The TRICARE Final Rule!

By: Dana Zelig, CIS Senior Associate
danazelig@cis-partners.com

Well readers, it has finally happened. The Department of Defense (DoD) has published the TRICARE Final Rule it has been working on since January 28, 2008. On March 17, 2009, Federal Register Vol. 74, No. 50 announced the TRICARE Final Rule: Inclusion of TRICARE Retail Pharmacy Program in Federal Procurement of Pharmaceuticals. According to the Federal Register’s Summary:

Section 703 of the National Defense Authorization Act for Fiscal Year 2008 (NDAA–08) states with respect to any prescription filled on or after the date of enactment of the NDAA, the TRICARE Retail Pharmacy Program shall be treated as an element of the DoD for purposes of procurement of drugs by Federal agencies under section 8126 of title 38, United States Code (U.S.C.), to the extent necessary to ensure pharmaceuticals paid for by the DoD that are provided by network retail pharmacies under the program to eligible covered beneficiaries are subject to the pricing standards in such section 8126. NDAA–08 was enacted on January 28, 2008. The statute requires implementing regulations. This final rule is to implement section 703 of the NDAA–08… This final rule is effective May 26, 2009.

Background

If you’ve read the Pharma Compliance Blog for a while, you will remember that CIS Senior Compliance Manager Meredith Taylor has been tracking the DoD’s progress in drafting this document, and providing answers to manufacturers confused and frustrated by the lack of guidance around processing TRICARE utilization data. For example, you wondered if you were really supposed to use Medicaid ROSI templates to process TRICARE rebates. In her April 16, 2008 TRICARE Update: Where Oh Where is My Utilization Data?, Meredith confirmed that the DoD did, in fact, want manufacturers to use the ROSI templates (used to process state Medicaid rebate claims) to submit TRICARE rebate data to the federal government.

TRICARE Proposed Rule

On July 25, 2008 the DoD issued a Proposed Rule, to address the TRICARE provisions outlined in the NDAA-08 (see TRICARE Proposed Rule by Meredith and Katie Lapins, Director of Small and Mid-market Pharma). The Proposed Rule established refund procedures, and stated that:

…in the case of the failure of a manufacturer of a covered drug to make or honor an agreement to ensure that DoD pays no more than the Federal Ceiling Price (FCP) for covered drugs provided through the TRICARE Retail Pharmacy Network component of the program, the Director, TRICARE Management Activity (TMA), in addition to other actions referred to in the rule, may take any other action authorized by law. (Federal Register Vol. 74, No. 50 - Section B. Provisions of the Proposed Rule)

However, many companies still struggled to format TRICARE utilization data, calculate rebates, and accrue refunds (see Manufacturers Wrestle with TRICARE Data). Now that the TRICARE Final Rule has been issued, manufacturers are hopeful that a clear-cut path to participating in the TRICARE Retail Pharmacy Program and dealing with TRICARE data has been provided.

Provisions of the TRICARE Final Rule

Section D. Provisions of the Final Rule, describes changes and additions made to the Proposed Rule, based on comments provided by the pharmaceutical industry (good work peers!) and the retail pharmacy sector (Section C. Public Comments), and additional research performed by the DoD between issuing the Proposed Rule on July25, 2008, and issuing the Final Rule on March 17, 2009. We have included the most relevant excerpts from Federal Register Vol. 74, No. 50, Section D for your review:

Like the proposed rule, the final rule adds to section 199.21 of the TRICARE regulation a new paragraph (q) regarding pricing standards for the retail pharmacy program… to state in simpler terms DoD’s interpretation of the statute as requiring that all covered drug TRICARE Retail Pharmacy Network prescriptions are subject to Federal Ceiling Prices under 38 U.S.C. 8126.

Paragraph (2) provides that a written agreement by a manufacturer to honor Federal Ceiling Prices in the retail pharmacy network as required by the statute is with respect to a particular covered drug a condition for inclusion of that drug on the Uniform Formulary (Tier 2) and for the availability of that drug through retail network pharmacies without preauthorization. A covered drug not under such an agreement requires preauthorization to be provided through a retail network pharmacy. This preauthorization requirement does not apply to other points of
service… The final rule adds to the list of non-covered drugs for this purpose any drug provided under a prescription and dispensed by a pharmacy under the Section 340B program.

The final rule adds a new paragraph (q)(2)(iv) stating that the requirement for a manufacturer’s agreement to honor FCPs in the Retail Pharmacy Network as a precondition to Uniform Formulary (Tier 2) placement may, upon the recommendation of the P&T Committee, be waived by the Director, TMA if necessary to ensure that at least one drug in the applicable drug class is included on the Uniform Formulary. Any such waiver, however, does not waive the statutory requirement that all covered TRICARE Retail Pharmacy Network prescriptions are subject to Federal Ceiling Prices; it only waives the exclusion from the Uniform Formulary of drugs not covered by agreements.

Paragraph (q)(3) addresses refund procedures. Paragraph (q)(3)(i) states that refund procedures to ensure that pharmaceuticals paid for by DoD that are provided by retail network pharmacies under the Pharmacy Benefits Program are subject to Federal Ceiling Prices shall be established. Such procedures may be established as part of the agreement referred to above, or in a separate agreement, or pursuant to section 199.11…

Paragraph (q)(3)(ii) provides that the refund procedures shall, to the extent practicable, incorporate common industry practices for implementing pricing
agreements between manufacturers and large pharmacy benefit plan sponsors. The
procedures will provide the manufacturer at least 70 days from the date of the
submission of the TRICARE pharmaceutical utilization data needed to calculate
the refund before the refund payment is due. The basis of the refund will be the
difference between the average non-federal price of the drug sold by the manufacturer to wholesalers, as represented by the most recent annual non-Federal average manufacturing prices (non-FAMP) (reported to the Department of Veterans Affairs (VA)) and the corresponding FCP or, in the discretion of the manufacturer, the difference between the FCP and direct commercial contract sales prices specifically attributable to the reported TRICARE paid pharmaceuticals, determined for each applicable NDC listing. The current annual FCP and the non-FAMP on which it was based will be those applicable during the calendar year in which the prescription was filled.

As under the proposed rule, paragraph (q)(3)(iii) provides that a refund due under the law is subject to section 199.11 of the TRICARE regulation, the section that governs recovery of overpayments. The final rule provision has been revised to clarify that the refund amount will be treated, in the vernacular of section 199.11, as an erroneous payment. The final rule has also been revised to elaborate that the
applicability of section 199.11 brings with it a procedure for a manufacturer to request waiver or compromise of a refund amount due under the statute. During
the pendency of any request for such a waiver or compromise, a manufacturer’s
written agreement to honor FCPs shall be deemed to exclude the matter that is
the subject of the request for waiver or compromise so that the agreement, if
otherwise sufficient, will continue to be sufficient for purposes of satisfying the precondition to Uniform Formulary Tier 2 placement.

Also, during the pendency of any such request, the matter that is the subject
of the request shall not be considered a failure of a manufacturer to honor an
agreement for purposes of remedies for noncompliance. The final rule is further
revised to state that a request for waiver may also be premised on the voluntary removal by the manufacturer in writing of a drug from coverage in the TRICARE Pharmacy Benefit Program. This change further protects a manufacturer from involuntary involvement in the program.

One other change to the refund procedures paragraph is that a new paragraph
(q)(3)(iv) has been added to state that in the case of disputes by the manufacturer of the accuracy of TMA’s utilization data, a refund obligation as to the amount in dispute will be deferred pending good faith efforts to resolve the dispute. If the dispute
is not resolved within 60 days, the Director, TMA will issue an initial administrative decision and provide the manufacturer with opportunity to request reconsideration or appeal consistent with procedures under the TRICARE regulation. When the
dispute is ultimately resolved, any refund owed relating to the amount in dispute will be subject to an interest charge consistent with the normal regulatory practice.

Paragraph (q)(4) provides that in the case of the failure of a manufacturer of a covered drug to make or honor an agreement under paragraph (q), the Director, TMA, in addition to other actions referred to in the paragraph, may take any other action authorized by law. This paragraph is unchanged from the proposed rule.

Finally, a new paragraph (q)(5) has been added. It provides that in cases in which a
pharmaceutical is removed from the Uniform Formulary or designated for
preauthorization, the Director, TMA may for transitional time periods determined
appropriate by the Director or for particular circumstances authorize the continued availability of the pharmaceutical in the retail pharmacy network or in MTF pharmacies for some or all beneficiaries as if the pharmaceutical were still on the Uniform Formulary.

Look for an in-depth account of these changes on the Blog and in the upcoming PCX Newsletter, and feel free to contact CIS at any time to discuss how the changes might affect you and your company! We at CIS are working hard to make sure you have the tools you need to comply with the TRICARE Final Rule by its effective date of May 26, 2009!

Also stay tuned for an upcoming CIS conference call, where we will take your questions and provide our insight into the TRICARE Final Rule.

*