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  • Key Changes Made In Final Chapter 9 Of The Prescription Drug Benefit Manual

    Wendy L. Krasner and Gregory W. Fortsch
    American Health Lawyers Association
    May 05, 2006

    Introduction

    The much-anticipated final version of Chapter 9 of the Prescription Drug Benefit Manual was released by the Centers for Medicare and Medicaid Services (CMS) on April 25, 2006. This article focuses on the key changes made in the final version, which include:

    • Ability of Part D Plan Sponsors (Sponsors) to delegate certain duties to first tier, downstream, and related entities;
    • Clarification of what is "required" by law and what is "recommended" by CMS;
    • Clarification on use of the term "subcontractor";
    • Reaffirmation that self-reporting of fraud, waste, and, abuse (FWA) is voluntary;
    • Increase in the time requirements recommended for self-reporting FWA; and
    • Trend toward elimination or reduction of specific time requirements for compliance training and other obligations.

    Chapter 9, entitled the "Part D Program to Control Fraud, Waste and Abuse," was released in draft by CMS in February 2006 for public review and comment. The purpose of the final chapter is to identify how Sponsors can meet their legal obligations to establish a comprehensive FWA plan to detect, correct, and prevent FWA as required by statutory and regulatory provisions. In a May 2, 2006 Special Open Door Forum on the final chapter, CMS officials stated that Sponsors must have their FWA plans "in line with" the recommendations and requirements set forth in the final chapter by January 1, 2007.

    Discretion and the Ability to Delegate

    The final chapter emphasizes the "discretion" Sponsors have in adopting the methods suggested for implementing a FWA program. One example of this "discretion" is the ability of Sponsors to delegate FWA oversight to first tier, downstream, and related entities. For instance, the final chapter now allows Sponsors to receive certifications or assurances from first tier, downstream, and related entities that those entities have:

    • Checked Office of Inspector General (OIG) and General Services Administration (GSA) exclusion lists to make sure its employees are not excluded from federal healthcare programs and removed excluded employees (Section 50.2.1.2);
    • Obtained conflict of interest statements, attestations, or certifications from managers, officers, or directors responsible for the administration or delivery of Part D benefits (Section 50.2.L2);
    • Conducted their own compliance training and education of employees (Section 50.2.3. 1); and
    • Adopted and followed a code of conduct that reflects a commitment to detecting, preventing, and connecting FWA (Section 50.2.I.3).

    Of course, Sponsors should monitor the duties they delegate. The final chapter adds a recommendation that Part D compliance officers at the Sponsor level have the authority to conduct and direct internal audits and investigations of any first tier, downstream, or related entities (Section 50.2.2.1).

    Making the Chapter Consistent with Statutory and Regulatory Provisions

    • "Shall" vs. "Should"
      A key feature of the final chapter is the passage in Section 20, which states that "statutory or regulatory program requirements" are reflected by the use of the terms "shall" or "must," while "recommendations" by CMS are reflected by the use of the term "should." Here, CMS has made an important distinction between what is mandatory and what is voluntary in an attempt to make the final chapter consistent with statutory and regulatory requirements and to ensure that the chapter does not impermissibly expand or modify such requirements. Notably, the use of the term "shall" has been significantly reduced in the final chapter
    • Other Examples 
      In many parts of the chapter, CMS has eliminated the use of the term "subcontractor" and replaced it with the phrase "first tier entity, downstream entity, and related entity." In other sections of the chapter, the term "subcontractor" is retained or added in place of other phrases. These changes were made so that the chapter would contain the exact terms as the regulations it is citing to uses.

      One curious development is that, while the term "subcontractor" has been retained in certain parts of the chapter, the definition of the term has been eliminated. Even though a CMS official explained at the May 2 Open Door that the definition was removed from the chapter to be consistent with the regulations in which no definition of the term is provided, this will not lessen the confusion confounding this undefined term.

      In other examples illustrating the effort by CMS not to go beyond applicable Part D requirements, CMS recommends in the final chapter that policies and procedures be in place to ensure a "commitment to Pharmacy and Therapeutic (P&T) Committee decisions that are made in accordance with CMS regulations and guidance." (Emphasis added). The draft chapter had recommended that Sponsors have policies and procedures in place that ensure a "commitment to legal Pharmacy and Therapeutic Committee decisions and formulary decisions." (Emphasis added). Likewise, the draft of the chapter required that the P&T Committee members' conflict of interest statements divulge their relationships to "Sponsors, PBMs, pharmacies or pharmaceutical manufacturers." In contrast, the final version deleted the references to PBMs and pharmacies so that now the conflict disclosure is limited to Sponsors or pharmaceutical manufacturers and consistent with the applicable Part D regulation.

    Trend Toward Elimination or Modification of Time Requirements

    Another significant change made in the final chapter is that CMS no longer recommends that general compliance training be a minimum of two hours and specialized compliance training be a minimum of four hours (Sections 50.2.3.2 and 50.2.3.2). Also, the final chapter now recommends policies and procedures that ensure Sponsors' review of OIG and GSA exclusion lists only once a year after new employees have been hired (Section 50.2.1.2).In addition, the chapter no ionger requires that training session materials be retained for a minimum of ten years (Section 50.2.3.2). Finally, CMS now allows Sponsors to refer potentially fraudulent activity to Medicare Drug Integrity Contractors (MEDICs) within two weeks from when such activity has been discovered (Section 50.2.8.2) as opposed to the immediate referral recommended in the draft chapter.

    Against the trend in the chapter toward reductions or eliminations of burdensome time requirements, CMS imposed one new time requirement for Sponsors to initiate investigations of inquiries from a hotline complaint within two weeks of receiving the complaint.

    Self-Reporting Is Voluntary

    The final chapter reaffirms that self-reproofing of potential FWA is voluntary (Section 50.2.8.2). The chapter does, however, add a recommendation that Sponsors should not only report fraud at their level but also at the first tier, downstream, and related entity levels (Section 50.2.8.2). CMS also lessens the burden of self-reporting on Sponsors by increasing the time for reporting it to MEDICs from thirty to sixty days (Section 50.2.8.2). Finally, the chapter emphasizes that Sponsors are not required to develop Special Investigation Units (SIUs) as part of their internal monitoring and audit compliance functions if they do not already have them in place (Section 50.2.7.2).

    Conclusion

    Now that the final chapter has been released, the challenge for Sponsors and other Part D stakeholders is to address and implement the dizzying array of requirements and recommendations in a way that ensures compliance with Part D Program requirements and guidance and, at the same time, is not overly burdensome to the everyday operation of their businesses.