[Federal Register: January 6, 2004 (Volume 69, Number 3)]
[Proposed Rules]
[Page 565-568]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06ja04-39]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 447
[CMS-2188-P]
RIN 0938-AN01
Medicaid Program; Time Limitation on Recordkeeping Requirements
Under the Drug Rebate Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: On August 29, 2003, we published a final rule with comment
period in the Federal Register that finalized two specific provisions:
it established new 3-year recordkeeping requirements for drug
manufacturers under the Medicaid drug rebate program and set a 3-year
time limitation during which manufacturers must report changes to
average manufacturer price and best price for purposes of reporting
data to us. In addition, it announced the pressing need for
codification of fundamental recordkeeping requirements. On September
26, 2003, we issued a correction notice to change the effective date of
the August 29, 2003 rule from October 1, 2003 to January 1, 2004. In
this proposed rule, we propose removing the 3-year recordkeeping
requirements and replacing them with 10-year recordkeeping
requirements. We also propose that manufacturers must retain records
beyond the 10-year period if the records are the subject of an audit or
a government investigation.
DATES: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on March
8, 2004.
ADDRESSES: In commenting, please refer to file code CMS-2188-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission or e-mail.
Mail written comments (one original and two copies) to the
following address
[[Page 566]]
ONLY: Centers for Medicare & Medicaid Services, Department of Health
and Human Services, Attention: CMS-2188-P, P.O. Box 8017, Baltimore, MD
21244-8017.
Please allow sufficient time for mailed comments to be timely
received in the event of delivery delays.
If you prefer, you may deliver (by hand or courier) your written
comments (one original and two copies) to one of the following
addresses:
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or Room C5-14-03, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
(Because access to the interior of the HHH 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.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and could be considered late.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Marge Watchorn, (410) 786-4361.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received timely will 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 (410) 786-7197.
Copies: To order copies of the Federal Register containing this
document, send your request to: New Orders, Superintendent of
Documents, PO Box 371954, Pittsburgh, PA 15250-7954. Specify the date
of the issue requested and enclose a check or money order payable to
the Superintendent of Documents, or enclose your Visa or Master Card
number and expiration date. Credit card orders can also be placed by
calling the order desk at (202) 512-1800 (or toll-free at 1-888-293-
6498) or by faxing to (202) 512-2250. The cost for each copy is $10. As
an alternative, you can view and photocopy the Federal Register
document at most libraries designated as Federal Depository Libraries
and at many other public and academic libraries throughout the country
that receive the Federal Register.
This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html
.
I. Background
In order for a pharmaceutical manufacturer's products to be
eligible for Medicaid reimbursement under section 1903(a) of the Social
Security Act (the Act), the manufacturer must sign an agreement with us
on behalf of the Secretary of Health and Human Services to participate
in the Medicaid drug rebate program. Among the terms to which the
manufacturer must agree is the requirement to retain pricing data to
support the calculation of average manufacturer price and best price as
defined in section 1927 of the Act. Absent a regulatory or statutory
requirement, it has been our position that manufacturers must retain
these records indefinitely.
On September 19, 1995, we published a proposed rule in the Federal
Register that proposed numerous provisions related to the Medicaid drug
rebate program. As relevant to this proposed rule, we proposed new 3-
year recordkeeping requirements for drug manufacturers under the
Medicaid drug rebate program and proposed a 3-year time limitation
during which manufacturers must report changes to average manufacturer
price and best price for purposes of reporting data to us. On August
29, 2003, we published a final rule with comment period in the Federal
Register that finalized both provisions. In addition, we announced the
pressing need for codification of fundamental recordkeeping
requirements. On September 26, 2003, we issued a correction notice in
the Federal Register to change the effective date of the August 29,
2003 rule from October 1, 2003 to January 1, 2004. In a separate
document published today in the Federal Register (CMS-2175-IFC), we are
removing the 3-year recordkeeping requirements and replacing them with
temporary 10-year recordkeeping requirements for the period January 1,
2004 through December 31, 2004.
In this proposed rule, we propose removing the 3-year recordkeeping
requirements and replacing them with 10-year recordkeeping
requirements. We also propose that manufacturers must retain records
beyond the 10-year period if the records are the subject of an audit or
a government investigation of which the manufacturer is aware. We
propose that the 10-year recordkeeping requirement be effective without
a sunset date provision.
II. Provisions of the Proposed Regulations
This proposed rule would establish a 10-year recordkeeping
requirement for prescription drug manufacturers that participate in the
Medicaid drug rebate program. This provision would be set forth in 42
CFR part 447 subpart I. Under the 10-year recordkeeping requirement, a
drug manufacturer would be required to retain records for 10 years from
the date the manufacturer reports that rebate period's data to us. In
addition, a manufacturer would be required to retain data beyond the
10-year period if the records are the subject of an audit or a
government investigation of which the manufacturer is aware and if the
audit findings or investigation related to the manufacturer's average
manufacturer price and best price have not been resolved.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
[sbull] The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
[sbull] The accuracy of our estimate of the information collection
burden.
[sbull] The quality, utility, and clarity of the information to be
collected.
[sbull] Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Therefore, we are soliciting public comment on each of these issues
for the following section of this document that contains information
collection requirements:
Section 447.534(h) of this document contains the information
collection requirements. We are seeking comment on these requirements
in CMS-2175-IFC, in conjunction with a request for emergency approval
for revisions to OMB 0938-0578. We are also seeking
[[Page 567]]
comment through this proposed rule; we are requesting reapproval of
these requirements.
There are two recordkeeping requirements in Sec. 447.534(h):
(1)(i) A manufacturer must retain records (written or electronic)
for 10 years from the date the manufacturer reports that rebate
period's data. The records must include these data and any other
materials from which the calculations of the average manufacturer price
and best price are derived, including a record of any assumptions made
in the calculations. The 10-year timeframe applies to a manufacturer's
quarterly submission of pricing data as well as any revised pricing
data subsequently submitted to us.
(ii) A manufacturer must retain records beyond the 10-year period
if both of the following circumstances exist: (A) The records are the
subject of an audit or of a government investigation related to pricing
data that are used in average manufacturer price or best price of which
the manufacturer is aware, and (B) The audit findings or investigation
related to the average manufacturer price and best price have not been
resolved.
The burden associated with the recordkeeping is minimal, a maximum
of $1.00 per year for a compact disc per manufacturer. Staffing costs
are unknown and being researched; we welcome comments.
As required by section 3504(h) of the Paperwork Reduction Act of
1995, we have submitted a copy of this document to the Office of
Management and Budget (OMB) for its review of these information
collection requirements.
If you comment on these information collection and recordkeeping
requirements, please mail copies directly to the following:
Centers for Medicare & Medicaid Services, Office of Strategic
Operations and Regulatory Affairs, Regulations Development Group, Attn:
Julie Brown, Room C5-14-03, 7500 Security Boulevard, Baltimore, MD
21244-1850.
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Brenda Aguilar, CMS Desk Officer.
Comments submitted to OMB may also be e-mailed to the following
address: e-mail: baguilar@omb.eop.gov; or faxed to OMB at (202) 395-
6974.
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, if we proceed with a subsequent document, we will respond to the
major comments in the preamble to that document.
V. Regulatory Impact
A. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 (as amended by Executive Order 13258, which
merely assigns responsibility of duties) directs agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
We believe this rule would not have an economically significant effect.
We believe the rule would result in neither costs nor savings to the
Medicaid program and that additional costs to drug manufacturers would
be minimal. We do not consider this rule to be a major rule.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and government agencies.
Most hospitals and most other providers and suppliers are small
entities, either by nonprofit status or by having revenues of $6
million to $29 million or less in any 1 year. For purposes of the RFA,
pharmaceutical manufacturers with 750 or fewer employees are considered
small businesses according to the Small Business Administration's size
standards matched to the North American Industry Classification System,
effective October 1, 2002, http://www.sba.gov/size/sizetable2002.html).
Use of the Small Business Administration's size standards matched to
North American Industry Classification System is in compliance with the
Small Business Administration's regulation that set forth size
standards for health care industries at 65 FR 69432. Individuals and
States are not included in the definition of a small entity. Because
pharmaceutical manufacturers are not required to report their number of
employees to the Small Business Administration, we are unable to
determine how many of them are considered small entities. This rule
would not have a significant impact on small businesses because
although some pharmaceutical manufacturers may be small businesses, we
estimated that the cost to manufacturers would be minimal, as described
in section V.B below.
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 603 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. This rule would not have
a significant impact on small rural hospitals because the provisions
contained in this proposed rule would not pertain to hospitals. Section
202 of the Unfunded Mandates Reform Act of 1995 also requires that
agencies assess anticipated costs and benefits before issuing any rule
that may result in expenditure in any 1 year by State, local, or tribal
governments, in the aggregate, or by the private sector, of $110
million. We anticipate this rule would not impact State governments or
the private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. We do not anticipate this rule would impose direct
requirement costs on State governments.
B. Anticipated Effects
1. Effects on Drug Manufacturers
We do not collect information on the costs associated with
manufacturer recordkeeping under the Medicaid drug rebate program.
Therefore, in the absence of such information, we derived an estimate
based on our annual costs of storing electronic pricing data that we
receive from approximately 500 drug manufacturers. We store drug
product data, including pricing information, for
[[Page 568]]
approximately 55,000 drug products. Over the course of the 12 years the
Medicaid drug rebate program has been in existence, we have gathered
nearly 250 megabytes of information. This information fits on one
compact disc. The cost of one blank compact disc is less than $1. We
did not have a reasonable proxy available to estimate the staffing
costs associated with maintaining the data, so our estimate does not
include these costs.
On the whole, we believe this approach is reasonable because it is
our understanding that these records are maintained by most
manufacturers in an electronic format, while smaller companies may
maintain their pricing records in written format. In order to more
accurately evaluate the fiscal impact of this provision, we are
requesting that manufacturers provide us with information on the costs
they would expect to incur pursuant to retaining records for a 10-year
period. To the extent possible, we ask that manufacturers make an
effort to distinguish between the cost of meeting the 10-year
recordkeeping requirement versus other recordkeeping requirements that
may apply to the same records.
We do not anticipate that this rule would adversely affect a drug
manufacturer's participation in the Medicaid Drug Rebate program or
impact the current level of access and availability of prescription
drugs for Medicaid beneficiaries. There would be no impact on
contractors or providers.
2. Effects on the Medicaid Program
We are unable to quantitatively address the burden to States with
respect to recordkeeping. This rule would not adversely affect a
State's ability to obtain manufacturers' rebates or impact the current
level of access and availability of prescription drugs for Medicaid
beneficiaries. There would be no impact on Medicaid providers or
contractors.
C. Alternatives Considered
Retain the 3-Year Recordkeeping Provision in the August 29, 2003 Final
Rule With Comment Period
We considered retaining the 3-year recordkeeping provision in the
August 29, 2003 final rule with comment period. However, we believe it
is necessary to propose replacing the 3-year provision with a 10-year
provision to address concerns raised by commenters regarding Federal
and State investigations under the False Claims Act and related anti-
fraud provisions.
Propose a Different Time Limitation
Another alternative would be to propose a longer or a shorter
recordkeeping requirement. We did not choose a longer recordkeeping
timeframe because we believe a 10-year period would offer immediate
protection to address situations where investigations are under seal in
False Claims Act qui tam actions. Further, the exception to the 10-year
requirement would adequately address situations where investigations
known to manufacturers are not yet resolved. We did not suggest a
shorter recordkeeping timeframe in this rule because we are concerned
that such a timeframe, should it eventually become effective, could be
misconstrued to lead a manufacturer to believe it could prematurely
discard vital evidence in a case of fraud against the government.
Finalize the 10-Year Requirement Without Issuing Another Proposed Rule
We considered finalizing the 10-year recordkeeping requirement
without issuing another proposed rule. However, we believe that it is
important to offer interested parties an opportunity to provide
comments about whether a 10-year recordkeeping requirement is the
proper timeframe to address the concerns raised on this provision.
D. Conclusion
For these reasons, we are not preparing analyses for either the RFA
or section 1102(b) of the Act because we have determined that this rule
would not have a significant economic impact on a substantial number of
small entities or a significant impact on the operations of a
substantial number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects
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 proposes to amend 42 CFR chapter IV part 447 as set
forth below:
PART 447-PAYMENTS FOR SERVICES
1. The authority citation for part 447 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
Subpart I-Payment for Outpatient Prescription Drugs Under Drug
Rebate Agreements
2. In Sec. 447.534, paragraph (h)(2) is removed and paragraph
(h)(1) is revised to read as follows:
Sec. 447.534 Manufacturer reporting requirements.
* * * * *
(h) Recordkeeping requirements. (1)(i) A manufacturer must retain
records (written or electronic) for 10 years from the date the
manufacturer reports that rebate period's data to CMS. The records must
include these data and any other materials from which the calculations
of the average manufacturer price and best price are derived, including
a record of any assumptions made in the calculations. The 10-year time
frame applies to a manufacturer's quarterly submission of pricing data
as well as any revised pricing data subsequently submitted to CMS.
(ii) A manufacturer must retain records beyond the 10-year period
if both of the following circumstances exist:
(A) The records are the subject of an audit or of a government
investigation related to pricing data that are used in average
manufacturer price or best price of which the manufacturer is aware.
(B) The audit findings or investigation related to the average
manufacturer price and best price have not been resolved.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: December 29, 2003.
Dennis G. Smith,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: December 30, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-32330 Filed 12-31-03; 12:47 pm]
BILLING CODE 4120-01-P