must submit the total number of units that are used to calculate the monthly AMP. The burden associated with these new requirements is the time and effort it takes a drug manufacturer to reconfigure its pricing systems to correctly calculate AMP and best price before it can submit the required data to CMS.
We estimate that these requirements affect the approximately 610 drug manufacturers in the MDR program. We estimate it will take a Computer System Analyst 400 hours at $83.96/hr, a General and Operations Manager 180 hours at $112.70/hr, a Training and Development Manager 180 hours at $106.76/hr, a Lawyer 40 hours at $128.34/hr, and an Operations Research Analyst 400 hours at $79.76/hr to complete the new requirements concerning the changes to AMP and best price definitions. In aggregate, the one-time total burden for the 610 drug manufacturers participating in the MDR program is estimated to be 732,000 hours (610 drug manufacturers × 1,200 hr/drug manufacturer) at a cost of $67,175,884. The requirements and burden estimates will be submitted to OMB for approval under control number 0938-0578 (CMS-367).
In addition to the one-time burden of reconfiguring pricing systems, based on comments received, we now estimate a one-time start-up cost to include the cost of training drug manufacturer staff on the new, reconfigured pricing systems. To complete this task, we believe it will take a General and Operations Manager 600 hours at $112.70/hr, a Training and Development Manager 1,700 hours at $106.76/hr, and an Operations Research Analyst 1,700 hours at $79.76/hr. In aggregate, the one-time total burden is estimated to be 2,440,000 hours (610 drug manufacturers × 4,000 hr/drug manufacturer) at a cost of $234,669,440. The requirements and burden estimates will be submitted to OMB for approval under control number 0938-0578 (CMS-367). Once the pricing systems have been reconfigured, there should be no additional burden in time or effort other than that which already exists.
Drug manufacturers are required to pay a 17.1 percent rebate on innovator drugs identified as approved by the FDA exclusively for a pediatric indication. There are currently only nine manufacturers that have identified such drugs to CMS within the first 5 years since this statutory requirement became effective. Therefore, we believe very few drug manufacturers will pay the 17.1 percent rebate based on the number of drug manufacturers that have identified such drugs to CMS. We also believe drug manufacturers will be able to easily identify such drugs based upon this final rule's definition of pediatric indication at § 447.502. Therefore, the requirement that drug manufacturers identify such drugs and pay the 17.1 percent rebate on drugs approved exclusively for pediatric indications does not add a measurable burden to drug manufacturers.
In section II.B.9. of this final rule, we discuss that manufacturers of certain drugs may choose to seek an exception to the requirement that drugs approved under an NDA, other than an ANDA, must be reported to the MDR program as single source or innovator multiple source drugs. We indicate that in such cases, for drugs that are reported to the MDR program prior to the effective date of the final rule, the manufacturer will have up to four quarters after the effective date of the final rule to submit, for CMS approval, materials to CMS demonstrating the basis of how the drug may be subject to the narrow exception to classify the drug as a noninnovator multiple source drug. While this exception process is subject to the requirements of the PRA, we believe it would affect relatively few manufacturers. Similarly, it should require very little evaluation or assessment on the manufacturer's part of whether the manufacturer believes the exception applies since the manufacturer should know the approval route under which the drug was approved; and the manufacturer should already have in its possession the necessary documentation to submit the exception request to CMS, if applicable. We are developing an information collection request for OMB review and approval. The public will have an opportunity to both review the information collection and submit comments. We plan to announce the information collection request under the required 60-day and 30-day
Under § 447.510(f)(1), a drug manufacturer is required to retain records for 10 years from the date the drug manufacturer reports data to CMS for that rebate period. While this requirement is subject to the PRA, we believe this is a usual and customary business practice as defined in 5 CFR 1320.3(b)(2) and, therefore, the associated burden is exempt from the PRA.
We received the following PRA-related comments regarding requirements for drug manufacturers. A summary of the comments along with our response follow.
Another commenter estimated that it would take 4 months and cost $250,000 to analyze how 25,000 existing customers should be categorized under the new AMP inclusions and exclusions; take 3 months and cost $500,000 for drafting new assumptions, policies, documents, and training employees and $4.2 million for reprogramming cost.
However, we have revised our estimates pertaining to the implementation of the revised definitions of AMP and best price under the existing presumed inclusion approach. Specifically, we have revised our estimates to reflect that reconfiguring the manufacturers' pricing systems to implement the AMP and best price definitions will require 1,200 hours per drug manufacturer, for a one-time total of 732,000 hours with a one-time total cost of $67,175,884 for 610 participating drug manufacturers. In addition to the one-time burden of
We will work with drug manufacturers regarding the collection of data they need from the territories to pay their rebates. We have accounted for the administrative and financial burden associated with the changes to the definitions of AMP and best price in the burden estimates in this section, and we considered the changes necessary to collect data on sales to territories to be included in these estimates. As previously noted in the Definition section of this final rule (section II.B.20.), the inclusion of the territories in the definitions of state and United States is effective 1 year after the effective date of the final rule. Therefore, the application of the MDR program to the territories is also effective 1 year after the effective date of this final rule; which we believe will enable the drug manufacturers to make the necessary changes in their systems.
The state requirements include the collection of rebates as well as changes to the reimbursement methodology based on AAC (as discussed in detail in sections II.J. and II.M. of this final rule) and the finalization of the FULs (as discussed in detail in section II.K. of this final rule).
Consistent with section 1927(b)(2)(A) of the Act, we proposed a new § 447.511 to clarify the reporting requirements for states (77 FR 5345 and 5366) addressing the data that the state must provide to participating drug manufacturers within 60 days of the end of each quarter; the requirement that states must submit this same data to CMS on a quarterly basis; and the requirement that states that have participating Medicaid MCOs, which include CODs in their contracts, must report data pertaining to drugs dispensed through those Medicaid MCOs separately from the data pertaining to drugs dispensed on a FFS basis.
As discussed in detail in section II.I. of this rule, we are finalizing § 447.511 (Requirements for States) as proposed (77 FR 5366). As such, states must report the total rebates (both fee-for-service and Medicaid MCO CODs) they receive from drug manufacturers onto the MBES CMS-64 form and submit this data to CMS on a quarterly basis. The information collection requirements and burden associated with CMS-64 for states and territories are approved by OMB under control number 0938-1265 (CMS-10529). Since this final rule does not impose any new or revised burden or reporting or recordkeeping requirements concerning CMS-64, a revised PRA package is not applicable.
We had also proposed (77 FR 5326) to revise the definition of the term “states” to include the territories (the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa), in addition to the 50 states and the District of Columbia. We also proposed to add a definition of “United States” to include the territories (the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa), in addition to the 50 states and the District of Columbia.
As discussed in detail in section II.B.20. of this rule, we are finalizing the definitions of state and United States to specify that territories will be added to these definitions effective 1 year after the effective date of this rule. As a result, the territories will able to receive drug manufacturer rebates through the MDR program in the same manner that the 50 states and the District of Columbia are currently receiving rebates, beginning 1 year after the effective date of this rule.
To begin collecting rebates from drug manufacturers, the territories must first come into compliance with the MDR program because the systems that the territories currently have in place are not set up for the MDR program. As a result, the territories will likely use contractors to ensure that their systems are in place to begin collecting rebates from drug manufacturers. In the proposed rule, we indicated that we were unsure of the time, effort, and cost for this compliance process and sought comments specific to this issue. A summary of comments we received pertaining to this issue are provided in this section along with our response.
Under § 447.502, we also proposed to replace the term, “estimated acquisition cost” (EAC) with “actual acquisition cost” (AAC) and to define AAC as “the agency's determination of the pharmacy providers' actual prices paid to acquire drug products marketed or sold by specific drug manufacturers” (77 FR 5320 and 5359). We also proposed to replace the term “dispensing fee” with “professional dispensing fee” as the drug ingredient cost is only one component of the two-part formula used to reimburse pharmacies for prescribed drugs dispensed to Medicaid beneficiaries (77 FR 5361). We also proposed to require states to reconsider the dispensing fee methodology consistent with the revised requirements (discussed in more detail at 77 FR 5326). As discussed in detail in sections II.B. and II.J. of this rule, we are finalizing the definitions of AAC and professional dispensing fee as proposed.
As discussed in detail in section II.K. of this final rule, upon consideration of the comments received, as well as a result of our ongoing analysis of the draft Affordable Care Act FULs in comparison with the monthly NADAC pricing files, we are making a revision to the methodology we will use to calculate the FUL. Specifically, the FUL will be calculated at an amount equal to 175 percent of the weighted average of the most recently reported monthly AMPs for pharmaceutically and therapeutically equivalent multiple source drugs, except where that amount is less than the average retail community pharmacies' acquisition cost for such drug products as determined by the most current national survey of such costs. In situations where the FUL is less than the average retail community pharmacies' acquisition cost, we will establish the FUL using a higher multiplier so that the FUL amount would equal the average retail community pharmacies' acquisition cost as determined by the most current national survey of such costs.
As a result of these changes, and as discussed in sections II.J. and II.M. of this final rule, states are required to consider both the ingredient cost reimbursement and the professional dispensing fee reimbursement when proposing changes to either or both of these components of the reimbursement for Medicaid covered drugs to ensure that total reimbursement to the pharmacy provider is in accordance with the requirements under section 1902(a)(30)(A) of the Act. In addition, states must submit to CMS the proposed change in reimbursement and the supporting data through a SPA through the formal review process.
We recognize that there will be some additional burden to the states to implement the new AAC and professional dispensing fee requirements as well as the new reimbursements for the FULs and other federal programs, such as 340B, IHS, and I/T/U. This burden may include the time and cost for administrative processes and requirements such as legislative and regulatory action, operational changes, and the submission of a SPA for formal review; therefore,
We received the following PRA-related comments regarding requirements for states, including comments pertaining to the costs associated with the territories coming into compliance with the requirements of the MDR program. A summary of the comments along with our response follow.
We recognize that there will be some additional burden to the states to implement the new AAC and professional dispensing fee requirements, as well as the new reimbursement requirements for the FULs and other federal programs, such as 340B, IHS, and I/T/U. This burden may include the time and cost for administrative processes and requirements such as legislative and regulatory action, operational changes, and the submission of a SPA for formal review; therefore, we are revising the state estimate for these burdens to include an additional 300 hours per state.
We have submitted a copy of this rule to OMB for its review of the rule's information collection and recordkeeping requirements. These requirements are not effective until they have been approved by the OMB.
To obtain copies of the supporting statement and any related forms for the proposed paperwork collections referenced above, access CMS's Web site at
We invite public comments on this rule's information collection requirements. If you would like to comment, please submit your comments to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: CMS Desk Officer, (CMS-2345-F) Fax: (202) 395-6974; or Email:
Comments must be received by March 2, 2016.
We examined the impacts 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 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). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated an “economically” significant rule, under section 3(f)(1) of Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget.
This final rule implements changes to section 1927 of the Act as set forth in sections 2501, 2503, and 3301(d)(2) of the Affordable Care Act, section 1927 of the Act as set forth in sections 1101(c) and 1206 of the HCERA, and section 1927 of the Act as set forth in section 202 of the Education Jobs and Medicaid Funding Act. This rule will also implement changes to section 1927 of the Act as set forth in section 221 of Division F, Title II, of the Appropriations Act. It also codifies other requirements in section 1927 of the Act pertaining to the MDR program and revised certain regulatory provisions presently codified at 42 CFR part 447, subpart I, and makes other changes concerning Medicaid prescription drug payments.
In the proposed rule, we estimated this final rule would save approximately $17.7 billion for federal fiscal years (FFYs) 2010 through 2014, reflecting $13.7 billion in federal savings and $4.0 billion in state savings (77 FR 5353). These impact estimates represented the increased percentages of rebates on generic and brand name drugs, the treatment of new formulations, the change in the maximum rebate amounts, the extension of rebate collection for Medicaid MCOs, and providing for adequate pharmacy reimbursement. Lastly, we estimated costs to Medicaid MCOs, drug manufacturers, and states in the amount of $81.4 million for FFYs 2010 through 2014 which included administrative and infrastructure expenses necessary to implement the required systems changes.
As discussed in detail in the introduction to section I of this final rule, the amendments made by subsections 2501(a), (b), (d) and (e) of the Affordable Care Act were effective January 1, 2010, and the amendments made by section 2501(c) of the Affordable Care Act were effective March 23, 2010. Furthermore, section 2503(d) of the Affordable Care Act specified that the amendments made by section 2503 of the Affordable Care Act were effective October 1, 2010, without regard to whether final regulations to carry out such amendments have been issued by October 1, 2010. However, as stated in a November 2014 Informational Bulletin, we have delayed the release the Affordable Care Act FULs and announced that we expect to release them at or about the same time that we publish the final rule. This informational bulletin can be found on the Medicaid.gov Web site at
The other amendments made by section 2503 of the Affordable Care Act, including the definitions of multiple source drug, AMP, retail community pharmacy, and wholesaler; as well as the requirement that drug manufacturers report, not later than 30 days after the last day of each month of a rebate period under the agreement, on the drug manufacturer's total number of units that are used to calculate the monthly AMP for each COD; and the requirement that the Secretary post, on a Web site accessible to the public, the weighted average of the most recently reported monthly AMPs for each multiple source drug were effective and implemented as of October 1, 2010.
As a result, the estimates for those sections already implemented are currently reflected in the Medicaid baseline projections.
As discussed in the Overall Impact section above, subsections 2501(a), (b), (c), (d), and (e) of the Affordable Care Act have been implemented, and are currently reflected in the Medicaid baseline projections. While publication of this final rule would not have an impact on subsections (a), (b), (c), or (e) of section 2501 of the Affordable Care Act, we expect the following impacts to section 2501(d) of the Affordable Care Act.
We note that the final rule contains two modifications that would affect the administration of section 2501(d) of the Affordable Care Act, which requires a change in the rebate formula for line extension drugs. First, as discussed in sections II.B. and II.G. of this final rule, at this time we are not finalizing the regulatory definition of a line extension drug. Instead, manufacturers will rely on the statutory definition of line extension at section 1927(c)(2)(C) of the Act, and where appropriate, are permitted to use reasonable assumptions in their determination of whether their drug qualifies as a line extension drug. In addition, as discussed in section II.G. of this final rule, we are finalizing the requirements of § 447.509(a)(4)(i), which specifies the rebate calculation requirements for line extension drugs. Second, the final rule requires drug manufacturers of line extension drugs to calculate the alternative rebate only if they also manufactured the initial brand name listed drug, or have a corporate relationship with the drug manufacturer of the initial brand name listed drug. We are finalizing this requirement at revised § 447.509(a)(4)(ii). We will rely upon the manufacturers to determine which drugs meet the definition of a line extension, and when the alternative rebates apply.
We are not able to quantify the impact that the decision to not finalize the regulatory definition of line extension drug will have on the rebates that were originally estimated to be collected due to this rule. We also believe that the impact of the provision about related drug manufacturers would have a small impact, and the total effect on Medicaid payments is smaller than can be credibly estimated.
Section 2503(a), which revised section 1927(e) of the Act to require that the Secretary calculate a FUL for certain multiple source drugs, has been delayed in implementation since the original passage of the Affordable Care Act. In the proposed rule, we proposed to calculate the FUL at 175 percent of the weighted average (determined on the basis of utilization) of the most recently reported monthly AMPs for pharmaceutically and therapeutically equivalent multiple source drug products that are available for purchase by retail community pharmacies on a nationwide basis. The calculation of the FUL using this methodology was projected to reduce net costs through average reduction in prices paid to pharmacies. However, in this final rule we are establishing an exception option to calculating the FUL, whereby we are making a revision to calculate the FUL at an amount equal to 175 percent of the weighted average of the most recently reported monthly AMPs for pharmaceutically and therapeutically equivalent multiple source drugs, except where that amount is less than the average retail community pharmacies' acquisition cost for such drug products as determined by the most current national survey of such costs. In situations where the FUL is less than the average retail community pharmacies' acquisition cost, we will establish the FUL using a higher multiplier so that the FUL amount would equal the most current average retail community pharmacies' acquisition cost as determined by the most current national survey of such costs.
Our analysis was based on the drug utilization and price data for December 2013, which was the most recent period prior to the Medicaid eligibility expansion. The projected impact of implementing the FULs is consistent with the projections of Medicaid expenditures in the President's FY 2016 Budget. Based on previous modeling of the impact of FULs to Medicaid and a measurement of the weighted average price difference for such drugs, we estimate that the impact of applying the NADAC as a lower bound to FUL calculations would reduce the savings impact of the FULs. This reduction was about 1.6 percent, which is very similar to the results that GAO found (1.4 percent) in a recent study on Medicaid prescription drugs (“Medicaid Prescription Drugs: CMS Should Implement Revised Federal Upper Limits and Monitory Their Relationship to Retail Pharmacy Acquisition Costs,” GAO, December 2013).
We believe that the revised process to calculate the FUL, as stated in this section, will provide a more reliable and credible benchmark for states as they apply the FUL aggregate upper limit. Table 3 provides the estimated savings of the FULs policy being finalized in this final rule.
These estimates rely on assumptions about prescription drug utilization and prices, including the assumption that there would be no change in the behavior of the manufacturers for their decisions to develop new treatments or modify prices to account for the Medicaid drug rebate. Changes in the utilization and prices of prescription drugs in the future (including new prescription drugs coming to the market) may lead these savings to be greater than or less than projected here. Furthermore, these projections rely on assumptions and projections of future Medicaid expenditure and enrollment growth, which may vary from the projections in the President's Budget.
As discussed earlier in the final rule (sections II.B, J. and M) we are replacing the term “dispensing fee” with “professional dispensing fee” and are revising § 447.518(d) to provide that, when states are proposing changes to either the ingredient cost reimbursement or professional dispensing fee reimbursement, they are required to consider both the ingredient cost reimbursement and the professional dispensing fee reimbursement when proposing changes to either or both of these components of the reimbursement for Medicaid covered drugs to ensure adequate pharmacy reimbursement. However, as discussed in section II.M. of this final rule, there is no requirement that states perform a state-specific cost of dispensing survey.
Since states have several options when reviewing and adjusting their professional dispensing fee (including using a neighboring state's survey results, conducting their own survey, or using survey data from a prior survey [within a reasonable timeframe]), we have no way to definitively estimate the number of states that will actually choose to perform individual state surveys. There are many factors and variables that need to be taken into consideration when trying to determine a cost estimate for a state to perform a cost of dispensing survey. For example, not only will the size of the state (geographic as well as population) impact the cost, but other variables such as the elements included in the scope of work and the number of pharmacies involved in the survey will impact the cost. Based on the limited information we received from comments and a contractor who performs such studies, we estimate that a cost of dispensing survey and study could range from $30,000 to $150,000 depending on the scope of work, number of pharmacies involved in the survey and the size of the state. Taking into consideration that ten states have already implemented a reimbursement methodology using AAC and a professional dispensing fee and another two states are currently in the process of having their state plans reviewed by CMS to make this transition, the field drops from 56 (states and territories) to 44 (states and territories) that will have to evaluate their cost of dispensing and may choose to do so by conducting a state-specific cost of dispensing survey. Based on the limited information available, the potential range of the cost in conducting the dispensing survey could be from $0 (if no states choose to conduct a cost of dispensing survey) to $6,600,000 (if all 44 states conduct a cost of dispensing survey that costs $150,000). However, since we cannot accurately estimate how many states will choose to conduct a state-specific cost of dispensing survey, we have not included this estimate in the ICRs found in section III. of this final rule, nor are the estimates accounted for in tables 2 or 4 of this final rule.
As discussed earlier in this rule (section II.B), we are revising the definitions of “states” and “United States” to include the U.S. territories (the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa). We have delayed the inclusion of the territories in the program for one year to give territories and manufacturers time to make necessary system changes and develop the mechanisms and processes necessary to comply with the requirements of the Medicaid drug rebate program. We also will consider allowing a territory to use existing waiver authority to elect not to participate in the MDR program consistent with the statutory waiver standards.
As such there are many complicating factors that make it difficult to provide an accurate estimate of the voluntary start-up and ongoing operational costs for the territories that will participate in the MDR program. First, we do not know which of the territories will participate in the MDR program and which will seek a waiver from participation. Second, each territory is unique in how it is funded and operates. Third, we are unaware of the existing infrastructure of each territory. Furthermore, we only received one comment that contained an estimate of $500,000 to $900,000 for the start-up costs for Puerto Rico and another comment which estimated a minimum annual expense of $500,000 in operating costs for the territories.
Additionally, the number of beneficiaries served, the structure of each territory's Medicaid program, as well as the factors discussed above, are just some of the reasons why it is difficult to accurately provide a reliable quantitative analysis of the economic impact on the territories if they were to participate in the MDR program. Therefore, we believe it is appropriate to instead provide the following qualitative assessment of the benefits that the territories might see if they participate in the MDR program. One benefit that a territory which participates in the MDR program will realize is a savings in providing coverage of prescription drugs to Medicaid beneficiaries through the receipt of rebate payments. It is our understanding that at least some of the territories already have agreements with some manufacturers to provide rebates on certain brand name prescription drugs. These agreements are operated outside of the MDR program and do not encompass the full range of drugs covered by the MDR program. Therefore, a territory that participates in the MDR program will have access to rebates on a much larger number of drugs than they currently do, including physician-administered drugs and drugs dispensed through MCOs. While we are unable to quantify the savings benefit the territories would realize from this, we would expect the savings to be beneficial simply for the fact that a greater number of drugs would be eligible for rebates. Territories, as with the other states, would also be able to negotiate supplemental rebate agreements with drug manufacturers to obtain even greater savings. The availability of rebates on more drugs will result in savings for the territories, which will likely free up some currently constrained resources to provide a greater number of beneficiaries with access to needed drugs. While territories will retain their ability to develop their own preferred drug list, they will also have access to rebates on any covered outpatient drug provided to a Medicaid beneficiary.
We understand that each territory will have to consider the size and makeup of
Since we do not know how many of the territories will participate in the MDR program, nor can we accurately estimate the startup costs or ongoing operational expenses for the territories that participate in the MDR program, we have not included these estimates in the ICRs found in section III. of this final rule, nor are the estimates accounted for in tables 2 or 4 of this final rule.
Table 4 provides a cost estimate to drug manufacturers and states for FFYs 2016 through 2020 based on the burden estimates discussed in the Collection of Information section (section III.) of this final rule.
As previously indicated in Collection of Information section (section III.) of this final rule, there are approximately 610 drug manufacturers that participate in the MDR program. The final rule requires all drug manufacturers to provide an increased rebate percentage for generic and brand name drugs.
Section III. of this final rule provides the detailed breakdown of the burden associated with drug manufacturer's participation in the Medicaid Drug Rebate program. This burden includes the time and cost for drug manufacturers to gather, calculate, and report pricing (AMP and/or best price) and unit information associated with their drug sales on a monthly and quarterly basis. As previously discussed in section III. of this final rule, the one-time total burden hours for the 610 drug manufacturers participating in the MDR program to reconfigure pricing systems is estimated to be a total cost of $67,175,884. In addition, we now also estimate a one-time start-up cost to include the cost of training drug manufacturer staff on the new, reconfigured pricing systems to be a total cost of $234,669,440. These estimates are accounted for in Table 2, as well as Table 4.
For each of their products, drug manufacturers also are required to submit the FDA application number issued by FDA when the product is approved. If the product does not currently have an FDA application number, the drug manufacturer must provide either evidence that the product is a COD, or the COD status. As specified in section III., the requirements and burden to report the FDA application number and, if applicable, the COD status code have been approved by OMB under control number 0938-0578 (CMS-367), and therefore, are not accounted for in the estimates provided in Tables 2 and 4.
In addition, we believe that it will take time for drug manufacturers to identify the drugs that fall into 5i drug categories. As previously discussed in section III. of the final rule, the burden for the one-time reporting requirement for all drug manufacturers to identify 5i drugs to CMS through the DDR system have been approved by OMB under control number 0938-0578 (CMS-367), and therefore, are not accounted for in Tables 2 or 4.
In addition to this one time reporting requirement to identify 5i drugs, in accordance with § 447.507(b)(1) of this final rule, the drug manufacturer is required to determine whether the percentage of sales for the 5i drugs has met the threshold to be considered not generally dispensed through a retail community pharmacy on a monthly basis. This is estimated to be an annual cost of $20,851,020. The requirements and burden estimates will be submitted to OMB for approval under control number 0938-0578 (CMS-367) and are accounted for in Tables 2 and 4.
Lastly, as previously discussed in section III. of the final rule, the new one-time burden for all 610 drug manufacturers to complete the new reporting requirements to report the Line Extension Drug Indicator is estimated to be a total cost of $1,407,550.60. In addition, for the drugs that have been determined to be a line extension product, the new annual burden for all 610 drug manufacturers to complete the quarterly reporting of the initial brand name listed drug and the line extension drug is estimated to be a total cost of $4,675,528. The requirements and burden estimates will be submitted to OMB for approval under control number 0938-0578 (CMS-367) and are accounted for in Tables 2 and 4. Additional information on these reporting requirements for drug manufacturers can be found in sections II.C., II.G., and II.H., as well as section III. of this final rule.
We received the following comments on the anticipated effects on drug manufacturers:
Several commenters provided adjustments and specific cost estimates that drug manufacturers would be likely to incur should the buildup methodology be implemented. One commenter stated that CMS considered only the cost and time of drug manufacturers' computer analysts, at one flat rate ($60/hour), however they anticipate the need for a dedicated team of ten full-time contract IT professionals at a significantly higher rate. One commenter believed that CMS has grossly underestimated the amount of time that it would take for drug manufacturers to understand and implement these new requirements and they estimate that the costs associated with implementing the proposed changes to be approximately $2.8 million to $6.5 million, respectively. One commenter stated that they would require at least one year to implement the proposed rule at a cost of at least $6.85 million, including $2.65 million for upfront costs and an additional $4.2 million for reprogramming costs. Another commenter compared their costs to implementing the DRA final rule, in which their cost for outside consulting services and IT support was approximately $8 million. The commenter noted that they had approximately 15 full-time employees dedicated to implementing the DRA Final Rule over a more than 2-year period. Given the far greater scope of CMS's current proposals, the commenter believed implementing them would impose even greater costs and burdens on drug manufacturers.
One commenter stated that small or mid-sized drug manufacturers have estimated that it would take between 3 and 12 months to become fully compliant with the proposed rule, and large drug manufacturers have estimated that it would take between 12 and 24 months to become fully compliant. They also state that the time and resources already spent reviewing and understanding the proposed rule exceeds CMS's implementation cost estimates. One commenter stated that switching to a buildup methodology would drastically increase compliance burdens and would require millions of dollars of extra compliance costs.
Another commenter supplied several estimates that the different sectors within their company (government price reporting team, finance department, product teams, legal experts, and outside consultants) would incur. They stated it will take their stakeholders 3 months analyzing and interpreting the final rule to finalize the new AMP and best price calculation methodologies and cost over $400,000; they estimated they would need 12 months to replace the default rule with a buildup methodology in their systems, including analysis, reprogramming, and testing and validation time and estimate the costs associated with the changes to be $3.6 million; they estimated their stakeholders will need to research data limitations and potential remediation strategies for their wholesaler data in connection with the proposed abandonment of the default rule, and develop a solution for implementing the new rule, which they estimated will take 12 months and cost $1 million, not including the costs of contract IT professionals and additional costs to purchase data that may be available (should CMS seek to require drug manufacturers to purchase data on wholesaler re-sales); and they estimated that many of their stakeholders will work to draft new reasonable assumptions, policies, and procedural documents, and train employees on the same, which could take an additional 3 months and cost approximately $500,000.
Another commenter stated that it estimated the costs to reconfigure pricing systems and perform AMP and best price calculations correctly under the proposed rule to be approximately $0.3 million to $1.7 million per small or mid-sized drug manufacturer and $0.5 million to $6.8 million per large drug manufacture. One commenter stated that they estimated their cost to update their systems to accommodate a presumed inclusion would be at least $1 million plus internal resources estimated at 2,000 hours.
Another commenter noted that its company would incur one-time costs up to 450 times the costs identified by CMS, with a total between approximately $0.3 million and $1.7 million for small or mid-sized companies and from $1.5 million to $6.8 million for large companies. The commenter stated that these “one-time efforts” will impose substantial costs because the complete data necessary to perform the calculations do not currently exist and, if they are possible to acquire, they will either have to be obtained from a third party or will have to be created by manipulating and adding to several existing internal data sets. Another commenter stated they would incur ongoing costs associated with processing and validating third party data that may be needed due to the reversal of the default rule (if the data are even available).
The commenter also stated that the ongoing costs of processing (including determining whether new customers are retail community pharmacies), validating, and checking/reconciling third party data are estimated to be approximately $150,000 for small or mid-sized drug manufacturers and $250,000 to $350,000 for large drug manufacturers. Finally, the commenter stated that CMS did not anticipate nor include in its estimates, that drug manufacturers will incur any one-time or ongoing capital costs to comply with the new regulations.
Another commenter agreed that the one-time costs that CMS has identified for reporting FDA application number
Therefore, we will not require drug manufacturers to calculate two base date AMPs. Further discussion of the base date AMP and its application to 5i drugs is included under the Base Date AMP section of the final rule. In addition to the statutory requirement for a single base date AMP, we believe that two base date AMPs will not be necessary.
Also, our decision to allow drug manufacturers to continue using a presumed inclusion approach when determining AMP, along with the addition of the smoothing process for determining when a drug is not generally dispensed through a retail community pharmacy will likely result in drug manufacturers not experiencing the erratic changes in calculated AMPs that they anticipated. Therefore, the system and staff changes associated with the monthly determinations and reporting will not be as onerous on drug manufacturers as the commenters predict.
A few commenters further stated that imposing the penalty on a per drug basis, as well as a per day basis, would disproportionately penalize generic drug manufacturers because they tend to offer more extensive product lines than do branded houses and in some instances would be arguing for penalties that are so large as to be unreasonable and unconscionable. The commenter continued by requesting that CMS revise the proposed rule to more closely track the statute, and thereby, avoid the potential for extremely large fines that would unduly burden the generic industry with one commenter specifying that for a company with many products, the cost of uploading the monthly AMP file one day late would be well over $10 million.
Several commenters stated that the proposed Regulatory Impact Analysis severely underestimated the amount of resources that would be required to implement an expansion of the MDR program to the territories. Many commenters stated that this expansion would pose significant financial burden for drug manufacturers as it will require alterations to existing systems and collection of data not currently captured. A few commenters stated that they would incur expenses through the engagement of external auditors in evaluating the accounting practices of wholesalers in Puerto Rico and the territories.
Several commenters stated that drug manufacturers would see an increase in their administrative burden, with one commenter stating that processing invoices for five additional jurisdictions would result in an approximate 10 percent increase of their current administrative burden in preparing the quarterly MDR program remittance advices. Several commenters also stated that the administrative burden of such an expansion would be significant since some companies would have to reconfigure their government pricing and/or financial management systems to permit them to capture territory sales in their AMP and best price calculations and all would face higher rebate invoice processing costs. One commenter estimated that it will take approximately nine months and cost roughly $500,000, not including programming costs, for their stakeholders (government price reporting team, finance department, product teams, legal experts, and outside consultants) to understand how to capture the necessary data and modify our price reporting systems to include sales and units to U.S. territories.
A few commenters stated that CMS should not require drug manufacturers to include the territories in their AMP and best price calculations because of the enormous burden and compliance concerns that such an expansion would pose. One commenter added that increased operational costs for generic drug manufacturers will inevitably impact health care consumers and public and private payers. One commenter in particular remarked that the inclusion of sales in best price would create a financial hurdle that could result in fewer products reaching patients, as drug manufacturers would be forced to terminate deeply discounted sales that would, under the proposed rule, become eligible for inclusion in best price calculations. A commenter stated that CMS should permit drug manufacturers to exclude from best price the differential in prices between mainland prices and price-controlled prices in the territories as these price differentials can have a significant and detrimental effect on a drug manufacturer's best price.
Retail community pharmacies will be affected by this regulation, because it will result in FULs that are closer to the acquisition cost of the drug. In a 2009 OIG report titled “A Comparison of Medicaid Federal Upper Limit Amounts to Acquisition Costs, Medicare Payment Amounts, and Retail Prices,” the OIG found that for the fourth quarter of FY 2007 the pre-DRA FUL reimbursement was more than double the average pharmacy acquisition cost for 46 of the 50 highest expenditure FUL drugs. In the proposed rule, we stated that the Affordable Care Act FULs will generally reduce those limits in comparison to the highly inflated pre-DRA FULs and, thereby, reduce Medicaid payment for drugs subject to the limits. However, we noted that many states have implemented MACs, which were likely lower than the pre-DRA FUL amounts and provided an example of this as exemplified in comparing the pre-DRA FUL, the Affordable Care Act FUL and Indiana's SMAC, as explained the preamble of § 447.514 of the proposed rule (77 FR 5355).
However, other than the comparison chart provided in the discussion regarding proposed § 447.514 (77 FR 5348), we did not analyze how each state's MAC program will impact the total savings under the new Affordable Care Act FUL methodology. Therefore, we invited public comments on this impact. The estimated federal savings associated with the proposed rule implementing section 2503 of the Affordable Care Act, as specified in the proposed rule, reflected this change in reimbursement for retail community pharmacies. Additionally, in the proposed rule (77 FR 5355), we specified that although there are savings to the Medicaid program largely realized because of lower payment to pharmacies, pharmacies may receive a higher reimbursement under the Affordable Care Act FUL than they will when compared to what states currently reimburse pharmacies.
As discussed in detail in section II.K., upon consideration of the comments received, as well as a result of our ongoing analysis of the draft Affordable Care Act FULs in comparison with the monthly NADAC pricing files, we are making a revision to calculate the FUL at an amount equal to 175 percent of the weighted average of the most recently reported monthly AMPs for pharmaceutically and therapeutically equivalent multiple source drugs,
Additionally, in the proposed rule, at § 447.502, we proposed to replace the term, “estimated acquisition cost” (EAC) with “actual acquisition cost” (AAC) and to define AAC as “the agency's determination of the pharmacy providers' actual prices paid to acquire drug products marketed or sold by specific drug manufacturers” (77 FR 5320 and 5359). We believe that this revision would give states the flexibility to establish a more accurate methodology for establishing prices, while assuring access, consistent with section 1902(a)(30)(A). Furthermore, in the proposed rule at § 447.502 we proposed to replace the term “dispensing fee” with “professional dispensing fee” as the drug ingredient cost is only one component of the two-part formula used to reimburse pharmacies for prescribed drugs dispensed to Medicaid beneficiaries (77 FR 5361). We also proposed to require states to reconsider the dispensing fee methodology consistent with the revised requirements (discussed in more detail at 77 FR 5326). As discussed in detail in sections II.B. and II.J. of this final rule, we are finalizing the definitions of AAC and professional dispensing fee as they were proposed. We received the following comments on the anticipated effects of these policies on retail community pharmacies:
This final rule is not designed to mandate state payment rates. We set aggregate upper limit requirements, and as we stated in the proposed rule, states have the flexibility to establish an AAC reimbursement in their state plan based on several different pricing benchmarks, for example, the NADAC files, a state survey of retail pharmacy providers, or AMP-based pricing (77 FR 5350). States have the responsibility to ensure that Medicaid pharmacy providers are adequately reimbursed and to establish payment rates in their state plan consistent with such requirements. To the extent that entities have concerns with prices established under a state's AAC methodology, those concerns should be raised to the state, especially given that states are responsible for setting payment rates and complying with a public notice process when setting those rates.
Another commenter stated that an annual adjustment to the fee must be made to cover increased operating costs and that dispensing fees should account for the practice type of a specialty pharmacy (for example, a pharmacy that provides factor replacement products) because these pharmacies will have significantly higher operating costs per prescription than that of a traditional retail pharmacy.
One commenter noted that the current reimbursement fee for insurance companies is between $1.00 and $3.00. The commenter stated that this is not enough for pharmacies to survive on and requested that CMS consider this as it finalizes its policies.
Another commenter stated that margins are already below a level that community pharmacies can remain viable and going to a net cost model will only further shrink those margins and limit access to pharmacists that have the time to provide real patient care. Another commenter stated that there is increased demand for professional interventions, documentation, responsibilities, technologies, inventories, safety measures, and those increases can no longer be absorbed by the provider. Several commenters indicated that increasing the dispensing fees must follow the other increases and stated that without an increase in fees, the patient will be put in a position of risk. Another commenter requested that
Several commenters commended CMS's recognition that reimbursement for drug ingredient costs and professional dispensing fees must be adjusted in tandem. The commenter was concerned, however, that the discussion of professional fees and costs of dispensing studies do not contemplate the need for reasonable margins that for-profit companies need to sustain their businesses and invest in quality, safety and efficiency improvements. The commenter requested that CMS strengthen its oversight of SPAs to ensure that once states adopt AAC, they cannot unilaterally reduce dispensing fees without a follow-up cost-to-dispense study.
Another commenter stated that because so few providers are willing to participate in the Medicaid program due to low reimbursement, new Medicaid beneficiaries will rely on safety net providers as their only access point for primary and preventative care. The commenter stated that this will present a fiscal challenge for those health centers which already do not receive sufficient reimbursement from Medicaid to cover the costs of delivering healthcare. One commenter stated that if cuts to pharmacy reimbursement happen, then over half the pharmacies in the country will close because they are already seeing reimbursement rates below cost and believe that further cuts will also cause the rural pharmacists to close.
One commenter stated that it shares CMS's view that the dispensing fee should reflect the actual costs of pharmacists services tied to dispensing the product. The commenter urged CMS to require the states to factor in the operational costs associated with providing pharmacy services as part of the professional dispensing fee calculation and suggested that at the very least, the following five factors should be included: Prescription department payroll; prescription department costs; facilities costs; other store/location costs; and corporate costs allocated to prescription department.
Another commenter stated that currently in one particular state, pharmacies have been losing money on generically filled prescriptions simply because the federal upper limit pricing has not been updated to reflect market price increases. This is in spite of the state currently having a higher dispensing fee than most states, due to a recent increase from a cost to dispense survey.
In accordance with longstanding Federal regulations, the FULs are designed as an aggregate upper limit to give states flexibility to establish payment rates and adjust those rates for individual drugs consistent with those aggregate limits.
We have cited examples in the proposed rule (77 FR 5350) that the states can use to develop or support an AAC. States retain the flexibility to establish an AAC reimbursement based on several different pricing benchmarks, but they have the responsibility to ensure that Medicaid pharmacy providers are adequately reimbursed in accordance with the requirements of section 1902(a)(30)(A) of the Act.
Further, as discussed in detail in section II.M., we are revising § 447.518(d) to specify that when states are proposing changes to either the ingredient cost reimbursement or professional dispensing fee reimbursement, they are required to review their proposed changes in accordance with the revised requirements of this final rule, and states must consider both the ingredient cost reimbursement and the professional dispensing fee reimbursement when proposing such changes. Furthermore, states must utilize adequate data, including, but not limited to, data from a state or national survey of retail pharmacy providers or other reliable data, to support any proposed changes to either or both of the components of the pharmacy reimbursement methodology.
The commenter continued that these findings reinforce their concerns that CMS's proposed rule does not properly take into consideration the impact that reduced reimbursement will have on the small independent community pharmacy, many of which continue to purchase generic drugs at a premium of up to 50 percent relative to national chains. The commenter stated that most of these small pharmacies are located in rural communities where many Medicaid patients reside, and over 1,000 of these pharmacies are the sole pharmacy in their community. Furthermore, the commenter stated that 92 percent of these pharmacies' revenues are derived from prescription drugs, with 16 percent of this revenue coming from Medicaid. The commenter stated that further cuts to Medicaid revenues will force many of these small rural pharmacies to close their doors, negatively impacting the very patients that CMS purports to represent.
The commenter continued that to illustrate the competitive disadvantage that small community pharmacies face, they conducted an analysis of the negative impact from these reimbursement changes. The commenter analyzed the six draft FUL lists that have been issued to date by CMS. In almost every monthly draft list, more than one third of all products with FULs are lower than independent community pharmacy acquisition costs. The commenter cannot assume that states will reimburse pharmacies above their MACs, so the commenter assumed that products where the FUL is higher than pharmacies' costs, that states would drop the FULs to the state MAC.
The commenter applied these new FULs to a market basket of Medicaid drugs that are typically dispensed by a common independent community pharmacy for each month. They looked at the impact on low, medium, and high volume pharmacies. The commenter stated that the results illustrated that in most cases, pharmacies lost anywhere from a third to 40 percent of their Medicaid revenues, and such revenue losses are not sustainable. The commenter further notes that the closure of these small community pharmacies will result in increased costs for Medicaid because these pharmacies have a well-established records of dispensing lower priced generic drugs and providing face-to-face counseling which increases medication adherence, leading to fewer hospital visits. The commenter stated that CMS appears insensitive to the needs of small businesses in this proposed regulation.
We note that, as discussed previously and in the proposed rule (77 FR 5347), this final rule is not designed to mandate state payment rates. Therefore, states have the discretion to adjust reimbursement on a drug-by-drug basis using pricing benchmarks, such as the NADAC pricing file, or other reliable data, to adjust reimbursement, as long as such payments are consistent with the state plan.
States share in the savings from this final rule. As noted in the Table 3, we estimate a 5-year state savings of approximately $1.125 billion due to the implementation of the FULs as revised in this final rule. We also note states have already been impacted by the provisions of this regulation by the inclusion the requirement that, consistent with section 1927(b) of the Act, as amended by section 2501(c) of the Affordable Care Act, participating drug manufacturers must pay rebates for covered outpatient drugs dispensed to individuals enrolled in Medicaid MCOs if the MCO is responsible for coverage of such drugs. Per the effective date mandated by the Affordable Care Act, this provision was effective as of March 23, 2010. Furthermore, as noted earlier in this section, state administrative costs associated with this regulation are estimated at $800,000 to implement the reimbursement methodologies being finalized in this final rule.
As stated earlier in section III., this final rule does not impose any new or revised reporting or record keeping requirements concerning CMS-64. Also, as a result of the increased rebate amounts under the national rebate agreement, drug manufacturers may reduce rebates they pay to states through supplemental rebate agreements. While this potential loss of supplemental rebates is not a direct consequence of this proposed rule, we recognize that this may occur due to the statutory change to the rebate amounts in 1927(c) of the Act.
We received the following comments on the anticipated effects on State Medicaid programs:
The commenters requested that CMS reconsider the definition of line extension products to preserve state supplemental rebate arrangements and patient access to combination products. Another commenter stated that as proposed, this rule reduces states' supplemental rebates, which would be further exacerbated by the retroactive implementation of the regulation, and would impact prior federal rebate amounts previously determined and owed by the state. Commenters noted that this loss of supplemental rebates is not detailed in the proposed rule's Regulatory Impact Analysis and that the statement of need's estimated savings of $1.6 billion to the program for line extensions does not account for supplemental rebates that will be lost by states as a result of line extension penalties. Commenters requested that CMS revise its analysis to note that the line extension penalty reduces the share of rebates to states, thereby increasing their cost share for drugs above and beyond the normal arrangement.
Another commenter requested that CMS consider establishing a reasonable percentage of rebates that states could retain to reflect the costs incurred in complying with these Medicaid MCO requirements, especially for products for which states are not receiving any rebates. Commenters requested that CMS revise its analysis that the rule would not impose additional costs to states since the collection of Medicaid MCO rebates imposes system changes, programming, and staffing burden to bill for and collect rebates, as well as burden of mediating disputes. The commenter also noted that there is a cost associated with retraining staff or contracting with a vendor to complete these activities.
One of the commenters further estimated that the cost associated with collection of Medicaid MCO rebates appears to be underestimated by approximately $100,000 annually and that this amount may vary by state.
Another commenter requested that CMS provide states with flexibility under the revised reimbursement regulations to allow state-specific approaches to implementation because without this flexibility, the commenter expected its reimbursement expenditures to increase.
The commenter continued that it will take up to 2 years to solicit a Request for Proposal (RFP) for a pharmacy invoice audit, conduct the audit, make system changes, and update the state plan and administrative rules. The commenter stated that it would be less burdensome for them to work directly with the drug manufacturers to obtain the actual costs the drug manufacturer charges for each drug.
As discussed in the Definition section of this final rule (section II.B.20.), the definitions of the terms “states” and “United States” will be revised to include the territories: The Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, in addition to the 50 states and the District of Columbia. The territories will be able to receive manufacturer rebates through the MDR program in the same manner that the 50 states and the District of Columbia are currently receiving rebates.
For territories to be able to begin collecting rebates from the manufacturers, the territories will be required to come into compliance with the MDR program because the computer systems that the territories currently have are not setup for the MDR program. As a result, these territories will likely have to utilize contractors to ensure that their computer systems are in place to begin to collect rebates from manufacturers. As specified in the proposed rule (77 FR 5356), we do not have cost estimates for this compliance process to be completed and solicited comment specific to this issue. We received the following comments on the anticipated effects on U.S. territories:
Another one of these commenters noted that a specific territory would need to take several actions to ensure compliance with the requirements of the final rule including upgrade its current computer systems and estimated the cost at $500,000 to $900,000 to hire a contractor to perform the upgrades. Another commenter stated that CMS did not consider the costs to the territories of implementing a rebate system for territories and stated that it estimated these costs at a minimum of $500,000 annually.
As discussed in the Definition section of this final rule (section II.B.20.), while federal matching dollars are not specifically addressed in the proposed rule, we will work with the territories that participate in the MDR program, and address any questions they have regarding the need to claim administrative costs associated with the MDR program. Furthermore, as stated in the Definition section of this final rule (section II.B.20.), the definitions of “states” and “United States” will be revised by including the territories 1 year after the effective date of the final rule.
We considered a number of different policies and approaches during the development of the final rule.
As mentioned in the Determination of AMP section of the proposed rule (77 FR 5334), a goal of the Affordable Care Act is to capture the AMP for those drugs that will be difficult for manufacturers to calculate an AMP based on only retail community pharmacy sales. Therefore, to eliminate any problems that may result from a manufacturer not able to determine an AMP for a particular drug, the Congress amended the Affordable Care Act to include an exception for inhalation, infusion, instilled, implanted, or injectable drugs that are not generally dispensed through retail community pharmacies. In this final rule, we considered whether we need to define and determine which drugs constitute 5i drugs. Also, we looked at Medicare Part B drugs and considered using their list to define these drugs. However, as discussed in the proposed rule (77 FR 5334), the ASP NDC-HCPCS crosswalk file includes drug which do not meet the 5i criteria, specifically, oral drugs covered by Part B following a transplant as well as oral anti-emetics and oral cancer drugs (
We proposed to use a multistep process to identify if the drug is not generally dispensed through a retail community pharmacy. To recap, drug manufacturers would identify which
With regard to the offset of the increased rebate percentages, as discussed in the proposed rule (77 FR 5342), we considered offsetting the non-federal share of the entire difference between the minimum rebate percentages in effect on December 31, 2009 and the new minimum rebate percentages in effect under Affordable Care Act, regardless of whether states received a rebate amount based on the difference between AMP and best price. However, after careful consideration of the provision in 2501 of the Affordable Care Act, we will finalize that the offset amount will be calculated to reflect rebates based on the difference between AMP and best price.
As discussed in the proposed rule (77 FR 5342), we also considered a different interpretation in calculating the offset for line extension drugs in the September 28, 2010 State Medicaid Director (SMD) letter, #10-019. In the SMD letter, we stated that for a drug that is a line extension of a brand name drug that is an oral solid dosage form, we planned to offset only the difference in the additional rebate of the line extension drug based on the calculation methodology of the additional rebate for the drug preceding the requirements of the Affordable Care Act and the calculation of rebates for the line extension drug, if greater, in accordance with the Affordable Care Act. However, after further review of section 1927(c)(2)(C) of the Act, we proposed in the proposed rule to offset the difference between the URA for the drug calculated based on the applicable rebate percentage in section 1927 of the Act prior to the Affordable Care Cat and the calculation of the URA for the line extension drug, if greater, in accordance with the Affordable Care Act. We are finalizing the calculation of the offset provisions for line extension drug as proposed as we believe that this calculation is more aligned with the statute.
In the proposed rule (77 FR 5345), we also considered determining whether there would be a cost or savings in implementing the Affordable Care Act FUL by comparing simulations of the DRA FUL and new Affordable Care Act FUL, using price, utilization, and reimbursement data from the MDR system combined with generic group codes from First Data Bank. The difference in savings from these simulations (expressed as a percent of total Medicaid drug spending) was applied to projected Medicaid prescription drug spending developed for the mid-session review of the FY 2010 Budget, resulting in a 5-year federal and state cost of $1.7 billion for the Affordable Care Act FULs compared to the DRA FULs. However, this alternative did not take into account a state's ability to choose to reimburse at the state MACs, which may be lower than the FUL for a drug. As a result, this alternative/methodology yields a cost to the states and federal government, when in actuality it should reflect a savings as many states have implemented their own state MAC and reimburse below the FUL. In addition, the DRA FUL was never implemented and therefore this alternative was based on unpublished FULs and not representative of actual reimbursement.
In the proposed rule (77 FR 5356) we solicited comments pertaining to the alternatives considered in drafting the proposed rule. We address comments pertaining to the alternatives considered for identification of 5i drugs that are not generally dispensed through retail community pharmacies in the Determination of AMP (section II.C.7.) of this final rule. Furthermore, we address comments pertaining to the alternatives implementing the Affordable Care Act FUL in the Upper Limits for multiple source drugs (section II.K.) of this final rule. Comments pertaining to calculating the offset for line extension drugs are addressed in the Treatment of new formulations section (section II.G.2.) of this final rule.
As required by OMB's Circular A-4 (available at
In the proposed rule, we estimated savings from this regulation of $17.7 billion over 5 years (2010 through 2014), $13.7 billion to the federal government and $4.0 billion to the states (77 FR 5353). Most of these savings resulted from the increased rebate percentages on brand name drugs and the offsets of the total savings of the increased rebate percentage, treatment of new formulations, and from the collection of rebates from enrollees of Medicaid MCOs, all of which have been in effect since 2010 and are already accounted for in the Medicaid baseline. We estimate the savings from the implementation of the FULs as revised in this final rule of $2.735 billion over 5 years (2016 through 2020), $1.61 billion to the federal government and $1.125 billion to the states. Lastly, we estimate costs to drug manufacturers and states of $431.96 million for FFYs 2016 through 2020.
While the effects of this regulation are substantial, they are primarily a result of changes in the statute.
The Regulatory Flexibility Act (RFA) requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, non-profit organizations, and small governmental jurisdictions. Individuals and States are not included in the definition of a small entity. For purposes of the RFA, three types of small businesses are potentially impacted by this final rule. These include small retail community pharmacies, small pharmaceutical manufacturers participating in the Medicaid Drug Rebate Program, and small Medicaid managed care organizations (MCOs). More detailed analysis on the impact of these entities is provided in the Detailed Economic Analysis section (section IV.D.) of this final rule. The great majority of hospitals and most other health care providers and suppliers are small entities, either by being nonprofit organizations or by meeting the Small Business Administration's (SBA) definition of a small business (having revenues of less than $7.5 million to $38.5 million in any 1 year).
For purposes of the RFA, most of the retail pharmacies are considered small businesses according to the SBA's size standards with total revenues of $27.5 million or less in any 1 year (
According to the SBA size standards, drug manufacturers are considered small businesses if they have fewer than 750 employees (Code 325412, (
The rule would require all drug manufacturers participating in the Medicaid Drug Rebate program to increase the rebate percentages that they are currently paying. Manufacturers are required by the Affordable Care Act to pay the increased percentages. The savings for sections 2501(a)(1), 2501(b) and 2501(d) Affordable Care Act reflect this statutory change.
According to the SBA's size standards, an HMO, of which we have included MCOs, is considered a small business if it has revenues of $32.5 million or less in any 1 year (
Therefore, the Secretary has determined that this proposed rule would have a significant economic impact on a substantial number of small entities. We offer an analysis of the alternatives considered in section IV.E. of this final rule. The preceding economic analysis, together with the remainder of this preamble, constitutes the regulatory flexibility analysis.
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 and has fewer than 100 beds. We do not expect this final rule to have a significant
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits before issuing any rule that includes a federal mandate that could result in expenditure in any 1 year by state, local or tribal governments, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2015, that threshold level is approximately $144 million. This final rule imposes no mandate on drug manufacturers and other private entities. We believe the rule would not impose additional mandates on states and local governments. This final rule has tribal implications, and in accordance with E.O. 13175 and the HHS Tribal Consultation Policy (December 2010), CMS will consult with Tribal officials prior to the formal promulgation of this regulation.
Executive Order 13132 establishes certain requirements that an agency must meet when it issues 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. This final rule does not impose substantial direct requirement costs on state or local governments, preempts state law, or otherwise has federalism implications.
This final regulation is subject to the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801
In accordance with the provisions of Executive Order 12866, this final rule was reviewed by the Office of Management and Budget.
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:
Sec. 1102 of the Social Security Act (42 U.S.C. 1302).
(a)
(1) Interprets those provisions of section 1927 of the Act that set forth requirements for drug manufacturers' calculating and reporting average manufacturer prices (AMPs) and best prices and that set upper payment limits for covered outpatient drugs.
(2) Implements section 1903(i)(10) of the Act with regard to the denial of Federal financial participation (FFP) in expenditures for certain physician-administered drugs.
(3) Implements section 1902(a)(54) of the Act with regard to a State plan that provides covered outpatient drugs.
(4) Implements section 1903(m)(2)(A)(xiii) of the Act, in part, and section 1927(b) of the Act with regard to rebates for covered outpatient drugs dispensed to individuals eligible for medical assistance who are enrolled in Medicaid managed care organizations (MCOs).
(5) Implements section 1902(a)(30)(A) of the Act with regard to the efficiency, economy, and quality of care in the context of payments for covered outpatient drugs.
(b)
For the purpose of this subpart, the following definitions apply:
(1) The discounts in a bundled sale, including those discounts resulting from a contingent arrangement, are allocated proportionally to the total dollar value of the units of all drugs or products sold under the bundled arrangement.
(2) For bundled sales where multiple drugs are discounted, the aggregate value of all the discounts in the bundled arrangement must be proportionally allocated across all the drugs or products in the bundle.
(1) A drug can only be considered a covered outpatient drug if it:
(i) Is approved for safety and effectiveness as a prescription drug by the FDA under section 505 or 507 of the FFDCA or under section 505(j) of the FFDCA;
(ii) Was commercially used or sold in the United States before the enactment of the Drug Amendments of 1962 or which is identical, similar, or related (within the meaning described in FDA regulations at 21 CFR 310.6(b)(1)) to such a drug, and which has not been the subject of a final determination by the Secretary that it is a “new drug” (within the meaning of section 201(p) of the FFDCA) or an action brought by the Secretary under sections 301, 302(a), or 304(a) of FFDCA to enforce section 502(f) or 505(a) of the FFDCA;
(iii) Is described in section 107(c)(3) of the Drug Amendments of 1962 and for which the Secretary has determined there is a compelling justification for its medical need or is identical, similar, or related (within the meaning described in FDA regulations at 21 CFR 310.6(b)(1)) to such a drug or for which the Secretary has not issued a notice for an opportunity for a hearing under section 505(e) of the FFDCA on a proposed order of the Secretary to withdraw approval of an application for such drug under section 505(e) of the FFDCA because the Secretary has determined that the drug is less than effective for some or all conditions of use prescribed, recommended, or suggested in its labeling;
(iv) Is a biological product other than a vaccine that may only be dispensed upon a prescription and is licensed under section 351 of the Public Health Service Act (PHSA) and is produced at an establishment licensed under section 351 of the PHSA to produce such product; or
(v) Is insulin certified under section 506 of the FFDCA.
(2) A covered outpatient drug does not include any drug, biological product, or insulin provided as part of or incident to and in the same setting as any of the following services (and for which payment may be made as part of that service instead of as a direct reimbursement for the drug):
(i) Inpatient Services;
(ii) Hospice Services;
(iii) Dental Services, except that drugs for which the State plan authorizes direct reimbursement to the dispensing dentist are covered outpatient drugs;
(iv) Physician services;
(v) Outpatient hospital services;
(vi) Nursing facility and services provided by an intermediate care facility for individuals with intellectual disabilities;
(vii) Other laboratory and x-ray services; or
(viii) Renal dialysis.
(3) A covered outpatient drug does not include:
(i) Any drug product, prescription or over-the-counter (OTC), for which an NDC number is not required by the FDA;
(ii) Any drug product for which a manufacturer has not submitted to CMS evidence to demonstrate that the drug product satisfies the criteria in paragraph (1) of this definition;
(iii) Any drug product or biological used for a medical indication which is not a medically accepted indication; or
(iv) Over-the-counter products that are not drugs.
(1) Is engaged in the production, preparation, propagation, compounding, conversion, or processing of covered outpatient drug products, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis; or
(2) Is engaged in the packaging, repackaging, labeling, relabeling, or distribution of covered outpatient drug products and is not a wholesale distributor of drugs or a retail pharmacy licensed under State law.
(3) For authorized generic products, the term “manufacturer” will also include the original holder of the NDA.
(4) For drugs subject to private labeling arrangements, the term “manufacturer” will also include the entity under whose own label or trade name the product will be distributed.
(1) Is rated as therapeutically equivalent as reported in the FDA's
(2) Is pharmaceutically equivalent and bioequivalent, as determined by the FDA.
(3) Is sold or marketed in the United States during the rebate period.
(1) A multiple source drug that is not an innovator multiple source drug or a single source drug;
(2) A multiple source drug that is marketed under an ANDA or an abbreviated antibiotic drug application;
(3) A covered outpatient drug that entered the market before 1962 that was not originally marketed under an NDA;
(4) Any drug that has not gone through an FDA approval process, but otherwise meets the definition of covered outpatient drug; or
(5) If any of the drug products listed in this definition of a noninnovator multiple source drug subsequently receives an NDA or ANDA approval from FDA, the product's drug category changes to correlate with the new product application type.
(1) Is incurred at the point of sale or service and pays for costs in excess of the ingredient cost of a covered outpatient drug each time a covered outpatient drug is dispensed;
(2) Includes only pharmacy costs associated with ensuring that possession of the appropriate covered outpatient drug is transferred to a Medicaid beneficiary. Pharmacy costs include, but are not limited to, reasonable costs associated with a pharmacist's time in checking the computer for information about an individual's coverage, performing drug utilization review and preferred drug list review activities, measurement or mixing of the covered outpatient drug, filling the container, beneficiary counseling, physically providing the completed prescription to the Medicaid beneficiary, delivery, special packaging, and overhead associated with maintaining the facility and equipment necessary to operate the pharmacy; and
(3) Does not include administrative costs incurred by the State in the operation of the covered outpatient drug benefit including systems costs for interfacing with pharmacies.
(a)
(b)
(1) Sales to wholesalers for drugs distributed to retail community pharmacies.
(2) Sales to other manufacturers who act as wholesalers for drugs distributed to retail community pharmacies.
(3) Sales to retail community pharmacies (including those sales, nominal price sales, and associated discounts, rebates (other than rebates under section 1927 of the Act or as specified in regulations), payments, or other financial transactions that are received by, paid by, or passed through to retail community pharmacies).
(c)
(1) Any prices on or after October 1, 1992, to the Indian Health Service (IHS), the Department of Veterans Affairs (DVA), a State home receiving funds under 38 U.S.C. 1741, the Department of Defense (DoD), the Public Health Service (PHS), or a covered entity described in section 1927(a)(5)(B) of the Act (including inpatient prices charged to hospitals described in section 340B(a)(4)(L) of the PHSA).
(2) Any prices charged under the Federal Supply Schedule (FSS) of the General Services Administration (GSA).
(3) Any depot prices (including TRICARE) and single award contract prices, as defined by the Secretary, of any agency of the Federal government.
(4) Sales outside the United States.
(5) Sales to hospitals.
(6) Sales to health maintenance organizations (HMOs) (including managed care organizations (MCOs)), including HMO or MCO operated pharmacies.
(7) Sales to long-term care providers, including nursing facility pharmacies, nursing home pharmacies, long-term care facilities, contract pharmacies for the nursing facility where these sales can be identified with adequate documentation, and other entities where the drugs are dispensed through a nursing facility pharmacy, such as assisted living facilities.
(8) Sales to mail order pharmacies.
(9) Sales to clinics and outpatient facilities (for example, surgical centers, ambulatory care centers, dialysis centers, and mental health centers).
(10) Sales to government pharmacies (for example, a Federal, State, county, or municipal-owned pharmacy).
(11) Sales to charitable pharmacies.
(12) Sales to not-for-profit pharmacies.
(13) Sales, associated rebates, discounts, or other price concessions paid directly to insurers.
(14) Bona fide service fees, as defined in § 447.502, paid by manufacturers to wholesalers or retail community pharmacies.
(15) Customary prompt pay discounts extended to wholesalers.
(16) Reimbursement by the manufacturer for recalled, damaged, expired, or otherwise unsalable returned goods, including (but not limited to) reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction, but only to the extent that such payment covers only those costs.
(17) Associated discounts, rebates, or other price concessions provided under the Medicare Coverage Gap Discount Program under section 1860D-14A of the Act.
(18) Payments received from and rebates and discounts provided to pharmacy benefit manufacturers (PBMs).
(19) Rebates under the national rebate agreement or a CMS-authorized State supplemental rebate agreement paid to State Medicaid Agencies under section 1927 of the Act.
(20) Sales to hospices (inpatient and outpatient).
(21) Sales to prisons.
(22) Sales to physicians.
(23) Direct sales to patients.
(24) Free goods, not contingent upon any purchase requirement.
(25) Manufacturer coupons to a consumer redeemed by the manufacturer, agent, pharmacy or another entity acting on behalf of the manufacturer, but only to the extent that the full value of the coupon is passed on to the consumer and the pharmacy, agent, or other AMP-eligible entity does not receive any price concession.
(26) Manufacturer-sponsored programs that provide free goods, including but not limited to vouchers and patient assistance programs, but only to the extent that: The voucher or benefit of such a program is not contingent on any other purchase requirement; the full value of the voucher or benefit of such a program is passed on to the consumer; and the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
(27) Manufacturer-sponsored drug discount card programs, but only to the extent that the full value of the discount is passed on to the consumer and the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
(28) Manufacturer-sponsored patient refund/rebate programs, to the extent that the manufacturer provides a full or partial refund or rebate to the patient for out-of-pocket costs and the pharmacy, agent, or other AMP eligible entity does not receive any price concessions.
(29) Manufacturer copayment assistance programs, to the extent that the program benefits are provided entirely to the patient and the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
(30) Any rebates, discounts, or price concessions provided to a designated State Pharmacy Assistance Program (SPAP).
(d)
(1) Sales to physicians.
(2) Sales to pharmacy benefit managers.
(3) Sales to health maintenance organizations (HMOs), including managed care organizations (MCOs).
(4) Sales to insurers (except for rebates under section 1927 of the Act and this subpart).
(5) Sales to hospitals.
(6) Sales to clinics and outpatient facilities (for example, surgical centers,
(7) Sales to mail order pharmacies.
(8) Sales to long-term care providers, including nursing facility pharmacies, nursing home pharmacies, long-term care facilities, contract pharmacies for the nursing facility where these sales can be identified with adequate documentation, and other entities where the drugs are dispensed through a nursing facility pharmacy, such as assisted living facilities.
(9) Sales to hospices (inpatient and outpatient).
(10) Sales to manufacturers, or any other entity that does not conduct business as a wholesaler or retail community pharmacy.
(e)
(1) Any prices on or after October 1, 1992, to the Indian Health Service (IHS), the Department of Veterans Affairs (DVA), a State home receiving funds under 38 U.S.C. 1741, the Department of Defense (DoD), the Public Health Service (PHS), or a covered entity described in section 1927(a)(5)(B) of the Act (including inpatient prices charged to hospitals described in section 340B(a)(4)(L) of the PHSA).
(2) Any prices charged under the Federal Supply Schedule (FSS) of the General Services Administration (GSA).
(3) Any depot prices (including TRICARE) and single award contract prices, as defined by the Secretary, of any agency of the Federal government.
(4) Sales outside the United States.
(5) Bona fide service fees as defined in § 447.502 paid by manufacturers to wholesalers or retail community pharmacies.
(6) Customary prompt pay discounts extended to wholesalers.
(7) Reimbursement by the manufacturer for recalled, damaged, expired, or otherwise unsalable returned goods, including (but not limited to) reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction, but only to the extent that such payment covers only these costs.
(8) Any prices charged which are negotiated by a prescription drug plan under Part D of title XVIII, by any MA-PD plan under Part C of such title for covered Part D drugs, or by a Qualified Retiree Prescription Drug Plan (as defined in section 1860D-22(a)(2) of the Act) for such drugs on behalf of individuals entitled to benefits under Part A or enrolled under Part B of Medicare, or any discounts provided by manufacturers under the Medicare coverage gap discount program under section 1860D-14A of the Act.
(9) Rebates under the national rebate agreement or a CMS-authorized State supplemental rebate agreement paid to State Medicaid Agencies under section 1927 of the Act.
(10) Any rebates, discounts, or price concessions provided to a designated State Pharmacy Assistance Program (SPAP).
(11) Sales to patients.
(12) Free goods, not contingent upon any purchase requirement.
(13) Manufacturer coupons to a consumer redeemed by the manufacturer, agent, pharmacy or another entity acting on behalf of the manufacturer, but only to the extent that the full value of the coupon is passed on to the consumer and the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
(14) Manufacturer-sponsored programs that provide free goods, including, but not limited to vouchers and patient assistance programs, but only to the extent that the voucher or benefit of such a program is not contingent on any other purchase requirement; the full value of the voucher or benefit of such a program is passed on to the consumer; and the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
(15) Manufacturer-sponsored drug discount card programs, but only to the extent that the full value of the discount is passed on to the consumer and the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
(16) Manufacturer-sponsored patient refund/rebate programs, to the extent that the manufacturer provides a full or partial refund or rebate to the patient for out-of-pocket costs and the pharmacy, agent, or other AMP eligible entity does not receive any price concessions.
(17) Manufacturer copayment assistance programs, to the extent that the program benefits are provided entirely to the patient and the pharmacy, agent, or other AMP eligible entity does not receive any price concession.
(18) Sales to government pharmacies (for example, a Federal, State, county, or municipal-owned pharmacy).
(19) Sales to charitable pharmacies.
(20) Sales to not-for-profit pharmacies.
(f)
(2) Quarterly AMP is calculated as a weighted average of monthly AMPs in that quarter.
(3) The manufacturer must adjust the AMP for a rebate period if cumulative discounts, rebates, or other arrangements subsequently adjust the prices actually realized, to the extent that such cumulative discounts, rebates, or other arrangements are not excluded from the determination of AMP by statute or regulation.
(a)
(b)
(c)
(1) Any prices on or after October 1, 1992, charged to the IHS, the DVA, a State home receiving funds under 38 U.S.C. 1741, the DoD, or the PHS.
(2) Any prices charged to a covered entity described in section 1927(a)(5)(B) of the Act (including inpatient prices charged to hospitals described in section 340B(a)(4)(L) of the PHSA).
(3) Any prices charged under the FSS of the GSA.
(4) Any prices, rebates, or discounts provided to a designated State Pharmacy Assistance Program (SPAP).
(5) Any depot prices (including TRICARE) and single award contract prices, as defined by the Secretary, of any agency of the Federal government.
(6) Any prices charged which are negotiated by a prescription drug plan under Part D of title XVIII, by any MA-PD plan under Part C of such title for covered Part D drugs, or by a Qualified Retiree Prescription Drug Plan (as defined in section 1860D-22(a)(2) of the Act) for such drugs on behalf of individuals entitled to benefits under Part A or enrolled under Part B of Medicare, or any discounts provided by manufacturers under the Medicare coverage gap discount program under section 1860D-14A of the Act.
(7) Rebates under the national rebate agreement or a CMS-authorized supplemental rebate agreement paid to State Medicaid Agencies under section 1927 of the Act.
(8) Manufacturer-sponsored drug discount card programs, but only to the extent that the full value of the discount is passed on to the consumer and the pharmacy, agent, or other entity does not receive any price concession.
(9) Manufacturer coupons to a consumer redeemed by a consumer, agent, pharmacy, or another entity acting on behalf of the manufacturer; but only to the extent that the full value of the coupon is passed on to the consumer, and the pharmacy, agent, or other entity does not receive any price concession.
(10) Manufacturer copayment assistance programs, to the extent that the program benefits are provided entirely to the patient and the pharmacy, agent, or other entity does not receive any price concession.
(11) Manufacturer-sponsored patient refund or rebate programs, to the extent that the manufacturer provides a full or partial refund or rebate to the patient for out-of-pocket costs and the pharmacy, agent, or other entity does not receive any price concession.
(12) Manufacturer-sponsored programs that provide free goods, including but not limited to vouchers and patient assistance programs, but only to the extent that the voucher or benefit of such a program is not contingent on any other purchase requirement; the full value of the voucher or benefit of such a program is passed on to the consumer; and the pharmacy, agent, or other entity does not receive any price concession.
(13) Free goods, not contingent upon any purchase requirement.
(14) Reimbursement by the manufacturer for recalled, damaged, expired, or otherwise unsalable returned goods, including, but not limited to, reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction but only to the extent that such payment covers only these costs.
(15) Nominal prices to certain entities as set forth in § 447.508.
(16) Bona fide service fees as defined in § 447.502.
(17) PBM rebates, discounts, or other financial transactions except their mail order pharmacy's purchases or where such rebates, discounts, or other financial transactions are designed to adjust prices at the retail or provider level.
(18) Sales outside the United States.
(19) Direct sales to patients.
(d)
(2) Best price must be determined on a unit basis without regard to package size, special packaging, labeling, or identifiers on the dosage form or product or package.
(3) The manufacturer must adjust the best price for a rebate period if cumulative discounts, rebates, or other arrangements subsequently adjust the prices available from the manufacturer.
(a)
(b)
(c)
(d)
(a)
(b)
(1) A 5i drug is not generally dispensed through a retail community pharmacy if 70 percent or more of the sales (based on units at the NDC-9 level) of the 5i drug, were to entities other than retail community pharmacies or wholesalers for drugs distributed to retail community pharmacies.
(2) A manufacturer is responsible for determining and reporting to CMS whether a 5i drug is not generally dispensed through a retail community pharmacy on a monthly basis.
(a)
(1) A covered entity as described in section 340B(a)(4) of the PHSA.
(2) An ICF/IID providing services as set forth in § 440.150 of this chapter.
(3) A State-owned or operated nursing facility providing services as set forth in § 440.155 of this chapter.
(4) A public or non-profit entity, or an entity based at an institution of higher learning whose primary purpose is to provide health care services to students of that institution, that provides family planning services described under section of 1001(a) of PHSA, 42 U.S.C. 300.
(5) An entity that:
(i) Is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of that Act or is State-owned or operated; and
(ii) Is providing the same services to the same type of population as a covered entity described in section 340B(a)(4) of the PHSA but does not receive funding under a provision of law referred to in such section.
(b)
(c)
(a)
(i) The total number of units of each dosage form and strength paid for under the State plan in the rebate period (as reported by the State); and
(ii) The greater of:
(A) The difference between the AMP and the best price for the dosage form and strength of the drug; or
(B) The AMP for the dosage form and strength of the drug multiplied by one of the following percentages:
(
(
(
(2)
(i) The total number of units of such dosage form and strength paid for under the State plan in the rebate period.
(ii) The amount, if any, by which:
(A) The AMP for the dosage form and strength of the drug for the period exceeds:
(B) The base date AMP for such dosage form and strength, increased by the percentage by which the consumer price index for all urban consumers (United States city average) for the month before the month in which the rebate period begins exceeds such index associated with the base date AMP of the drug.
(3)
(4)
(A) The AMP of the line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form.
(B) The highest additional rebate (calculated as a percentage of AMP) under this section for any strength of the original single source drug or innovator multiple source drug.
(C) The total number of units of each dosage form and strength of the line extension product paid for under the State plan in the rebate period (as reported by the State).
(ii) The alternative rebate is required to be calculated if the manufacturer of the line extension drug also manufactures the initial brand name listed drug or has a corporate relationship with the manufacturer of the initial brand name listed drug.
(5)
(6)
(i) The total number of units of such dosage form and strength for which payment was made under the State plan for the rebate period; and
(ii) The AMP for the dosage form and strength for the rebate period multiplied by 13 percent.
(b)
(2) Manufacturers are exempt from the requirement in paragraph (b)(1) of this section if such drugs are the following:
(i) Dispensed by health maintenance organizations including MCOs that contract under section 1903(m) of the Act; and
(ii) Discounted under section 340B of the PHSA.
(c)
(1) For single source or innovator multiple source drugs other than blood clotting factors and drugs approved by FDA exclusively for pediatric indications:
(i) If AMP minus best price is less than or equal to AMP times 15.1 percent, then the offset amount is the full 8.0 percent of AMP (the difference between 23.1 percent of AMP and 15.1 percent of AMP).
(ii) If AMP minus best price is greater than AMP times 15.1 percent but less than AMP times 23.1 percent, then the offset amount is the difference between AMP times 23.1 percent and AMP minus best price.
(iii) If AMP minus best price is equal to or greater than AMP times 23.1 percent, then there is no offset amount.
(2) For single source or innovator multiple source drugs that are clotting factors and drugs approved by FDA exclusively for pediatric indications that are subject to a rebate percentage of 17.1 percent of AMP:
(i) If AMP minus best price is less than or equal to AMP times 15.1 percent, then the offset amount is the full 2.0 percent of AMP (the difference between 17.1 percent of AMP and 15.1 percent of AMP).
(ii) If AMP minus best price is greater than AMP times 15.1 percent but less than AMP times 17.1 percent, then the offset amount is the difference between AMP times 17.1 percent and AMP minus best price.
(iii) If AMP minus best price is equal to or greater than AMP times 17.1 percent, then there is no offset amount.
(3) For a drug that is a line extension of a single source or innovator multiple source drug that is an oral solid dosage form, the offset amount is the difference between the unit rebate amount (URA) calculation for the drug calculated based on the applicable rebate percentage in section 1927 of the Act prior to the Affordable Care Act and the calculation of the URA for the line extension drug, if greater, in accordance with the Affordable Care Act.
(4) For noninnovator multiple source drugs, the offset amount is equal to 2.0 percent of the AMP (the difference between 13.0 percent of AMP and 11.0 percent of AMP).
(a)
(1) AMP, calculated in accordance with § 447.504.
(2) Best price, calculated in accordance with § 447.505.
(3) Customary prompt pay discounts, which are reported as an aggregate dollar amount for each covered outpatient drug at the nine-digit NDC level, provided to all wholesalers in the rebate period.
(4) Prices that fall within the nominal price exclusion, which are reported as an aggregate dollar amount and include all sales of single source and innovator multiple source drugs to the entities listed in § 447.508(a) for the rebate period.
(b)
(i) The change is a result of the drug category change or a market date change.
(ii) The change is an initial submission for a product.
(iii) The change is due to termination of a manufacturer from the MDR program for failure to submit pricing data and must submit pricing data to reenter the program.
(iv) The change is due to a technical correction; that is, not based on any changes in sales transactions or pricing adjustments from such transactions.
(v) The change is to address specific rebate adjustments to States by manufacturers, as required by CMS or court order, or under an internal investigation, or an OIG or Department of Justice (DOJ) investigation.
(2) A manufacturer must report revised AMP within the 12-quarter time period, except when the revision would be solely as a result of data pertaining to lagged price concessions.
(c)
(2)
(ii) A manufacturer may choose to recalculate the DRA base date AMP on a product-by-product basis.
(iii) A manufacturer must use actual and verifiable pricing records in recalculating the DRA base date AMP.
(3)
(4)
(ii) A manufacturer may choose to recalculate the Affordable Care Act base date AMP on a product-by-product basis.
(iii) A manufacturer must use actual and verifiable pricing records in recalculating the Affordable Care Act base date AMP.
(d)
(2)
(i) The monthly AMP is calculated based on the weighted average of prices for all the manufacturer's package sizes of each covered outpatient drug sold by the manufacturer during a month.
(ii) It is calculated as net sales divided by number of units sold, excluding goods or any other items specifically excluded in the statute or regulations. Monthly AMP is calculated based on the best data available to the manufacturer at the time of submission.
(iii) In calculating monthly AMP, a manufacturer must estimate the impact of its lagged AMP-eligible price concessions using a 12-month rolling percentage in accordance with the methodology described in this paragraph (d)(2).
(A) For each NDC-9 with at least 12 months of AMP-eligible sales, after adjusting for sales excluded from AMP, the manufacturer calculates a percentage equal to the sum of the price concessions for the most recent 12-month period (inclusive of the current reporting period) available associated with sales subject to the AMP reporting requirement divided by the total in dollars for the sales subject to the AMP reporting requirement for the same 12-month period.
(B) For each NDC-9 with less than 12 months of AMP-eligible sales, the calculation described in paragraph (d)(2)(iii)(A) of this section is performed for the time period equaling the total number of months of AMP-eligible sales.
(iv) The manufacturer multiplies the applicable percentage described in paragraph (d)(2)(iii)(A) or (B) of this section by the total in dollars for the sales subject to the AMP reporting requirement (after adjusting for sales excluded from AMP) for the month being submitted. The result of this multiplication is then subtracted from the total in dollars for the sales subject to the AMP reporting requirement (after adjusting for sales excluded from AMP) for the month being submitted.
(v) The manufacturer uses the result of the calculation described in paragraph (d)(2)(iv) of this section as the numerator and the number of units sold in the month (after adjusting for sales excluded from AMP) as the denominator to calculate the manufacturer's AMP for the NDC for the month being submitted.
(vi)
(3)
(4)
(5)
(6)
(e)
(1) The manufacturer's chief executive officer (CEO).
(2) The manufacturer's chief financial officer (CFO).
(3) An individual other than a CEO or CFO, who has authority equivalent to a CEO or a CFO; or
(4) An individual with the directly delegated authority to perform the certification on behalf of an individual described in paragraphs (e)(1) through (3) of this section.
(f)
(i) The records must include these data and any other materials from which the calculations of the AMP, the best price, customary prompt pay discounts, and nominal prices are derived, including a record of any assumptions made in the calculations.
(ii) The 10-year timeframe applies to a manufacturer's quarterly and monthly submissions of pricing data, as well as any revised pricing data subsequently submitted to CMS.
(2) A manufacturer must retain records beyond the 10-year period if all of the following circumstances exist:
(i) The records are the subject of an audit, or of a government investigation related to pricing data that are used in AMP, best price, customary prompt pay discounts, or nominal prices of which the manufacturer is aware.
(ii) The audit findings or investigation related to the AMP, best price, customary prompt pay discounts, or nominal price have not been resolved.
(g)
(a)
(1) The State code.
(2) National Drug Code.
(3) Period covered.
(4) Product FDA list name.
(5) Unit rebate amount.
(6) Units reimbursed.
(7) Rebate amount claimed.
(8) Number of prescriptions.
(9) Medicaid amount reimbursed.
(10) Non-Medicaid amount reimbursed.
(11) Total amount reimbursed.
(b)
(c)
(a)
(b)
(1) AAC plus a professional dispensing fee established by the agency; or
(2) Providers' usual and customary charges to the general public.
(c)
(2) The agency must decide what certification form and procedure are used.
(3) A check off box on a form is not acceptable but a notation like “brand necessary” is allowable.
(4) The agency may allow providers to keep the certification forms if the forms will be available for inspection by the agency or HHS.
(a)
(2) CMS publishes the list of multiple source drugs for which upper limits have been established and any revisions to the list in Medicaid Program issuances.
(b)
(2)
(c)
(1) The AMP of a terminated NDC will not be used to set the Federal upper limit (FUL) beginning with the first day of the month after the termination date reported by the manufacturer to CMS.
(2) The monthly AMP units data will be used to calculate the weighted average of monthly AMPs for all multiple source drugs to establish the FUL.
(d) The FUL will be applied as an aggregate upper limit.
The upper limits for payment for prescribed drugs in this subpart also apply to payment for drugs provided as part of skilled nursing facility services and intermediate care facility services and under prepaid capitation arrangements.
(a)
(i) A covered entity described in section 1927(a)(5)(B) of the Act.
(ii) A contract pharmacy under contract with a covered entity described in section 1927(a)(5)(B) of the Act.
(iii) An Indian Health Service, tribal and urban Indian pharmacy.
(2) The agency's payment methodology in paragraph (a)(1) of this section must be in accordance with the definition of AAC in § 447.502.
(b)
(1)
(i) In the aggregate, its Medicaid expenditures for multiple source drugs, identified and listed in accordance with § 447.514(a), are in accordance with the upper limits specified in § 447.514(b).
(ii) In the aggregate, its Medicaid expenditures for all other drugs are in accordance with § 447.512.
(2)
(c)
(d)
(a) No FFP is available for physician-administered drugs for which a State has not required the submission of claims using codes that identify the drugs sufficiently for the State to bill a manufacturer for rebates.
(1) As of January 1, 2006, a State must require providers to submit claims for single source, physician-administered drugs using Healthcare Common Procedure Coding System codes or NDC numbers to secure rebates.
(2) As of January 1, 2007, a State must require providers to submit claims for physician-administered single source drugs and the 20 multiple source drugs identified by the Secretary using NDC numbers.
(b) As of January 1, 2008, a State must require providers to submit claims for the 20 multiple source physician-administered drugs identified by the Secretary as having the highest dollar value under the Medicaid Program using NDC numbers to secure rebates.
(c) A State that requires additional time to comply with the requirements of this section may apply to the Secretary for an extension.
(a) Medicaid coverage of investigational drugs may be provided at State option under section 1905(a)(12) of the Act when such drug is the subject of an investigational new drug application (IND) that has been allowed by FDA to proceed.
(b) A State agency electing to provide coverage of an investigational drug must include in its State plan a description of the coverage and payment for such drug.
(c) The State plan must indicate that any reimbursement for investigational drugs by the State are consistent with FDA regulations at 21 CFR part 312 if they are to be eligible to receive FFP for these drugs.
(d) Medicaid coverage of other drugs may be provided at State option under section 1905(a)(12) of the Act provided that they are not eligible to be covered as covered outpatient drugs in the Medicaid Drug Rebate program.
(e) Investigational drugs and other drugs are not subject to the rebate requirements of section 1927 of the Act provided they do not meet the definition of a covered outpatient drug as set forth in section 1927(k) of the Act.
(a) Membership of the Task Force. In addition to the Vice President, the Task Force shall consist of the heads of the executive branch departments, agencies, and offices listed below:
(b) Administration of the Task Force. The NIH shall provide funding and administrative support for the Task Force to the extent permitted by law and within existing appropriations. The Vice President shall designate
(a) accelerate our understanding of cancer, and its prevention, early detection, treatment, and cure;
(b) improve patient access and care;
(c) support greater access to new research, data, and computational capabilities;
(d) encourage development of cancer treatments;
(e) identify and address any unnecessary regulatory barriers and consider ways to expedite administrative reforms;
(f) ensure optimal investment of Federal resources; and
(g) identify opportunities to develop public-private partnerships and increase coordination of the Federal Government's efforts with the private sector, as appropriate.
(b) Nothing in this memorandum shall be construed to impair or otherwise affect:
(c) This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.
(d) This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by
Category | Regulatory Information | |
Collection | Federal Register | |
sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
Publisher | Office of the Federal Register, National Archives and Records Administration |