42 CFR Part 423 — Voluntary Medicare Prescription Drug Benefit

PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT Authority: 42 U.S.C. 1302, 1306, 1395w-101 through 1395w-152, and 1395hh. Source: 70 FR 4525, Jan. 28, 2005, unless otherwise noted. Subpart A—General Provisions § 423.1 Basis and scope. (a) Basis. 1106. Disclosure of Information in Possession of Agency. 1128J(d). Reporting and Returning of Overpayments. 1860D-1. Eligibility, enrollment, and information. 1860D-2. Prescription drug benefits. 1860D-3. Access to a choice of qualified prescription drug coverage. 1860D-4. Beneficiary protections for qualified prescription drug coverage. 1860D-11. PDP regions; submission of bids; plan approval. 1860D-12. Requirements for and contracts with prescription drug plan (PDP) sponsors. 1860D-13. Premiums; late enrollment penalty. 1860D-14. Premium and cost-sharing subsidies for low-income individuals. 1860D-14A. Medicare coverage gap discount program. 1860D-14C. Manufacturer Discount Program. 1860D-15. Subsidies for Part D eligible individuals for qualified prescription drug coverage. 1860D-16. Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund. 1860D-21. Application to Medicare Advantage program and related managed care programs. 1860D-22. Special rules for Employer-Sponsored Programs 1860D-23. State pharmaceutical assistance programs. 1860D-24. Coordination requirements for plans providing prescription drug coverage. 1860D-31. Medicare prescription drug discount card and transitional assistance program. 1860D-41. Definitions; treatment of references to provisions in Part C. 1860D-42. Miscellaneous provisions. 1860D-43. Condition for coverage of drugs under this part. (2) The following specific sections of the Medicare Modernization Act also address the prescription drug benefit program: Sec. 102 Medicare Advantage conforming amendments. Sec. 103 Medicaid amendments. Sec. 104 Medigap. Sec. 109 Expanding the work of Medicare Quality Improvement Organizations to include Parts C and D. (3) Section 1611 of Title 8 of the United States Code regarding individuals who are not lawfully present and ineligible for Federal public benefits. (b) Scope. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 30683, May 28, 2008; 79 FR 29962, May 23, 2014; 80 FR 7962, Feb. 12, 2015; 91 FR 17583, Apr. 6, 2026] § 423.4 Definitions. The following definitions apply to this part, unless the context indicates otherwise: Actuarial equivalence Authorized generic drug Biological product Biosimilar biological product Brand name biological product Brand name drug Cost plan Credible allegation of fraud means (1) Fraud hotline tips verified by further evidence. (2) Claims data mining. (3) Patterns identified through provider audits, civil false claims cases, and law enforcement investigations. Allegations are considered to be credible when they have indicia of reliability. Downstream entity Eligible fallback entity or fallback entity Fallback prescription drug plan First tier entity Fiscally sound operation Formulary Fraud hotline tip Full-benefit dual eligible individual Generic drug Geographic area Group health plan Immediate need individual Inappropriate prescribing (1) Documentation of a patient's medical condition. (2) Identified instances of patient harm or death. (3) Medical records, including claims (if available). (4) Concurrent prescribing of opioids with an opioid potentiator in a manner that increases risk of serious patient harm. (5) Levels of morphine milligram equivalent (MME) dosages prescribed. (6) Absent clinical indication or documentation in the care management plan or in a manner that may indicate diversion. (7) State-level prescription drug monitoring program (PDMP) data. (8) Geography, time, and distance between a prescriber and the patient. (9) Refill frequency and factors associated with increased risk of opioid overdose. Insurance risk Interchangeable biological product Limited Income Newly Eligible Transition (LI NET) sponsor MA MA plan MA-PD plan Medicare prescription drug account Monthly beneficiary premium MTM program Outlier prescriber of opioids PACE Plan PACE organization Parent organization Part D eligible individual Part D plan (or Medicare Part D plan) Part D plan sponsor or Part D sponsor PDP region PDP sponsor Persistent outlier prescriber of opioids Pharmacist Prescription drug plan or PDP Reference product Related entity (1) Performs some of the Part D plan sponsor's management functions under contract or delegation; (2) Furnishes services to Medicare enrollees under an oral or written agreement; or (3) Leases real property or sells materials to the Part D plan sponsor at a cost of more than $2,500 during a contract period. Service area (Service area does not include facilities in which individuals are incarcerated.) (1) A prescription drug plan, an area established in § 423.112(a) within which access standards under § 423.120(a) are met; (2) An MA-PD plan, an area that meets the definition of MA service area as described in § 422.2 of this chapter, and within which access standards under § 423.120(a) are met; (3) A fallback prescription drug plan, the service area described in § 423.859(b); (4) A PACE plan offering qualified prescription drug coverage, the service area described in § 460.12(c) of this chapter; and (5) A cost plan offering qualified prescription drug coverage, the service area defined in § 417.1 of this chapter. Specialty Subsidy-eligible individual Substantiated or suspicious activities of fraud, waste, or abuse (1) Engaged in a pattern of improper billing; (2) Submitted improper claims with suspected knowledge of their falsity; (3) Submitted improper claims with reckless disregard or deliberate ignorance of their truth or falsity; or (4) Is the subject of a fraud hotline tip verified by further evidence. Tiered cost-sharing Unbranded biological product [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68731, Dec. 5, 2007; 76 FR 21570, Apr. 15, 2011; 84 FR 25671, June 3, 2019; 86 FR 6114, Jan. 19, 2021; 88 FR 22337, Apr. 12, 2023; 89 FR 30829, Apr. 23, 2024; 91 FR 17583, Apr. 6, 2026] § 423.6 Cost-sharing in beneficiary education and enrollment-related costs. The requirements of section 1857(e)(2) of the Act and § 422.6 of this chapter with regard to the payment of fees established by CMS for cost sharing of enrollment related costs apply to PDP sponsors under Part D. Subpart B—Eligibility and Enrollment § 423.30 Eligibility and enrollment. (a) General rule. (i) Is entitled to Medicare benefits under Part A or enrolled in Medicare Part B (but not including an individual enrolled solely for coverage of immunosuppressive drugs under § 407.1(a)(6)) of this subchapter. (ii) Lives in the service area of a Part D plan, as defined under § 423.4. (iii) Is a United States citizen or is lawfully present in the United States as determined in 8 CFR 1.3. (2) Except as provided in paragraphs (b), (c), and (d) of this section, an individual is eligible to enroll in a PDP if: (i) The individual is eligible for Part D in accordance with paragraph (a)(1) of this section; (ii) The individual resides in the PDP's service area; and (iii) The individual is not enrolled in another Part D plan. (3) Retroactive Part A or Part B determinations. Individuals who become entitled to Medicare Part A or enrolled in Medicare Part B for a retroactive effective date are Part D eligible as of the month in which a notice of entitlement Part A or enrollment in Part B is provided. (b) Coordination with MA plans. (1) A Part D eligible individual is eligible to enroll in a PDP if the individual is enrolled in a MA private fee-for-service plan (as defined in section 1859(b)(2) of the Act) that does not provide qualified prescription drug coverage; and (2) A Part D eligible individual is eligible to enroll in a PDP if the individual is enrolled in a MSA plan (as defined in section 1859(b)(3) of the Act). (c) Enrollment in a PACE plan. (d) Enrollment in a cost-based HMO or CMP. [70 FR 4525, Jan. 28, 2005, as amended at 80 FR 7962, Feb. 12, 2015; 87 FR 66510, Nov. 3, 2022] § 423.32 Enrollment process. (a) General rule. (b) Enrollment form or CMS-approved enrollment mechanism. (1) The enrollment must be completed by the individual and include an acknowledgement by the beneficiary for disclosure and exchange of necessary information between the U.S. Department of Health and Human Services (or its designees) and the PDP sponsor. Individuals who assist beneficiaries in completing the enrollment, including authorized representatives, must indicate they have provided assistance and their relationship to the beneficiary. (2) Part D eligible individuals enrolling or enrolled in a Part D plan must provide information regarding reimbursement for Part D costs through other insurance, group health plan or other third-party payment arrangement, and consent to the release of the information provided by the individual on other insurance, group health plan or other third-party payment arrangements, as well as any other information on reimbursement of Part D costs collected or obtained from other sources, in a form and manner approved by CMS. (c) Timely process an individual's enrollment request. (d) Notice requirement. (e) Maintenance of enrollment. (i) The individual successfully enrolls in another PDP or MA-PD plan; (ii) The individual voluntarily disenrolls from the PDP; (iii) The individual is involuntary disenrolled from the PDP in accordance with § 423.44(b)(2); (iv) The PDP is discontinued within the area in which the individual resides; or (iv) The individual is enrolled after the initial enrollment, in accordance with § 423.34(c). (f) Enrollees of cost-based HMOs or CMPs and PACE. (g) Passive enrollment by CMS. (1) Passive enrollment procedures. (i) Decline the plan selected by CMS, in a form and manner determined by CMS; or (ii) Request enrollment in another plan. (2) Beneficiary notification. (3) Special election period. (h) Notification of reinstatement based on beneficiary cancellation of new enrollment. (i) Exception for employer group health plans. (2) In order to obtain the effective date described in paragraph (i)(1) of this section, the beneficiary must certify that, at the time of enrollment in the PDP, he or she received the disclosure statement specified in § 423.128. (3) Upon receipt of the election from the employer, the PDP sponsor must submit the enrollment to CMS within timeframes specified by CMS. (j) Authorized representatives. (1) The authorized representative would constitute the “beneficiary” or the “enrollee” for the purpose of making an election. (2) Authorized representatives may include court-appointed legal guardians, persons having durable power of attorney for health care decisions, or individuals authorized to make health care decisions under state surrogate consent laws, provided they have the authority to act for the beneficiary in this capacity. (k) Enrollments requiring prior CMS approval CMS approval. (2) Special election periods. (i) SEP for individuals who were not adequately informed of a loss of creditable prescription drug coverage, § 423.38(c)(2). (ii) SEP for contract violation, § 423.38(c)(8). (iii) SEP for individuals who disenroll in connection with CMS sanction, § 423.38(c)(12). (iv) SEP for other exceptional circumstances, § 423.38(c)(36). [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1543, Jan. 12, 2009; 83 FR 16736, Apr. 16, 2018; 89 FR 30830, Apr. 23, 2024; 91 FR 17583, Apr. 6, 2026] § 423.34 Enrollment of low-income subsidy eligible individuals. (a) General rule. (b) Definitions—Full-benefit dual-eligible individual. (1) Determined eligible by the State for— (i) Medical assistance for full-benefits under Title XIX of the Act for the month under any eligibility category covered under the State plan or comprehensive benefits under a demonstration under section 1115 of the Act; or (ii) Medical assistance under section 1902(a)(10(C) of the Act (medically needy) or section 1902(f) of the Act (States that use more restrictive eligibility criteria than are used by the SSI program) for any month if the individual was eligible for medical assistance in any part of the month. (2) Eligible for Part D in accordance with § 423.30(a) of this subpart. Low-income subsidy-eligible individual. (c) Reassigning low income subsidy eligible individuals General rule. (2) Part D prescription drug plans that waive a de minimis premium amount. (d) Automatic enrollment rules General rule. (2) Individuals enrolled in an MSA plan or one of the following that does not offer a Part D benefit. (3) Exception for individuals who are qualifying covered retirees. (ii) Before effectuating such an enrollment, CMS provides notice to such individuals of their choices and advises them to discuss the potential impact of Medicare Part D coverage on their group health plan coverage. The notice informs individuals that they will be deemed to have declined to enroll in Part D unless they affirmatively enroll in a Part D plan or contact CMS and confirm that they wish to be auto-enrolled in a PDP. Individuals who elect not to be auto-enrolled, may enroll in Medicare Part D at a later time if they choose to do so. (iii) All other low income subsidy eligible beneficiaries who are qualified covered retirees are not enrolled by CMS into PDPs. (4) Enrollment in PDP plans that voluntarily waive a de minimis premium amount. (e) Declining enrollment and disenrollment. (1) Affirmatively declining enrollment in Part D; or (2) Disenrolling from the Part D plan in which the individual is enrolled and electing to enroll in another Part D plan during the special enrollment period provided under § 423.38. (f) Effective date of enrollment for full-benefit dual eligible individuals. (1) January 1, 2006 for individuals who are full-benefit dual-eligible individuals as of December 31, 2005. (2) The first day of the month the individual is eligible for Part D under § 423.30(a)(1) for individuals who are Medicaid eligible and subsequently become newly eligible for Part D under § 423.30(a)(1) on or after January 1, 2006. (3) For individuals who are eligible for Part D under § 423.30(a)(1) of this subpart and subsequently become newly eligible for Medicaid on or after January 1, 2006, enrollment is effective with the first day of the month when the individuals become eligible for both Medicaid and Part D. (g) Effective date of enrollment for non-full-benefit dual-eligible individuals who are low-income subsidy-eligible individuals. [75 FR 19815, Apr. 15, 2010, as amended at 76 FR 21570, Apr. 15, 2011] § 423.36 Disenrollment process. (a) General rule. (b) Responsibilities of the PDP sponsor. (1) Submit a disenrollment notice to CMS within timeframes CMS specifies; (2) Provide the enrollee with a notice of disenrollment as CMS determines and approves; and (3) File and retain disenrollment requests for the period specified in CMS instructions. (4) In the case of an incomplete disenrollment request— (i) Document its efforts to obtain information to complete the disenrollment request; (ii) Notify the individual (in writing or verbally) within 10 calendar days of receipt of the disenrollment request; and (iii) The organization must deny the request if any additional information needed to make the disenrollment request “complete” is not received within the following timeframes: (A) For disenrollment requests received during the AEP by December 7, or within 21 calendar days of the request for additional information, whichever is later; and (B) For disenrollment requests received during all other election periods, by the end of the month in which the disenrollment request was initially received, or within 21 calendar days of the request for additional information, whichever is later. (c) Retroactive disenrollment. (1) There never was a legally valid enrollment; or (2) A valid request for disenrollment was properly made but not processed or acted upon. (d) Incomplete disenrollment. (e) Exception for employer group health plans. (2) Upon receipt of the election from the employer, the PDP sponsor must submit the disenrollment to CMS within timeframes specified by CMS. (f) Effect of failure to submit disenrollment notice to CMS promptly. (g) Disenrollments requiring prior CMS approval CMS approval. (2) Special election periods. (i) SEP for individuals who were not adequately informed of a loss of creditable prescription drug coverage, § 423.38(c)(2). (ii) SEP for contract violation, § 423.38(c)(8). (iii) SEP for individuals who disenroll in connection with CMS sanction, § 423.38(c)(12). (iv) SEP for other exceptional circumstances, § 423.38(c)(36). [70 FR 4525, Jan. 28, 2005, as amended at 89 FR 30830, Apr. 23, 2024; 91 FR 17584, Apr. 6, 2026] § 423.38 Enrollment periods. (a) Initial enrollment period for Part D—Basic rule. (1) In 2005. (2) February 2006. (3) March 2006 and subsequent months. (ii) Exception. For those individuals who are not eligible to enroll in a Part D plan at any time during their initial enrollment period for Medicare Part B, their initial enrollment period under this Part is the 3 months before becoming eligible for Part D, the month of eligibility, and the three months following eligibility to Part D. (iii) An individual who becomes entitled to Medicare Part A or enrolled in Part B for a retroactive effective date has an initial enrollment period under this Part beginning with the month in which notification of the Medicare determination is received and ending on the last day of the third month following the month in which the notification was received. (b) Annual coordinated election period For 2006. (2) For 2007 through 2010. (3) For 2011 and subsequent years. (c) Special enrollment periods. (1) The individual involuntarily loses creditable prescription drug coverage or such coverage is involuntarily reduced so that it is no longer creditable coverage as defined under § 423.56(a). Loss of credible prescription drug coverage due to failure to pay any required premium is not considered involuntary loss of the coverage. (2) The individual was not adequately informed, as required by standards established by CMS under § 423.56, that he or she has lost his or her creditable prescription drug coverage, that he or she never had credible prescription drug coverage, or the coverage is involuntarily reduced so that it is no longer creditable prescription drug coverage. This SEP requires CMS approval prior to use. The individual must use a CMS-operated election mechanism, in a form and manner specified by CMS, to make an election using this SEP. (3) The individual's enrollment or non-enrollment in a Part D plan is unintentional, inadvertent, or erroneous because of the error, misrepresentation, or inaction of a Federal employee, or any person authorized by the Federal government to act on its behalf. (4)(i) Except as provided in paragraph (ii) of this section, the individual is a full-subsidy eligible individual or other subsidy-eligible individual as defined in § 423.772, who is making a one-time-per month election into a PDP. (ii) An individual described in paragraph (i) is not eligible for this special enrollment period if he or she has been notified that he or she has been identified as a “potential at-risk beneficiary” or “at-risk beneficiary” as defined in § 423.100 and such identification has not been terminated in accordance with § 423.153(f)). (5) The individual elects to disenroll from a MA-PD plan and elects coverage under Medicare Part A and Part B in accordance with § 422.62(c) of this chapter. (6) The PDP sponsor's contract is terminated by the PDP sponsor or by CMS, as provided under § 423.507 through § 423.510, or the PDP plan is no longer offered in the area when the individual resides. (7)(i) The individual is no longer eligible for the PDP because of a change in his or her place of residence to a location outside of the PDP region(s) in which the PDP is offered; or (ii) The individual who, as a result of a change in permanent residence, has new Part D plan options available to them. (8) This SEP requires CMS approval prior to use. The individual must use a CMS-operated election mechanism, in a form and manner specified by CMS, to make an election using this SEP. The individual must demonstrate to CMS, in accordance with guidelines issued by CMS, that the PDP sponsor offering the PDP substantially violated a material provision of its contract under this part in relation to the individual, including, but not limited to any of the following: (i) Failure to provide the individual on a timely basis benefits available under the plan. (ii) Failure to provide benefits in accordance with applicable quality standards. (iii) The PDP (or its agent, representative, or plan provider) materially misrepresented the plan's provisions in communications as outlined in subpart V of this part. (9) The individual is making an election within 3 months after a gain, loss, or change to Medicaid or LIS eligibility, or notification of such a change, whichever is later. (10) The individual is making an election within 3 months after notification of a CMS or State-initiated enrollment action or that enrollment action's effective date, whichever is later. (11) The individual is making an enrollment request into or out of an employer sponsored Part D plan, is disenrolling from a Part D plan to take employer sponsored coverage of any kind, or is disenrolling from employer sponsored coverage (including Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage) to elect a Part D plan. (i) This special election period (SEP) is available to individuals who have (or are enrolling in) an employer or union sponsored Part D plan and ends 2 months after the month the employer or union coverage of any type ends. (ii) The individual may choose an effective date that is not earlier than the first of the month following the month in which the election is made and no later than up to 3 months after the month in which the election is made. (12) The individual is enrolled in a Part D plan offered by a Part D plan sponsor that has been sanctioned by CMS and elects to disenroll from that plan in connection with the matter(s) that gave rise to that sanction. This SEP requires CMS approval prior to use. The individual must receive a notice, as described in paragraph (c)(12)(i) of this section, to make an election using this SEP. (i) Consistent with the disclosure requirements at § 423.128(f), CMS may require the sponsor to notify current enrollees that if the enrollees believe they are affected by the matter(s) that gave rise to the sanction, the enrollees are eligible for a SEP to elect another PDP. (ii) The SEP starts with the imposition of the sanction and ends when the sanction ends or when the individual makes an election, whichever occurs first. (13) The individual is enrolled in a section 1876 cost contract that is non-renewing its contract for the area in which the enrollee resides. (i) Individuals eligible for this SEP must meet Part D plan eligibility requirements. (ii) This SEP begins December 8 of the then-current contract year and ends on the last day of February of the following year. (14) The individual is disenrolling from a PDP to enroll in a Program of All-inclusive Care for the Elderly (PACE) organization or is enrolling in a PDP after disenrolling from a PACE organization. (i) An individual who disenrolls from PACE has a SEP for 2 months after the effective date of PACE disenrollment to elect a PDP. (ii) An individual who disenrolls from a PDP has a SEP for 2 months after the effective date of PDP disenrollment to elect a PACE plan. (15) The individual moves into, resides in, or moves out of an institution, as defined by CMS, and elects to enroll in, or disenroll from, a Part D plan. (16) The individual who is not entitled to premium free Part A and enrolls in Part B during the General Enrollment Period for Part B that starts January 1, 2023, is eligible to request enrollment in a Part D plan. The special enrollment period begins when the individual submits their Part B application and continues for the first 2 months of Part B enrollment. The Part D plan enrollment is effective the first of the month following the month the Part D sponsor receives the enrollment request. (17) The individual belongs to a qualified State Pharmaceutical Assistance Program (SPAP) and is requesting enrollment in a Part D plan. (i) The individual is eligible to make one enrollment election per year. (ii) This SEP is available while the individual is enrolled in the SPAP and, upon loss of eligibility for SPAP benefits, for an additional 2 calendar months after either the month of the loss of eligibility or notification of the loss, whichever is later. (18) The individual is enrolled in a Part D plan and elects to disenroll from that Part D plan to enroll in or maintain other creditable prescription drug coverage. (19)(i) The individual is enrolled in a section 1876 cost contract and an optional supplemental Part D benefit under that contract and elects a Part D plan upon disenrolling from the cost contract. (ii) The SEP begins the month the individual requests disenrollment from the cost contract and ends when the individual makes an enrollment election or on the last day of the second month following the month the cost contract enrollment ended, whichever is earlier. (20) The individual is requesting enrollment in a Part D plan offered by a Part D plan sponsor with a Star Rating of 5 Stars. An individual may use this SEP only once for the contract year in which the Part D plan was assigned a 5-star overall performance rating, beginning the December 8 before that contract year through November 30 of that contract year. (21)(i) The individual is a non-U.S. citizen who becomes lawfully present in the United States. (ii) This SEP begins the month the enrollee attains lawful presence status and ends the earlier of when the individual makes an enrollment election or 2 calendar months after the month the enrollee attains lawful presence status. (22) The individual was adversely affected by having requested, but not received, required notices or information in an accessible format, as outlined in section 504 of the Rehabilitation Act of 1973, within the same timeframe that the Part D plan sponsor or CMS provided the same information to individuals who did not request an accessible format. (i) The SEP begins at the end of the election period during which the individual was seeking to make an election and the length is at least as long as the time it takes for the information to be provided to the individual in an accessible format. (ii) Part D plan sponsors may determine eligibility for this SEP when the criterion is met, ensuring adequate documentation of the situation, including records indicating the date of the individual's request, the amount of time taken to provide accessible versions of materials and the amount of time it takes for the same information to be provided to an individual who does not request an accessible format. (23) Individuals affected by an emergency or major disaster declared by a Federal, State or local government entity are eligible for an SEP to make a Part D enrollment or disenrollment election. The SEP starts as of the date the declaration is made, the incident start date or, if different, the start date identified in the declaration, whichever is earlier. The SEP ends 2 full calendar months following the end date identified in the declaration or, if different, the date the end of the incident is announced, the date the incident automatically ends under applicable state or local law, or, if the incident end date is not otherwise identified, the incident end date specified in paragraph (c)(23)(i) of this section. (i) If the incident end date of an emergency or major disaster is not otherwise identified, the incident end date is 1 year after the SEP start date or, if applicable, the date of a renewal or extension of the emergency or disaster declaration, whichever is later. Therefore, the maximum length of this SEP, if the incident end date is not otherwise identified, is 14 full calendar months after the SEP start date or, if applicable, the date of a renewal or extension of the emergency or disaster declaration. (ii)(A) Resides, or resided at the start of the SEP eligibility period described in this paragraph (c)(23), in an area for which a Federal, state or local government entity has declared an emergency or major disaster; or (B) Does not reside in an affected area but relies on help making healthcare decisions from one or more individuals who reside in an affected area; (iii) Was eligible for another election period at the time of SEP eligibility period described in this paragraph (c)(23); and (iv) Did not make an election during that other election period due to the emergency or major disaster. (24) The individual is using the SEP at § 422.62(b)(8) of this chapter to disenroll from a MA plan that includes Part D benefits. (i) This SEP permits a one-time election to enroll in a Part D plan. (ii) This SEP begins upon disenrollment from the MA plan and continues for 2 calendar months. (25)(i) An individual using the MA Open Enrollment Period for Institutionalized Individuals (OEPI) to disenroll from a MA plan that includes Part D benefits plan is eligible for a SEP to request enrollment in a Part D plan. (ii) The SEP begins with the month the individual requests disenrollment from the MA plan and ends on the last day of the second month following the month MA enrollment ended. (26) An individual using the Medicare Advantage Open Enrollment Period (MA OEP) to elect original Medicare is eligible for a SEP to make a Part D enrollment election. (27)(i) The individual is enrolled in a MA special needs plan (SNP) and is no longer eligible for the SNP because he or she no longer meets the specific special needs status. (ii) The individual may request enrollment in a Part D plan that begins the month the individual's special needs status changes and ends the earlier of when he or she makes an election or 3 months after the effective date of involuntary disenrollment from the SNP. (28) The individual is found, after enrollment into a Chronic Care SNP, not to have the required qualifying condition. (i) This individual is eligible to enroll prospectively in a Part D plan. (ii) This SEP begins when the MA organization notifies the individual of the lack of eligibility for the Chronic Care SNP and extends through the end of that month and the following 2 calendar months. (iii) The SEP ends when the individual makes an enrollment election or on the last day of the second of the 2 calendar months following notification of the lack of eligibility, whichever occurs first. (29) The individual uses the SEP at § 422.62(b)(15) of this chapter to enroll in a MA Private Fee-for-Service plan without Part D benefits, or enrolls in a section 1876 cost plan, is eligible to request enrollment in a PDP or the cost plan's optional supplemental Part D benefit, if offered. (i) This SEP begins the month the individual uses the SEP at § 422.62(b)(15) of this chapter and continues for 2 additional months. (ii) [Reserved] (30) An individual who uses the SEP at § 422.62(b)(23) of this chapter to disenroll from a MA plan is eligible to request enrollment in a PDP. (i) This SEP begins the month the individual is notified of eligibility for the SEP at § 422.62(b)(23) of this chapter and continues for an additional 2 calendar months. (ii) This SEP permits one enrollment into a PDP. (iii) This SEP ends when the individual has enrolled in the PDP. (iv) An individual may use this SEP to request enrollment in a PDP subsequent to having submitted a disenrollment to the MA plan or may simply request enrollment in the PDP, resulting in automatic disenrollment from the MA plan. (31) The individual is enrolled in a plan offered by a Part D plan sponsor that has been placed into receivership by a state or territorial regulatory authority. The SEP begins the month the receivership is effective and continues until it is no longer in effect or until the enrollee makes an election, whichever occurs first. When instructed by CMS, the MA plan that has been placed under receivership must notify its enrollees, in the form and manner directed by CMS, of the enrollees' eligibility for this SEP and how to use the SEP. (32) The individual is enrolled in a plan that has been identified with the low performing icon in accordance with § 423.186(h)(1)(ii). This SEP exists while the individual is enrolled in the low performing Part D plan. (33) The individual was involuntarily disenrolled from an MA-PD plan due to loss of Part B but continues to be entitled to Part A. This SEP begins when the individual is advised of the loss of Part B and continues for 2 additional months. (34) The individual enrolls in Medicare premium-Part A or Part B using an exceptional condition SEP, as described in 42 CFR parts 406.27 and 407.23. The SEP begins when the individual submits their premium-Part A or Part B application and continues for the first 2 months of enrollment in premium Part A or Part B. The Part D plan enrollment is effective the first of the month following the month the Part D plan receives the enrollment request. (35)(i) The individual is a full-benefit dual eligible individual (as defined in § 423.772) making a one-time-per month election into a fully integrated dual eligible special needs plan as defined in § 422.2 of this chapter, a highly integrated dual eligible special needs plan as defined in § 422.2 of this chapter, or an applicable integrated plan as defined in § 422.561 of this chapter. (ii) The SEP is available only to facilitate aligned enrollment as defined in § 422.2 of this chapter. (36) The individual meets other exceptional circumstances as CMS may provide. This SEP requires CMS approval prior to use. The individual must use a CMS-operated election mechanism, in a form and manner specified by CMS, to make an election using this SEP. (d) Enrollment period to coordinate with MA annual 45-day disenrollment period. (e) Enrollment period to coordinate with MA open enrollment period. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19816, Apr. 15, 2010; 76 FR 21570, Apr. 15, 2011; 83 FR 16737, Apr. 16, 2018; 85 FR 33909, June 2, 2020; 88 FR 22337, Apr. 12, 2023; 89 FR 30830, Apr. 23, 2024; 91 FR 17584, Apr. 6, 2026] § 423.40 Effective dates. (a) Initial enrollment period. (2) Except as otherwise provided under § 423.34(f), an enrollment made during or after the month of entitlement to Part A or enrollment in Part B is effective the first day of the calendar month following the month in which the enrollment in Part D is made. (3) If the individual is not eligible to enroll in Part D on the first day of the calendar month following the month in which the election to enroll in Part D is made, the enrollment in Part D is effective the first day of the month the individual is eligible for Part D. (4) In no case is an enrollment in Part D effective before January 1, 2006 or before entitlement to Part A or enrollment Part B. (b) Annual coordinated election periods General rule. (2) Exception for January 1, 2006 through May 15, 2006. (c) Special enrollment periods. (d) PDP enrollment period to coordinate with the MA annual disenrollment period. (e) PDP enrollment period to coordinate with the MA open enrollment period. (f) Beneficiary choice of effective date. (1) To determine the beneficiary's choice of election period and effective date, the Part D plan sponsor must attempt to contact the beneficiary and must document its attempts. (2) If the Part D plan sponsor is unable to obtain the beneficiary's desired enrollment effective date, the Part D plan sponsor must assign an election period using the following ranking of election periods: (i) ICEP/Part D IEP. (ii) MA-OEP. (iii) SEP. (iv) AEP. (v) OEPI. (3) If the Part D plan sponsor is unable to obtain the beneficiary's desired disenrollment effective date, the Part D plan sponsor must assign an election period that results in the earliest disenrollment. [70 FR 4525, Jan. 28, 2005, as amended at 76 FR 21570, Apr. 15, 2011; 83 FR 16737, Apr. 16, 2018; 85 FR 33911, June 2, 2020; 89 FR 30831, Apr. 23, 2024] § 423.44 Involuntary disenrollment from Part D coverage. (a) General rule. (1) Involuntarily disenroll an individual from any PDP it offers; or (2) Orally or in writing, or by any action or inaction, request or encourage an individual to disenroll. (b) Basis for disenrollment Optional involuntary disenrollment. (i) Any monthly premium is not paid on a timely basis, as specified under paragraph (d)(1) of this section; or (ii) The individual has engaged in disruptive behavior, as specified under paragraph (d)(2) of this section. (iii) The individual provides fraudulent information on his or her election form or permits abuse of his or her enrollment card as specified in paragraph (d)(9) of this section. (2) Required involuntary disenrollment. (i) The individual no longer resides in the PDP's service area. (ii) The individual loses eligibility for Part D. (iii) Death of the individual. (iv) The PDP sponsor's contract is terminated by CMS or by a PDP or through mutual consent. The PDP sponsor must disenroll affected enrollees in accordance with the procedures for disenrollment set forth at § 423.507 through § 423.510. (v) The individual materially misrepresents information, as determined by CMS, to the PDP sponsor that the individual has or expects to receive reimbursement for third-party coverage. (vi) The individual is not lawfully present in the United States. (c) Notice requirement. (2) Notices for reasons specified in paragraphs (b)(1) through (b)(2)(i) and (b)(2)(iii) of this section must— (i) Be provided to the individual before submission of the disenrollment notice to CMS; and (ii) Include an explanation of the individual's right to file a grievance under the PDP's grievance procedures. (d) Process for disenrollment (i) The PDP sponsor can demonstrate to CMS that it made reasonable efforts to collect the unpaid premium amount. (ii) The PDP sponsor gives the enrollee notice of disenrollment that meets the requirements set forth in paragraph (c) of this section. (iii) The PDP sponsor provides the individual with a grace period, that is, an opportunity to pay past due premiums in full. The grace period must— (A) Be at least 2 whole calendar months; and (B) Begin on the first day of the month for which the premium is unpaid or the first day of the month following the date on which premium payment is requested, whichever is later. (iv) Reenrollment in the PDP. (v) A PDP sponsor may not disenroll either of the following: (A) An individual who had monthly premiums withheld per § 423.293(a) and (e) of this part or who is in premium withhold status, as defined by CMS. (B) A member or initiate the disenrollment process if the sponsor has been notified that an SPAP, or other payer, is paying the Part D portion of the premium, and the sponsor has not yet coordinated receipt of the premium payments with the SPAP or other payer. (vi) Extension of grace period for good cause and reinstatement. (A) Submits a request for reinstatement for good cause within 60 calendar days of the disenrollment effective date. (B) Has not previously requested reinstatement for good cause during the same 60-day period following the involuntary disenrollment. (C) Shows good cause for failure to pay within the initial grace period. (D) Pays all overdue premiums within 3 calendar months after the disenrollment date. (E) Establishes by a credible statement that failure to pay premiums within the initial grace period was due to circumstances for which the individual had no control, or which the individual could not reasonably have been expected to foresee. (vii) No extension of grace period. (2) Disruptive behavior Definition. (ii) Basis of disenrollment for disruptive behavior. (iii) Effort to resolve the problem. (iv) Documentation. (A) Must document the enrollee's behavior, its own efforts to resolve any problems, as described in paragraph (d)(2)(iii) of this section, and any extenuating circumstances; (B) May request from CMS the ability to decline future enrollment by the individual; and (C) Must submit the following: ( 1 ( 2 ( 3 (v) CMS review of the proposed disenrollment. (vi) Exception for fallback prescription drug plans. § 423.855 (vii) Effective date of disenrollment. (viii) Required notices. (A) The first notice, the advance notice, informs the member that continued disruptive behavior could lead to involuntary disenrollment and provides the individual an opportunity to cease the behavior in order to avoid the disenrollment action. ( 1 ( 2 (B) The second notice, the notice of intent to request CMS permission to disenroll the member, notifies the member that the PDP sponsor requests CMS permission to involuntarily disenroll the member. ( 1 ( 2 (3) Loss of Part D eligiblity. (4) Death of the individual. (5) Individual no longer resides in the PDP service area—Basis for disenrollment. Basis for disenrollment. (ii) Special rule. (iii) Incarceration. (iv) Notification by CMS of incarceration. (6) Plan termination. (ii) The notice must be sent before the effective date of the plan termination or area reduction, and in the timeframes specified by CMS. (7) Misrepresentation of third-party reimbursement. (ii) Reenrollment in the PDP. (8) Individual is not lawfully present in the United States. (9) Individual commits fraud or permits abuse of enrollment card Basis for disenrollment. (A) Knowingly provides, on the election form, fraudulent information that materially affects the individual's eligibility to enroll in the PDP; or (B) Intentionally permits others to use his or her enrollment card to obtain drugs under the PDP. (ii) Notice of disenrollment. (iii) Report to CMS. (e) Involuntary disenrollment by CMS General rule. (2) Initial grace period. (3) Extension of grace period for good cause and reinstatement. (4) Notice of termination. (5) Effective date of disenrollment. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1543, Jan. 12, 2009; 75 FR 19816, Apr. 15, 2010; 76 FR 21570, Apr. 15, 2011; 79 FR 29962, May 23, 2014; 80 FR 7962, Feb. 12, 2015; 89 FR 30831, Apr. 23, 2024; 89 FR 63827, Aug. 6, 2024] § 423.46 Late enrollment penalty. (a) General. (1) The individual was eligible to enroll in a Part D plan; (2) The individual was not covered under any creditable prescription drug coverage; and (3) The individual was not enrolled in a Part D plan. (b) Role of Part D plan in determination of the penalty. (c) Reconsideration. (d) Record retention. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 54251, Sept. 18, 2008; 74 FR 1543, Jan. 12, 2009] § 423.48 Information about Part D. Each Part D plan must provide, on an annual basis, and in a format and using standard terminology that CMS may specify in guidance, the information necessary to enable CMS to provide to current and potential Part D eligible individuals the information they need to make informed decisions among the available choices for Part D coverage. § 423.56 Procedures to determine and document creditable status of prescription drug coverage. (a) Definition. (1) The use of generally accepted actuarial principles and in accordance with CMS guidelines; or (2) For group health plans not receiving a retiree drug subsidy, meeting the following requirements under the simplified creditable coverage determination methodology: (i) Provision of reasonable coverage for brand name and generic prescription drugs and biological products. (ii) Provision of reasonable access to retail pharmacies. (iii) Is designed to pay on average a minimum percent of participants' prescription drug expenses, with the percent value at 73 percent for 2027 and percent values for subsequent years to be updated by CMS in subregulatory guidance in a time and manner determined by CMS to reflect the actuarial value of defined standard prescription drug coverage under Part D. (b) Types of coverage. (1) Prescription drug coverage under a PDP or MA-PD plan. (2) Medicaid coverage under title XIX of the Act or under a waiver under section 1115 of the Act. (3) Coverage under a group health plan (other than an account-based medical plan as defined at § 423.882 (paragraph (4) of the definition of Group health plans)) including the Federal employees health benefits program, and qualified retiree prescription drug plans as defined in section 1860D-22(a)(2) of the Act. (4) Coverage under State Pharmaceutical Assistance Programs (SPAP) as defined at § 423.454. (5) Coverage of prescription drugs for veterans, survivors and dependents under chapter 17 of title 38, U.S.C. (6) Coverage under a Medicare supplemental policy (Medigap policy) as defined at § 403.205 of this chapter. (7) Military coverage under chapter 55 of title 10, U.S.C., including TRICARE. (8) Individual health insurance coverage (as defined in section 2791(b)(5) of the Public Health Service Act) that includes coverage for outpatient prescription drugs and that does not meet the definition of an excepted benefit (as defined in section 2791(c) of the Public Health Service Act). (9) Coverage provided by the medical care program of the Indian Health Service, Tribe or Tribal organization, or Urban Indian organization (I/T/U). (10) Coverage provided by a PACE organization. (11) Coverage provided by a cost-based HMO or CMP under part 417 of this chapter. (12) Coverage provided through a State High-Risk Pool as defined under 42 CFR 146.113(a)(1)(vii). (13) Other coverage as the Secretary may determine appropriate. (c) General disclosure requirements. (d) Disclosure of non-creditable coverage. (1) The fact that the coverage is not creditable prescription drug coverage, as provided by CMS; (2) That there are limitations on the periods in a year in which the individual may enroll in Part D plans; and (3) That the individual may be subject to a late enrollment penalty, as described under § 423.46. (e) Disclosure to CMS. (f) Notification content and timing requirements. (1) Prior to an individual's initial enrollment period for Part D, as described under § 423.38(a); (2) Prior to the effective date of enrollment in the prescription drug coverage and upon any change that affects whether the coverage is creditable prescription drug coverage; (3) Prior to the commencement of the Annual Coordinated Election Period as defined in § 423.38(b); and (4) Upon request by the individual. (g) When an individual is not adequately informed of coverage. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20505, Apr. 15, 2008; 77 FR 22168, Apr. 12, 2012; 91 FR 17584, Apr. 6, 2026] Subpart C—Benefits and Beneficiary Protections § 423.100 Definitions. As used in this part, unless otherwise specified— ACIP-recommended adult vaccine Actual cost Affected enrollee, Alternative prescription drug coverage (1) Basic alternative coverage (2) Enhanced alternative coverage Applicable beneficiary (1) Is enrolled in a prescription drug plan or an MA-PD plan; (2) Is not enrolled in a qualified retiree prescription drug plan; (3)(i) For the purposes of the Coverage Gap Discount Program— (A) Is not entitled to an income-related subsidy under section 1860D-14(a) of the Act; (B) Has reached or exceeded the initial coverage limit under section 1860D-2(b)(3) of the Act during the year; (C) Has not incurred costs for covered Part D drugs in the year equal to the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B) of the Act; and (D) Has a claim that— ( 1 ( 2 ( 3 ( 4 (ii) For the purposes of the Manufacturer Discount Program, has incurred costs, as determined in accordance with section 1860D-2(b)(4)(C) of the Act, for covered Part D drugs in the year that exceed the annual deductible specified in section 1860D-2(b)(1) of the Act. Applicable discount, (1) Coverage Gap Discount Program, has the meaning set forth at § 423.2305; and (2) Manufacturer Discount Program, has the meaning set forth at § 423.2712. Applicable drug (1)(i) Approved under a new drug application under section 505(c) of the Federal Food, Drug, and Cosmetic Act (FDCA); or (ii) In the case of a biological product, licensed under section 351 of the Public Health Service Act (other than, with respect to a plan year before 2019, a product licensed under subsection (k) of such section 351). (2)(i) If the PDP sponsor of the prescription drug plan or the MA organization offering the MA-PD plan uses a formulary, which is on the formulary of the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in; (ii) If the PDP sponsor of the prescription drug plan or the MA organization offering the MA-PD plan does not use a formulary, for which benefits are available under the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in; (iii) Is provided to a particular applicable beneficiary through an exception or appeal for that particular applicable beneficiary; or (iv) For the purposes of the Manufacturer Discount Program, is provided to a particular applicable beneficiary as a transition fill under § 423.120(b)(3) or as an emergency supply as may be required for an applicable beneficiary who is a long-term care resident. (3) Not a compounded drug product (as described in § 423.120(d)) that contains an applicable drug; and (4) For the purposes of the Manufacturer Discount Program, not a selected drug during a price applicability period with respect to such drug. Applicable number of calendar days At-risk beneficiary (1) Who is— (i) Identified using clinical guidelines (as defined in this section); (ii) Not an exempted beneficiary; and (iii) Determined to be at-risk for misuse or abuse of such frequently abused drugs by a Part D plan sponsor under its drug management program in accordance with the requirements of § 423.153(f); or (2) With respect to whom a Part D plan sponsor receives a notice upon the beneficiary's enrollment in such sponsor's plan that the beneficiary was identified as an at-risk beneficiary (as defined in the paragraph (1) of this definition) under the prescription drug plan in which the beneficiary was most recently enrolled and such identification had not been terminated upon disenrollment. Basic prescription drug coverage Bioequivalent Clinical guidelines, (1) To identify potential at-risk beneficiaries who may be determined to be at-risk beneficiaries under such programs; and (2) That are developed in accordance with the standards in § 423.153(f)(16) and, beginning with contract year 2020, will be published in guidance annually. Contracted pharmacy network Corresponding drug Coverage gap Covered insulin product (1) Is a covered Part D drug covered under a PDP or MA-PD plan— (i) Is licensed under section 351 of the Public Health Service Act; and (ii) Is marketed under the license described in paragraph (1)(i) of this definition. (2) Is not a compounded drug product that contains insulin (as described in § 423.120(d)). Covered insulin product applicable cost-sharing amount (1) $35. (2) An amount equal to 25 percent of the maximum fair price established for the covered insulin product in accordance with Part E of title XI of the Act. (3) An amount equal to 25 percent of the negotiated price (as defined in this section) of the covered insulin product under the PDP or MA-PD plan. Covered Part D Daily cost-sharing rate (1) Monthly copayment under the enrollee's Part D plan, divided by the number of days in the approved month's supply for the drug dispensed and rounded to the nearest cent; or (2) Coinsurance percentage under the enrollee's Part D plan. Date of dispensing Dispensing fees (1) Are incurred at the point of sale and pay for costs in excess of the ingredient cost of a covered Part D drug each time a covered Part D drug is dispensed; (2) Include only pharmacy costs associated with ensuring that possession of the appropriate covered Part D drug is transferred to a Part D enrollee. Pharmacy costs include, but are not limited to, any reasonable costs associated with a pharmacist's time in checking the computer for information about an individual's coverage, performing quality assurance activities consistent with § 423.153(c)(2), measurement or mixing of the covered Part D drug, filling the container, physically providing the completed prescription to the Part D enrollee, delivery, special packaging, and salaries of pharmacists and other pharmacy workers as well as the costs associated with maintaining the pharmacy facility and acquiring and maintaining technology and equipment necessary to operate the pharmacy. Dispensing fees should take into consideration the number of dispensing events in a billing cycle, the incremental costs associated with the type of dispensing methodology, and with respect to Part D drugs dispensed in LTC facilities, the techniques to minimize the dispensing of unused drugs. Dispensing fees may also take into account costs associated with data collection on unused Part D drugs and restocking fees associated with return for credit and reuse in long-term care pharmacies, when return for credit and reuse is permitted under the State in law and is allowed under the contract between the Part D sponsor and the pharmacy. (3) Do not include administrative costs incurred by the Part D plan in the operation of the Part D benefit, including systems costs for interfacing with pharmacies. Effective date of the ACIP recommendation Exempted beneficiary (1) Has elected to receive hospice care or is receiving palliative or end-of-life care; (2) Is a resident of a long-term care facility, of a facility described in section 1905(d) of the Act, or of another facility for which frequently abused drugs are dispensed for residents through a contract with a single pharmacy; (3) Is being treated for cancer-related pain or (4) Has sickle cell disease. Frequently abused drug (1) The drug's schedule designation by the Drug Enforcement Administration. (2) Government or professional guidelines that address that a drug is frequently abused or misused. (3) An analysis of Medicare or other drug utilization or scientific data. Government-funded health program (1) An approved State child health plan under title XXI of the Act providing benefits for child health assistance that meets the requirements of section 2103 of the Act; (2) The Medicaid program under title XIX of the Act or a waiver under section 1115 of the Act; (3) The veterans' health care program under Chapter 17 of title 38 of the United States Code; (4) The Indian Health Service program under the Indian Health Care Improvement Act under Chapter 18 of title 25 of the United States Code; and (5) Any other government-funded program whose principal activity is the direct provision of health care to persons. Group health plan, Immediate negative formulary change Incurred costs (1) For— (i) Covered Part D drugs that are not paid for under the Part D plan as a result of application of any annual deductible or other cost-sharing rules for covered Part D drugs prior to the Part D enrollee satisfying the out-of-pocket threshold under § 423.104(d)(5)(iii), including any price differential for which the Part D enrollee is responsible under § 423.124(b); or (ii) Nominal cost-sharing paid by or on behalf of an enrollee, which is associated with drugs that would otherwise be covered Part D drugs, as defined in § 423.100, but are instead paid for, with the exception of said nominal cost-sharing, by a patient assistance program providing assistance outside the Part D benefit, provided that documentation of such nominal cost-sharing has been submitted to the Part D plan consistent with the plan processes and instructions for the submission of such information; and (2) That are paid for— (i) By the Part D enrollee or on behalf of the Part D enrollee by another person, and the Part D enrollee (or person paying on behalf of the Part D enrollee) is not reimbursed through insurance or otherwise, a group health plan, or other third party payment arrangement, or the person paying on behalf of the Part D enrollee is not paying under insurance or otherwise, a group health plan, or third party payment arrangement; (ii) Under State Pharmaceutical Assistance Program (as defined in § 423.464); by the Indian Health Service, an Indian tribe or tribal organization, or urban Indian organization (as defined in section 4 of the Indian Health Care Improvement Act) or under an AIDS Drug Assistance Program (as defined in part B of title XXVI of the Public Health Service); or by a manufacturer as payment for an applicable discount (as defined in § 423.2305) under the Medicare Coverage Gap Discount Program (as defined in § 423.2305); or (iii) Under § 423.782. (3) For 2025 and subsequent years, that are reimbursed through insurance, a group health plan, or certain other third party payment arrangements, but not including the coverage provided by a prescription drug plan or an MA-PD plan that is basic prescription drug coverage or any payments by a manufacturer under the Manufacturer Discount Program under subpart AA of this part. Insurance (1) Health insurance coverage (as defined in 42 U.S.C. 300gg-91(b)(1)); (2) A Medicare Advantage plan (as described under section 1851(a)(2) of the Act); and (3) A PACE organization (as defined under sections 1894(a)(3) and 1934(a)(13) of the Act) but specifically excluding a personal health savings vehicle. I/T/U pharmacy Labeler code Long-term care facility Long-term care pharmacy Long-term care network pharmacy Maintenance change (1) Making any negative formulary changes to a drug within 90 days of adding a corresponding drug to the same or a lower cost-sharing tier and with the same or less restrictive prior authorization (PA), step therapy (ST), or quantity limit (QL) requirements (other than immediate substitutions that meet the requirements of § 423.120(e)(2)(i)). (2) Making any negative formulary changes to a reference product within 90 days of adding a biosimilar biological product other than an interchangeable biological product of that reference product to the same or a lower cost-sharing tier and with the same or less restrictive PA, ST, or QL requirements. (3) Removing a non-Part D drug. (4) Adding or making more restrictive PA, ST, or QL requirements based upon a new FDA-mandated boxed warning. (5) Removing a drug withdrawn from sale by the manufacturer or that FDA determines to be withdrawn for safety or effectiveness reasons if the Part D sponsor chooses not to treat it as an immediate negative formulary change. (6) Removing a drug based on long term shortage and market availability. (7) Making negative formulary changes based upon new clinical guidelines or information or to promote safe utilization. (8) Adding PA to help determine Part B versus Part D coverage. Manufacturer Manufacturer Discount Program Manufacturer Discount Program agreement Medicare Coverage Gap Discount Program (or Coverage Gap Discount Program) Medicare Coverage Gap Discount Program agreement (or Coverage Gap Discount Program agreement) National Drug Code (NDC) Negative formulary change (1) Removing a drug from a formulary. (2) Moving a drug to a higher cost-sharing tier. (3) Adding or making more restrictive prior authorization (PA), step therapy (ST), or quantity limit (QL) requirements. Negative formulary changes do not include safety-based claim edits which are not submitted to CMS as part of the formulary. Negotiated price (1) The Part D sponsor (or other intermediary contracting organization) and the network dispensing pharmacy or other network dispensing provider have negotiated as the lowest possible reimbursement such network entity will receive, in total, for a particular drug; (2) Meets all of the following: (i) Includes all price concessions (as defined in this section) from network pharmacies or other network providers; (ii) Includes any dispensing fees; and (iii) Excludes additional contingent amounts, such as incentive fees, if these amounts increase prices; and (3) Is reduced by non-pharmacy price concessions and other direct or indirect remuneration that the Part D sponsor passes through to Part D enrollees at the point of sale. Network pharmacy Non-applicable drug Non-maintenance change Non-preferred pharmacy Or otherwise Other specified entities Out-of-network pharmacy Part D drug (1) Unless excluded under paragraph (2) of this definition, any of the following if used for a medically accepted indication (as defined in section 1860D-2(e)(4) of the Act)— (i) A drug that may be dispensed only upon a prescription and that is described in sections 1927(k)(2)(A)(i) through (iii) of the Act. (ii) A biological product described in sections 1927(k)(2)(B)(i) through (iii) of the Act. (iii) Insulin described in section 1927(k)(2)(C) of the Act. (iv) Medical supplies associated with the injection of insulin, including syringes, needles, alcohol swabs, and gauze. (v) A vaccine licensed under section 351 of the Public Health Service Act and for vaccine administration on or after January 1, 2008, its administration. (vi) Supplies that are directly associated with delivering insulin into the body, such as an inhalation chamber used to deliver the insulin through inhalation. (vii) A combination product approved and regulated by the FDA as a drug, vaccine, or biologic described in paragraphs (1)(i), (ii), (iii), or (v) of this definition. (2) Does not include any of the following: (i) Drugs for which payment as so prescribed and dispensed or administered to an individual is available for that individual under Part A or Part B (even though a deductible may apply, or even though the individual is eligible for coverage under Part A or Part B but has declined to enroll in Part A or Part B). (ii) Drugs or classes of drugs, or their medical uses, which may be excluded from coverage or otherwise restricted under Medicaid under sections 1927(d)(2) or (d)(3) of the Act, except for smoking cessation agents. (iii) Medical foods, defined as a food that is formulated to be consumed or administered enterally under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation, and that are not regulated as drugs under section 505 of the Federal Food, Drug, and Cosmetic Act. Person Personal health savings vehicle (1) A Health Savings Account (as defined under section 220 of the Internal Revenue Code); (2) A Flexible Spending Account (as defined in section 106(c)(2) of the Internal Revenue Code) offered in conjunction with a cafeteria plan under section 125 of the Internal Revenue Code; and (3) An Archer Medical Savings Account (as defined under section 223 of the Internal Revenue Code); but specifically excluding a Health Reimbursement Arrangement (as described under Internal Revenue Ruling 2002-41 and Internal Revenue Notice 2002-45) Plan allowance Potential at-risk beneficiary (1) Who is identified using clinical guidelines (as defined in this section); or (2) With respect to whom a Part D plan sponsor receives a notice upon the beneficiary's enrollment in such sponsor's plan that the beneficiary was identified as a potential at-risk beneficiary (as defined in paragraph (1) of this definition) under the prescription drug plan in which the beneficiary was most recently enrolled and such identification had not been terminated upon disenrollment. Preclusion list (1) Meet all of the following requirements: (i) The prescriber is currently revoked from Medicare for a reason other than that stated in § 424.535(a)(3) of this chapter. (ii) The prescriber is currently under a reenrollment bar under § 424.535(c) of this chapter. (iii) CMS determines that the underlying conduct that led to the revocation is detrimental to the best interests of the Medicare program. In making this determination under this paragraph (1)(iii), CMS considers the following factors: (A) The seriousness of the conduct underlying the prescriber's revocation; (B) The degree to which the prescriber's conduct could affect the integrity of the Part D program; and (C) Any other evidence that CMS deems relevant to its determination; or (2) Meet both of the following requirements: (i) The prescriber has engaged in behavior, other than that described in § 424.535(a)(3) of this chapter, for which CMS could have revoked the individual to the extent applicable had he or she been enrolled in Medicare. (ii) CMS determines that the underlying conduct that would have led to the revocation is detrimental to the best interests of the Medicare program. In making this determination under this paragraph, CMS considers all of the following factors: (A) The seriousness of the conduct involved. (B) The degree to which the prescriber's conduct could affect the integrity of the Part D program. (C) Any other evidence that CMS deems relevant to its determination; or (3) The prescriber, regardless of whether he or she is or was enrolled in Medicare, has been convicted of a felony under Federal or State law within the previous 10 years that CMS deems detrimental to the best interests of the Medicare program. Factors that CMS considers in making such a determination under this paragraph are as follows: (i) The severity of the offense. (ii) When the offense occurred. (iii) Any other information that CMS deems relevant to its determination. Preferred drug Preferred pharmacy Price applicability period Price concession Program size Qualified prescription drug coverage Required prescription drug coverage (1) Basic prescription drug coverage; or (2) Enhanced alternative coverage, provided there is no MA monthly supplemental beneficiary premium (as defined under section 1854(b)(2)(C) of the Act) applied under the plan due to the application of a credit against the premium of a rebate under § 422.266(b) of this chapter. Retail pharmacy Rural Selected drug Standard prescription drug coverage (1) Defined standard coverage (2) Actuarially equivalent standard coverage Suburban Supplemental benefits Therapeutically equivalent Third Party Administrator Third party payment arrangement Urban Usual and customary (U&C) price Valid prescription [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20506, Apr. 15, 2008; 74 FR 1543, Jan. 12, 2009; 76 FR 21571, Apr. 15, 2011; 77 FR 22169, Apr. 12, 2012; 77 FR 32407, June 1, 2012; 79 FR 29962, May 23, 2014; 80 FR 7963, Feb. 12, 2015; 80 FR 25966, May 6, 2015; 83 FR 16737, Apr. 16, 2018; 84 FR 15840, Apr. 16, 2019; 86 FR 6115, Jan. 19, 2021; 87 FR 27899, May 9, 2022; 89 FR 30832, Apr. 23, 2024; 89 FR 63828, Aug. 6, 2024; 90 FR 15911, Apr. 15, 2025; 91 FR 17584, Apr. 6, 2026] § 423.104 Requirements related to qualified prescription drug coverage. (a) General. (b) Availability of prescription drug plan. (1) To all Part D eligible beneficiaries residing in the plan's service area; and (2) At a uniform premium, with uniform benefits and level of cost-sharing throughout the plan's service area. (c) Types of benefits. (d) Standard prescription drug coverage. (1) Deductible. (i) For 2006. (ii) For years subsequent to 2006. (2) Cost-sharing under prescription drug plans. (A) Equal to 25 percent of actual cost; or (B) Actuarially equivalent to an average expected coinsurance of no more than 25 percent of actual cost, as determined through processes and methods established under § 423.265(c) and (d). (ii) Tiered copayments. (iii) Tiered cost sharing under paragraph (d)(2)(ii) of this section may not exceed levels annually determined by CMS to be discriminatory. (iv) Specialty tier means a formulary cost sharing tier dedicated to high-cost Part D drugs with ingredient costs for a 30-day equivalent supply (as described in paragraph (d)(2)(iv)(A)( 2 (A) Specialty-tier cost threshold. ( 1 30-day equivalent ingredient cost. ( 2 30-day equivalent supply. ( 3 Top 1 percent. ( 4 Determination. 3 ( 5 Claims history. 2 ( 6 No claims history. 2 (B) Limit on specialty-tier cost threshold adjustment. 1 3 ( 2 3 (C) Data used to determine the specialty-tier cost threshold. (D) Maximum number of specialty tiers and maximum allowable cost sharing. ( 1 ( 2 ( 3 ( i ( ii Equation 1 to Paragraph (d)(2)(iv)(D)( 3 ii (3) Initial coverage limit. (i) For 2006. (ii) For years 2007 through 2024. (iii) For year 2025 and each subsequent year. (4) Cost-sharing in the coverage gap for applicable beneficiaries. (i) Coinsurance in the coverage gap (as defined in § 423.100) for costs for covered Part D drugs that are not applicable drugs (as defined in § 423.100) under the Medicare coverage gap discount program that is— (A) Equal to the generic gap coinsurance percentage described in paragraph (d)(4)(iii) of this section; or (B) Actuarially equivalent to an average expected coinsurance for covered Part D drugs that are not applicable drugs under the Medicare coverage gap discount program, as determined through processes and methods established under § 423.265 (c) and (d). (ii) Coinsurance in the coverage gap for the actual cost minus the dispensing fee and any vaccine administration fee for covered Part D drugs that are applicable drugs under the Medicare coverage gap discount program that is— (A) Equal to the difference between the applicable gap coinsurance percentage described in paragraph (d)(4)(iv) of this section and the discount percentage determined under the Medicare coverage gap discount program; or (B) Actuarially equivalent to an average expected coinsurance for covered Part D drugs that are applicable drugs under the Medicare coverage gap discount program, as determined through processes and methods established under § 423.265 (c) and (d). (iii) Generic gap coinsurance percentage. (A) For 2011, 93 percent. (B) For years 2012 through 2019, the amount specified in this paragraph for the previous year, decreased by 7 percentage points. (C) For 2020 through 2024, 25 percent. (iv) Applicable gap coinsurance percentage. (A) For 2013 and 2014, 97.5 percent. (B) For 2015 and 2016, 95 percent. (C) For 2017, 90 percent. (D) For 2018, 85 percent. (E) For 2019 through 2024, 75 percent. (v) For 2025 and each subsequent year, there is no coverage gap. (5) Protection against high out-of-pocket expenditures. (i) After an enrollee's incurred costs exceed the annual out-of-pocket threshold described in paragraph (d)(5)(iii) of this section, for 2024 and each subsequent year, cost-sharing equal to $0, and for each year preceding 2024, cost-sharing equal to the greater of— (A) Copayments. 1 ( 2 (B) Coinsurance. (ii) As determined through processes and methods established under § 423.265(c) and (d), a Part D plan may substitute for cost-sharing under paragraph (d)(5)(i) of this section an amount that is actuarially equivalent to expected cost-sharing under paragraph (d)(5)(i) of this section. (iii) Annual out-of-pocket threshold. (A) For 2006. (B) For each year 2007 through 2013. (C) For years 2014 and 2015. (D) For each year 2016 through 2019. ( 1 ( 2 (E) For 2020. (F) For 2021 through 2024. (G) For 2025. (H) For 2026 and each subsequent year. (iv) Annual percentage increase in Part D drug expenditures General. (B) Calculating the annual percentage increase. (C) Annual percentage trend. (D) Multiplicative update. (v) Additional annual percentage increase. (e) Alternative prescription drug coverage. (1) Has an annual deductible that does not exceed the annual deductible specified in paragraph (d)(1) of this section; (2) Imposes cost-sharing no greater than that specified in paragraphs (d)(5)(i) or (ii) of this section once the annual out-of-pocket threshold described in paragraph (d)(5)(iii) of this section is met; (3) Has a total or gross value that is at least equal to the total or gross value of defined standard coverage. (4) Has an unsubsidized value that is at least equal to the unsubsidized value of standard prescription drug coverage. For purposes of this subparagraph, the unsubsidized value of coverage is the amount by which the actuarial value of the coverage exceeds the actuarial value of the subsidy payments under § 423.782 for the coverage; and (5) Provides coverage that is designed, based upon an actuarially representative pattern of utilization, to provide for the payment, for costs incurred for covered Part D drugs, that are equal to the initial coverage limit under paragraph (d)(3) of this section for a year preceding 2025, or the annual out-of-pocket threshold specified in paragraph (d)(5)(iii) for the year for 2025 and each subsequent year, of an amount equal to at least the product of the following: (i) The amount by which the initial coverage limit described in paragraph (d)(3) of this section for the year, for a year preceding 2025, or the annual out-of-pocket threshold described in paragraph (d)(5)(iii) for the year for 2025 and each subsequent year, exceeds the deductible described in paragraph (d)(1) of this section. (ii) 100 percent minus the coinsurance percentage specified in paragraph (d)(2)(i) of this section. (f) Enhanced alternative coverage. (i) Basic prescription drug coverage, as defined in § 423.100; and (ii) Supplemental benefits, which include- (A) Coverage of drugs that are specifically excluded as Part D drugs under paragraph (2)(ii) of the definition of Part D drug under § 423.100; or (B) Any of the following changes or combination of changes that increase the actuarial value of benefits under the Part D plan above the actuarial value of defined standard prescription drug coverage, as determined through processes and methods established under § 423.265— ( 1 ( 2 ( 3 (C) Both the coverage described in paragraph (f)(1)(ii)(A) of this section and the changes or combination of changes described in paragraph (f)(1)(ii)(B) of this section. (2) Restrictions on the offering of enhanced alternative coverage by PDP sponsors. (3) Restrictions on the offering of enhanced alternative coverage by MA organization (i) May not offer an MA coordinated care plan, as defined in § 422.4 of this chapter, in an area unless either that plan (or another MA plan offered by the MA organization in that same service area) includes required prescription drug coverage; and (ii) May not offer prescription drug coverage (other than that required under Parts A and B of title XVIII of the Act) to an enrollee— (A) Under an MSA plan, as defined in § 422.2 of this chapter; or (B) Under another MA plan (including a private fee-for-service plan, as defined in § 422.4 of this chapter) unless the drug coverage under the other plan provides qualified prescription drug coverage and unless the requirements of paragraph (f)(3)(i) of this section are met. (4) Restrictions on the offering of enhanced alternative coverage by cost plans. (ii) A cost plan that offers qualified prescription drug coverage as an optional supplemental benefit under § 417.440(b)(2)(ii) of this chapter may not offer prescription drug coverage that is not qualified prescription drug coverage. A cost plan that does not offer qualified prescription drug coverage under § 417.440(b)(2)(ii) of this chapter may offer prescription drug coverage that is not qualified prescription drug coverage under § 417.440(b)(2)(i) of this chapter. (g) Negotiated prices Access to negotiated prices. (2) Interaction with Medicaid best price. (i) A Part D plan, as defined in § 423.4; or (iii) A qualified retiree prescription drug plan (as defined in § 423.882) for Part D eligible individuals. (3) Disclosure. (ii) Information on negotiated prices disclosed to CMS under paragraph (g)(3) of this section is protected under the confidentiality provisions applicable under section 1927(b)(3)(D) of the Act. (4) Audits. (h) Valid prescription. (i) Daily cost-sharing rate. (j) Drugs not subject to the defined standard deductible. (2) If a plan offers a deductible other than the deductible provided under the Defined Standard benefit and a beneficiary accumulates sufficient incurred costs, as defined at § 423.100, to satisfy the plan deductible but has not accumulated incurred costs across all drugs at or above the deductible provided under the Defined Standard benefit, then applicable discounts, as defined at § 423.2712, under the Manufacturer Discount Program are not available for that beneficiary and the plan must cover the portion of the costs that would be covered by the applicable discount if the beneficiary were an applicable beneficiary until the beneficiary's incurred costs exceed the deductible provided under the Defined Standard benefit and they become an applicable beneficiary. (3) If a plan offers a deductible other than the deductible provided under the Defined Standard benefit and a beneficiary accumulates sufficient incurred costs, as defined at § 423.100, to satisfy the plan deductible but has not accumulated incurred costs across all drugs at or above the deductible provided under the Defined Standard benefit, then the selected drug subsidy is not available for that beneficiary and the plan must cover the portion of the costs that would be covered by the selected drug subsidy, as described at § 423.329(e), if the beneficiary were an applicable beneficiary until the beneficiary's incurred costs exceed the deductible provided under the Defined Standard benefit and they become an applicable beneficiary. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1544, Jan. 12, 2009; 75 FR 19816, Apr. 15, 2010; 76 FR 21571, Apr. 15, 2011; 77 FR 22169, Apr. 12, 2012; 80 FR 7963, Feb. 12, 2015; 86 FR 6115, Jan. 19, 2021; 89 FR 30833, Apr. 23, 2024; 91 FR 17586, Apr. 6, 2026] § 423.112 Establishment of prescription drug plan service areas. (a) Service area for prescription drug plan sponsors. (b) Establishment of PDP regions General. (2) Relation to MA regions. (c) Authority for territories. (d) Revision of PDP regions. (e) Regional or national plan. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19816, Apr. 15, 2010] § 423.120 Access to covered Part D drugs. (a) Assuring pharmacy access Standards for convenient access to network pharmacies. (i) At least 90 percent of Medicare beneficiaries, on average, in urban areas served by the Part D sponsor live within 2 miles of a network pharmacy that is a retail pharmacy or a pharmacy described under paragraph (a)(2) of this section. (ii) At least 90 percent of Medicare beneficiaries, on average, in suburban areas served by the Part D sponsor live within 5 miles of a network pharmacy that is a retail pharmacy or a pharmacy described under paragraph (a)(2) of this section. (iii) At least 70 percent of Medicare beneficiaries, on average, in rural areas served by the Part D sponsor live within 15 miles of a network pharmacy that is a retail pharmacy or a pharmacy described under paragraph (a)(2) of this section. (2) Applicability of some non-retail pharmacies to standards for convenient access. (3) Access to non-retail pharmacies. (4) Access to home infusion pharmacies. (i) Are capable of delivering home-infused drugs in a form that can be administered in a clinically appropriate fashion. (ii) Are capable of providing infusible Part D drugs for both short-term acute care and long-term chronic care therapies. (iii) Ensure that the professional services and ancillary supplies necessary for home infusion therapy are in place before dispensing Part D home infusion drugs. (iv) Provide delivery of home infusion drugs within 24 hours of discharge from an acute care setting, or later if so prescribed. (5) Access to long-term care pharmacies. (6) Access to I/T/U pharmacies. (7) Waiver of pharmacy access requirements. (i) An MA organization or cost contract (as described in section 1876(h) of the Act) that provides its enrollees with access to covered Part D drugs through pharmacies owned and operated by the MA organization or cost contract, provided the organization's or plan's pharmacy network meets the access standard set forth— (A) At § 422.112 of this chapter for an MA organization; or (B) At § 417.416(e) of this chapter for a cost contract. (ii) An MA organization offering a private fee-for-service plan described in § 422.4 of this chapter that— (A) Offers qualified prescription drug coverage; and (B) Provides plan enrollees with access to covered Part D drugs dispensed at all pharmacies, without regard to whether they are contracted network pharmacies and without charging cost-sharing in excess of that described in § 423.104(d)(2) and (d)(5). (8) Pharmacy network contracting requirements. In establishing its contracted pharmacy network, a Part D sponsor offering qualified prescription drug coverage— (i) Must contract with any pharmacy that meets the Part D sponsor's standard terms and conditions; (ii) May not require a pharmacy to accept insurance risk as a condition of participation in the Part D sponsor's contracted pharmacy network; and (iii) May not prohibit a pharmacy from, nor penalize a pharmacy for, informing a Part D plan enrollee of the availability at that pharmacy of a prescribed medication at a cash price that is below the amount that the enrollee would be charged to obtain the same medication through the enrollee's Part D plan. (9) Differential cost-sharing for preferred pharmacies. (10) Level playing field between mail-order and network pharmacies. (b) Formulary requirements. (1) Development and revision by a pharmacy and therapeutic committee. (i) Includes a majority of members who are practicing physicians and/or practicing pharmacists. (ii) Includes at least one practicing physician and at least one practicing pharmacist who are independent and free of conflict relative to- (A) The Part D sponsor and Part D plan; and (B) Pharmaceutical manufacturers. (iii) Includes at least one practicing physician and one practicing pharmacist who are experts regarding care of elderly or disabled individuals. (iv) Clearly articulates and documents processes to determine that the requirements under paragraphs (b)(1)(i) through (iii) of this section have been met, including the determination by an objective party of whether disclosed financial interests are conflicts of interest and the management of any recusals due to such conflicts. (v) Bases clinical decisions on the strength of scientific evidence and standards of practice, including assessing peer-reviewed medical literature, pharmacoeconomic studies, outcomes research data, and other such information as it determines appropriate. (vi) Considers whether the inclusion of a particular Part D drug in a formulary or formulary tier has any therapeutic advantages in terms of safety and efficacy. (vii) Reviews policies that guide exceptions and other utilization management processes, including drug utilization review, quantity limits, generic substitution, and therapeutic interchange. (viii) Evaluates and analyzes treatment protocols and procedures related to the plan's formulary at least annually consistent with written policy guidelines and other CMS instructions. (ix) Documents in writing its decisions regarding formulary development and revision and utilization management activities. (x) Reviews and approves all clinical prior authorization criteria, step therapy protocols, and quantity limit restrictions applied to each covered Part D drug. (xi) Meets other requirements consistent with written policy guidelines and other CMS instructions. (2) Provision of an Adequate Formulary. A Part D plan's formulary must— (i) Except as provided in paragraphs (b)(2)(ii) and (v) of this section, include within each therapeutic category and class of Part D drugs at least two Part D drugs that are not therapeutically equivalent and bioequivalent, with different strengths and dosage forms available for each of those drugs, except that only one Part D drug must be included in a particular category or class of covered Part D drugs if the category or class includes only one Part D drug. (ii) Include at least one Part D drug within a particular category or class of Part D drugs to the extent the Part D plan demonstrates, and CMS approves, the following- (A) That only two drugs are available in that category or class of Part D drugs; and (B) That one drug is clinically superior to the other drug in that category or class of Part D drugs. (iii) Include adequate coverage of the types of drugs most commonly needed by Part D enrollees, as recognized in national treatment guidelines. (iv) Be approved by CMS consistent with § 423.272(b)(2). (v) Until such time as there are established, through notice and comment rulemaking, criteria to identify, as appropriate, categories and classes of clinical concern, the categories and classes of clinical concern are as specified in section 1860D-4(b)(3)(G)(iv) of the Act. (vi) Exceptions to paragraph (b)(2)(v) of this section are as follows: (A) Drug or biological products that are rated as either of the following: ( 1 ( 2 (B) Utilization management processes that limit the quantity of drugs due to safety. (C) Subject to CMS review and approval, for enrollees that are not on existing therapy on the protected class Part D drug, and except for antiretroviral medications, prior authorization and step therapy requirements to confirm intended use is for a protected class indication, to ensure clinically appropriate use, to promote utilization of preferred formulary alternatives, or a combination thereof. (D) Other drugs that CMS specifies through a process that is based upon scientific evidence and medical standards of practice (and, in the case of antiretroviral medications, is consistent with the Department of Health and Human Services Guidelines for the Use of Antiretroviral Agents in HIV-1-Infected Adults and Adolescents) and which permits public notice and comment. (3) Transition process. (i)(A) Be applicable to all of the following: ( 1 ( 2 ( 3 ( 4 (B) Not apply in cases of immediate changes as permitted under paragraph (e)(2) of this section. (ii) Ensure access to a temporary supply of drugs within the first 90 days of coverage under a new plan. This 90 day timeframe applies to retail, home infusion, long-term care and mail-order pharmacies, (iii) Ensure the provision of a temporary fill when an enrollee requests a fill of a non-formulary drug during the time period specified in paragraph (b)(3)(ii) of this section (including Part D drugs that are on a plan's formulary but require prior authorization or step therapy under a plan's utilization management rules) by providing a one-time, temporary supply of at least an approved month's supply of medication, unless the prescription is written by a prescriber for less than an approved month's supply and requires the Part D sponsor to allow multiple fills to provide up to a total of an approved month's supply of medication. (iv) Ensure written notice is provided to each affected enrollee within 3 business days after adjudication of the temporary fill. For long-term care residents dispensed multiple supplies of a Part D drug, in increments of 14-days-or-less, consistent with the requirements under § 423.154, the written notice must be provided within 3 business days after adjudication of the first temporary fill. (v) Ensure that reasonable efforts are made to notify prescribers of affected enrollees who receive a transition notice under paragraph (b)(3)(iv) of this section. (vi) A Part D sponsor must charge cost sharing for a temporary supply of drugs provided under its transition process such that the following conditions are met: (A) For low-income subsidy (LIS) enrollees, a sponsor must not charge higher cost sharing for transition supplies than the statutory maximum copayment amounts. (B) For non-LIS enrollees, a sponsor must charge— ( 1 ( 2 (4) Limitation on changes in therapeutic classification. (5) Notice of formulary changes. Part D sponsors must provide notice of changes to CMS-approved formularies as specified in § 423.120(f). (6) Changes to CMS-approved formularies. Changes to CMS-approved formularies may be made only in accordance with paragraph (e) of this section. (7) Provider and patient education. (c) Use of standardized technology. (2) When processing Part D claims, a Part D sponsor or its intermediary must comply with the electronic transaction standards established by 45 CFR 162.1102. CMS will issue guidance on the use of conditional fields within such standards. (3) A Part D sponsor must require its network pharmacies to submit claims to the Part D sponsor or its intermediary whenever the card described in paragraph (c)(1) of this section is presented or on file at the pharmacy unless the enrollee expressly requests that a particular claim not be submitted to the Part D sponsor or its intermediary. (4) Beginning January 1, 2012, a part D sponsor must assign and exclusively use a unique— (i) Part D BIN or RxBIN and Part D processor control number (RxPCN) combination in its Medicare line of business; and (ii) Part D cardholder identification number (RxID) to each Medicare Part D enrollee to clearly identify Medicare Part D beneficiaries. (5)(i) A Part D plan sponsor must reject, or must require its pharmacy benefit manager (PBM) to reject, a pharmacy claim for a Part D drug unless the claim contains the active and valid National Provider Identifier (NPI) of the prescriber who prescribed the drug. (ii) The sponsor must communicate at point-of sale whether or not a submitted NPI is active and valid in accordance with this paragraph (c)(5)(ii). (A) If the sponsor communicates that the NPI is not active and valid, the sponsor must permit the pharmacy to— ( 1 ( 2 (B) If the pharmacy confirms that the NPI is active and valid or corrects the NPI, the sponsor must pay the claim if it is otherwise payable. (iii) A Part D sponsor must not later recoup payment from a network pharmacy for a claim that does not contain an active and valid individual prescriber NPI on the basis that it does not contain one, unless the sponsor— (A) Has complied with paragraph (c)(5)(ii) of this section; (B) Has verified that a submitted NPI was not in fact active and valid; and (C) The agreement between the parties explicitly permits such recoupment. (iv) With respect to requests for reimbursement submitted by Medicare beneficiaries, a Part D sponsor may not make payment to a beneficiary dependent upon the sponsor's acquisition of an active and valid individual prescriber NPI, unless there is an indication of fraud. If the sponsor is unable to retrospectively acquire an active and valid individual prescriber NPI, the sponsor may not seek recovery of any payment to the beneficiary solely on that basis. (6)(i) Except as provided in paragraph (c)(6)(iv) of this section, a Part D sponsor must reject, or must require its PBM to reject, a pharmacy claim for a Part D drug if the individual who prescribed the drug is included on the preclusion list, defined in § 423.100. (ii) Except as provided in paragraph (c)(6)(iv) of this section, a Part D sponsor must deny, or must require its PBM to deny, a request for reimbursement from a Medicare beneficiary if the request pertains to a Part D drug that was prescribed by an individual who is identified by name in the request and who is included on the preclusion list, defined in § 423.100. (iii) A Part D plan sponsor may not submit a prescription drug event (PDE) record to CMS unless it includes on the PDE record the active and valid individual NPI of the prescriber of the drug, and the prescriber is not included on the preclusion list, defined in § 423.100, for the date of service. (iv) With respect to Part D prescribers who have been added to an updated preclusion list but are not currently excluded by the OIG, the Part D plan sponsor must do all of the following: (A) Subject to all other Part D rules and plan coverage requirements, and no later than 30 days after the posting of this updated preclusion list, must provide an advance written notice to any beneficiary who has received a Part D drug prescribed by an individual added to the preclusion list in this update and whom the plan sponsor has identified during the applicable 30-day period. (B)( 1 2 ( 2 1 ( i ( ii (C) Must not reject a pharmacy claim or deny a beneficiary request for reimbursement for a Part D drug prescribed by the prescriber, solely on the ground that they have been included in the updated preclusion list, in the 60-day period after the date it sent the notice described in paragraph (c)(6)(iv)(A) of this section. (v)(A) CMS sends written notice to the prescriber via letter of his or her inclusion on the preclusion list. The notice must contain the reason for the inclusion on the preclusion list and inform the prescriber of his or her appeal rights. A prescriber may appeal his or her inclusion on the preclusion list under this section in accordance with part 498 of this chapter. (B) If the prescriber's inclusion on the preclusion list is based on a contemporaneous Medicare revocation under § 424.535 of this chapter: ( 1 ( 2 (C)( 1 2 ( i ( ii ( 2 (vi) CMS has the discretion not to include a particular individual on (or if warranted, remove the individual from) the preclusion list should it determine that exceptional circumstances exist regarding beneficiary access to prescriptions. In making a determination as to whether such circumstances exist, CMS takes into account— (A) The degree to which beneficiary access to Part D drugs would be impaired; and (B) Any other evidence that CMS deems relevant to its determination. (vii)(A) Except as provided in paragraphs (c)(6)(vii)(C) and (D) of this section, a prescriber who is revoked under § 424.535 of this chapter will be included on the preclusion list for the same length of time as the prescriber's reenrollment bar. (B) Except as provided in paragraphs (c)(6)(vii)(C) and (D) of this section, a prescriber who is not enrolled in Medicare will be included on the preclusion list for the same length of time as the reenrollment bar that CMS could have imposed on the prescriber had the prescriber been enrolled and then revoked. (C) Except as provided in paragraph (c)(6)(vii)(D) of this section, an individual, regardless of whether the individual is or was enrolled in Medicare, that is included on the preclusion list because of a felony conviction will remain on the preclusion list for a 10-year period, beginning on the date of the felony conviction, unless CMS determines that a shorter length of time is warranted. Factors that CMS considers in making such a determination are— ( 1 ( 2 ( 3 (D) In cases where an individual is excluded by the OIG, the individual must remain on the preclusion list until the expiration of the CMS-imposed preclusion list period or reinstatement by the OIG, whichever occurs later. (viii) Payment denials under paragraph (c)(6) of this section that are based upon the prescriber's inclusion on the preclusion list are not appealable by beneficiaries. (d) Treatment of compounded drug products. (1) Make a determination as to whether the compound is covered under Part D. (i) A compound that contains at least one ingredient covered under Part B as prescribed and dispensed or administered is considered a Part B compound, regardless of whether other ingredients in the compound are covered under Part B as prescribed and dispensed or administered. (ii) Only compounds that contain at least one ingredient that independently meets the definition of a Part D drug, and that do not meet the criteria under paragraph (d)(1)(i) of this section, may be covered under Part D. For purposes of this paragraph (d) these compounds are referred to as Part D compounds. (iii) For a Part D compound to be considered on-formulary, all ingredients that independently meet the definition of a Part D drug must be considered on-formulary (even if the particular Part D drug would be considered off-formulary if it were provided separately—that is, not as part of the Part D compound). (iv) For a Part D compound that is considered off-formulary— (A) Transition rules apply such that all ingredients in the Part D compound that independently meet the definition of a Part D drug must become payable in the event of a transition fill under § 423.120(b)(3); and (B) All ingredients that independently meet the definition of a Part D drug must be covered if an exception under § 423.578(b) is approved for coverage of the compound. (2) Establish consistent rules for beneficiary payment liabilities for both ingredients of the Part D compound that independently meet the definition of a Part D drug and non-Part D ingredients. (i) For low income subsidy beneficiaries the copayment amount is based on whether the most expensive ingredient that independently meets the definition of a Part D drug in the Part D compound is a generic or brand name drug (as described under § 423.782). (ii) For any non-Part D ingredient of the Part D compound (including drugs described under § 423.104(f)(1)(ii)(A)), the Part D sponsor's contract with the pharmacy must prohibit balance billing the beneficiary for the cost of any such ingredients. (e) Approval of changes to CMS-approved formularies. (1) Negative change request. (2) Exception for immediate negative formulary changes. (i) Immediate substitutions. (ii) Market withdrawals. (3) Approval process for negative formulary changes Maintenance changes. (ii) Non-maintenance changes. (4) Limitation on formulary changes prior to the beginning of a contract year. (f) Provision of notice regarding changes to CMS-approved formularies (1) Notice of negative formulary changes. (2) Advance general notice of immediate negative formulary changes. (3) Retrospective notice and update. (4) Content of written notice: (i) The name of the affected covered Part D drug. (ii) Whether the plan is removing the covered Part D drug from the formulary, moving it to a higher cost-sharing tier, or adding or making more restrictive PA, ST, or QL requirements. (iii) The reason for the negative formulary change. (iv) Appropriate alternative drugs on the formulary in the same or a lower cost-sharing tier and the expected cost sharing for those drugs. (v) For formulary changes other than those described in paragraph (e)(2)(ii) of this section, the means by which enrollees may obtain a coverage determination under § 423.566, including an exception to a coverage rule under § 423.578. (5) Notice of other formulary changes. (i) Advance general notice to all current and prospective enrollees, CMS, and other specified entities in formulary and other applicable beneficiary communication materials advising them that the Part D sponsor may make formulary changes other than negative formulary changes at any time and providing information about how to access the plan's online formulary and how to contact the plan; and (ii) Notice of specific formulary changes to other specified entities by complying with § 423.128(d)(2) and to CMS by submitting such changes to CMS in their next required or scheduled formulary update. (g) Coverage of ACIP-recommended adult vaccines. (1) Not apply any deductible nor charge any cost sharing; and (2) Once a new or revised recommendation is posted on the CDC website, provide coverage consistent with paragraph (g)(1) of this section for dates of service on or after the effective date of the ACIP recommendation, as defined at § 423.100. (3) Apply the requirements in paragraphs (g)(1) and (2) of this section to ACIP-recommended adult vaccines obtained from either an in-network or out-of-network pharmacy or provider in accordance with § 423.124(a) and (c). (h) Cost sharing for covered insulin products. (1) Not apply a deductible. (2) Ensure any enrollee cost sharing for each prescription fill up to a one-month supply does not exceed the covered insulin product applicable cost-sharing amount defined at § 423.100. (3) Ensure any enrollee cost sharing for each prescription fill greater than a 1-month supply does not exceed the cumulative covered insulin product applicable cost-sharing amount (as defined in § 423.100) that would apply if the same days' supply was dispensed in the fewest number of 1-month supply increments necessary. (4) Apply the requirements in paragraphs (h)(1) through (3) of this section to covered insulin products obtained from either an in-network or out-of-network pharmacy or provider. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20506, Apr. 15, 2008; 74 FR 2888, Jan. 16, 2009; 75 FR 19816, Apr. 15, 2010; 75 FR 32860, June 10, 2010; 76 FR 21572, Apr. 15, 2011; 77 FR 22169, Apr. 12, 2012; 79 FR 29962, May 23, 2014; 80 FR 7963, Feb. 12, 2015; 80 FR 25966, May 6, 2015; 83 FR 16738, Apr. 16, 2018; 84 FR 15840, Apr. 16, 2019; 84 FR 23883, May 23, 2019; 84 FR 26579, June 7, 2019; 89 FR 30833, Apr. 23, 2024; 90 FR 15912, Apr. 15, 2025] § 423.124 Special rules for out-of-network access to covered Part D drugs at out-of-network pharmacies. (a) Out-of-network access to covered part D drugs Out-of-network pharmacy access. (i) Cannot reasonably be expected to obtain such drugs at a network pharmacy; and (ii) Do not access covered Part D drugs at an out-of-network pharmacy on a routine basis. (2) Physician's office access. (b) Financial responsibility for out-of-network access to covered Part D drugs. (c) Limits on out-of-network access to covered Part D. § 423.128 Dissemination of Part D plan information. (a) Detailed description. (1) To each enrollee of a Part D plan offered by the Part D sponsor under this part, except as provided in paragraph (b)(11)(ii) of this section; (2) In a clear, accurate, and standardized form; and (3) At the time of enrollment and at least annually thereafter, by the first day of the annual coordinated election period. (b) Content of Part D plan description. (1) Service area. (2) Benefits. (i) Applicable conditions and limitations. (ii) Premiums. (iii) Cost-sharing (such as copayments, deductibles, and coinsurance), and cost-sharing for subsidy eligible individuals. (iv) Any other conditions associated with receipt or use of benefits. (3) Cost-sharing. (4) Formulary. (i) A list of drugs included on the plan's formulary; (ii) The manner in which the formulary (including any tiered formulary structure and utilization management procedures used) functions; (iii) The process for obtaining an exception to a plan's formulary or tiered cost-sharing structure; and (iv) A description of how a Part D eligible individual may obtain additional information on the formulary, in accordance with paragraph (d) of this section. (5) Access. (6) Out-of-network coverage. (7) Grievance, coverage determination, and appeal procedures. (i) Access to a uniform model form used to request a coverage determination under § 423.568 or § 423.570, and a uniform model form used to request a redetermination under § 423.582 or § 423.584, to the extent such uniform model forms have been approved for use by CMS; (ii) Immediate access to the coverage determination and redetermination processes via an Internet Web site; and (iii) A system that transmits codes to network pharmacies so that the network pharmacy is notified to populate and/or provide a printed notice at the point-of-sale to an enrollee explaining how the enrollee can request a coverage determination by contacting the plan sponsor's toll free customer service line or by accessing the plan sponsor's internet Web site. (8) Quality assurance policies and procedures. (9) Disenrollment rights and responsibilities. (10) Potential for contract termination. (11) Opioid information. (A) The risks associated with prolonged opioid use. (B) Coverage of non-pharmacological therapies, devices, and non-opioid medications— ( 1 ( 2 (ii) The Part D sponsor may elect to, in lieu of disclosing the information described in paragraph (b)(11)(i) of this section to each enrollee under each plan offered by the Part D sponsor under this part, disclose such information to a subset of enrollees, such as enrollees who have been prescribed an opioid in the previous 2-year period. (c) Disclosure upon request of general coverage information, utilization, and grievance information. (1) General coverage information. (i) Enrollment procedures. (ii) Rights. (iii) Benefits. (B) Any beneficiary cost-sharing, such as deductibles, coinsurance, and copayment amounts, including cost-sharing for subsidy eligible individuals; (C) Any maximum limitations on out-of-pocket expenses; (D) The extent to which an enrollee may obtain benefits from out-of-network providers; (E) The types of pharmacies that participate in the Part D plan's network and the extent to which an enrollee may select among those pharmacies; and (F) The Part D plan's out-of-network pharmacy access policy. (iv) Premiums; (v) The Part D plan's formulary; (vi) The Part D plan's service area; and (vii) Quality and performance indicators for benefits under the Part D plan as determined by CMS. (2) The procedures the Part D sponsor uses to control utilization of services and expenditures. (3) The number of disputes, and the disposition in the aggregate, in a manner and form described by CMS. These disputes are categorized as— (i) Grievances according to § 423.564; (ii) Appeals according to § 423.580 et. seq.; and (iii) Exceptions according to § 423.578. (4) Financial condition of the Part D sponsor, including the most recently audited information regarding, at a minimum, a description of the financial condition of the Part D sponsor offering the Part D plan. (d) Provision of specific information. (1) A toll-free customer call center that— (i) Is open during usual business hours. (A) For coverage beginning on and after January 1, 2022, is open at least from 8:00 a.m. to 8:00 p.m. in all regions served by the Part D plan, with the following exceptions: ( 1 ( 2 (B) For coverage beginning on and after January 1, 2022, any call center serving pharmacists or pharmacies must be open so long as any network pharmacy in that region is open. (ii) Provides customer telephone service, including to pharmacists, in accordance with standard business practices. (A) For coverage beginning on and after January 1, 2022, limits average hold time to 2 minutes. The hold time is defined as the time spent on hold by callers following the interactive voice response (IVR) system, touch-tone response system, or recorded greeting, before reaching a live person. (B) For coverage beginning on and after January 1, 2022, answers 80 percent of incoming calls within 30 seconds after the interactive voice response (IVR), touch-tone response system, or recorded greeting interaction. (C) For coverage beginning on and after January 1, 2022, limits the disconnect rate of all incoming calls to 5 percent. The disconnect rate is defined as the number of calls unexpectedly dropped divided by the total number of calls made to the customer call center. (iii)(A) Provides interpreters for non-English speaking and limited English proficient (LEP) individuals. (B) For coverage beginning on and after January 1, 2022, interpreters must be available for 80 percent of incoming calls requiring an interpreter within 8 minutes of reaching the customer service representative and be made available at no cost to the caller. (iv) Provides immediate access to the coverage determination and redetermination processes. (v) At a minimum, for coverage beginning on and after January 1, 2022: (A) Provides effective real-time communication with individuals using auxiliary aids and services, including TTYs and all forms of Federal Communication Commission-approved telecommunications relay systems, when using automated-attendant systems. See 28 CFR 35.161 and 36.303(d). (B) Establishes contact with a customer service representative within 7 minutes on no fewer than 80 percent of incoming calls requiring TTY services. (vi) For coverage beginning on and after January 1, 2022, provides the information described in paragraph (d)(4) of this section to enrollees who call the customer service call center. (2) An Internet website that— (i) Includes, at a minimum, the information required in paragraph (b) of this section. (ii) Includes a current formulary for its Part D plan, updated at least monthly. (iii) Provides current and prospective Part D enrollees with notice that is timely under § 423.120(f) regarding any negative formulary changes on its Part D plan's formulary. (3) The provision of information in writing, upon request. (4) Beginning on January 1, 2023, a Part D sponsor must implement, and make available directly to enrollees, in an easy to understand manner, the following complete, accurate, timely, clinically appropriate, patient-specific formulary and benefit real-time information in their beneficiary-specific portal or computer application: (i) Enrollee cost sharing amounts. (ii) Formulary medication alternatives for a given condition. (iii) Formulary status, including utilization management requirements applicable to each alternative medication, as appropriate for each enrollee and medication presented. (5) The Part D sponsor may provide rewards and incentives to enrollees who use the beneficiary real time benefit tool (RTBT) described in paragraph (d)(4) of this section, provided the rewards and incentives comply with the requirements in paragraphs (d)(5)(i) through (vi) of this section, and the rewards and incentives information is made available to CMS upon request. Use is defined as logging into the RTBT, via portal or computer application, or calling the customer service call center to obtain the information described in paragraph (d)(4) of this section. The rewards and incentives must meet the following: (i) Be of reasonable value, both individually and in the aggregate. (ii) Be designed so that all enrollees are eligible to earn rewards and incentives, and that there is no discrimination based on race, color, national origin, including limited English proficiency, sex, age, disability, chronic disease, health status, or other prohibited basis. (iii) Not be offered in the form of cash or other cash equivalents. (iv) Not be used to target potential enrollees. (v) Be earned solely for logging onto the beneficiary RTBT and not for any other purpose. (vi) Otherwise comply with all relevant fraud and abuse laws, including, when applicable, the anti-kickback statute and civil money penalty prohibiting inducements to beneficiaries. (e) Claims information. (1) List the item or service for which payment was made and the amount of the payment for each item or service. (2) Include a notice of the individual's right to request an itemized statement. (3) Include the cumulative, year-to-date total amount of benefits provided, in relation to— (i) The deductible for the current year. (ii) For a year preceding 2025, the initial coverage limit for the current year. (iii) The annual out-of-pocket threshold for the current year. (4) Include the cumulative, year-to-date total of incurred costs to the extent practicable. (5) For each prescription drug claim, must include the cumulative percentage increase (if any) in the negotiated price since the first claim of the current benefit year and therapeutic alternatives with lower cost-sharing, when available as determined by the plan, from the applicable approved plan formulary. (6) Include any negative formulary changes applicable to an enrollee for which Part D plans are required to provide notice as described in § 423.120(f). (7) Be provided no later than the end of the month following any month when prescription drug benefits are provided under this part, including, for a year preceding 2025, the covered Part D spending between the initial coverage limit described in § 423.104(d)(3) and the out-of-pocket threshold described in § 423.104(d)(5)(iii). (f) Disclosure requirements. (g) Changes in rules. (1) Submit the changes for CMS review under the procedures of Subpart V of this part. (2) For changes that take effect on January 1, notify all enrollees at least 15 days before the beginning of the Annual Coordinated Election Period as defined in section 1860D-1(b)(1)(B) of the Act. (3) Provide notice of all other changes in accordance with notice requirements as specified in this part. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 54222, Sept. 18, 2008; 74 FR 1544, Jan. 12, 2009; 75 FR 19818, Apr. 15, 2010; 76 FR 21573, Apr. 15, 2011; 80 FR 7963, Feb. 12, 2015; 83 FR 16739, Apr. 16, 2018; 84 FR 23883, May 23, 2019; 86 FR 6115, Jan. 19, 2021; 89 FR 30834, Apr. 23, 2024; 91 FR 17587, Apr. 6, 2026] § 423.129 Resolution of complaints in complaints tracking module. (a) Definitions. Assignment date Complaints Tracking Module Immediate need complaint Urgent complaint (b) Timelines for complaint resolution Immediate need complaint (2) Urgent complaints. (3) All other complaints. (4) Extensions. (5) Coordination with timeframes for grievances, PACE service determination requests, and PACE appeals. (c) Timeline for contacting individual filing a complaint. [89 FR 30834, Apr. 23, 2024] § 423.132 Public disclosure of pharmaceutical prices for equivalent drugs. (a) General requirements. (b) Timing of notice. (c) Waiver of public disclosure requirement. (1) An MA private fee-for-service plan described in § 422.4 of this chapter that— (i) Offers qualified prescription drug coverage and provides plan enrollees with access to covered Part D drugs dispensed at all pharmacies, without regard to whether they are contracted network pharmacies; and (ii) Does not charge additional cost-sharing for access to covered Part D drugs dispensed at out-of-network pharmacies. (2) An out-of-network pharmacy. (3) An I/T/U network pharmacy. (4) A network pharmacy that is located in any of the U.S. territories. (5) A long-term care network pharmacy. (6) Other circumstances where CMS deems compliance with the requirements of paragraph (a) of this section to be impossible or impracticable. (d) Modification of timing requirement. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19818, Apr. 15, 2010] § 423.136 Privacy, confidentiality, and accuracy of enrollee records. For any medical records or other health and enrollment information it maintains with respect to enrollees, a PDP sponsor must establish procedures to do the following— (a) Abide by all Federal and State laws regarding confidentiality and disclosure of medical records, or other health and enrollment information. The PDP sponsor must safeguard the privacy of any information that identifies a particular enrollee and have procedures that specify— (1) For what purposes the information is used within the organization; and (2) To whom and for what purposes it discloses the information outside the organization. (b) Ensure that medical information is released only in accordance with applicable Federal or State law, or under court orders or subpoenas. (c) Maintain the records and information in an accurate and timely manner. (d) Ensure timely access by enrollees to the records and information that pertain to them. § 423.137 Medicare Prescription Payment Plan. (a) General. (b) Definitions. (1) OOP costs for the Medicare Prescription Payment Plan (i) For the subsequent month calculation of the Part D cost sharing incurred by the Part D enrollee, it includes those Part D cost sharing amounts that the enrollee is responsible for paying after taking into account amounts paid by third-party payers. (ii) It does not include the covered plan pay amount or other costs defined under section 1860D-2(b)(4)(C) of the Act. (2) Remaining OOP costs owed by the participant (c) Calculation of the maximum monthly cap on cost-sharing payments. (1) Enrollee monthly payments. (i) First month maximum monthly cap calculation. (A) When the out-of-pocket costs incurred in the first month of program participation are less than the maximum monthly cap defined in this paragraph (c)(1)(i), the PDP sponsor or MA organization must bill the participant the lesser of the participant's actual out-of-pocket costs or the first month's maximum monthly cap. (B) When an enrollee opts into the Medicare Prescription Payment Plan prior to the start of the plan year, the calculation described in this paragraph (c)(1)(i) applies to their first month of active coverage within the plan year. (ii) Calculation of maximum monthly cap in subsequent months. (2) Eligible out-of-pocket costs. (3) Months remaining in the plan year. (4) Impact on true out-of-pocket cost accumulation. (5) Prescriptions for an extended day supply. (6) Mid-year plan switching. (d) Eligibility and election. (1) Election. (i) The annual coordinated election period for the subsequent plan year. (ii) The Part D initial enrollment period. (iii) Part D special election periods. (2) Format of election requests. (i) Paper election requests. (A) The Part D sponsor initially stamps a document received by regular mail (that is, U.S. Postal Service); or (B) A delivery service that has the ability to track when a shipment is delivered (for example, U.S. Postal Service, UPS, FedEx, or DHL) delivers the document. (ii) Telephonic election requests. (A) The verbal request is made by telephone with a customer service representative. (B) A message is left on the Part D sponsor's voicemail system if the Part D sponsor utilizes a voicemail system to accept requests or supporting statements after normal business hours. (iii) Electronic election requests. (3) Completion of election request. (i) The name of the Part D enrollee. (ii) The Medicare ID number of the Part D enrollee. (iii) The Part D enrollee's or their authorized legal representative's agreement to the Part D sponsor's terms and conditions for the program (signature or, in the case of telephonic requests, verbal attestation). (4) Processing an election request Prior to plan year. (A) Within 10 calendar days of receipt, process a complete election request as specified in paragraph (d)(3) of this section. (B) Within 10 calendar days of receipt of an incomplete election request, contact the Part D enrollee to request the necessary information to process the request as specified in paragraph (d)(3) of this section. (C) If information necessary to consider the request complete, as required at paragraph (d)(3) of this section, is not received within 21 calendar days of the request for information, the Part D sponsor may deny the request. (ii) During a plan year. (A) Within 24 hours of receipt, process a complete election request, as specified in paragraph (d)(3) of this section. (B) Within 24 hours of receipt of an incomplete election request, contact the Part D enrollee to request the necessary information to process the request, as required in paragraph (d)(3) of this section. (C) If information necessary to consider the request complete, as required at paragraph (d)(3) of this section, is not received within 21 calendar days of the request for information, the Part D sponsor may deny the request. (D) In the event a Part D sponsor fails to process the request within 24 hours due to no fault of the Part D enrollee, the Part D sponsor must— ( 1 ( 2 (5) Inclusion of all covered Part D drugs once in the program. (6) Retroactive election. (A) The Part D enrollee believes that any delay in filling the prescription(s) due to the 24-hour timeframe required to process their request to opt in may seriously jeopardize their life, health, or ability to regain maximum function. (B) The Part D enrollee requests retroactive election within 72 hours of the date and time the claim(s) were adjudicated. (ii) The Part D sponsor must process the reimbursement for all cost sharing paid by the enrollee for the prescription and any covered Part D prescription filled between the date of adjudication of the claim and the date that the enrollee's election is effectuated within 45 calendar days of the election date. (iii) If the Part D sponsor determines that an enrollee failed to request retroactive election within the required timeframe, it must promptly notify the individual of its determination and provide instructions on how the individual may file a grievance, as required under paragraph (h)(2) of this section. (7) Retroactive LIS eligibility. (8) Mid-year plan switching. (i) The Part D sponsor of the prior Part D plan must offer the participant the option to repay the full outstanding amount in a lump sum. If the individual chooses to continue paying monthly, the Part D sponsor must continue to bill the participant monthly based on the participant's accrued OOP costs for the Medicare Prescription Payment Plan while in the program under that sponsor's Part D plan. The Part D sponsor cannot require full immediate repayment. (ii) Part D enrollees may only be precluded from opting into the program under a new Part D plan if both of the following conditions are met: (A) Both the former and new plans are offered by the same Part D sponsor. (B) The enrollee was involuntarily terminated from the program under the former plan, as described in paragraph (f)(2)(ii) of this section, for failure to pay and still owes an overdue balance. (9) Automatic renewal. (10) Election communications Election request form. (A) Timing. (B) Contents. ( 1 ( i ( ii ( iii ( iv ( v ( vi ( 2 ( 3 (C) Additional information. (D) Terms and conditions. (ii) Notice of election approval. (A) Timing. 1 ( 2 ( 3 (B) Contents. ( 1 ( 2 ( 3 ( 4 ( 5 ( 6 ( 7 ( i ( ii ( iii ( iv (C) Additional information. (iii) Notification of denial. (A) Timing. 1 ( 2 ( 3 (B) Contents. (iv) Renewal notice. (A) Timing. (B) Contents. ( 1 ( 2 ( 3 (e) Part D enrollee targeted outreach. (1) Identification criteria. (i) For 2026 and subsequent years, the targeted outreach criteria are as follows: (A) A Part D enrollee is likely to benefit from participating in the program if the enrollee incurs $600 or more in out-of-pocket costs for a single covered Part D drug. (B) A Part D enrollee is likely to benefit from participating in the program if the enrollee incurred $2,000 in out-of-pocket costs for covered Part D drugs in the first nine months of the year prior to the upcoming plan year. (ii) A Part D sponsor may develop supplemental strategies for identification of additional Part D enrollees likely to benefit. If supplemental strategies are implemented, then the Part D sponsor must apply any additional identification criteria to every enrollee of each plan equally. (2) Point of sale notification. (ii) A Part D sponsor must ensure that a pharmacy, after receiving such a notification from the Part D sponsor, informs the Part D enrollee that it is likely that the Part D enrollee may benefit from the Medicare Prescription Payment Plan. (3) Part D sponsor notification. (i) Prior to the plan year. (ii) On an ongoing basis during the plan year. (4) Targeted outreach notification requirements. (i) When the enrollee is identified as likely to benefit directly by the Part D sponsor, either prior to or during the plan year, the notification may be done via mail or electronically (based on the Part D enrollee's preferred and authorized communication methods). (A) The outreach must include a program election request form and additional information about the Medicare Prescription Payment Plan. The additional information requirement may be fulfilled by including with the notice the CMS-developed fact sheet about the program. If the Part D sponsor develops and uses alternative informational materials in lieu of the CMS-developed fact sheet to satisfy this paragraph (e)(4)(i)(A), they must ensure that these alternative materials accurately convey program information and are compliant with existing Part D requirements specified at subpart V of this part. (B) During the plan year, the initial notice may be provided via telephone, so long as the written “Medicare Prescription Payment Plan Likely to Benefit Notice,” election request form, and additional information are sent within 3 calendar days of the telephone notification. (ii) When the enrollee is identified as likely to benefit during the plan year at the pharmacy point of sale, the notice must be provided as described in paragraph (i)(2) of this section. (5) Targeted outreach exclusions. (i) For the current year during the final month of the plan year (December). (ii) When the enrollee is currently participating in the program, including— (A) For the current year; and (B) For the upcoming year. (iii) When the enrollee is precluded from opting into the program. (iv) When the PDP is non-renewing its contract or individual plan benefit package. This exclusion only applies to the requirements at paragraph (e)(3)(i) of this section related to prior to plan year targeted outreach. (f) Termination of election, reinstatement, and preclusion General rule. (i) Terminate an individual from the Medicare Prescription Payment Plan. (ii) Orally or in writing, or by any action or inaction, request or encourage an individual to disenroll. (2) Basis for termination Voluntary terminations. (A) When a participant opts out of the Medicare Prescription Payment Plan, a Part D sponsor must— ( 1 ( 2 ( i Timing. ( ii Contents. ( 3 ( 4 ( 5 (B) [Reserved] (ii) Involuntary termination. (A) A participant will be considered to have failed to pay their monthly billed amount only after the conclusion of the required grace period as specified at paragraph (f)(4) of this section. (B) When a Part D sponsor involuntarily terminates a participant, the sponsor must do all of the following: ( 1 ( 2 ( 3 (C) If a Part D sponsor involuntarily terminates a participant under this paragraph (f)(2)(ii), the Part D sponsor must send the individual an initial notice explaining that the individual has failed to pay the billed amount. ( 1 Timing. ( 2 Contents. ( i ( ii ( iii ( iv ( v ( vi (D) If the individual has failed to pay the amount due by the end of the grace period described at paragraph (f)(4) of this section, the Part D sponsor must send the individual a termination notice explaining that the individual has been terminated from the Medicare Prescription Payment Plan. ( 1 Timing. ( 2 Contents. ( i ( ii ( iii ( iv ( v ( vi (E) If either notice is returned to the Part D sponsor as undeliverable, the Part D sponsor must immediately implement its existing procedure for researching a potential change of address. (3) Required grace period and reinstatement. (i) The grace period must begin on the first day of the month following the date on which the initial notice described in this paragraph (f)(3) is sent. (ii) A participant must be allowed to pay the overdue balance in full during the grace period to remain in the program. (iii) If a participant fails to pay their monthly billed amount under the program with fewer than two full calendar months remaining in the calendar year, the grace period must carry over into the next calendar year. (A) If the program participant is within their grace period from the prior year, the Part D sponsor must allow the participant to opt into the program for the next year. (B) If that participant fails to pay the amount due from the prior year during the required grace period, the Part D sponsor may terminate the individual's participation in the program in the new year following the procedures outlined in paragraph (f)(2)(ii) of this section. (iv) If an individual who has been terminated from the Medicare Prescription Payment Plan demonstrates good cause for failure to pay the program billed amount within the grace period and pays all overdue amounts billed, a Part D sponsor must reinstate that individual into the Medicare Prescription Payment Plan. (A) A Part D sponsor is expected to reinstate an individual into the program within a reasonable timeframe after the individual has repaid their past due Medicare Prescription Payment Plan balance in full. (B) To demonstrate good cause, the individual must establish by a credible statement that failure to pay the monthly amount billed within the grace period was due to circumstances for which the individual had no control, or which the individual could not reasonably have been expected to foresee. (v) If an individual who has been terminated from the Medicare Prescription Payment Plan pays all overdue amounts billed in full, a Part D sponsor may also reinstate that individual, at the sponsor's discretion and within a reasonable timeframe, even if the individual does not demonstrate good cause. (4) Preclusion of election in a subsequent plan year. (i) A Part D sponsor may only preclude an individual from opting into the Medicare Prescription Payment Plan in a subsequent year if the individual owes an overdue balance to that Part D sponsor. (ii) If an individual enrolls in a Part D plan offered by a different Part D sponsor than the Part D sponsor to which the individual owes an overdue balance, that individual cannot be precluded from opting into the Medicare Prescription Payment Plan in a subsequent year by that different Part D sponsor. (iii) If a Part D enrollee remains in a plan offered by the same Part D sponsor and continues to owe an overdue balance, preclusion may extend beyond the immediately subsequent plan year. (A) If an individual pays off the outstanding balance under the Medicare Prescription Payment Plan during a subsequent year, the Part D sponsor must promptly permit them to opt into the Medicare Prescription Payment Plan after the balance is paid. (B) [Reserved] (iv) A Part D sponsor that offers more than one Part D plan may have different preclusion policies for its different plans. However, the Part D sponsor must apply its preclusion policy consistently among all enrollees of the same Part D plan. (5) Prohibition on Part D enrollment penalties. (i) Disenrolling a Part D enrollee from a Part D plan for failure to pay any amount billed under the Medicare Prescription Payment Plan. (ii) Declining future enrollment into a Part D plan based on an individual's failure to pay a monthly amount billed under the Medicare Prescription Payment Plan. (6) Disenrollment. (ii) If the participant enrolls in a different plan, they may opt into the Medicare Prescription Payment Plan under their new plan. (7) Billing for amounts owed. (g) Participant billing rights General rule. (i) A Part D sponsor must not bill a participant who is in the program but has not yet incurred any out-of-pocket costs during the plan year. (ii) While past due balances from prior monthly bills may also be included in a billing statement, which could result in the total amount on the billing statement exceeding the maximum monthly cap, the amount billed for the month for which the maximum monthly cap is being calculated cannot be higher than the cap for that month. (iii) A Part D sponsor must not charge late fees, interest payments, or other fees, such as for different payment mechanisms. (A) A Part D sponsor must ensure that— ( 1 ( 2 (B) [Reserved] (iv) A Part D sponsor must send a bill for the Medicare Prescription Payment Plan that is separate from the bill for collection of premiums, if applicable. (2) Billing period. (i) The billing period begins on either of the following: (A) The effective date of a Part D enrollee's participation in the Medicare Prescription Payment Plan (for the first month a participant elects into the program during the plan year). (B) The first day of the month (for each subsequent month or for the first month of a participant who elects into the program prior to the start of the plan year). (ii) The billing period ends on the last date of that month. (3) Billing statement. (i) A statement that the bill is for the Medicare Prescription Payment Plan. (ii) A brief description of the program. (iii) A reference to where additional information about the program can be found. (iv) The effective date of program participation. (v) The last payment received, showing the date, amount of the last payment, and the means of payment made by the participant. (vi) Any balance carried over from the prior month, including any missed payments. (vii) Itemized out-of-pocket costs by prescription for the month being billed. (viii) The amount due from the participant for the month being billed (that is, the amount based on the application of the monthly cap calculation). (ix) The remaining total out-of-pocket cost sharing balance. (x) Information on the next steps if the participant fails to pay by the stated due date. (xi) Information on how to voluntarily opt out of the program and balances due if participation is terminated. (xii) Information on the dispute processes available if the individual disputes their bill. (xiii) LIS program information, including the following: (A) General information about how to enroll in the LIS program (as an additional or alternative avenue for addressing prescription drug costs). (B) A statement that LIS enrollment, for those who qualify, is likely to be more advantageous than participation in the Medicare Prescription Payment Plan. (xiv) Plan contact information for participant questions about the billing statement. (4) Treatment of unsettled balances. (i) The Secretary is not liable for any such balances outside of those assumed as losses estimated in a Part D sponsor's plan bid. (ii) If a Part D sponsor is compensated by or on behalf of the participant for an unsettled balance or sells an unsettled balance as a debt, that Part D sponsor cannot treat the amount as a loss and cannot include it in its bid. (5) Prioritization of premium payments. (6) Financial reconciliation. (i) Participant payment. (B) The participant cannot pay more than their total OOP costs for the Medicare Prescription Payment Plan. (C) If a participant does pay more than their total OOP costs for the Medicare Prescription Payment Plan, then the Part D sponsor must reimburse the participant the amount that is paid above the balance owed. (ii) Reimbursements for excess participant payments. (iii) Claims adjustments resulting in increased amounts owed. (h) Participant disputes Coverage determination and appeals procedures. (2) Grievance procedures. (i) Pharmacy point of sale notification process. (2) A Part D sponsor must ensure that the “Medicare Prescription Payment Plan Likely to Benefit Notice” is provided to enrollees identified as likely to benefit (or the person acting on their behalf) through the pharmacy point of sale notification process. (i) In pharmacy settings in which there is direct contact with enrollees (for example, community pharmacies where enrollees present in person to pick up prescriptions), the Part D sponsor must ensure that a hard copy of the “Medicare Prescription Payment Plan Likely to Benefit Notice” is provided to enrollees identified as likely to benefit (or the person acting on their behalf) at the time the prescription is picked up. (ii) For non-retail pharmacy settings without in-person encounters (such as mail order pharmacies), a Part D sponsor must require the pharmacy to notify the Part D enrollee via a telephone call or their preferred contact method. (iii) For long-term care pharmacy settings, the Part D plan sponsor should not require that the pharmacy notify the Part D enrollee prior to dispensing the medication. Instead, the Part D plan sponsor should require the long-term care pharmacy to provide the notice to the Part D enrollee (or their authorized representative) at the time of its typical enrollee cost-sharing billing process. (iv) If the pharmacy is in contact with a Part D enrollee identified as likely to benefit and the enrollee declines to complete the prescription filling process, the Part D sponsor must ensure that the pharmacy provides the “Medicare Prescription Payment Plan Likely to Benefit Notice” to the Part D enrollee. (3) A Part D sponsor must ensure that any contract between the Part D sponsor and a pharmacy (or between a first tier, downstream, or related entity and a pharmacy on the Part D sponsor's behalf) for participation in one or more of the Part D sponsor's networks includes a provision requiring pharmacies to provide this notification to Part D enrollees. (j) Pharmacy claims processing Electronic claims processing methodology. (i) Part D sponsors must utilize, and ensure pharmacies utilize, an additional BIN/PCN that is unique to the Medicare Prescription Payment Plan to facilitate electronic processing of supplemental coordination of benefits (COB) transactions for program participants. (ii) A Part D sponsor must provide the unique Medicare Prescription Payment Plan BIN/PCN and any other pertinent billing information to the pharmacy on paid claim responses when the enrollee is also a Medicare Prescription Payment Plan participant. (iii) A Part D sponsor must assign a program-specific PCN that starts with “MPPP” and report the new BIN/PCN to CMS. (iv) The transaction processed through the Medicare Prescription Payment Plan BIN/PCN will be submitted after processing any applicable other payer transactions in order to capture the final patient responsibility amount after all other payers have paid. (2) Supplemental coverage that increases final patient pay amount. (i) When the final patient pay amount returned to the pharmacy by a supplemental payer for a covered Part D drug is higher than the original Part D patient pay amount, the Part D sponsor may only include in the Medicare Prescription Payment Plan the participant's original Part D cost sharing, as determined by their plan-specific benefit structure. (ii) [Reserved] (3) Prescription drug event reporting. (4) Real-time benefit tools. (5) Inclusion of retroactive claims. (6) Re-adjudication of prescription drug claims for new program participants. (ii) When the Part D enrollee returns to the pharmacy after their election into the Medicare Prescription Payment Plan has been effectuated, the plan sponsor must require the pharmacy to reverse and reprocess the high-cost claim that triggered the likely to benefit notification. (A) Should a Part D enrollee have other unpaid claims at the same pharmacy for covered Part D drugs from prior dates of service, in addition to the prescription that may have triggered the likely to benefit notification, they may also request that those claims be readjudicated. (B) [Reserved] (iii) When the Part D claim date of service is the same as the date of program effectuation), the Part D sponsor is not required to ensure the pharmacy reverse and resubmit the Part D claim, provided that they otherwise obtain the necessary Medicare Prescription Payment Plan BIN/PCN for the program-specific transaction. (k) Pharmacy payment obligations. (1) Impose any fees or costs related to program implementation on pharmacies. (2) Hold pharmacies responsible for any unsettled balances of a participant or for collecting unpaid balances from the participant on the Part D sponsor's behalf. (l) [Reserved] (m) General Part D sponsor outreach and education requirements. (1) Mailing. (i) The mailing must be sent by the later of— (A) Within 10 calendar days from receipt of CMS confirmation of enrollment in the Part D plan; or (B) The last day of the month prior to the plan effective date. (ii) The election request form and supplemental information may be sent— (A) With the membership ID card mailing described at § 423.2267(e)(32); or (B) In its own envelope. (iii) The mailing may be sent only to a Part D enrollee who is receiving a new membership ID card or to all Part D enrollees. (iv) The additional information requirement may be fulfilled by including in the mailing the CMS-developed fact sheet about the program. If the Part D sponsor develops and uses alternative informational materials in lieu of the CMS-developed fact sheet to satisfy this paragraph (m)(1)(iv), they must ensure that these alternative materials accurately convey program information and are compliant with existing Part D requirements specified at subpart V of this part. (2) Websites. (i) An election request mechanism, as described at paragraph (d)(2) of this section. (ii) An overview of the Medicare Prescription Payment Plan. (iii) Examples of the program calculation and explanations. (iv) A description of Part D enrollees who may be likely to benefit from the program. (v) The financial implications of participation. (vi) The implications of not paying monthly bills. (vii) Instructions for how to opt into and out of the program, including timing requirements around election effectuation. (viii) A description of the standards for retroactive election in cases where an enrollee believes that a delay in filling a prescription may seriously jeopardize their life, health, or ability to regain maximum function. (ix) A description of the dispute and grievance procedure, as required under § 423.137(h). (x) Contact information Part D enrollees can use to obtain further information (xi) General information about the LIS program, including an overview of how LIS enrollment, for those who qualify, is likely to be more advantageous than program participation. [90 FR 15912, Apr. 15, 2025] Subpart D—Cost Control and Quality Improvement Requirements § 423.150 Scope. This subpart sets forth the requirements relating to the following: (a) Drug utilization management programs, quality assurance measures and systems, and MTM programs for Part D sponsors. (b) Appropriate dispensing of prescription drugs in long-term care facilities under PDPs and MA-PD plans. (c) Consumer satisfaction surveys of Part D plans. (d) Electronic prescription drug programs for prescribers, dispensers, and Part D sponsors. (e) Quality improvement organization (QIO) activities. (f) Compliance deemed on the basis of accreditation. (g) Accreditation organizations. (h) Procedures for the approval of accreditation organizations as a basis for deeming compliance. [70 FR 4525, Jan. 28, 2005, as amended at 70 FR 67593, Nov. 7, 2005; 76 FR 21573, Apr. 15, 2011; 89 FR 30834, Apr. 23, 2024] § 423.153 Drug utilization management, quality assurance, medication therapy management (MTM) programs, drug management programs, and access to Medicare Parts A and B claims data extracts. (a) General rule. (b) Drug utilization management. (1) Includes incentives to reduce costs when medically appropriate. (2) Maintains policies and systems to assist in preventing over-utilization and under-utilization of prescribed medications. (3) Provides CMS with information concerning the procedures and performance of its drug utilization management program, according to guidelines specified by CMS. (4)(i) Daily cost sharing rate. (ii) Exceptions. (A) Solid oral doses of antibiotics. (B) Solid oral doses that are dispensed in their original container as indicated in the Food and Drug Administration Prescribing Information or are customarily dispensed in their original packaging to assist patients with compliance. (iii) Cost-sharing Copayments. (B) Coinsurance. (c) Quality assurance. (1) Representation that network providers are required to comply with minimum standards for pharmacy practice as established by the States. (2) Concurrent drug utilization review systems, policies, and procedures designed to ensure that a review of the prescribed drug therapy is performed before each prescription is dispensed to an enrollee in a sponsor's Part D plan, typically at the point-of-sale or point of distribution. The review must include, but not be limited to, (i) Screening for potential drug therapy problems due to therapeutic duplication. (ii) Age/gender-related contraindications. (iii) Over-utilization and under-utilization. (iv) Drug-drug interactions. (v) Incorrect drug dosage or duration of drug therapy. (vi) Drug-allergy contraindications. (vii) Clinical abuse/misuse. (3) Retrospective drug utilization review systems, policies, and procedures designed to ensure ongoing periodic examination of claims data and other records, through computerized drug claims processing and information retrieval systems, in order to identify patterns of inappropriate or medically unnecessary care among enrollees in a sponsor's Part D plan, or associated with specific drugs or groups of drugs. (4) Internal medication error identification and reduction systems. (5) Provision of information to CMS regarding its quality assurance measures and systems, according to guidelines specified by CMS. (d) Medication therapy management (MTM) program General rule. (i) Is designed to ensure that covered Part D drugs prescribed to targeted beneficiaries described in paragraph (d)(2) of this section are appropriately used to optimize therapeutic outcomes through improved medication use; (ii) Is designed to reduce the risk of adverse events, including adverse drug interactions, for targeted beneficiaries described in paragraph (d)(2) of this section; (iii) May be furnished by a pharmacist or other qualified provider; and (iv) May distinguish between services in ambulatory and institutional settings. (v) Must enroll targeted beneficiaries using an opt-out method of enrollment only. (vi) Must target beneficiaries for enrollment in the MTM program at least quarterly during each plan year. (vii) Must offer a minimum level of medication therapy management services for each beneficiary enrolled in the MTM program that includes all of the following: (A) Interventions for both beneficiaries and prescribers. (B) Annual comprehensive medication review with written summaries. 1 ( i ( ii ( 2 (C) Quarterly targeted medication reviews with follow-up interventions when necessary. (D) Standardized action plans and summaries that comply with requirements as specified by CMS for the standardized format. (E) Beginning January 1, 2022, for enrollees targeted in paragraph (d)(2) of this section, provide at least annually as part of the comprehensive medication review, a targeted medication review, or other MTM correspondence or service, information about safe disposal of prescription drugs that are controlled substances, drug take back programs, in-home disposal and cost-effective means to safely dispose of such drugs. (F) The information to be provided under paragraph (d)(1)(vii)(E) of this section must comply with all requirements of § 422.111(j) of this chapter. (2) Targeted beneficiaries. (i)(A) Have multiple chronic diseases, with three chronic diseases being the maximum number a Part D plan sponsor may require for targeted enrollment; (B) Are taking multiple Part D drugs, with eight Part D drugs being the maximum number of drugs a Part D plan sponsor may require for targeted enrollment; and (C) Are likely to incur annual covered Part D drug costs greater than or equal to the MTM cost threshold determined by CMS, as specified in this paragraph (d)(2)(i)(C) of this section. ( 1 ( 2 ( 3 (ii) Beginning January 1, 2022, are at-risk beneficiaries as defined in § 423.100. (iii) Beginning January 1, 2025, in identifying beneficiaries who have multiple chronic diseases under paragraph (d)(2)(i)(A) of this section, Part D plan sponsors must include all of the following diseases, and may include additional chronic diseases: (A) Alzheimer's disease. (B) Bone disease-arthritis (including osteoporosis, osteoarthritis, and rheumatoid arthritis). (C) Chronic congestive heart failure (CHF). (D) Diabetes. (E) Dyslipidemia. (F) End-stage renal disease (ESRD). (G) Human immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS). (H) Hypertension. (I) Mental health (including depression, schizophrenia, bipolar disorder, and other chronic/disabling mental health conditions). (J) Respiratory disease (including asthma, chronic obstructive pulmonary disease (COPD), and other chronic lung disorders). (iv) Beginning January 1, 2025, in identifying the number of Part D drugs under paragraph (d)(2)(i)(B) of this section, Part D plan sponsors must include all Part D maintenance drugs, relying on information in a widely accepted, commercially or publicly available drug database to make such determinations, and may include all Part D drugs. (3) Use of experts. (4) Coordination with care management plans. (5) Considerations in pharmacy fees. (i) Describe in its application how it takes into account the resources used and time required to implement the MTM program it chooses to adopt in establishing fees for pharmacists or others providing MTM services for covered Part D drugs under a Part D plan. (ii) Disclose to CMS upon request the amount of the management and dispensing fees and the portion paid for MTM services to pharmacists and others upon request. Reports of these amounts are protected under the provisions of section 1927(b)(3)(D) of the Act. (6) MTM program reporting. (e) Exception for private fee-for-service MA plans offering qualified prescription drug coverage. (f) Drug management programs. (1) Written policies and procedures. (i) The appropriate credentials of the clinical staff conducting case management required under paragraph (f)(2) of this section, including that the staff must have a current and unrestricted license to practice within the scope of his or her profession in a State, Territory, Commonwealth of the United Stated (that is, Puerto Rico), or the District of Columbia. (ii) The necessary and appropriate contents of files for case management required under paragraph (f)(2) of this section, which must include documentation of the substance of prescriber and beneficiary contacts. (iii) Monitoring reports and notifications about incoming enrollees who meet the definition of an at-risk beneficiary or a potential at-risk beneficiary in § 423.100 and responding to requests from other sponsors for information about at-risk beneficiaries and potential at-risk beneficiaries who recently disenrolled from the sponsor's prescription drug benefit plan. (2) Case management/clinical contact/prescriber verification General rule. (A) Send written information to the beneficiary's prescribers that the beneficiary met the clinical guidelines and is a potential at risk beneficiary. (B) Elicit information from the prescribers about any factors in the beneficiary's treatment that are relevant to a determination that the beneficiary is an at-risk beneficiary, including whether prescribed medications are appropriate for the beneficiary's medical conditions or the beneficiary is an exempted beneficiary. (C) In cases where prescribers have not responded to the inquiry described in paragraph (f)(2)(i)(B) of this section, make reasonable attempts to communicate with the prescribers telephonically and/or by another effective communication method designed to elicit a response from the prescribers within a reasonable period after sending the written information. (ii) Exception for identification by prior plan. (3) Limitation on access to coverage for frequently abused drugs. (i) Implement a point-of-sale claim edit for frequently abused drugs that is specific to an at-risk beneficiary. (ii) In accordance with paragraphs (f)(9) and (13) of this section, limit an at-risk beneficiary's access to coverage for frequently abused drugs to those that are— (A) Prescribed for the beneficiary by one or more prescribers; (B) Dispensed to the beneficiary by one or more network pharmacies; or (C) Both. (iii)(A) If the sponsor implements an edit as specified in paragraph (f)(3)(i) of this section, the sponsor must not cover frequently abused drugs for the beneficiary in excess of the edit, unless the edit is terminated or revised based on a subsequent determination, including a successful appeal. (B) If the sponsor limits the at-risk beneficiary's access to coverage as specified in paragraph (f)(3)(ii) of this section, the sponsor must cover frequently abused drugs for the beneficiary only when they are obtained from the selected pharmacy(ies) or prescriber(s) or both, as applicable— ( 1 ( 2 (4) Requirements for limiting access to coverage for frequently abused drugs. (A) Conducted case management as required by paragraph (f)(2) of this section and updated it, if necessary. (B) Except in the case of a pharmacy limitation imposed pursuant to paragraph (f)(3)(ii)(B) of this section, obtained the agreement of at least one prescriber of frequently abused drugs for the beneficiary that the specific limitation is appropriate. (C) Provided the notices to the beneficiary in compliance with paragraphs (f)(5) and (6) of this section. (ii)(A) Except as provided in paragraph paragraph (f)(3)(ii)(A) of this sectionregarding a prescriber limitation, if the sponsor has complied with the requirement of paragraph paragraph (f)(2)(i)(B) of this section about attempts to reach prescribers, and the prescribers were not responsive after 3 attempts by the sponsor to contact them within 10 business days, then the sponsor has met the requirement of paragraph (f)(4)(i)(B) of this section for eliciting information from the prescribers. (B) The sponsor may not implement a prescriber limitation pursuant to paragraph (f)(3)(ii)(A) of this section if no prescriber was responsive. (5) Initial notice to a beneficiary. (ii) The notice must do all of the following: (A) Use language approved by the Secretary. (B) Be in a readable and understandable form. (C) Provide all of the following information: ( 1 ( 2 ( 3 ( 4 ( 5 ( i ( ii ( iii ( 6 4 ( 7 ( 8 (iii) The Part D plan sponsor must make reasonable efforts to provide the beneficiary's prescriber(s) of frequently abused drugs with a copy of the notice required under paragraph (f)(5)(i) of this section. (iv) If the Part D plan sponsor subsequently intends to make a change to the terms of an ongoing limitation(s) established under paragraph (f)(3) of this section, including the intention to impose an additional limitation on the at-risk beneficiary, the sponsor must comply with the requirements of paragraph (f)(3) of this section, as well as all applicable requirements for beneficiary notices described in paragraphs (f)(5) through (8) of this section. (6) Second notice. (ii) The second notice must do all of the following: (A) Use language approved by the Secretary. (B) Be in a readable and understandable form. (C) Provide all of the following information: ( 1 ( 2 ( i ( ii ( 3 ( 4 ( i ( ii ( iii ( 5 ( 6 5 ( 7 (iii) The Part D plan sponsor must make reasonable efforts to provide the beneficiary's prescriber(s) of frequently abused drugs with a copy of the notice required by paragraph (f)(6)(i) of this section. (7) Alternate second notice. (ii) The alternate second notice must do all of the following: (A) Use language approved by the Secretary. (B) Be in a readable and understandable form. (C) Provide all of the following information: ( 1 ( 2 ( 3 ( 4 ( 5 (iii) The Part D sponsor must make reasonable efforts to provide the beneficiary's prescriber(s) of frequently abused drugs with a copy of the notice required in accordance with paragraph (f)(7)(i) of this section. (8) Notices: Timing and exceptions. (A) Within 3 days of the date the sponsor makes the relevant determination. (B) Sixty days after the date of the initial notice described in paragraph (f)(5) of this section. (ii) In the case of a beneficiary who is determined by a Part D sponsor to be exempt, the sponsor must provide the alternate second notice within 3 days of the date the sponsor makes the relevant determination, even if such determination is made less than 30 days from the date of the initial notice described in paragraph (f)(5) of this section. (iii) A gaining plan sponsor may forgo providing the initial notice and may immediately provide a second notice described in paragraph (f)(6) of this section to an at-risk beneficiary as defined in subparagraph (2) of the definition in § 423.100), if the sponsor is implementing either of the following: (A) A beneficiary-specific point-of-sale claim edit as described in paragraph (f)(3)(i) of this section, if the edit is the same as the one that was implemented in the immediately prior plan. (B) A limitation on access to coverage as described in paragraph (f)(3(ii) of this section, if such limitation would require the beneficiary to obtain frequently abused drugs from the same location of pharmacy and/or the same prescriber, as applicable, that was selected under the immediately prior plan under paragraph (f)(9) of this section. (9) Beneficiary preferences. (i) Review such preferences. (ii) If the beneficiary is— (A) Enrolled in a stand-alone prescription drug benefit plan and specifies a prescriber(s) or network pharmacy(ies) or both, select or change the selection of prescriber(s) or network pharmacy(ies) or both for the beneficiary based on beneficiary's preference(s). (B) Enrolled in a Medicare Advantage prescription drug benefit plan and specifies a network prescriber(s) or network pharmacy(ies) or both, select or change the selection of prescriber(s) or pharmacy(ies) or both for the beneficiary based on the beneficiary's preference(s). (iii) The sponsor must inform the beneficiary of the selection or change in— (A) The second notice; or (B) If the second notice is not feasible due to the timing of the beneficiary's submission, in a subsequent written notice, issued no later than 14 days after receipt of the submission. (10) Exception to beneficiary preferences. (ii) If the sponsor changes the selection, the sponsor must provide the beneficiary with— (A) At least 30 days advance written notice of the change; and (B) A rationale for the change. (11) Reasonable access. (i) Geographic location; (ii) Beneficiary preference; (iii) The beneficiary's predominant usage of a prescriber or pharmacy or both; (iv) The impact on cost-sharing; (v) Reasonable travel time; (vi) Whether the beneficiary has multiple residences; (vii) Natural disasters and similar situations; and (viii) The provision of emergency services. (12) Selection of prescribers and pharmacies. (A) One, or, if the sponsor reasonably determines it necessary to provide the beneficiary with reasonable access, more than one, network prescriber who is authorized to prescribe frequently abused drugs for the beneficiary, unless the plan is a stand-alone PDP, or the selection of an out-of-network provider is necessary; and (B) One, or, if the sponsor reasonably determines it necessary to provide the beneficiary with reasonable access, more than one, network pharmacy that may dispense such drugs to such beneficiary, unless the selection of an out-of-network pharmacy is necessary. (ii)(A) For purposes of this paragraph (f)(12) of this section, in the case of a pharmacy that has multiple locations that share real-time electronic data, all such locations of the pharmacy must collectively be treated as one pharmacy. (B) For purposes of this paragraph (f)(12) of this section, in the case of a group practice, all prescribers of the group practice must be treated as one prescriber. (13) Confirmation of selections(s). (ii) The sponsor must receive confirmation from the prescriber(s) or pharmacy(ies) or both, as applicable, that the selection is accepted before conveying this information to the at-risk beneficiary, unless the pharmacy has agreed in advance in a network agreement with the sponsor to accept all such selections and the agreement specifies how the pharmacy will be notified by the sponsor of its selection. (14) Termination of identification as an at-risk beneficiary. (i) The date the beneficiary demonstrates through a subsequent determination, including but not limited to, a successful appeal, that the beneficiary is no longer likely, in the absence of the limitation under this paragraph, to be an at-risk beneficiary; or (ii)(A) The end of a one year period calculated from the effective date of the limitation, as specified in the notice provided under paragraph (f)(6) of this section, unless the limitation was extended pursuant to paragraph (f)(14)(ii)(B) of this section. (B) The end of a two year period calculated from the effective date of the limitation, as specified in a notice provided under paragraph (f)(6) of this section, subject to the following requirements: ( 1 ( 2 ( 3 ( 4 ( 5 (15) Data disclosure. (ii) A Part D sponsor that operates a drug management program must disclose any data and information to CMS and other Part D sponsors that CMS deems necessary to oversee Part D drug management programs at a time, and in a form and manner specified by CMS. The data and information disclosures must do all of the following: (A) Provide information to CMS within 30 days of receiving a report about a potential at-risk beneficiary from CMS. (B) Provide information to CMS about any potential at-risk beneficiary that meets paragraph (1) of the definition in § 423.100 that a sponsor identifies within 30 days from the date of the most recent CMS report identifying potential at-risk beneficiaries; (C) Provide information to CMS about any potential at-risk beneficiary or at-risk beneficiary that meets paragraph (2) of the definitions in § 423.100 that a sponsor identifies within 30 days from the date of the most recent CMS report identifying potential at-risk beneficiaries. (D) Provide information to CMS as soon as possible but no later than 7 days from the date of the initial notice or second notice that the sponsor provided to a beneficiary, or as soon as possible but no later than 7 days of a termination date, as applicable, about a beneficiary-specific opioid claim edit or a limitation on access to coverage for frequently abused drugs. (E) Transfer case management information upon request of a gaining sponsor as soon as possible but not later than 2 weeks from the gaining sponsor's request when— ( 1 ( 2 (16) Clinical guidelines. (i) Are developed with stakeholder consultation; (ii) Are based on: (1) The acquisition of frequently abused drugs from multiple prescribers, multiple pharmacies, the level of frequently abused drugs used, or any combination of these factors; or (2) Beginning January 1, 2022, a history of opioid-related overdose as determined by at least one recent claim that contains a principal diagnosis indicating opioid overdose, and at least one recent claim for an opioid medication other than an opioid used for medication assisted therapy (MAT). (iii) Are derived from expert opinion and an analysis of Medicare data; and (iv) Include a program size estimate. (g) Prescription drug plan sponsors' access to Medicare Parts A and B claims data extracts. (ii) CMS makes the data requested in paragraph (g)(1)(i) of this section available to eligible PDP sponsors, in accordance with all applicable laws. The data is provided at least quarterly on a specified release date, and in an electronic format to be determined by CMS. (iii) If CMS determines or has a reasonable belief that the PDP sponsor has violated the requirements of this paragraph (g) or that unauthorized uses, reuses, or disclosures of the Medicare claims data have taken place, at CMS' sole discretion, the PDP sponsor may be denied further access to the data described in paragraph (g)(2) of this section. (2) Data described. (3) Purposes. (i) To optimize therapeutic outcomes through improved medication use, as such phrase is used in paragraph (d)(1)(i) of this section. (ii) To improve care coordination so as to prevent adverse health outcomes, such as preventable emergency department visits and hospital readmissions. (iii) For activities falling under paragraph (1) of the definition of “health care operations” under 45 CFR 164.501. (iv) For activities falling under paragraph (2) of the definition of “health care operations” under 45 CFR 164.501. (v) For “fraud and abuse detection or compliance activities” under 45 CFR 164.506(c)(4)(ii). (vi) For disclosures that qualify as “required by law” disclosures at 45 CFR 164.103. (4) Limitations. (i) The PDP sponsor will not use the data to inform coverage determinations under Part D. (ii) The PDP sponsor will not use the data to conduct retroactive reviews of medically accepted indications determinations. (iii) The PDP sponsor will not use the data to facilitate enrollment changes to a different prescription drug plan or an MA-PD plan offered by the same parent organization. (iv) The PDP sponsor will not use the data to inform marketing of benefits. (v) The PDP sponsor will contractually bind its contractors that have access to the Medicare claims data, and require their contractors to contractually bind any other potential downstream data recipients, to the terms and conditions imposed on the PDP sponsor under this paragraph (g). (5) Ensuring the privacy and security of data. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19818, Apr. 15, 2010; 75 FR 32860, June 10, 2010; 76 FR 21573, Apr. 15, 2011; 77 FR 22169, Apr. 12, 2012; 80 FR 7963, Feb. 12, 2015; 83 FR 16739, Apr. 16, 2018; 84 FR 15841, Apr. 16, 2019; 86 FR 6116, Jan. 19, 2021; 89 FR 30834, Apr. 23, 2024; 89 FR 79452, Sept. 30, 2024] § 423.154 Appropriate dispensing of prescription drugs in long-term care facilities under PDPs and MA-PD plans. (a) In general. (1) Require all pharmacies servicing long-term care facilities, as defined in § 423.100 to— (i) Dispense solid oral doses of brand-name drugs, as defined in § 423.4, to enrollees in such facilities in no greater than 14-day increments at a time; (ii) Permit the use of uniform dispensing techniques for Part D drugs dispensed to enrollees in long-term care facilities under paragraph (a)(1)(i) of this section as defined by each of the long-term care facilities in which such enrollees reside; and (2) Not penalize long-term care facilities' choice of more efficient uniform dispensing techniques described in paragraph (a)(1)(ii) of this section by prorating dispensing fees based on days' supply or quantity dispensed. (3) Ensure that any difference in payment methodology among long-term care pharmacies incentivizes more efficient dispensing techniques. (4) Collect and report information, in a form and manner specified by CMS, on the dispensing methodology used for each dispensing event described by paragraph (a)(1) of this section. (b) Exclusions. (1) Solid oral doses of antibiotics; or (2) Solid oral doses that are dispensed in their original container as indicated in the Food and Drug Administration Prescribing Information or are customarily dispensed in their original packaging to assist patients with compliance (for example, oral contraceptives). (c) Waivers. (d) Applicability date. (e) Unused drugs returned to the pharmacy. [76 FR 21573, Apr. 15, 2011, as amended at 80 FR 7963, Feb. 12, 2015; 88 FR 22337, Apr. 12, 2023] § 423.156 Consumer satisfaction surveys. Part D contracts with 600 or more enrollees as of July of the prior year must contract with approved Medicare Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey vendors to conduct the Medicare CAHPS satisfaction survey of Part D plan enrollees in accordance with CMS specifications and submit the survey data to CMS. Part D sponsors are not required to submit CAHPS data that would otherwise be required for the calculation of the 2021 Star Ratings. [75 FR 19818, Apr. 15, 2010, as amended at 85 FR 19290, Apr. 6, 2020] § 423.159 Electronic prescription drug program. (a) Definitions. Dispenser Electronic media E-prescribing Electronic prescription drug program Prescriber Prescription-related information (b) [Reserved] (c) Requirement. (d) Promotion of electronic prescribing by MA-PD plans. [70 FR 4525, Jan. 28, 2005, as amended at 70 FR 67593, Nov. 7, 2005] § 423.160 Standards for electronic prescribing. (a) General rules. (2) Except as provided in paragraph (a)(3) of this section, prescribers and dispensers that transmit, directly or through an intermediary, prescriptions and prescription-related information using electronic media (including entities transmitting prescriptions or prescription-related information where the prescriber is required by law to issue a prescription for a patient to a non-prescribing provider, such as a nursing facility, that in turn forwards the prescription to a dispenser), must comply with the applicable standards in paragraph (b) of this section when e-prescribing for covered Part D drugs for Part D eligible individuals. (3)(i) Entities transmitting prescriptions or prescription-related information must utilize the NCPDP SCRIPT standard, consistent with paragraph (b)(1) of this section, in all instances other than temporary/transient network transmission failures. (ii) Electronic transmission of prescriptions or prescription-related information by means of computer-generated facsimile is only permitted in instances of temporary/transient transmission failure and communication problems that would preclude the use of the NCPDP SCRIPT standard adopted by this section. (iii) Entities may use either HL7 messages or the NCPDP SCRIPT standard to transmit prescriptions or prescription-related information internally when the sender and the recipient are part of the same legal entity. If an entity sends prescriptions outside the entity (for example, from an HMO to a non-HMO pharmacy), it must use the adopted NCPDP SCRIPT standard or other applicable adopted standards. Any pharmacy within an entity must be able to receive electronic prescription transmittals for Medicare beneficiaries from outside the entity using the adopted NCPDP SCRIPT standard. This exemption does not supersede any HIPAA requirement that may require the use of a HIPAA transaction standard within an organization. (4) In accordance with section 1860D-4(e)(5) of the Act, the standards under this paragraph (b) of this section supersede any State law or regulation that— (i) Is contrary to the standards or restricts the ability to carry out Part D of Title XVIII of the Act; and (ii) Pertains to the electronic transmission of medication history and of information on eligibility, benefits, and prescriptions with respect to covered Part D drugs under Part D of Title XVIII of the Act. (5) Beginning on January 1, 2021, prescribers must, except in the circumstances described in paragraphs (a)(5)(i) through (iii) of this section, conduct prescribing for at least 70 percent of their Schedule II, III, IV, and V controlled substances that are Part D drugs electronically using the applicable standards in paragraph (b) of this section, subject to the exemption in paragraph (a)(3)(iii) of this section. Prescriptions written for a beneficiary in a long-term care facility will not be included in determining compliance until January 1, 2028. Compliance actions against prescribers who do not meet the compliance threshold based on prescriptions written for a beneficiary in a long-term care facility will commence on or after January 1, 2028. Compliance actions against prescribers who do not meet the compliance threshold based on other prescriptions will commence on or after January 1, 2023. Prescribers will be exempt from this requirement in the following situations: (i) Prescriber issues 100 or fewer controlled substance prescriptions for Part D drugs per calendar year as determined using CMS claims data with dates of service as of December 31st of the current year. (ii) Prescriber has an address in PECOS in the geographic area of an emergency or disaster declared by a Federal, State, or local government entity. If a prescriber does not have an address in PECOS, prescriber has an address in NPPES in the geographic area of an emergency or disaster declared by a Federal, State, or local government entity. Starting in the 2024 measurement year, CMS will identify which emergencies or disasters qualify for this exception. (iii) Prescriber has received a CMS-approved waiver because the prescriber is unable to conduct electronic prescribing of controlled substances (EPCS) due to circumstances beyond the prescriber's control. (b) Standards Prescriptions, electronic prior authorization, and medication history. see (i)(A) GetMessage. (B) Status. (C) Error. (D) RxChangeRequest and RxChangeResponse. (E) RxRenewalRequest and RxRenewalResponse. (F) Resupply. (G) Verify. (H) CancelRx and CancelRxResponse. (I) RxFill. (J) DrugAdministration. (K) NewRxRequest. (L) NewRx. (M) NewRxResponseDenied. (N) RxTransferInitiationRequest. (O) RxTransfer. (P) RxTransferConfirm. (Q) RxFillIndicatorChange. (R) Recertification. (S) REMSInitiationRequest and REMSInitiationResponse. (T) REMSRequest and REMSResponse. (U) RxHistoryRequest and RxHistoryResponse. (V) PAInitiationRequest and PAInitiationResponse. (W) PARequest and PAResponse. (X) PAAppealRequest and PAAppealResponse. (Y) PACancelRequest and PACancelResponse. (Z) PANotification. (ii) [Reserved] (2) Eligibility. (3) Formulary and benefits. see see see (4) Provider identifier. (5) Real-time benefit tools. see (c) Incorporation by reference. [email protected]. www.archives.gov/federal-register/cfr/ibr-locations [email protected]. [email protected]; www.ncpdp.org. (1) NCPDP Formulary and Benefit Standard, Implementation Guide, Version 3, Release 0 (Version 3.0), ANSI-approved January 28, 2011. (2) NCPDP SCRIPT Standard, Implementation Guide Version 2017071, ANSI-approved July 28, 2017. (3) NCPDP SCRIPT Standard, Implementation Guide Version 2023011, ANSI-approved January 17, 2023. (4) NCPDP Real-Time Prescription Benefit Standard, Implementation Guide Version 13, ANSI-approved May 19, 2022. (5) NCPDP Formulary and Benefit Standard, Implementation Guide Version 60, ANSI-approved April 12, 2023. [89 FR 51263, June 17, 2024, as amended by 89 FR 98565, Dec. 9, 2024] § 423.162 Quality improvement organization activities. (a) General rule. (b) Collection of information. (c) Applicability of QIO confidentiality provisions. § 423.165 Compliance deemed on the basis of accreditation. (a) General rule. (1) The Part D sponsor is fully accredited (and periodically reaccredited) for the standards related to the applicable area under paragraph (b) of this section by a private, national accreditation organization approved by CMS; and (2) The accreditation organization uses the standards approved by CMS for the purposes of assessing the Part D sponsor's compliance with Medicare requirements. (b) Deemable requirements. The requirements relating to the following areas are deemable: (1) Access to covered drugs, as provided under §§ 423.120 and 423.124. (2) Drug utilization management programs, quality assurance measures and systems, and MTM programs as provided under § 423.153. (3) Privacy, confidentiality, and accuracy of enrollee records, as provided under § 423.136. (c) Effective date of deemed status. (1) The date the accreditation organization is approved by CMS. (2) The date the Part D sponsor is accredited by the accreditation organization. (d) Obligations of deemed Part D sponsors. (1) Submit to surveys by CMS to validate its accreditation organization's accreditation process; and (2) Authorize its accreditation organization to release to CMS a copy of its most recent accreditation survey, together with any survey-related information that CMS may require (including corrective action plans and summaries of unmet CMS requirements). (e) Removal of deemed status. (1) CMS determines, on the basis of its own investigation, that the Part D sponsor does not meet the Medicare requirements for which deemed status was granted. (2) CMS withdraws its approval of the accreditation organization that accredited the Part D sponsor. (3) The Part D sponsor fails to meet the requirements of paragraph (d) of this section. (f) Authority. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19818, Apr. 15, 2010; 89 FR 30835, Apr. 23, 2024] § 423.168 Accreditation organizations. (a) Conditions for approval. (1) In accrediting Part D sponsors and Part D plans, it applies and enforces standards that are at least as stringent as Medicare requirements for the standard or standards in question. (2) It complies with the application and reapplication procedures set forth in § 423.171. (3) It ensures that— (i) Any individual associated with it, who is also associated with an entity it accredits, does not influence the accreditation decision concerning that entity; (ii) The majority of the membership of its governing body is not comprised of managed care organizations, Part D sponsors or their representatives; and (iii) Its governing body has a broad and balanced representation of interests and acts without bias. (b) Notice and comment Proposed notice. Federal Register (i) Announces CMS's receipt of the accreditation organization's application for approval; (ii) Describes the criteria CMS uses in evaluating the application; and (iii) Provides at least a 30-day comment period. (2) Final notice. Federal Register (ii) If CMS grants the request, the final notice specifies the effective date and the term of the approval that may not exceed 6 years. (c) Ongoing responsibilities of an approved accreditation organization. (1) Provide to CMS in written form and on a monthly basis all of the following: (i) Copies of all accreditation surveys, together with any survey-related information that CMS may require including corrective action plans and summaries of unmet CMS requirements). (ii) Notice of all accreditation decisions. (iii) Notice of all complaints related to deemed Part D sponsors. (iv) Information about any Part D sponsor against which the accrediting organization has taken remedial or adverse action, including revocation, withdrawal, or revision of the Part D sponsor's accreditation. (The accreditation organization must provide this information within 30 days of taking the remedial or adverse action.) (v) Notice of any proposed changes in its accreditation standards or requirements or survey process. If the organization implements the changes before or without CMS approval, CMS may withdraw its approval of the accreditation organization. (2) Within 30 days of a change in CMS requirements, submit the following to CMS— (i) An acknowledgment of CMS's notification of the change. (ii) A revised crosswalk reflecting the new requirements. (iii) An explanation of how the accreditation organization plans to alter its standards to conform to CMS's new requirements, within the timeframes specified in the notification of change it receives from CMS. (3) Permit its surveyors to serve as witnesses if CMS takes an adverse action based on accreditation findings. (4) Within 3 days of identifying, in an accredited Part D sponsor, a deficiency that as determined by the accrediting organization poses immediate jeopardy to the plan's enrollees or to the general public, give CMS written notice of the deficiency. (5) Within 10 days of CMS's notice of withdrawal of approval, give written notice of the withdrawal to all accredited Part D sponsors. (6) On an annual basis, provide summary data specified by CMS that relate to the past year's accreditation activities and trends. (d) Continuing Federal oversight of approved accreditation organizations. (1) Equivalency review. (i) CMS imposes new requirements or changes its survey process; (ii) An accreditation organization proposes to adopt new standards or changes in its survey process; or (iii) The term of an accreditation organization's approval expires. (2) Validation review. (i) A 20 percent rate of disparity between certification by the accreditation organization and certification by CMS or its agent on standards that do not constitute immediate jeopardy to patient health and safety if unmet; (ii) Any disparity between certification by the accreditation organization and certification by CMS or its agent on standards that constitute immediate jeopardy to patient health and safety if unmet; or (iii) That, regardless of the rate of disparity, there are widespread or systematic problems in an organization's accreditation process that accreditation no longer provides assurance that the Medicare requirements are met or exceeded. (3) Onsite observation. (i) Reviewing documents. (ii) Auditing meetings concerning the accreditation process. (iii) Evaluating survey results or the accreditation status decision-making process. (iv) Interviewing the organization's staff. (4) Notice of intent to withdraw approval. (5) Withdrawal of approval. (i) Deeming, based on accreditation, no longer guarantees that the Part D sponsor meets the requirements for offering qualified prescription drug coverage, and failure to meet those requirements may jeopardize the health or safety of Medicare enrollees and constitute a significant hazard to the public health; or (ii) The accreditation organization has failed to meet its obligations under this section or under § 423.165 or § 423.171. (6) Reconsideration of withdrawal of approval. § 423.171 Procedures for approval of accreditation as a basis for deeming compliance. (a) Required information and materials. (1) The types of Part D plans and sponsors that it reviews as part of its accreditation process. (2) A detailed comparison of the organization's accreditation requirements and standards with the Medicare requirements (for example, a crosswalk). (3) Detailed information about the organization's survey process, including the following: (i) Frequency of surveys and whether surveys are announced or unannounced. (ii) Copies of survey forms, and guidelines and instructions to surveyors. (iii) Descriptions of— (A) The survey review process and the accreditation status decision making process; (B) The procedures used to notify accredited Part D sponsors of deficiencies and to monitor the correction of those deficiencies; and (C) The procedures used to enforce compliance with accreditation requirements. (4) Detailed information about the individuals who perform surveys for the accreditation organization, including the— (i) Size and composition of accreditation survey teams for each type of plan reviewed as part of the accreditation process; (ii) Education and experience requirements surveyors must meet; (iii) Content and frequency of the in-service training provided to survey personnel; (iv) Evaluation systems used to monitor the performance of individual surveyors and survey teams; and (v) Organization's policies and practice for the participation, in surveys or in the accreditation decision process by an individual who is professionally or financially affiliated with the entity being surveyed. (5) A description of the organization's data management and analysis system for its surveys and accreditation decisions, including the kinds of reports, tables, and other displays generated by that system. (6) A description of the organization's procedures for responding to and investigating complaints against accredited organizations, including policies and procedures regarding coordination of these activities with appropriate licensing bodies and ombudsmen programs. (7) A description of the organization's policies and procedures for the withholding or removal of accreditation for failure to meet the accreditation organization's standards or requirements, and other actions the organization takes in response to noncompliance with its standards and requirements. (8) A description of all types (for example, full or partial) and categories (for example, provisional, conditional, or temporary) of accreditation offered by the organization, the duration of each type and category of accreditation, and a statement identifying the types and categories that serve as a basis for accreditation if CMS approves the accreditation organization. (9) A list of all currently accredited Part D sponsors and MA organizations and the type, category, and expiration date of the accreditation held by each of them. (10) A list of all full and partial accreditation surveys scheduled to be performed by the accreditation organization as requested by CMS. (11) The name and address of each person with an ownership or control interest in the accreditation organization. (b) Required supporting documentation. (1) A written presentation that demonstrates its ability to furnish CMS with electronic data in CMS compatible format. (2) A resource analysis that demonstrates that it's staffing, funding, and other resources are adequate to perform the required surveys and related activities. (3) A statement acknowledging that, as a condition for approval, it agrees to comply with the ongoing responsibility requirements of § 423.168(c). (c) Additional information. (d) Onsite visit. (e) Notice of determination. (1) States whether the request for approval is granted or denied; (2) Gives the rationale for any denial; and (3) Describes the reconsideration and reapplication procedures. (f) Withdrawal. (g) Reconsideration of adverse determination. (h) Request for approval following denial. (i) Has revised its accreditation program to correct the deficiencies on which the denial was based. (ii) Can demonstrate that the Part D sponsors that it has accredited meet or exceed applicable Medicare requirements; and (iii) Resubmits the application in its entirety. (2) An accreditation organization that has requested reconsideration of CMS' denial of its request for approval may not submit a new request until the reconsideration is administratively final. § 423.180 Basis and scope of the Part D Prescription Drug Plan Quality Rating System. (a) Basis. (b) Purpose. (1) To provide comparative information on plan quality and performance to beneficiaries for their use in making knowledgeable enrollment and coverage decisions in the Medicare program. (2) To provide quality ratings on a 5-star rating system. (3) To provide a means to evaluate and oversee overall and specific compliance with certain regulatory and contract requirements by Part D plans, where appropriate and possible to use data of the type described in § 423.182(c). (c) Applicability. [83 FR 16743, Apr. 16, 2018] § 423.182 Part D Prescription Drug Plan Quality Rating System. (a) Definitions. Absolute percentage cap CAHPS Case-mix adjustment Categorical Adjustment Index (CAI) Clustering Consolidation Consumed contract Cut point cap Display page Domain rating Dual-eligible (DE) Guardrail Health equity index Highest rating Highly-rated contract Low-income subsidy (LIS) Mean resampling Measurement period Measure score Measure star Overall rating Part C summary rating Part D summary rating Plan benefit package (PBP) Reliability Restricted range Restricted range cap Reward factor Statistical significance Surviving contract Traditional rounding rules Tukey outer fence outliers (b) Contract ratings General. (2) Plan benefit packages. (3) Contract consolidations. (ii) The Star Ratings posted on Medicare Plan Finder for contracts that consolidate are as follows: (A)( 1 ( 2 (B)( 1 ( 2 (iii) This provision governing the Star Ratings of surviving contracts is applicable to contract consolidations that are approved on or after January 1, 2019. (c) Data sources. (2) Part D sponsors are required to collect, analyze, and report data that permit measurements of health outcomes and other indices of quality. Part D sponsors must provide unbiased, accurate, and complete quality data described in paragraph (c)(1) of this section to CMS on a timely basis as requested by CMS. (3) For 2021 Star Ratings only, Part D sponsors are not required to submit CAHPS data that would otherwise be required for the calculation of the 2021 Star Ratings. [83 FR 16743, Apr. 16, 2018; 84 FR 15841, Apr. 16, 2019, as amended at 85 FR 19290, Apr. 6, 2020; 85 FR 33911, June 2, 2020; 86 FR 6118, Jan. 19, 2021; 88 FR 22337, Apr. 12, 2023; 91 FR 17587, Apr. 6, 2026] § 423.184 Adding, updating, and removing measures. (a) General. (b) Review of data quality. (c) Adding measures. (2) In advance of the measurement period, CMS will announce potential new measures and solicit feedback through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act and then subsequently will propose and finalize new measures through rulemaking. (3) New measures added to the Part D Star Ratings program will be on the display page on www.cms.gov (4) A measure will remain on the display page for longer than 2 years if CMS finds reliability or validity issues with the measure specification. (d) Updating measures Non-substantive updates. (i) Narrow the denominator or population covered by the measure; (ii) Do not meaningfully impact the numerator or denominator of the measure; (iii) Update the clinical codes with no change in the target population or the intent of the measure; (iv) Provide additional clarifications: (A) Adding additional qualifiers that would meet the numerator requirements; (B) Clarifying documentation requirements; (C) Adding additional instructions; or (v) Add alternative data sources or expand modes of data collection. (2) Substantive updates. (e) Removing measures. (i) When the clinical guidelines associated with the specifications of the measure change such that the specifications are no longer believed to align with positive health outcomes, or (ii) A measure shows low statistical reliability. (iii) The measure steward other than CMS retires a measure. (2) CMS will announce the removal of a measure based upon its application of paragraph (e)(1) of this section through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act in advance of the measurement period or will propose and finalize the removal of the measure through rulemaking in advance of the measurement period. (3) CMS will propose and finalize the removal of a measure for any reason not stated in paragraph (e)(1) of this section through rulemaking in advance of the measurement period. (f) Improvement measure. (1) Identifying eligible measures. (i) CMS will include only measures available for the current and previous year in the improvement measures and that have numeric value scores in both the current and prior year. (ii) CMS will exclude any measure for which there was a substantive specification change from the previous year. (iii) The Part D improvement measure will include only Part D measure scores. (iv) CMS excludes any measure that receives a measure-level Star Rating reduction for data integrity concerns for either the current or prior year from the improvement measure(s). (2) Determining eligible contracts. (3) Special rules for calculation of the improvement score. (4) Calculation of the improvement score. (i) The improvement change score (the difference in the measure scores in the 2-year period) will be determined for each measure that has been designated an improvement measure and for which a contract has a numeric score for each of the 2 years examined. (ii) Each contract's improvement change score per measure will be categorized as a significant change or not a significant change by employing a two-tailed t-test with a level of significance of 0.05. (iii) The net improvement per measure category (outcome, access, patient experience, process) would be calculated by finding the difference between the weighted number of significantly improved measures and significantly declined measures, using the measure weights associated with each measure category. (iv) The improvement measure score will then be determined by calculating the weighted sum of the net improvement per measure category divided by the weighted sum of the number of eligible measures. (v) The improvement measure scores will be converted to measure-level Star Ratings by determining the cut points using hierarchical clustering algorithms in accordance with § 423.186(a)(2)(i) through (iii). (vi) The Part D improvement measure cut points for MA-PDs and PDPs will be determined using separate clustering algorithms in accordance with §§ 422.166(a)(2)(iii) and 423.186(a)(2)(iii). (g) Data integrity. (i) CMS will reduce measures based on data that a Part D organization must submit to CMS under § 423.514 to 1 star when a contract did not score at least 95 percent on data validation for the applicable reporting section or was not compliant with CMS data validation standards/sub-standards for data directly used to calculate the associated measure. (ii) [Reserved] (2) CMS will reduce a measure rating to 1 star for additional concerns that data inaccuracy, incompleteness, or bias have an impact on measure scores and are not specified in paragraphs (g)(1)(i) and (ii) of this section, including a contract's failure to adhere to CAHPS reporting requirements. (h) Review of sponsors' data. (2) A Part D plan sponsor may request that CMS review its' contract's Complaints Tracking Module (CTM) data provided that the request is received by the annual deadline set by CMS for the applicable Star Ratings year. (i) [Reserved] (3) Beginning with the 2025 measurement year (2027 Star Ratings), Part D sponsor may request that CMS review its contract's administrative data for Patient Safety measures provided that the request is received by the annual deadline set by CMS for the applicable Star Ratings year. [83 FR 16743, Apr. 16, 2018, as amended at 84 FR 15842, Apr. 16, 2019; 85 FR 19291, Apr. 6, 2020; 86 FR 6118, Jan. 19, 2021; 87 FR 27899, May 9, 2022; 88 FR 22338, Apr. 12, 2023; 89 FR 30835, Apr. 23, 2024; 91 FR 17588, Apr. 6, 2026] § 423.186 Calculation of Star Ratings. (a) Measure Star Ratings Cut points. (2) Clustering algorithm for all measures except CAHPS measures. (i) The method maximizes differences across the star categories and minimizes the differences within star categories using mean resampling with the hierarchal clustering of the current year's data. Effective for the Star Ratings issued in October 2023 and subsequent years, prior to applying mean resampling with hierarchal clustering, Tukey outer fence outliers are removed. Effective for the Star Ratings issued in October 2022 and subsequent years, CMS will add a guardrail so that the measure-threshold-specific cut points for non-CAHPS measures do not increase or decrease more than the value of the cap from 1 year to the next. The cap is equal to 5 percentage points for measures having a 0 to 100 scale (absolute percentage cap) or 5 percent of the restricted range for measures not having a 0 to 100 scale (restricted range cap). New measures that have been in the Part C and D Star Rating program for 3 years or less use the hierarchal clustering methodology with mean resampling with no guardrail for the first 3 years in the program. (ii) In cases where multiple clusters have the same measure score value range, those clusters would be combined, leading to fewer than 5 clusters. (iii) The clustering algorithm for the improvement measure scores is done in two steps to determine the cut points for the measure-level Star Ratings. Clustering is conducted separately for improvement measure scores greater than or equal to zero and those with improvement measure scores less than zero. (A) Improvement scores of zero or greater would be assigned at least 3 stars for the improvement Star Rating. (B) Improvement scores less than zero would be assigned either 1 or 2 stars for the improvement Star Rating. (3) Relative distribution and significance testing for CAHPS measures. (i) A contract is assigned 1 star if both of the criteria in paragraphs (a)(3)(i)(A) and (B) of this section are met plus at least one of the criteria in paragraphs (a)(3)(i)(C) or (D) of this section is met: (A) Its average CAHPS measure score is lower than the 15th percentile; and (B) Its average CAHPS measure score is statistically significantly lower than the national average CAHPS measure score; (C) The reliability is not low; or (D) Its average CAHPS measure score is more than one standard error below the 15th percentile. (ii) A contract is assigned 2 stars if it does not meet the 1-star criteria and meets at least one of these three criteria: (A) Its average CAHPS measure score is lower than the 30th percentile and the measure does not have low reliability; or (B) Its average CAHPS measure score is lower than the 15th percentile and the measure has low reliability; or (C) Its average CAHPS measure score is statistically significantly lower than the national average CAHPS measure score and below the 60th percentile. (iii) A contract is assigned 3 stars if it meets at least one of these three criteria: (A) Its average CAHPS measure score is at or above the 30th percentile and lower than the 60th percentile, and it is not statistically significantly different from the national average CAHPS measure score; or (B) Its average CAHPS measure score is at or above the 15th percentile and lower than the 30th percentile, the reliability is low, and the score is not statistically significantly lower than the national average CAHPS measure score; or (C) Its average CAHPS measure score is at or above the 60th percentile and lower than the 80th percentile, the reliability is low, and the score is not statistically significantly higher than the national average CAHPS measure score. (iv) A contract is assigned 4 stars if it does not meet the 5-star criteria and meets at least one of these three criteria: (A) Its average CAHPS measure score is at or above the 60th percentile and the measure does not have low reliability; or (B) Its average CAHPS measure score is at or above the 80th percentile and the measure has low reliability; or (C) Its average CAHPS measure score is statistically significantly higher than the national average CAHPS measure score and above the 30th percentile. (v) A contract is assigned 5 stars if both of the following criteria in paragraphs (a)(3)(v)(A) and (B) of this section are met plus at least one of the criteria in paragraphs (a)(3)(v)(C) or (D) of this section is met: (A) Its average CAHPS measure score is at or above the 80th percentile; and (B) Its average CAHPS measure score is statistically significantly higher than the national average CAHPS measure score; (C) The reliability is not low; or (D) Its average CAHPS measure score is more than one standard error above the 80th percentile. (4) 5-Star Scale. (b) Domain Star Ratings. (ii) The 4 domains for the Part D Star Ratings are: Drug Plan Customer Service; Member Complaints and Changes in the Drug Plan's Performance; Member Experience with the Drug Plan; and Drug Safety and Accuracy of Drug Pricing. (2) CMS calculates the domain ratings as the unweighted mean of the Star Ratings of the included measures. (i) A contract must have scores for at least 50 percent of the measures required to be reported for that contract type for that domain to have a domain rating calculated. (ii) The domain ratings are on a 1 to 5 star scale ranging from 1 (worst rating) to 5 (best rating) in whole star increments using traditional rounding rules. (c) Part D summary ratings. (2)(i) A contract must have scores for at least 50 percent of the measures required to be reported for the contract type to have a summary rating calculated. (ii) The Part D improvement measure is not included in the count of the minimum number of rated measures. (3) The summary ratings are on a 1 to 5 star scale ranging from 1 (worst rating) to 5 (best rating) in half-star increments using traditional rounding rules. (d) Overall MA-PD rating. (2)(i) An MA-PD must have both Part C and Part D summary ratings and scores for at least 50 percent of the measures required to be reported for the contract type to have the overall rating calculated. (ii) The Part C and D improvement measures are not included in the count of measures needed for the overall rating. (iii) Any measures that share the same data and are included in both the Part C and Part D summary ratings will be included only once in the calculation for the overall rating. (iv) The overall rating is on a 1 to 5 star scale ranging from 1 (worst rating) to 5 (best rating) in half-increments using traditional rounding rules. (e) Measure weights General rules. (i) Improvement measures receive the highest weight of 5. (ii) Outcome and Intermediate outcome measures receive a weight of 3. (iii) Through the 2025 Star Ratings, patient experience and complaint measures receive a weight of 4. Starting with the 2026 Star Ratings and subsequent Star Ratings years, patient experience and complaint measures receive a weight of 2. (iv) Through the 2025 Star Ratings, access measures receive a weight of 4. Starting with the 2026 Star Ratings and subsequent Star Ratings years, access measures receive a weight of 2. (v) Process measures receive a weight of 1. (2) Rules for new and substantively updated measures. (3) Special rule for Puerto Rico. (f) Completing the Part D summary and overall rating calculations. (1) Reward factor. (i) The contract's performance will be assessed using its weighted mean and its ranking relative to all rated contracts in the rating level (overall for MA-PDs and Part D summary for MA-PDs and PDPs) for the same Star Ratings year. The contract's stability of performance will be assessed using the weighted variance and its ranking relative to all rated contracts in the rating type (overall for MA-PDs and Part D summary for MA-PDs and PDPs). The weighted mean and weighted variance are compared separately for MA-PD and standalone Part D contracts (PDPs). The measure weights are specified in paragraph (e) of this section. Since highly-rated contracts may have the improvement measure(s) excluded in the determination of their final highest rating, each contract's weighted variance and weighted mean will be calculated both with and without the improvement measures. For an MA-PD's Part C and D summary ratings, its ranking is relative to all other contracts' weighted variance and weighted mean for the rating type (Part C summary, Part D summary) with the improvement measure. For the 2022 Star Ratings only, since all contracts may have the improvement measure(s) excluded in the determination of their highest rating and summary rating(s), each contract's weighted variance and weighted mean are calculated both with and without the improvement measures. (ii) Relative performance of the weighted variance (or weighted variance ranking) will be categorized as being high (at or above 70th percentile), medium (between the 30th and 69th percentile) or low (below the 30th percentile). Relative performance of the weighted mean (or weighted mean ranking) will be categorized as being high (at or above the 85th percentile), relatively high (between the 65th and 84th percentiles), or other (below the 65th percentile). (iii) The combination of the relative variance and relative mean is used to determine the reward factor to be added to the contract's summary and overall ratings as follows: (A) A contract with low variance and a high mean will have a reward factor equal to 0.4. (B) A contract with medium variance and a high mean will have a reward factor equal to 0.3. (C) A contract with low variance and a relatively high mean will have a reward factor equal to 0.2. (D) A contract with medium variance and a relatively high mean will have a reward factor equal to 0.1. (E) A contract with all other combinations of variance and relative mean will have a reward factor equal to 0.0. (iv) The reward factor is determined and applied before application of the CAI adjustment under paragraph (f)(2) of this section; the reward factor is based on unadjusted scores. (2) Categorical adjustment index. (i) The CAI is added to or subtracted from the contract's overall and summary ratings and is applied after the reward factor adjustment described in paragraph (f)(1) of this section (if applicable). (A) The adjustment factor is monotonic (that is, as the proportion of LIS/DE and disabled increases in a contract, the adjustment factor increases in at least one of the dimensions) and varies by a contract's categorization into a final adjustment category that is determined by a contract's proportion of LIS/DE and disabled beneficiaries. (B) To determine a contract's final adjustment category, contract enrollment is determined using enrollment data for the month of December for the measurement period of the Star Ratings year. ( 1 ( 2 ( 3 ( 4 (C) A MA-PD contract may be adjusted up to three times with the CAI: One for the overall Star Rating and one for each of the summary ratings (Part C and Part D). (D) A PDP contract may be adjusted only once for the CAI for the Part D summary rating. (E) The CAI values are rounded and displayed with 6 decimal places. (ii) In determining the CAI values, a measure will be excluded from adjustment if the measure meets any of the following: (A) The measure is already case-mix adjusted for socioeconomic status. (B) The focus of the measurement is not a beneficiary-level issue but rather a plan or provider-level issue. (C) The measure is scheduled to be retired or revised. (D) The measure is applicable only to SNPs. (iii) The Star Ratings measures that remain after the exclusion criteria, paragraph (f)(2)(ii) of this section, have been applied will be adjusted for the determination of the CAI. CMS will announce the measures identified for adjustment in the calculations of the CAI under this paragraph (f)(2) through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act. (iv) The adjusted measures scores for the selected measures are determined using the results from regression models of beneficiary level measure scores that adjust for the average within-contract difference in measure scores for MA or PDP contracts. (A) A logistic regression model with contract fixed effects and beneficiary level indicators of LIS/DE and disability status is used for the adjustment. (B) The adjusted measure scores are converted to a measure-level Star Rating using the measure thresholds for the Star Ratings year that corresponds to the measurement period of the data employed for the CAI determination. (v) The rating-specific CAI values will be determined using the mean differences between the adjusted and unadjusted Star Ratings (overall, Part D summary for MA-PDs and Part D summary for PDPs) in each final adjustment category. (A) For the annual development of the CAI, the distribution of the percentages for LIS/DE and disabled (using the enrollment data that parallels the previous Star Ratings year's data) would be examined to determine the number of equal-sized initial groups for each attribute (LIS/DE and disabled). (B) The initial categories are created using all groups formed by the initial LIS/DE and disabled groups. (C) The mean difference between the adjusted and unadjusted summary or overall ratings per initial category would be calculated and examined. The initial categories would then be collapsed to form the final adjustment categories. The collapsing of the initial categories to form the final adjustment categories would be done to enforce monotonicity in at least one dimension (LIS/DE or disabled). (D) The mean difference within each final adjustment category by rating-type (overall, Part D for MA-PD, and Part D for PDPs) would be the CAI values for the next Star Ratings year. (vi) CMS develops the model for the modified contract-level LIS/DE percentage for Puerto Rico using the following sources of information: (A) The most recent data available at the time of the development of the model of both 1-year American Community Survey (ACS) estimates for the percentage of people living below the Federal Poverty Level (FPL) and the ACS 5-year estimates for the percentage of people living below 150 percent of the FPL. The data to develop the model will be limited to the 10 states, drawn from the 50 states plus the District of Columbia with the highest proportion of people living below the FPL, as identified by the 1-year ACS estimates. (B) The Medicare enrollment data from the same measurement period as the Star Rating's year. The Medicare enrollment data would be aggregated from MA contracts that had at least 90 percent of their enrolled beneficiaries with mailing addresses in the 10 highest poverty states. (vii) A linear regression model is developed to estimate the percentage of LIS/DE for a contacts that solely serve the population of beneficiaries in Puerto Rico. (A) The maximum value for the modified LIS/DE indicator value per contract would be capped at 100 percent. (B) All estimated modified LIS/DE values for Puerto Rico would be rounded to 6 decimal places when expressed as a percentage. (C) The model's coefficient and intercept are updated annually and published in the Technical Notes. (g) Applying the improvement measure scores. (i) If the highest rating for each contract-type is 4 stars or more without the use of the improvement measure(s) and with all applicable adjustments (CAI and the reward factor), a comparison of the highest rating with and without the improvement measure(s) is done. The higher rating is used for the rating. (ii) If the highest rating is less than 4 stars without the use of the improvement measure(s) and with all applicable adjustments (CAI and the reward factor), the rating will be calculated with the improvement measure(s). (2) The Part D summary rating for MA-PDs will include the Part D improvement measure. (3) For 2022 Star Ratings only, CMS runs the calculations twice for the highest rating for each contract-type (overall rating for MA-PD contracts and Part D summary rating for PDPs) and Part D summary rating for MA-PDs with all applicable adjustments (CAI and the reward factor), once including the improvement measure(s) and once without including the improvement measure(s). In deciding whether to include the improvement measures in a contract's highest and summary rating(s), CMS applies the following rules: (i) For MA-PDs and PDPs, a comparison of the highest rating with and without the improvement measure is done. The higher rating is used for the highest rating. (ii) For MA-PDs, a comparison of the Part D summary rating with and without the improvement measure is done. The higher rating is used for the summary rating. (h) Posting and display of ratings. (1) Medicare Plan Finder performance icons. (i) High-performing icon. (ii) Low-performing icon. (B) CMS may disable the Medicare Plan Finder online enrollment function (in Medicare Plan Finder) for Medicare health and prescription drug plans with the low performing icon; beneficiaries will be directed to contact the plan directly to enroll in the low-performing plan. (2) Plan preview of the Star Ratings. (i) Extreme and uncontrollable circumstances. (1) Identification of affected contracts. (i) The contract's service area is within an “emergency area” during an “emergency period” as defined in section 1135(g) of the Act. (ii) The contract's service area is within a county, parish, U.S. territory or tribal area designated in a major disaster declaration under the Stafford Act and the Secretary exercised authority under section 1135 of the Act based on the same triggering event(s). (iii) As specified in paragraphs (i)(2) through (8) of this section, a certain minimum percentage (25 percent or 60 percent) of the enrollees under the contract must reside in a Federal Emergency Management Agency (FEMA)-designated Individual Assistance area at the time of the extreme and uncontrollable circumstance. (2) CAHPS adjustments. (ii) An affected contract with at least 25 percent of enrollees in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable circumstance is exempt from administering the CAHPS survey if the contract completes both of the following: (A) Demonstrates to CMS that the required sample for the survey cannot be contacted because a substantial number of the contract's enrollees are displaced due to the FEMA-designated disaster identified in paragraph (i)(1)(iii) of this section in the prior calendar year. (B) Requests and receives a CMS approved exemption. (iii) An affected contract with an exemption described in paragraph (i)(2)(ii) of this section receives the contract's CAHPS measure stars and corresponding measure scores from the prior year. (iv) For an affected contract with at least 25 percent of enrollees in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable circumstance, the contract receives the higher of the previous year's Star Rating or the current year's Star Rating (and corresponding measure score) for each CAHPS measure. (v) When a contract is an affected contract with at least 25 percent of enrollees in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable circumstance with regard to separate extreme and uncontrollable circumstances that begin in successive years, it is a multiple year-affected contract. A multiple year-affected contract receives the higher of the current year's Star Rating or what the previous year's Star Rating would have been in the absence of any adjustments that took into account the effects of the previous year's disaster for each measure (using the corresponding measure score for the Star Ratings year selected). (3) New measure adjustments. (4) Other Star Ratings measure adjustments. (ii) CMS does not adjust the scores of the Star Ratings for the Part D Call Center—Foreign Language Interpreter and TTY Availability measure, unless the exemption listed in paragraph (i)(4)(iii) of this section applies. (iii) CMS adjusts the measure listed in paragraph (i)(4)(ii) of this section using the adjustments listed in paragraph (i)(4)(i) of this section for contracts affected by extreme and uncontrollable circumstances where there are continuing communications issues related to loss of electricity and damage to infrastructure during the call center study. (iv) When a contract is an affected contract with at least 25 percent of enrollees in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable circumstance with regard to separate extreme and uncontrollable circumstances that begin in successive years, it is a multiple year-affected contract. A multiple year-affected contract receives the higher of the current year's Star Rating or what the previous year's Star Rating would have been in the absence of any adjustments that took into account the effects of the previous year's disaster for each measure (using the corresponding measure score for the Star Ratings year selected). (5) Exclusion from improvement measures. (6) Missing data. (7) Cut points for non-CAHPS measures. (ii) The cut points calculated as described in paragraph (i)(7)(i) of this section are used to assess all affected contracts' measure Star Ratings. (8) Reward factor. (ii) All affected contracts are eligible for the Reward Factor based on the calculations described in paragraph (i)(8)(i) of this section. (9) Special rules for the 2022 Star Ratings only. (j) Special rules for 2021 Star Ratings only. (i) The measures calculated based on CAHPS data are calculated based on survey data collected from March through May 2019. (ii) The measure-level change score calculation described at § 423.184(f)(4)(i) is not applied for CAHPS measures and the measure-level change score used for the 2020 Star Ratings is applied in its place for all CAHPS-based measures. (iii) The provisions of § 423.184(g)(2) are not applied for failure to submit CAHPS-based measures. (iv) [Reserved] (2) [Reserved] [83 FR 16743, Apr. 16, 2018, as amended at 84 FR 15842, Apr. 16, 2019; 85 FR 19291, Apr. 6, 2020; 85 FR 33911, June 2, 2020; 85 FR 54872, Sept. 2, 2020; 86 FR 6118, Jan. 19, 2021; 87 FR 27899, May 9, 2022; 88 FR 22338, Apr. 12, 2023; 89 FR 30835, Apr. 23, 2024; 91 FR 17588, Apr. 6, 2026] Subpart E [Reserved] Subpart F—Submission of Bids and Monthly Beneficiary Premiums; Plan Approval § 423.251 Scope. This section sets forth the requirements and limitations on submission, review, negotiation and approval of competitive bids for prescription drug plans and MA-PD plans; the calculation of the national average bid amount; and the determination of enrollee premiums. § 423.258 Definitions. For the purposes of this subpart, the following definitions apply: Full risk plan Limited risk plan Standardized bid amount § 423.265 Submission of bids and related information. (a) Eligibility for bidding. (b) Bid submission General. (2) Substantial differences between bids General rule. (ii) Exception. (3) Limit on number of plan offerings. (4) Bid acceptance. (5) Limitations on changes. (c) Basic rule for bid. (1) Included costs. (2) Excluded costs. (3) Actuarial valuation. (d) Specific requirements for bids. (1) Coverage. (2) Actuarial value of bid components. (i) The actuarial value of the qualified prescription drug coverage to be offered under each plan for a Part D eligible individual with a national average risk profile for the factors described in § 423.329(b)(1) and the basis for the estimate. (ii) The portion of the bid attributable to basic prescription drug coverage and the portion (if any) attributable to supplemental benefits. (iii) The assumptions regarding reinsurance amounts payable under § 423.329(c) used in calculating the bid. (iv) The assumptions regarding low-income cost-sharing payable under § 423.329(d) used in calculating the bid. (v) The amount of administrative costs and return on investment or profit included in the bid. (vi) The assumptions regarding the selected drug subsidy under § 423.329(e) used in calculating the bid. (3) Service area. (4) Level of risk assumed. (5) Plan Average Risk Score. (6) Additional information. (e) Special rule for PDP sponsors. (1) Increase in Federal percentage assumed in initial risk corridor. (2) Increase in Federal percentage assumed in second risk corridor. (3) Decrease in size of risk corridors. (f) Special rule for fallback prescription drug plans. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19818, Apr. 15, 2010; 76 FR 21573, Apr. 15, 2011; 83 FR 16749, Apr. 16, 2018; 86 FR 6118, Jan. 19, 2021; 88 FR 22339, Apr. 12, 2023; 89 FR 30836, Apr. 23, 2024; 91 FR 17588, Apr. 6, 2026] § 423.272 Review and negotiation of bid and approval of plans submitted by potential Part D sponsors. (a) Review and negotiation regarding information, terms and conditions. (b) Approval of proposed plans. (1) Application of revenue requirements standard. (2) Plan design. (ii) If the design of the categories and classes within a formulary is consistent with the model guidelines (if any) established by the United States Pharmacopeia, the formulary categories and classes alone will not be found to discourage enrollment. (iii) A plan that adopts the categories and classes discussed in paragraph (b)(2)(ii) of this section may nevertheless be found to discourage enrollment because it excludes specific drugs from the formulary. (3) Substantial differences between bids General. (ii) Transition period for PDP sponsors with new acquisitions. (4) CMS may decline to approve a bid if the Part D sponsor proposes significant increases in cost sharing or decreases in benefits offered under the plan. (c) Limited risk plans. (2) Maximizing assumption of risk. (3) Limited exercise of authority. (d) Special rules for private fee-for-service (PFFS) plans that offer prescription drug coverage. (1) Exemption from negotiations. (2) Requirements regarding negotiated prices. (3) Modification of pharmacy access standard and disclosure requirement. (e) Special rule for plans with standardized bids sufficiently below the national average monthly bid to result in a negative premium. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19819, Apr. 15, 2010; 76 FR 21574, Apr. 15, 2011; 83 FR 16749, Apr. 16, 2018] § 423.279 National average monthly bid amount. (a) Bids included. (b) Calculation of weighted average. (2) For purposes of calculating the monthly national average monthly bid amount for 2006, CMS assigns equal weighting to PDP sponsors (other than fallback entities) and assigns MA-PD plans included in the national average bid a weight based on prior enrollment (new MA-PD plans are assigned zero weight). (c) Geographic adjustment. (2) CMS does not apply any geographic adjustments if CMS determines that price variations among PDP regions are negligible. (3) CMS applies any geographic adjustment in a budget neutral manner so as to not result in a change in the aggregate payments that may have been made if CMS had not applied an adjustment. (4) CMS does not apply any geographic adjustment until an appropriate methodology is developed. § 423.286 Rules regarding premiums. (a) General rule. (b) Base beneficiary premium percentage. (i) Numerator of which is 25.5 percent; and (ii) Denominator of which is as follows: (A) 100 percent minus the percentage established in paragraph (b)(1)(ii)(B) of this section. (B) The percentage established in this paragraph (b) equals— ( 1 ( 2 (2) The beneficiary premium percentage for the years 2024 through 2029 is the lesser of the beneficiary premium percentage— (i) For the immediately preceding year increased by 6 percent; or (ii) Calculated under the formula computed under paragraph (b)(1) of this section. (c) Base beneficiary premium. (1) Beneficiary premium percentage as specified in paragraph (b) of this section; and (2) National average monthly bid amount (computed under § 423.279) for the month. (d) Adjustments to base beneficiary premium. (1) Adjustment to reflect difference between bid and national average bid. (2) Increase for supplemental prescription drug benefits. (3) Increase for late enrollment penalty. (i) Late enrollment penalty amount. (A) An amount that CMS determines is actuarially sound for each uncovered month in the same continuous period of eligibility; or (B) 1 percent of the base beneficiary premium (computed under paragraph (c) of this section) for each uncovered month in the period. (ii) Special rule for 2006 and 2007. (4) Increase for income-related monthly adjustment amount (Part D—IRMAA). (i) Social Security Administration determination. (B) If an individual disagrees with SSA's determination that such individual is subject to the Part D—IRMAA, or about the amount the individual must pay, an individual may file an appeal or request a new initial determination consistent with 20 CFR part 418. (ii) Calculating the income-related monthly adjustment amount. (e) Decrease in monthly beneficiary premium for low-income assistance. (f) Special rules for fallback prescription drug plans. [70 FR 4525, Jan. 28, 2005, as amended at 76 FR 21574, Apr. 15, 2011; 86 FR 6118, Jan. 19, 2021; 91 FR 17588, Apr. 6, 2026] § 423.293 Collection of monthly beneficiary premium. (a) General rules. (1) Charge enrollees a consolidated monthly Part D premium equal to the sum of the Part D monthly premium for basic prescription drug coverage (if any) and the premium for supplemental coverage (if any and if the beneficiary has enrolled in such supplemental coverage). (2) Permit payment of monthly Part D premiums (if any) under the timing of payments established in § 422.262(e) of this chapter; and (3) Permit each enrollee, at the enrollee's option, to make payment of premiums (if any) under this part to the sponsor using any of the methods listed in § 422.262(f) of this chapter. (4) Retroactive collection of premiums. (b) Crediting of late enrollment penalty. (c) Collection of late enrollment penalty Collection through withholding. (2) Collection by plan. (d) Collection of the income-related monthly adjustment amount (Part D—IRMAA). Collection through withholding. (2) Collection through direct billing. (3) Failure to pay the income-related monthly adjustment amount: General rule. (e) Special rule for fallback plans. (f) Prohibition on improper billing of premiums. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20506, Apr. 15, 2008; 74 FR 1544, Jan. 12, 2009; 76 FR 21574, Apr. 15, 2011; 89 FR 30836, Apr. 23, 2024] § 423.294 Failure to collect and incorrect collections of premiums and cost sharing. (a) Requirement to collect premiums and cost sharing. (1) In accordance with the timing of premium payments; (2) At the time a drug is dispensed; or (3) By billing the enrollee or another appropriate party after the fact. (b) Refunds of incorrect collections—(1) Definitions. Amounts incorrectly collected. (B) Includes amounts collected with respect to an enrollee who was believed to be entitled to Medicare benefits but was later found not to be entitled; and (C) Excludes de minimis amounts, as calculated per PDE transaction or per monthly premium billing. De minimis amounts Other amounts due (A) Accessed at an out-of-network pharmacy in accordance with the requirements at § 423.124; or (B) Initially denied but, upon appeal, found to be covered Part D drugs the enrollee was entitled to have provided by the Part D plan. (2) General rule. (3) Refund methods Lump-sum payment. (A) Amounts incorrectly collected as cost-sharing. (B) Other amounts due. (C) All amounts due if the Part D plan is going out of business or terminating its Part D contract for a prescription drug plan(s). (ii) Premium adjustment, lump-sum payment, or both. (iii) Refund when enrollee has died or cannot be located. (4) Premium reduction and compliance. (ii) The Part D plan may receive compliance notices from CMS or, depending on the extent of the non-compliance, be the subject of an intermediate sanction (for example, suspension of marketing and enrollment activities) in accordance with subpart O of this part. (c) Collections of cost-sharing and premium amounts General rule. (2) Timeframe. (3) Retroactive collection of premiums. [89 FR 30836, Apr. 23, 2024] Subpart G—Payments to Part D Plan Sponsors For Qualified Prescription Drug Coverage § 423.301 Scope. This subpart sets forth rules for the calculation and payment of CMS direct and reinsurance subsidies for Part D plans; the application of risk corridors and risk-sharing adjustments to payments; and retroactive adjustments and reconciliations to actual enrollment and interim payments. This subpart does not apply to fallback entities or fallback prescription drug plans. § 423.308 Definitions and terminology. For the purposes of this subpart, the following definitions apply— Actually paid Administrative costs Allowable reinsurance costs Allowable risk corridor costs (1) The subset of costs incurred under a Part D plan (not including administrative costs, but including dispensing fees) that are attributable to basic prescription drug coverage only and that are incurred and actually paid by the Part D sponsor to— (i) A dispensing pharmacy or other dispensing provider (whether directly or through an intermediary contracting organization) under the Part D plan; (ii) The parties listed in § 423.464(f)(1) of this part with which the Part D sponsor must coordinate benefits, including other Part D plans, as the result of any reconciliation process developed by CMS under § 423.464 of this part; or (iii) An enrollee (or third party paying on behalf of the enrollee) to indemnify the enrollee when the reimbursement is associated with obtaining drugs under the Part D plan; and (2) These costs must be based upon imposition of the maximum amount of copayments permitted under § 423.782 of this part. The costs for any Part D plan offering enhanced alternative coverage must be adjusted not only to exclude any costs attributable to benefits beyond basic prescription drug coverage, but also to exclude any prescription drug coverage costs determined to be attributable to increased utilization over standard prescription drug coverage as the result of the insurance effect of enhanced alternative coverage in accordance with CMS guidelines on actuarial valuation. Coverage year Gross covered prescription drug costs (1) The share of actual costs (as defined at § 423.100) paid by the Part D plan that is received as reimbursement by the pharmacy, or other dispensing entity, reimbursement paid to indemnify an enrollee when the reimbursement is associated with an enrollee obtaining covered Part D drugs under the Part D plan, or payments made by the Part D sponsor to other parties listed in § 423.464(f)(1) with which the Part D sponsor must coordinate benefits, including other Part D plans, or as the result of any reconciliation process developed by CMS under § 423.464. (2) Nominal cost-sharing paid by or on behalf of an enrollee which is associated with drugs that would otherwise be covered Part D drugs, as defined at § 423.100, but are instead paid for, with the exception of said nominal cost-sharing, by a patient assistance program providing assistance outside the Part D benefit, provided that documentation of such nominal cost-sharing has been submitted to the Part D plan consistent with the plan processes and instructions for the submission of such information. (3) All amounts paid under the Part D plan by or on behalf of an enrollee (such as the deductible, coinsurance, cost sharing, or, for years prior to 2025, amounts between the initial coverage limit and the out-of-pocket threshold) in order to obtain Part D drugs that are covered under the Part D plan. If an enrollee who is paying 100 percent cost sharing (as a result of paying a deductible or, for years prior to 2025, because the enrollee is between the initial coverage limit and the out-of-pocket threshold) obtains a covered Part D drug at a lower cost than is available under the Part D plan, such cost-sharing will be considered an amount paid under the plan by or on behalf of an enrollee under the previous sentence of this definition, if the enrollee's costs are incurred costs as defined at § 423.100 and documentation of the incurred costs has been submitted to the Part D plan consistent with plan processes and instructions for the submission of such information. These costs are determined regardless of whether the coverage under the plan exceeds basic prescription drug coverage. (4) All amounts paid by manufacturers under the Manufacturer Discount Program (as defined at § 423.100). Inflation Reduction Act Subsidy Amount (IRASA) (1) The beneficiary cost-sharing for a covered insulin product or an ACIP-recommended adult vaccine under the plan's approved bids submitted under § 423.265 for contract year 2023; and (2) The applicable statutory maximum cost-sharing for the covered insulin product or for the ACIP-recommended adult vaccine for contract year 2023. Reopening Global reopening (2) Targeted reopening Target amount [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1544, Jan. 12, 2009; 75 FR 19819, Apr. 15, 2010; 88 FR 22340, Apr. 12, 2023; 89 FR 30837, Apr. 23, 2024; 91 FR 17588, Apr. 6, 2026] § 423.315 General payment provisions. (a) Source of payments. (b) Monthly payments. (c) Reinsurance subsidies. (d) Low-income subsidies. (e) Risk-sharing arrangements. (f) Retroactive adjustments and reconciliations. (g) Special rules for private fee-for-service plans Application of reinsurance. (2) Exemption from risk corridor provisions. (h) Selected drug subsidy. [70 FR 4525, Jan. 28, 2005, as amended at 91 FR 17589, Apr. 6, 2026] § 423.322 Requirement for disclosure of information. (a) Payment conditional upon provision of information. (b) Restrictions on use of information. (i) In carrying out this subpart, including, but not limited to, determination of payments, and payment-related oversight and program integrity activities. (ii) In conducting oversight, evaluation, and enforcement under Title XVIII of the Act. (2) The United States Attorney General and the Comptroller General of the United States may use the information disclosed or obtained in accordance with the provisions of this subpart for purposes of, and to the extent necessary in, carrying out health oversight activities. (3) The restrictions described in paragraphs (b)(1) and (2) of this section do not limit either of the following: (i) OIG's authority to fulfill the Inspector General's responsibilities in accordance with applicable Federal law. (ii) CMS' ability to use data regarding drug claims in accordance with section 1848(m) of the Act. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 54251, Sept. 18, 2008; 80 FR 7963, Feb. 12, 2015] § 423.325 PDE submission timeliness requirements. (a) General PDE submission timeliness requirements. (1) Initial PDE records within 30 calendar days from the date the Part D sponsor (or its contracted first tier, downstream, or related entity) receives the claim. (2) Adjustment or deletion PDE records within 90 calendar days of the Part D sponsor (or its contracted first tier, downstream, or related entity) discovering or receiving notification of an issue that requires a change to the previously submitted PDE record. (3) A PDE record for a paid claim transaction associated with a PDE record that was previously rejected by CMS at least once every 90 calendar days from receipt of a rejection until the PDE record is accepted unless the claim associated with the rejected PDE record is reversed or deleted, or the PDE record that was rejected is otherwise found to have been submitted in error. (b) Selected Drugs PDE submission timeliness requirement. [90 FR 15919, Apr. 15, 2025, as amended at 91 FR 17589, Apr. 6, 2026] § 423.329 Determination of payments. (a) Subsidy payments Direct subsidy. (2) Subsidy through reinsurance. (3) Low-income cost-sharing subsidy. (b) Health status risk adjustment Establishment of risk factors. (2) Considerations. (3) Data collection. (i) PDP sponsors to submit data regarding drug claims that can be linked at the individual level to Part A and Part B data in a form and manner similar to the process provided under § 422.310 of this chapter and other information as CMS determines necessary; and (ii) MA organizations that offer MA-PD plans to submit data regarding drug claims that can be linked at the individual level to other data that the organizations are required to submit to CMS in a form and manner similar to the process provided under § 422.310 of this chapter and other information as CMS determines necessary. (4) Publication. (c) Reinsurance payment amount (1) General rule General rule for years preceding 2025. (ii) General rule for 2026 and subsequent years. (2) Payment method. (i) Payments during the coverage year. CMS establishes a payment method by which payments of amounts under this section are made on a monthly basis during a year based on either estimated or incurred allowable reinsurance costs. (ii) Final payments. (3) Special rules for private fee-for-service Plans offering prescription drug coverage. (i) Bases the amount on CMS' estimate of the amount of the payments that are payable if the plan were an MA-PD plan described in section 1851(a)(2)(A)(i) of the Act; and (ii) Takes into account the average reinsurance payments made under § 423.329(c) for populations of similar risk under MA-PD plans described in section 1851(a)(2)(A)(i) of the Act. (d) Low-income cost sharing subsidy payment amount General rule. (2) Payment method. (i) Interim payments. (ii) Final payments. (e) Selected drug subsidy amount General rule. (2) Payment method. (i) Interim payments. (ii) Final payments. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1545, Jan. 12, 2009; 80 FR 7964, Feb. 12, 2015; 85 FR 33911, June 2, 2020; 91 FR 17589, Apr. 6, 2026] § 423.336 Risk-sharing arrangements. (a) Portion of total payments to a Part D sponsor subject to risk Adjusted allowable risk corridor costs. (i) The allowable risk corridor costs for the Part D plan for the coverage year, reduced by— (ii) The sum of— (A) The total reinsurance payments made under § 423.329(c) to the Part D sponsor of the Part D plan for the year; and (B) The total non-premium subsidy payments made under § 423.782 to the Part D sponsor of the Part D plan for the coverage year. (2) Establishment of risk corridors. Risk corridors. (A) First threshold lower limit. ( 1 ( 2 (B) Second threshold lower limit. ( 1 ( 2 (C) First threshold upper limit. ( 1 ( 2 (D) Second threshold upper limit. ( 1 ( 2 (ii) First and second threshold risk percentage defined. First threshold risk percentage. ( 1 ( 2 ( 3 (B) Second threshold risk percentage. (1) 2006 and 2007, 5.0 percent; (2) 2008 through 2011, 10 percent (3) 2012 and subsequent years, a percentage CMS establishes that is greater than the percent established for the year under paragraph (a)(2)(ii)(A)(3) of this section, but in no case less than 10 percent. (iii) Reduction of risk percentage to ensure two Plans in an area. (3) Plans at risk for entire amount of supplemental prescription drug coverage. (b) Payment adjustments No adjustment if adjusted allowable risk corridor costs within risk corridor. (2) Increase in payment if adjusted allowable risk corridor costs above upper limit of risk corridor Costs between first and second threshold upper limits. (ii) Costs above second threshold upper limits. (A) 50 percent (or, for 2006 and 2007, 75 percent or 90 percent if the conditions specified in paragraph (b)(2)(iii) of this section are met for the year) of the difference between the second threshold upper limit and the first threshold upper limit; and (B) 80 percent of the difference between the adjusted allowable risk corridor costs and the second threshold upper limit of the risk corridor. (iii) Conditions for application of higher percentage for 2006 and 2007. (A) At least 60 percent of Part D plans to which this paragraph applies have adjusted allowable risk corridor costs for the Part D plan for the year that are more than the first threshold upper limit of the risk corridor for the Part D plan for the year; and (B) Such plans represent at least 60 percent of Part D eligible individuals enrolled in any Part D plan. (3) Reduction in payment if adjusted allowable risk corridor costs below lower limit of risk corridor Costs between first and second threshold lower limits. (ii) Costs below second threshold lower limit. (A) 50 percent (or, for 2006 and 2007, 75 percent) of the difference between the first threshold lower limit and the second threshold lower limit; and (B) 80 percent of the difference between the second threshold upper limit of the risk corridor and the adjusted allowable risk corridor costs. (c) Payment methods. (1) Submission of cost data. (2) Lump sum and adjusted monthly payments. (d) No effect on monthly premium. [70 FR 4525, Jan. 28, 2005, as amended at 91 FR 17589, Apr. 6, 2026] § 423.343 Retroactive adjustments and reconciliations. (a) Application of enrollee adjustment. (b) Health status. (c) Reinsurance. (1) Submission of cost data. (2) Payments. (d) Low-income cost-sharing subsidy. (1) Submission of cost data. (2) Payments. (e) Selected drug subsidy. (1) Submission of cost data. (2) Payments. [70 FR 4525, Jan. 28, 2005, as amended at 91 FR 17589, Apr. 6, 2026] § 423.346 Reopening. (a) CMS may conduct a global or targeted reopening to reopen and revise an initial or reconsidered final payment determination, including the following: a determination of the final amount of direct subsidy described at § 423.329(a)(1), final reinsurance payments described at § 423.329(c), final amount of the low income subsidy described at § 423.329(d), final risk corridor payments as described at § 423.336, reconciled Coverage Gap Discount Program payment described at § 423.2320(b), reconciled Inflation Reduction Act Subsidy Amount (IRASA) payment for contract year 2023 described at § 423.308, reconciled Manufacturer Discount Program payment described at § 423.2744(c), and reconciled selected drug subsidy payment described at § 423.343(e)— (1) For any reason, within 12 months from the date of the notice of the final determination to the Part D sponsor (2) After that 12-month period, but within 6 years after the date of the notice of the initial or reconsidered determination to the Part D sponsor, upon establishment of good cause for reopening; or (3) At any time, in instances of fraud or similar fault of the Part D sponsor or any subcontractor of the Part D sponsor. (b) For purposes of this section, CMS will find good cause if— (1) New and material evidence that was not readily available at the time the final determination was made is furnished; (2) A clerical error in the computation of payments was made; or (3) The evidence that was considered in making the determination clearly shows on its face that an error was made. (c) For purposes of this section, CMS will not find good cause if the only reason for reopening is a change of legal interpretation or administrative ruling upon which the final determination was made. (d) A decision not to reopen under this section is final and is not subject to review. (e) CMS notifies the sponsor(s) that will be included in the reopening of its intention to conduct a global or targeted reopening when it is necessary for the sponsor(s) to submit prescription drug event (PDE) data or direct and indirect remuneration (DIR) for the reopening. The notification to sponsor(s) must include the following: (1) The date by which PDE or DIR data must be accepted by CMS to be included in the reopening, which is at least 90 calendar days after the date of the notification. (2) A statement indicating the Part D contracts or types of contracts that are included in the reopening. (f) CMS announces when it has completed a reopening and provide the sponsor(s) with all of the following information: (1) A description of the data used in the reopening. (2) A statement indicating the Part D contracts or types of contracts that were included in the reopening. (3) The date by which reports describing the reopening results is available to the sponsor. (4) The date by which a sponsor must submit an appeal, in accordance with § 423.350, if the sponsor disagrees with the reopening results. (g) Inclusion criteria— (1) For a global reopening, CMS includes only those Part D sponsor contracts that were in effect for the contract year being reopened and for whom CMS has not sent the “Notice of final settlement,” as described at § 423.521(a), as of the date CMS announces the completion of the reopening in accordance with paragraph (f) of this section. (2) For a target reopening, CMS includes only Part D sponsor contracts that meet the criteria for inclusion in a global reopening as specified in paragraph (1) of this section and that CMS specifies for inclusion in the reopening as provided in paragraph (e)(2) or (f)(2) of this section. [70 FR 4525, Jan. 28, 2005, as amended at 80 FR 7964, Feb. 12, 2015; 89 FR 30837, Apr. 23, 2024; 89 FR 79452, Sept. 30, 2024; 91 FR 17590, Apr. 6, 2026] § 423.350 Payment appeals. (a) Payment determinations Payment methods subject to appeal. (i) The reconciled health status risk adjustment of the direct subsidy as provided in § 423.343(b). (ii) The reconciled reinsurance payments under § 423.343(c). (iii) The reconciled final payments made for low-income cost sharing subsidies provided in § 423.343(d). (iv) Final risk-sharing payments made under § 423.336. (v) The reconciled coverage gap discount payment under § 423.2320(b). (vi) The reconciled Inflation Reduction Act Subsidy Amount (IRASA) payment for contract year 2023 described at § 423.308. (vii) The reconciled Manufacturer Discount Program payment under § 423.2744(c). (viii) The reconciled selected drug subsidy payment under § 423.343(e). (2) Payment information not subject to appeal. Payment information submitted to CMS under § 423.322 and reconciled or used in the payment calculations for the reconciled IRASA payment for contract year 2023 described at § 423.308 or under § 423.336, § 423.343, § 423.2320(b), or § 423.2744(c) is final and may not be appealed, nor may the appeals process be used to submit new information after the submission of information necessary for CMS to determine retroactive adjustments and reconciliations, including the calculation of risk corridor costs. (b) Request for reconsideration Time for filing a request. (2) Content of request. (3) Conduct of informal written reconsideration. (4) Decision of the informal written reconsideration. (5) Effect of CMS informal written reconsideration. (c) Right to informal hearing. (1) Manner and timing for request. (2) Content of request. (3) Informal hearing procedures. (ii) The hearing are conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not presented with the reconsideration request. The CMS hearing officer is limited to the review of the record that was before CMS when CMS made both its initial and reconsideration determinations. (iii) If CMS did not issue a written reconsideration decision, the hearing officer may request, but not require, a written statement from CMS or its contractors explaining CMS' determination, or CMS or its contractors may, on their own, submit the written statement to the hearing officer. Failure of CMS to submit a written statement does not result in any adverse findings against CMS and may not in any way be taken into account by the hearing officer in reaching a decision. (4) Decision of the CMS hearing officer. (5) Effecting of hearing officer decision. (d) Review by the Administrator. (2) The Administrator may review the hearing officer's decision, any written documents submitted to CMS or to the hearing officer, as well as any other information included in the record of the hearing officer's decision and determine whether to uphold, reverse or modify the hearing officer's decision. (3) The Administrator's determination is final and binding. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20506, Apr. 15, 2008; 80 FR 7964, Feb. 12, 2015; 91 FR 17590, Apr. 6, 2026] § 423.352 CMS-identified overpayments associated with payment data submitted by Part D sponsors. (a) Definitions. Applicable reconciliation date (1) Prescription drug event (PDE) data for the annual Part D payment reconciliations referred to in § 423.343(c) and (d); or (2) Direct and indirect remuneration data. Erroneous payment data Payment data (b) Request to correct payment data. (2) The notice will include or make reference to the specific payment data that need to be corrected, the reason why CMS believes that the payment data are erroneous, and the timeframe for correcting the payment data. (c) Payment offset. (i) The payment error affects payments for any of the 6 most recently completed payment years; and (ii) The payment error for a particular payment year is identified after the applicable reconciliation date for that payment year. (2) CMS will calculate the payment offset amount using the correct payment data and a payment algorithm that applies the payment rules for the applicable year. (d) Payment offset notification. (1) The dollar amount of the offset from plan payments. (2) An explanation of how the erroneous data were identified and used to calculate the payment offset amount. (3) An explanation that, if the Part D sponsor disagrees with the payment offset, it may request an appeal within 30 days of issuance of the payment offset notification. (e) Appeals process. (1) Reconsideration. (i) Manner and timing of request. (ii) Content of request. (iii) Conduct of reconsideration. (iv) Reconsideration decision. (v) Effect of reconsideration decision. (2) Informal hearing. (i) Manner and timing for request. (ii) Content of request. (iii) Informal hearing procedures. (A) CMS provides written notice of the time and place of the informal hearing at least 30 days before the scheduled date. (B) The informal hearing is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not timely presented with the reconsideration request. The CMS hearing officer is limited to the review of the record that was before the CMS reconsideration official when CMS made its reconsideration determination. (C) The CMS hearing officer will review the proceeding before the CMS reconsideration official on the record made before the CMS reconsideration official using the clearly erroneous standard of review. (iv) Decision of the CMS hearing officer. (v) Effect of hearing officer's decision. (3) Review by the Administrator. (i) A Part D sponsor that has received a hearing officer's decision may request review by the Administrator within 30 days of the date of issuance of the hearing officer's decision under paragraph (e)(2)(iv) of this section. The Part D sponsor may submit written arguments to the Administrator for review. (ii) After receiving a request for review, the Administrator has the discretion to elect to review the hearing officer's determination in accordance with paragraph (e)(3)(iv) of this section or to decline to review the hearing officer's decision. (iii) If the Administrator declines to review the hearing officer's decision, the hearing officer's decision is final and binding. (iv) If the Administrator elects to review the hearing officer's decision, the Administrator will review the hearing officer's decision, as well as any information included in the record of the hearing officer's decision and any written argument submitted by the Part D sponsor, and determine whether to uphold, reverse, or modify the hearing officer's decision. (v) The Administrator's determination is final and binding. (f) Matters subject to appeal and burden of proof. (2) The Part D sponsor bears the burden of proof by a preponderance of the evidence in demonstrating that CMS' finding that the payment data were erroneous was incorrect or otherwise inconsistent with applicable program requirements. (g) Applicability of appeals process. [79 FR 67032, Nov. 10, 2014] § 423.360 Reporting and returning of overpayments. (a) Definitions. Applicable reconciliation (i) PDE data for the annual Part D payment reconciliations referred to in § 423.343(c) and (d); or (ii) Direct and indirect remuneration data. Funds Overpayment (b) General rule. (c) Identified overpayment. (d) Reporting and returning of an overpayment. (1) Reporting. (2) Returning. (e) Enforcement. (f) Look-back period. [79 FR 29963, May 23, 2014, as amended at 89 FR 98565, Dec. 9, 2024] Subpart H [Reserved] Subpart I—Organization Compliance with State Law and Preemption by Federal Law § 423.401 General requirements for PDP sponsors. (a) General requirements. (1) Licensure. (2) Assumption of financial risk for unsubsidized coverage. (b) Reinsurance permitted. (c) Solvency for unlicensed sponsors. § 423.410 Waiver of certain requirements to expand choice. (a) Authorizing waiver. (b) Grounds for approval of waivers. (1) Failure to act on licensure application on a timely basis. (2) Denial of application based on discriminatory treatment. (i) The State imposed material requirements, procedures, or standards (other than solvency requirements) not generally applied by the State to other entities engaged in a substantially similar business; or (ii) The State required, as a condition of licensure, that the organization offer any product or plan other than a prescription drug plan. (3) Denial of application based on application of solvency requirements. (i) The solvency requirements are different from the solvency standards CMS establishes in accordance with § 423.420; or (ii) CMS determines that the State imposed, as a condition of licensing, any documentation or information requirements relating to solvency that are different from the standards CMS establishes in accordance with § 423.420. (4) Grounds other than those required by Federal Law. (c) Waiver when licensing process not in effect. (d) Special waiver for plan years beginning before January 1, 2008. (e) Waiver requirements. (1) Treatment of waiver. (2) Prompt action on application. (3) A State that does not have a PDP sponsor. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20506, Apr. 15, 2008] § 423.415 Temporary waivers for entities seeking to offer a prescription drug plan in more than one State in a region. (a) General rule. (b) Filing of application. (c) Processing of application for temporary waiver. (d) Time limit for temporary waiver. § 423.420 Solvency standards for non-licensed entities. (a) Establishment and publication. (b) Compliance with standards. § 423.425 Licensure does not substitute for or constitute certification. The fact that a Part D sponsor is State licensed or has a waiver application approved under § 423.410 or § 423.415 does not deem the sponsor to meet other requirements imposed under this part for a Part D sponsor. § 423.440 Prohibition of State imposition of premium taxes; relation to State laws. (a) Federal preemption of State law. (b) State premium taxes prohibited Basic rule. (2) Construction. Subpart J—Coordination of Part D Plans With Other Prescription Drug Coverage § 423.452 Scope. This section sets forth the application of Part D rules to Part C plans; establishes waivers for MA-PD plans, employer-sponsored group prescription drug plans, cost plans, and PACE organizations; and establishes requirements for coordination of benefits with State Pharmaceutical Assistance Programs and other providers of prescription drug coverage. § 423.454 Definitions. For purposes of this part, the following definitions apply— Employer-sponsored group prescription drug plan State Pharmaceutical Assistance Program (SPAP) [70 FR 4525, Jan. 28, 2005, as amended at 77 FR 1882, Jan. 12, 2012] § 423.458 Application of Part D rules to certain Part D plans on and after January 1, 2006. (a) Relationship to Part C. (b) MA waiver. (1) Application of waiver. (2) Request for waivers. (i) A waiver of those requirements under this part otherwise applicable to the MA-PD plan or MA organization under paragraph (a) of this section that are duplicative of, or that are in conflict with, provisions otherwise applicable to the MA-PD plan, proposed MA-PD plan, or a MA organization under Part C of Medicare. (ii) A waiver of a requirement under this part otherwise applicable to the MA-PD plan or MA organization under paragraph (a) of this section, if such waiver improves coordination of benefits provided under Part C of Medicare with benefits under this Part. (c) Employer group waiver General rule for employer-sponsored group prescription drug plans that are Medicare Part D plans. (2) General rule for employer-sponsored group prescription drug plans for which a sponsor could qualify for payments under subpart R of this part. (3) Use of waiver. (4) Employer-sponsored group prescription drug plans must comply with all applicable requirements under this part that are not specifically waived or modified in accordance with in paragraph (c)(3) of this section. (d) Other waivers. (1) Application of waiver. (2) Request for waivers. (i) A waiver of those requirements under this part otherwise applicable to cost plans or PACE organizations that are duplicative of, or that are in conflict with, provisions otherwise applicable to cost plans or PACE organizations. (ii) A waiver of a requirement under this part otherwise applicable to cost plans or PACE organizations, if such waiver improves coordination of benefits provided by the cost plan under section 1876 of the Act, or by the PACE organization under sections 1894 and 1934 of the Act, with the benefits under Part D. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20506, Apr. 15, 2008; 77 FR 1882, Jan. 12, 2012; 77 FR 22170, Apr. 12, 2012] § 423.462 Medicare secondary payer procedures. (a) General rule. (b) Reporting requirements. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19819, Apr. 15, 2010] § 423.464 Coordination of benefits with other providers of prescription drug coverage. (a) General rule. (1) Payment of premiums and coverage; and (2) Payment for supplemental prescription drug benefits as described in § 423.104(f)(1)(ii)(including payment to a Part D plan on a lump sum per capita basis) for Part D eligible individuals enrolled in the Part D plan and the SPAP or entity providing other prescription drug coverage. (3) Retroactive claims adjustments, underpayment reimbursements, and overpayment recoveries as described in paragraph (g) of this section and § 423.466(a) of this subpart. (b) Medicare as primary payer. (c) User fees. (d) Cost management tools. (e) Coordination with State Pharmaceutical Assistance Programs Requirements to be a State Pharmaceutical Assistance Program (SPAP). (i) Provides financial assistance for the purchase or provision of supplemental prescription drug coverage or benefits on behalf of Part D eligible individuals; (ii) Provides assistance to Part D eligible individuals in all Part D plans without discriminating based upon the Part D plan in which an individual enrolls; (iii) Meets the benefit coordination requirements specified in this subpart; (iv) Does not follow or adopt rules that change or affect the primary payer status of a Part D plan. The definition of SPAP excludes State Medicaid programs, section 1115 demonstration programs, and any other program where program funding is from Federal grants, awards, contracts, entitlement programs, or other Federal sources of funding; and (v) Provides supplemental drug coverage to individuals based on financial need, age, or medical condition, and not based on current or former employment status. (vi) Does not engage in midyear plan or noncalendar year plan enrollment changes on behalf of a substantial number of its members when authorized to do so on the beneficiary's behalf. (2) Use of a single card. (3) Construction. (f) Coordination with other prescription drug coverage Definition of other prescription drug coverage. (i) Medicaid programs. (ii) Group health plans. (iii) FEHBP. (iv) Military coverage (including TRICARE). (v) Indian Health Service. (vi) Federally qualified health centers. (vii) Rural health clinics. (viii) Other Part D plans. (ix) Other prescription drug coverage. (2) Treatment under out-of-pocket rule. (A) Include the enrollee's incurred costs (as defined in § 423.100). (B) Report, accept and apply benefit accumulator data in a timeframe and manner determined by CMS. (C) Exclude expenditures for covered Part D drugs made by government-funded health programs or the coverage provided by a prescription drug plan or an MA-PD plan that is basic prescription drug coverage or any payments by a manufacturer under the Manufacturer Discount Program. (ii) A Part D enrollee must disclose all these expenditures to a Part D plan in accordance with requirements under § 423.32(b)(ii). (3) Imposition of fees. (4) Authority to recover expenditures due to incorrect information on true out-of-pocket costs. (5) Plan-to-plan liability. (6) Use of other reconciliation processes. (g) Responsibility to account for other providers of prescription drug coverage when a retroactive claims adjustment creates an overpayment or underpayment. (1) Adjustments involving payments by other plans and programs providing prescription drug coverage have been made. (2) Reimbursements for excess cost-sharing and premiums for low-income subsidy eligible individuals have been processed in accordance with the requirements in § 423.800(c). (3) Recoveries of erroneous payments for enrollees as specified in § 423.464(f)(4) have been sought. (h) Reporting requirements. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20507, Apr. 15, 2008; 75 FR 19819, Apr. 15, 2010; 76 FR 21574, Apr. 15, 2011; 79 FR 29963, May 23, 2014; 80 FR 7964, Feb. 12, 2015; 91 FR 17590, Apr. 6, 2026] § 423.466 Timeframes for coordination of benefits and claims adjustments. (a) Retroactive claims adjustments, underpayment refunds, and overpayment recoveries. (b) Coordination of benefits. [75 FR 19819, Apr. 15, 2010, as amended at 80 FR 7964, Feb. 12, 2015] Subpart K—Application Procedures and Contracts with Part D plan sponsors § 423.500 Scope. This subpart sets forth application procedures and contracts with Part D plans: application procedures and requirements; contract terms; procedures for termination of contracts; reporting by Part D plans. For purposes of this subpart, Medicare Advantage (MA) organizations offering Part D plans follow the requirements of part 422 of this chapter for MA organizations, except in cases where the requirements for the qualified prescription drug coverage involve additional requirements. § 423.501 Definitions For purposes of this subpart, the following definitions apply: Bona fide service fees Business transaction (1) Sale, exchange, or lease of property. (2) Loan of money or extension of credit. (3) Goods, services, or facilities furnished for a monetary consideration, including management services, but not including— (i) Salaries paid to employees for services performed in the normal course of their employment; or (ii) Health services furnished to the Part D plan sponsor's enrollees by pharmacies and other providers, by Part D plan sponsor staff, medical groups, or independent practice associations, or by any combination of those entities. Downstream entity Final settlement adjustment period Final settlement amount (1) Risk adjustment reconciliation, as applicable (described in § 422.310 of this chapter). (2) Part D annual reconciliation (described in § 423.343). (3) Coverage Gap Discount Program annual reconciliation (described in § 423.2320). (4) MLR remittances (described in §§ 422.2470 of this chapter and 423.2470). Final settlement process (1) Calculates the final settlement amount. (2) Issues the final settlement amount along with supporting documentation in the notice of final settlement to the Part D sponsor. (3) Receives responses from the Part D sponsor requesting an appeal of the final settlement amount. (4) Takes action to adjudicate an appeal (if requested) and make payments to or receive payments from the Part D sponsor. The final settlement amount is calculated after all applicable reconciliations have occurred after a contract has been consolidated, nonrenewed, or terminated. First tier entity Party in interest (1) Any director, officer, partner, or employee responsible for management or administration of a Part D plan sponsor. (2) Any person who is directly or indirectly the beneficial owner of more than 5 percent of the organization's equity; or the beneficial owner of a mortgage, deed of trust, note, or other interest secured by and valuing more than 5 percent of the organization. (3) In the case of a PDP sponsor organized as a nonprofit corporation, an incorporator or member of the corporation under applicable State corporation law. (4) Any entity in which a person specified in paragraphs (1), (2), or (3) of this definition— (i) Is an officer, director, or partner; or (ii) Has the kind of interest described in paragraphs (1), (2), or (3) of this definition. (5) Any person that directly or indirectly controls, is controlled by, or is under common control with the Part D plan sponsor. (6) Any spouse, child, or parent of an individual specified in paragraphs (1), (2), or (3) of this definition. Prescription drug pricing standard (1) Average wholesale price. (2) Wholesale acquisition cost. (3) Average manufacturer price. (4) Average sales price. (5) Maximum allowable cost. (6) Other cost, whether publicly available or not. Related entity (1) Performs some of the Part D plan sponsor's management functions under contract or delegation; (2) Furnishes services to Medicare enrollees under an oral or written agreement; or (3) Leases real property or sells materials to the Part D plan sponsor at a cost of more than $2,500 during a contract period. Significant business transaction [70 FR 4525, Jan. 28, 2005, as amended at 77 FR 22170, Apr. 12, 2012; 80 FR 29963, Nov. 6, 2015; 89 FR 30837, Apr. 23, 2024; 89 FR 63828, Aug. 6, 2024] § 423.502 Application requirements. (a) Scope. (b) Completion of a notice of intent to apply. (2) Submitting a Notice of Intent to Apply does not bind that organization to submit an application for the applicable contract year. (3) An organization's decision not to submit an application after submitting an Notice of Intent to Apply will not form the basis of any action taken against the organization by CMS. (c) Completion of an application. (i) Documentation of appropriate State licensure or State certification that the entity is able to offer health insurance or health benefits coverage that meets State-specified standards as specified in subpart I of this part; or (ii) A Federal waiver as specified in subpart I of this part. (2) The authorized individual must describe thoroughly how the entity is qualified to meet the all requirements described in this part. (d) Responsibility for making determinations. (2) A CMS determination that an entity is qualified to act as a Part D plan sponsor is distinct from the bid negotiations that occur under subpart F of part 423 and such negotiations are not subject to the appeals provisions included in subpart N of this part. (e) Disclosure of application information under the Freedom of Information Act. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19819, Apr. 15, 2010] § 423.503 Evaluation and determination procedures. (a) Basis for evaluation and determination. Information used to evaluate applications. (2) Issuing application determination. (3) Limitation on PDP contracts under a single parent organization (4) Substantially incomplete applications. (ii) An application is substantially incomplete when the submission as of the deadline for applications established by CMS is missing content or responsive materials for one or more sections of the application form required by CMS. (iii) A determination that an application is substantially incomplete is not a contract determination as defined in § 423.641 and a determination that an organization submitted a substantially incomplete application is not subject to the appeals provisions of subpart N of this part. (b) Use of information from a current or prior contract. (i) An applicant may be considered to have failed to comply with a contract for purposes of an application denial under paragraph (b)(1) of this section if during the applicable review period the applicant: (A) Was under an intermediate sanction under subpart O of this part, or a determination by CMS to prohibit the enrollment of new enrollees under § 423.2410(c). (B) Failed to maintain a fiscally sound operation consistent with the requirements of § 423.505(b)(23). (C) Filed for or is currently in federal or state bankruptcy proceedings. (D) Received any combination of Part C or Part D summary ratings of 2.5 or less in both of the two most recent Star Rating periods, as identified in § 423.186. (E) Met or exceeded 13 points for compliance actions on any one contract. ( 1 ( i ( ii ( iii ( 2 (ii) CMS may deny an application submitted by an organization that does not hold a Part D contract at the time of the submission when the applicant's parent organization or another subsidiary of the parent organization meets the criteria for denial stated in paragraph (b)(1)(i) of this section. This paragraph does not apply when the parent completed the acquisition of the subsidiary that meets the criteria within the 24 months preceding the application submission deadline. (2) In the absence of 12 months of performance history, CMS may deny an application based on a lack of information available to determine an applicant's capacity to comply with the requirements of the Part D program. (3) If CMS has terminated, under § 423.509, or non-renewed, under § 423.507(b), a Part D plan sponsor's contract, effective within the 38 months preceding the deadline established by CMS for the submission of contract qualification applications, CMS may deny an application based on the applicant's substantial failure to comply with the requirements of the Part D program even if the applicant currently meets all of the requirements of this part. (4) During the same 38-month period as specified in (b)(3) of this section, CMS may deny an application where the applicant's covered persons also served as covered persons for the terminated or non-renewed contract. A “covered person” as used in this paragraph means one of the following: (i) All owners of terminated organizations who are natural persons, other than shareholders who have an ownership interest of less than 5 percent. (ii) An owner in whole or part interest in any mortgage, deed of trust, note or other obligation secured (in whole or in part) by the organization, or any of the property or assets thereof, which whole or part interest is equal to or exceeds 5 percent of the total property, and assets of the organization. (iii) A member of the board of directors or board of trustees of the entity, if the organization is organized as a corporation. (c) Notice of determination. (1) Approval of application. (2) Intent to deny. (ii) Within 10 days from the date of the notice, the applicant may respond in writing to the issues or other matters that were the basis for CMS's preliminary finding and may revise its application to remedy any defects CMS identified. (iii) If CMS does not receive a revised application within 10 days from the date of the notice, or if after timely submission of a revised application, CMS still finds the applicant does not appear qualified to contract as a Part D plan sponsor or has not provided enough information to allow CMS to evaluate the application, CMS denies the application. (3) Denial of application. If CMS denies the application, it gives written notice to the applicant indicating— (i) That the applicant is not qualified to contract as a Part D sponsor under Part D of title XVIII of the Act; (ii) The reasons why the applicant does is not so qualified; and (iii) The applicant's right to request a hearing in accordance with the procedures specified in subpart N of this part. (4) Nullification of approval of application. (i) This determination is not subject to the appeals provisions in subpart N of this part. (ii) This provision only applies to applicants that have not previously entered into a Part D contract with CMS and neither it, nor another subsidiary of the applicant's parent organization, is offering Part D benefits during the current year. (d) Withdrawal of application and bid in a previous year. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19820, Apr. 15, 2010; 76 FR 21574, Apr. 15, 2011; 77 FR 22170, Apr. 12, 2012; 79 FR 29963, May 23, 2014; 80 FR 7964, Feb. 12, 2015; 83 FR 16750, Apr. 16, 2018; 86 FR 6118, Jan. 19, 2021; 87 FR 27900, May 9, 2022; 89 FR 30837, Apr. 23, 2024] § 423.504 General provisions. (a) General rule. (b) Conditions necessary to contract as a Part D plan sponsor. (1) Complete an application as described in § 423.502 demonstrating that the entity has the capability to meet the requirements of this part, including those listed in § 423.505. (2) Be organized and licensed under State law as a risk bearing entity eligible to offer health insurance or health benefits coverage in each State in which it offers a Part D plan, or have secured a Federal waiver, as described in subpart I of this part. (Fallback entity applicants need not be licensed as risk-bearing entities, nor are they required to obtain State licensure demonstrating that the applicant is eligible to offer health insurance or health benefits coverage in each State in which it applies to operate.) (3) Meet the minimum enrollment requirements of § 423.512(a) unless waived under § 423.512(b). (4) Have administrative and management arrangements satisfactory to CMS, as demonstrated by at least the following: (i) A policy making body that exercises oversight and control over the Part D plan sponsor's policies and personnel to ensure that management actions are in the best interest of the organization and its enrollees. (ii) Personnel and systems sufficient for the Part D plan sponsor to organize, implement, control, and evaluate financial and communication activities, the furnishing of prescription drug services, the quality assurance, medical therapy management, and drug and or utilization management programs, and the administrative and management aspects of the organization. (iii) At a minimum, an executive manager whose appointment and removal are under the control of the policy making body. (iv) A fidelity bond or bonds, procured and maintained by the Part D sponsor, in an amount fixed by its policymaking body but not less than $100,000 per individual, covering each officer and employee entrusted with the handling of its funds. The bond may have reasonable deductibles, based upon the financial strength of the Part D plan sponsor. (v) Insurance policies or other arrangements, secured and maintained by the Part D plan sponsor and approved by CMS to insure the Part D plan sponsor against losses arising from professional liability claims, fire, theft, fraud, embezzlement, and other casualty risks. (vi) Adopt and implement an effective compliance program, which must include measures that prevent, detect, and correct noncompliance with CMS' program requirements as well as measures that prevent, detect, and correct fraud, waste, and abuse. The compliance program must, at a minimum, include the following core requirements: (A) Written policies, procedures, and standards of conduct that— ( 1 ( 2 ( 3 ( 4 ( 5 ( 6 ( 7 (B) The designation of a compliance officer and a compliance committee who report directly and are accountable to the Part D plan sponsor's chief executive or other senior management. ( 1 ( 2 ( 3 (C)( 1 ( 2 (D) Establishment and implementation of effective lines of communication, ensuring confidentiality, between the compliance officer, members of the compliance committee, the Part D plan sponsor's employees, managers and governing body, and the Part D plan sponsor's first tier, downstream, and related entities. Such lines of communication must be accessible to all and allow compliance issues to be reported including a method for anonymous and confidential good faith reporting of potential compliance issues as they are identified. (E) Well-publicized disciplinary standards through the implementation of procedures which encourage good faith participation in the compliance program by all affected individuals. These standards must include policies that— ( 1 ( 2 ( 3 (F) Establishment and implementation of an effective system for routine monitoring and identification of compliance risks. The system should include internal monitoring and audits and, as appropriate, external audits, to evaluate the Part D plan sponsors, including first tier entities', compliance with CMS requirements and the overall effectiveness of the compliance program. (G) Establishment and implementation of procedures and a system for promptly responding to compliance issues as they are raised, investigating potential compliance problems as identified in the course of self-evaluations and audits, correcting such problems promptly and thoroughly to reduce the potential for recurrence, and ensure ongoing compliance with CMS requirements. ( 1 ( 2 ( 3 ( 4 4 6 ( i ( ii ( 5 6 i 4 ( ii 4 ii ( 7 i 4 i ii ( ii ( iii ( iv (5) Not have non-renewed a contract under § 423.507 within the past 2 years unless— (i) During the 6-month period, beginning on the date the entity notified CMS of the intention to non-renew the most recent previous contract, there was a change in the statute or regulations that had the effect of increasing Part D sponsor payments in the payment area or areas at issue; or (ii) CMS has otherwise determined that circumstances warrant special consideration. (6) Not have terminated a contract by mutual consent under which, as a condition of the consent, the Part D plan sponsor agreed that it was not eligible to apply for new contracts or service area expansions for a period up to 2 years per § 423.508(e) of this subpart. (7) For a full risk or limited risk PDP applicant, not submitted a bid or offered a fallback prescription drug plan in accordance with the following rules. (i) CMS does not contract with a potential PDP sponsor for the offering of a full risk or limited risk prescription drug plan in a PDP region for a year if the applicant— (A) Submitted a bid under § 423.863 for the year (as the first year of a contract period under § 423.863 to offer a fallback prescription drug plan in any PDP region; (B) Offers a fallback prescription drug plan in any PDP region during the year; or (C) Offered a fallback prescription drug plan in that PDP region during the previous year. (ii) Construction. (8) If neither the applicant, nor its parent or another subsidiary of the same parent, holds a Part D sponsor contract that has been in effect for at least 1 year at the time it submits an application, the applicant must have arrangements in place such that the applicant and its contracted first tier, downstream, or related entities, in combination, have at least 1 full-benefit year of experience within the 2 years preceding the application submission performing at a minimum all of the following functions in support of the operation of another Part D contract: (i) Authorization, adjudication, and processing of prescription drug claims at the point of sale. (ii) Administration and tracking of enrollees' drug benefits in real time, including automated coordination of benefits with other payers. (iii) Operation of an enrollee appeals and grievance process. (9) For organizations applying to offer stand-alone prescription drug plans, the organization, its parent, or a subsidiary of the organization or its parent, must have either of the following: (i) For 2 continuous years immediately prior to submitting an application, actively offered health insurance or health benefits coverage, including prescription drug coverage, as a risk-bearing entity in at least one State. (ii) For 5 continuous years immediately prior to submitting an application, actively managed prescription drug benefits for an organization that offers health insurance or health benefits coverage, including at a minimum, all of the services listed in paragraph (b)(8) of this section. (10) Pass an essential operations test prior to the start of the benefit year. This provision only applies to new sponsors that have not previously entered into a Part D contract with CMS when neither it, nor another subsidiary of the applicant's parent organization, is offering Part D benefits during the current year. (c) Contracting authority. (d) Protection against fraud and beneficiary protections. (2) Each contract under this section must provide that CMS, or any person or organization designated by CMS, has the right to— (i) Inspect or otherwise evaluate the quality, appropriateness, and timeliness of services performed under the Part D plan sponsor's contract; (ii) Inspect or otherwise evaluate the facilities of the Part D sponsor when there is reasonable evidence of some need for the inspection; and (iii) Audit and inspect any books, contracts, and records of the Part D plan sponsor that pertain to— (A) The ability of the organization or its first tier or downstream providers to bear the risk of potential financial losses; or (B) Services performed or determinations of amounts payable under the contract. (iv) CMS may require that the Part D Plan sponsor hire an independent auditor to provide CMS with additional information to determine if deficiencies found during an audit or inspection have been corrected and are not likely to recur. The independent auditor must work in accordance with CMS specifications and must be willing to attest that a complete and full independent review has been performed. (e) Severability of contracts. (1) The contract could be amended to exclude any State-licensed entity, or a Part D plan specified by CMS; and (2) A separate contract for any excluded plan or entity must be deemed to be in place when a request is made. (f) Outlier prescribers of opioids. (2) At least annually, CMS will communicate information about persistent outlier prescribers of opioids to all Part D plan sponsors. [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68732, Dec. 5, 2007; 73 FR 20507, Apr. 15, 2008; 75 FR 19820, Apr. 15, 2010; 79 FR 29964, May 23, 2014; 80 FR 7964, Feb. 12, 2015; 83 FR 16750, Apr. 16, 2018; 86 FR 6118, Jan. 19, 2021; 91 FR 17590, Apr. 6, 2026] § 423.505 Contract provisions. (a) General rule. (b) Requirements for contracts. (1) All the applicable requirements and conditions set forth in this part and in general instructions. (2) Accept new enrollments, make enrollments effective, process voluntary disenrollments, and limit involuntary disenrollments, as provided in subpart B of this part. (3) Comply with the prohibition in § 423.34(a) on discrimination in beneficiary enrollment. (4) Provide the basic prescription drug coverage as defined under § 423.100 and, to the extent applicable, supplemental benefits as defined in § 423.100. (Fallback entities may offer only standard prescription drug coverage as specified in § 423.855.) (5) Disclose information to beneficiaries in the manner and the form specified by CMS under § 423.128. (6) Operate quality assurance, cost and utilization management, medication therapy management, and support e-prescribing as required under subpart D of this part. (7) Comply with all requirements in subpart M of this part governing coverage determinations, grievances, and appeals, and formulary exceptions. (8) Comply with the disclosure and reporting requirements in § 423.505(f), § 423.514, and the requirements in § 423.329(b) of this part for submitting current and prior drug claims and related information to CMS for its use in risk adjustment calculations and for the purposes of implementing § 423.505(f), (l), and (m) and § 423.329(b) of this part. (9) Provide CMS with the information CMS determines is necessary to carry out payment provisions in subpart G of this part (or for fallback entities, the information necessary to carry out the payment provisions in subpart Q of this part). (10) Allow CMS to inspect and audit any books and records of a Part D plan sponsor and its delegated first tier, downstream and related entities, that pertain to the information regarding costs provided to CMS under paragraph (b)(9) of this section, or, if a fallback entity, the information submitted under subpart Q of this part. (11) Be paid under the contract in accordance with the payment rules in subpart G of this part, or, if a fallback entity, in accordance with the payment rules of subpart Q of this part. (12) Except for fallback entities, submit a future year's bid, including all required information on premiums, benefits, and cost-sharing, by any applicable due date, as provided in subpart F so that CMS and the Part D plan sponsor may conduct negotiations regarding the terms and conditions of the proposed bid and benefit plan renewal. (13) Permit CMS to determine that it is not qualified to renew its contract or that its contract may be terminated in accordance with this subpart and subpart N of this part. (Subpart N applies to fallback entities only to the extent a fallback contract is terminated.) (14) Comply with the confidentiality and enrollee record accuracy specified in § 423.136. (15) Comply with State law and preemption by Federal law requirements described in subpart I of this part. (16) Comply with the coordination requirements with SPAPs and plans that provide other prescription drug coverage as described in subpart J of this part. (17) Provide benefits by means of point of service systems to adjudicate in a drug claims in a timely and efficient manner in compliance with CMS standards, except when necessary to provide access in underserved areas, I/T/U pharmacies (as defined in § 423.100), and long-term care pharmacies (as defined in § 423.100). (18) To agree to have a standard contract with reasonable and relevant terms and conditions of participation whereby any willing pharmacy may access the standard contract and participate as a network pharmacy including all of the following: (i) Making standard contracts available upon request from interested pharmacies no later than September 15 of each year for contracts effective January 1 of the following year. (ii) Providing a copy of a standard contract to a requesting pharmacy within 7 business days after receiving such a request from the pharmacy. (19) Effective contract year 2010, include the prompt payment provisions described in § 423.520. (20) Effective contract year 2010, provide that pharmacies located in, or having a contract with, a long-term care facility (as defined in § 423.100) must have not less than 30 days, nor more than 90 days, to submit to the Part D sponsor claims for reimbursement under the plan. (21)(i) Update any prescription drug pricing standard (as defined in § 423.501) based on the cost of the drug used for reimbursement of network pharmacies by the Part D sponsor on January 1 of each contract year and not less frequently than once every 7 days thereafter; (ii) Indicate the source used for making any such updates; and (iii) Disclose all individual drug prices to be updated to the applicable pharmacies in advance of their use for reimbursement of claims, if the source for any prescription drug pricing standard is not publicly available. (22) As described in § 423.129, address and resolve complaints received by CMS against the Part D sponsor in the Complaints Tracking Module. (23) Maintain a fiscally sound operation by at least maintaining a positive net worth (total assets exceed total liabilities). (24) Provide applicable discounts on applicable drugs when dispensed to applicable beneficiaries in accordance with the requirements in subpart W of part for the Coverage Gap Discount Program and the requirements in subpart AA of part for the Manufacturer Discount Program. (25) Maintain administrative and management capabilities sufficient for the organization to organize, implement, and control the financial, communication, benefit administration, and quality assurance activities related to the delivery of Part D services. (26) Maintain a Part D summary plan rating score of at least 3 stars under the 5-star rating system specified in subpart 186 of this part 423. A Part D summary plan rating is calculated as provided in § 423.186. (27) Pass an essential operations test prior to the start of the benefit year. This provision only applies to new sponsors that have not previously entered into a Part D contract with CMS and neither it, nor another subsidiary of the applicant's parent organization, is offering Part D benefits during the current year. (c) Communication with CMS. (d) Maintenance of records. (1) Are sufficient to do the following: (i) Accommodate periodic auditing of the financial records (including data related to Medicare utilization, costs, and computation of the bid of part D plan sponsors). (ii) Enable CMS to inspect or otherwise evaluate the quality, appropriateness, and timeliness of services performed under the contract and the facilities of the organization. (iii) Enable CMS to audit and inspect any books and records of the Part D plan sponsor that pertain to the ability of the organization to bear the risk of potential financial losses, or to services performed or determinations of amounts payable under the contract. (iv) Except for fallback entities, properly reflect all direct and indirect costs claimed to have been incurred and used in the preparation of the Part D plan sponsor's bid and necessary for the calculation of gross covered prescription drug costs, allowable reinsurance costs, and allowable risk corridor costs (as defined in § 423.308). (v) Except for fallback entities, establish the basis for the components, assumptions, and analysis used by the Part D plan in determining the actuarial valuation of standard, basic alternative, or enhanced alternative coverage offered in accordance with the CMS guidelines specified in § 423.265(c)(3). (vi) Enable CMS to review original format documentation or information utilized from all written, electronic, and verbal communications between the plan sponsor and the pharmacist, prescriber, enrollee, or other relevant stakeholders, in addition to what is included on the pharmacy claim, that is relied upon by the Part D plan sponsor to make a coverage determination or otherwise permit a point-of-sale claim adjudication that determine a drug's coverage under the Part D benefit. In instances when a coverage determination is extended, the original coverage determination must be maintained as documentation. The documentation covered by these standards must be made available to CMS during Part D program integrity prescription drug event (PDE) record review audits. Failure to produce sufficient documentation to support Part D coverage will result in an improper Part D audit determination and will be subject to PDE record deletion in accordance with § 423.325(a)(2). (2) Include records of the following: (i) Ownership and operation of the Part D sponsor's financial, medical, and other record keeping systems. (ii) Financial statements for the current contract period and 10 prior periods. (iii) Federal income tax or informational returns for the current contract period and 10 prior periods. (iv) Asset acquisition, lease, sale, or other actions. (v) Agreements, contracts, and subcontracts. (vi) Franchise, marketing, and management agreements. (vii) Matters pertaining to costs of operations. (viii) Amounts of income received by source and payment. (ix) Cash flow statements. (x) Any financial reports filed with other Federal programs or State authorities. (xi) All prescription drug claims for the current contract period and 10 prior periods. (xii) All price concessions (including concessions offered by manufacturers) for the current contract period and 10 prior periods accounted for separately from other administrative fees. (xiii) Documentation or information from all written, electronic, and verbal communications between the plan sponsor and the pharmacist, prescriber, enrollee, or other relevant stakeholders, in addition to what is included on the pharmacy claim, that is relied upon when Part D plan sponsors make coverage determinations or otherwise permit a point-of-sale claim adjudication that determines coverage of a drug under the Part D benefit, consistent with paragraph (d)(1)(vi) of this section. This includes: (A) Date and time the request for a coverage determination or point-of-sale claim adjudication was received and, when available, the identity of the individual or entity who submitted the request. (B) Name and title, as applicable if additional outreach is made, of the individual the Part D plan contacted to obtain the information needed to complete the request (for example, pharmacist, prescriber, enrollee, or enrollee representative). (C) Information obtained, including the questions asked and responses received, and the final decision rendered. (D) Diagnosis for a coverage determination or point-of-sale claim adjudication when used to determine Part D coverage for a medically accepted indication. (E) Any other information that the Part D plan sponsor utilized to determine the final outcome of the coverage determination or point-of-sale claim adjudication request. (e) Access to facilities and records. (1) HHS, the Comptroller General, or their designee may evaluate, through audit, inspection, or other means— (i) The quality, appropriateness, and timeliness of services furnished to Medicare enrollees under the contract; (ii) Compliance with CMS requirements for maintaining the privacy and security of protected health information and other personally identifiable information of Medicare enrollees; (iii) The facilities of the Part D sponsor to include computer and other electronic systems; and (iv) The enrollment and disenrollment records for the current contract period and 10 prior periods. (2) The Part D plan sponsor agrees to make available to HHS, the Comptroller General, or their designees, for the purposes specified in paragraph (d) of this section, its premises, physical facilities and equipment, records relating to its Medicare enrollees, and any additional relevant information that CMS may require. The Part D plan sponsor also agrees to make available any books, contracts, records and documentation of the Part D plan sponsor, first tier, downstream and related entity(s), or its transferee that pertain to any aspect of services performed, reconciliation of benefit liabilities, and determination of amounts payable under the contract, or as the Secretary may deem necessary to enforce the contract. (3) The Part D plan sponsor agrees to make available, for the purposes specified in paragraph (d) of this section, its premises, physical facilities and equipment, records relating to its Medicare enrollees, and any additional relevant information that CMS may require. (4) HHS, the Comptroller General, or their designee's right to inspect, evaluate, and audit extends through 10 years from the end of the final contract period or completion of audit, whichever is later unless— (i) CMS determines there is a special need to retain a particular record or group of records for a longer period and notifies the Part D plan sponsor at least 30 days before the normal disposition date; (ii) There is a termination, dispute, or allegation of fraud or similar fault by the Part D plan sponsor, in which case the retention may be extended to 6 years from the date of any resulting final resolution of the termination, dispute, or fraud or similar fault; or (iii) CMS determines that there is a reasonable possibility of fraud or similar fault, in which case CMS may inspect, evaluate, and audit the Part D plan sponsor at any time. (f) Disclosure of information. (1) Certified financial information that must include the following: (i) Information as CMS may require demonstrating that the organization has a fiscally sound operation. (ii) Information as CMS may require pertaining to the disclosure of ownership and control of the Part D plan sponsor. (2) All information to CMS that is necessary for CMS to administer and evaluate the program and to simultaneously establish and facilitate a process for current and prospective beneficiaries to exercise choice in obtaining prescription drug coverage. This information includes, but is not limited to: (i) The benefits covered under a Part D plan. (ii) The Part D plan monthly basic beneficiary premium and Part D plan monthly supplemental beneficiary premium, if any, for the plan. Fallback entities submit the monthly beneficiary premium for standard prescription drug coverage. (iii) The service area of each plan. (iv) Plan quality and performance indicators for the benefits under the plan including— (A) Disenrollment rates for Medicare enrollees electing to receive benefits through the plan for the previous 2 years; (B) Information on Medicare enrollee satisfaction; (C) The recent records regarding compliance of the plan with requirements of this part, as determined by CMS; and (D) Other information determined by CMS to be necessary to assist beneficiaries in making an informed choice regarding Part D plans. (v) Information about beneficiary appeals and their disposition, and formulary exceptions. (vi) Information regarding all formal actions, reviews, findings, or other similar actions by States, other regulatory bodies, or any other certifying or accrediting organization. (vii) Information on other matters that CMS may require, including, but not limited to, program monitoring and oversight, performance measures, quality assessment, research and evaluation, CMS outreach activities, payment-related oversight*, and fraud, abuse, and waste*, as specified in CMS guidelines. (viii) Any other information deemed necessary to CMS for the administration or evaluation of the Medicare program. (3) All data elements included in all its drug claims for purposes deemed necessary and appropriate by the Secretary, including, but not limited to the following: (i) Reporting to Congress and the public on overall statistics associated with the operation of the Medicare prescription drug program. (ii) Conducting evaluations of the overall Medicare program, including the interaction between prescription drug coverage under Part D of Title XVIII of the Social Security Act and the services and utilization under Parts A, B, and C of title XVIII of the Act and under titles XIX and XXI of the Act, as well as other studies addressing public health questions. (iii) Making legislative proposals to the Congress regarding Federal health care programs and related programs. (iv) Conducting demonstration and pilot projects and making recommendations for improving the economy, efficiency, or effectiveness of the Medicare program. (v) Supporting care coordination and disease management programs. (vi) Supporting quality improvement and performance measurement activities. (vii) Populating personal health care records. (viii) Supporting program integrity purposes, including coordination with the States. (4) To its enrollees, all informational requirements under § 423.128 and, upon an enrollee's request, the financial disclosure information required under § 423.128(c)(4). (g) Beneficiary financial protections. (1) Each Part D plan sponsor must adopt and maintain arrangements satisfactory to CMS to protect its enrollees from incurring liability for payment of any fees that are the legal obligation of the Part D sponsor. To meet this requirement, the Part D plan sponsor must— (i) Ensure that all contractual or other written arrangements prohibit the sponsor's contracting agents from holding any beneficiary enrollee liable for payment of any such fees; and (ii) Indemnify the beneficiary enrollee for payment of any fees that are the legal obligation of the Part D plan sponsor for covered prescription drugs furnished by non-contracting pharmacists, or that have not otherwise entered into an agreement with the Part D plan sponsor, to provide services to the organization's beneficiary enrollees. (2) In meeting the requirements of this paragraph, other than the provider contract requirements specified in paragraph (g)(1)(i) of this section, the Part D plan sponsor may use— (i) Contractual arrangements; (ii) Insurance acceptable to CMS; (iii) Financial reserves acceptable to CMS; or (iv) Any other arrangement acceptable to CMS. (h) Requirements of other laws and regulations. (1) Federal laws and regulations designed to prevent fraud, waste, and abuse, including, but not limited to applicable provisions of Federal criminal law, the False Claims Act (31 U.S.C. 3729 et seq. (2) HIPAA Administrative Simplification rules at 45 CFR parts 160, 162, and 164. (i) Relationship with first tier, downstream, and related entities. (2) The Part D sponsor agrees to require all first tier, downstream, and related entities to agree that— (i) HHS, the Comptroller General, or their designees have the right to audit, evaluate, collect, and inspect any books, contracts, computer or other electronic systems, including medical records and documentation of the first tier, downstream, and related entities related to CMS' contract with the Part D sponsor. (ii) HHS, the Comptroller General or their designees have the right to audit, evaluate, collect, and inspect any records under paragraph (i)(2)(i) of this section directly from any first tier, downstream, or related entity. (iii) For records subject to review under paragraph (i)(2)(ii) of this section, except in exceptional circumstances, CMS will provide notification to the Part D sponsor that a direct request for information has been initiated. (iv) HHS', the Comptroller General's, or their designee's right to inspect, evaluate, and audit any pertinent information for any particular contract period exists through 10 years from the final date of the contract period or from the date of completion of any audit, whichever is later. (3) Each and every contract governing Part D sponsors and first tier, downstream, and related entities, must contain the following: (i) Enrollee protection provisions that provide, consistent with paragraph (g)(1) of this section, arrangements that prohibit pharmacies or other providers from holding an enrollee liable for payment of any fees that are the obligation of the Part D plan sponsor. (ii) Accountability provisions that indicate that the Part D sponsor may delegate activities or functions to a first tier, downstream, or related entity only in a manner consistent with requirements set forth at paragraph (i)(4) of this section. (iii) A provision requiring that any services or other activity performed by a first tier, downstream, and related entity in accordance with a contract are consistent and comply with the Part D sponsor's contractual obligations. (iv) Each and every contract must specify that first tier, downstream, and related entities must comply with all applicable Federal laws, regulations, and CMS instructions. (v) A provision requiring prompt payment of clean claims by the Part D sponsor, consistent with § 423.520. (vi) A provision that establishes timeframes, consistent with § 423.505(b)(20), for long-term care pharmacies to submit claims to the Part D sponsor for reimbursement under the plan. (vii) If applicable, provisions addressing the drug pricing standard requirements of § 423.505(b)(21). (4) If any of the Part D plan sponsors' activities or responsibilities under its contract with CMS is delegated to other parties, the following requirements apply to any first tier, downstream, and related entity: (i) Each and every contract must specify delegated activities and reporting responsibilities. (ii) Each and every contract must either provide for revocation of the delegation activities and reporting responsibilities described in paragraph (i)(4)(i) of this section or specify other remedies in instances when CMS or the Part D plan sponsor determine that the parties have not performed satisfactorily. (iii) Each and every contract must specify that the Part D plan sponsor on an ongoing basis monitors the performance of the parties. (iv) Each and every contract must specify that the related entity, contractor, or subcontractor must comply with all applicable Federal laws, regulations, and CMS instructions. (5) If the Part D plan sponsor delegates selection of its prescription drug providers to another organization, the Part D sponsor's written arrangements with that organization must state that the CMS-contracting Part D plan sponsor retains the right to approve, suspend, or terminate any such arrangement. (6) If the Part D plan sponsor delegates any of the following functions to a first tier, downstream, or related entity, the Part D sponsor's written arrangements must state that a termination initiated by such entity must provide, at minimum, 60-days' prior notice and have an effective termination date that coincides with the end of a calendar month: (i) Authorization, adjudication, and processing of prescription drug claims at the point of sale. (ii) Administration and tracking of enrollees' drug benefits in real time, including automated coordination of benefits with other payers. (iii) Operation of an enrollee appeals and grievance process. (iv) Contracting with or selection of prescription drug providers for inclusion in the Part D sponsor's network. (j) Additional contract terms. (k) Certification of data that determine payment General rule. (2) Certification of enrollment and payment information. (3) Certification of claims data. (4) Certification of bid submission information. (5) Certification of allowable costs for risk corridor and reinsurance information. (6) Certification of accuracy of data for price comparison. (7) Certification of accuracy of data for overpayments. (l) CMS may use the information collected under paragraph (f)(3) of this section. Any restriction set forth by § 423.322(b) of this part must not be construed to limit the Secretary's authority to use the information collected under paragraph (f)(3). (m) Release of data. (i) Applicable Federal laws. (ii) CMS data sharing procedures. (iii) Subject, in certain cases, to encryption of beneficiary identifiers and aggregation of cost data to protect beneficiary confidentiality and commercially sensitive data of Part D sponsors, in accordance with all of the following principles: (A) Subject to the restrictions in this paragraph, all elements on the claim are available to HHS, other executive branch agencies, and the States. (B) Cost data elements on the claim generally are aggregated for releases to other executive branch agencies, States, and external entities. Upon request, CMS excludes sales tax from the aggregation at the individual level if necessary for the project. (C) Beneficiary identifier elements on the claim generally are encrypted for release, except in limited circumstances, such as the following: ( 1 ( 2 (iv) For purposes of paragraph (m)(1)(iii) of this section, States and executive-branch Federal agencies are not considered to be external entities. (2) Any restriction set forth by § 423.322(b) of this part must not be construed to limit the Secretary's authority to release the information collected under paragraph (f)(3) of this section. (3)(i) CMS must make available to Congressional support agencies (the Congressional Budget Office, the Government Accountability Office, the Medicare Payment Advisory Commission, and the Congressional Research Service when it is acting on behalf of a Congressional committee in accordance with 2 U.S.C. 166(d)(1)) all information collected under paragraph (f)(3) of this section for the purposes of conducting congressional oversight, monitoring, making recommendations, and analysis of the Medicare program. (ii) The Congressional Research Service is considered an external entity when it is not acting on behalf of a Congressional committee in accordance with 2 U.S.C. 166(d)(1) for the purposes of paragraph (m)(1) of this section. (n) Issuance of compliance actions for failure to comply with the terms of the contract. (1) CMS may take compliance actions as described in paragraph (n)(3) of this section if it determines that the Part D plan sponsor has not complied with the terms of a current or prior Part D contract with CMS. (i) CMS may determine that a Part D plans sponsor is out of compliance with a Part D requirement when the organization fails to meet performance standards articulated in the Part D statutes, regulations in this chapter, or guidance. (ii) If CMS has not already articulated a measure for determining noncompliance, CMS may determine that a Part D plan sponsor is out of compliance when its performance in fulfilling Part D requirements represents an outlier relative to the performance of other Part D plan sponsors. (2) CMS bases its decision on whether to issue a compliance action and what level of compliance action to take on an assessment of the circumstances surrounding the noncompliance, including all of the following: (i) The nature of the conduct. (ii) The degree of culpability of the Part D plan sponsor. (iii) The adverse effect to beneficiaries which resulted or could have resulted from the conduct of the Part D plan sponsor. (iv) The history of prior offenses by the Part D plan sponsor or its related entities. (v) Whether the noncompliance was self-reported. (vi) Other factors which relate to the impact of the underlying noncompliance or the lack of the Part D plan sponsor's oversight of its operations that contributed to the noncompliance. (3) CMS may take one of three types of compliance actions based on the nature of the noncompliance. (i) Notice of noncompliance. (ii) Warning letter. (iii) Corrective action plan. (B) CMS issues a corrective action plan if CMS determines that the Part D plan sponsor has repeated or not corrected noncompliance identified in prior compliance actions, has substantially impacted beneficiaries or the program with its noncompliance, and/or must implement a detailed plan to correct the underlying causes of the noncompliance. (o) Acknowledgements of CMS release of data Summary CMS payment data. (i) The average per member per month Part D direct subsidy standardized to the 1.0 (average risk score) beneficiary for each Part D plan offered. (ii) The average Part D risk score for each Part D plan offered. (iii) The average per member per month Part D plan low-income cost sharing subsidy for each Part D plan offered. (iv) The average per member per month Part D Federal reinsurance subsidy for each Part D plan offered. (v) The actual Part D reconciliation payment data summarized at the Parent Organization level including breakouts of risk sharing, reinsurance, and low income cost sharing reconciliation amounts. (2) Part D MLR data. (p) Business continuity. (i) Risk assessment. (ii) Mitigation strategy. (A) Identify specific events that will activate the business continuity plan. (B) Develop a contingency plan to maintain, during any business disruption, the availability and, as applicable, confidentiality of communication systems and essential records in all forms (including electronic and paper copies). The contingency plan must do the following: ( 1 ( i ( ii ( 2 (C) Establish a chain of command. (D) Establish a business communication plan that includes emergency capabilities and procedures to contact and communicate with the following: ( 1 ( 2 ( 3 (E) Establish employee and facility management plans to ensure that essential operations and job responsibilities can be assumed by other employees or moved to alternate sites as necessary or both. (F) Establish a restoration plan including procedures to transition to normal operations. (G) Comply with all applicable Federal, State, and local laws. (iii) Testing and revision. (A) That it can be implemented in emergency situations. (B) That employees understand how it is to be executed. (iv) Training. (v) Records. (B) Make the information specified in paragraph (p)(1)(v)(A) of this section available to CMS upon request. (2) Restoration of essential functions. (i) Benefit authorization (if not waived), adjudication, and processing of prescription drug claims at the point of sale. (ii) Administration and tracking of enrollees' drug benefits in real time, including automated coordination of benefits with other payers. (iii) Provision of pharmacy technical assistance. (iv) Operation of an enrollee exceptions and appeals process including coverage determinations. (v) Operation of call center customer services. (q) Enrollment in the Medicare Transaction Facilitator Data Module for the Medicare Drug Price Negotiation Program. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20507, Apr. 15, 2008; 73 FR 30683, May 28, 2008; 73 FR 54251, Sept. 18, 2008; 73 FR 70599, Nov. 21, 2008; 74 FR 1545, Jan. 12, 2009; 75 FR 19821, Apr. 15, 2010; 76 FR 21574, Apr. 15, 2011; 76 FR 54634, Sept. 1, 2011; 77 FR 22170, Apr. 12, 2012; 79 FR 29964, May 23, 2014; 80 FR 7964, Feb. 12, 2015; 81 FR 80557, Nov. 15, 2016; 83 FR 16750, Apr. 16, 2018; 86 FR 6119, Jan. 19, 2021; 87 FR 27900, May 9, 2022; 88 FR 22340, Apr. 12, 2023; 89 FR 30838, Apr. 23, 2024; 90 FR 15919, Apr. 15, 2025; 91 FR 17590, Apr. 6, 2026] § 423.506 Effective date and term of contract. (a) Effective date. (b) Term of contract. (c) Qualification to renew a contract. (d) Renewal of contract contingent on reaching agreement on the bid. (e) The provisions of this section do not apply to fallback entities. [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68732, Dec. 5, 2007] § 423.507 Nonrenewal of contract. (a) Nonrenewal by a Part D plan sponsor. (2) If a Part D plan sponsor does not intend to renew its contract, it must notify— (i) CMS in writing by the first Monday of June in the year in which the contract ends; (ii) Each Medicare enrollee by mail at least 90 calendar days before the date on which the nonrenewal is effective. The sponsor must also provide information about alternative enrollment options by doing one or more of the following: (A) Provide a CMS approved written description of alternative MA plan and PDP options available for obtaining qualified prescription drug coverage within the beneficiaries' region. (B) Place outbound calls to all affected enrollees to ensure beneficiaries know who to contact to learn about their enrollment options. (3)(i) If a Part D plan sponsor does not renew a contract under this paragraph (a), CMS cannot enter into a contract with the organization for 2 years in the PDP region or regions served by the contract unless there are circumstances that warrant special consideration, as determined by CMS. (ii) If a PDP sponsor does not renew any of its PBPs in a PDP region, CMS does not approve plan bids submitted by the organization in that PDP region for 2 years unless there are circumstances that warrant special consideration, as determined by CMS. (iii) The provisions of this paragraph do not apply to employer group waiver plans offered by a Part D plan sponsor. (4) During the same 2-year period specified under paragraph (a)(3) of this section, CMS will not contract with an organization whose covered persons also served as covered persons for the non-renewing sponsor. A “covered person” as used in this paragraph means one of the following: (i) All owners of nonrenewed or terminated organizations who are natural persons, other than shareholders who have an ownership interest of less than 5 percent. (ii) An owner of a whole or part interest in a mortgage, deed of trust, note or other obligation secured (in whole or in part) by the organization, or by any of the property or assets thereof, which whole or part interest is equal to or exceeds 5 percent of the total property and assets of the organization. (iii) A member of the board of directors or board of trustees of the entity, if the organization is organized as a corporation. (5) If a Part D plan sponsor does not renew a contract under this paragraph (a), it must ensure the timely transfer of any data or files. (b) [Reserved] [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68733, Dec. 5, 2007; 74 FR 1546, Jan. 12, 2009; 75 FR 19821, Apr. 15, 2010; 76 FR 21575, Apr. 15, 2011; 83 FR 16750, Apr. 16, 2018; 89 FR 30838, Apr. 23, 2024] § 423.508 Modification or termination of contract by mutual consent. (a) General rule. (b) Notification of termination. (c) Notification of modification. (d) Timely transfer of data and files. (e) Agreement to limit new Part D applications. (2) A PDP sponsor that agrees to terminate its offering of PBPs in a PDP region also agrees that it is not eligible to apply to resume offering plans in that region for 2 years. (3) The provisions of this paragraph do not apply to employer group waiver plans offered by a Part D plan sponsor. (f) Prohibition against Part D program participation by organizations whose owners, directors, or management employees served in a similar capacity with another organization that mutually terminated its Medicare contract within the previous 2 years. (1) All owners of nonrenewed or terminated organizations who are natural persons, other than shareholders who have an ownership interest of less than 5 percent. (2) An owner of a whole or part interest in a mortgage, deed of trust, note or other obligation secured (in whole or in part) by the organization, or any of the property or assets thereof, which whole or part interest is equal to or exceeds 5 percent of the total property, and assets of the organization. (3) A member of the board of directors or board of trustees of the entity, if the organization is organized as a corporation. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19821, Apr. 15, 2010; 76 FR 21575, Apr. 15, 2011; 83 FR 16750, Apr. 16, 2018; 89 FR 30838, Apr. 23, 2024] § 423.509 Termination of contract by CMS. (a) Termination by CMS. (1) Has failed substantially to carry out the contract. (2) Is carrying out the contract in a manner that is inconsistent with the efficient and effective administration of this part. (3) No longer substantially meets the applicable conditions of this part. (4) CMS may make a determination under paragraph (a)(1), (2) or (3) of this section if the Part D Plan sponsor has had one or more of the following occur: (i) Based on credible evidence, has committed or participated in false, fraudulent, or abusive activities affecting the Medicare, Medicaid, or other State or Federal health care programs, including submission of false or fraudulent data. (ii) Substantially failed to comply with the requirements in subpart M of this part relating to grievances and appeals. (iii) Failed to provide CMS with valid risk adjustment, reinsurance and risk corridor related data as required under §§ 423.322 and 423.329 (or, for fallback entities, failed to provide the information in § 423.871(f)). (iv) Substantially failed to comply with the service access requirements in § 423.120. (v) Substantially failed to comply with either of the following: (A) Requirements in subpart V of this part. (B) Information dissemination requirements of § 423.128 of this part. (vi) Substantially failed to comply with the coordination with plans and programs that provide prescription drug coverage as described in subpart J of this part. (vii) Substantially failed to comply with the cost and utilization management, quality improvement, medication therapy management and fraud, abuse and waste program requirements as specified in subparts D and K of this part. (viii) Failed to comply with the regulatory requirements contained in this part. (ix) Failed to meet CMS performance requirements in carrying out the regulatory requirements contained in this part. (x) Achieves a Part D summary plan rating of less than 3 stars for 3 consecutive contract years. Plan ratings issued by CMS before September 1, 2012 are not included in the calculation of the 3-year period. (xi)(A) Has failed to report MLR data in a timely and accurate manner in accordance with § 423.2460; or (B) That any MLR data required by this subpart is found to be materially incorrect or fraudulent. (xii) Failure of an essential operations test before the start of the benefit year by an organization that has entered into a Part D contract with CMS when neither it, nor another subsidiary of the organization's parent organization, is offering Part D benefits during the current year. (xiii) The Part D plan sponsor has committed any of the acts in § 423.752 that support the imposition of intermediate sanctions or civil money penalties under § 423.750. (xiv) Following the issuance of a notice to the sponsor no later than August 1, CMS must terminate, effective December 31 of the same year, an individual PDP if that plan does not have a sufficient number of enrollees to establish that it is a viable independent plan option. (b) Notice. (1) Termination of contract by CMS. (ii) The Part D plan sponsor notifies its Medicare enrollees of the termination by mail at least 30 calendar days before the effective date of the termination. (iii) The Part D plan sponsor notifies the general public of the termination at least 30 calendar days before the effective date of the termination by releasing a press statement to news media serving the affected community or county and posting the press statement prominently on the organization's Web site. (iv) CMS notifies the general public of the termination no later than 30 calendar days after notifying the plan of CMS's decision to terminate the Part D plan sponsor's contract by releasing a press statement. (v) In the event that CMS issues a termination notice to a Part D plan sponsor on or before August 1 with an effective date of the following December 31, the Part D plan sponsor must issue notification to its Medicare enrollees at least 90 days prior to the effective date of the termination. (2) Immediate termination of contract by CMS. (A) CMS determines that a delay in termination, resulting from compliance with the procedures provided in this part prior to termination, would pose an imminent and serious risk to the health of the individuals enrolled with the Part D plan sponsor; (B) The Part D plan sponsor experiences financial difficulties so severe that its ability to make necessary health services available is impaired to the point of posing an imminent and serious risk to the health of its enrollees, or otherwise fails to make services available to the extent that such a risk to health exists; or (C) The contract is being terminated based on the grounds specified in paragraphs (a)(4)(i) and (xii) of this section. (ii) CMS notifies the Part D plan sponsor in writing that its contract will be terminated on a date specified by CMS. If a termination in is effective in the middle of a month, CMS has the right to recover the prorated share of the capitation payments made to the Part D plan sponsor covering the period of the month following the contract termination. (iii) CMS notifies the Part D plan sponsor's Medicare enrollees in writing of CMS's decision to terminate the Part D plan sponsor's contract. This notice occurs no later than 30 days after CMS notifies the plan of its decision to terminate the Part D plan sponsor's contract. CMS simultaneously informs the Medicare enrollees of alternative options for obtaining qualified prescription drug coverage, including alternative PDP sponsors and MA-PDs in a similar geographic area. (iv) CMS notifies the general public of the termination no later than 30 days after notifying the plan of CMS's decision to terminate the Part D plan sponsor's contract. This notice is published in one or more newspapers of general circulation in each community or county located in the Part D plan sponsor's service area. (c) Opportunity to develop and implement a corrective action plan General. (ii) The Part D plan sponsor is solely responsible for the identification, development, and implementation of its corrective action plan and for demonstrating to CMS that the underlying deficiencies have been corrected within the time period specified by CMS in the notice requesting corrective action. (2) Exceptions. (i) CMS determines that a delay in termination, resulting from compliance with the procedures provided in this part prior to termination, would pose an imminent and serious risk to the health of the individuals enrolled with the Part D plan sponsor; (ii) The Part D plan sponsor experiences financial difficulties so severe that its ability to make necessary health services available is impaired to the point of posing an imminent and serious risk to the health of its enrollees, or otherwise fails to make services available to the extent that such a risk to health exists; or (iii) The contract is being terminated based on the violation specified in (a)(4)(i) of this section. (d) Appeal rights. (e) Timely transfer of data and files. (f) If CMS makes a determination to terminate a Part D sponsor's contract under § 423.509(a), CMS also imposes the intermediate sanctions at § 423.750(a)(1) and (3) in accordance with the following procedures: (1) The sanction will go into effect 15 days after the termination notice is sent. (2) The Part D sponsor will have a right to appeal the intermediate sanction in the same proceeding as the termination appeal specified in paragraph (d) of this section. (3) A request for a hearing does not delay the date specified by CMS when the sanction becomes effective. (4) The sanction will remain in effect— (i) Until the effective date of the termination; or (ii) If the termination decision is overturned on appeal, when a final decision is made by the hearing officer or Administrator. [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68733, Dec. 5, 2007; 73 FR 20507, Apr. 15, 2008; 75 FR 19822, Apr. 15, 2010; 76 FR 21575, Apr. 15, 2011; 77 FR 22170, Apr. 12, 2012; 78 FR 31310, May 23, 2013; 79 FR 29965, May 23, 2014; 80 FR 7965, Feb. 12, 2015; 83 FR 16750, Apr. 16, 2018; 89 FR 30838, Apr. 23, 2024] § 423.510 Termination of contract by the Part D sponsor. (a) Cause for termination. (b) Notice of termination. (1) To CMS, at least 90 days before the intended date of termination. This notice must specify the reasons why the Part D sponsor is requesting contract termination. (2) To its Medicare enrollees, at least 60 days before the termination effective date. This notice must include a written description of alternatives available for obtaining qualified prescription drug coverage within the services area, including alternative PDPs, MA-PDPs, and original Medicare and must receive CMS approval. (3) To the general public, at least 60 days before the termination effective date by publishing a CMS-approved notice in one or more newspapers of general circulation in each community or county located in the Part D plan sponsor's geographic area. (c) Effective date of termination. (d) CMS's liability. (e) Effect of termination by the organization. (2) During the same 2-year period specified in (e)(1) of this section, CMS will not contract with an organization whose covered persons also served as covered persons for the terminating sponsor. A “covered person” as used in this paragraph means one of the following: (i) All owners of nonrenewed or terminated organizations who are natural persons, other than shareholders who have an ownership interest of less than 5 percent. (ii) An owner of a whole or part interest in a mortgage, deed of trust, note or other obligation secured (in whole or in part) by the organization, or any of the property or assets thereof, which whole or part interest is equal to or exceeds 5 percent of the total property and assets of the organization. (iii) A member of the board of directors or board of trustees of the entity, if the organization is organized as a corporation. (f) Timely transfer of data and files. [70 FR 4525, Jan. 28, 2005, as amended at 76 FR 21575, Apr. 15, 2011] § 423.512 Minimum enrollment requirements. (a) Basic rule. (1) At least 5,000 individuals are enrolled for the purpose of receiving prescription drug benefits from the organization; or (2) At least 1,500 individuals are enrolled for purposes of receiving prescription drug benefits from the organization and the organization primarily serves individuals residing outside of urbanized areas as defined in § 412.62(f) of this chapter; (3) Except as provided for in paragraph (b) of this section, a Part D plan sponsor must maintain a minimum enrollment as defined in paragraphs (a)(1) and (a)(2) of this section for the duration of its contract. (b) Minimum enrollment waiver. § 423.514 Validation of Part D reporting requirements. (a) Required information. (1) The cost of its operations. (2) The procedures related to and utilization of its services and items. (3) The availability, accessibility, and acceptability of its services. (4) Information demonstrating that the Part D plan sponsor has a fiscally sound operation. (5) Pharmacy performance measures. (6) Other matters that CMS may require. (b) Significant business transactions. (1) A description of significant business transactions, as defined in § 423.501, between the Part D plan sponsor and a party in interest, including the following: (i) Indication that the costs of the transactions listed in paragraph (c) of this section do not exceed the costs that would be incurred if these transactions were with someone who is not a party in interest; or (ii) If they do exceed, a justification that the higher costs are consistent with prudent management and fiscal soundness requirements. (2) A combined financial statement for the Part D plan sponsor and a party in interest if either of the following conditions is met: (i) Thirty five percent or more of the costs of operation of the Part D sponsor go to a party in interest. (ii) Thirty five percent or more of the revenue of a party in interest is from the Part D plan sponsor. (c) Requirements for combined financial statements. (2) Inter-entity transactions must be eliminated in the consolidated column. (3) The statements must be examined by an independent auditor in accordance with generally accepted accounting principles and must include appropriate opinions and notes. (4) Upon written request from a Part D plan sponsor showing good cause, CMS may waive the requirement that the organization's combined financial statement include the financial information required in this paragraph (c) of this section for a particular entity. (d) Reporting requirements for pharmacy benefits manager data. (1) The total number of prescriptions that were dispensed. (2) The percentage of all prescriptions that were provided through retail pharmacies compared to mail order pharmacies. (3) The percentage of prescriptions for which a generic drug was available and dispensed (generic dispensing rate), by pharmacy type (which includes an independent pharmacy, chain pharmacy, supermarket pharmacy, or mass merchandiser pharmacy that is licensed as a pharmacy by the State and that dispenses medication to the general public), that is paid by the Part D sponsor or PBM under the contract. (4) The aggregate amount and type of rebates, discounts, or price concessions (excluding bona fide service fees as defined in § 423.501) that the PBM negotiates that are attributable to patient utilization under the plan. (5) The aggregate amount of the rebates, discounts, or price concessions that are passed through to the plan sponsor, and the total number of prescriptions that were dispensed. (6) The aggregate amount of the difference between the amount the Part D sponsor pays the PBM and the amount that the PBM pays retail pharmacies, and mail order pharmacies. (e) Confidentiality of pharmacy benefits manager data. (1) As the Secretary determines necessary to carry out section 1150A of the Act or Part D of Title XVIII. (2) To permit the Comptroller General to review the information provided. (3) To permit the Director of the Congressional Budget Office to review the information provided. (f) Penalties for failure to provide pharmacy benefits manager data. (g) Reporting and disclosure under Employee Retirement Income Security Act of 1974 (ERISA). (2) The PDP sponsor must furnish the information to the employer or the employer's designee, or to the plan administrator, as the term “administrator” is defined in ERISA. (h) Loan information. (i) Enrollee access to information. (j) Data validation. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19822, Apr. 15, 2010; 77 FR 22171, Apr. 12, 2012; 86 FR 6119, Jan. 19, 2021; 89 FR 30838, Apr. 23, 2024] § 423.516 Prohibition of midyear implementation of significant new regulatory requirements. CMS may not implement, other than at the beginning of a calendar year, regulations under this section that impose new, significant regulatory requirements on a PDP sponsor or a prescription drug plan. § 423.520 Prompt payment by Part D sponsors. (a) Contract between CMS and the Part D sponsor. (i) 14 days after the date on which the claim is received, as defined in paragraph (a)(2)(i) of this section, for an electronic claim; or (ii) 30 days after the date on which the claim is received, as defined in paragraph (a)(2)(ii) of this section, for any other claim. (2) Date of receipt of claim. (i) On the date on which the claim is transferred, for an electronic claim; or (ii) On the 5th day after the postmark day of the claim or the date specified in the time stamp of the transmission, for any other claim, whichever is sooner. (b) Clean claim. (c) Procedures involving claims Claims determined to be clean. (i) 10 days after the date on which the claim is received, as defined in paragraph (a)(2)(i) of this section, for an electronic claim; or (ii) 15 days after the date on which the claim is received, as defined in paragraph (a)(2)(ii) of this section, for any other claim. (2) Claims determined not to be clean General. (ii) Determination after submission of additional information. (3) Obligation to pay. (d) Date of payment of claim. (1) The payment is transferred, for an electronic claim; or (2) The payment is submitted to the United States Postal Service or common carrier for delivery, for any other claim. (e) Interest payment General. (2) Authority not to charge interest. (f) Electronic transfer of funds. (g) Protecting the rights of the claimants General. (2) Anti-retaliation. (h) Construction. [73 FR 54252, Sept. 18, 2008, as amended at 76 FR 54634, Sept. 1, 2011] § 423.521 Final settlement process and payment. (a) Notice of final settlement. (1) A final settlement amount for the contract that has been consolidated, nonrenewed, or terminated, which may be one of the following: (i) An amount due to the Part D sponsor. (ii) An amount due from the Part D sponsor. (iii) $0 if nothing is due to or from the Part D sponsor. (2) Relevant banking and financial mailing instructions for Part D sponsors that owe CMS a final settlement amount. (3) Relevant CMS contact information. (4) A description of the steps for requesting an appeal of the final settlement amount calculation, in accordance with the requirements specified in § 423.522. (b) Request for an appeal. (1) If a Part D sponsor agrees with the final settlement amount, no response is required. (2) If a Part D sponsor disagrees with the final settlement amount but does not request an appeal within 15 calendar days from the date of the issuance of the notice of final settlement, CMS does not consider subsequent requests for appeal. (c) Actions if a Part D sponsor does not request an appeal. (2) For Part D sponsors that owe CMS money, the Part D sponsor is required to remit payment to CMS within 120 calendar days from issuance of the notice of final settlement. If the Part D sponsor fails to remit payment within that 120-calendar-day period, CMS refers the debt owed to CMS to the Department of the Treasury for collection. (d) Actions following a request for appeal. (e) No additional payment adjustments. (1) No longer applies retroactive payment adjustments to the terminated, consolidated or nonrenewed contract; and (2) There are no adjustments applied to amounts used in the calculation of the final settlement amount. [89 FR 30838, Apr. 23, 2024] § 423.522 Requesting an appeal of the final settlement amount. (a) Appeals process. (1) Reconsideration. (i) Manner and timing of request. (ii) Content of request. (A) Specify the calculation with which the Part D sponsor disagrees and the reasons for its disagreement. (B) Include evidence supporting the assertion that CMS's calculation of the final settlement amount is incorrect. (C) Not include new reconciliation data or data that was submitted to CMS after the final settlement notice was issued. CMS does not consider information submitted for the purposes of retroactively adjusting a prior reconciliation. (iii) Conduct of reconsideration. (iv) Reconsideration decision. (v) Effect of reconsideration decision. (2) Informal hearing. (i) Manner and timing of request. (ii) Content of request. (iii) Informal hearing procedures. (A) The CMS Hearing Officer provides written notice of the time and place of the informal hearing at least 30 calendar days before the scheduled date. (B) The CMS reconsideration official provides a copy of the record that was before CMS when CMS made its decision to the hearing officer. (C) The hearing officer review is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence. The CMS hearing officer is limited to the review of the record that was before CMS when CMS made its decision. (iv) Decision of the CMS hearing officer. (v) Effect of hearing officer's decision. (3) Review by the Administrator. (i) Manner and timing of request. (ii) Discretionary review. (B) If the Administrator declines to review the hearing officer's decision, the hearing officer's decision is final and binding. (iii) Electing to review. (iv) Effect of Administrator's decision. (b) Matters subject to appeal and burden of proof. (2) The Part D sponsor bears the burden of proof by providing evidence demonstrating that CMS' calculation of the final settlement amount is incorrect. (c) Stay of financial transaction until appeals are exhausted. (d) Continued compliance with other law required. [89 FR 30839, Apr. 23, 2024, as amended at 89 FR 63828, Aug. 6, 2024] § 423.530 Plan crosswalks. (a) General rules Definition of plan crosswalk. (2) Prohibitions. (ii) Plan crosswalks are prohibited that split the enrollment of one PBP into multiple PBPs. (iii) Plan crosswalks are prohibited from a PBP offering basic prescription drug coverage to a PBP offering enhanced alternative coverage. (3) Compliance with renewal/non-renewal rules. (4) Eligibility. (5) Applicability to Employer group health or waiver plans. (b) Mandatory plan crosswalks. (1) Renewal of a PBP offering basic prescription drug coverage. (2) Renewal of a PBP offering enhanced alternative drug coverage. (c) Plan crosswalk exceptions. (1) Consolidated renewals. (i) The plan ID for the upcoming contract year PBP must be the same plan ID as one of PBPs for the current contract year. (ii) The PBPs being consolidated must be under the same PDP contract. (iii) A PBP offering basic prescription drug coverage may not be discontinued if the PDP contract continues to offer coverage (other than employer group waiver plans) in the service area of the PBP. (iv) Enrollment from a PBP offering enhanced alternative coverage may be crosswalked into a PBP offering either enhanced alternative or basic prescription drug coverage. (v) If the PDP contract includes more than one renewing PBP into which enrollment of the non-renewing PBP can be crosswalked, the enrollment of the non-renewing PBP must be crosswalked into the renewing PBP that will result in lowest increase in monthly premiums for the enrollees. (vi) A plan crosswalk is not approved under this paragraph if it will result in a premium increase for the following benefit year (as reflected in the bid for the receiving PBP submitted on the first Monday in June) that is higher than the greater of the following: (A) The current year's premium for the non-renewing PBP. (B) The current year's average base beneficiary premium, as described in § 423.286(c) of this part, for the PDP region in which the PBP operates. (vii) If an organization that non-renews an enhanced alternative PBP does not request and receive a plan crosswalk exception as provided in paragraph (d) of this section, CMS does not approve a new enhanced alternative PBP in the same service area as the non-renewing PBP in the following contract year. (2) Contract consolidations. (i) The non-renewing PDP contract and the surviving contract must be held by the same legal entity or by legal entities with the same parent organization. (ii) The approved service area of the surviving contract must include the service area of the non-renewing PBPs whose enrollment will be crosswalked into the surviving contract. (iii) Enrollment may be crosswalked between PBPs offering the same type of prescription drug coverage (basic or enhanced alternative). (iv) Enrollment from a PBP offering enhanced alternative coverage may be crosswalked into a PBP offering basic prescription drug coverage. (v) Enrollment from a PBP offering enhanced alternative coverage must be crosswalked into the PBP in the surviving contract that will result in the lowest premium increase. (vi) A plan crosswalk is not approved under this paragraph if it will result in a premium increase for the following benefit year (as reflected in the bid for the receiving PBP submitted on the first Monday in June) that is higher than the greater of: (A) The current year's premium for the non-renewing PBP, or (B) The current year's average base beneficiary premium, as described in § 423.286(c), for the region in which the PBP operates. (d) Procedures. (i) All plan crosswalks described in paragraph (b) of this section in writing through the bid submission process in HPMS by the bid submission deadline. (ii) All plan crosswalk exception requests described in paragraph (c) of this section in writing through the plan crosswalk exceptions process in HPMS by the plan crosswalk exception request deadline announced annually by CMS. (2) CMS verifies the requests and notifies a requesting PDP sponsor of the approval or denial after the crosswalk exception request deadline. [89 FR 30839, Apr. 23, 2024] Subpart L—Effect of Change of Ownership or Leasing of Facilities During Term of Contract § 423.551 General provisions. (a) Change of ownership. (1) Partnership. (2) Asset transfer. (3) Corporation. (b) Change of ownership, exception. (c) Advance notice requirement. (2) If the PDP sponsor fails to give CMS the required notice in a timely manner, it continues to be liable for payments that CMS makes to it on behalf of Medicare enrollees after the date of change of ownership. (d) Novation agreement defined. (1) Is embodied in a document executed and signed by all 3 parties; (2) Meets the requirements of § 423.552; and (3) Recognizes the new owner as the successor in interest to the current owner's Medicare contract. (e) Effect of change of ownership without novation agreement. (1) The current PDP sponsor, with respect to the affected contract, has substantially failed to comply with the regulatory requirements as described in § 423.509(a)(4)(ix) and the contract may be subject to intermediate enrollment and marketing sanctions as outlined in § 423.750(a)(1) and (a)(3). Intermediate sanctions imposed as part of this section remain in place until CMS approves the change of ownership (including execution of an approved novation agreement), or the contract is terminated. (i)(A) If the new owner does not participate in the Medicare program in the same service area as the affected contract, it must apply for, and enter into, a contract in accordance with subpart K of this part and part 422 if applicable; and (B) If the application is conditionally approved, must submit, within 30 days of the conditional approval, the documentation required under § 423.551(d) for review and approval by CMS; or (ii) If the new owner currently participates in the Medicare program and operates in the same service area as the affected contract, it must, within 30 days of imposition of intermediate sanctions as outlined in paragraph (e)(1) of this section, submit the documentation required under § 423.551(d) for review and approval by CMS. (2) If the new owner fails to begin the processes required under paragraph (e)(1)(i) or (e)(1)(ii) of this section, within 30 days of imposition of intermediate sanctions as outlined in paragraph (e)(1) of this section, the existing contract is subject to termination in accordance with § 423.509(a)(4)(ix). (f) Effect of change of ownership with novation agreement. (g) Sale of beneficiaries not permitted. (2) CMS does not recognize or allow a sale or transfer that consists solely of the sale or transfer of individual beneficiaries or groups of beneficiaries enrolled in a plan benefit package. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1546, Jan. 12, 2009; 75 FR 19822, Apr. 15, 2010; 75 FR 32860, June 10, 2010; 86 FR 6119, Jan. 19, 2021; 89 FR 30840, Apr. 23, 2024] § 423.552 Novation agreement requirements. (a) Conditions for CMS approval of a novation agreement. (1) Advance notification. (2) Advance submittal of agreement. (3) CMS's determination. (i) The proposed new owner is in fact a successor in interest to the contract. (ii) Recognition of the new owner as a successor in interest to the contract is in the best interest of the Medicare program. (iii) The successor organization meets the requirements to qualify as a PDP sponsor under subpart K of this part. (b) Provisions of a novation agreement. (1) Assumption of contract obligations. (2) Waiver of right to reimbursement. (3) Guarantee of performance. (i) Guarantee performance of the contract by the new owner during the contract period; or (ii) Post a performance bond that is satisfactory to CMS. (4) Records access. § 423.553 Effect of leasing of a PDP sponsor's facilities. (a) General effect of leasing. (b) Effect of lease of all facilities. (2) If the other entity wishes to participate in Medicare as a PDP sponsor, it must apply for and enter into a contract in accordance with § 423.502. (c) Effect of partial lease of facilities. Subpart M—Grievances, Coverage Determinations, Redeterminations, and Reconsiderations § 423.558 Scope. (a) This subpart sets forth the requirements relating to the following: (1) Part D plan sponsors with respect to grievances, coverage determinations, and redeterminations. (2) Part D IRE with respect to reconsiderations. (3) Part D enrollees' rights with respect to grievances, coverage determinations, redeterminations, and reconsiderations. (4) Review of at-risk determinations made under a drug management program in accordance with § 423.153(f). (b) The requirements regarding reopenings, ALJ hearings and ALJ and attorney adjudicator decisions, Council review, and judicial review are set forth in subpart U of this chapter. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5125, Jan. 17, 2017; 83 FR 16750, Apr. 16, 2018] § 423.560 Definitions. As used in this subpart, unless the context indicates otherwise— Appeal At-risk determination Drug Use Enrollee Grievance Other prescriber Physician Projected value Reconsideration Redetermination Representative Specialty tier: (2) Beginning January 1, 2022, has the meaning given the term in § 423.104. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20507, Apr. 15, 2008; 74 FR 1546, Jan. 12, 2009; 82 FR 5125, Jan. 17, 2017; 83 FR 16750, Apr. 16, 2018; 86 FR 6119, Jan. 19, 2021] § 423.562 General provisions. (a) Responsibilities of the Part D plan sponsor. (1) A Part D plan sponsor, for each Part D plan that it offers, must establish and maintain— (i) A grievance procedure as described in § 423.564 for addressing issues that do not involve coverage determinations; (ii) Use a single, uniform exceptions and appeals process which includes procedures for accepting oral and written requests for coverage determinations and redeterminations that are in accordance with § 423.128(b)(7) and (d)(1)(iv). (iii) A procedure for making timely coverage determinations, including determinations on requests for exceptions to a tiered cost-sharing structure or to a formulary; and (iv) Appeal procedures that meet the requirements of this subpart for issues that involve coverage determinations. (v) Appeal procedures that meet the requirements of this subpart for issues that involve at-risk determinations. Determinations made in accordance with the processes at § 423.153(f) are collectively referred to as an at-risk determination, defined at § 423.560, made under a drug management program. (2) A Part D plan sponsor must ensure that all enrollees receive written information about the— (i) Grievance and appeal procedures that are available to them through the Part D plan sponsor; and (ii) Complaint process available to the enrollee under the QIO process as set forth under section 1154(a)(14) of the Act. (3) A Part D plan sponsor must arrange with its network pharmacies to distribute notices instructing enrollees how to contact their plans to obtain a coverage determination or request an exception. These notices must comply with the standards established in § 423.128(b)(7)(iii). (4) In accordance with subpart K of this part, if the Part D plan sponsor delegates any of its responsibilities under this subpart to another entity or individual through which the Part D plan sponsor provides covered benefits, the Part D plan sponsor is ultimately responsible for ensuring that the entity or individual satisfies the relevant requirements of this subpart. (5) A Part D plan sponsor must employ a medical director who is responsible for ensuring the clinical accuracy of all coverage determinations and redeterminations involving medical necessity. The medical director must be a physician with a current and unrestricted license to practice medicine in a State, Territory, Commonwealth of the United States (that is, Puerto Rico), or the District of Columbia. (b) Rights of enrollees. (1) The right to have grievances between the enrollee and the Part D plan sponsor heard and resolved by the plan sponsor, as described in § 423.564. (2) The right to a timely coverage determination by the Part D plan sponsor, as specified in § 423.566 and § 423.568, including the right to request from the Part D plan sponsor an exception to its tiered cost-sharing structure or formulary, as specified in § 423.578. (3) The right to request from the Part D plan sponsor an expedited coverage determination, as specified in § 423.570. (4) If dissatisfied with any part of a coverage determination or an at-risk determination under a drug management program in accordance with § 423.153(f), all of the following appeal rights: (i) The right to a redetermination of the adverse coverage determination or at-risk determination by the Part D plan sponsor, as specified in § 423.580. (ii) The right to request an expedited redetermination, as provided under § 423.584. (iii) If, as a result of the redetermination, a Part D plan sponsor affirms, in whole or in part, its adverse coverage determination or at-risk determination, the right to a reconsideration or expedited reconsideration by an independent review entity (IRE) contracted by CMS, as specified in § 423.600. (iv) If the IRE affirms the plan's adverse coverage determination or at-risk determination, in whole or in part, the right to an ALJ hearing if the amount in controversy meets the requirements in § 423.2006. (v) If the ALJ or attorney adjudicator affirms the IRE's adverse coverage determination or at-risk determination, in whole or in part, the right to request Council review of the ALJ's or attorney adjudicator's decision, as specified in § 423.2100. (vi) If the Council affirms the ALJ's or attorney adjudicator's adverse coverage determination or at-risk determination, in whole or in part, the right to judicial review of the decision if the amount in controversy meets the requirements in § 423.2006. (c) When other regulations apply. (d) Relation to ERISA Requirements. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 65363, Dec. 9, 2009; 76 FR 21575, Apr. 15, 2011; 80 FR 7965, Feb. 12, 2015; 82 FR 5125, Jan. 17, 2017; 83 FR 16751, Apr. 16, 2018; 84 FR 19872, May 7, 2019; 89 FR 30841, Apr. 23, 2024] § 423.564 Grievance procedures. (a) General rule. (b) Distinguished from appeals. (c) Distinguished from the quality improvement organization complaint process. (d) Method for filing a grievance. (2) An enrollee must file a grievance no later than 60 calendar days after the event or incident that precipitates the grievance. (e) Grievance disposition and notification. (2) The Part D plan sponsor may extend the 30 calendar day timeframe by up to 14 calendar days if the enrollee requests the extension or if the Part D plan sponsor justifies a need for additional information and documents how the delay is in the interest of the enrollee. When the Part D plan sponsor extends the deadline, it must immediately notify the enrollee in writing of the reason(s) for the delay. (3) The Part D plan sponsor must inform the enrollee of the disposition of the grievance in accordance with the following procedures: (i) All grievances submitted in writing must be responded to in writing. (ii) Grievances submitted orally may be responded to either orally or in writing, unless the enrollee requests a written response. (iii) All grievances related to quality of care, regardless of how the grievance is filed, must be responded to in writing. The response must include a description of the enrollee's right to file a written complaint with the QIO. For any complaint submitted to a QIO, the Part D plan sponsor must cooperate with the QIO in resolving the complaint. (f) Expedited grievances. (g) Record keeping. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 65363, Dec. 9, 2009; 83 FR 16751, Apr. 16, 2018] § 423.566 Coverage determinations. (a) Responsibilities of the Part D plan sponsor. (b) Actions that are coverage determinations. (1) A decision not to provide or pay for a Part D drug (including a decision not to pay because the drug is not on the plan's formulary, because the drug is determined not to be medically necessary, because the drug is furnished by an out-of-network pharmacy, or because the Part D plan sponsor determines that the drug is otherwise excludable under section 1862(a) of the Act if applied to Medicare Part D) that the enrollee believes may be covered by the plan; (2) Failure to provide a coverage determination in a timely manner, when a delay would adversely affect the health of the enrollee; (3) A decision concerning an exceptions request under § 423.578(a); (4) A decision concerning an exceptions request under § 423.578(b); or (5) A decision on the amount of cost sharing for a drug. (c) Who can request a coverage determination. Individuals who can request a standard or expedited coverage determination are— (1) The enrollee; (2) The enrollee's representative, on behalf of the enrollee; or (3) The prescribing physician or other prescriber, on behalf of the enrollee. (d) Who must review coverage determinations. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1546, Jan. 12, 2009; 76 FR 21576, Apr. 15, 2011; 86 FR 6119, Jan. 19, 2021] § 423.568 Standard timeframe and notice requirements for coverage determinations. (a) Method and place for filing a request. (1) Except as specified in paragraph (a)(2) of this section, the request may be made orally or in writing. (2) Requests for payment must be made in writing (unless the Part D plan sponsor has implemented a voluntary policy of accepting oral payment requests). (3) The Part D plan sponsor must establish and maintain a method of documenting all oral requests and retain the documentation in the case file. (b) Timeframe for requests for drug benefits. (c) Timeframe for requests for payment. (d) Written notice for favorable decisions by a Part D plan sponsor. (e) Form and content of the approval notice. (f) Written notice for denials by a Part D plan sponsor. (g) Form and content of the denial notice. (1) Use approved notice language in a readable and understandable form. (2) State the specific reasons for the denial. (i) For drug coverage denials, describe both the standard and expedited redetermination processes, including the enrollee's right to, and conditions for, obtaining an expedited redetermination and the rest of the appeals process. (ii) For payment denials, describe the standard redetermination process and the rest of the appeals process. (3) Inform the enrollee of his or her right to a redetermination. (4) Comply with any other notice requirements specified by CMS. (h) Effect of failure to meet the adjudicatory timeframes. (i) Dismissing a request. (1) When the individual making the request is not permitted to request a coverage determination under § 423.566(c). (2) When the Part D plan sponsor determines the party failed to make out a valid request for a coverage determination that substantially complies with paragraph (a) of this section. (3) When an enrollee or the enrollee's representative files a request for a coverage determination, but the enrollee dies while the request is pending, and both of the following criteria apply: (i) The enrollee's surviving spouse or estate has no remaining financial interest in the case. (ii) The enrollee's representative, if any, does not wish to pursue the request for coverage. (4) When a party filing the coverage determination request submits a timely request for withdrawal of the request for a coverage determination with the Part D plan sponsor. (j) Notice of dismissal. (1) The reason for the dismissal. (2) The right to request that the Part D plan sponsor vacate the dismissal action. (3) The right to request redetermination of the dismissal. (k) Vacating a dismissal. ( l Effect of dismissal. (m) Withdrawing a request. [75 FR 19823, Apr. 15, 2010, as amended at 76 FR 21576, Apr. 15, 2011; 84 FR 15843, Apr. 16, 2019; 86 FR 6119, Jan. 19, 2021; 86 FR 29528, June 2, 2021] § 423.570 Expediting certain coverage determinations. (a) Request for expedited determination. (b) How to make a request. (2) A prescribing physician or other prescriber may provide oral or written support for an enrollee's request for an expedited determination. (c) How the Part D plan sponsor must process requests. (1) An efficient and convenient means for accepting oral or written requests submitted by enrollees, prescribing physicians, or other prescribers. (2) A method for documenting all oral requests and maintaining the documentation in the case file; and (3) A means for issuing prompt decisions on expediting a determination, based on the following requirements: (i) For a request made by an enrollee, provide an expedited determination if it determines that applying the standard timeframe for making a determination may seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function. (ii) For a request made or supported by an enrollee's prescribing physician or other prescriber, provide an expedited determination if the physician or other prescriber indicates that applying the standard timeframe for making a determination may seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function. (d) Actions following denial. (1) Make the determination within the 72-hour timeframe established in § 423.568(b) for a standard determination. The 72-hour period begins on the day the Part D plan sponsor receives the request for expedited determination. For an exceptions request, the Part D plan sponsor must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receipt of the physician's or other prescriber's supporting statement. If a supporting statement is not received by the end of 14 calendar days from receipt of the exceptions request, the Part D plan sponsor must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination as expeditiously as the enrollee's health condition requires, but no later than 72 hours from the end of 14 calendar days from receipt of the exceptions request. (2) Give the enrollee and prescribing physician or other prescriber prompt oral notice of the denial that— (i) Explains that the Part D plan sponsor must process the request using the 72 hour timeframe for standard determinations; (ii) Informs the enrollee of the right to file an expedited grievance if he or she disagrees with the decision by the Part D plan sponsor not to expedite; (iii) Informs the enrollee of the right to resubmit a request for an expedited determination with the prescribing physician's or other prescriber's support and (iv) Provides instructions about the plan's grievance process and its timeframes. (3) Subsequently deliver to the enrollee, within 3 calendar days, equivalent written notice. (e) Actions on accepted requests for expedited determination. (f) Dismissing a request. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20507, Apr. 15, 2008; 74 FR 1546, Jan. 12, 2009; 75 FR 19823, Apr. 15, 2010; 84 FR 15843, Apr. 16, 2019; 86 FR 6120, Jan. 19, 2021] § 423.572 Timeframes and notice requirements for expedited coverage determinations. (a) Timeframe for determination and notification. (b) Confirmation of oral notice. (c) Content of the notice of expedited determination. (2) If the determination is not completely favorable to the enrollee, the notice must— (i) Use approved language in a readable and understandable form; (ii) State the specific reasons for the denial; (iii) Inform the enrollee of his or her right to a redetermination; (iv) Describe— (A) Both the standard and expedited redetermination processes, including the enrollee's right to request an expedited redetermination; (B) Conditions for obtaining an expedited redetermination; and (C) Other aspects of the appeal process. (d) Effect of failure to meet the adjudicatory timeframes. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1564, Jan. 12, 2009; 75 FR 19823, Apr. 15, 2010; 84 FR 15843, Apr. 16, 2019] § 423.576 Effect of a coverage determination. The coverage determination is binding on the Part D plan sponsor and the enrollee unless it is reviewed and revised under §§ 423.580 through 423.604 and §§ 423.2000 through 423.2140 or is reopened and revised under § 423.1978. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 65363, Dec. 9, 2009; 84 FR 19872, May 7, 2019] § 423.578 Exceptions process. (a) Requests for exceptions to a plan's tiered cost-sharing structure. (1) The tiering exceptions procedures must address situations where a formulary's tiering structure changes during the year and an enrollee is using a drug affected by the change. (2) Part D plan sponsors must establish criteria that provide for a tiering exception, consistent with paragraphs (a)(3) through (6) of this section. (3) An enrollee or the enrollee's prescribing physician or other prescriber may file a request for an exception. (4) A prescribing physician or other prescriber must provide an oral or written supporting statement that the preferred drug(s) for the treatment of the enrollee's condition— (i) Would not be as effective for the enrollee as the requested drug; (ii) Would have adverse effects for the enrollee; or (iii) Both paragraphs (a)(4)(i) and (a)(4)(ii) of this section apply. (5) If the physician or other prescriber provides an oral supporting statement, the Part D plan sponsor may require the physician or other prescriber to subsequently provide a written supporting statement. The Part D plan sponsor may require the prescribing physician or other prescriber to provide additional supporting medical documentation as part of the written follow-up. (6) Limitations on tiering exceptions: A Part D plan sponsor is permitted to design its tiering exceptions procedures such that an exception is not approvable in the following circumstances: (i) To cover a brand name drug, as defined in § 423.4, at a preferred cost-sharing level that applies only to alternative drugs that are— (A) Generic drugs, for which an application is approved under section 505(j) of the Federal Food, Drug, and Cosmetic Act; or (B) Authorized generic drugs as defined in section 505(t)(3) of the Federal Food, Drug, and Cosmetic Act. (ii) To cover a biological product licensed under section 351 of the Public Health Service Act at a preferred cost-sharing level that does not contain any alternative drug(s) that are biological products. (iii)(A) Before January 1, 2022, if a Part D plan sponsor maintains a specialty tier, as defined in § 423.560, the Part D sponsor may design its exception process so that Part D drugs on the specialty tier are not eligible for a tiering exception. (B) Beginning January 1, 2022, if a Part D sponsor maintains one or two specialty tiers, as defined in § 423.104, the Part D sponsor may design its exception process so that Part D drugs on the specialty tier(s) are not eligible for tiering exception(s) to non-specialty tiers. (b) Request for exceptions involving a non-formulary Part D drug. (1) The plan's formulary exceptions process must address each of the following circumstances: (i) Situations where a formulary changes during the year, and situations where an enrollee is already using a given drug. (ii) Continued coverage of a particular Part D prescription drug that the Part D plan sponsor is discontinuing coverage on the formulary for reasons other than safety or because the Part D prescription drug cannot be supplied by or was withdrawn from the market by the drug's manufacturer. (iii) An exception to a plan's coverage policy that causes a Part D prescription drug not to be covered because of cost utilization tools, such as a requirement for step therapy, dosage limitations, or therapeutic substitution. (2) The exception criteria of a Part D plan sponsor must include, but are not limited to— (i) A description of the criteria a Part D plan sponsor uses to evaluate a prescribing physician's or other prescriber's determination made under paragraph (b)(5) of this section; (ii) A process for gathering and comparing applicable medical and scientific evidence on the safety and effectiveness of the requested non-formulary drug with the formulary drug for the enrollee, including safety information generated by an authoritative government body; and (iii) A description of the cost-sharing scheme that will be applied when coverage is provided for a non-formulary drug. (3) If the Part D plan sponsor covers a non-formulary drug, the cost(s) incurred by the enrollee for that drug are treated as being included for purposes of calculating and meeting the annual out-of-pocket threshold. (4) An enrollee, the enrollee's representative, or the prescribing physician or other prescriber (on behalf of the enrollee) may file a request for an exception. (5) A prescribing physician or other prescriber must provide an oral or written supporting statement that the requested prescription drug is medically necessary to treat the enrollee's disease or medical condition because— (i) All of the covered Part D drugs on any tier of a plan's formulary for treatment for the same condition would not be as effective for the enrollee as the non-formulary drug, would have adverse effects for the enrollee, or both; (ii) The prescription drug alternative(s) listed on the formulary or required to be used in accordance with step therapy requirements— (A) Has been ineffective in the treatment of the enrollee's disease or medical condition or, based on both sound clinical evidence and medical and scientific evidence and the known relevant physical or mental characteristics of the enrollee and known characteristics of the drug regimen, is likely to be ineffective or adversely affect the drug's effectiveness or patient compliance; or (B) Has caused or based on sound clinical evidence and medical and scientific evidence, is likely to cause an adverse reaction or other harm to the enrollee; or (iii) The number of doses that is available under a dose restriction for the prescription drug has been ineffective in the treatment of the enrollee's disease or medical condition or, based on both sound clinical evidence and medical and scientific evidence and the known relevant physical or mental characteristics of the enrollee and known characteristics of the drug regimen, is likely to be ineffective or adversely affect the drug's effectiveness or patient compliance. (6) If the physician or other prescriber provides an oral supporting statement, the Part D plan sponsor may require the physician or other prescriber to subsequently provide a written supporting statement. The Part D plan sponsor may require the prescribing physician or other prescriber to provide additional supporting medical documentation as part of the written follow-up. (c) Requirements for exceptions General rule. (2) When a Part D plan sponsor does not make a timely decision. If the Part D plan sponsor fails to make a decision on an exceptions request and provide notice of the decision within the timeframe required under § 423.568(a) or § 423.572(a), as applicable, the failure constitutes an adverse coverage determination, and the Part D plan sponsor must forward the enrollee's request to the IRE within 24 hours of the expiration of the adjudication timeframe. (3) When a tiering exceptions request is approved. (i) The Part D plan sponsor may not require the enrollee to request approval for a refill, or a new prescription to continue using the Part D prescription drug after the refills for the initial prescription are exhausted, as long as— (A) The enrollee's prescribing physician or other prescriber continues to prescribe the drug; (B) The drug continues to be considered safe for treating the enrollee's disease or medical condition; and (C) The enrollment period has not expired. If an enrollee renews his or her membership after the plan year, the plan may choose to continue coverage into the subsequent plan year. (ii) The Part D plan sponsor must provide coverage for the approved prescription drug at the cost-sharing level that applies to preferred alternative drugs. If the plan's formulary contains alternative drugs on multiple tiers, cost-sharing must be assigned at the lowest applicable tier, under the requirements in paragraph (a) of this section. (4) When a non-formulary exceptions request is approved. (i) The Part D plan sponsor may not require the enrollee to request approval for a refill, or a new prescription to continue using the Part D prescription drug after the refills for the initial prescription are exhausted, as long as— (A) The enrollee's prescribing physician or other prescriber continues to prescribe the drug; (B) The drug continues to be considered safe for treating the enrollee's disease or medical condition; and (C) The enrollment period has not expired. If an enrollee renews his or her membership after the plan year, the plan may choose to continue coverage into the subsequent plan year. (ii) The Part D plan sponsor must not establish a special formulary tier or co-payment or other cost-sharing requirement that is applicable only to prescription drugs approved for coverage under this section. (iii) An enrollee may not request a tiering exception for a non-formulary prescription drug approved under § 423.578(b). (d) Notice regarding formulary changes. Whenever a Part D plan sponsor makes any negative formulary change, as defined in § 423.100, to its CMS-approved formulary, the Part D plan sponsor must provide notice in accordance with the requirements at § 423.120(b)(5) and (f). (e) Limitation of the exceptions procedures to Part D drugs. (f) Implication of the physician's or other prescriber's supporting statement. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1546, Jan. 12, 2009; 83 FR 16751, Apr. 16, 2018; 86 FR 6120, Jan. 19, 2021; 89 FR 30841, Apr. 23, 2024] § 423.580 Right to a redetermination. An enrollee who has received a coverage determination (including one that is reopened and revised as described in § 423.1978) or an at-risk determination under a drug management program in accordance with § 423.153(f) may request that it be redetermined under the procedures described in § 423.582, which address requests for a standard redetermination. The prescribing physician or other prescriber (acting on behalf of an enrollee), upon providing notice to the enrollee, may request a standard redetermination under the procedures described in § 423.582. An enrollee or an enrollee's prescribing physician or other prescriber (acting on behalf of an enrollee) may request an expedited redetermination as specified in § 423.584. [83 FR 16752, Apr. 16, 2018] § 423.582 Request for a standard redetermination. (a) Method and place for filing a request. (b) Timeframe for filing a request. (1) The date of receipt of the coverage determination or at-risk determination is presumed to be 5 calendar days after the date of the written coverage determination or at-risk determination, unless there is evidence to the contrary. (2) For purposes of meeting the 60-calendar day filing deadline, the request is considered as filed on the date it is received by the Part D plan sponsor or delegated entity specified in the Part D plan sponsor's written coverage determination or at-risk determination. (c) Extending the time for filing a request General rule. (2) How to request an extension of timeframe. (i) Be in writing; and (ii) State why the request for redetermination was not filed on time. (d) Withdrawing a request. (e) Dismissing a request. (1) When the person or entity requesting a redetermination is not a proper party under § 423.580. (2) When the Part D plan sponsor determines the party failed to make out a valid request for redetermination that substantially complies with paragraph (a) of this section. (3) When the party fails to file the redetermination request within the proper filing time frame in accordance with paragraph (b) of this section. (4) When the enrollee or the enrollee's representative files a request for redetermination, but the enrollee dies while the request is pending, and both of the following criteria apply: (i) The enrollee's surviving spouse or estate has no remaining financial interest in the case. (ii) The enrollee's representative, if any, does not wish to pursue the request for coverage. (5) When a party filing the redetermination request submits a timely request for withdrawal of the request for a redetermination with the Part D plan sponsor. (f) Notice of dismissal. (1) The reason for the dismissal. (2) The right to request that the Part D plan sponsor vacate the dismissal action. (3) The right to request review of the dismissal by the independent entity. (g) Vacating a dismissal. (h) Effect of dismissal. [74 FR 1547, Jan. 12, 2009, as amended at 74 FR 65363, Dec. 9, 2009; 83 FR 16752, Apr. 16, 2018; 86 FR 6120, Jan. 19, 2021; 89 FR 30841, Apr. 23, 2024] § 423.584 Expediting certain redeterminations. (a) Who may request an expedited redetermination. (b) Procedure and timeframe for filing a request. (2) A prescribing physician or other prescriber may provide oral or written support for an enrollee's request for an expedited redetermination. (3) The date of receipt of the coverage determination or at-risk determination is presumed to be 5 calendar days after the date of the written coverage determination or at-risk determination, unless there is evidence to the contrary. (4) For purposes of meeting the 60-calendar day filing deadline, the request is considered as filed on the date it is received by the Part D plan sponsor or delegated entity specified in the Part D plan sponsor's written coverage determination or at-risk determination. (c) How the Part D plan sponsor must process requests. (1) Handling of requests. (2) Prompt decision making. (i) For a request made by an enrollee, the Part D plan sponsor must provide an expedited redetermination if it determines that applying the standard timeframe for making a redetermination may seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function. (ii) For a request made or supported by a prescribing physician or other prescriber, the Part D plan sponsor must provide an expedited redetermination if the physician or other prescriber indicates that applying the standard timeframe for conducting a redetermination may seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function. (d) Actions following denial of a request. (1) Make the determination within the 7 calendar day timeframe established in § 423.590(a). The 7 calendar day period begins the day the Part D plan sponsor receives the request for expedited redetermination. (2) Give the enrollee prompt oral notice of the denial that— (i) Explains that the Part D plan sponsor processes the enrollee's request using the 7 calendar day timeframe for standard redetermination; (ii) Informs the enrollee of the right to file an expedited grievance if he or she disagrees with the decision by the Part D plan sponsor not to expedite; (iii) Informs the enrollee of the right to resubmit a request for an expedited redetermination with the prescribing physician's or other prescriber's support; and (iv) Provides instructions about the expedited grievance process and its timeframes. (3) Subsequently deliver, within three calendar days, equivalent written notice. (e) Action following acceptance of a request. (f) Dismissing a request. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20507, Apr. 15, 2008; 74 FR 1547, Jan. 12, 2009; 74 FR 65363, Dec. 9, 2009; 83 FR 16752, Apr. 16, 2018; 86 FR 6120, Jan. 19, 2021; 89 FR 30841, Apr. 23, 2024; 89 FR 63828, Aug. 6, 2024] § 423.586 Opportunity to submit evidence. The Part D plan sponsor must provide the enrollee or the prescribing physician or other prescriber, as appropriate, with a reasonable opportunity to present evidence and allegations of fact or law, related to the issue in dispute, in person as well as in writing. In the case of an expedited redetermination, the opportunity to present evidence is limited by the short timeframe for making a decision. Therefore, the Part D plan sponsor must inform the enrollee or the prescribing physician or other prescriber of the conditions for submitting the evidence. [74 FR 1548, Jan. 12, 2009] § 423.590 Timeframes and responsibility for making redeterminations. (a) Standard redetermination—request for covered drug benefits or review of an at-risk determination. (2) If the Part D plan sponsor makes a redetermination that affirms, in whole or in part, its adverse coverage determination or at-risk determination, it must notify the enrollee in writing of its redetermination as expeditiously as the enrollee's health condition requires, but no later than 7 calendar days from the date it receives the request for a standard redetermination. (b) Standard redetermination—request for payment. (2) If the Part D plan sponsor affirms, in whole or in part, its adverse coverage determination, it must notify the enrollee in writing of its redetermination no later than 14 calendar days from the date it receives the request for redetermination. (c) Effect of failure to meet timeframe for standard redeterminations. (d) Expedited redetermination Timeframe. (2) Confirmation of oral notice. (3) How the Part D plan sponsor must request additional information. If the Part D plan sponsor must receive medical information, the Part D plan sponsor must request the necessary information within 24 hours of the initial request for an expedited redetermination. Regardless of whether the Part D plan sponsor requests additional information, the Part D plan sponsor is responsible for meeting the timeframe and notice requirements. (e) Failure to meet timeframe for expedited redetermination. (f) Who must conduct the review of an adverse coverage determination or at-risk determination. (2) When the issue is the denial of coverage based on a lack of medical necessity (or any substantively equivalent term used to describe the concept of medical necessity), the redetermination must be made by a physician with expertise in the field of medicine that is appropriate for the services at issue. The physician making the redetermination need not, in all cases, be of the same specialty or subspecialty as the prescribing physician or other prescriber. (g) Form and content of an adverse redetermination notice. (1) Use approved notice language in a readable and understandable form; (2) State the specific reasons for the denial; (3) Inform the enrollee of his or her right to a reconsideration; (i) For adverse drug coverage redeterminations, or redeterminations related to a drug management program in accordance with § 423.153(f), describe both the standard and expedited reconsideration processes, including the enrollee's right to, and conditions for, obtaining an expedited reconsideration and the rest of the appeals process; (ii) For adverse payment redeterminations, describe the standard reconsideration process and the rest of the appeals process; and (4) Comply with any other notice requirements specified by CMS. (h) Form and content of a completely favorable redetermination notice. (i) Automatic forwarding of redeterminations made under a drug management program. (j) Requests for review of a dismissal by the independent entity. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1548, Jan. 12, 2009; 75 FR 19823, Apr. 15, 2010; 83 FR 16752, Apr. 16, 2018; 86 FR 6120, Jan. 19, 2021] § 423.600 Reconsideration by an independent review entity (IRE). (a) An enrollee who is dissatisfied with the redetermination of a Part D plan sponsor has a right to a reconsideration by an independent review entity that contracts with CMS. The prescribing physician or other prescriber (acting on behalf of an enrollee), upon providing notice to the enrollee, may request an IRE reconsideration. The enrollee, or the enrollee's prescribing physician or other prescriber (acting on behalf of the enrollee) must file a written request for reconsideration with the IRE within 60 calendar days after receipt of the written redetermination by the Part D plan sponsor. (1) The date of receipt of the redetermination is presumed to be 5 calendar days after the date of the Part D plan sponsor's written redetermination, unless there is evidence to the contrary. (2) For purposes of meeting the 60-calendar day filing deadline, the request is considered as filed on the date it is received by the IRE specified in the Part D plan sponsor's written redetermination. (b) When an enrollee, or an enrollee's prescribing physician or other prescriber (acting on behalf of the enrollee), files an appeal or a determination is forwarded to the IRE by a Part D plan sponsor, the IRE is required to solicit the views of the prescribing physician or other prescriber. (1) The IRE may solicit the views of the prescribing physician or other prescriber orally or in writing. (2) A written account of the prescribing physician's or other prescriber's views (prepared by either the prescribing physician, other prescriber, or IRE, as appropriate) must be contained in the IRE record. (c) In order for an enrollee or a prescribing physician or other prescriber (acting on behalf of an enrollee) to request an IRE reconsideration of a determination by a Part D plan sponsor not to provide for a Part D drug that is not on the formulary, the prescribing physician or other prescriber must determine that all covered Part D drugs on any tier of the formulary for treatment of the same condition would not be as effective for the individual as the non-formulary drug, would have adverse effects for the individual, or both. (d) The independent review entity must conduct the reconsideration as expeditiously as the enrollee's health condition requires but must not exceed the deadlines applicable in § 423.590, including those deadlines that are applicable when a request for an expedited reconsideration is received and granted. (e) When the issue is the denial of coverage based on a lack of medical necessity (or any substantively equivalent term used to describe the concept of medical necessity), the reconsideration must be made by a physician with expertise in the field of medicine that is appropriate for the services at issue. The physician making the reconsideration need not, in all cases, be of the same specialty or subspecialty as the prescribing physician or other prescriber. (f) The party who files a request for reconsideration may withdraw it by filing a request with the IRE. (g) The independent entity dismisses a reconsideration request, either entirely or as to any stated issue, under any of the following circumstances: (1) When the person or entity requesting a reconsideration is not a proper party under paragraph (a) of this section. (2) When the IRE determines the party failed to make out a valid request for reconsideration that substantially complies with paragraph (a) of this section. (3) When the party fails to file the reconsideration request within the proper filing time frame in accordance with paragraph (a) of this section. (4) When an enrollee or the enrollee's representative files a request for reconsideration, but the enrollee dies while the request is pending, and both of the following criteria apply: (i) The enrollee's surviving spouse or estate has no remaining financial interest in the case. (ii) The enrollee's representative, if any, does not wish to continue the appeal. (5) When a party filing the reconsideration request submits a timely request for withdrawal of the request for a reconsideration with the IRE. (h) The IRE mails or otherwise transmits a written notice of the dismissal of the reconsideration request to the parties. The notice must state all of the following: (1) The reason for the dismissal. (2) That there is a right to request that the IRE vacate the dismissal action. (3) The right to a review of the dismissal in accordance with § 423.2004. (i) If good cause is established, the IRE may vacate its dismissal of a request for redetermination within 6 months from the date of the notice of dismissal. (j) An enrollee has a right to have an IRE's dismissal reconsidered in accordance with § 423.2004. (k) If the IRE determines that the Part D plan sponsor's dismissal was in error, the IRE vacates the dismissal and remands the case to the Part D plan sponsor for reconsideration consistent with § 423.590. The IRE's decision regarding an Part D plan sponsor's dismissal, including a decision to deny a request for review of a dismissal, is binding and not subject to further review. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1548, Jan. 12, 2009; 74 FR 65363, Dec. 9, 2009; 77 FR 22171, Apr. 12, 2012; 86 FR 6120, Jan. 19, 2021; 89 FR 30841, Apr. 23, 2024] § 423.602 Notice of reconsideration determination by the independent review entity. (a) Responsibility for the notice. (b) Content of the notice. (1) State the specific reasons for the IRE's decision in understandable language; (2) If the reconsideration determination is adverse (that is, does not completely reverse the adverse coverage determination or redetermination by the Part D plan sponsor), inform the enrollee of his or her right to an ALJ hearing if the amount in controversy meets the threshold requirement under § 423.2006; (3) Describe the procedures that must be followed to obtain an ALJ hearing; and (4) Comply with any other requirements specified by CMS. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 65363, Dec. 9, 2009; 77 FR 22171, Apr. 12, 2012; 83 FR 16752, Apr. 16, 2018; 84 FR 19872, May 7, 2019] § 423.604 Effect of a reconsideration determination. A reconsideration determination is final and binding on the enrollee and the Part D plan sponsor, unless the enrollee files a request for a hearing under the provisions of § 423.2014. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 65363, Dec. 9, 2009; 84 FR 19872, May 7, 2019] §§ 423.610-423.634 [Reserved] § 423.636 How a Part D plan sponsor must effectuate standard redeterminations, reconsiderations, or decisions. (a) Reversals by the Part D plan sponsor Requests for benefits. (2) Requests for payment. (3) Review of an at-risk determination. (b) Reversals other than by the Part D plan sponsor Requests for benefits. (2) Requests for payment. (3) Review of an at-risk determination. [70 FR 4525, Jan. 28, 2005, as amended at 83 FR 16752, Apr. 16, 2018] § 423.638 How a Part D plan sponsor must effectuate expedited redeterminations or reconsiderations. (a) Reversals by the Part D plan sponsor Requests for benefits. (2) Review of an at-risk determination. (b) Reversals other than by the Part D plan sponsor Requests for benefits. (2) Review of an at-risk determination. [83 FR 16753, Apr. 16, 2013] Subpart N—Medicare Contract Determinations and Appeals § 423.641 Contract determinations. This subpart establishes the procedures for reviewing the following contract determinations: (a) A determination that an entity is not qualified to enter into a contract with CMS under Part D of title XVIII of the Act. (b) A determination not to authorize a renewal of a contract with a PDP sponsor in accordance with § 423.507(b). (c) A determination to terminate a contract with a PDP sponsor in accordance with § 423.509. (d) Fallback entities are governed under subpart Q of this part, and are not subject to this subpart, except to the extent a fallback prescription drug plan contract is terminated by CMS. § 423.642 Notice of contract determination. (a) When CMS makes a contract determination under § 423.641, it gives the PDP sponsor written notice. (b) The notice specifies the— (1) Reasons for the determination; and (2) The Part D sponsor's right to request a hearing. (c) CMS-initiated terminations General rule. (2) Exception. (d) When CMS determines that it will not authorize a contract renewal, CMS mails the notice to the Part D sponsor by August 1 of the current contract year. [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68733, Dec. 5, 2007; 75 FR 19823, Apr. 15, 2010; 79 FR 29965, May 23, 2014] § 423.643 Effect of contract determination. The contract determination is final and binding unless a timely request for a hearing is filed under 423.651. [72 FR 68733, Dec. 5, 2007] § 423.650 Right to a hearing, burden of proof, standard of proof, and standards of review. (a) Right to a hearing. (1) A contract applicant that has been determined to be unqualified to enter into a contract with CMS under Part D of Title XVIII of the Act in accordance with § 423.502 and § 423.503 of this part. (2) A Part D sponsor whose contract has been terminated in accordance with § 423.509 of this part. (3) A Part D sponsor whose contract has not been renewed in accordance with § 423.507 of this part. (4) A Part D sponsor who has had an intermediate sanction imposed in accordance with § 423.752(a) through (b). (b) Burden of proof, standard of proof, and standard of review at hearing. (2) During a hearing to review a contract determination as described at § 423.641(b) of this part, the Part D plan sponsor has the burden of proving by a preponderance of the evidence that CMS' determination was inconsistent with the requirements of § 423.507 of this part. (3) During a hearing to review a contract determination as described at § 423.641(c) of this subpart, the Part D plan sponsor has the burden of proving by a preponderance of the evidence that CMS' determination was inconsistent with the requirements of § 423.509 of this part. (4) During a hearing to review the imposition of an intermediate sanction as described at § 423.750 of this part, the Part D sponsor has the burden of proving by a preponderance of the evidence that CMS' determination was inconsistent with the requirements of § 423.752 of this part. (c) Timing of favorable decision. [75 FR 19824, Apr. 15, 2010, as amended at 80 FR 7965, Feb. 12, 2015] § 423.651 Request for hearing. (a) Method and place for filing a request. (2) The request for the hearing must be filed in accordance with the requirements specified in the notice. (b) Time for filing a request. (c) Parties to a hearing. (1) The parties described in § 423.650; (2) At the discretion of the hearing officer, any interested parties who make a showing that their rights may be prejudiced by the decision to be rendered at the hearing; and (3) CMS. [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68734, Dec. 5, 2007; 75 FR 19824, Apr. 15, 2010] § 423.652 Postponement of effective date of a contract determination when a request for a hearing is filed timely. (a) Hearing. (b) Exceptions: (2) A contract terminated in accordance with § 423.509(b)(2)(i) of this part will be terminated on the date specified by CMS and will not be postponed if a hearing is requested. [72 FR 68734, Dec. 5, 2007, as amended at 75 FR 19824, Apr. 15, 2010; 83 FR 16753, Apr. 16, 2018] § 423.653 Designation of hearing officer. CMS designates a hearing officer to conduct the hearing. The hearing officer need not be an ALJ. § 423.654 Disqualification of hearing officer. (a) A hearing officer may not conduct a hearing in a case in which he or she is prejudiced or partial to any party or has any interest in the matter pending for decision. (b) A party to the hearing who objects to the designated hearing officer must notify that officer in writing at the earliest opportunity. (c) The hearing officer must consider the objections, and may, at his or her discretion, either proceed with the hearing or withdraw. (1) If the hearing officer withdraws, CMS designates another hearing officer to conduct the hearing. (2) If the hearing officer does not withdraw, the objecting party may, after the hearing, present objections and request that the officer's decision be revised or a new hearing be held before another hearing officer. The objections must be submitted in writing to CMS. § 423.655 Time and place of hearing. (a) The hearing officer— (1) Fixes a time and place for the hearing, which is not to exceed 30 calendar days after the receipt of request for the hearing; (2) Sends written notice to the parties that informs the parties of the general and specific issues to be resolved, the burden of proof, and information about the hearing procedure. (b)(1) The hearing officer may, on his or her own motion, change the time and place of the hearing. (2) The hearing officer may adjourn or postpone the hearing. (c)(1) The Part D plan sponsor or CMS may request an extension by filing a written request no later than 10 calendar days prior to the scheduled hearing. (2) When either the Part D plan sponsor or CMS requests an extension the hearing officer will provide a one-time 15-calendar day extension. (3) Additional extensions may be granted at the discretion of the hearing officer. [75 FR 19824, Apr. 15, 2010] § 423.656 Appointment of representatives. A party may appoint as its representative at the hearing anyone not disqualified or suspended from acting as a representative before the Secretary or otherwise prohibited by law. § 423.657 Authority of representatives. (a) A representative appointed and qualified in accordance with § 423.656, on behalf of the represented party— (1) Gives or accepts any notice or request pertinent to the proceedings set forth in this subpart; (2) Presents evidence and allegations as to facts and law in any proceedings affecting that party; and (3) Obtains information to the same extent as the party. (b) A notice or request sent to the representative has the same force and effect as if it is sent to the party. § 423.658 Conduct of hearing. (a) The hearing is open to the parties and to the public. (b) The hearing officer inquires fully into all the matters at issue and receives in evidence the testimony of witnesses and any documents that are relevant and material. (c) The hearing officer provides the parties an opportunity to enter any objection to the inclusion of any document. (d) The Part D sponsor bears the burden of going forward and must first present evidence and argument before CMS presents its evidence and argument. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19824, Apr. 15, 2010] § 423.659 Evidence. The hearing officer rules on the admissibility of evidence and may admit evidence that is inadmissible under rules applicable to court procedures. § 423.660 Witnesses. (a) The hearing officer may examine the witnesses. (b) The parties or their representatives are permitted to examine their witnesses and cross-examine witnesses of other parties. § 423.661 Witnesses lists and documents. Witness lists and documents must be identified and exchanged at least 5 calendar days prior to the scheduled hearing [75 FR 19824, Apr. 15, 2010] § 423.662 Prehearing and summary judgment. (a) Prehearing. (b) Summary judgment. [72 FR 68734, Dec. 5, 2007] § 423.663 Record of hearing. (a) A complete record of the proceedings at the hearing is made and transcribed and made available to all parties upon request. (b) The record may not be closed until a hearing decision is issued. § 423.664 Authority of hearing officer. In exercising his or her authority, the hearing officer must comply with the provisions of title XVIII and related provisions of the Act, the regulations issued by the Secretary, and general instructions issued by CMS in implementing the Act. § 423.665 Notice and effect of hearing decision. (a) As soon as practical after the close of the hearing, the hearing officer issues a written decision that— (1) Is based upon the evidence of record; and (2) Contains separately numbered findings of fact and conclusions of law. (b) The hearing officer provides a copy of the hearing decision to each party. (c) The hearing decision is final and binding unless it is reversed or modified by the Administrator following review under § 423.666, or reopened and revised in accordance with § 423.668. § 423.666 Review by the Administrator. (a) Request for review by Administrator. (b) Decision to review the hearing decision. (c) Notification of Administrator determination. (d) Review by the Administrator. (e) Decision by the Administrator. [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68734, Dec. 5, 2007; 75 FR 19824, Apr. 15, 2010] § 423.667 Effect of Administrator's decision. A decision by the Administrator under section § 423.666(c) is final and binding unless it is reopened and revised in accordance with § 423.668. § 423.668 Reopening of a contract determination or decision of a hearing officer or the Administrator. (a) CMS may reopen and revise an initial determination upon its own motion. (b) Contract determination. (c) Decision of Administrator. (d) Notices. (2) The notice of revision specifies the reasons for revisions. [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68734, Dec. 5, 2007; 75 FR 19824, Apr. 15, 2010] Subpart O—Intermediate Sanctions § 423.750 Types of intermediate sanctions and civil money penalties. (a) The following intermediate sanctions may be imposed and will continue in effect until CMS is satisfied that the deficiencies that are the basis for the sanction determination have been corrected and are not likely to recur: (1) Suspension of the Part D plan sponsor's enrollment of Medicare beneficiaries. (2) Suspension of payment to the Part D plan sponsor for Medicare beneficiaries enrolled after the date CMS notifies the organization of the intermediate sanction. (3) Suspension of communication activities to Medicare beneficiaries by a Part D plan sponsor, as defined by CMS. (b) CMS may impose civil money penalties as specified in 423.760. [72 FR 68734, Dec. 5, 2007, as amended at 75 FR 19824, Apr. 15, 2010; 83 FR 16753, Apr. 16, 2018] § 423.752 Basis for imposing intermediate sanctions and civil money penalties. (a) All intermediate sanctions. (1) Fails substantially to provide medically necessary items and services that are required (under law or under the contract) to be provided to an individual covered under the contract, if the failure has adversely affected (or has the substantial likelihood of adversely affecting) the individual. (2) Imposes on Part D plan enrollees premiums in excess of the monthly basic and supplemental beneficiary premiums permitted under section 1860D-1 et seq. (3) Acts to expel or refuses to re-enroll a beneficiary in violation of the provisions of this part. (4) Engages in any practice that would reasonably be expected to have the effect of denying or discouraging enrollment (except as permitted by this part) by eligible individuals with the organization whose medical condition or history indicates a need for substantial future medical services. (5) Misrepresents or falsifies information that it furnishes— (i) To CMS; or (ii) To an individual or to any other entity under the Part D drug benefit program. (6) Employs or contracts with an individual or entity who is excluded from participation in Medicare under section 1128 or 1128A of the Act (or with an entity that employs or contracts with an excluded individual or entity) for the provision of any of the following: (i) Health care. (ii) Utilization review. (iii) Medical social work. (iv) Administrative services. (7) Except as provided under § 423.34, enrolls an individual in any plan under this part without the prior consent of the individual or the designee of the individual. (8) Transfers an individual enrolled under this part from one plan to another without the prior consent of the individual or the designee of the individual or solely for the purpose of earning a commission. (9) Fails to comply with communication restrictions described in subpart V of this part or applicable implementing guidance. (10) Employs or contracts with any individual, agent, provider, supplier or entity who engages in the conduct described in paragraphs (a)(1) through (9) of this section. (b) Suspension of enrollment and communications. (c) Civil money penalties CMS. (i) Section 423.760(b) for any of the determinations at § 423.509(a), except § 423.509(a)(4)(i). (ii) Section 423.760(c) for any of the determinations in paragraph (a) of this section except § 422.752(a)(5) of this chapter. (2) OIG. (i) Violations listed at 423.752(a). (ii) Determinations made pursuant to § 422.510(a)(4)(i) of this chapter. [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68734, Dec. 5, 2007; 75 FR 19825, Apr. 15, 2010; 79 FR 29965, May 23, 2014; 83 FR 16753, Apr. 16, 2018] § 423.756 Procedures for imposing intermediate sanctions and civil money penalties. (a) Notice of intermediate sanction and opportunity to respond Notice of intent. (i) Sends a written notice to the Part D plan sponsor stating the nature and basis of the proposed intermediate sanction, and the Part D plan sponsor's right to a hearing as specified in paragraph (b) of this section; and (ii) Sends the OIG a copy of the notice. (2) Opportunity to respond. (b) Hearing. (2) A written request must be received by the designated CMS office within 15 calendar days after the receipt of the notice. (3) A request for a hearing under § 423.650 of this part does not delay the date specified by CMS when the sanction becomes effective. (4) The Part D plan sponsor must follow the right to a hearing procedure as specified at subpart N of this part. (c) Effective date and duration of sanctions Effective date. (2) Exception. (3) Duration of sanction. (i) CMS may require that the Part D plan sponsor hire an independent auditor to provide CMS with additional information to determine if the deficiencies that are the basis for the sanction determination have been corrected and are not likely to recur. The independent auditor must work in accordance with CMS specifications and must be willing to attest that a complete and full independent review has been performed. (ii) In instances where intermediate sanctions have been imposed, CMS may require a Part D plan sponsor to market or to accept enrollments or both for a limited period of time in order to assist CMS in making a determination as to whether the deficiencies that are the bases for the intermediate sanctions have been corrected and are not likely to recur. (A) If, following this time period, CMS determines the deficiencies have not been corrected or are likely to recur, the intermediate sanctions will remain in effect until such time that CMS is assured the deficiencies have been corrected and are not likely to recur. (B) The Part D plan sponsor does not have a right to a hearing under § 423.650(a)(4) of this subpart to challenge CMS' determination to keep the intermediate sanctions in effect. (C) During the limited time period, sanctioned Part D plan sponsors under the benchmark that would normally participate in the annual and monthly auto enrollment process for enrollees receiving the low income subsidy will not be allowed to receive or process these types of enrollments. (d) Non-renewal or termination by CMS. (1) Decline to authorize the renewal of an organization's contract in accordance with § 423.507(b); or (2) Terminate the contract in accordance with § 423.509. (e) Notice to impose civil money penalties CMS notice to OIG. (2) CMS notice of civil money penalties to Part D plan sponsors. (i) A description of the basis for the determination. (ii) The basis for the penalty. (iii) The amount of the penalty. (iv) The date the penalty is due. (v) The Part D sponsor's right to a hearing as specified under Subpart T of this part. (vi) Information about where to file the request for hearing. [70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68735, Dec. 5, 2007; 73 FR 55764, Sept. 26, 2008; 75 FR 19825, Apr. 15, 2010; 79 FR 29965, May 23, 2014; 83 FR 16753, Apr. 16, 2018] § 423.758 Collection of civil money penalties imposed by CMS. (a) When a Part D plan sponsor does not request a hearing CMS initiates collection of the civil money penalty following the expiration of the timeframe for requesting an ALJ hearing as specified in subpart T. (b) If a Part D sponsor requests a hearing and CMS' decision to impose a civil money penalty is upheld, CMS may initiate collection of the civil money penalty once the administrative decision is final. [72 FR 68735, Dec. 5, 2007] § 423.760 Determinations regarding the amount of civil money penalties and assessment imposed by CMS. (a) Determining the appropriate amount of any penalty. (1) The nature of the conduct. (2) The degree of culpability of the Part D sponsor. (3) The adverse effect to enrollees which resulted or could have resulted from the conduct of the Part D sponsor. (4) The financial condition of the Part D sponsor. (5) The history of prior offenses by the Part D sponsor or principals of the Part D sponsor. (6) Such other matters as justice may require. (b) Amount of penalty. (1) If the deficiency on which the determination is based has directly adversely affected (or has the substantial likelihood of adversely affecting) one or more Part D enrollees—up to $25,000 as adjusted annually under 45 CFR part 102 for each determination. (2) If the deficiency on which the determination is based has directly adversely affected (or has the substantial likelihood of adversely affecting) one or more Part D enrollees, CMS may calculate a CMP of up to $25,000 as adjusted annually under 45 CFR part 102 for each Part D enrollee directly adversely affected (or with a substantial likelihood of being adversely affected) by a deficiency . (3)(i) Definitions for calculating penalty amounts— (A) Per determination. (B) Per enrollee. (C) Standard minimum penalty. (D) Aggravating factor(s). (ii) CMS sets minimum penalty amounts in accordance with paragraphs (b)(1) and (2) of this section. (iii) CMS announces the standard minimum penalty amounts and aggravating factor amounts for per determination and per enrollee penalties on an annual basis. (iv) CMS has the discretion to issue penalties up to the maximum amount under paragraphs (b)(1) and (2) of this section when CMS determines that an organization's non-compliance warrants a penalty that is higher than would be applied under the minimum penalty amounts set by CMS. (4) For each week that a deficiency remains uncorrected after the week in which the Part D sponsor receives CMS' notice of the determination—up to $10,000 as adjusted annually under 45 CFR part 102. (5) If CMS makes a determination that a Part D sponsor has terminated its contract other than in a manner described under 423.510 and that the Part D sponsor has therefore failed to substantially carry out the terms of the contract, $250 as adjusted annually under 45 CFR part 102 per Medicare enrollee from the terminated Part D sponsor or plans at the time the Part D sponsor terminated its contract, or $100,000 as adjusted annually under 45 CFR part 102, whichever is greater. (c) Amount of penalty imposed by CMS or OIG. (1) Civil money penalties of not more than $25,000 as adjusted annually under 45 CFR part 102 for each determination made. (2) With respect to a determination made under § 423.752(a)(4) or (a)(5)(i), not more than $100,000 as adjusted annually under 45 CFR part 102 for each such determination except with respect to a determination made under § 423.752(a)(5), an assessment of not more than the amount claimed by such plan or PDP sponsor based upon the misrepresentation or falsified information involved. (3) Plus with respect to a determination made under § 423.752(a)(2), double the excess amount charged in violation of such paragraph (and the excess amount charged must be deducted from the penalty and returned to the individual concerned). (4) Plus with respect to a determination made under § 423.752(a)(4), $15,000 as adjusted annually under 45 CFR part 102 for each individual not enrolled as a result of the practice involved. [72 FR 68735, Dec. 5, 2007, as amended at 74 FR 1548, Jan. 12, 2009; 79 FR 29966, May 23, 2014; 81 FR 61562, Sept. 6, 2016; 86 FR 6121, Jan. 19, 2021; 89 FR 30841, Apr. 23, 2024] § 423.762 Settlement of penalties. For civil money penalties imposed by CMS, CMS may settle civil money penalty cases at any time before a final decision is rendered. [72 FR 68735, Dec. 5, 2007] § 423.764 Other applicable provisions. The provisions of section 1128A of the Act (except paragraphs (a) and (b)) apply to civil money penalties under this subpart to the same extent that they apply to a civil money penalty or procedure under section 1128A of the Act. [70 FR 4525, Jan. 28, 2005. Redesignated at 72 FR 68735, Dec. 5, 2007] Subpart P—Premiums and Cost-Sharing Subsidies for Low-Income Individuals § 423.771 Basis and scope. (a) Basis. (b) Scope. § 423.772 Definitions. For purposes of this subpart, the following definitions apply: Applicant Best available evidence Family size Federal poverty line (FPL) Full-benefit dual eligible individual (1) Has coverage for the month under a prescription drug plan under Part D of title XVIII, or under an MA-PD plan under Part C of title XVIII; and (2) Is determined eligible by the State for medical assistance for full benefits under title XIX for the month under any eligibility category covered under the State plan or comprehensive benefits under a demonstration under section 1115 of the Act. (This does not include individuals under Pharmacy Plus program demonstrations or under a section 1115 demonstration that provides pharmacy-only benefits to these individuals.). It also includes any individual who is determined by the State to be eligible for medical assistance under section 1902(a)(10)(C) of the Act (medically needy) or section 1902(f) of the Act (States that use more restrictive eligibility criteria than are used by the SSI program) of the Act for any month if the individual was eligible for medical assistance in any part of the month. Full subsidy Full subsidy eligible individuals Income Individual receiving home and community-based services (1) Section 1115 of the Act. (2) Section 1915(c) or (d) of the Act. (3) State plan amendment under section 1915(i) of the Act. (4) Services are provided through enrollment in a Medicaid managed care organization with a contract under section 1903(m) of the Act or section 1932 of the Act. Institutionalized individual Other subsidy eligible individuals Personal representative for purposes of this subpart means— (1) An individual who is authorized to act on behalf of the applicant; (2) If the applicant is incapacitated; or incompetent, someone acting responsibly on their behalf, or (3) An individual of the applicant's choice who is requested by the applicant to act as his or her representative in the application process. Resources State [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 54253, Sept. 18, 2008; 74 FR 1548, Jan. 12, 2009; 76 FR 21576, Apr. 15, 2011] § 423.773 Requirements for eligibility. (a) Subsidy eligible individual. (1) Has income below 150 percent of the FPL applicable to the individual's family size. (2) Has resources at or below the resource thresholds set forth in § 423.773(b)(2) or (d)(2). (b) Full subsidy eligible individual. (1) Has income below 135 percent of the FPL applicable to the individual's family size or, with respect to a plan year beginning on or after January 1, 2024, has income below 150 percent of the FPL applicable to the individual's family size; and (2) Has resources that do not exceed— (i) For 2006, 3 times the amount of resources an individual may have and still be eligible for benefits under the Supplemental Security Income (SSI) program under title XVI of the Act (including the assets or resources of the individual's spouse). (ii) For years 2007 through 2023, the amount of resources allowable for the previous year under this paragraph (b)(2) increased by the annual percentage increase in the consumer price index (all items, U.S. city average) as of September of that previous year, rounded to the nearest multiple of $10. The nearest multiple are rounded up if it is equal to or greater than $5 and down if it is less than $5. (iii) For plan years beginning on or after January 1, 2024, the amount of resources specified at paragraph (d)(2) of this section. (c)(1) Individuals treated as full subsidy eligible. (i) Full-benefit dual eligible individual; (ii) Beneficiary of SSI benefits under title XVI of the Act; or (iii) Eligible for Medicaid as a Qualified Medicare Beneficiary (QMB), Specified Low Income Medicare Beneficiary (SLMB), or a Qualifying Individual (QI) under a State's plan. (2) CMS notifies an individual treated as a full-subsidy eligible under this paragraph (c) that he or she does not need to apply for the subsidies under this subpart, and, at a minimum, is deemed eligible for a full subsidy as follows: (i) For an individual deemed eligible between January 1 and June 30 of a calendar year, the individual is deemed eligible for a full subsidy for the remainder of the calendar year. (ii) For an individual deemed eligible between July 1 and December 31 of a calendar year, the individual is deemed eligible for the remainder of the calendar year and the following calendar year. (d) Other low-income subsidy individuals. (1) Have income less than 150 percent of the FPL applicable to the individual's family size; and (2) Have resources that do not exceed— (i) For 2006, $10,000 if single or $20,000 if married (including the assets or resources of the individual's spouse). (ii) For subsequent years, the resource amount allowable for the previous year under this paragraph (d)(2), increased by the annual percentage increase in the consumer price index (all items, U.S. city average) as of September of the previous year, rounded to the nearest multiple of $10. The nearest multiple will be rounded up if it is equal to or greater than $5 and down if it is less than $5. [70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19825, Apr. 15, 2010; 88 FR 22340, Apr. 12, 2023] § 423.774 Eligibility determinations, redeterminations, and applications. (a) Determinations of whether an individual is a subsidy eligible individual. (b) Effective date of initial eligibility determinations. (c) Redeterminations and appeals of low-income subsidy eligibility Redeterminations and appeals of low-income subsidy eligibility determinations—eligibility determinations made by States. (2) Redeterminations and appeals of low-income subsidy eligibility—eligibility determinations made by Commissioner of Social Security. (d) Application requirements. (i) Complete all required elements of the application; (ii) Provide any statements from financial institutions, as requested, to support information in the application; and (iii) Certify, under penalty of perjury or similar sanction for false statements, as to the accuracy of the information provided on the application form. (2) Multiple applications. § 423.780 Premium subsidy. (a) Full subsidy eligible individuals. (b) Premium subsidy amount. (i) Under the Part D plan selected by the beneficiary, the portion of the monthly beneficiary premium attributable to basic coverage (for enrollees in PDPs) or the portion of the MA monthly prescription drug beneficiary premium attributable to basic prescription drug coverage (for enrollees in MA-PD plans); or (ii) The greater of the low-income benchmark premium amount (determined under paragraph (b)(2) of this section) for the PDP region in which the subsidy eligible individual resides or the lowest monthly beneficiary premium for a PDP that offers basic prescription drug coverage in the PDP region. (2) Calculation of the low-income benchmark premium amount. (ii) Premium amounts. (A) The monthly beneficiary premium for a PDP that is basic prescription drug coverage; (B) The portion of the monthly beneficiary premium attributable to basic prescription drug coverage for a PDP that is enhanced alternative coverage; or, (C) The MA monthly prescription drug beneficiary premium (as defined under section 1854(b)(2)(B) of the Act) for a MA-PD plan and determined before the application of the monthly rebate computed under section 1854(b)(1)(C)(i) of the Act for that plan and year involved. (c) Special rule for 2006 to weight the low-income benchmark premium. (d) Other low-income subsidy eligible individuals—sliding scale premium. (1) For individuals with income at or below 135 percent of the FPL applicable to their family size, the full premium subsidy amount. (2) For individuals with income greater than 135 percent but at or below 140 percent of the FPL applicable to the family size, a premium subsidy equal to 75 percent of the premium subsidy amount. (3) For individual with income greater than 140 percent but at or below 145 percent of the FPL applicable to the family size a premium subsidy equal to 50 percent of the premium subsidy amount. (4) For individuals with income greater than 145 percent but below 150 percent of FPL applicable to the family size a premium subsidy equal to 25 percent of the premium subsidy amount. (e) Waiver of late enrollment penalty for subsidy-eligible individuals. (f) Waiver of de minimis premium amounts. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 18182, Apr. 3, 2008; 73 FR 20508, Apr. 15, 2008; 73 FR 54253, Sept. 18, 2008; 76 FR 21576, Apr. 15, 2011; 88 FR 22340, Apr. 12, 2023] § 423.782 Cost-sharing subsidy. (a) Full subsidy eligible individuals. (1) Elimination of the annual deductible under § 423.104(d)(1). (2) Reduction in cost-sharing for all covered Part D drugs covered under the PDP or MA-PD plan below the out-of-pocket limit (under § 423.104), including for years preceding 2025, Part D drugs covered under the PDP or MA-PD plan obtained after the initial coverage limit (under § 423.104(d)(4)), as follows: (i) Except as provided under paragraphs (a)(2)(ii) and (a)(2)(iii) of this section, copayment amounts not to exceed the copayment amounts specified in § 423.104(d)(5)(A). This applies to both: (A) Those full-benefit dual eligible individuals who are not institutionalized and who have income above 100 percent of the Federal poverty line applicable to the individual's family size and (B) Those individuals who have income for years prior to 2024 under 135 percent, and for 2024 and subsequent years, under 150 percent of the Federal poverty line applicable to the individual's family size who meet the resources test described at § 423.773(b)(2). (ii) Full-benefit dual-eligible individuals who are institutionalized or who are receiving home and community-based services have no cost-sharing for Part D drugs covered under their PDP or MA-PD plans. (iii) Full-benefit dual eligible individuals with incomes that do not exceed 100 percent of the Federal poverty line applicable to the individual's family size are subject to cost-sharing for covered Part D drugs equal to the lesser of: (A) A copayment amount of not more than $1 for a generic drug, biological product for which an application under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred drugs that are multiple source (as defined under section 1927(k)(7)(A)(i) of the Act) or $3 for any other drug in 2006, or for years after 2006 the amounts specified in this paragraph (a)(2)(iii)(A) for the percentage increase in the Consumer Price Index specified in paragraph (d) of this section, rounded to the nearest multiple of 5 cents or 10 cents, respectively; or (B) The copayment amount charged to other individuals under this paragraph (a)(2)(i) of this section. (3) Elimination of all cost-sharing for covered Part D drugs covered under the PDP or MA-PD plan above the out-of-pocket limit (under § 423.104(d)(5)). (b) Other low-income subsidy eligible individuals. (1) In 2006, reduction in the annual deductible to $50. This amount is increased each year beginning in 2007 by the annual percentage increase in average per capita aggregate expenditures for Part D drugs, rounded as specified under § 423.104(d)(5)(iv) to the nearest multiple of $1. (2) Fifteen percent coinsurance for all covered Part D drugs obtained after the annual deductible under the plan up to the out-of-pocket limit (under § 423.104(d)(5)(iii)). (3) For covered Part D drugs above the out-of-pocket limit (under § 423.104(d)(5)(iii)) in 2006, copayments not to exceed $2 for a generic drug, biological product for which an application under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred drugs that are multiple source drugs (as defined under section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug. For years beginning in 2007, the amounts specified in § 423.104(d)(5)(i)(A)(2), rounded to the nearest multiple of 5 cents. (c) When the out-of-pocket cost for a covered Part D drug under a Part D sponsor's plan benefit package is less than the maximum allowable copayment, coinsurance or deductible amounts under paragraphs (a) and (b) of this section, the Part D sponsor may only charge the lower benefit package amount. (d) Annual percentage increase in consumer price index (CPI) General. (2) Calculating the annual percentage increase in CPI. (3) Annual percentage trend. (4) Multiplicative update. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1548, Jan. 12, 2009; 76 FR 21576, Apr. 15, 2011; 83 FR 16753, Apr. 16, 2018; 91 FR 17591, Apr. 6, 2026] § 423.800 Administration of subsidy program. (a) Notification of eligibility for low-income subsidy. (b) Reduction of premium or cost-sharing by PDP sponsor or organization. (c) Reimbursement for cost-sharing paid before notification of eligibility for low-income subsidy. (d) Use of the best available evidence process to establish cost-sharing. (1) Accept best available evidence as defined in § 423.772 of this part received from beneficiaries or other individuals acting directly on their behalf; and (2) Update the subsidy eligible individual's LIS status. and respond to requests for assistance in securing acceptable evidence of subsidy eligibility from beneficiaries or other individuals acting directly on their behalf in accordance with the process(es) established by CMS, and within the reasonable timeframe(s) as determined by CMS. (e) Timeframe for refunds and recoveries due to retroactive adjustments to cost sharing. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1549, Jan. 12, 2009; 75 FR 19825, Apr. 15, 2010] Subpart Q—Guaranteeing Access to a Choice of Coverage (Fallback Prescription Drug Plans) § 423.851 Scope. This subpart sets forth—the rights of beneficiaries to a choice of at least two sources of qualified prescription drug coverage; requirements and limitations on the bid submission, review and approval of fallback prescription drug plans, and the determination of enrollee premium and plan payments for these plans. § 423.855 Definitions. As used in this subpart, unless specified otherwise- Actual costs Actually paid Eligible fallback entity fallback entity (1) Is a PDP sponsor that does not have to be a risk-bearing entity (or, if applying to become a fallback entity, an entity that meets all the requirements to become a Part D plan sponsor except that it does not have to be a risk-bearing entity); and (2) Does not submit a risk bid under § 423.265 for offering a prescription drug plan for any PDP region for the first year of that contract period. An entity is treated as submitting a risk bid if the entity is acting as a subcontractor for an integral part of the drug benefit management activities of an entity that is or applies to become a non-fallback PDP sponsor. An entity is not treated as submitting a bid if it is a subcontractor of an MA organization, unless that organization is acting as or applies to become a non-fallback PDP sponsor for a prescription drug plan. Fallback prescription drug plan (1) Offers only defined standard or actuarially equivalent standard prescription drug coverage as defined in § 423.100; (2) Provides access to negotiated prices, including discounts from manufacturers; and (3) Meets all other requirements established for prescription drug plans, except as otherwise specified by CMS in this subpart or in separate guidance. Qualifying plan § 423.859 Assuring access to a choice of coverage. (a) Choice of at least 2 qualifying plans in each area. (b) Fallback service area For coverage year. (2) For mid-year changes. (c) Access to coverage in the territories. (1) CMS determines that waiver or modification is necessary to secure access to qualified prescription drug coverage for Part D eligible individuals residing in a State other than the 50 States or the District of Columbia; or (2) An entity seeking to become a prescription drug plan in an area such as a territory, other than the 50 States or the District of Columbia requests waiver or modification of any Part D requirement in order to provide qualified prescription drug coverage. § 423.863 Submission and approval of bids. (a) Submission of bids Solicitation of bids. (2) Timing of bids. (3) Format of bid. (b) Negotiation and acceptance of bids General rule. (2) Flexibility in risk assumed and application of fallback prescription drug plan. (3) Limitation of 1 Plan for all fallback service areas in a PDP region. (4) Competitive procedures. (5) Timing of contracts. (6) No national fallback prescription drug plan. § 423.867 Rules regarding premiums. (a) Monthly beneficiary premium. (b) Special rule for collection of premiums in fallback prescription drug plans. § 423.871 Contract terms and conditions. (a) General. (b) Period of contract. (c) Entity not permitted to market or brand fallback prescription drug plans. (d) Performance measures. (1) Types of performance measures. (i) Costs. (ii) Quality programs. (iii) Customer service. (iv) Benefit administration and claims adjudication. (2) Development of performance measures. (e) Payment terms. (1) The actual costs of covered Part D drugs provided to Part D eligible individuals enrolled in a fallback prescription drug plan offered by the entity; and (2) Management fees that consist of administrative costs and return on investment and are tied to the performance measures established by CMS for the management, administration, and delivery of the benefits under the contract as provided under paragraph (d) of this section. (f) Requirement for the submission of information. (g) Amendment to reflect changes in service area. § 423.875 Payment to fallback plans. The amount payable for a fallback prescription drug plan is the amount determined under the contract for the plan in accordance with § 423.871(e). Subpart R—Payments to Sponsors of Retiree Prescription Drug Plans § 423.880 Basis and scope. (a) Basis. (b) Scope. § 423.882 Definitions. For the purposes of this subpart, the following definitions apply: Actually paid Administrative costs Allowable retiree costs Benefit option Employment-based retiree health coverage Gross covered retiree plan-related prescription drug costs, or gross retiree costs, (1) The share of prices paid by the qualified retiree prescription drug plan that is received as reimbursement by the pharmacy or by an intermediary contracting organization, and reimbursement paid to indemnify a qualifying covered retiree when the reimbursement is associated with a qualifying covered retiree obtaining Part D drugs under the qualified retiree prescription drug plan. (2) All amounts paid under the qualified retiree prescription drug plan by or on behalf of a qualified covered retiree (such as the deductible, coinsurance, cost sharing, or, for years prior to 2025, amounts between the initial coverage limit and the out-of-pocket threshold) in order to obtain Part D drugs that are covered under the qualified retiree prescription drug plan. (3) All amounts paid by manufacturers under the Manufacturer Discount Program (as defined at § 423.100). Group health (1) A Federal or State governmental plan, which is a plan providing medical care that is established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision of a State (including a county or local government), or by any agency or instrumentality or any of the foregoing, including a health benefits plan offered under chapter 89 of Title 5, United States Code (the Federal Employee Health Benefit Plan (FEHBP)). (2) A collectively bargained plan, which is a plan providing medical care that is established or maintained under or by one or more collective bargaining agreements. (3) A church plan, which is a plan providing medical care that is established and maintained for its employees or their beneficiaries by a church or by a convention or association of churches that is exempt from tax under section 501 of the Internal Revenue Code of 1986 (26 U.S.C. 501). (4) An account-based medical plan such as a Health Reimbursement Arrangement (HRA) as defined in Internal Revenue Service Notice 2002-45, 2002-28 I.R.B. 93, a health Flexible Spending Arrangement (FSA) as defined in Internal Revenue Code (Code) section 106(c)(2), a health savings account (HSA) as defined in Code section 223, or an Archer MSA as defined in Code section 220, to the extent they are subject to ERISA as employee welfare benefit plans providing medical care (or would be subject to ERISA but for the exclusion in ERISA section 4(b), 29 U.S.C.§ . § 1003(b), for governmental plans or church plans). Part D drug Part D eligible individual Qualified retiree prescription drug plan Qualifying covered retiree Retiree drug subsidy amount, or subsidy payment Standard prescription drug coverage Sponsor Sponsor agreement [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1549, Jan. 12, 2009; 77 FR 1883, Jan. 12, 2012; 91 FR 17591, Apr. 6, 2026] § 423.884 Requirements for qualified retiree prescription drug plans. (a) General. (1) An actuarial attestation is submitted in accordance with paragraph (d) of this section. The rules for submitting attestations as part of subsidy applications are described in paragraph (c) of this section. (2) Part D eligible individuals covered under the plan are provided with creditable coverage notices in accordance with § 423.56. (3) Records are maintained and made available for audit in accordance with paragraph (f) of this section and § 423.888(d). (b) Disclosure of information. (c) Application Submitting an application. (2) Required information. (i) Employer Tax ID Number (if applicable). (ii) Sponsor name and address. (iii) Contact name and email address. (iv) Actuarial attestation that satisfies the standards specified in paragraph (d) of this section and any other supporting documentation required by CMS for each qualified retiree prescription drug plan for which the sponsor seeks subsidy payments. (v) A list of all individuals the sponsor believes (using information reasonably available to the sponsor when it submits the application) are qualifying covered retirees enrolled in each prescription drug plan (including spouses and dependents, if Medicare-eligible), along with the information about each person listed below in this paragraph: (A) Full name. (B) Health Insurance Claim (HIC) number or Social Security number. (C) Date of birth. (D) Sex. (E) Relationship to the retired employee. (vi) A sponsor may satisfy paragraph (c)(2)(v) of this section by entering into a voluntary data sharing agreement (VDSA) with CMS (or any other arrangement CMS may make available). (vii) A signed sponsor agreement. (viii) Any other information specified by CMS. (3) Terms and conditions. (i) Comply with the terms and conditions of eligibility for a subsidy payment set forth in this regulation and in any related CMS guidance; (ii) Acknowledge that at the same time CMS releases Part C and Part D summary payment data in accordance with §§ 422.504(n) and 423.505(o) CMS will also release Part D retiree drug subsidy payment data for the most recently reconciled year including the name of the eligible sponsor, the total gross aggregate dollar amount of the CMS subsidy, and the number of eligible retirees; (iii) Acknowledge that the information in the application is being provided to obtain Federal funds; and (iv) Require that all subcontractors, including plan administrators, acknowledge that information provided in connection with the subcontract is used for purposes of obtaining Federal funds. (4) Signature by sponsor. (5) Timing General rule. (ii) Transition rule. (6) Updates. (7) Data match. (i) Matches the names and identifying information for the individuals submitted as qualifying covered retirees with a CMS database(s) to determine which retirees are Part D eligible individuals who are not enrolled in a Part D plan. (ii) Provides information concerning the results of the search in paragraph (c)(7)(i) of this paragraph (such as names and other identifying information, if necessary) to the sponsor (or to a designee). (d) Actuarial attestation—general. (1) Contents of the attestation include the following assurances: (i) The actuarial gross value of the retiree prescription drug coverage under the plan for the plan year is at least equal to the actuarial gross value of the defined standard prescription drug coverage under Part D for the plan year in question, for years prior to 2025, not taking into account the value of any discount or coverage provided during the coverage gap and for 2025 and subsequent years, not taking into account the value of any discount provided under the Manufacturer Discount Program. (ii) The actuarial net value of the retiree prescription drug coverage under the plan for that plan year is at least equal to the actuarial net value of the defined standard prescription drug coverage under Part D for that plan year in question, for years prior to 2025, not taking into account the value of any discount or coverage provided during the coverage gap and for 2025 and subsequent years, not taking into account the value of any discount provided under the Manufacturer Discount Program. (iii) The actuarial values must be determined using the methodology in paragraph (d)(5) of this section. (2) The attestation must be made by a qualified actuary who is a member of the American Academy of Actuaries. Applicants may use qualified outside actuaries, including (but not limited to) actuaries employed by the plan administrator or an insurer providing benefits under the plan. If an applicant uses an outside actuary, the attestation can be submitted directly by the outside actuary or by the plan sponsor. (3) The attestation must be signed by a qualified actuary and must state that the attestation is true and accurate to the best of the attester's knowledge and belief. (4) The attestation must contain an acknowledgement that the information being provided in the attestation is being used to obtain Federal funds. (5) Methodology Basis of the attestation. (ii) Specific rules for determining the actuarial value of the sponsor's retiree prescription drug coverage. (B) The net value of coverage provided under the sponsor's retiree prescription drug plan must be determined by reducing the gross value of such coverage as determined under paragraph (d)(5)(ii)(A) of this section by the expected premiums paid by Part D eligible individuals who are plan participants or their spouses and dependents. For sponsors of plans that charge a single, integrated premium or contribution to their retirees for both prescription drug coverage and other types of medical coverage, the attestation must allocate a portion of the premium/contribution to prescription drug coverage under the sponsor's plan, under any method determined by the sponsor or its actuary. (iii) Specific rules for calculating the actuarial value of defined standard prescription drug coverage under Part D. (B) To calculate the net value of defined standard prescription drug coverage under Part D, the gross value of defined standard prescription drug coverage under Part D as determined by paragraph (d)(5)(iii)(A) of this section is reduced by the following amounts: ( 1 ( 2 2 (C) The valuation of defined standard prescription drug coverage for a given plan year is based on the initial coverage limit cost-sharing and out-of-pocket threshold for defined standard prescription drug coverage under Part D in effect at the start of such plan year, for years prior to 2025, not taking into account the value of any discount or coverage provided during the coverage gap and for 2025 and subsequent years, not taking into account the value of any discount provided under the Manufacturer Discount Program. (D) Example: If a sponsor's retiree prescription drug plan operates under a plan year that ends March 30, the sponsor has a choice of basing the attestation for the year April 1, 2007 through March 30, 2008 on either the initial coverage limit, cost-sharing amounts, and out-of-pocket threshold amounts that apply to defined standard prescription drug coverage under Part D in CY 2007, or the amounts announced for CY 2008. However, in order to use the amounts applicable in CY 2007, the sponsor must submit the attestation within 60 days after the publication of the Part D coverage limits for CY 2008. If the attestation is submitted more than 60 days after the 2008 coverage limits have been published, the CY 2008 coverage limits would apply. (iv) Employment-based retiree health coverage with two or more benefit options. For the assurance required under paragraph (d)(1)(i) of this section, the assurance must be provided separately for each benefit option for which the sponsor requests a subsidy under this subpart. For the assurance required under paragraph (d)(1)(ii) of this section, the assurance may be provided either separately for each benefit option for which the sponsor provided assurances under paragraph (d)(1)(i) of this section, or in the aggregate for all benefit options (or for a subset of the benefit options). (6) Timing Annual submission. (ii) Submission following material change. The attestation must be provided no later than 90 days before the implementation of a material change to the drug coverage of the sponsor's retiree prescription drug plan. For purposes of this clause, the term “material change” means the addition of a benefit option that does not impact the actuarial value of the retiree prescription drug coverage under the sponsor's plan such that it no longer meets the standards set forth in paragraph (d)(1)(i) or (ii) of this section. (7) Notice of failure to continue to satisfy the actuarial equivalence standards. A sponsor must notify CMS, in a form and manner specified by CMS, no later than 90 days before the implementation of a change to the drug coverage that impacts the actuarial value of the retiree prescription drug coverage under the sponsor's plan such that it no longer meets the standards set forth in paragraph (d)(1)(i) or (ii) of this section. (e) Disclosure of creditable prescription drug coverage status. (f) Access to records for audit. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20508, Apr. 15, 2008; 76 FR 21576, Apr. 15, 2011; 91 FR 17591, Apr. 6, 2026] § 423.886 Retiree drug subsidy amounts. (a) Amount of subsidy payment. (2) Transition provision. (b) Cost threshold and cost limit. (1) Subject to paragraph (b)(3) of this section, the cost threshold under this section is equal to $250 for plan years that end in 2006. (2) Subject to paragraph (b)(3) of this section, the cost limit under this section is equal to $5,000 for plan years that end in 2006. (3) The cost threshold and cost limit specified in paragraphs (b)(1) and (b)(2) of this section, for plan years that end in years after 2006, are adjusted in the same manner as the annual Part D deductible and the annual Part D out-of-pocket threshold are adjusted annually under § 423.104(d)(1)(ii) and (d)(5)(iii)(B), respectively. § 423.888 Payment methods, including provision of necessary information. (a) Basis. (b) General payment rules. (1) Timing. (i) Monthly or quarterly payments. (ii) Annual payments. (2) Submission of cost data Monthly or quarterly payments. (ii) Annual payments. (3) Payment by CMS. (4) Reconciliation. (ii) Upon receiving this data, CMS adjusts the payments made for the plan year in question in a manner to be specified by CMS. (5) Special rule for insured plans Interim payments. (ii) Final payments. (c) Use of information provided. (d) Maintenance of records. (2) CMS or the OIG may extend the 6-year retention requirement for the records enumerated in paragraph (d)(3) of this section in the event of an ongoing investigation, litigation, or negotiation involving civil, administrative or criminal liability. In addition, the sponsor of the qualified retiree prescription drug plan (or a designee), as applicable, must maintain the records enumerated in paragraph (d)(3) of this section longer than 6 years if it knows or should know that the records are the subject of an ongoing investigation, litigation or negotiation involving civil, administrative or criminal liability. (3) The records that must be retained are: (i) Reports and working documents of the actuaries who wrote the attestation submitted in accordance with § 423.884(a). (ii) All documentation of costs incurred and other relevant information utilized for calculating the amount of the subsidy payment made in accordance with § 423.886, including the underlying claims data. (iii) Any other records specified by CMS. (4) CMS may issue additional guidance addressing recordkeeping requirements, including (but not limited to) the use of electronic media. [70 FR 4525, Jan. 28, 2005, as amended at 74 FR 1549, Jan. 12, 2009] § 423.890 Appeals. (a) Informal written reconsideration Initial determinations. (i) The amount of the subsidy payment. (ii) The actuarial equivalence of the sponsor's retiree prescription drug plan. (iii) If an enrollee in a retiree prescription drug plan is a qualifying covered retiree; or (iv) Any other similar determination (as determined by CMS) that affects eligibility for, or the amount of, a subsidy payment. (2) Effect of an initial determination regarding the retiree drug subsidy. (3) Manner and timing for request. (4) Content of request. (5) Conduct of informal written reconsideration. (6) Decision of the informal written reconsideration. (7) Effect of CMS informal written reconsideration. (b) Right to informal hearing. (1) Manner and timing for request. (2) Content of request. (3) Informal hearing procedures. (ii) The hearing is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not presented with the reconsideration request. The CMS hearing officer is limited to the review of the record that was before CMS when CMS made both its initial and reconsideration determinations. (iii) If CMS did not issue a written reconsideration decision, the hearing officer may request, but not require, a written statement from CMS or its contractors explaining CMS' determination, or CMS or its contractors may, on their own, submit the written statement to the hearing officer. Failure of CMS to submit a written statement does not result in any adverse findings against CMS and may not in any way be taken into account by the hearing officer in reaching a decision. (4) Decision of the CMS hearing officer. (5) Effect of hearing officer decision. (c) Review by the Administrator. (2) The Administrator may review the hearing officer's decision, any written documents submitted to CMS or to the hearing officer, as well as any other information included in the record of the hearing officer's decision and determine whether to uphold, reverse or modify the hearing officer's decision. (3) The Administrator's determination is final and binding. (d) Reopening Ability to reopen. (i) Within 1 year of the date of the notice of determination for any reason. (ii) Within 4 years for good cause. (iii) At any time when the underlying decision was obtained through fraud or similar fault. (2) Notice of reopening. (ii) Notice of reopening specifies the reasons for revision. (3) Effect of reopening. (i) The sponsor requests reconsideration in accordance with paragraph (a) of this section; (ii) A timely request for a hearing is filed under paragraph (b) of this section; (iii) The determination is reviewed by the Administrator in accordance with paragraph (c) of this section; or (iv) The determination is reopened and revised in accordance with paragraph (d) of this section. (4) Good cause. (i) New and material evidence exists that was not readily available at the time the initial determination was made; (ii) A clerical error in the computation of payments was made; or (iii) The evidence that was considered in making the determination clearly shows on its face that an error was made. (5) For purposes of this section, CMS does not find good cause if the only reason for reopening is a change of legal interpretation or administrative ruling upon which the initial determination was made. (6) A decision by CMS not to reopen an initial or reconsidered determination is final and binding and cannot be appealed. § 423.892 Change of ownership. (a) Change of ownership. (1) Partnership. (2) Asset sale. (3) Corporation. (b) Change of ownership, exception. (c) Advance notice requirement. (d) Assignment of agreement. (e) Conditions that apply to assigned agreements. § 423.894 Construction. Nothing in this part must be interpreted as prohibiting or restricting: (a) A Part D eligible individual who is covered under employment-based retiree health coverage, including a qualified retiree prescription drug plan, from enrolling in a Part D plan; (b) A sponsor or other person from paying all or any part of the monthly beneficiary premium (as defined in § 423.286) for a Part D plan on behalf of a retiree (or his or her spouse or dependents); (c) A sponsor from providing coverage to Part D eligible individuals under employment-based retiree health coverage that is— (1) Supplemental to the benefits provided under a Part D plan; or (2) Of higher actuarial value than the actuarial value of standard prescription drug coverage (as defined in § 423.104(d)); or (d) Sponsors from providing for flexibility in the benefit design and pharmacy network for their qualified retiree prescription drug coverage, without regard to the requirements applicable to Part D plans under § 423.104, as long as the requirements under § 423.884 are met. Subpart S—Special Rules for States-Eligibility Determinations for Subsidies and General Payment Provisions § 423.900 Basis and scope. (a) Basis. (b) Scope. § 423.902 Definitions. The following definitions apply to this subpart: Actuarial value of capitated prescription drug benefits (1) State rate setting documentation for drug costs to the full dual eligible population; (2) State encounter and enrollment record databases including cost data; and (3) State managed care plan-specific financial cost data; and (4) Other appropriate data. Applicable growth factor Base year Medicaid per capita expenditures (1) The gross base year (calendar year 2003) per capita Medicaid expenditures for prescription drugs, reduced by the rebate adjustment factor; and (2) The estimated actuarial value of prescription drug benefits provided under a comprehensive capitated Medicaid managed care plan per full-benefit dual eligible for 2003. The per capita payments for full-benefit dual eligibles with comprehensive managed care and non-managed care are weighted by the respective average monthly full dual eligible enrollment populations reported through the Medicaid Statistical Information System (MSIS). Full-benefit dual eligible individual (1) Has coverage for the month under a prescription drug plan under Part D of title XVIII, or under an MA-PD plan under Part C of title XVIII; and (2) Is determined eligible by the State for medical assistance for full benefits under title XIX for the month under any eligibility category covered under the State plan or comprehensive benefits under a demonstration under section 1115 of the Act. (This does not include individuals under Pharmacy Plus demonstrations or under a section 1115 of the Act demonstration that provides pharmacy only benefits to these individuals.) It also includes any individual who is determined by the State to be eligible for medical assistance under section 1902(a)(10)(C) of the Act (medically needy) or section 1902(f) of the Act (States that use more restrictive eligibility criteria than are used by the SSI program) of the Act for any month if the individual was eligible for medical assistance in any part of the month. For the 2003 baseline calculations, the full-benefit dual eligibles are those individuals reported in MSIS as having Medicaid drug benefit coverage and Medicare Part A or Part B coverage. Dual eligibility status will be established by CMS using an algorithm that incorporates the quarterly MSIS dual eligibility code for the prescription fill date and the dual eligibility code for the prior quarter. Gross base year Medicaid per capita expenditures Noncovered drugs Phased-down State contribution factor 1/3 2/3 1/3 2/3 1/3 2/3 Phased-down State contribution payment 1/12 (1) Multiplied by the State medical assistance percentage; (2) Increased for each year (beginning with 2004 up to and including the year involved) by the applicable growth factor; (3) Multiplied by the number of the State's full-benefit dual eligible individuals for the given month; and (4) Multiplied by the phased-down State contribution factor. Rebate adjustment factor State medical assistance percentage [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20509, Apr. 15, 2008] § 423.904 Eligibility determinations for low-income subsidies. (a) General rule. (b) Notification to CMS. (c) Screening for eligibility for Medicare cost-sharing and enrollment under the State plan. (1) Screen individuals who apply for subsidies under this part for eligibility for Medicaid programs that provide assistance with Medicare cost-sharing specified in section 1905(p)(3) of the Act. (2) Offer enrollment for the programs under the State plan (or under a waiver of the plan) for those meeting the eligibility requirements. (d) Application form and process Assistance with application. (i) Low-income subsidy application forms; (ii) Information on the nature of, and eligibility requirements for, the subsidies under this section; and (iii) Assistance with completion of low-income subsidy application forms. (2) Completion of application. (i) Complete all required elements of the application and provide documents, as necessary, consistent with paragraph (d)(3) of this section; and (ii) Certify, under penalty of perjury or similar sanction for false statements, as to the accuracy of the information provided on the application form. (3) The application process and States. (ii) May require that information submitted on the application be subject to verification in a manner the State determines to be most cost-effective and efficient. (4) Other information. § 423.906 General payment provisions. (a) Regular Federal matching. (b) Medicare as primary payer. (1) Part D drugs; or (2) Any cost-sharing obligations under Part D relating to Part D drugs. (3) The effective date of paragraphs (b)(1) and (b)(2) of this section is January 1, 2006. (c) Noncovered drugs. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20509, Apr. 15, 2008] § 423.907 Treatment of territories. (a) General rules. (2) A territory may submit a plan to the Secretary under which medical assistance is to be provided to low-income individuals for the provision of covered Part D drugs. (3) Territories with plans approved by the Secretary will receive increased grants under section 1935(e)(3) of the Act as described in paragraph (c) of this section. (b) Plan requirements. (1) A description of the medical assistance to be provided. (2) The low-income population (income less than 150 percent of the Federal poverty level) to receive medical assistance. (3) An assurance that no more than 10 percent of the amount of the increased grant will be used for administrative expenses. (c) Increased grant amounts. (1) The number of individuals who are entitled to benefits under Part A or enrolled under Part B and who reside in the territory (as determined by the Secretary based on the most recent available data for the beginning of the year); and (2) The sum of the number of individuals in all territories in paragraph (c)(1) of this section with approved plans. (d) Total grant amount. (1) For the last three quarters of fiscal year 2006, $28,125,000; (2) For fiscal year 2007, $37,500,000; and (3) For each subsequent year, the amount for the prior fiscal year increased by the annual percentage increase described in § 423.104(d)(5)(iv). § 423.908 Phased-down State contribution to drug benefit costs assumed by Medicare. This subpart sets forth the requirements for State contributions for Part D drug benefits based on full-benefit dual eligible individual drug expenditures. § 423.910 Requirements. (a) General rule. (b) State contribution payment (1) Calculation of payment. Illustrative Calculation of State Phased-down Monthly Contribution for 2006 Item Illustrative Value Source (i) Gross per capita Medicaid expenditures for prescription drugs for 2003 for full-benefit dual eligibles not receiving drug coverage through a comprehensive Medicaid managed care plan, excluding drugs not covered by Part D $2,000 CY MSIS data (ii) Aggregate State rebate receipts in calendar year 2003 $100,000,000 CMS-64 (iii) Gross State Medicaid expenditures for prescription drugs in calendar year 2003 $500,000,000 CMS-64 (iv) Rebate adjustment factor 0.2000 (2) ÷ (3) (v) Adjusted 2003 gross per capita Medicaid expenditures for prescription drugs for full-benefit dual eligibles not in comprehensive managed care plans $1,600 (1) × [1 − (4)] (vi) Estimated actuarial value of prescription drug benefits under comprehensive capitated managed care plans for full-benefit dual eligibles for 2003 $1,500 To be Determined (vii) Average number of full-benefit dual eligibles in 2003 who did not receive covered outpatient drugs through comprehensive Medicaid managed care plans 90,000 CY MSIS data (viii) Average number of full-benefit dual eligibles in 2003 who received covered outpatient drugs through comprehensive Medicaid managed care plans 10,000 CY MSIS data (ix) Base year State Medicaid per capita expenditures for covered Part D drugs for full-benefit dual eligible individuals (weighted average of (5) and (6)) $1,590 [(7) × (5) + (8) × (6)] ÷ [(7) + (8)] (x) 100 minus Federal Medical Assistance Percentage (FMAP) applicable to month of State contribution (as a proportion) 0.4000 Federal Register (xi) Applicable growth factor (cumulative increase from 2003 through 2006) 50.0% NHE projections (xii) Number of full-benefit dual eligibles for the month 120,000 State submitted data (xiii) Phased-down State reduction factor for the month 0.9000 specified in statute (xiv) Phased-down State contribution for the month $8,586,000 1 / 12 × (9) × (10) × [1 + (11)] × (12) × (13) (2) Method of payment. (c) State Medicaid Statistical Information System (MSIS) Reporting. (d) State monthly enrollment reporting. (1) States must submit an electronic file as specified in paragraph (d)(2) of this section, identifying each full-benefit dual eligible individual enrolled in the State for each month. This file must include specified information including identifying information, a dual eligible type code, available income data and institutional status. The file includes data on enrollment for the current month, plus retroactive changes in enrollment characteristics for prior months. This file will be used by CMS to establish the monthly enrollment for those individuals with Part D drug coverage who are also determined by the State to be eligible for full Medicaid benefits subject to the phased down State contribution payment. This file is due to CMS no later than the last day of the reporting month. For States that do not submit an acceptable file by the end of the month, the phased down State contribution for that month is based on data deemed appropriate by CMS. (2)(i) For the period prior to April 1, 2022, States must submit the file at least monthly and may submit updates to that file on a more frequent basis. (ii) For the period beginning April 1, 2022, States must submit the file at least monthly and must submit updates to that file on a daily basis. (e) Data match. (f) Rebate adjustment factor. (g) Annual per capita drug expenditures. [70 FR 4525, Jan. 28, 2005, as amended at 73 FR 20509, Apr. 15, 2008; 85 FR 25634, May 1, 2020] Subpart T—Appeal Procedures for Civil Money Penalties Source: 72 FR 68736, Dec. 5, 2007, unless otherwise noted. § 423.1000 Basis and scope. (a) Statutory basis. (2) Section 1857 (g) of the Act provides that, for Part D sponsors found to be out of compliance with the requirements in part 423, specified remedies may be imposed instead of, or in addition to, termination of the Part D sponsor's contract. Section 1857(g)(4) of the Act makes certain provisions of section 1128A of the Act applicable to civil money penalties imposed on Part D sponsors. (3)(i) CMS must impose a civil money penalty on a manufacturer that fails to provide applicable discounts for applicable drugs of the manufacturer dispensed to applicable beneficiaries in accordance with the terms of such manufacturer's— (A) Coverage Gap Discount Program agreement, in accordance with section 1860D-14A(e)(2) of the Act; and (B) Manufacturer Discount Program agreement, in accordance with section 1860D-14C(e) of the Act. (ii) The provisions of section 1128A (other than subsections (a) and (b)) of the Act apply to a civil money penalty under paragraph (a)(3)(i) of this section. (b) [Reserved] [72 FR 68736, Dec. 5, 2007, as amended 77 FR 22171, Apr. 12, 2012; 91 FR 17591, Apr. 6, 2026] § 423.1002 Definitions. As used in this subpart— Affected party ALJ Departmental Appeals Board or Board Part D sponsor [72 FR 68736, Dec. 5, 2007, as amended 77 FR 22171, Apr. 12, 2012; 91 FR 17592, Apr. 6, 2026] § 423.1004 Scope and applicability. (a) Scope. (b) Initial determinations by CMS. § 423.1006 Appeal rights. (a) Appeal rights of Part D sponsors. (2) Part D sponsors may request judicial review of the Departmental Appeals Board's decision that imposes a CMP. (b) [Reserved] § 423.1008 Appointment of representatives. (a) An affected party may appoint as its representative anyone not disqualified or suspended from acting as a representative in proceedings before the Secretary or otherwise prohibited by law. (b) If the representative appointed is not an attorney, the party must file written notice of the appointment with the ALJ or the Departmental Appeals Board. (c) If the representative appointed is an attorney, the attorney's statement that he or she has the authority to represent the party is sufficient. § 423.1010 Authority of representatives. (a) A representative appointed and qualified in accordance with 423.1008 may, on behalf of the represented party— (1) Give and accept any notice or request pertinent to the proceedings set forth in this part; (2) Present evidence and allegations as to facts and law in any proceedings affecting that party to the same extent as the party; and (3) Obtain information to the same extent as the party. (b) A notice or request may be sent to the affected party, to the party's representative, or to both. A notice or request sent to the representative has the same force and effect as if it had been sent to the party. § 423.1012 Fees for services of representatives. Fees for any services performed on behalf of an affected party by an attorney appointed and qualified in accordance with 423.1008 are not subject to the provisions of section 206 of Title II of the Act, which authorizes the Secretary to specify or limit those fees. § 423.1014 Charge for transcripts. A party that requests a transcript of prehearing or hearing proceedings or Board review must pay the actual or estimated cost of preparing the transcript unless, for good cause shown by that party, the payment is waived by the ALJ or the Departmental Appeals Board, as appropriate. § 423.1016 Filing of briefs with the Administrative Law Judge or Departmental Appeals Board, and opportunity for rebuttal. (a) Filing of briefs and related documents. (b) Opportunity for rebuttal. (2) The ALJ or the Board will grant an opportunity to reply to the rebuttal statement only if the party shows good cause. [72 FR 68736, Dec. 5, 2007, as amended at 79 FR 29966, May 23, 2014] § 423.1018 Notice and effect of initial determinations. (a) Notice of initial determination General rule. (b) Effect of initial determination. (1) The affected party requests a hearing; or (2) CMS revises its decision. § 423.1020 Request for hearing. (a) Manner and timing of request. (2) The Part D sponsor or its legal representative or other authorized official must file the request, in writing, to the appropriate Departmental Appeals Board office, with a copy to CMS, within 60 calendar days after receipt of the notice of initial determination, to request a hearing before an ALJ to appeal any determination by CMS to impose a civil money penalty. (b) Content of request for hearing. (1) Identify the specific issues, and the findings of fact and conclusions of law with which the affected party disagrees; and (2) Specify the basis for each contention that a CMS finding or conclusion of law is incorrect. [72 FR 68736, Dec. 5, 2007, as amended at 79 FR 29966, May 23, 2014] § 423.1022 Parties to the hearing. The parties to the hearing are the affected party and CMS, as appropriate. § 423.1024 Designation of hearing official. (a) The Chair of the Departmental Appeals Board, or his or her delegate, designates an ALJ or a member or members of the Departmental Appeals Board to conduct the hearing. (b) If appropriate, the Chair or the delegate may substitute another ALJ or another member or other members of the Departmental Appeals Board to conduct the hearing. (c) As used in this part, “ALJ” includes a member or members of the Departmental Appeals Board who are designated to conduct a hearing. § 423.1026 Disqualification of Administrative Law Judge. (a) An ALJ may not conduct a hearing in a case in which he or she is prejudiced or partial to the affected party or has any interest in the matter pending for decision. (b) A party that objects to the ALJ designated to conduct the hearing must give notice of its objections at the earliest opportunity. (c) The ALJ will consider the objections and decide whether to withdraw or proceed with the hearing. (1) If the ALJ withdraws, another ALJ will be designated to conduct the hearing. (2) If the ALJ does not withdraw, the objecting party may, after the hearing, present its objections to the Departmental Appeals Board as reasons for changing, modifying, or reversing the ALJ's decision or providing a new hearing before another ALJ. § 423.1028 Prehearing conference. (a) At any time before the hearing, the ALJ may call a prehearing conference for the purpose of delineating the issues in controversy, identifying the evidence and witnesses to be presented at the hearing, and obtaining stipulations accordingly. (b) On the request of either party or on his or her own motion, the ALJ may adjourn the prehearing conference and reconvene at a later date. § 423.1030 Notice of prehearing conference. (a) Timing of notice. (b) Content of notice. (c) Additional issues. (1) Either party gives timely notice to that effect to the ALJ and the other party; or (2) The ALJ raises the issues in the notice of prehearing conference or at the conference. § 423.1032 Conduct of prehearing conference. (a) The prehearing conference is open to the affected party or its representative, to the CMS representatives and their technical advisors, and to any other persons whose presence the ALJ considers necessary or proper. (b) The ALJ may accept the agreement of the parties as to the following: (1) Facts that are not in controversy. (2) Questions that have been resolved favorably to the affected party after the determination in dispute. (3) Remaining issues to be resolved. (c) The ALJ may request the parties to indicate the following: (1) The witnesses that will be present to testify at the hearing. (2) The qualifications of those witnesses. (3) The nature of other evidence to be submitted. § 423.1034 Record, order, and effect of prehearing conference. (a) Record of prehearing conference. (2) The record may be transcribed at the request of either party or the ALJ. (b) Order and opportunity to object. (2) Copies of the order are sent to all parties and the parties have 10 calendar days to file objections to the order. (3) After the 10 calendar days have elapsed, the ALJ settles the order. (c) Effect of prehearing conference. § 423.1036 Time and place of hearing. (a) The ALJ fixes a time and place for the hearing and gives the parties written notice at least 10 calendar days before the scheduled date. (b) The notice informs the parties of the general and specific issues to be resolved at the hearing. § 423.1038 Change in time and place of hearing. (a) The ALJ may change the time and place for the hearing either on his or her own initiative or at the request of a party for good cause shown, or may adjourn or postpone the hearing. (b) The ALJ may reopen the hearing for receipt of new evidence at any time before mailing the notice of hearing decision. (c) The ALJ gives the parties reasonable notice of any change in time or place or any adjournment or reopening of the hearing. § 423.1040 Joint hearings. When two or more affected parties have requested hearings and the same or substantially similar matters are at issue, the ALJ may, if all parties agree, fix a single time and place for the prehearing conference or hearing and conduct all proceedings jointly. If joint hearings are held, a single record of the proceedings is made and a separate decision issued with respect to each affected party. § 423.1042 Hearing on new issues. (a) Basic rules. (2) The ALJ may consider new issues even if CMS has not made initial determinations on them, and even if they arose after the request for hearing was filed or after a prehearing conference. (3) The ALJ may give notice of hearing on new issues at any time after the hearing request is filed and before the hearing record is closed. (b) Notice and conduct of hearing on new issues. (2) After giving notice, the ALJ will, except as provided in paragraph (c) of this section, proceed to hearing on new issues in the same manner as on an issue raised in the request for hearing. (c) Remand to CMS. § 423.1044 Subpoenas. (a) Basis for issuance. (b) Timing of request by a party. (c) Content of request. (1) Identify the witnesses or documents to be produced; (2) Describe their addresses or location with sufficient particularity to permit them to be found; and (3) Specify the pertinent facts the party expects to establish by the witnesses or documents, and indicate why those facts could not be established without use of a subpoena. (d) Method of issuance. § 423.1046 Conduct of hearing. (a) Participants in the hearing. (b) Hearing procedures. (2) If the ALJ believes that there is relevant and material evidence available which has not been presented at the hearing, he may, at any time before mailing of notice of the decision, reopen the hearing to receive that evidence. (3) The ALJ decides the order in which the evidence and the arguments of the parties are presented and the conduct of the hearing. (4) CMS has the burden of coming forward with evidence related to disputed findings that is sufficient (together with any undisputed findings and legal authority) to establish a prima facie case that CMS has a legally sufficient basis for its determination. (5) The affected party has the burden of coming forward with evidence sufficient to establish the elements of any affirmative argument or defense which it offers. (6) The affected party bears the ultimate burden of persuasion. To prevail, the affected party must prove by a preponderance of the evidence on the record as a whole that there is no basis for the determination. (c) Review of the penalty. (1) Set a penalty of zero or reduce a penalty to zero, or (2) Review the exercise of discretion by CMS to impose a civil money penalty. § 423.1048 Evidence. Evidence may be received at the hearing even though inadmissible under the rules of evidence applicable to court procedure. The ALJ rules on the admissibility of evidence. § 423.1050 Witnesses. Witnesses at the hearing testify under oath or affirmation. The representative of each party is permitted to examine his or her own witnesses subject to interrogation by the representative of the other party. The ALJ may ask any questions that he or she deems necessary. The ALJ rules upon any objection made by either party as to the propriety of any question. § 423.1052 Oral and written summation. The parties to a hearing are allowed a reasonable time to present oral summation and to file briefs or other written statements of proposed findings of fact and conclusions of law. Copies of any briefs or other written statements must be sent in accordance with 423.1016. § 423.1054 Record of hearing. A complete record of the proceedings at the hearing is made and transcribed in all cases. § 423.1056 Waiver of right to appear and present evidence. (a) Waiver procedures. (2) If the affected party wishes to withdraw a waiver, it may do so, for good cause, at any time before the ALJ mails notice of the hearing decision. (b) Effect of waiver. (1) The ALJ believes that the testimony of the affected party or its representatives or other witnesses is necessary to clarify the facts at issue. (2) CMS shows good cause for requiring the presentation of oral evidence. (c) Dismissal for failure to appear. (d) Hearing without oral testimony. (1) Make a record of the relevant written evidence that was considered in making the determination being appealed, and of any additional evidence submitted by the parties; (2) Furnish to each party copies of the additional evidence submitted by the other party; and (3) Give both parties a reasonable opportunity for rebuttal. (e) Handling of briefs and related statements. § 423.1058 Dismissal of request for hearing. (a) The ALJ may, at any time before mailing the notice of the decision, dismiss a hearing request if a party withdraws its request for a hearing or the affected party asks that its request be dismissed. (b) An affected party may request a dismissal by filing a written notice with the ALJ. § 423.1060 Dismissal for abandonment. (a) The ALJ may dismiss a request for hearing if it is abandoned by the party that requested it. (b) The ALJ may consider a request for hearing to be abandoned if the party or its representative— (1) Fails to appear at the prehearing conference or hearing without having previously shown good cause for not appearing; and (2) Fails to respond, within 10 calendar days after the ALJ sends a “show cause” notice, with a showing of good cause. § 423.1062 Dismissal for cause. On his or her own motion, or on the motion of a party to the hearing, the ALJ may dismiss a hearing request either entirely or as to any stated issue, under any of the following circumstances: (a) Res judicata. (b) No right to hearing. (c) Hearing request not timely filed. § 423.1064 Notice and effect of dismissal and right to request review. (a) Notice of the ALJ's dismissal action is mailed to the parties. The notice advises the affected party of its right to request that the dismissal be vacated as provided in 423.1066. (b) The dismissal of a request for hearing is binding unless it is vacated by the ALJ or the Departmental Appeals Board. § 423.1066 Vacating a dismissal of request for hearing. An ALJ may vacate any dismissal of a request for hearing if a party files a request to that effect within 60 calendar days from receipt of the notice of dismissal and shows good cause for vacating the dismissal. § 423.1068 Administrative Law Judge's decision. (a) Timing, basis and content. (b) Notice and effect. (1) A party requests review by the Departmental Appeals Board within the time period specified in 423.1076, and the Board reviews the case; (2) The Departmental Appeals Board denies the request for review and the party seeks judicial review by filing an action in a United States District Court or, in the case of a civil money penalty, in a United States Court of Appeals; (3) The decision is revised by an ALJ or the Department Appeals Board; or (4) The decision is a recommended decision directed to the Board. § 423.1070 Removal of hearing to Departmental Appeals Board. (a) At any time before the ALJ receives oral testimony, the Board may remove to itself any pending request for a hearing. (b) Notice of removal is mailed to each party. (c) The Board conducts the hearing in accordance with the rules that apply to ALJ hearings under this subpart. § 423.1072 Remand by the Administrative Law Judge. (a) If CMS requests remand, and the affected party concurs in writing or on the record, the ALJ may remand any case properly before him or her to CMS for a determination satisfactory to the affected party. (b) The ALJ may remand at any time before notice of hearing decision is mailed. § 423.1074 Right to request Departmental Appeals Board review of Administrative Law Judge's decision or dismissal. Either of the parties has a right to request Departmental Appeals Board review of the ALJ's decision or dismissal order, and the parties are so informed in the notice of the ALJ's action. § 423.1076 Request for Departmental Appeals Board review. (a) Manner and time of filing. (2) The requesting party or its representative or other authorized official must file the request with the DAB within 60 calendar days from receipt of the notice of decision or dismissal, unless the Board, for good cause shown by the requesting party, extends the time for filing. (b) Content of request for review. § 423.1078 Departmental Appeals Board action on request for review. (a) Request by CMS. (b) Request by the affected party. (1) The affected party requests dismissal of its request for review. (2) The affected party did not file timely or show good cause for late filing. (3) The affected party does not have a right to review. (4) A previous determination or decision, based on the same facts and law, and regarding the same issue, has become final through judicial affirmance or because the affected party failed to timely request reconsideration, hearing, Board review, or judicial review, as appropriate. (c) Effect of dismissal. (d) Review panel. § 423.1080 Procedures before the Departmental Appeals Board on review. The parties are given, upon request, a reasonable opportunity to file briefs or other written statements as to fact and law, and to appear before the Departmental Appeals Board to present evidence or oral arguments. Copies of any brief or other written statement must be sent in accordance with 423.1016. § 423.1082 Evidence admissible on review. (a) The Departmental Appeals Board may admit evidence into the record in addition to the evidence introduced at the ALJ hearing, (or the documents considered by the ALJ if the hearing was waived), if the Board considers that the additional evidence is relevant and material to an issue before it. (b) If it appears to the Board that additional relevant evidence is available, the Board will require that it be produced. (c) Before additional evidence is admitted into the record— (1) Notice is mailed to the parties (unless they have waived notice) stating that evidence will be received regarding specified issues; and (2) The parties are given a reasonable time to comment and to present other evidence pertinent to the specified issues. (d) If additional evidence is presented orally to the Board, a transcript is prepared and made available to any party upon request. § 423.1084 Decision or remand by the Departmental Appeals Board. (a) When the Departmental Appeals Board reviews an ALJ's decision or order of dismissal, or receives a case remanded by a court, the Board may either issue a decision or remand the case to an ALJ for a hearing and decision or a recommended decision for final decision by the Board. (b) In a remanded case, the ALJ initiates additional proceedings and takes other actions as directed by the Board in its order of remand, and may take other action not inconsistent with that order. (c) Upon completion of all action called for by the remand order and any other consistent action, the ALJ promptly makes a decision or, as specified by the Board, certifies the case to the Board with a recommended decision. (d) The parties have 20 calendar days from the date of a notice of a recommended decision to submit to the Board any exception, objection, or comment on the findings of fact, conclusions of law, and recommended decision. (e) After the 20-calendar day period, the Board issues its decision adopting, modifying or rejecting the ALJ's recommended decision. (f) If the Board does not remand the case to an ALJ, the following rules apply: (1) The Board's decision— (i) Is based upon the evidence in the hearing record and any further evidence that the Board receives during its review; (ii) Is in writing and contains separate numbered findings of fact and conclusions of law; and (iii) May modify, affirm, or reverse the ALJ's decision. (2) A copy of the Board's decision is mailed to each party. § 423.1086 Effect of Departmental Appeals Board Decision. (a) General rule. (1) The affected party has a right to judicial review and timely files a civil action in a United States District Court or, in the case of a civil money penalty, in a United States Court of Appeals; or (2) The Board reopens and revises its decision in accordance with 423.1092. (b) Right to judicial review. (c) Special rules: Civil money penalty. § 423.1088 Extension of time for seeking judicial review. (a) Any affected party that is dissatisfied with an Departmental Appeals Board decision and is entitled to judicial review must commence civil action within 60 calendar days from receipt of the notice of the Board's decision, unless the Board extends the time in accordance with paragraph (c) of this section. (b) The request for extension must be filed in writing with the Board before the 60-calendar day period ends. (c) For good cause shown, the Board may extend the time for commencing civil action. § 423.1090 Basis, timing, and authority for reopening an Administrative Law Judge or Board decision. (a) Basis and timing for reopening. (b) Authority to reopen. (2) A decision of an ALJ may be reopened by that ALJ, by another ALJ if that one is not available, or by the Departmental Appeals Board. For purposes of this paragraph, an ALJ is considered to be unavailable if the ALJ has died, terminated employment, or been transferred to another duty station, is on leave of absence, or is unable to conduct a hearing because of illness. § 423.1092 Revision of reopened decision. (a) Revision based on new evidence. If a reopened decision is to be revised on the basis of new evidence that was not included in the record of that decision, the ALJ or the Departmental Appeals Board— (1) Notifies the parties of the proposed revision; and (2) Unless the parties waive their right to hearing or appearance— (i) Grants a hearing in the case of an ALJ revision; and (ii) Grants opportunity to appear in the case of a Board revision. (b) Basis for revised decision and right to review. (2) If the decision is revised by an ALJ, the Departmental Appeals Board may review that revised decision at the request of either party or on its own motion. § 423.1094 Notice and effect of revised decision. (a) Notice. (b) Effect ALJ revised decision. (2) Departmental Appeals Board revised decision. [72 FR 68726, Dec. 5, 2007, as amended at 85 FR 72909, Nov. 16, 2020] Subpart U—Reopening, ALJ Hearings and ALJ and Attorney Adjudicator Decisions, Council Review, and Judicial Review Source: 74 FR 65363, Dec. 9, 2009, unless otherwise noted. § 423.1968 Scope. This subpart sets forth the requirements relating to the following: (a) Part D sponsors, the Part D IRE, ALJs and attorney adjudicators, and the Council with respect to reopenings. (b) ALJs with respect to hearings and decisions or decisions of attorney adjudicators if no hearing is conducted. (c) The Council with respect to review of Part D appeals. (d) Part D enrollees' rights with respect to reopenings, ALJ hearings and ALJ or attorney adjudicator reviews, Council reviews, and judicial review by a Federal District Court. [82 FR 5125, Jan. 17, 2017] §§ 423.1970-423.1976 [Reserved] § 423.1978 Reopening determinations and decisions. (a) A coverage determination or redetermination made by a Part D plan sponsor, a reconsideration made by the independent review entity specified in § 423.600, or the decision of an ALJ or attorney adjudicator or the Council that is otherwise binding may be reopened and revised by the entity that made the determination or decision as provided in § 423.1980 through § 423.1986. (b) The filing of a request for reopening does not relieve the Part D plan sponsor of its obligation to make payment or provide benefits as specified in § 423.636 or § 423.638 of this chapter. (c) Once an entity issues a revised determination or decision, the revisions made by the decision may be appealed. (d) A decision not to reopen by the Part D plan sponsor or any other entity is not subject to review. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5126, Jan. 17, 2017] § 423.1980 Reopening of coverage determinations, redeterminations, reconsiderations, decisions, and reviews. (a) General rules. (i) A Part D plan sponsor to revise the coverage determination or redetermination; (ii) An IRE to revise the reconsideration; (iii) An ALJ or attorney adjudicator to revise his or her decision; or (iv) The Council to revise the ALJ or attorney adjudicator decision, or its review decision. (2) When an enrollee has filed a valid request for an appeal of a coverage determination, redetermination, reconsideration, ALJ or attorney adjudicator decision, or Council review, no adjudicator has jurisdiction to reopen an issue that is under appeal until all appeal rights for that issue are exhausted. Once the appeal rights for the issue have been exhausted, the Part D plan sponsor, IRE, ALJ or attorney adjudicator, or Council may reopen as set forth in this section. (3) Consistent with § 423.1978(b), the filing of a request for reopening does not relieve the Part D plan sponsor of its obligation to make payment or provide benefits as specified in § 423.636 or § 423.638. (4) Consistent with § 423.1978(d), the Part D plan sponsor's, IRE's, ALJ's or attorney adjudicator's, or Council's decision on whether to reopen is binding and not subject to appeal. (5) A determination under the Medicare secondary payer provisions of section 1862(b) of the Act that Medicare has an MSP recovery claim for drug claims that were already reimbursed by the Part D plan sponsor is not a reopening. (b) Timeframes and requirements for reopening coverage determinations and redeterminations initiated by a Part D plan sponsor. (1) Within 1 year from the date of the coverage determination or redetermination for any reason. (2) Within 4 years from the date of the coverage determination or redetermination for good cause as defined in § 423.1986. (3) At any time if there exists reliable evidence as defined in § 405.902 of this chapter that the coverage determination was procured by fraud or similar fault as defined in § 405.902. (c) Timeframe and requirements for reopening coverage determinations and redeterminations requested by an enrollee. (2) An enrollee may request that a Part D plan sponsor reopen its coverage determination or redetermination within 4 years from the date of the coverage determination or redetermination for good cause in accordance with § 423.1986. (d) Time frame and requirements for reopening reconsiderations, decisions and reviews initiated by an IRE, ALJ or attorney adjudicator, or the Council. (2) An ALJ or attorney adjudicator may reopen his or her decision, or the Council may reopen an ALJ or attorney adjudicator decision on its own motion within 180 calendar days from the date of the decision for good cause in accordance with § 423.1986. If the decision was procured by fraud or similar fault, then the ALJ or attorney adjudicator may reopen his or her decision, or the Council may reopen an ALJ or attorney adjudicator decision at any time. (3) The Council may reopen its review decision on its own motion within 180 calendar days from the date of the review decision for good cause in accordance with § 423.1986. If the Council's decision was procured by fraud or similar fault, then the Council may reopen at any time. (e) Time frames and requirements for reopening reconsiderations, decisions, and reviews requested by an enrollee or a Part D plan sponsor. (2) An enrollee who received an ALJ's or attorney adjudicator's decision or a Part D plan sponsor may request that an ALJ or attorney adjudicator reopen his or her decision, or the Council reopen an ALJ or attorney adjudicator decision, within 180 calendar days from the date of the decision for good cause in accordance with § 423.1986. (3) An enrollee who received a Council decision or a Part D plan sponsor may request that the Council reopen its decision within 180 calendar days from the date of the review decision for good cause in accordance with § 423.1986. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5126, Jan. 17, 2017] § 423.1982 Notice of a revised determination or decision. (a) When adjudicators initiate reopenings. (1) The Part D plan sponsor, IRE, ALJ or attorney adjudicator, or the Council must mail its revised determination or decision to the enrollee at his or her last known address. (2) The IRE, ALJ or attorney adjudicator, or the Council must mail its revised determination or decision to the Part D plan sponsor. (3) An adverse revised determination or decision must state the rationale and basis for the reopening and revision and any right to appeal. (b) Reopenings initiated at the request of an enrollee or a Part D plan sponsor. (2) The IRE, ALJ or attorney adjudicator or the Council must mail its revised determination or decision to the Part D plan sponsor. (3) An adverse revised determination or decision must state the rationale and basis for the reopening and revision and any right to appeal. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5126, Jan. 17, 2017] § 423.1984 Effect of a revised determination or decision. (a) Coverage determinations. (b) Redeterminations. (c) Reconsiderations. (d) ALJ or attorney adjudicator decisions. (e) Council review. (f) Appeal of only the portion of the determination or decision revised by the reopening. (g) Effect of a revised determination or decision. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5127, Jan. 17, 2017; 84 FR 19872, May 7, 2019] § 423.1986 Good cause for reopening. (a) Establishing good cause. (1) There is new and material evidence that— (i) Was not available or known at the time of the determination or decision; and (ii) May result in a different conclusion; or (2) The evidence that was considered in making the determination or decision clearly shows on its face that an obvious error was made at the time of the determination or decision. (b) Change in substantive law or interpretative policy. General rule. (2) An adjudicator may reopen a determination or decision to apply the current law or CMS or the Part D plan sponsor policy rather than the law or CMS or the Part D plan sponsor policy at the time the coverage determination is made in situations where the enrollee has not yet received the drug and the current law or CMS or the Part D plan sponsor policy may affect whether the drug should be received. (c) Third party payer error. § 423.1990 Expedited access to judicial review. (a) Process for expedited access to judicial review. (2) In order to obtain expedited access to judicial review (EAJR), a review entity must certify that the Council does not have the authority to decide the question of law or regulation relevant to the matters in dispute and that there is no material issue of fact in dispute. (3) An enrollee may make a request for EAJR only once with respect to a question of law or regulation for a specific matter in dispute in an appeal. (b) Conditions for making the expedited appeals request. (i) An IRE has made a reconsideration determination and the enrollee has filed a request for an ALJ hearing in accordance with § 423.2002 and a decision, dismissal order, or remand order of the ALJ or an attorney adjudicator has not been issued; or (ii) An ALJ or attorney adjudicator has made a decision and the enrollee has filed a request for Council review in accordance with § 423.2102 and a final decision, dismissal order, or remand order of the Council has not been issued. (2) The requestor is an enrollee. (3) The amount remaining in controversy meets the threshold requirements specified in § 423.2006. (4) If there is more than one enrollee to the hearing or Council review, each enrollee concurs, in writing, with the request for the EAJR. (5) There are no material issues of fact in dispute. (c) Content of the request for EAJR. (1) Allege that there are no material issues of fact in dispute and identify the facts that the enrollee considers material and that are not disputed; and (2) Assert that the only factor precluding a decision favorable to the enrollee is— (i) A statutory provision that is unconstitutional, or a provision of a regulation that is invalid and specify the statutory provision that the enrollee considers unconstitutional or the provision of a regulation that the enrollee considers invalid; or (ii) A CMS Ruling that the enrollee considers invalid. (3) Include a copy of the IRE reconsideration and of any ALJ or attorney adjudicator decision that the enrollee has received; (4) If the IRE reconsideration or ALJ or attorney adjudicator decision was based on facts that the enrollee is disputing, state why the enrollee considers those facts to be immaterial; and (5) If the IRE reconsideration or ALJ or attorney adjudicator decision was based on a provision of a law, regulation, or CMS Ruling in addition to the one the enrollee considers unconstitutional or invalid, a statement as to why further administrative review of how that provision applies to the facts is not necessary. (d) Place and time for an EAJR request. Method and place for filing request. (i) If a request for ALJ hearing or Council review is not pending, file a written EAJR request with the HHS Departmental Appeals Board, with his or her request for an ALJ hearing or Council review; or (ii) If an appeal is already pending for an ALJ hearing or otherwise before OMHA or the Council, file a written EAJR request with the HHS Departmental Appeals Board. (2) Time of filing request. The enrollee may file a request for EAJR— (i) If the enrollee has requested a hearing, at any time before receipt of the notice of the ALJ's or attorney adjudicator's decision; or (ii) If the enrollee has requested Council review, at any time before receipt of notice of the Council's decision. (e) Determination on EAJR request. (2) Within 60 calendar days after the date the review entity receives a request and accompanying documents and materials meeting the conditions in paragraphs (b), (c), and (d) of this section, the review entity will issue either a certification in accordance with paragraph (f) of this section or a denial of the request. (3) A determination by the review entity either certifying that the requirements for EAJR are met pursuant to paragraph (f) of this section or denying the request is not subject to review by the Secretary. (4) If the review entity fails to make a determination within the timeframe specified in paragraph (e)(2) of this section, then the enrollee may bring a civil action in Federal District Court within 60 calendar days of the end of the timeframe. (f) Certification by the review entity. (1) The material facts involved in the appeal are not in dispute; (2) Except as indicated in paragraph (f)(3) of this section, the Secretary's interpretation of the law is not in dispute; (3) The sole issue(s) in dispute is the constitutionality of a statutory provision, or the validity of a provision of a regulation or CMS Ruling; (4) But for the provision challenged, the enrollee would receive a favorable decision on the ultimate issue; and (5) The certification by the review entity is the Secretary's final action for purposes of seeking expedited judicial review. (g) Effect of certification by the review entity. (1) The enrollee that requested the EAJR is considered to have waived any right to completion of the remaining steps of the administrative appeals process regarding the matter certified. (2) The enrollee has 60 calendar days, beginning on the date of the review entity's certification within which to bring a civil action in Federal District Court. (3) The enrollee must satisfy the requirements for venue under section 205(g) of the Act, as well as the requirements for filing a civil action in a Federal District Court under § 423.2136. (h) Rejection of EAJR. (2) Whenever a review entity forwards a rejected EAJR request to OMHA or the Council, the appeal is considered timely filed and, if an adjudication time frame applies to the appeal, the adjudication time frame begins on the day the request is received by OMHA or the Council from the review entity. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5127, Jan. 17, 2017; 84 FR 19872, May 7, 2019] § 423.2000 Hearing before an ALJ and decision by an ALJ or attorney adjudicator: General rule. (a) If an enrollee is dissatisfied with an IRE's reconsideration, the enrollee may request a hearing before an ALJ. (b) A hearing before an ALJ may be conducted in-person, by video-teleconference, or by telephone. At the hearing, the enrollee may submit evidence subject to the restrictions in § 423.2018, examine the evidence used in making the determination under review, and present and/or question witnesses. (c) In some circumstances, the Part D plan sponsor, CMS, or the IRE may participate in the proceedings on a request for an ALJ hearing as specified in § 423.2010. (d) The ALJ or attorney adjudicator conducts a de novo review and issues a decision based on the administrative record, including, for an ALJ, any hearing record. (e) If an enrollee waives his or her right to appear at the hearing in person or by telephone or video-teleconference, the ALJ or an attorney adjudicator may make a decision based on the evidence that is in the file and any new evidence that is submitted for consideration. (f) The ALJ may require the enrollee to participate in a hearing if it is necessary to decide the case. If the ALJ determines that it is necessary to obtain testimony from a person other than the enrollee, he or she may hold a hearing to obtain that testimony, even if the enrollee has waived the right to appear. In that event, however, the ALJ will give the enrollee the opportunity to appear when the testimony is given, but may hold the hearing even if the enrollee decides not to appear. (g) An ALJ or attorney adjudicator may also issue a decision on the record on his or her own initiative if the evidence in the administrative record supports a fully favorable finding. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5127, Jan. 17, 2017] § 423.2002 Right to an ALJ hearing. (a) An enrollee who is dissatisfied with the IRE reconsideration determination has a right to a hearing before an ALJ if— (1) The enrollee files a written request for an ALJ hearing within 60 calendar days after receipt of the written notice of the IRE's reconsideration; and (2) The enrollee meets the amount in controversy requirements of § 423.2006. (b) An enrollee may request that the hearing before an ALJ be expedited if: (1) The appeal involves an issue specified in § 423.566(b) but does not include solely a request for payment of Part D drugs already furnished; (2) The enrollee submits a written or oral request for an expedited ALJ hearing within 60 calendar days of the date of the written notice of an IRE reconsideration determination. The request can only be submitted after the enrollee receives the written IRE reconsideration notice. The request should also explain why applying the standard timeframe may seriously jeopardize the life or health of the enrollee; and (3) The enrollee meets the amount in controversy requirements of § 423.2006. (c) OMHA must document all oral requests for expedited hearings in writing and maintain the documentation in the case files. (d) For purposes of this section, the date of receipt of the reconsideration is presumed to be 5 calendar days after the date of the written reconsideration, unless there is evidence to the contrary. (e) For purposes of meeting the 60 calendar day filing deadline, the request is considered as filed on the date it is received by the office specified in the IRE's reconsideration. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5127, Jan. 17, 2017; 84 FR 19872, May 7, 2019] § 423.2004 Right to a review of IRE notice of dismissal. (a) An enrollee has a right to have an IRE's dismissal of a request for reconsideration reviewed by an ALJ or attorney adjudicator if— (1) The enrollee files a written request for review within 60 calendar days after receipt of the notice of the IRE's dismissal. (2) The enrollee meets the amount in controversy requirements of § 423.2006. (3) For purposes of this section, the date of receipt of the IRE's dismissal is presumed to be 5 calendar days after the date of the written dismissal notice, unless there is evidence to the contrary. (4) For purposes of meeting the 60 calendar day filing deadline, the request is considered as filed on the date it is received by the office specified in the IRE's dismissal. (b) If the ALJ or attorney adjudicator determines that the IRE's dismissal was in error, he or she vacates the dismissal and remands the case to the IRE for a reconsideration in accordance with § 423.2056. (c) If the ALJ or attorney adjudicator affirms the IRE's dismissal of a reconsideration request, he or she issues a notice of decision affirming the IRE's dismissal in accordance with § 423.2046(b). (d) The ALJ or attorney adjudicator may dismiss the request for review of an IRE's dismissal in accordance with § 423.2052(b). [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5127, Jan. 17, 2017; 84 FR 19872, May 7, 2019] § 423.2006 Amount in controversy required for an ALJ hearing and judicial review. (a) ALJ review. (1) For ALJ hearing requests, the required amount remaining in controversy must be $100, increased by the percentage increase in the medical care component of the Consumer Price Index for All Urban Consumers (U.S. city average) as measured from July 2003 to the July preceding the current year involved. (2) If the figure in paragraph (a)(1) of this section is not a multiple of $10, it is rounded to the nearest multiple of $10. The Secretary will publish changes to the amount in controversy requirement in the Federal Register (b) Judicial review. (c) Calculating the amount remaining in controversy. (2) If the basis for the appeal is the refusal by the Part D plan sponsor to provide drug benefits, the projected value of those benefits is used to compute the amount remaining in controversy. The projected value of a Part D drug or drugs must include any costs the enrollee could incur based on the number of refills prescribed for the drug(s) in dispute during the plan year. (3) If the basis for the appeal is an at-risk determination made under a drug management program in accordance with § 423.153(f), the projected value of the drugs subject to the drug management program is used to compute the amount remaining in controversy. The projected value of the drugs subject to the drug management program shall include the value of any refills prescribed for the drug(s) in dispute during the plan year. (d) Aggregating appeals to meet the amount in controversy Enrollee. (i) The appeals have previously been reconsidered by an IRE; (ii) The enrollee requests aggregation at the same time the requests for hearing are filed, and the request for aggregation and requests for hearing are filed within 60 calendar days after receipt of the notice of reconsideration for each of the reconsiderations being appealed, unless the deadline to file one or more of the requests for hearing has been extended in accordance with § 423.2014(d); and (iii) The appeals the enrollee seeks to aggregate involve the delivery of prescription drugs to a single enrollee, as determined by an ALJ or attorney adjudicator. Only an ALJ may determine the appeals the enrollee seeks to aggregate do not involve the delivery of prescription drugs to a single enrollee. (2) Multiple enrollees. (i) The appeals have previously been reconsidered by an IRE; (ii) The enrollees request aggregation at the same time the requests for hearing are filed, and the request for aggregation and requests for hearing are filed within 60 calendar days after receipt of the notice of reconsideration for each of the reconsiderations being appealed, unless the deadline to file one or more of the requests for hearing has been extended in accordance with § 423.2014(d); and (iii) The appeals the enrollees seek to aggregate involve the same prescription drugs, as determined by an ALJ or attorney adjudicator. Only an ALJ may determine the appeals the enrollees seek to aggregate do not involve the same prescription drugs. [84 FR 19872, May 7, 2019, as amended at 86 FR 6121, Jan. 19, 2021] § 423.2008 Parties to the proceedings on a request for an ALJ hearing. The enrollee (or the enrollee's representative) who filed the request for hearing is the only party to the proceedings on a request for an ALJ hearing. [82 FR 5127, Jan. 17, 2017] § 423.2010 When CMS, the IRE, or Part D plan sponsors may participate in the proceedings on a request for an ALJ hearing. (a) When CMS, the IRE, or the Part D plan sponsor may participate. (2) An ALJ may request, but may not require, CMS, the IRE, and/or the Part D plan sponsor to participate in any proceedings before the ALJ, including the oral hearing, if any. The ALJ cannot draw any adverse inferences if CMS, the IRE, and/or the Part D plan sponsor decide not to participate in any proceedings before an ALJ, including the hearing. (b) How a request to participate is made No notice of hearing. (2) Notice of hearing. (3) Timing of request. (i) If a standard request for hearing was filed, if no hearing is scheduled, within 30 calendar days after notification that a standard request for hearing was filed; (ii) If an expedited hearing is requested, but no hearing has been scheduled, within 2 calendar days after notification that a request for an expedited hearing was filed; (iii) If a non-expedited hearing is scheduled, within 5 calendar days after receiving the notice of hearing; or (iv) If an expedited hearing is scheduled, within 1 calendar day after receiving the notice of hearing. Requests may be made orally or submitted by facsimile to the hearing office. (c) The ALJ's or attorney adjudicator's decision on a request to participate. (1) If no hearing is scheduled, at least 20 calendar days before the ALJ or attorney adjudicator issues a decision, dismissal, or remand; (2) If a non-expedited hearing is scheduled, within 5 calendar days of receipt of a request to participate; or (3) If an expedited hearing is scheduled, within 1 calendar of receipt of a request to participate. (d) Roles and responsibilities of CMS, the IRE, and/or the Part D plan sponsor as a participant. (2) When CMS, the IRE, and/or the Part D plan sponsor participates in an ALJ hearing, CMS, the IRE, and/or the Part D plan sponsor may not be called as a witness during the hearing and is not subject to examination or cross-examination by the enrollee, but the enrollee may provide testimony to rebut factual or policy statements made by a participant and the ALJ may question the participant about its testimony. (3) CMS, IRE, and/or Part D plan sponsor position papers and written testimony are subject to the following: (i) Unless the ALJ or attorney adjudicator grants additional time to submit a position paper or written testimony, a position paper and written testimony must be submitted— (A) Within 14 calendar days for a standard appeal, or 1 calendar day for an expedited appeal, after receipt of the ALJ's or attorney adjudicator's decision on a request to participate if no hearing has been scheduled; or (B) No later than 5 calendar days prior to the hearing if a non-expedited hearing is scheduled, or 1 calendar day prior to the hearing if an expedited hearing is scheduled. (ii) A copy of any position paper and written testimony that CMS, the IRE, or the Part D plan sponsor submits to OMHA must be sent within the same time frames specified in paragraph (d)(3)(i)(A) and (B) of this section to the enrollee. (iii) If CMS, the IRE, and/or the Part D plan sponsor fails to send a copy of its position paper or written testimony to the enrollee or fails to submit its position paper or written testimony within the time frames described in this section, the position paper or written testimony will not be considered in deciding the appeal. (e) Invalid requests to participate. (2) If the request to participate is determined to be invalid, the written notice of an invalid request to participate must be sent to the entity that made the request to participate and the enrollee. (i) If no hearing is scheduled or the request to participate was made after the hearing occurred, the written notice of an invalid request to participate must be sent no later than the date the notice of decision, dismissal, or remand is mailed. (ii) If a non-expedited hearing is scheduled, the written notice of an invalid request to participate must be sent prior to the hearing. If the notice would be sent fewer than 5 calendar days before the hearing is scheduled to occur, oral notice must be provided to the entity that submitted the request, and the written notice must be sent as soon as possible after the oral notice is provided. (iii) If an expedited hearing is scheduled, oral notice of an invalid request to participate must be provided to the entity that submitted the request, and the written notice must be sent as soon as possible after the oral notice is provided. [82 FR 5127, Jan. 17, 2017, as amended at 84 FR 19873, May 7, 2019] § 423.2014 Request for an ALJ hearing or a review of an IRE dismissal. (a) Content of the request. (i) The name, address, telephone number, and Medicare number of the enrollee. (ii) The name, address, and telephone number of the representative, as defined at § 423.560, if any. (iii) The Medicare appeal number, if any, assigned to the IRE reconsideration or dismissal being appealed. (iv) The prescription drug in dispute. (v) The plan name. (vi) The reasons the enrollee disagrees with the IRE's reconsideration or dismissal being appealed. (2) The enrollee must submit a statement of any additional evidence to be submitted and the date it will be submitted. (3) The enrollee must submit a statement that the enrollee is requesting an expedited hearing, if applicable. (b) Request for expedited hearing. (c) Complete request required. (2) If supporting materials submitted with a request clearly provide information required for a complete request, the materials will be considered in determining whether the request is complete. (d) When and where to file. (1) Within 60 calendar days from the date the enrollee receives written notice of the IRE's reconsideration or dismissal being appealed. (2) With the office specified in the IRE's reconsideration or dismissal. (i) If the request for hearing is timely filed with an office other than the office specified in the IRE's reconsideration, the request is not treated as untimely, and any applicable time frame specified in § 423.2016 for deciding the appeal begins on the date the office specified in the IRE's reconsideration or dismissal receives the request for hearing. (ii) If the request for hearing is filed with an office, other than the office specified in the IRE's reconsideration or dismissal, OMHA must notify the enrollee of the date the request was received in the correct office and the commencement of any applicable adjudication timeframe. (e) Extension of time to request a hearing or review. (2) Any request for an extension of time must be in writing or, for expedited reviews, in writing or oral. OMHA must document all oral requests in writing and maintain the documentation in the case file. (3) The request must be filed with the office specified in the notice of reconsideration or dismissal, must give the reasons why the request for a hearing or review was not filed within the stated time period, and must be filed with the request for hearing or request for review of an IRE dismissal, or upon notice that the request may be dismissed because it was not timely filed. (4) An ALJ or attorney adjudicator may find there is good cause for missing the deadline to file a request for an ALJ hearing or request for review of an IRE dismissal, or there is no good cause for missing the deadline to file a request for a review of an IRE dismissal, but only an ALJ may find there is no good cause for missing the deadline to file a request for an ALJ hearing. If good cause is found for missing the deadline, the time period for filing the request for hearing or request for review of an IRE dismissal will be extended. To determine whether good cause for late filing exists, the ALJ or attorney adjudicator uses the standards set forth in § 405.942(b)(2) and (3) of this chapter. (5) If a request for hearing is not timely filed, any applicable adjudication period in § 423.2016 begins the date the ALJ or attorney adjudicator grants the request to extend the filing deadline. (6) A determination granting a request to extend the filing deadline is not subject to further review. [82 FR 5128, Jan. 17, 2017, as amended at 84 FR 19873, May 7, 2019; 86 FR 6121, Jan. 19, 2021] § 423.2016 Timeframes for deciding an appeal of an IRE reconsideration. (a) Standard appeals. (2) The adjudication period specified in paragraph (a)(1) of this section begins on the date that a timely filed request for hearing is received by the office specified in the IRE's reconsideration, or, if it is not timely filed, the date that the ALJ or attorney adjudicator grants any extension to the filing deadline. (3) If the Council remands a case and the case was subject to an adjudication time frame under paragraph (a)(1) of this section, the remanded appeal will be subject to the same adjudication time frame beginning on the date that OMHA receives the Council remand. (b) Expedited appeals Standard for expedited appeal. (2) Grant of a request. (i) Make the decision to grant an expedited appeal within 5 calendar days of receipt of the request for an expedited hearing; (ii) Give the enrollee prompt oral notice of this decision; and (iii) Subsequently send to the enrollee at his or her last known address and to the Part D plan sponsor written notice of the decision. This notice may be provided within the written notice of hearing. (3) Denial of a request. (i) Make this decision within 5 calendar days of receipt of the request for expedited hearing; (ii) Give the enrollee prompt oral notice of the denial that informs the enrollee of the denial and explains that an ALJ or attorney adjudicator will process the enrollee's request using the 90 calendar day timeframe for non-expedited appeals; and (iii) Subsequently send to the enrollee at his or her last known address and to the Part D plan sponsor an equivalent written notice of the decision within 3 calendar days after the oral notice. (4) Decision not appealable. (5) Time frame for adjudication. (ii) The adjudication period specified in paragraph (b)(5)(i) of this section begins on the date that a timely provided request for hearing is received by the office specified in the IRE's reconsideration, or, if it is not timely provided, the date that an ALJ or attorney adjudicator grants any extension to the filing deadline. (6) Time frame for Council remands. (c) Waivers and extensions of adjudication period. (2) The adjudication periods specified in paragraphs (a)(1) and (b)(5) of this section are extended as otherwise specified in this subpart, and for the following events— (i) The duration of a stay of action on adjudicating the matters at issue ordered by a court or tribunal of competent jurisdiction; (ii) The duration of a stay of proceedings granted by an ALJ or attorney adjudicator on a motion by an enrollee. [82 FR 5129, Jan. 17, 2017, as amended at 84 FR 19873, May 7, 2019] § 423.2018 Submitting evidence. (a) All appeals. (1) An ALJ or attorney adjudicator will not consider any evidence submitted regarding a change in condition of an enrollee after the appealed coverage determination or at-risk determination was made. (2) An ALJ or attorney adjudicator will remand a case to the Part D IRE where an enrollee wishes evidence on his or her change in condition after the coverage determination or at-risk determination to be considered. (b) Non-expedited appeals. (2) If a represented enrollee submits written or other evidence later than 10 calendar days after receiving the notice of hearing, any applicable adjudication period specified in § 423.2016 is extended by the number of calendar days in the period between 10 calendar days after receipt of the notice of hearing and the day the evidence is received. (3) The requirements of paragraph (b) of this section do not apply to unrepresented enrollees. (c) Expedited appeals. (2) If an enrollee submits written or other evidence later than 2 calendar days after receiving the notice of expedited hearing, any applicable adjudication period specified in § 423.2016 is extended by the number of calendar days in the period between 2 calendar days after receipt of the notice of expedited hearing and the day the evidence is received. (d) When this section does not apply. [82 FR 5130, Jan. 17, 2017, as amended at 83 FR 16754, Apr. 16, 2018] § 423.2020 Time and place for a hearing before an ALJ. (a) General. (b) Determining how appearances are made. Appearances by unrepresented enrollees. (i) The ALJ may also offer to conduct a hearing by telephone if the request for hearing or administrative record suggests that a telephone hearing may be more convenient for the unrepresented enrollee. (ii) The ALJ, with the concurrence of the Chief ALJ or designee, may find good cause that an in-person hearing should be conducted if— (A) The video-teleconferencing or telephone technology is not available; or (B) Special or extraordinary circumstances exist. (2) Appearances by represented enrollees. (i) The ALJ may find good cause for an appearance by video-teleconferencing if he or she determines that video-teleconferencing is necessary to examine the facts or issues involved in the appeal. (ii) The ALJ, with the concurrence of the Chief ALJ or designee, may find good cause that an in-person hearing should be conducted if— (A) The video-teleconferencing and telephone technology are not available; or (B) Special or extraordinary circumstances exist. (c) Notice of hearing. (2) The notice of hearing will require the enrollee to reply to the notice by: (i) Acknowledging whether they plan to attend the hearing at the time and place proposed in the notice of hearing, or whether they object to the proposed time and/or place of the hearing; (ii) If the representative is an entity or organization, specifying who from the entity or organization plans to attend the hearing, if anyone, and in what capacity, in addition to the individual who filed the request for hearing; and (iii) Listing the witnesses who will be providing testimony at the hearing. (3) The notice of hearing will require CMS, the IRE, or the Part D plan sponsor that requests to attend the hearing as a participant to reply to the notice by: (i) Acknowledging whether it plans to attend the hearing at the time and place proposed in the notice of hearing; and (ii) Specifying who from the entity plans to attend the hearing, (d) An enrollee's right to waive a hearing. (1) As specified in § 423.2000, an ALJ may require the enrollee to attend a hearing if it is necessary to decide the case. (2) If an ALJ determines that it is necessary to obtain testimony from a person other than the enrollee, he or she may still hold a hearing to obtain that testimony, even if the enrollee has waived the right to appear. In those cases, the ALJ would give the enrollee the opportunity to appear when the testimony is given but may hold the hearing even if the enrollee decides not to appear. (e) An enrollee's objection to time and place of hearing. (2) The enrollee must state the reason for the objection and state the time and place he or she wants the hearing to be held. (3) The objection must be in writing except for an expedited hearing when the objection may be provided orally, and except that the enrollee may orally request that a non-expedited hearing be rescheduled in an emergency circumstance the day prior to or day of the hearing. The ALJ must document all oral objections to the time and place of a hearing in writing and maintain the documentation in the case files. (4) The ALJ may change the time or place of the hearing if the enrollee has good cause. (5) If the enrollee's objection to the place of the hearing includes a request for an in-person or video-teleconferencing hearing, the objection and request are considered in paragraph (i) of this section. (f) Good cause for changing the time or place. (1) The enrollee or his or her representative is unable to attend or to travel to the scheduled hearing because of a serious physical or mental condition, incapacitating injury, or death in the family; or (2) Severe weather conditions make it impossible to travel to the hearing; or (3) Good cause exists as set forth in paragraph (g) of this section. (g) Good cause in other circumstances. (2) Factors evaluated to determine the impact of the change include, but are not limited to, the effect on processing other scheduled hearings, potential delays in rescheduling the hearing, and whether any prior changes were granted the enrollee. (3) Examples of other circumstances an enrollee might give for requesting a change in the time or place of the hearing include, but are not limited to, the following: (i) The enrollee has attempted to obtain a representative but needs additional time. (ii) The enrollee's representative was appointed within 10 calendar days of the scheduled hearing for non-expedited hearings (or 2 calendar days for expedited hearings) and needs additional time to prepare for the hearing. (iii) The enrollee's representative has a prior commitment to be in court or at another administrative hearing on the date scheduled for the hearing. (iv) A witness who will testify to facts material to an enrollee's case is unavailable to attend the scheduled hearing and the evidence cannot be otherwise obtained. (v) Transportation is not readily available for an enrollee to travel to the hearing. (vi) The enrollee is unrepresented, and is unable to respond to the notice of hearing because of any physical, mental, educational, or linguistic limitations (including any lack of facility with the English language). (vii) The enrollee or enrollee's representative has a prior commitment that cannot be changed without significant expense. (viii) The enrollee or enrollee's representative asserts he or she did not receive the notice of hearing and is unable to appear at the scheduled time and place. (h) Effect of rescheduling hearing. (i) An enrollee's request for an in-person or video-teleconferencing hearing. (2) The enrollee must state the reason for the objection and state the time and/or place he or she wants an in-person or video-teleconferencing hearing to be held. (3) The request must be in writing except for an expedited hearing for which the request may be provided orally. The ALJ must document all oral objections to an expedited video-teleconferencing or telephone hearing in writing and maintain the documentation in the case files. (4) When an enrollee's request for an in-person or video-teleconferencing hearing is granted and an adjudication time frame applies in accordance with § 423.2016, the ALJ issues a decision, dismissal, or remand to the IRE within the adjudication time frame specified in § 423.2016 (including any applicable extensions provided in this subpart), unless the enrollee requesting the hearing agrees to waive such adjudication timeframe in writing. (5) The ALJ may grant the request, with the concurrence of the Chief ALJ or designee if the request was for an in-person hearing, upon a finding of good cause and will reschedule the hearing for a time and place when the enrollee may appear in person or by video-teleconference before the ALJ. Good cause is not required for a request for video-teleconferencing hearing made by an unrepresented enrollee who filed the request for hearing and objects to an ALJ's offer to conduct a hearing by telephone. (j) Amended notice of hearing. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5130, Jan. 17, 2017; 83 FR 16754, Apr. 16, 2018; 84 FR 19873, May 7, 2019] § 423.2022 Notice of a hearing before an ALJ. (a) Issuing the notice. (2) The notice is mailed, transmitted, or served at least 20 calendar days before the hearing, except for expedited hearings where written notice is mailed, transmitted, or served at least 3 calendar days before the hearing, unless the enrollee or other potential participant agrees in writing to the notice being mailed, transmitted, or served fewer than 20 calendar days before the non-expedited hearing or 3 calendar days before the expedited hearing. For expedited hearings, the ALJ may orally provide notice of the hearing to the enrollee and other potential participants but oral notice must be followed by an equivalent written notice within 1 calendar day of the oral notice. (b) Notice information. (i) A statement that the issues before the ALJ include all of the issues brought out in the coverage determination or at-risk determination, redetermination, or reconsideration that were not decided entirely in the enrollee's favor and that were specified in the request for hearing; and (ii) A statement of any specific new issues the ALJ will consider in accordance with § 423.2032. (2) The notice will inform the enrollee that he or she may designate a person to represent him or her during the proceedings. (3) The notice must include an explanation of the procedures for requesting a change in the time or place of the hearing, a reminder that the ALJ may dismiss the hearing request if the enrollee fails to appear at the scheduled hearing without good cause, and other information about the scheduling and conduct of the hearing. (4) The enrollee will also be told if his or her appearance or that of any other witness is scheduled by video-teleconferencing, telephone, or in person. If the ALJ has scheduled the enrollee to appear at the hearing by video-teleconferencing, the notice of hearing will advise that the scheduled place for the hearing is a video-teleconferencing site and explain what it means to appear at the hearing by video-teleconferencing. (5) The notice advises the enrollee that if he or she objects to appearing by video-teleconferencing or telephone, and wishes instead to have his or her hearing at a time and place where he or she may appear in person before the ALJ, he or she must follow the procedures set forth at § 423.2020(i) for notifying the ALJ of his or her objections and for requesting an in-person hearing. (c) Acknowledging the notice of hearing. (2) If the enrollee states that he or she did not receive the notice of hearing, a copy of the notice is sent to him or her by certified mail or other means requested by the enrollee and in accordance with OMHA procedures. (3) The enrollee may request that the ALJ reschedule the hearing in accordance with § 423.2020(e). [82 FR 5131, Jan. 17, 2017, as amended at 83 FR 16754, Apr. 16, 2018] § 423.2024 Objections to the issues. (a) If an enrollee objects to the issues described in the notice of hearing, he or she must notify the ALJ in writing at the earliest possible opportunity before the time set for the hearing, and no later than 5 calendar days before the hearing, except for expedited hearings in which the enrollee must submit written or oral notice of objection no later than 2 calendar days before the hearing. OMHA must document all oral objections in writing and maintain the documentation in the case files. (b) The enrollee must provide the reasons for his or her objections. (c) The ALJ makes a decision on the objections either in writing, at a prehearing conference, or at the hearing. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5132, Jan. 17, 2017] § 423.2026 Disqualification of the ALJ or attorney adjudicator. (a) An ALJ or attorney adjudicator may not adjudicate an appeal if he or she is prejudiced or partial to the enrollee or has any interest in the matter pending for decision. (b) If an enrollee objects to the ALJ or attorney adjudicator assigned to adjudicate the appeal, the enrollee must notify the ALJ within 10 calendar days of the date of the notice of hearing if a non-expedited hearing is scheduled, except for expedited hearings in which the enrollee must submit written or oral notice no later than 2 calendar days after the date of the notice of hearing, or the ALJ or attorney adjudicator at any time before a decision, dismissal order, or remand order is issued if no hearing is scheduled. The ALJ or attorney adjudicator must document all oral objections in writing and maintain the documentation in the case files. The ALJ or attorney adjudicator considers the enrollee's objections and decides whether to proceed with the appeal or withdraw. (c) If the ALJ or attorney adjudicator withdraws, another ALJ or attorney adjudicator will be assigned to adjudicate the appeal. If the ALJ or attorney adjudicator does not withdraw, the enrollee may, after the ALJ or attorney adjudicator has issued an action in the case, present his or her objections to the Council in accordance with § 423.2100 through § 423.2130. The Council will then consider whether the decision or dismissal should be revised or, if applicable, a new hearing held before another ALJ. (d) If the enrollee objects to the ALJ or attorney adjudicator and the ALJ or attorney adjudicator subsequently withdraws from the appeal, any adjudication period that applies to the appeal in accordance with § 423.2016 is extended by 14 calendar days for a standard appeal, or 2 calendar days for an expedited appeal. [82 FR 5132, Jan. 17, 2017] § 423.2030 ALJ hearing procedures. (a) General rule. (b) At the hearing. (2) The ALJ may limit testimony and argument at the hearing that are not relevant to an issue before the ALJ, that are repetitive of evidence or testimony already in the record, or that relate to an issue that has been sufficiently developed or on which the ALJ has already ruled. The ALJ may, but is not required to, provide the enrollee or representative with an opportunity to submit additional written statements and affidavits on the matter in lieu of testimony and/or argument at the hearing. The written statements and affidavits must be submitted within the time frame designated by the ALJ. (3) If the ALJ determines that the enrollee or enrollee's representative is uncooperative, disruptive to the hearing, or abusive during the course of the hearing after the ALJ has warned the enrollee or representative to stop such behavior, the ALJ may excuse the enrollee or representative from the hearing and continue with the hearing to provide the participants with an opportunity to offer testimony and/or argument. If an enrollee or representative was excused from the hearing, the ALJ will provide the enrollee or representative with an opportunity to submit written statements and affidavits in lieu of testimony and/or argument at the hearing, and the enrollee or representative may request a recording of the hearing in accordance with § 423.2042 and respond in writing to any statements made by participants and/or testimony of the witnesses at the hearing. The written statements and affidavits must be submitted within the time frame designated by the ALJ. (c) Missing evidence. (d) Effect of new evidence on adjudication period. (e) Continued hearing. (2) If the enrollee requests the continuance and an adjudication time frame applies to the appeal in accordance with § 423.2016, the adjudication period is extended by the period between the initial hearing date and the continued hearing date. (f) Supplemental hearing. (2) If the enrollee requests the supplemental hearing and an adjudication period applies to the appeal in accordance with § 423.2016, the adjudication period is extended by the period between the initial hearing date and the supplemental hearing date. [82 FR 5132, Jan. 17, 2017] § 423.2032 Issues before an ALJ or attorney adjudicator. (a) General rule. (b) New issues When a new issue may be considered. (i) There is new and material evidence that was not available or known at the time of the determination and that may result in a different conclusion; or (ii) The evidence that was considered in making the determination clearly shows on its face that an obvious error was made at the time of the determination. (2) Notice of the new issue. (3) Opportunity to submit evidence. (c) Adding coverage determinations to a pending appeal. [82 FR 5132, Jan. 17, 2017, as amended at 83 FR 16754, Apr. 16, 2018; 84 FR 19873, May 7, 2019] § 423.2034 Requesting information from the IRE. (a) If an ALJ or attorney adjudicator believes that the written record is missing information that is essential to resolving the issues on appeal and that information can be provided only by CMS, the IRE, and/or the Part D plan sponsor, the information may be requested from the IRE that conducted the reconsideration or its successor. (1) Official copies of redeterminations and reconsiderations that were conducted on the appealed issues, and official copies of dismissals of a request for redetermination or reconsideration, can be provided only by CMS, the IRE, and/or the Part D plan sponsor. Prior to issuing a request for information to the IRE, OMHA will confirm whether an electronic copy of the missing redetermination, reconsideration, or dismissal is available in the official system of record, and if so will accept the electronic copy as an official copy. (2) “Can be provided only by CMS, the IRE, and/or the Part D plan sponsor” means the information is not publicly available, is not in the possession of the enrollee, and cannot be requested and obtained by the enrollee. Information that is publicly available is information that is available to the general public via the Internet or in a printed publication. Information that is publicly available includes, but is not limited to, information available on a CMS, IRE or Part D Plan sponsor Web site or information in an official CMS or HHS publication. (b) The ALJ or attorney adjudicator retains jurisdiction of the case, and the case remains pending at OMHA. (c) The IRE has 15 calendar days for standard appeals, or 2 calendar days for expedited appeals, after receiving the request for information to furnish the information or otherwise respond to the information request directly or through CMS or the Part D plan sponsor. (d) If an adjudication period applies to the appeal in accordance with § 423.2016, the adjudication period is extended by the period between the date of the request for information and the date the IRE responds to the request or 20 calendar days after the date of the request for standard appeals, or 3 calendar days after the date of the request for expedited appeals, whichever occurs first. [82 FR 5133, Jan. 17, 2017, as amended at 84 FR 19873, May 7, 2019] § 423.2036 Description of an ALJ hearing process. (a) The right to appear and present evidence. (2) An enrollee may also make his or her appearance by means of a representative, who may make his or her appearance by video-teleconferencing, telephone, or in person, as determined under § 423.2020. (3) Witness testimony may be given and CMS, IRE, and Part D plan sponsor participation may also be accomplished by video-teleconferencing, telephone, or in person, as determined under § 423.2020. (b) Waiver of the right to appear. (i) For expedited hearings, an enrollee may indicate in writing or orally that he or she does not wish to appear at the hearing. (ii) The OMHA hearing office must document all oral waivers in writing and maintain the documentation in the case files. (2) The enrollee may subsequently withdraw his or her waiver in writing at any time before the notice of the hearing decision is issued; however, by withdrawing the waiver the enrollee agrees to an extension of the adjudication period as specified in § 423.2016, that may be necessary to schedule and hold the hearing. (3) Even if the enrollee waives his or her right to appear at a hearing, the ALJ may require him or her to attend an oral hearing if the ALJ believes that a personal appearance and testimony by the enrollee is necessary to decide the case. (c) Presenting written statements and oral arguments. (d) Witnesses at a hearing. (e) What evidence is admissible at a hearing. (f)(1) Subpoenas. (2) Reviewability of an ALJ Subpoena. (3) Exception. (i) Upon notice to the ALJ that the enrollee or a non-party, as applicable, intends to seek Council review of the ALJ's ruling on the subpoena, the ALJ must stay all proceedings affected by the subpoena. (ii) The proceedings are stayed for 15 calendar days or until the Council issues a written decision that affirms, reverses, or modifies the ALJ's subpoena, whichever comes first. (iii) If the Council does not take action within the 15 calendar days, then the stay is lifted and the enrollee or non-party must comply with the ALJ's subpoena. (4) Enforcement. (ii) After submitting the enforcement request, the time period for the ALJ to issue a decision, dismissal or remand a case in response to a request for hearing is stayed for 15 calendar days or until the Secretary makes a decision with respect to the enforcement request, whichever occurs first. (iii) Any enforcement request by an ALJ must consist of a written notice to the Secretary describing in detail the ALJ's findings of noncompliance and his or her specific request for enforcement, and providing a copy of the subpoena and evidence of its receipt by certified mail by the enrollee or person other than the enrollee subject to the subpoena. (iv) The ALJ must promptly mail a copy of the notice and related documents to the individual or entity subject to the subpoena, to the enrollee, and to any other affected person. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5133, Jan. 17, 2017; 83 FR 16754, Apr. 16, 2018; 84 FR 19873, May 7, 2019; 86 FR 6121, Jan. 19, 2021] § 423.2038 Deciding a case without a hearing before an ALJ. (a) Decision fully favorable. (b) Enrollee does not wish to appear. (i) The enrollee indicates in writing or, for expedited hearings orally or in writing, that he or she does not wish to appear before an ALJ at a hearing, including a hearing conducted by telephone or video-teleconferencing, if available. OMHA must document all oral requests not to appear at a hearing in writing and maintain the documentation in the case files; or (ii) The enrollee lives outside the United States and does not inform OMHA that he or she wants to appear at a hearing before an ALJ. (2) When a hearing is not held, the decision of the ALJ or attorney adjudicator must refer to the evidence in the record on which the decision was based. (c) Stipulated decision. [82 FR 5133, Jan. 17, 2017, as amended at 83 FR 16754, Apr. 16, 2018] § 423.2040 Prehearing and posthearing conferences. (a) The ALJ may decide on his or her own, or at the request of the enrollee to the hearing, to hold a prehearing or posthearing conference to facilitate the hearing or the hearing decision. (b) For non-expedited hearings, the ALJ informs the enrollee, and CMS, the IRE, and/or the Part D plan sponsor if the ALJ has granted their request(s) to be a participant to the hearing at the time the notice of conference is sent, of the time, place, and purpose of the conference at least 7 calendar days before the conference date, unless the enrollee indicates in writing that he or she does not wish to receive a written notice of the conference. (c) For expedited hearings, the ALJ informs the enrollee, and CMS, the IRE, and/or the Part D plan sponsor if the ALJ has granted their request(s) to be a participant to the hearing, of the time, place, and purpose of the conference at least 2 calendar days before the conference date, unless the enrollee indicates orally or in writing that he or she does not wish to receive a written notice of the conference. (d) All oral requests not to receive written notice of the conference must be documented in writing and the documentation must be made part of the administrative record. (e) At the conference— (1) The ALJ or an OMHA attorney designated by the ALJ conducts the conference, but only the ALJ conducting a conference may consider matters in addition to those stated in the conference notice, if the enrollee consents to consideration of the additional matters in writing. (2) An audio recording of the conference is made. (f) The ALJ issues an order to the enrollee and all participants who attended the conference stating all agreements and actions resulting from the conference. If the enrollee does not object within 10 calendar days of receiving the order for non-expedited hearings or 1 calendar day for expedited hearings, or any additional time granted by the ALJ, the agreements and actions become part of the administrative record and are binding on the enrollee. [82 FR 5133, Jan. 17, 2017] § 423.2042 The administrative record. (a) Creating the record. (2) The record will include marked as exhibits, the appealed determinations and documents and other evidence used in making the appealed determinations and the ALJ's or attorney adjudicator's decision, including, but not limited to, medical records, written statements, certificates, reports, affidavits, and any other evidence the ALJ or attorney adjudicator admits. The record will also include any evidence excluded or not considered by the ALJ or attorney adjudicator, including but not limited to duplicative evidence submitted by the enrollee. (3) An enrollee may request and receive a copy of the record prior to or at the hearing, or, if a hearing is not held, at any time before the notice of decision is issued. (4) If a request for review is filed, the complete record, including any prehearing and posthearing conference and hearing recordings, is forwarded to the Council. (5) A typed transcription of the hearing is prepared if an enrollee seeks judicial review of the case in a Federal district court within the stated time period and all other jurisdictional criteria are met, unless, upon the Secretary's motion prior to the filing of an answer, the court remands the case. (b) Requesting and receiving copies of the record. (2) If an enrollee requests a copy of all or part of the record from OMHA or the ALJ or attorney adjudicator and an opportunity to comment on the record, any adjudication period that applies in accordance with § 423.2016 is extended by the time beginning with the receipt of the request through the expiration of the time granted for the enrollee's response. (3) If the enrollee requests a copy of all or part of the record and the record, including any audio recordings, contains information pertaining to an individual that the enrollee is not entitled to receive, such as personally identifiable information or protected health information, such portions of the record will not be furnished unless the enrollee obtains consent from the individual. [82 FR 5134, Jan. 17, 2017] § 423.2044 Consolidated proceedings. (a) Consolidated hearing. (2) It is within the discretion of the ALJ to grant or deny an enrollee's request for consolidation. In considering an enrollee's request, the ALJ may consider factors such as whether the issue(s) may be more efficiently decided if the appeals are consolidated for hearing. In considering the enrollee's request for consolidation, the ALJ must take into account any adjudication deadlines for each appeal and may require an enrollee to waive the adjudication deadline associated with one or more appeals if consolidation otherwise prevents the ALJ from deciding all of the appeals at issue within their respective deadlines. (3) The ALJ may also propose on his or her own motion to consolidate two or more appeals in one hearing for administrative efficiency, but may not require an enrollee to waive the adjudication deadline for any of the consolidated cases. (4) Notice of a consolidated hearing must be included in the notice of hearing issued in accordance with §§ 423.2020 and 423.2022. (b) Consolidated decision and record. (i) A consolidated decision and record; or (ii) A separate decision and record on each appeal. (2) If a separate decision and record on each appeal is made, the ALJ is responsible for making sure that any evidence that is common to all appeals and material to the common issue to be decided, and audio recordings of any conferences that were conducted and the consolidated hearing are included in each individual administrative record, as applicable. (3) If a hearing will not be conducted for multiple appeals that are before the same ALJ or attorney adjudicator, and the appeals involve one or more of the same issues, the ALJ or attorney adjudicator may make a consolidated decision and record at the request of the enrollee or on the ALJ's or attorney adjudicator's own motion. (c) Limitation on consolidated proceedings. [82 FR 5134, Jan. 17, 2017, as amended at 84 FR 19873, May 7, 2019] § 423.2046 Notice of an ALJ or attorney adjudicator decision. (a) Decisions on requests for hearing General rule. (i) The decision must be based on evidence offered at the hearing or otherwise admitted into the record, and shall include independent findings and conclusions. (ii) A copy of the decision should be mailed or otherwise transmitted to the enrollee at his or her last known address. (iii) A copy of the written decision should also be provided to the IRE that issued the reconsideration determination, and to the Part D plan sponsor that issued the coverage determination or at-risk determination. (2) Content of the notice. (i) The specific reasons for the determination, including, to the extent appropriate, a summary of any clinical or scientific evidence used in making the determination; (ii) The procedures for obtaining additional information concerning the decision; and (iii) Notification of the right to appeal the decision to the Council, including instructions on how to initiate an appeal under this section. (3) Limitation on decision. (b) Decisions on requests for review of an IRE dismissal General rule. (2) Content of the notice. (i) The specific reasons for the determination, including a summary of the evidence considered and applicable authorities; (ii) The procedures for obtaining additional information concerning the decision; and (iii) Notification that the decision is binding and is not subject to further review, unless reopened and revised by the ALJ or attorney adjudicator. (c) Recommended decision. [82 FR 5134, Jan. 17, 2017, as amended at 83 FR 16754, Apr. 16, 2018] § 423.2048 The effect of an ALJ's or attorney adjudicator's decision. (a) The decision of the ALJ or attorney adjudicator on a request for hearing is binding unless— (1) An enrollee requests a review of the decision by the Council within the stated time period or the Council reviews the decision issued by an ALJ or attorney adjudicator under the procedures set forth in § 423.2110, and the Council issues a final decision or remand order; (2) The decision is reopened and revised by an ALJ or attorney adjudicator or the Council under the procedures explained in § 423.1980; (3) The expedited access to judicial review process at § 423.1990 is used; (4) The ALJ's or attorney adjudicator's decision is a recommended decision directed to the Council and the Council issues a decision; or (5) In a case remanded by a Federal district court, the Council assumes jurisdiction under the procedures in § 423.2138 and the Council issues a decision. (b) The decision of the ALJ or attorney adjudicator on a request for review of an IRE dismissal is binding on the enrollee unless the decision is reopened and revised by the ALJ or attorney adjudicator under the procedures explained in § 423.1980. [82 FR 5135, Jan. 17, 2017] § 423.2050 Removal of a hearing request from OMHA to the Council. If a request for hearing is pending before OMHA, the Council may assume responsibility for holding a hearing by requesting that OMHA send the hearing request. If the Council holds a hearing, it conducts the hearing according to the rules for hearings before an ALJ. Notice is mailed to the enrollee at his or her last known address informing him or her that the Council has assumed responsibility for the case. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5135, Jan. 17, 2017] § 423.2052 Dismissal of a request for a hearing before an ALJ or request for review of an IRE dismissal. (a) Dismissal of request for hearing. (1) Neither the enrollee that requested the hearing nor the enrollee's representative appears at the time and place set for the hearing, if— (i) The enrollee was notified before the time set for the hearing that the request for hearing might be dismissed for failure to appear, the record contains documentation that the enrollee acknowledged the notice of hearing, and the enrollee does not contact the ALJ within 10 calendar days after the hearing for non-expedited hearings and 2 calendar days after the hearing for expedited hearings, or does contact the ALJ but the ALJ determines the enrollee did not demonstrate good cause for not appearing; or (ii) The record does not contain documentation that the enrollee acknowledged the notice of hearing, the ALJ sends a notice to the enrollee at his or her last known address asking why the enrollee did not appear, and the enrollee does not respond to the ALJ's notice within 10 calendar days for non-expedited hearings or within 2 calendar days for expedited hearings after receiving the notice, or does contact the ALJ but the ALJ determines the enrollee did not demonstrate good cause for not appearing. For expedited hearings, an enrollee may submit his or her response orally to the ALJ. (iii) In determining whether good cause exists under paragraphs (a)(1)(i) and (ii) of this section, the ALJ considers any physical, mental, educational, or linguistic limitations (including any lack of facility with the English language) the enrollee may have. (2) The person requesting a hearing has no right to it under § 423.2002. (3) The enrollee did not request a hearing within the stated time period and the ALJ has not found good cause for extending the deadline, as provided in § 423.2014(e). (4) The enrollee died while the request for hearing is pending and the request for hearing was filed by the enrollee or the enrollee's representative, and the enrollee's surviving spouse or estate has no remaining financial interest in the case and the enrollee's representative, if any, does not wish to continue the appeal. (5) The ALJ dismisses a hearing request entirely or refuses to consider any one or more of the issues because an IRE, an ALJ or attorney adjudicator, or the Council has made a previous determination or decision under this subpart about the enrollee's rights on the same facts and on the same issue(s), and this previous determination or decision has become binding by either administrative or judicial action. (6) The enrollee abandons the request for hearing. An ALJ may conclude that an enrollee has abandoned a request for hearing when OMHA attempts to schedule a hearing and is unable to contact the enrollee after making reasonable efforts to do so. (7) The enrollee's request is not complete in accordance with § 423.2014(a)(1), even after the enrollee is provided with an opportunity to complete the request. (b) Dismissal of request for review of IRE dismissal. (1) The enrollee has no right to a review of the IRE dismissal under § 423.2004. (2) The enrollee did not request a review within the stated time period and the ALJ or attorney adjudicator has not found good cause for extending the deadline, as provided in § 423.2014(e). (3) The enrollee died while the request for review was pending and the request was filed by the enrollee or the enrollee's representative, and the enrollee's surviving spouse or estate has no remaining financial interest in the case and the enrollee's representative, if any, does not wish to continue the appeal. (4) The enrollee's request is not complete in accordance with § 423.2014(a)(1), even after the enrollee is provided with an opportunity to complete the request. (c) Withdrawal of request. (d) Notice of dismissal. (e) Vacating a dismissal. [82 FR 5135, Jan. 17, 2017, as amended at 84 FR 19873, May 7, 2019] § 423.2054 Effect of dismissal of a request for a hearing or request for review of an IRE's dismissal. (a) The dismissal of a request for a hearing is binding, unless it is vacated by the Council under § 423.2108(b), or vacated by the ALJ or attorney adjudicator under § 423.2052(e). (b) The dismissal of a request for review of an IRE dismissal of a request for reconsideration is binding and not subject to further review unless vacated by the ALJ or attorney adjudicator under § 423.2052(e). [82 FR 5136, Jan. 17, 2017] § 423.2056 Remands of requests for hearing and requests for review. (a) Missing appeal determination or case record. (2) If the IRE does not furnish the case file for an appealed reconsideration, an ALJ or attorney adjudicator may issue a remand directing the IRE to reconstruct the record or, if it is not able to do so, initiate a new appeal adjudication. (3) If the IRE or Part D plan sponsor is able to reconstruct the record for a remanded case and returns the case to OMHA, the case is no longer remanded and the reconsideration is no longer vacated, and any adjudication period that applies to the appeal in accordance with § 423.2016 is extended by the period between the date of the remand and the date that case is returned to OMHA. (b) No redetermination. (c) Requested remand Request contents and timing. (2) Granting the request. (d) Remanding an IRE's dismissal of a request for reconsideration. (2) If an official copy of the notice of dismissal or case file cannot be obtained from the IRE, an ALJ or attorney adjudicator may also remand a request for review of a dismissal in accordance with the procedures in paragraph (a) of this section. (e) Consideration of change in condition. (f) Notice of a remand. (g) Review of remand. [82 FR 5136, Jan. 17, 2017, as amended at 83 FR 16754, Apr. 16, 2018; 84 FR 19873, May 7, 2019] § 423.2058 Effect of a remand. A remand of a request for hearing or request for review is binding unless vacated by the Chief ALJ or a designee in accordance with § 423.2056(g). [82 FR 5137, Jan. 17, 2017] § 423.2062 Applicability of policies not binding on the ALJ and Council. (a) ALJs or attorney adjudicators and the Council are not bound by CMS program guidance, such as program memoranda and manual instructions, but will give substantial deference to these policies if they are applicable to a particular case. (b) If an ALJ or attorney adjudicator or Council declines to follow a policy in a particular case, the ALJ or attorney adjudicator or Council decision must explain the reasons why the policy was not followed. An ALJ or attorney adjudicator or Council decision to disregard a policy applies only to the specific coverage determination or at-risk determination being considered and does not have precedential effect. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5137, Jan. 17, 2017; 83 FR 16754, Apr. 16, 2018] § 423.2063 Applicability of laws, regulations, CMS Rulings, and precedential decisions. (a) All laws and regulations pertaining to the Medicare program, including, but not limited to Titles XI, XVIII, and XIX of the Social Security Act and applicable implementing regulations, are binding on ALJs and attorney adjudicators, and the Council. (b) CMS Rulings are published under the authority of the CMS Administrator. Consistent with § 401.108 of this chapter, rulings are binding on all CMS components, and on all HHS components that adjudicate matters under the jurisdiction of CMS. (c) Precedential decisions designated by the Chair of the Departmental Appeals Board in accordance with § 401.109 of this chapter are binding on all CMS components, and all HHS components that adjudicate matters under the jurisdiction of CMS. [82 FR 5137, Jan. 17, 2017] § 423.2100 Medicare Appeals Council review: general. (a) An enrollee who is dissatisfied with an ALJ's or attorney adjudicator's decision or dismissal may request that the Council review the ALJ's or attorney adjudicator's decision or dismissal. (b) When the Council reviews an ALJ's or attorney adjudicator's written decision, it undertakes a de novo review. (c) The Council issues a final decision, dismissal order, or remands a case to the ALJ or attorney adjudicator no later than the end of the 90 calendar day period beginning on the date the request for review is received (by the entity specified in the ALJ's or attorney adjudicator's written notice of decision), unless the 90 calendar day period is extended as provided in this subpart or the enrollee requests expedited Council review. (d) If an enrollee requests expedited Council review, the Council issues a final decision, dismissal order or remand as expeditiously as the enrollee's health condition requires, but no later than the end of the 10 calendar day period beginning on the date the request for review is received (by the entity specified in the ALJ's or attorney adjudicator's written notice of decision), unless the 10 calendar day period is extended as provided in this subpart. [82 FR 5137, Jan. 17, 2017, as amended at 84 FR 19874, May 7, 2019] § 423.2102 Request for Council review when ALJ or attorney adjudicator issues decision or dismissal. (a)(1) An enrollee may request Council review of a decision or dismissal issued by an ALJ or attorney adjudicator if the enrollee files a written request for a Council review within 60 calendar days after receipt of the ALJ's or attorney adjudicator's written decision or dismissal. (2) An enrollee may request that Council review be expedited if the appeal involves an issue specified in § 423.566(b) but does not include solely a request for payment of Part D drugs already furnished. (i) If an enrollee is requesting that the Council review be expedited, the enrollee submits an oral or written request within 60 calendar days after the receipt of the ALJ's or attorney adjudicator's written decision or dismissal. A prescribing physician or other prescriber may provide oral or written support for an enrollee's request for expedited review. (ii) The Council must document all oral requests for expedited review in writing and maintain the documentation in the case files. (3) For purposes of this section, the date of receipt of the ALJ's or attorney adjudicator's written decision or dismissal is presumed to be 5 calendar days after the date of the notice of the decision or dismissal, unless there is evidence to the contrary. (4) The request is considered as filed on the date it is received by the entity specified in the notice of the ALJ's or attorney adjudicator's action. (b) An enrollee requesting a review may ask that the time for filing a request for Council review be extended if— (1) The request for an extension of time is in writing or, for expedited reviews, in writing or oral. The Council must document all oral requests in writing and maintain the documentation in the case file. (2) The request explains why the request for review was not filed within the stated time period. If the Council finds that there is good cause for missing the deadline, the time period will be extended. To determine whether good cause exists, the Council uses the standards outlined at § 405.942(b)(2) and (3) of this chapter. (c) An enrollee does not have the right to seek Council review of an ALJ's or attorney adjudicator's remand to an IRE, or an ALJ's or attorney adjudicator's affirmation of an IRE's dismissal of a request for reconsideration, or dismissal of a request to review an IRE dismissal. [82 FR 5137, Jan. 17, 2017] § 423.2106 Where a request for review may be filed. When a request for a Council review is filed after an ALJ or attorney adjudicator has issued a written decision or dismissal, the request for review must be submitted to the entity specified in the notice of the ALJ's or attorney adjudicator's action. If the request for review is timely filed with an entity other than the entity specified in the notice of the ALJ's or attorney adjudicator's action, the Council's adjudication period to conduct a review begins on the date the request for review is received by the entity specified in the notice of the ALJ's or attorney adjudicator's action. Upon receipt of a request for review from an entity other than the entity specified in the notice of the ALJ's or attorney adjudicator's action, the Council sends written notice to the enrollee of the date of receipt of the request and commencement of the adjudication timeframe. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5137, Jan. 17, 2017] § 423.2108 Council Actions when request for review is filed. (a) General. (b) Review of ALJ's or attorney adjudicator's dismissal of a request for a hearing. (c) Council dismissal of request for review. (d) Expedited reviews. Standard for expedited reviews. (2) Grant of a request. (i) Make this decision within 5 calendar days of receipt of the request for expedited review; (ii) Give the enrollee prompt oral notice of this decision; and (iii) Issue a decision, dismissal order or remand, as expeditiously as the enrollee's health condition requires, but no later than the end of the 10 calendar day period beginning on the date the request for review is received by the entity specified in the ALJ's or attorney adjudicator's written notice of decision. (3) Denial of a request. (i) Make this decision within 5 calendar days of receipt of the request for expedited review; (ii) Give the enrollee and Part D plan sponsor within 5 calendar days of receiving the request written notice of the denial. The written notice must inform the enrollee of the denial and explain that the Council will process the enrollee's request using the 90 calendar day timeframe for non-expedited reviews. (4) Decision on a request. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5137 Jan. 17, 2017] § 423.2110 Council reviews on its own motion. (a) General rule. (b) Referral of cases. (i) CMS or the IRE participated or requested to participate in the appeal at the OMHA level; and (ii) In CMS' or the IRE's view, the ALJ's or attorney adjudicator's decision or dismissal is not supported by the preponderance of evidence in the record or the ALJ or attorney adjudicator abused his or her discretion. (2) CMS' or the IRE's referral to the Council is made in writing and must be filed with the Council no later than 60 calendar days after the ALJ's or attorney adjudicator's written decision or dismissal is received. (i) The written referral will state the reasons why CMS or the IRE believes that the Council should review the case on its own motion. (ii) CMS or the IRE will send a copy of its referral to the enrollee and to the OMHA Chief ALJ. (iii) The enrollee may file exceptions to the referral by submitting written comments to the Council within 20 calendar days of the referral notice. (iv) An enrollee submitting comments to the Council must send the comments to CMS or the IRE. (c) Standard of review Referral by CMS or the IRE when CMS or the IRE participated or requested to participate in the OMHA level. (2) Referral by CMS or the IRE when CMS or the IRE did not participate or request to participate in the OMHA proceedings. (d) Council's action. (2) The Council may adopt, modify, or reverse the decision or dismissal, may remand the case to an ALJ or attorney adjudicator for further proceedings, or may dismiss a hearing request. (3) The Council must issue its action no later than 90 calendar days after receipt of the CMS or the IRE referral, unless the 90 calendar day period has been extended as provided in this subpart. (4) The Council may not issue its action before the 20 calendar day comment period has expired, unless it determines that the agency's referral does not provide a basis for reviewing the case. (5) If the Council declines to review a decision or dismissal on its own motion, the ALJ's or attorney adjudicator's decision or dismissal is binding. (e) Referral timeframe. [82 FR 5137, Jan. 17, 2017, as amended at 84 FR 19874, May 7, 2019] § 423.2112 Content of request for review. (a)(1) The request for Council review must be filed with the entity specified in the notice of the ALJ's or attorney adjudicator's action. (2) The request for review must be in writing and may be made on a standard form, except for requests for expedited reviews which may be made orally. (3) The Council must document all oral requests in writing and maintain the documentation in the case file. (4) A written request that is not made on a standard form or, for expedited requests, an oral request, is accepted if it includes the enrollee's name and telephone number, the plan name; Medicare number; the ALJ appeal number; the specific Part D drug(s) for which the review is requested; a statement that the enrollee is requesting an expedited review, if applicable; and the name of the enrollee or the representative of the enrollee. (b) The request for review must identify the parts of the ALJ or attorney adjudicator action with which the enrollee requesting review disagrees and explain why he or she disagrees with the ALJ's or attorney adjudicator's decision, dismissal, or other determination being appealed. (c) The Council will limit its review of an ALJ's or attorney adjudicator's actions to those exceptions raised by the enrollee in the request for review, unless the enrollee is unrepresented. For purposes of this section only, a representative is either anyone with a valid appointment as the enrollee's representative or is a member of the enrollee's family, a legal guardian or an individual who routinely acts on behalf of the enrollee, such as a family member or friend who has a power of attorney. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5138, Jan. 17, 2017; 84 FR 19874, May 7, 2019] § 423.2114 Dismissal of request for review. The Council dismisses a request for review if the enrollee requesting review did not file the request within the stated period of time and the time for filing has not been extended. The Council also dismisses the request for review if— (a) The enrollee asks to withdraw the request for review; (b) The individual or entity does not have a right to request Council review; or (c) The enrollee died while the request for review is pending and the enrollee's estate or representative, if any, either has no remaining financial interest in the case or does not want to continue the appeal. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5138, Jan. 17, 2017] § 423.2116 Effect of dismissal of request for Council review or request for hearing. The dismissal of a request for Council review or denial of a request for review of a dismissal issued by an ALJ or attorney adjudicator is binding and not subject to further review unless reopened and vacated by the Council. The Council's dismissal of a request for hearing is also binding and not subject to judicial review. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5138, Jan. 17, 2017] § 423.2118 Obtaining evidence from the Council. An enrollee may request and receive a copy of all or part of the record of the ALJ's or attorney adjudicator's action, including any index of the administrative record, documentary evidence, and a copy of the audio recording of the oral proceedings. However, the enrollee may be asked to pay the costs of providing these items. If an enrollee requests evidence from the Council and an opportunity to comment on that evidence, the time beginning with the Council's receipt of the request for evidence through the expiration of the time granted for the enrollee's response will not be counted toward the adjudication deadline. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5138, Jan. 17, 2017] § 423.2120 Filing briefs with the Council. Upon request, the Council will give the enrollee requesting review a reasonable opportunity to file a brief or other written statement about the facts and law relevant to the case. Unless the enrollee requesting review files the brief or other statement with the request for review, the time beginning with the date of receipt of the request to submit the brief and ending with the date the brief is received by the Council will not be counted toward the adjudication timeframe set forth in § 423.2100. The Council may also request, but not require, CMS, the IRE, and/or the Part D plan sponsor to file a brief or position paper if the Council determines that it is necessary to resolve the issues in the case. The Council cannot draw any adverse inference if CMS, the IRE, and/or the Part D plan sponsor either participates, or decides not to participate in Council review. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5138, Jan. 17, 2017] § 423.2122 What evidence may be submitted to the Council. (a) Appeal before the Council on request for review of ALJ's or attorney adjudicator's decision. (2) If the Council determines that additional evidence is needed to resolve the issues in the case and the administrative record indicates that the previous decision-makers have not attempted to obtain the evidence, the Council may remand the case to an ALJ or attorney adjudicator to obtain the evidence and issue a new decision. (3) The Council will not consider any new evidence submitted regarding a change in condition of an enrollee after a coverage determination or at-risk determination is made. The Council will remand a case to the Part D IRE if the Council determines that the enrollee wishes to have evidence on his or her change in condition after the coverage determination or at-risk determination considered. (b) Subpoenas. (1) To the extent a subpoena compels disclosure of a matter for which an objection based on privilege, or other protection from disclosure such as case preparation, confidentiality or undue burden, was made before the Council, the Secretary may review immediately that subpoena or a portion of the subpoena. (2) Upon notice to the Council that an enrollee or Part D plan sponsor intends to seek the Secretary review of the subpoena, the Council must stay all proceedings affected by the subpoena, tolling the time period for the Council to issue a final action or remand a case in response to a request for review for 15 calendar days or until the Secretary makes a decision with respect to the review request, whichever occurs first. (3) If the Secretary does not grant review within the time allotted for the stay, the stay is lifted and the subpoena stands. (c) Enforcement. (2) After submitting the enforcement request, the time period for the Council to issue a final action or remand a case in response to a request for review is stayed for 15 calendar days or until the Secretary makes a decision with respect to the enforcement request, whichever occurs first. (3) Any enforcement request by the Council must consist of a written notice to the Secretary describing in detail the Council's findings of noncompliance and its specific request for enforcement, and providing a copy of the subpoena and evidence of its receipt by certified mail by the enrollee or other person or entity subject to the subpoena. (4) The Council must promptly mail a copy of the notice and related documents to the enrollee or other person or entity subject to the subpoena, and to any other affected person. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5138, Jan. 17, 2017; 83 FR 16754, Apr. 16, 2018] § 423.2124 Oral argument. An enrollee may request to appear before the Council to present oral argument. (a) The Council grants a request for oral argument if it decides that the case raises an important question of law, policy, or fact that cannot be readily decided based on written submissions alone. (b) The Council may decide on its own that oral argument is necessary to decide the issues in the case. If the Council decides to hear oral argument, it informs the enrollee of the time and place of the oral argument at least 10 calendar days before the scheduled date or, in the case of an expedited review, at least 2 calendar days before the scheduled date. (c) In case of a previously unrepresented enrollee, a newly hired representative may request an extension of time for preparation of the oral argument and the Council must consider whether the extension is reasonable. (d) The Council may also request, but not require, CMS, the IRE, and/or the Part D plan sponsor to appear before it if the Council determines that it may be helpful in resolving the issues in the case. (e) The Council cannot draw any adverse inference if CMS, the IRE, and/or the Part D plan sponsor decide not to participate in the oral argument. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5138, Jan. 17, 2017] § 423.2126 Case remanded by the Council. (a) When the Council may remand a case to the ALJ or attorney adjudicator. (2) Action by ALJ or attorney adjudicator on remand. (3) Notice when case is returned with a recommended decision. (4) Filing briefs with the Council when ALJ or attorney adjudicator issues recommended decision. (ii) All other rules for filing briefs with and obtaining evidence from the Council follow the procedures explained in this subpart. (5) Procedures before the Council. (ii) If the Council determines that more evidence is required, it may again remand the case to an ALJ or attorney adjudicator for further inquiry into the issues, rehearing if applicable, receipt of evidence, and another decision or recommended decision. However, if the Council decides that it can get the additional evidence more quickly, it will take appropriate action. (b) When the Council must remand a case to the Part D IRE. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5138, Jan. 17, 2017; 83 FR 16754, Apr. 16, 2018] § 423.2128 Action of the Council. (a) After it has reviewed all the evidence in the administrative record and any additional evidence received, subject to the limitations on Council consideration of additional evidence in § 423.2122, the Council will make a decision or remand the case to an ALJ or attorney adjudicator. (b) The Council may adopt, modify, or reverse the ALJ or attorney adjudicator decision or recommended decision. (c) The Council mails a copy of its decision to the enrollee at his or her last known address, to CMS, to the IRE, and to the Part D plan sponsor. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5139, Jan. 17, 2017] § 423.2130 Effect of the Council's decision. The Council's decision is final and binding unless a Federal District Court issues a decision modifying the Council's decision or the decision is revised as the result of a reopening in accordance with § 423.1980. An enrollee may file an action in a Federal District Court within 60 calendar days after the date the enrollee receives written notice of the Council's decision. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5139, Jan. 17, 2017] § 423.2134 Extension of time to file action in Federal District Court. (a) An enrollee may request that the time for filing an action in a Federal District Court be extended. (b) The request must: (1) Be in writing. (2) Give the reasons why the action was not filed within the stated time period. (3) Be filed with the Council. (c) If the enrollee shows that he or she had good cause for missing the deadline, the time period will be extended. To determine whether good cause exists, the Council uses the standards specified in §§ 405.942(b)(2) or (b)(3) of this chapter. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5139, Jan. 17, 2017] § 423.2136 Judicial review. (a) General rule Review of Council decision. (i) It is a final decision of the Secretary; and (ii) The amount in controversy meets the threshold requirements of § 423.2006. (2) Review of ALJ's or attorney adjudicator's decision. (i) The Council denied the enrollee's request for review; and (ii) The amount in controversy meets the threshold requirements of § 423.2006. (b) Court in which to file civil action. (2) If the enrollee does not reside within any judicial district, the civil action must be filed in the District Court of the United States for the District of Columbia. (c) Time for filing civil action. (2) For purposes of this section, the date of receipt of the notice of the Council's decision shall be presumed to be 5 calendar days after the date of the notice, unless there is a reasonable showing to the contrary. (3) Where a case is certified for judicial review in accordance with the expedited access to judicial review process in § 423.1990, the civil action must be filed within 60 calendar days after receipt of the review entity's certification, except where the time is extended by the ALJ or attorney adjudicator or Council, as applicable, upon a showing of good cause. (d) Proper defendant. (2) If the complaint is erroneously filed against the United States or against any agency, officer, or employee of the United States other than the Secretary, the plaintiff enrollee will be notified that he or she has named an incorrect defendant and is granted 60 calendar days from the date of receipt of the notice in which to commence the action against the correct defendant, the Secretary. (e) Standard of review. (2) When the Secretary's decision is adverse to an enrollee due to an enrollee's failure to submit proof in conformity with a regulation prescribed under section 205(a) of the Act pertaining to the type of proof an enrollee must offer to establish entitlement to payment, the court will review only whether the proof conforms with the regulation and the validity of the regulation. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5139, Jan. 17, 2017; 84 FR 19874, May 7, 2019] § 423.2138 Case remanded by a Federal District Court. When a Federal District Court remands a case to the Secretary for further consideration, unless the court order specifies otherwise, the Council, acting on behalf of the Secretary, may make a decision, or it may remand the case to an ALJ or attorney adjudicator with instructions to take action and either issue a decision, take other action, or return the case to the Council with a recommended decision. If the Council remands a case, the procedures specified in § 423.2140 will be followed. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5139, Jan. 17, 2017] § 423.2140 Council Review of ALJ or attorney adjudicator decision in a case remanded by a Federal District Court. (a) General rules. (2) The Council may assume jurisdiction based on written exceptions to the decision of the ALJ or attorney adjudicator that an enrollee files with the Council or based on its authority under paragraph (c) of this section. (3) The Council either makes a new, independent decision based on the entire record that will be the final decision of the Secretary after remand, or remands the case to an ALJ or attorney adjudicator for further proceedings. (b) An enrollee files exceptions disagreeing with the decision of the ALJ or attorney adjudicator. (2) Exceptions may be filed by submitting a written statement to the Council setting forth the reasons for disagreeing with the decision of the ALJ or attorney adjudicator. (i) The enrollee must file exceptions within 30 calendar days of the date the enrollee receives the decision of the ALJ or attorney adjudicator or submit a written request for an extension within the 30 calendar day period. (ii) The Council will grant a timely request for a 30 calendar day extension. A request for an extension of more than 30 calendar days must include a statement of reasons as to why the enrollee needs the additional time and may be granted if the Council finds good cause under the standard established in §§ 405.942(b)(2) or (b)(3) of this chapter. (3) If written exceptions are timely filed, the Council considers the enrollee's reasons for disagreeing with the decision of the ALJ or attorney adjudicator. If the Council concludes that there is no reason to change the decision of the ALJ or attorney adjudicator, it will issue a notice addressing the exceptions and explaining why no change in the decision of the ALJ or attorney adjudicator is warranted. In this instance, the decision of the ALJ or attorney adjudicator is the final decision of the Secretary after remand. (4) When an enrollee files written exceptions to the decision of the ALJ, the Council may assume jurisdiction at any time. If the Council assumes jurisdiction, it makes a new, independent decision based on its consideration of the entire record adopting, modifying, or reversing the decision of the ALJ or attorney adjudicator or remanding the case to an ALJ or attorney adjudicator for further proceedings, including a new decision. The new decision of the Council is the final decision of the Secretary after remand. (c) Council assumes jurisdiction without exceptions being filed. (2) Notice of this action is mailed to the enrollee at his or her last known address. (3) The enrollee will be provided with the opportunity to file a brief or other written statement with the Council about the facts and law relevant to the case. (4) After the brief or other written statement is received or the time allowed (usually 30 calendar days) for submitting them has expired, the Council will either issue a final decision of the Secretary affirming, modifying, or reversing the decision of the ALJ, or remand the case to an ALJ or attorney adjudicator for further proceedings, including a new decision. (d) Exceptions are not filed and the Council does not otherwise assume jurisdiction. [74 FR 65363, Dec. 9, 2009, as amended at 82 FR 5139, Jan. 17, 2017] Subpart V—Part D Communication Requirements Source: 73 FR 54222, Sept. 18, 2008, unless otherwise noted. § 423.2260 Definitions. The definitions in this section apply for this subpart unless the context indicates otherwise. Advertisement (Ad) means Alternate format Banner Banner-like advertisement Communications Marketing (1) Intended, as determined under paragraph (1)(ii) of this definition, to do any of the following: (i)(A) Draw a beneficiary's attention to a Part D plan or plans. (B) Influence a beneficiary's decision making process when making a Part D plan selection. (C) Influence a beneficiary's decision to stay enrolled in a Part D plan (that is, retention-based marketing). (ii) In evaluating the intent of an activity or material, CMS will consider objective information including, but not limited to, the audience of the activity or material, other information communicated by the activity or material, timing, and other context of the activity or material and is not limited to the Part D sponsor's stated intent. (2) Include or address content regarding any of the following: (i) The plan's benefits, benefits structure, premiums or cost sharing. (ii) Measuring or ranking standards (for example, Star Ratings or plan comparisons). Outdoor advertising (ODA) Third-party marketing organization (TPMO) [86 FR 6121, Jan. 19, 2021, as amended at 87 FR 27901, May 9, 2022] § 423.2261 Submission, review, and distribution of materials. (a) General requirements. (1) The Health Plan Management System (HPMS) Marketing Module is the primary system of record for the collection, review, and storage of materials that must be submitted for review. (2) Materials must be submitted to the HPMS Marketing Module by the Part D sponsor or, where materials have been developed by a Third Party Marketing Organization for multiple Part D sponsors or plans, by a Third Party Marketing Organization with prior review of each Part D sponsor on whose behalf the materials were created or will be used. (3)(i) Part D sponsors offering dual eligible special needs plans with exclusively aligned enrollment subject to § 422.107(e) must submit all materials for the contract in HPMS under the Part D sponsor's contract number. (ii) Part D sponsors may not submit materials for the contract under the organization's Multi-Contract Entity number and third-party marketing organizations may not submit materials under the Multi-Plan number as described in § 423.2262(d)(2)(i). (b) CMS review of marketing materials and election forms. (1) CMS has reviewed and approved the material. (2) The material has been deemed approved; that is, CMS has not rendered a disposition for the material within 45 days (or 10 days if using CMS model or standardized marketing materials as outlined in § 422.2267(e) of this chapter) of submission to CMS. (3) The material has been accepted under File and Use, as follows: (i) The Part D sponsor may distribute certain types of marketing materials, designated by CMS based on the material's content, audience, and intended use, as they apply to potential risk to the beneficiary, 5 days following the submission. (ii) The Part D sponsor must certify that the material meets all applicable CMS communications and marketing requirements in §§ 423.2260 through 423.2267. (c) CMS review of non-marketing communications materials. (1) Certain designated communications materials that are critical to beneficiaries understanding or accessing their benefits (for example, the Evidence of Coverage (EOC). (2) Communications materials that, based on feedback such as complaints or data gathered through reviews, warrant additional oversight as determined by CMS, to ensure the information being received by beneficiaries is accurate. (d) Standards for CMS review. (1) Compliance with all applicable requirements under §§ 423.2260 through 423.2267. (2) Benefit and cost information is an accurate reflection of what is contained in the Part D sponsor's bid. (3) CMS may determine, upon review of such materials, that the materials must be modified, or may no longer be used. [86 FR 6122, Jan. 19, 2021, as amended at 88 FR 22340, Apr. 12, 2023; 91 FR 17592, Apr. 6, 2026] § 423.2262 General communications materials and activity requirements. Part D sponsors may not mislead, confuse, or provide materially inaccurate information to current or potential enrollees. (a) General rules. (1) Part D sponsors may not do any of the following: (i) Engage in activities that could mislead or confuse Medicare beneficiaries, or misrepresent the Part D sponsor. (ii) Engage in any discriminatory activity such as attempting to recruit Medicare beneficiaries from higher income areas without making comparable efforts to enroll Medicare beneficiaries from lower income areas, or vice versa. (iii) Target potential enrollees based on higher or lower income levels. (iv) Target potential enrollees based on health status. (v) State or imply plans are only available to seniors rather than to all Medicare beneficiaries. (vi) Employ Part D plan names that suggest that a plan is not available to all Medicare beneficiaries. (vii) Display the names or logos or both of co-branded network pharmacies on the sponsor's member identification card, unless the pharmacy names or logos or both are related to the member selection of specific pharmacies. (viii) Use a plan name that does not include the plan type. The plan type should be included at the end of the plan name, for example, “Super Medicare Drug Plan (PDP)”. Part D sponsors are not required to repeat the plan type when the plan name is used multiple times in the same material. (ix) Claim they are recommended or endorsed by CMS, Medicare, the Secretary, or HHS. (x) Convey that a failure to pay premium will not result in disenrollment except for factually accurate descriptions of the PDP sponsor's policies adopted in accordance with § 423.44(b)(1) and (d)(1) of this chapter. (xi) Use the term “free” to describe a $0 premium, any type of reduction in premium, reduction in deductibles or cost sharing, low-income subsidy, or cost sharing pertaining to dual eligible individuals. (xii) State or imply a plan is available only to or is designed for Medicaid beneficiaries. (xiii) Market a Part D plan not designed to serve dual eligible beneficiaries as if it were a plan designed to serve dual eligible beneficiaries. (xiv) Target marketing efforts primarily to dual eligible individuals. (xv) Claim a relationship with the state Medicaid agency, unless a contract to coordinate Medicaid services for enrollees in that plan is in place. (xvi) Use of the Medicare name, CMS logo, and products or information issued by the Federal Government, including the Medicare card in a misleading way. Use of the Medicare card image is permitted only with authorization from CMS. (2) Part D sponsors may do the following: (i) State that the Part D sponsor is approved to participate in Medicare programs or is contracted to administer Medicare benefits or both. (ii) Use the term “Medicare-approved” to describe benefits or services in materials or both. (b) Product endorsements and testimonials. (i) Television or video ads. (ii) Radio ads. (iii) Print ads. (iv) Social media ads. In cases of social media, the use of a previous post, whether or not associated with or originated by the Part D sponsor, is considered a product endorsement or testimonial. (v) Other types of ads. (2) Part D sponsors may use individuals to endorse the Part D sponsor's product provided the endorsement or testimonial adheres to the following requirements: (i) The speaker must identify the Part D sponsor's product or company by name. (ii) Medicare beneficiaries endorsing or promoting the Part D sponsor must have been an enrollee at the time the endorsement or testimonial was created. (iii) The endorsement or testimonial must clearly state that the individual was paid for the endorsement or testimonial, if applicable. (iv) If an individual is used (for example, an actor) to portray a real or fictitious situation, the advertisement must state that it is an actor portrayal. (c) Requirements when including certain telephone numbers in materials. (i) When a Part D sponsor includes its customer service number, the hours of operation must be prominently included at least once. (ii) When a Part D sponsor includes its customer service number, it must provide a toll-free TTY number in conjunction with the customer service number in the same font size. (iii) On every material where 1-800-MEDICARE or Medicare TTY appears, the Part D sponsor must prominently include, at least once, the hours and days of operation for 1-800-MEDICARE (that is, 24 hours a day/7 days a week). (2) The following advertisement types are exempt from these requirements: (i) Outdoor advertising. (ii) Banners or banner-like ads. (iii) Radio advertisements and sponsorships. (d) Standardized material identification (SMID). (2) The SMID consists of the following three parts: (i) The Part D sponsor's contract or Multi-Contract Entity (MCE) number, (that is, “S” for PDPs, or “Y” for MCE, a means of identification available for Plans/Part D sponsors that have multiple PDP contracts) followed by an underscore, except that the SMID for multi-plan marketing materials must begin with the word “MULTI-PLAN” instead of the Part D sponsor's contract number (for example, S1234_abc123_C or MULTI-PLAN_efg456_M). (ii) A series of alpha numeric characters (at the Part D sponsor's discretion) unique to the material followed by an underscore. (iii) An uppercase “C” for communication materials or an uppercase “M” for marketing materials (for example, S1234_abc123_C or S5678_efg456_M). (3) The SMID is required on all materials except the following: (i) Membership ID card. (ii) Envelopes, radio ads, outdoor advertisements, banners, banner-like ads, and social media comments and posts. (iii) OMB-approved forms/documents, except those materials specified in § 423.2267. (iv) Corporate notices or forms (that is, not Part D-specific) meeting the definition of communications such as privacy notices and authorization to disclose protected health information (PHI). (v) Agent-developed communications materials that are not marketing. (4) Non-English and alternate format materials, based on previously created materials, may have the same SMID as the material on which they are based. [86 FR 6122, Jan. 19, 2021, as amended at 88 FR 22340, Apr. 12, 2023; 91 FR 17592, Apr. 6, 2026] § 423.2263 General marketing requirements. Marketing is a subset of communications and therefore must follow the requirements outlined in § 423.2262 as well as this section. Marketing (as defined in § 423.2260) must additionally meet the following requirements: (a) Part D sponsors may begin marketing prospective plan year offerings on October 1 of each year for the following contract year. Part D sponsors may market the current and prospective year simultaneously provided materials clearly indicate what year is being discussed. (b) In marketing, Part D sponsors may not do any of the following: (1) Provide cash or other monetary rebates as an inducement for enrollment or otherwise. (2) Offer gifts to beneficiaries, unless the gifts are of nominal value (as governed by guidance published by the HHS OIG), are offered to similarly situated beneficiaries without regard to whether or not the beneficiary enrolls, and are not in the form of cash or other monetary rebates. (3) Provide meals to potential enrollees regardless of value. (4) Market non-health care related products to prospective enrollees during any Part D sales activity or presentation. This is considered cross-selling and is prohibited. (5) Compare their plan to other plans, unless the information is accurate, not misleading, and can be supported by the Part D sponsor making the comparison. (6) Display the names or logos or both of pharmacy co-branding partners on marketing materials, unless the materials clearly indicate via a disclaimer or in the body that “Other pharmacies are available in the network.” (7) Knowingly target or send unsolicited marketing materials to any Part D enrollee during the Open Enrollment Period (OEP). (i) During the OEP, a Part D sponsors may do any of the following: (A) Conduct marketing activities that focus on other enrollment opportunities, including but not limited to marketing to age-ins (who have not yet made an enrollment decision), marketing by 5-star plans regarding their continuous enrollment special election period (SEP), and marketing to dual-eligible and LIS beneficiaries who, in general, may make changes once per calendar quarter during the first nine months of the year; (B) Send marketing materials when a beneficiary makes a proactive request; (C) At the beneficiary's request, have one-on-one meetings with a sales agent; (D) At the beneficiary's request, provide information on the OEP through the call center; and (E) Include educational information, excluding marketing, on the Part D sponsor's website about the existence of OEP. (ii) During the OEP, a Part D sponsors may not: (A) Send unsolicited materials advertising the ability or opportunity to make an additional enrollment change or referencing the OEP; (B) Specifically target beneficiaries who are in the OEP because they made a choice during Annual Enrollment Period (AEP) by purchase of mailing lists or other means of identification; (C) Engage in or promote agent or broker activities that intend to target the OEP as an opportunity to make further sales; or (D) Call or otherwise contact former enrollees who have selected a new plan during the AEP. (8) Advertise benefits that are not available to beneficiaries in the service area(s) where the marketing appears, unless the advertisement is in local media that serves the service area(s) where the benefits are available and reaching beneficiaries who reside in other service areas is unavoidable. (9) Market any products or plans, benefits, or costs, unless the Part D sponsor or marketing name(s) as listed in HPMS of the entities offering the referenced products or plans, benefits, or costs are identified in the marketing material. (i) Part D sponsor or marketing names must be in 12-point font in print and may not be in the form of a disclaimer or in fine print. (ii) For television, online, or social media, the Part D sponsor or marketing name(s) must be either read at the same pace as the phone number or must be displayed throughout the entire advertisement in a font size equivalent to the advertised phone number, contact information or benefits. (iii) For radio or other voice-based advertisements, Part D sponsor or marketing names must be read at the same pace as phone numbers or contact information. (10) Part D sponsors may not include information about savings available to potential enrollees that are based on a comparison of typical expenses borne by uninsured individuals, unpaid costs of dually eligible beneficiaries, or other unrealized costs of a Medicare beneficiary. (c) The following requirements apply to how Part D sponsors must display CMS-issued Star Ratings: (1) References to individual Star Rating measure(s) must also include references to the overall Star Rating for MA-PDs and the summary rating for PDP plans. (2) May not use an individual underlying category, domain, or measure rating to imply overall higher Star Ratings. (3) Must be clear that the rating is out of 5 stars. (4) Must clearly identify the Star Ratings contract year. (5) May only market the Star Ratings in the service area(s) for which the Star Rating is applicable unless using Star Ratings to convey overall Part D sponsor performance (for example, “Plan X has achieved 4.5 stars in Montgomery, Chester, and Delaware Counties), in which case the Part D sponsor must do so in a way that is not confusing or misleading. (6) The following requirements apply to all 5 Star PDP contracts: (i) May not market the 5-star special enrollment period, as defined in § 423.38(c)(20), after November 30 of each year if the contract has not received an overall 5 star for the next contract year. (ii) May use CMS' 5- star icon or may create their own icon. (7) The following requirements apply to all Low Performing MA contracts: (i) The Low Performing Icon must be included on all materials about or referencing the specific contract's Star Ratings. (ii) Must state the Low Performing Icon means that the Part D sponsor's contract received a summary rating of 2.5 stars or below in Part D for the last 3 years. (iii) May not attempt to refute or minimize Low Performing Status. [86 FR 6123, Jan. 19, 2021, as amended at 88 FR 22340, Apr. 12, 2023] § 423.2264 Beneficiary contact. For the purpose of this section, beneficiary contact means any outreach activities to a beneficiary or a beneficiary's caregivers by the Part D sponsor or its agents and brokers. (a) Unsolicited contact. (1) Part D sponsors may make unsolicited direct contact by conventional mail and other print media (for example, advertisements and direct mail) or email (provided every email contains an opt-out option). (2) Part D sponsors may not do any of the following if unsolicited: (i) Use door to door solicitation, including leaving information of any kind, except that information may be left when an appointment is pre-scheduled but the beneficiary is not home. (A) Contact is unsolicited door-to-door contact unless an appointment, at the beneficiary's home at the applicable time and date, was previously scheduled. (B) [Reserved] (ii) Approach enrollees in common areas such as parking lots, hallways, lobbies. (iii) Send direct messages from social media platforms. (iv) Use telephone solicitation (that is, cold calling), robocalls, text messages, or voicemail messages, including, but not limited to, the following: (A) Calls based on referrals. (B) Calls to former enrollees who have disenrolled or those in the process of disenrolling, except to conduct disenrollment surveys for quality improvement purposes. (C) Calls to beneficiaries who attended a sales event, unless the beneficiary gave express permission to be contacted. (D) Calls to prospective enrollees to confirm receipt of mailed information. (3) Calls are not considered unsolicited if the beneficiary provides consent or initiates contact with the plan. For example, returning phone calls or calling an individual who has completed a business reply card requesting contact is not considered unsolicited. (b) Contact for plan business. (1) A Part D sponsor may conduct the following activities as plan business: (i) Call current enrollees, including those in non-Medicare products, to discuss Medicare products. Examples of such calls include, but are not limited to the following: (A) Enrollees aging into Medicare from commercial products. (B) Existing enrollees, including Medicaid enrollees, to discuss other Medicare products or plan benefits. (C) Members in an MA or cost plan to discuss other Medicare products. (ii) Call beneficiaries who submit enrollment applications to conduct business related to enrollment. (iii) With prior CMS approval, call LIS enrollees that a plan is prospectively losing due to reassignment. CMS decisions to approve calls are for limited circumstances based on the following: (A) The proximity of cost of the losing plan as compared to the national benchmark; and (B) The selection of plans in the service area that are below the benchmark. (iv) Agents/brokers calling clients who are enrolled in other products they may sell, such as automotive or home insurance. (v) Part D sponsors may not make unsolicited calls about other lines of business as a means of generating leads for Medicare plans. (2) If the Part D sponsor reaches out to beneficiaries regarding plan business, as outlined in this section, the Part D sponsor must provide notice to all beneficiaries whom the plan contacts as least once annually, in writing, of the individual's ability to opt out of future calls regarding plan business. (c) Events with beneficiaries. (1) Educational events must be advertised as such and be designed to generally inform beneficiaries about Medicare, including Medicare Advantage, Prescription Drug programs, or any other Medicare program. (i) At educational events, Part D sponsors and agents/brokers may not market specific Part D sponsors or benefits. (ii) Part D sponsors holding or participating in educational events may do any of the following: (A) Distribute communication materials. (B) Answer beneficiary initiated questions pertaining to Part D plans. (C) Distribute business cards. (D) Make available and receive beneficiary contact information, including Business Reply Cards and Scope of Appointment forms. (iii) Part D sponsors holding or participating in educational events may not conduct sales or marketing presentations or distribute or accept plan applications. (iv) Part D sponsors may schedule appointments with residents of long-term care facilities (for example, nursing homes, assisted living facilities, board and care homes) upon a resident's request. If a resident did not request an appointment, any visit by an agent or broker is prohibited as unsolicited door-to-door marketing. (2) Marketing or sales events are group events that fall within the definition of marketing at § 423.2260. (i) If a marketing event directly follows an educational event, the beneficiary must be notified that the educational event is ending and a marketing event will begin shortly and be given a sufficient opportunity to leave the educational event prior to the start of the marketing event. (ii) Part D sponsors holding or participating in marketing events may do any of the following: (A) Provide marketing materials. (B) Distribute and accept plan applications. (C) Collect Scope of Appointment forms for future personal marketing appointments. (D) Conduct marketing presentations. (iii) Part D sponsors holding or participating in marketing events may not do any of the following: (A) Require sign in sheets or require attendees to provide contact information as a prerequisite for attending an event. (B) Conduct activities, including health screenings, health surveys, or other activities that are used for or could be viewed as being used to target a subset of members (that is “cherry-picking”). (C) Use information collected for raffles or drawings for any purpose other than raffles or drawings. (3) Personal marketing appointments are those appointments that are tailored to an individual or small group (for example, a married couple) for purposes of discussing marketing topics. Personal marketing appointments are not defined by the location. (i) Prior to the personal marketing appointment, the Part D plan (or agent or broker, as applicable) must agree upon and record the Scope of Appointment with the beneficiary(ies). The Scope of Appointment must be in writing for in-person personal marketing appointments. (ii) Part D sponsors holding a personal marketing appointment may do any of the following: (A) Provide marketing materials. (B) Distribute and accept plan applications. (C) Conduct marketing presentations. (D) Review the individual needs of the beneficiary including, but not limited to, health care needs and history, commonly used medications, and financial concerns. (iii) Part D sponsors holding a personal marketing appointment may not do any of the following: (A) Market any health care related product during a marketing appointment beyond the scope agreed upon by the beneficiary, and documented by the plan in a Scope of Appointment, business reply card, or request to receive additional information, which is valid for 12 months following the date of beneficiary's signature date or the date of the beneficiary's initial request for information. (B) Market additional health related lines of plan business not identified prior to an individual appointment without a separate Scope of Appointment, identifying the additional lines of business to be discussed; such Scope of Appointment is valid for 12 months following the beneficiary's signature date. (C) Market non-health related products such as annuities. [86 FR 6124, Jan. 19, 2021, as amended at 88 FR 22340, Apr. 12, 2023; 88 FR 34780, May 31, 2023; 91 FR 17592, Apr. 6, 2026] § 423.2265 Websites. As required under § 423.128(d)(2), Part D sponsors must have a website. (a) General website requirements. (i) Maintain current year contract content through December 31 of each year. (ii) Notify users when they will leave the Part D sponsor's Medicare site. (iii) Include or provide access to (for example, through a hyperlink) applicable notices, statements, disclosures, or disclaimers with corresponding content. Overarching disclaimers, such as the Federal Contracting Statement, are not required on every page. (iv) Reflect the most current information within 30 days of any material change (v) Keep PDP content separate and distinct from other lines of business, including Medicare Supplemental Plans. (2) Part D sponsor websites may not do any of the following: (i) Require beneficiaries to enter any information other than zip code, county, or state for access to non-beneficiary-specific website content. (ii) Provide links to foreign drug sales, including advertising links. (iii) State that the Part D sponsor is not responsible for the content of their social media pages or the website of any first tier, downstream, or related entity that provides information on behalf of the Part D sponsor. (b) Required content. (1) A toll-free customer service number, TTY number, and days and hours of operation. (2) A physical or Post Office Box address. (3) A PDF or copy of a printable pharmacy directory. (4) A searchable pharmacy directory. (5) A searchable formulary. (6) Information on enrollees' and Part D sponsors' rights and responsibilities upon disenrollment. Part D sponsors may either post this information or provide specific information on where it is located in the Evidence of Coverage together with a link to that document. (7) A description of and information on how to file a grievance, request an organization determination, and an appeal. (8) Prominently displayed link to the Medicare.gov (9) A Notice of Privacy Practices as required under the HIPAA Privacy Rule (45 CFR 164.520). (10) Prescription Drug Transition Policy. (11) LIS Premium Summary Chart. (12) Prescription Drug Transition Policy. (13) A separate section or page about MTM programs providing the following: (i) Explanation of MTM program, including eligibility requirements, the purpose and benefits of MTM, how to obtain MTM service documents including the Medication list, that the service is free, and a summary of services. (ii) Information on how to obtain information about the MTM program, including how the member will know they are eligible and enrolled into the MTM program, the comprehensive medication review and targeted medication reviews, a description of how reviews are conducted and delivered, including time commitments and materials beneficiaries will receive. (14) Instructions on how to appoint a representative including a link to the downloadable version of the CMS Appointment of Representative Form (CMS Form-1696). (15) Enrollment instructions and forms. (16) Information about the Medicare Prescription Payment Plan as described in § 423.137(m)(2). (c) Required posted materials. (1) The following materials for each plan year must be posted on the website by October 15 prior to the beginning of the plan year: (i) Evidence of Coverage. (ii) Annual Notice of Change (for renewing plans). (iii) Summary of Benefits. (iv) Pharmacy Directory. (v) Formulary. (vi) Utilization Management Forms for physicians and enrollees. (2) The following materials must be posted on the website throughout the year and be updated as required: (i) Prior Authorization Forms for Physicians and Enrollees. (ii) Part D Model Coverage Determination and Redetermination Request Forms. (iii) Exception request forms for physicians (which must be posted by January 1 for new plans). (iv) CMS Star Ratings document, which must be posted within 21 days after its release on the Medicare Plan Finder. [86 FR 6125, Jan. 19, 2021, as amended at 87 FR 27901, May 9, 2022; 90 FR 15920, Apr. 15, 2025] § 423.2266 Activities with healthcare providers or in the healthcare setting. (a) Where marketing is prohibited. (1) Exam rooms. (2) Hospital patient rooms. (3) Treatment areas where patients interact with a provider and his/her clinical team and receive treatment (including such areas in dialysis treatment facilities). (4) Pharmacy counter areas. (b) Where marketing is permitted. (1) Common entryways. (2) Vestibules. (3) Waiting rooms. (4) Hospital or nursing home cafeterias. (5) Community, recreational, or conference rooms. (c) Provider-initiated activities. (1) Distributing unaltered, printed materials created by CMS, such as reports from Medicare Plan Finder, the “Medicare & You” handbook, or “Medicare Options Compare” (from https://www.medicare.gov (2) Providing the names of Part D sponsors with which they contract or participate or both. (3) Answering questions or discussing the merits of a Part D plan or plans, including cost sharing and benefit information including in areas where care is delivered. (4) Referring patients to other sources of information, such as State Health Insurance Assistance Program (SHIP) representatives, plan marketing representatives, State Medicaid Office, local Social Security Offices, CMS' website at https://www.medicare.gov, (5) Referring patients to Part D marketing materials available in common areas. (6) Providing information and assistance in applying for the LIS. (7) Announcing new or continuing affiliations with Part D sponsors, once a contractual agreement is signed. Announcements may be made through any means of distribution. (d) Plan-initiated provider activities. (1) During plan-initiated provider activities, Part D sponsors must ensure that the provider does not: (i) Accept/collect scope of appointment forms. (ii) Accept Medicare enrollment applications. (iii) Make phone calls or direct, urge, or attempt to persuade their patients to enroll in a specific plan based on financial or any other interests of the provider. (iv) Mail marketing materials on behalf of a Part D sponsor. (v) Offer inducements to persuade patients to enroll with a particular Part D plan or sponsor. (vi) Conduct health screenings as a marketing activity. (vii) Distribute marketing materials or enrollment forms in areas where care is being delivered. (viii) Offer anything of value to induce enrollees to select the provider. (ix) Accept compensation from the Part D sponsor for any marketing or enrollment activities performed on behalf of the Part D sponsor. (2) During plan-initiated provider activities, the provider may do any of the following: (i) Make available, distribute, and display communications materials, including in areas where care is being delivered. (ii) Provide or make available marketing materials and enrollment forms in common areas. (e) Part D sponsor activities in the healthcare setting. (1) Accepting and collect Scope of Appointment forms. (2) Accepting enrollment forms. (3) Making available, distributing, and displaying communications materials, including in areas where care is being delivered. [86 FR 6125, Jan. 19, 2021] § 423.2267 Required materials and content. For information CMS deems to be vital to the beneficiary, including information related to enrollment, benefits, health, and rights, the agency may develop materials or content that are either standardized or provided in a model form. Such materials and content are collectively referred to as required. (a) Standards for required materials and content. (1) Be in a 12pt font, Times New Roman or equivalent. (2) For markets with a significant non-English speaking population, be in the language of these individuals. Specifically, Part D sponsors must translate required materials into any non-English language that is the primary language of at least 5 percent of the individuals in a plan benefit package (PBP) service area. (3) Be provided to enrollees on a standing basis in any non-English language identified in paragraphs (a)(2) and (4) of this section and/or accessible format using auxiliary aids and services upon receiving a request for the materials in a non-English language or accessible format or when otherwise learning of the enrollee's primary language and/or need for an accessible format. This requirement also applies to the individualized plans of care described in § 422.101(f)(1)(ii) of this chapter for special needs plan enrollees. (4) For any fully integrated dual eligible special needs plan or highly integrated dual eligible special needs plan as defined at § 422.2 of this chapter, or applicable integrated plan as defined at § 422.561 of this chapter, be translated into the language(s) required by the Medicaid translation standard as specified through their capitated Medicaid managed care contract in addition to the language(s) required by the Medicare translation standard in paragraph (a)(2) of this section. (5) Be provided to the beneficiary within CMS's specified timeframes. (b) Standardized materials. (1) When CMS issues standardized material or content, a Part D sponsor must use the document without alteration except for the following: (i) Populating variable fields. (ii) Correcting grammatical errors. (iii) Adding customer service phone numbers. (iv) Adding plan name, logo, or both. (v) Deleting content that does not pertain to the plan type (for example, removing MA language for a Part D plan). (vi) Adding the SMID. (vii) A Notice of Privacy Practices as required under the HIPAA Privacy Rule (45 CFR 164.520). (2) When CMS issues standardized content, Part D sponsors— (3) The Part D sponsor may develop accompanying language for standardized material or content, provided that language does not conflict with the standardized material or content. For example, CMS may issue standardized content associated with an appeal notification and Part D sponsor may draft a letter that includes the standardized content in the body of the letter; the remaining language in the letter is at the sponsor's discretion, provided it does not conflict with the standardized content or other regulatory standards. (c) Model materials. (1) Must accurately convey the vital information in the required material or content to the beneficiary, although the Part D sponsor is not required to use CMS model materials or content verbatim; and (2) Must follow CMS's specified order of content, when specified. (d) Delivery of required materials. (1) For hard copy mailed materials, each enrollee must receive his or her own copy, except in cases of non-beneficiary-specific material(s) where the Part D sponsor has determined multiple enrollees are living in the same household and it has reason to believe the enrollees are related. In that case, the Part D sponsor may mail one copy to the household. The Part D sponsor must provide all enrollees an opt-out process so the enrollees can each receive his or her own copy, instead of a copy to the household. Materials specific to an individual beneficiary must always be mailed to that individual. (2) Materials may be delivered electronically following the requirements in paragraphs (d)(2)(i) and (ii) of this section. (i) Without prior authorization from the enrollee, Part D sponsors may mail new and current enrollees a notice informing enrollees how to electronically access the following required materials: the Evidence of Coverage, Provider and Pharmacy Directories, and Formulary. The following requirements apply: (A) The Part D sponsor may mail one notice for all materials or multiple notices. (B) Notices for prospective year materials may not be mailed prior to September 1 of each year, but must be sent in time for an enrollee to access the specified materials by October 15 of each year. (C) The Part D sponsor may send the notice throughout the year to new enrollees. (D) The notice must include the website address to access the materials, the date the materials will be available if not currently available, and a phone number to request that hard copy materials be mailed. (E) The notice must provide the enrollee with the option to request hardcopy materials. Requests may be material specific, and must have the option of a one-time request or a permanent request that must stay in place until the enrollee chooses to receive electronic materials again. (F) Hard copies of requested materials must be sent within three business days of the request. (ii) With prior authorization from the enrollee, the Part D sponsor may provide any required material or content electronically. To do so, the Part D sponsor must do all of the following: (A) Obtain prior consent from the enrollee. The consent must specify both the media type and the specific materials being provided in that media type. (B) Provide instructions on how and when enrollees can access the materials. (C) Have a process through which an enrollee can request hard copies be mailed, providing the beneficiary with the option of a one-time request or a permanent request (which must stay in place until the enrollee chooses to receive electronic materials again), and with the option of requesting hard copies for all or a subset of materials. Hard copies must be mailed within three business days of the request. (D) Have a process for automatic mailing of hard copies when electronic versions or the chosen media type is undeliverable. (e) CMS required materials and content. (1) Evidence of Coverage (EOC). (i) To current enrollees of plan by October 15, prior to the year to which the EOC applies. (ii) To new enrollees within 10 calendar days from receipt of CMS confirmation of enrollment or by last day of month prior to effective date, whichever is later. (2) Part D explanation of benefits (EOB). (3) Annual Notice of Change (ANOC). (i) Must send for enrollee receipt no later than September 30 of each year. (ii) Enrollees with an October 1, November 1, or December 1 effective date must receive within 10 calendar days from receipt of CMS confirmation of enrollment or by last day of month prior to effective date, whichever is later. (4) Pre-enrollment checklist (PECL). (i) The EOC. (ii) Provider directory. (iii) Pharmacy directory. (iv) Formulary. (v) Premiums/copayments/coinsurance. (vi) Emergency/urgent coverage. (vii) Plan-type rules. (viii) Effect on current coverage. (5) Summary of Benefits (SB). (i) The SB must be provided with an enrollment form as follows: (A) In hardcopy with a paper enrollment form. (B) For online enrollment, the SB must be made available electronically (for example, via a link) prior to the completion and submission of enrollment request. (C) For telephonic enrollment, the beneficiary must be verbally told where the SB can be accessed. (ii) The SB must include the following information: (A) Information on prescription drug expenses, including: ( 1 ( 2 ( 3 ( 4 (B) Plan sponsors may describe or identify other health related benefits in the SB. (6) Enrollment/Election form. (7) Enrollment Notice. (8) Disenrollment Notice. (9) Formulary. (i) Must be provided to current enrollees of plan by October 15 of each year. (ii) Must also provide to new enrollees within 10 calendar days from receipt of CMS confirmation of enrollment or by last day of month prior to effective date, whichever is later. (10) Low Income Subsidy (LIS) Notice. (11) Low Income Subsidy (LIS) Rider. (i) The LIS Rider must be provided at least once per year by September 30. (ii) The LIS Rider must be sent to enrollees who qualify for Extra Help or have a change in LIS levels within 30 days of receiving notification from CMS. (12) Midyear Change Notification. (i) Notices of changes in plan rules, unless otherwise addressed elsewhere in the regulation, must be provided 30 days in advance. (ii) National Coverage Determination (NCD) changes announced or finalized less than 30 days before effective date, a notification is required as soon as possible. (iii) Midyear NCD or legislative changes must be provided no later than 30 days after the NCD is announced or the legislative change is effective. (A) Plans may include the change in next plan mass mailing (for example, newsletter), provided it is within 30 days. (B) The notice must also appear on the MA organization's website. (13) Non-renewal notice. (i) The Non-renewal Notice must be provided at least 90 calendar days before the date on which the nonrenewal is effective. For contracts ending on December 31, the notice must be dated October 2 to ensure national consistency in the application of Medigap Guaranteed Issue (GI) rights to all enrollees, except for those enrollees in Medicare-Medicaid Plans (MMPs) and special needs plans (SNPs). Information about non-renewals or service area reductions may not be released to the public, including the Non-renewal Notice in this section, until CMS provides notification to the plan. (ii) The Non-renewal Notice must do all of the following: (A) Inform the enrollee that the plan will no longer be offered and the date the plan will end. (B) Provide information about any applicable open enrollment periods or special election periods or both (for example, Medicare open enrollment, non-renewal special election period), including the last day the enrollee has to make a Medicare prescription drug plan selection. (C) Explain what the enrollee must do to continue receiving Medicare coverage and what will happen if the enrollee chooses to do nothing. (D) As required under § 423.507(a)(2)(ii)(A), provide a CMS-approved written description of alternative MA plan, MA-PD plan, and PDP options available for obtaining qualified Medicare services within the beneficiary's region in the enrollee's notice. (E) Specify when coverage will start after a new Medicare plan is chosen. (F) List 1-800-MEDICARE contact information together with other organizations that may be able to assist with comparing plans (for example, SHIPs). (G) Include the Part D sponsor's call center telephone number, TTY number, and hours and days of operation. (14) Part D Transition Letter. (15) Pharmacy Directory. (i) Be provided to current enrollees by October 15 of the year prior to the applicable year. (ii) Be provided to new enrollees within 10 calendars days from receipt of CMS confirmation of enrollment or by last day of month prior to effective date, whichever is later. (iii) Be provided to current enrollees upon request, within three business days of the request. (iv) Be updated any time the Part D sponsor becomes aware of changes. (A) All updates to the online pharmacy directories must be completed within 30 days of receiving information requiring update. (B)( 1 ( 2 (16) Prescription transfer letter. (17) Star Ratings Document. (i) The Star Ratings Document is generated through HPMS. (ii) The Star Ratings Document must be provided with an enrollment form as follows: (A) In hardcopy with a paper enrollment form. (B) For online enrollment, made available electronically (for example, via a link) prior to the completion and submission of enrollment request. (C) For telephonic enrollment, the beneficiary must be verbally told where they can access the Star Ratings Document. (iii) New Part D sponsors that have no Star Ratings are not required to provide the Star Ratings Document until the following contract year. (iv) Updated Star Ratings must be used within 21 calendar days of release of updated information on Medicare Plan Finder. (v) Updated Star Ratings must not be used until CMS releases Star Ratings on Medicare Plan Finder. (18) Coverage Determination Notices. (19) Excluded Provider Notices. (20) Notice of Denial of Medicare Prescription Drug Coverage. (21) Medicare Prescription Drug Coverage and Your Rights. (22) Medicare Part D Coverage Determination Request Form. (23) Request for Additional Information. (24) Notice of Right to an Expedited Grievance. (25) Notice of Inquiry. (26) Notice of Case Status. (27) Request for Reconsideration of Medicare Prescription Drug Denial. (28) Notice of Redetermination. (29) LEP Reconsideration Request Form. (30) Request for Administrative Law Judge (ALJ) Hearing or Review of Dismissal. (31) Appointment of Representative (AOR). (32) Member ID card. (i) Must be provided to new enrollees within 10 calendars days from receipt of CMS confirmation of enrollment or by the last day of month prior to the plan effective date, whichever is later; (ii) Must include the Part D sponsor's— (A) Website address; (B) Customer service number (the member ID card is excluded from the hours of operations requirement under § 423.2262(c)(1)(i)); and (C) Contract/PBP number; (iii) Must include, if issued for a preferred provider organization (PPO) and PFFS plan, the phrase “Medicare limiting charges apply.”; (iv) May not use a member's Social Security number (SSN), in whole or in part; (v) Must be updated whenever information on a member's existing card changes; in such cases an updated card must be provided to the member; (vi) Is excluded from the translation requirement under paragraphs (a)(2) through (4) of this section; (vii) Is excluded from the 12-point font size requirement under paragraph (a)(1) of this section; and (viii) For dual eligible special needs plans that are applicable integrated plans, as defined in § 422.561 of this chapter, must be an integrated member ID card that serves as the ID card for both the Medicare and Medicaid plans in which the enrollee is enrolled, beginning no later than contract year 2027. (33) [Reserved] (34) Federal Contracting Statement. (i) The Federal Contracting Statement must include all of the following: (A) Legal or marketing name of the organization. (B) Type of plan (for example PDP). (C) A statement that the organization has a contract with Medicare (when applicable, Part D sponsors may incorporate a statement that the organization has a contract with the State/Medicaid program). (D) A statement that enrollment depends on contract renewal. (ii) Part D sponsors must include the Federal Contracting Statement on all marketing materials with the exception of the following: (A) Banner and banner-like advertisements. (B) Outdoor advertisements. (C) Text messages. (D) Social media. (E) Envelopes (35) Star Ratings Disclaimer. (i) Convey that plan sponsors are evaluated yearly by Medicare (ii) Convey that the ratings are based on a 5-star rating system (iii) Include the model content in disclaimer form or within the material whenever Star Ratings are mentioned in marketing materials, with the exception of when Star Ratings are published on small objects (that is, a give-away items such as a pens or rulers). (36) Accommodations Disclaimer. (i) Convey that accommodations for persons with special needs is available (ii) Provide a telephone number and TTY number (iii) Include the model content in disclaimer form or within the body of the material on any advertisement of invitation to all events as described under § 423.2264(c). (37) Mailing Statements. (i) Part D sponsors must include the following statement when mailing information about the enrollee's current plan: “Important [Insert Plan Name] information.” (ii) Part D sponsors must include the following statement when mailing health and wellness information “Health and wellness or prevention information.” (iii) The Part D sponsor must include the plan name; however, if the plan name is elsewhere on the envelope, the plan name does not need to be repeated in the disclaimer. (iv) Delegated or sub-contracted entities and downstream entities that conduct mailings on behalf of a multiple Part D sponsors must also comply with this requirement, however, they do not have to include a plan name. (38) Promotional Give-Away Disclaimer. (39) Provider Co-Branded Material Disclaimer. (i) Convey, as applicable, that other pharmacies, physicians or providers are available in the plan's network. (ii) Include the model content in disclaimer form or within the material whenever co-branding relationships with network provider are mentioned. (40) Limited access to preferred cost-sharing pharmacies. (i) Be used on all materials mentioning preferred pharmacies when there is limited access to preferred pharmacies; and (ii) Include the following language: “<insert organization/plan name>'s pharmacy network includes limited lower-cost, preferred pharmacies in <insert geographic area type(s) and state(s) for which plan is an outlier)>. The lower costs advertised in our plan materials for these pharmacies may not be available at the pharmacy you use. For up-to-date information about our network pharmacies, including whether there are any lower-cost preferred pharmacies in your area, please call <insert Member Services phone number and TTY> or consult the online pharmacy directory at <insert website>.” (41) Third-party marketing organization disclaimer. Medicare.gov Medicare.gov (i) Used by any TPMO, as defined under § 422.2260, that sells plans on behalf of more than one Part D sponsor. (ii) Verbally conveyed during sales calls prior to the discussion of any benefits. (iii) Electronically conveyed when communicating with a beneficiary through email, online chat, or other electronic means of communication. (iv) Prominently displayed on TPMO websites. (v) Included in any marketing materials, including print materials and television advertisements, developed, used or distributed by the TPMO. (42) [Reserved] (43) Comprehensive medication review—written summary. (44) Safe disposal information. (45) Election request form. (46) Notice of election approval. (47) Medicare Prescription Payment Plan Likely to Benefit Notice. (48) Notice of failure to pay. (49) Involuntary termination notice. (50) Voluntary termination notice. 2 (51) Renewal notice. [86 FR 6126, Jan. 19, 2021, as amended at 86 FR 29528, June 2, 2021; 87 FR 27901, May 9, 2022; 88 FR 22341, Apr. 12, 2023; 88 FR 34780, May 31, 2023; 89 FR 30842, Apr. 23, 2024; 90 FR 15920, Apr. 15, 2025; 91 FR 17592, Apr. 6, 2026] § 423.2272 Licensing of marketing representatives and confirmation of marketing resources. In its marketing, the Part D organization must— (a) Demonstrate to CMS's satisfaction that marketing resources are allocated to marketing to the disabled Medicare population as well as beneficiaries age 65 and over. (b) Establish and maintain a system for confirming that enrolled beneficiaries have in fact enrolled in the PDP and understand the rules applicable under the plan. (c) Employ as marketing representatives only individuals who are licensed by the State to conduct direct marketing activities (as defined in the Medicare Marketing Guidelines) in that State, and whom the sponsor has informed that State it has appointed, consistent with the appointment process provided for under State law. (d) Report to the State in which the MAO appoints an agent or broker, the termination of any such agent or broker, including the reasons for such termination if State law requires that the reasons for the termination be reported. (e) Establish and implement an oversight plan that monitors agent and broker activities, identifies non-compliance with CMS requirements, and reports non-compliance to CMS. [73 FR 54222, Sept. 18, 2008, as amended at 73 FR 54253, Sept. 18, 2008; 76 FR 21577, Apr. 15, 2011; 83 FR 16755, Apr. 16, 2018; 88 FR 22341, Apr. 12, 2023] § 423.2274 Agent, broker, and other third-party requirements. If a Part D sponsor uses agents and brokers to sell its Medicare Part D plans, the requirements in paragraphs (a) through (e) of this section are applicable. If a Part D sponsor makes payments to third parties, the requirements in paragraph (f) of this section are applicable. (a) Definitions. Compensation. (A) Commissions. (B) Bonuses. (C) Gifts. (D) Prizes or Awards. (E) Beginning with contract year 2025, payment of fees to comply with state appointment laws, training, certification, and testing costs. (F) Beginning with contract year 2025, reimbursement for mileage to, and from, appointments with beneficiaries. (G) Beginning with contract year 2025, reimbursement for actual costs associated with beneficiary sales appointments such as venue rent, snacks, and materials. (H) Beginning with contract year 2025, any other payments made to an agent or broker that are tied to enrollment, related to an enrollment in a Part D plan or product, or for services conducted as a part of the relationship associated with the enrollment into a Part D plan or product. (ii) Does not include any of the following: (A) Payment of fees to comply with State appointment laws, training, certification, and testing costs. (B) Reimbursement for mileage to, and from, appointments with beneficiaries. (C) Reimbursement for actual costs associated with beneficiary sales appointments such as venue rent, snacks, and materials. Fair market value (FMV) Initial enrollment year renewal year Like plan type (i) PDP replaced with another PDP. (ii) MA or MA-PD replaced with another MA or MA-PD. (iii) Cost plan replaced with another cost plan. Plan year enrollment year Renewal year Unlike plan type (i) An MA or MA-PD plan to a PDP or Section 1876 Cost Plan. (ii) A PDP to a Section 1876 Cost Plan or an MA or MA-PD plan. (iii) A Section 1876 Cost Plan to an MA or MA-PD plan or PDP. (b) Agent/broker requirements. (1) Be licensed and appointed under State law (if required under applicable State law). (2) Be trained and tested annually as required under paragraph (c)(4) of this section, and achieve an 85 percent or higher on all forms of testing. (3) Secure and document a Scope of Appointment prior to a personal marketing appointment. (c) Part D sponsor oversight. (1) As required under applicable State law, employ as marketing representatives only individuals who are licensed by the State to conduct marketing (as defined in this subpart) of health insurance in that State, and whom the Part D sponsor has informed that State it has appointed, consistent with the appointment process for agents and brokers provided for under State law. (2) As required under applicable State law, report the termination of an agent or broker to the State and the reason for termination if required by state law. (3) Report to CMS all enrollments made by unlicensed agents or brokers and for-cause terminations of agents or brokers. (4) On an annual basis, provide training and testing to agents and brokers on Medicare rules and regulations, the plan products that agents and brokers will sell including any details specific to each plan product, and relevant State and Federal requirements. (5) On an annual basis for plan years through 2024, by the last Friday in July, report to CMS whether the MA organization intends to use employed, captive, or independent agents or brokers in the upcoming plan year and the specific rates or range of rates the plan will pay independent agents and brokers. Following the reporting deadline, MA organizations may not change their decisions related to agent or broker type, or their compensation rates and ranges, until the next plan year. (6) On an annual basis by October 1, have in place full compensation structures for the following plan year. The structure must include details on compensation dissemination, including specifying payment amounts for initial enrollment year and renewal year compensation. (7) Submit agent or broker marketing materials to CMS through HPMS prior to use, following the requirements for marketing materials in this subpart. (8) Ensure beneficiaries are not charged marketing consulting fees when considering enrollment in Part D plans. (9) Establish and maintain a system for confirming all of the following: (i) Beneficiaries enrolled by agents or brokers understand the product, including the rules applicable under the plan. (ii) Agents and brokers appropriately complete Scope of Appointment records for all personal marketing appointments (including telephonic and walk-in). (10) Demonstrate that marketing resources are allocated to marketing to the disabled Medicare population as well as to Medicare beneficiaries age 65 and over. (11) Must comply with State requests for information about the performance of a licensed agent or broker as part of a state investigation into the individual's conduct. CMS will establish and maintain a memorandum of understanding (MOU) to share compliance and oversight information with States that agree to the MOU. (12) Ensure that, prior to an enrollment CMS' required questions and topics regarding beneficiary needs in a health plan choice are fully discussed. Topics include information regarding pharmacies (that is, whether or not the beneficiary's current pharmacy is in the plan's network), prescription drug coverage and costs (including whether or not the beneficiary's current prescriptions are covered), premiums, and other services or incentives. (13) Beginning with contract year 2025, ensure that no provision of a contract with an agent, broker, or other TPMO has a direct or indirect effect of creating an incentive that would reasonably be expected to inhibit an agent or broker's ability to objectively assess and recommend which plan best fits the health care needs of a beneficiary. (d) Compensation requirements. (1) General rules. (ii) For contract years through contract year 2024, Part D sponsors may determine, through their contracts, the amount of compensation to be paid, provided it does not exceed limitations outlined in this section. Beginning with contract year 2025, Part D sponsors are limited to the compensation amounts outlined in this section. (iii) Part D sponsors may determine their payment schedule (for example, monthly or quarterly). Payments (including payments for AEP enrollments) must be made during the year of the beneficiary's enrollment. (iv) Part D sponsors may only pay compensation for the number of months a member is enrolled. (2) Initial enrollment year compensation. For each enrollment in an initial enrollment year for contract years through contract year 2024, Part D sponsors may pay compensation at or below FMV. (i) Part D sponsors may pay either a full or pro-rated initial enrollment year compensation for: (A) A beneficiary's first year of enrollment in any plan; or (B) A beneficiary's move from an employer group plan to a non-employer group plan (either within the same parent organization or between parent organizations). (ii) Part D sponsors must pay pro-rated initial enrollment year compensation for: (A) A beneficiary's plan change(s) during their initial enrollment year. (B) A beneficiary's selection of an “unlike plan type” change. In that case, the new plan would only pay the months that the beneficiary is enrolled, and the previous plan would recoup the months that the beneficiary was not in the plan. (3) Renewal compensation. (i) Part D sponsors may pay compensation for a renewal year: (A) In any year following the initial enrollment year the beneficiary remains in the same plan; or (B) When a beneficiary enrolls in a new “like plan type”. (ii) [Reserved] (4) Other compensation scenarios. (ii) When a beneficiary enrolls in both a section 1876 Cost Plan and a stand-alone PDP, the 1876 Cost Plan sponsor may pay compensation for the cost plan enrollment and the Part D sponsor must pay compensation for the Part D enrollment. (iii) When a beneficiary enrolls in a MA-only plan and a PDP, the MA plan may pay for the MA plan enrollment and the Part D sponsor may pay for the PDP enrollment. (5) Additional compensation, payment, and compensation recovery requirements (Charge-backs). (ii) Compensation recovery is required when: (A) A beneficiary makes any plan change (regardless of the parent organization) within the first three months of enrollment (known as rapid disenrollment), except as provided in paragraph (d)(5)(iii) of this section. (B) Any other time period a beneficiary is not enrolled in a plan, but the plan paid compensation based on that time period. (iii) Rapid disenrollment compensation recovery does not apply when: (A) A beneficiary enrolls effective October 1, November 1, or December 1 and subsequently uses the Annual Election Period to change plans for an effective date of January 1. (B) A beneficiary's enrollment change is not in the best interests of the Medicare program, including for the following reasons: ( 1 for example ( 2 ( 3 ( 4 ( 5 ( 6 ( 7 ( 8 ( 9 ( 10 ( 11 ( 12 ( 13 ( 14 (iv)(A) When rapid disenrollment compensation recovery applies, the entire compensation must be recovered. (B) For other compensation recovery, plans must recover a pro-rated amount of compensation (whether paid for an initial enrollment year or renewal year) from an agent or broker equal to the number of months not enrolled. ( 1 ( 2 (e) Payments other than compensation (administrative payments). (2) Beginning with contract year 2025, administrative payments are included in the calculation of enrollment-based compensation. (f) Payments for referrals. (g) TPMO oversight. (1) When TPMOs is not otherwise an FDR, the Part D sponsor is responsible for ensuring that the TPMO adheres to any requirements that apply to the Part D sponsor. (2) Contracts, written arrangements, and agreements between the TPMO and a Part D plan, or between a TPMO and a Part D plan's FDR, must ensure the TPMO: (i) Discloses to the plan any subcontracted relationships used for marketing, lead generation, and enrollment. (ii) All marketing and sales calls, including the audio portion of calls conducted via web-based technology, must be recorded and retained in their entirety for a minimum period of 6 years. For the first 3 years of the retention period, records must be maintained in audio format. For years 4, 5, and 6, records may be maintained in either audio format or as complete and accurate transcript recordings. (iii) Report to plans monthly any staff disciplinary actions or violations of any requirements that apply to the Part D sponsor associated with beneficiary interaction to the plan. (iv) Use the TPMO disclaimer as required under § 423.2267(e)(41). (3) Ensure that the TPMO, when conducting lead generating activities, either directly or indirectly for a Part D sponsor, must, when applicable: (i) Disclose to the beneficiary that his or her information will be provided to a licensed agent for future contact. This disclosure must be provided: (A) Verbally when communicating with a beneficiary through telephone; (B) In writing when communicating with a beneficiary through mail or other paper; and (C) Electronically when communicating with a beneficiary through email, online chat, or other electronic messaging platform. (ii) When applicable, disclose to the beneficiary that he or she is being transferred to a licensed agent who can enroll him or her into a new plan. (4) Beginning October 1, 2024, personal beneficiary data collected by a TPMO for marketing or enrolling them into a Part D plan may only be shared with another TPMO when prior express written consent is given by the beneficiary. Prior express written consent from the beneficiary to share the information and be contacted for marketing or enrollment purposes must be obtained through a clear and conspicuous disclosure that lists each entity receiving the data and allows the beneficiary to consent or reject to the sharing of their data with each individual TPMO. [86 FR 6129, Jan. 19, 2021, as amended at 87 FR 27901, May 9, 2022; 88 FR 22342, Apr. 12, 2023; 89 FR 30842, Apr. 23, 2024; 91 FR 17592, Apr. 6, 2026] § 423.2276 Employer group retiree marketing. Part D sponsors may develop marketing materials designed for members of an employer group who are eligible for employer-sponsored benefits through the Part D sponsor, and furnish these materials only to the group members. These materials are not subject to CMS prior review and approval. Subpart W—Medicare Coverage Gap Discount Program Source: 77 FR 22172, Apr. 12, 2012, unless otherwise noted. § 423.2300 Scope. (a) Scope. (1) Condition for coverage of applicable drugs under Part D. (2) The Medicare Coverage Gap Discount Program Agreement. (3) Coverage gap discount payment processes for Part D sponsors. (4) Provision of applicable discounts on applicable drugs for applicable beneficiaries. (5) Manufacturer audit and dispute resolution processes. (6) Resolution of beneficiary disputes involving coverage gap discounts. (7) Compliance monitoring and civil money penalties. (8) The termination of the Medicare Coverage Gap Discount Program Agreement. (b) Applicability. [77 FR 22172, Apr. 12, 2012, as amended at 91 FR 17592, Apr. 6, 2026] § 423.2305 Definitions. As used in this subpart and for purposes of the Coverage Gap Discount Program, unless otherwise specified— Applicable discount Medicare Part D discount information Negotiated price (1) The Part D sponsor (or other intermediary contracting organization) and the network dispensing pharmacy or other network dispensing provider have negotiated as the lowest possible reimbursement such network entity will receive, in total, for a particular drug; (i) Includes all price concessions (as defined in § 423.100) from network pharmacies or other network providers; and (ii) Excludes additional contingent amounts, such as incentive fees, if these amounts increase prices; (2) Is reduced by those discounts, direct or indirect subsidies, rebates, non-pharmacy price concessions, and direct or indirect remuneration that the Part D sponsor has elected to pass through to Part D enrollees at the point-of-sale; and (3) Excludes any dispensing fee or vaccine administration fee for the applicable drug. (4) In connection with applicable drugs dispensed by an out-of-network provider in accordance with the applicable beneficiary's Part D plan out-of-network policies, the negotiated price means the plan allowance as set forth in § 423.124, less any dispensing fee or vaccine administration fee. Other health or prescription drug coverage [77 FR 22172, Apr. 12, 2012, as amended at 86 FR 6131, Jan. 19, 2021; 87 FR 27902, May 9, 2022; 91 FR 17593, Apr. 6, 2026] § 423.2310 Condition for coverage of drugs under Part D. (a) Covered Part D drug coverage requirement. (1) Participate in the Coverage Gap Discount Program. (2) Have entered into and have in effect an agreement described in § 423.2315(b). (3) Have entered into and have in effect, under terms and conditions specified by CMS, a contract with the TPA. (b) Exception to covered drug coverage requirement. [77 FR 22172, Apr. 12, 2012, as amended at 91 FR 17593, Apr. 6, 2026] § 423.2315 Medicare Coverage Gap Discount Program Agreement. (a) General rule. (b) Agreement requirements. (1) All the applicable requirements and conditions set forth in this part and general instructions. (2) Reimburse all applicable discounts provided by Part D sponsors on behalf of the manufacturer for all applicable drugs having NDCs with the manufacturer's FDA-assigned labeler code(s) invoiced to the manufacturer within a maximum of 3 years of the date of dispensing based upon information reported to CMS by Part D sponsors. (3) Pay each Part D sponsor in the manner specified by CMS within 38 calendar days of receipt of the invoice and Medicare Part D Discount Information for the applicable discounts included on the invoice, except as specified in § 423.2330(c)(3). (4) Provide CMS with all labeler codes for all the manufacturer's applicable drugs and to promptly update such list with any additional labeler codes for applicable drugs no later than 3 business days after learning of a new code assigned by the FDA. (5) Collect, have available, and maintain appropriate data, including data related to manufacturer's labeler codes, FDA drug approvals, FDA NDC Directory listings, NDC last lot expiration dates, utilization and pricing information relied on by the manufacturer to dispute quarterly invoices, and any other data CMS determines are necessary to carry out the Coverage Gap Discount Program, for a period of not less than 10 years from the date of payment of the invoice. (6) Comply with the audit and dispute resolution requirements in § 423.2330. (7) Electronically list and maintain up-to-date electronic FDA listings of all NDCs of the manufacturer, including providing timely information about discontinued drugs to enable the publication of accurate information regarding what drugs, identified by NDC, are in current distribution. (8) Maintain up-to-date NDC listings with the electronic database vendors for which the manufacturer provides NDCs for pharmacy claims processing. (9) Enter into and have in effect, under terms and conditions specified by CMS, an agreement with the TPA that has a contract with CMS under section 1860D-14(A)(d)(3) of the Act. (10) Pay quarterly invoices directly to accounts established by Part D sponsors via electronic funds transfer, or other manner if specified by CMS, within the time period specified in paragraph (b)(3) of this section and within 5 business days of the transfer to provide the TPA with electronic documentation of such payment in a manner specified by CMS. (11) Use information disclosed to the manufacturer on the invoice, as part of the Medicare Part D Discount Information, or upon audit or dispute only for purposes of paying the discount under the Coverage Gap Discount Program. (c) Timing and length of agreement. (2) For 2012 and subsequent years prior to 2025, for a Coverage Gap Discount Program Agreement to be effective for a year, a manufacturer must enter into such Agreement not later than January 30th of the preceding year. (3) Unless terminated in accordance with § 423.2345, the initial period of a Coverage Gap Discount Program Agreement is 24 months and the agreement is automatically renewed for a 1-year period on January first each year for a period of 1 year thereafter. (d) Compliance with requirements for administration of the Program. [77 FR 22172, Apr. 12, 2012, as amended at 91 FR 17593, Apr. 6, 2026] § 423.2320 Payment processes for Part D sponsors. (a) Interim payments. (b) Coverage Gap Discount Reconciliation. (c) Manufacturer bankruptcy. [77 FR 22172, Apr. 12, 2012, as amended at 80 FR 7965, Feb. 12, 2015; 91 FR 17593, Apr. 6, 2026] § 423.2325 Provision of applicable discounts. (a) General rule. (b) Discount determination. (i) Whether an enrollee is an applicable beneficiary (as defined in § 423.100). (ii) Whether a Part D drug is an applicable drug (as defined in § 423.100). (iii) The amount of the applicable discount (as defined in § 423.2305) to be provided at the point-of-sale. (2) Part D sponsors must make retroactive adjustments to the applicable discount as necessary to reflect changes to the claim or beneficiary eligibility determined after the date of dispensing. (3) Part D sponsors must determine whether any affected beneficiaries need to be notified by the Part D sponsor that an applicable drug is eligible for Part D coverage whenever CMS specifies a retroactive effective date for a labeler code and notify such beneficiaries. (c) Exception to point-of-sale requirement. (d) Collection of data. (e) Supplemental benefits. (2) No applicable discount is available if supplemental benefits (as defined in § 423.100) eliminate the coverage gap so that a beneficiary has zero cost-sharing. (f) Other health or prescription drug coverage. (g) Pharmacy prompt payment. (h) Treatment of employer group waiver plans. [77 FR 22172, Apr. 12, 2012, as amended at 80 FR 7966, Feb. 12, 2015] § 423.2330 Manufacturer discount payment audit and dispute resolution. (a) Third-party Administration (TPA) audits. (2) The manufacturer must provide the TPA with 60 days notice of the reasonable basis for the audit and a description of the information required for the audit. (3) The manufacturer must have the right to audit a statistically significant sample of data and information held by the TPA that were used to determine applicable discounts for applicable drugs having NDCs with the manufacturer's FDA-assigned labeler code(s). Such data and information will be made available on-site, and with the exception of work papers, such information cannot be removed from the audit site. (4) The auditor for the manufacturer may release only an opinion of the audit results and is prohibited from releasing other information obtained from the audit, including work papers, to its client, employer, or any other party. (b) Manufacturer audits. (2) CMS provides the manufacturer with 60 days notice of the audit and a description of the information required for the audit. (3) CMS has the right to audit appropriate data, including data related to a manufacturer's FDA-assigned labeler codes, NDC last lot expiration dates, utilization, and pricing information relied on by the manufacturer to dispute quarterly invoices, and any other data CMS determines are necessary to carry out the Coverage Gap Discount Program. (c) Dispute resolution. (2) Such notice must be accompanied by supporting evidence that is material, specific, and related to the dispute in a manner specified by CMS. (3) The manufacturer must not withhold any invoiced discount payments pending dispute resolution with the sole exception of invoiced amounts for applicable drugs that do not have labeler codes provided by the manufacturer to CMS in accordance with § 423.2315(b)(4). If payment is withheld in accordance with this paragraph, the manufacturer must notify the TPA and applicable Part D sponsors within 38 days of receipt of the applicable invoice that payment is being withheld for this reason. (4) If the manufacturer receives an unfavorable determination from the TPA, or the dispute is not resolved within 60 calendar days of the TPA's receipt of the notice of dispute, the manufacturer may request review by the independent review entity contracted by CMS within— (i) Thirty calendar days of the unfavorable determination; or (ii) Ninety calendar days after the TPA's receipt of the notice of dispute if dispute is not resolved within 60 days, whichever is earlier. (5) The independent review entity must make a determination within 90 calendar days of receipt of the manufacturer's request for review. (6)(i) CMS or a manufacturer that receives an unfavorable determination from the independent review entity may request review by the CMS Administrator within 30 calendar days of receipt of the notification of such determination. (ii) The decision of the CMS Administrator is final and binding. (7) CMS adjusts future invoices (or implements an alternative reimbursement process if determined necessary by CMS) if the dispute is resolved in favor of the manufacturer. [77 FR 22172, Apr. 12, 2012, as amended at 85 FR 72909, Nov. 16, 2020; 91 FR 17593, Apr. 6, 2026] § 423.2335 Beneficiary dispute resolution. The Part D coverage determination and appeals process as described in §§ 423.558 through 423.638 applies to beneficiary disputes involving the availability and amount of applicable discounts under the Coverage Gap Discount Program. [77 FR 22172, Apr. 12, 2012, as amended at 91 FR 17593, Apr. 6, 2026] § 423.2340 Compliance monitoring and civil money penalties. (a) General rule. (b) Basis for imposing civil money penalties. (c) Determination of the civil money penalty amounts. (1) The amount of applicable discount the manufacturer would have paid under the Coverage Gap Discount Program Agreement, which will then be used to pay the applicable discount that the manufacturer had failed to provide. (2) Twenty-five percent of such amount. (d) Procedures for imposing civil money penalties. (1) A description of the basis for the determination. (2) The basis for the penalty. (3) The amount of the penalty. (4) The date the penalty is due. (5) The manufacturer's right to a hearing (as specified in § 423.1006). (6) Information about where to file the request for hearing. (e) Collection of civil money penalties imposed by CMS. (2) If a manufacturer requests a hearing and the Administrator upholds CMS' decision to impose a CMP, CMS may initiate collection of the CMP once the Administrator's decision is final. (f) Other applicable provisions. [77 FR 22172, Apr. 12, 2012, as amended at 91 FR 17593, Apr. 6, 2026] § 423.2345 Termination of Coverage Gap Discount Program Agreement. (a)(1) CMS may terminate the Coverage Gap Discount Program Agreement for a knowing and willful violation of the requirements of the agreement or other good cause shown in relation to the manufacturer's participation in the Coverage Gap Discount Program. (2) The termination must not be effective earlier than 30 days after the date of notice to the manufacturer of such termination and must not be effective prior to resolution of timely appeal requests received in accordance with paragraphs (a)(4) and (5) of this section. (3)(i) CMS provides the manufacturer with an opportunity to cure any ground for termination for cause or to show the manufacturer is in compliance with the Coverage Gap Discount Program Agreement within 30 calendar days of receipt of the written termination notice. (ii) If the manufacturer cures the violation, or establishes that it was in compliance within the cure period, CMS repeals the termination notice by written notice. (4) CMS provides upon request a manufacturer with a hearing with the hearing officer concerning such termination if requested in writing within 15 calendar days of receiving notice of the termination. The hearing takes place prior to the effective date of the termination with sufficient time for such effective date to be repealed if CMS determines appropriate. (5)(i) CMS or a manufacturer that has received an unfavorable determination from the hearing officer may request review by the CMS Administrator within 30 calendar days of receipt of the notification of such determination. (ii) The decision of the CMS Administrator is final and binding. (b)(1) The manufacturer may terminate the Coverage Gap Discount Program Agreement for any reason. (2) Such termination is effective as of the day after the end of the calendar year if the termination occurs before January 30 of a calendar year, or as of the day after the end of the succeeding calendar year if the termination occurs on or after January 30 of a calendar year. (c) Any termination does not affect the manufacturer's responsibility to reimburse Part D sponsors for applicable discounts incurred before the effective date of the termination. (d) Upon the effective date of termination of the Coverage Gap Discount Program Agreement, CMS ceases releasing data to the manufacturer except as necessary to ensure that the manufacturer reimburses applicable discounts for previous time periods in which the Coverage Gap Discount Program Agreement was in effect, and notifies the manufacturer to destroy data files provided by CMS under the Coverage Gap Discount Program Agreement. (e) Manufacturer reinstatement is available only upon payment of any and all outstanding applicable discounts incurred during any previous period under the Coverage Gap Discount Program Agreement. The timing of any such reinstatement is consistent with the requirements for entering into a Coverage Gap Discount Program Agreement under § 423.2315(c) of this subpart. (f) Subject to § 423.2300(b), all Coverage Gap Discount Program Agreements under this subpart are terminated as of January 1, 2025. [77 FR 22172, Apr. 12, 2012, as amended at 91 FR 17593, Apr. 6, 2026] Subpart X—Requirements for a Minimum Medical Loss Ratio Source: 78 FR 31310, May 23, 2013, unless otherwise noted. § 423.2400 Basis and scope. This subpart is based on sections 1857(e)(4), 1860D-12(b)(3)(D), and 1106 of the Act, and sets forth medical loss ratio requirements for Part D sponsors, financial penalties and sanctions against Part D sponsors when minimum medical loss ratios are not achieved by Part D sponsors and release of medical loss ratio data to entities outside of CMS. [81 FR 80558, Nov. 15, 2016] § 423.2401 Definitions. Non-claims costs (1) Incurred claims (as provided in § 423.2420(b)(2) through (b)(4)); (2) Expenditures on quality improving activities (as provided in § 423.2430); (3) Licensing and regulatory fees (as provided in § 423.2420(c)(2)(i)); or (4) State and Federal taxes and assessments (as provided in § 423.2420(c)(2)(ii) and (iii)). § 423.2410 General requirements. (a) For contracts beginning in 2014 or subsequent contract years, a Part D sponsor (defined at § 423.4) is required to report the information required under § 423.2460 for each contract under this part for each contract year. (b) If CMS determines for a contract year that a Part D sponsor has an MLR for a contract that is less than 0.85, the Part D sponsor must remit to CMS an amount equal to the product of the following: (1) The total revenue of the prescription drug plan for the contract year. (2) The difference between 0.85 and the MLR for the contract year. (c) If CMS determines that a Part D sponsor has an MLR for a contract that is less than 0.85 for 3 or more consecutive contract years, CMS does not permit the enrollment of new enrollees under the contract for coverage during the second succeeding contract year. (d) If CMS determines that a Part D sponsor has an MLR for a contract that is less than 0.85 for 5 consecutive contract years, CMS terminates the contract under the authority at 423.509(b)(1) and (d) effective as of the second succeeding contract year. [78 FR 31310, May 23, 2013; 78 FR 43821, July 22, 2013; 83 FR 16756, Apr. 16, 2018] § 423.2420 Calculation of medical loss ratio. (a) Determination of the MLR. (2) The MLR must reflect costs and revenues for benefits described at § 423.104(d) through (f). The MLR for MA-PD plans (defined at § 422.2 of this chapter) must also reflect costs and revenues for benefits described at § 422.100(c) of this chapter. (b) Determining the MLR numerator. (i) Incurred claims for all enrollees, as defined in paragraphs (b)(2) through (4) of this section. (ii) The expenditures under the contract for activities that improve health care quality, as defined in § 423.2430; (2) Incurred claims for prescription drug costs. (i) Direct drug costs that are actually paid (as defined in § 423.308, which are net of prescription drug rebates and other direct or indirect remuneration as defined herein) by the Part D sponsor. (ii) Unpaid claims reserves for the current contract year, including claims reported in the process of adjustment. (iii) Percentage withholds from payments made to contracted providers. (iv) Claims incurred but not reported based on past experience, and modified to reflect current conditions such as changes in exposure, claim frequency or severity. (v) Changes in other claims-related reserves. (vi) Claims that are recoverable for anticipated coordination of benefits. (vii) Claims payments recoveries received as a result of subrogation. (viii) [Reserved] (ix) Reserves for contingent benefits and the Part D claim portion of lawsuits. (3) Adjustments that must be deducted from incurred claims include the following: (i) Overpayment recoveries received from providers. (4) Exclusions from incurred claims. (i) Non-claims costs, as defined in § 423.2401, which include the following: (A) Amounts paid to third party vendors for secondary network savings. (B) Amounts paid to third party vendors for any of the following: ( 1 ( 2 ( 3 ( 4 (C) Amounts paid, including amounts paid to a pharmacy, for professional or administrative services that do not represent compensation or reimbursement for covered services provided to an enrollee, such as the following: ( 1 ( 2 ( 3 ( 4 ( 5 ( i ( ii ( iii ( iv ( v ( vi (D) Unsettled balances from the Medicare Prescription Payment Plan. (ii) Amounts paid to CMS as a remittance under § 423.2410(b). (iii) Prospective Manufacturer Discount Program Payments. (iv) Selected Drug Subsidy Program Payments. (v) Inflation Reduction Act Subsidy Amounts. (5) Incurred claims under this part for policies issued by one Part D sponsor and later assumed by another entity must be reported by the assuming organization for the entire MLR reporting year during which the policies were assumed and no incurred claims under this part for that contract year must be reported by the ceding Part D sponsor. (6) Reinsured incurred claims for a block of business that was subject to indemnity reinsurance and administrative agreements effective before March 23, 2010, for which the assuming entity is responsible for 100 percent of the ceding entity's financial risk and takes on all of the administration of the block, must be reported by the assuming issuer and must not be reported by the ceding issuer. (c) Determining the MLR denominator. (1) CMS' payments to the Part D sponsor for all enrollees under a contract, reported on a direct basis, including the following: (i) Payments under § 423.329(a)(1) and (2). (ii) Payment adjustments resulting from reconciliation per § 423.329(c)(2)(ii). (iii) All premiums paid by or on behalf of enrollees to the Part D sponsor as a condition of receiving coverage under a Part D plan, including CMS' payments for low income premium subsidies under § 422.304(b)(2) of this chapter. (iv) All unpaid premium amounts that a Part D sponsor could have collected from enrollees in the Part D plan(s) under the contract. (v) All changes in unearned premium reserves. (vi) Payments under § 423.315(e). (2) The following amounts must be deducted from total revenue in calculating the MLR: (i) Licensing and regulatory fees. (ii) Federal taxes and assessments. (iii) State taxes and assessments. (A) Any industry-wide (or subset) assessments (other than surcharges on specific claims) paid to the State directly. (B) Guaranty fund assessments. (C) Assessments of State industrial boards or other boards for operating expenses or for benefits to sick employed persons in connection with disability benefit laws or similar taxes levied by States. (D) State income, excise, and business taxes other than premium taxes. (iv) Community benefit expenditures. (A) Community benefit expenditures means expenditures for activities or programs that seek to achieve the objectives of improving access to health services, enhancing public health and relief of government burden. (B) Such payment may be deducted up to the limit of either 3 percent of total revenue under this part or the highest premium tax rate in the State for which the Part D sponsor is licensed, multiplied by the Part D sponsor's earned premium for the contract. (3) The following amounts must not be included in total revenue: (i) The amount of unpaid premiums for which the Part D sponsor can demonstrate to CMS that it made a reasonable effort to collect. (ii) Coverage Gap Discount Program payments under § 423.2320. (4) Total revenue (as defined at § 423.2420(c)) of this chapter) for policies issued by one Part D sponsor and later assumed by another entity must be reported by the assuming entity for the entire MLR reporting year during which the policies were assumed and no revenue under this part for that contract year must be reported by the ceding Part D sponsor. (5) Total revenue (as defined at § 423.2420(c) of this chapter) that is reinsured for a block of business that was subject to indemnity reinsurance and administrative agreements effective before March 23, 2010, for which the assuming entity is responsible for 100 percent of the ceding entity's financial risk and takes on all of the administration of the block, must be reported by the assuming issuer and must not be reported by the ceding issuer. (d) Allocation of expenses General requirements. (ii) Expenditures that benefit multiple contracts, or contracts other than those being reported, including but not limited to those that are for or benefit self-funded plans, must be reported on a pro rata share. (2) Description of the methods used to allocate expenses. (ii) Shared expenses, including expenses under the terms of a management contract, must be apportioned pro rata to the entities incurring the expense. (iii)(A) Any basis adopted to apportion expenses must be that which is expected to yield the most accurate results and may result from special studies of employee activities, salary ratios, premium ratios or similar analyses. (B) Expenses that relate solely to the operations of a reporting entity, such as personnel costs associated with the adjusting and paying of claims, must be borne solely by the reporting entity and are not to be apportioned to other entities within a group. [78 FR 31310, May 23, 2013; 78 FR 43821, July 22, 2013; 83 FR 16756, Apr. 16, 2018; 90 FR 15920, Apr. 15, 2025; 91 FR 17593, Apr. 6, 2026] § 423.2430 Activities that improve health care quality. (a) Activity requirements. (i) Fall into one of the categories in paragraph (a)(2) of this section and meet all of the requirements in paragraph (a)(3) of this section; or (ii) Be listed in paragraph (a)(4) of this section. (2) Categories of quality improving activities. (i) To improve health outcomes through the implementation of activities such as quality reporting, effective case management, care coordination, chronic disease management, and medication and care compliance initiatives, including through the use of the medical homes model as defined for purposes of section 3602 of the Patient Protection and Affordable Care Act, for treatment or services under the plan or coverage. (ii) To prevent hospital readmissions through a comprehensive program for hospital discharge that includes patient-centered education and counseling, comprehensive discharge planning, and post-discharge reinforcement by an appropriate health care professional. (iii) To improve patient safety and reduce medical errors through the appropriate use of best clinical practices, evidence-based medicine, and health information technology under the plan or coverage. (iv) To promote health and wellness. (v) To enhance the use of health care data to improve quality, transparency, and outcomes and support meaningful use of health information technology. Activities, such as Health Information Technology (HIT) expenses, are required to accomplish the activities that improve health care quality and that are designed for use by health plans, health care providers, or enrollees for the electronic creation, maintenance, access, or exchange of health information, and are consistent with meaningful use requirements, and which may in whole or in part improve quality of care, or provide the technological infrastructure to enhance current quality improving activities or make new quality improvement initiatives possible. (3) The activity must be designed for all of the following: (i) To improve health quality. (ii) To increase the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producing verifiable results and achievements. (iii) To be directed toward individual enrollees or incurred for the benefit of specified segments of enrollees or provide health improvements to the population beyond those enrolled in coverage as long as no additional costs are incurred due to the non-enrollees. (iv) To be grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized professional medical associations, accreditation bodies, government agencies or other nationally recognized health care quality organizations. (4)(i) Medication Therapy Management Programs meeting the requirements of § 423.153(d). (ii) Fraud reduction activities, including fraud prevention, fraud detection, and fraud recovery. (b) Exclusions. (1) Those that are designed primarily to control or contain costs other than those that are related to fraud reduction. (2) The pro rata share of expenses that are for lines of business or products other than those being reported, including but not limited to, those that are for or benefit self-funded plans. (3) Those which otherwise meet the definitions for quality improving activities but which were paid for with grant money or other funding separate from premium revenue. (4) Those activities that can be billed or allocated by a pharmacy for care delivery and that are reimbursed as clinical services. (5) Establishing or maintaining a claims adjudication system, including costs directly related to upgrades in health information technology that are designed primarily or solely to improve claims payment capabilities (and that are not related to fraud reduction activities under paragraph (a)(4)(ii) of this section) or to meet regulatory requirements for processing claims, including ICD-10 implementation costs in excess of 0.3 percent of total revenue under this part, and maintenance of ICD-10 code sets adopted in accordance with the Health Insurance Portability and Accountability Act (HIPAA), 42 U.S.C. 1320d-2, as amended. (6) That portion of the activities of health care professional hotlines that does not meet the definition of activities that improve health quality. (7) All retrospective and concurrent utilization review. (8) [Reserved] (9) The cost of developing and executing pharmacy contracts and fees associated with establishing or managing a pharmacy network, including fees paid to a vendor for the same reason. (10) Pharmacy network credentialing. (11) Marketing expenses. (12) Costs associated with calculating and administering individual enrollee or employee incentives. (13) That portion of prospective utilization review that does not meet the definition of activities that improve health quality. (14) Any function or activity not expressly permitted by CMS under this part. [78 FR 31310, May 23, 2013, as amended at 83 FR 16756, Apr. 16, 2018] § 423.2440 Credibility adjustment. (a) A Part D sponsor may add the credibility adjustment specified under paragraph (e) of this section to a contract's MLR if the contract's experience is partially credible, as defined in paragraph (d)(1) of this section. (b) A Part D sponsor may not add a credibility adjustment to a contract's MLR if the contract's experience is fully credible, as defined in paragraph (d)(2) of this section. (c) For those contract years for which a contract has non-credible experience, as defined in paragraph (d)(3) of this section, sanctions under § 423.2410(b) through (d) will not apply. (d)(1) A contract's experience is partially credible if it is based on the experience of at least 4,800 member months and fewer than or equal to 360,000 member months. (2) A contract's experience is fully credible if it is based on the experience of more than 360,000 member months. (3) A contract's experience is non-credible if it is based on the experience of fewer than 4,800 member months. (e) The credibility adjustment for partially credible experience is determined based on the number of member months for all enrollees under the contract and the factors shown in Table 1 of this section. When the number of member months used to determine credibility exactly matches a member month category listed in Table 1 of this section, the value associated with that number of member months is the credibility adjustment. The credibility adjustment for a number of member months between the values shown in Table 1 of this section is determined by linear interpolation. Table 1 to § 423.2440—Credibility Adjustments for Part D Contracts Member months Credibility adjustment <4,800 N/A (Non-credible). 4,800 8.4%. 12,000 5.3%. 24,000 3.7%. 48,000 2.6%. 120,000 1.7%. 240,000 1.2%. 360,000 1.0%. >360,000 0.0% (Fully credible). [85 FR 33911, June 2, 2020] § 423.2450 [Reserved] § 423.2460 Reporting requirements. (a) Except as provided in paragraph (b) of this section, for each contract year, each Part D sponsor must submit to CMS, in a timeframe and manner specified by CMS, a report that includes the data needed by the Part D sponsor to calculate and verify the medical loss ratio (MLR) and remittance amount, if any, for each contract under this part, including the amount of incurred claims for prescription drugs, supplemental benefits, total revenue, expenditures on quality improving activities, non-claims costs, taxes, licensing and regulatory fees, and any remittance owed to CMS under § 423.2410. (b) For contract years 2018 through 2022, each Part D sponsor must submit to CMS, in a timeframe and manner specified by CMS, the following information: (1) Fully credible and partially credible contracts. (2) Non-credible contracts. (c) Total revenue included as part of the MLR calculation must be net of all projected reconciliations. (d) Subject to paragraph (e) of this section, the MLR is reported once, and is not reopened as a result of any payment reconciliation processes. (e) With respect to a Part D sponsor that has already submitted to CMS the MLR report or MLR data required under paragraph (a) or (b) of this section, respectively, for a contract for a contract year, paragraph (d) of this section does not prohibit resubmission of the MLR report or MLR data for the purpose of correcting the prior MLR report or data submission. Such resubmission must be authorized or directed by CMS, and upon receipt and acceptance by CMS, is regarded as the contract's MLR report or data submission for the contract year for purposes of this subpart. [83 FR 16756, Apr. 16, 2018, as amended at 87 FR 27902, May 9, 2022] § 423.2470 Remittance to CMS if the applicable MLR requirement is not met. (a) General requirement. (b) Amount of remittance. (c) Timing of remittance. (d) Treatment of remittance. § 423.2480 MLR review and non-compliance. To ensure the accuracy of MLR reporting, CMS conducts selected review of data submitted under § 423.2460 to determine that the MLRs and remittance amounts under § 423.2410(b) and sanctions under § 423.2410(c) and (d), were accurately calculated, reported, and applied. (a) The reviews will include a validation of amounts included in both the numerator and denominator of the MLR calculation reported to CMS. (b) Part D sponsors are required to maintain evidence of the amounts reported to CMS and to validate all data necessary to calculate MLRs. (c)(1) Documents and records must be maintained for 10 years from the date such calculations were reported to CMS with respect to a given contract year. (2) Part D sponsors must require any third party vendor supplying drug cost contracting and claim adjudication services to the Part D sponsors to provide all underlying data associated with MLR reporting to that Part D sponsor in a timely manner, when requested by the Part D sponsor, regardless of current contractual limitations, in order to validate the accuracy of MLR reporting. (d) Data submitted under § 423.2460, calculations, or any other MLR submission required by this subpart found to be materially incorrect or fraudulent— (1) Are noted by CMS; (2) Appropriate remittance amounts are recouped by CMS; and (3) Sanctions may be imposed by CMS as provided in § 423.752. [78 FR 31310, May 23, 2013, as amended at 83 FR 16756, Apr. 16, 2018] § 423.2490 Release of Part D MLR data. (a) Terminology. (b) Exclusions from Part D MLR data. (1) Narrative descriptions that Part D sponsors submit to support the information reported to CMS pursuant to the reporting requirements at § 423.2460, such as descriptions of expense allocation methods. (2) Information that is reported at the plan level, such as the number of member months associated with each plan under a contract, including information submitted for a contract consisting of only one plan. (3) Any information that could be used to identify Medicare beneficiaries or other individuals. (4) MLR review correspondence. (5) Any information for a contract for those contract years for which the contract is determined to be non-credible, as defined in accordance with § 423.2440(d). (c) Data release. [81 FR 80558, Nov. 15, 2016, as amended at 83 FR 16756, Apr. 16, 2018] Subpart Y—Transitional Coverage and Retroactive Medicare Part D Coverage for Certain Low-Income Beneficiaries Through the Limited Income Newly Eligible Transition (LI NET) Program Source: 88 FR 22342, Apr. 12, 2023, unless otherwise noted. § 423.2500 Basis and scope. (a) Basis. (b) Scope. § 423.2504 LI NET eligibility and enrollment. (a) Eligibility. (1) LIS-eligible. (i) Has not yet enrolled in a prescription drug plan or an MA-PD plan; or (ii) Has enrolled in a prescription drug plan or MA-PD plan but their coverage has not yet taken effect. (2) Immediate need individuals. (3) Documentation of LIS eligibility. (i) A copy of the beneficiary's Medicaid card that includes their name and the eligibility date; (ii) A copy of a letter from the State or SSA showing LIS or “Extra Help” status; (iii) The date that a verification call was made to the State Medicaid Agency, the name and telephone number of the State staff person who verified the Medicaid period, and the Medicaid eligibility dates confirmed on the call; (iv) A copy of a State document that confirms active Medicaid status; (v) A screen-print from the State's Medicaid systems showing Medicaid status; or (vi) Evidence at point-of-sale of recent Medicaid billing and payment in the pharmacy's patient profile. (4) Confirmation of LIS eligibility. (5) Inability to confirmation of eligibility. (b) Enrollment. (1) Automatic enrollment. (2) Point-of-sale enrollment. (3) Direct reimbursement request. (4) LI NET application form. (c) Duration of LI NET enrollment. (2) Retroactive LI NET coverage begins on the date an individual is identified as eligible for a low-income subsidy as a full-benefit dual eligible or an SSI benefit recipient, or 36 months prior to the date such individual enrolls in (or opts out of) Part D coverage, whichever is later. LI NET coverage ends with enrollment into a Part D plan or opting out of Part D coverage. (d) Ending LI NET enrollment. (1) The individual is auto-enrolled into a standalone Part D plan in accordance with the guidelines at § 423.34(d) and that coverage has taken effect. (2) The individual elects another Part D plan and that coverage has taken effect. (3) The individual voluntarily disenrolls from the LI NET program. (4) The individual is involuntarily disenrolled under § 423.44(b). (5) LIS eligibility for an individual in LI NET due to an immediate need cannot be confirmed within the period of LI NET coverage. § 423.2508 LI NET benefits and beneficiary protections. (a) Formulary. (b) Network. (c) Safety. (1) Sections 423.153(b) and (c) for dispensing and point-of-sale safety edits; (2) Section 423.154 for appropriate dispensing of prescription drugs in long-term care facilities; (3) Sections 423.159 and 423.160 for electronic prescribing, excepting the requirements pertaining to formulary standards in § 423.160(b)(5); (4) Section 423.162 for QIO activities; and (5) Section 423.165 for compliance deemed on the basis of accreditation. (d) Cost sharing. (2) LI NET beneficiaries under § 423.2504(a)(2) will pay the cost sharing associated with the category of non-institutionalized full-benefit dual eligible individuals with incomes above 100% of the Federal poverty level and full-subsidy-non-FBDE individuals. If the beneficiary is later confirmed to belong to a different LIS category, the LI NET sponsor must reimburse the beneficiary for the difference between the cost sharing they paid versus what they would have paid in their LIS category. (e) Appeals. § 423.2512 LI NET sponsor requirements. The LI NET program is administered by one or more Part D sponsor(s) that meet all of the requirements in paragraphs (a) through (c) of this section. (a) Pharmacies and access to Part D drugs. (2) The LI NET sponsor must meet the requirements for providing access to Part D drugs under § 423.120(a), (c), and (d). (b) Experience. (c) Other LI NET sponsor requirements. (1) Have the technical capability and the infrastructure to provide immediate, current, and retroactive coverage for LI NET enrollees; (2) Have the technical capability to develop the infrastructure necessary for verifying Medicaid dual eligibility status for presumed eligible LI NET enrollees. (3) Identify, develop, and conduct outreach plans in consultation with CMS targeting key stakeholders to inform them about the LI NET program. (4) Establish and manage a toll-free customer call center per § 423.128(d)(1) and fax line that can be accessed by pharmacy providers and beneficiaries, or others acting on their behalf, for purposes that include but are not limited to: handling inquiries about services under the LI NET program, providing the status of eligibility or claims, and having the ability to accept supporting documentation. (5) Timely respond to beneficiary requests for reimbursement of claims by issuing reimbursement for eligible claims submitted by beneficiaries no later than 30 days after receipt, or, if the drug is not covered, the LI NET sponsor has 14 days to send communication to the beneficiary with a reason for the denial. (6) Adjudicate claims from out-of-network pharmacies that are in good standing (as defined in § 423.2508(b)) according to the LI NET sponsor's standard reimbursement for their network pharmacies. § 423.2516 Selection of LI NET sponsor and contracting provisions. (a) Appointment by CMS. (b) Selection criteria. (1) Experience covering low-income beneficiaries, including but not limited to enrolling and providing coverage to low-income subsidy individuals as defined in § 423.34; (2) Pharmacy access as outlined in § 423.120; (3) Past performance, including Star Ratings (as detailed in § 423.186), previous intermediate sanctions (as detailed in § 423.750), and consistent with past performance in § 423.503(b); and (4) Ability to meet the requirements listed in § 423.505 that are not waived under § 423.2536. (c) Term of appointment. § 423.2518 Intermediate sanctions for the LI NET sponsor. In the event it is determined that the LI NET sponsor violated its contract, CMS may impose intermediate sanctions as outlined in subpart O of this part. § 423.2520 Non-renewal or termination of appointment. (a) Notice of non-renewal. (b) Selection of successor and transition period. (c) Immediate termination for cause. (2) CMS sends notice of an immediate termination as specified at § 423.509(b)(2)(ii). (d) Appeal rights. § 423.2524 Bidding and payments to LI NET sponsor. (a) Source of payments. (b) Submission of bids and related information. (2) The review, negotiation, and approval of the LI NET bid would follow the provisions in § 423.272(a) and (b)(1) and (4). (3) Basic rule for bid. The bid must reflect the LI NET sponsor's estimate of its revenue needs for Payment Rates A and B per paragraph (c) of this section. (c) Monthly payments. (1) Payment Rate A is an annual rate of payment for projected administrative costs. An annual percentage-based cap on Payment Rate A limiting the year over year increase to Payment Rate A is set as part of the bid review and negotiation under § 423.272(a). (i) For the 2024 plan year, the LI NET sponsor includes in its bid the assumption that Payment Rate A cannot exceed a 2% increase from the prior year's Payment A, which is a figure CMS will provide to the LI NET sponsor. (ii) For the 2025 plan year and subsequent plan years, the LI NET sponsor will specify its assumption for any increase needed to the prior year's Payment Rate A, submitting justification to CMS in their bid if the cap exceeds 2%. (2) Payment Rate B reflects the projected net costs of the Part D drugs dispensed to individuals who receive the LI NET benefit. (d) Payment reconciliation and risk corridors Reconciliation. (2) Risk corridors. (i) There will be no risk sharing in the symmetrical 1% risk corridor around the target amount as defined in § 423.308. (ii) There will be symmetrical risk sharing of 0.1% beyond the 1% risk corridor. (iii) To carry out this section, § 423.336(c) applies to LI NET. (e) Reopening. (f) Payment appeals. (g) Overpayments. § 423.2536 Waiver of Part D program requirements. CMS waives the following Part D program requirements for the LI NET program: (a) General information. (b) Formularies. (c) Medicare Prescription Payment Plan. (d) Cost control and quality improvement requirements. (1) Section 423.153(b) and (c) for dispensing and point-of-sale safety edits; (2) Section 423.154 for appropriate dispensing of prescription drugs in long-term care facilities; (3) Sections 423.159 and 423.160 for electronic prescribing, excepting the requirements pertaining to formulary standards in § 423.160(b)(5); (4) Section 423.162 for QIO activities; and (5) Section 423.165 for compliance deemed on the basis of accreditation. (e) Out-of-network access. (f) Medicare contract determinations and appeals. (g) Risk-sharing arrangements. (h) Certification of accuracy of data for price comparison. (i) Part D communication requirements. (1) Section 423.2265(b)(4), (5), (11), (13), and (16); (2) Section 423.2265(c); (3) Section 423.2266(a); (4) Section 423.2267(e)(3) through (5), (9) through (12), (14) through (17), (25), (29), (33), and (45) through (51); and (5) Section 423.2274. (j) Medicare Coverage Gap Discount Program. (k) Requirements for a minimum medical loss ratio. (l) Recovery audit contractor Part C appeals process. (m) Provision of specific information. [88 FR 22342, Apr. 12, 2023; 88 FR 34780, May 31, 2023; 90 FR 15920, Apr. 15, 2025; 91 FR 17593, Apr. 6, 2026] Subpart Z—Appeals Process for Part D Program Integrity Prescription Drug Event Record Review Audits Source: 79 FR 29967, May 23, 2014, unless otherwise noted. § 423.2600 Payment appeals. Medicare Part D plan sponsors may appeal program integrity prescription drug event record review audit determinations. (a) Issues eligible for appeal. (2) Factual or data errors. (b) Issues ineligible for appeal. (2) The program integrity prescription drug event record review audit methodology. [91 FR 17594, Apr. 6, 2026] § 423.2605 Request for reconsideration. (a) Time for filing a request. (b) Content of request. (2) The Part D plan sponsor must include with its request all supporting documentary evidence it wishes the independent reviewer to consider. (i) This material must be submitted in the format requested by CMS. (ii) Documentation, evidence, or substantiation submitted after the filing of the reconsideration request will not be considered. (c) CMS Rebuttal. (1) The rebuttal must be submitted within 30 calendar days of the review entity's notification to CMS that it has received the Part D plan sponsor's reconsideration request. (2) CMS sends its rebuttal to the Part D plan sponsor at the same time it is submitted to the independent reviewer. (d) Review entity. (e) Notification of decision. (f) Effect of decision. (g) Right to hearing official review. [79 FR 29967, May 23, 2014, as amended at 91 FR 17594, Apr. 6, 2026] § 423.2610 Hearing official review. (a) Time for filing a request. (b) Content of the request. (2) The Part D plan sponsor must submit with its request all supporting documentation, evidence, and substantiation that it wants to be considered. (3) No new evidence may be submitted. (4) Documentation, evidence, or substantiation submitted after the filing of the request will not be considered. (c) CMS rebuttal. (1) The rebuttal must be submitted within 30 calendar days of the Part D plan sponsor's submission of its hearing official review request. (2) CMS sends its rebuttal to the Part D plan sponsor at the same time it is submitted to the hearing official. (d) Conducting a review. (1) The hearing is not to be conducted live or via telephone unless the hearing official, in his or her sole discretion, requests a live or telephonic hearing. (2) In all cases, the hearing official's review is limited to information that meets one or more of the following: (i) The CMS used in making its determinations. (ii) The independent reviewer used in making its determinations. (iii) The Part D plan sponsor submits with its hearing request. (iv) CMS submits in accordance with paragraph (c) of this section. (3) Neither the Part D plan sponsor nor CMS is permitted to submit new evidence. (e) Hearing official decision. (f) Effect of hearing official decision. [79 FR 29967, May 23, 2014, as amended at 91 FR 17594, Apr. 6, 2026] § 423.2615 Review by the Administrator. (a) Request for review by Administrator. (1) The request must be filed with the CMS Administrator within 30 calendar days of the date of the hearing official's decision. (2) The request must provide evidence or reasons to substantiate the request. (b) Content of request. (1) Documentation, evidence, or substantiation submitted after the filing of the request will not be considered. (2) Neither the Part D plan sponsor nor CMS is permitted to submit new evidence. (c) Discretionary review. (d) Notification of decision whether to review. (e) Administrator Review. [79 FR 29967, May 23, 2014, as amended at 91 FR 17594, Apr. 6, 2026] Subpart AA—Medicare Part D Manufacturer Discount Program Source: 91 FR 17594, Apr. 6, 2026, unless otherwise noted. § 423.2700 Basis and scope. (a) Basis. (b) Scope. § 423.2704 Definitions. As used in this subpart and for purposes of the Manufacturer Discount Program, unless otherwise specified— Agreement holder Applicable discount Applicable LIS percent Applicable small manufacturer percent Covered Part D drug Dispute submission deadline Negotiated price Network pharmacy Part D drug Primary manufacturer Specified drug Specified small manufacturer drug Total expenditures (1) Part D, the total gross covered prescription drug costs, as defined in § 423.308; and (2) Part B, the total Medicare allowed amount ( i.e., § 423.2708 Conditions for coverage of drugs under Part D. (a) General rule. (1) The FDA-assigned labeler code of such applicable drug or selected drug must be covered by a Manufacturer Discount Program agreement (described at § 423.2752) that is in effect; (2) The manufacturer must participate in the Manufacturer Discount Program in accordance with paragraph (b) of this section; and (3) The manufacturer must have entered into and have in effect a Manufacturer Discount Program agreement in accordance with paragraph (b) of this section. (b) Participation in the Manufacturer Discount Program. (1) Executes and has in effect its own Manufacturer Discount Program agreement. (2) Participates in the Manufacturer Discount Program by means of an arrangement whereby its labeler code(s) is covered by another manufacturer's Manufacturer Discount Program agreement that is in effect. (c) Exception. (d) Non-applicable drugs. § 423.2712 Applicable discounts. (a) Defined. (1) Not incurred costs, as defined at § 423.100, for covered Part D drugs (as defined at § 423.100) in the year that are equal to or exceed the annual out-of-pocket threshold specified at § 423.104(d)(5)(iii) for the year, 10 percent of the negotiated price of such drug; and (2) Incurred costs, as defined in § 423.100, for covered Part D drugs (as defined at § 423.100) in the year that are equal to or exceed the annual out-of-pocket threshold specified at § 423.104(d)(5)(iii) for the year, 20 percent of the negotiated price of such drug. (b) Application of supplemental benefits. (c) Application of other coverage. (d) Application of discount phase-in for specified manufacturers and specified small manufacturers Applicable LIS percent. (i) For the individual who has not incurred costs equal to or exceeding the annual out-of-pocket threshold for the year— (A) For 2025, 1 percent; (B) For 2026, 2 percent; (C) For 2027, 5 percent; (D) For 2028, 8 percent; and (E) For 2029 and each subsequent year, 10 percent. (ii) For the individual who has incurred costs equal to or exceeding the annual out-of-pocket threshold for the year— (A) For 2025, 1 percent; (B) For 2026, 2 percent; (C) For 2027, 5 percent; (D) For 2028, 8 percent; (E) For 2029, 10 percent; (F) For 2030, 15 percent; and (G) For 2031 and each subsequent year, 20 percent. (2) Applicable small manufacturer percent. (i) For the individual who has not incurred costs equal to or exceeding the annual out-of-pocket threshold for the year— (A) For 2025, 1 percent; (B) For 2026, 2 percent; (C) For 2027, 5 percent; (D) For 2028, 8 percent; and (E) For 2029 and each subsequent year, 10 percent. (ii) For the individual who has incurred costs equal to or exceeding the annual out-of-pocket threshold for the year— (A) For 2025, 1 percent; (B) For 2026, 2 percent; (C) For 2027, 5 percent; (D) For 2028, 8 percent; (E) For 2029, 10 percent; (F) For 2030, 15 percent; and (G) For 2031 and each subsequent year, 20 percent. (3) An applicable drug of a specified manufacturer or a specified small manufacturer, as applicable, is considered to have been marketed as of August 16, 2022 if the applicable drug had Part D expenditures on or before August 16, 2022, and did not have a marketing end date on the FDA NDC SPL Data Elements File before August 17, 2022. (e) Straddle claims. (1) Above the annual deductible specified at § 423.104(d)(1), the manufacturer provides the applicable discount on only the portion of the negotiated price that falls above the deductible; and (2) Below or entirely above the annual out-of-pocket threshold specified at § 423.104(d)(5)(iii), the manufacturer provides the applicable discount on each portion of the negotiated price in accordance with this section based on the benefit phase into which each portion of the negotiated price falls. (f) Claims not subject to discount. (1) Medicare Secondary Payer claims. (2) Medicaid Subrogation claims. (3) Non-standard format coordination of benefits claims. (4) Manual claims with a service provider identification qualifier of “Other”. (g) Impact of applicable discount on enrollee cost sharing. (2) If, after the applicable discount is applied to the negotiated price of an applicable drug, the enrollee cost sharing specified under the plan would exceed such negotiated price minus the applicable discount, the enrollee cost sharing is the negotiated price minus the applicable discount. § 423.2716 Phase-in of applicable discount for certain manufacturers. (a) Specified manufacturer. (1) A Coverage Gap Discount Program agreement, as described at § 423.2315, in effect in accordance with § 423.2720(a)(1); (2) Total expenditures for all of its specified drugs (as defined in § 423.2704) covered by a Coverage Gap Discount Program agreement for 2021 and covered under Part D in 2021 represented less than 1.0 percent of total expenditures for all Part D drugs in 2021; and (3) Total expenditures for all of its specified drugs that are single source drugs and biological products for which payment may be made under Part B in 2021 represented less than 1.0 percent of the total expenditures under Part B for all drugs or biological products in 2021. (b) Specified small manufacturer. (1) Is a specified manufacturer as described in paragraph (a) of this section; and (2) The total expenditures under Part D for any one of its specified small manufacturer drugs covered under a Coverage Gap Discount Program agreement for 2021 and covered under Part D in 2021 are equal to or greater than 80 percent of the total expenditures for all its specified small manufacturer drugs covered under Part D in 2021. (c) Aggregation rule. § 423.2720 Determination of phase-in eligibility. For each manufacturer with one or more FDA-assigned labeler codes covered by a Manufacturer Discount Program agreement, CMS will determine whether the manufacturer is a specified manufacturer or a specified small manufacturer when the manufacturer executes a Manufacturer Discount Program agreement, or, in the case of a manufacturer whose FDA-assigned labeler code(s) is covered by another manufacturer's Manufacturer Discount Program agreement, when such labeler code(s) is first added to such agreement. In applying the aggregation rule at § 423.2716(c), CMS will attribute expenditures for a drug to a manufacturer based on the NDC(s) for the drug, as reported on PDE records. Specifically, CMS will match the labeler code extracted from the first 5 digits of each NDC to the manufacturer to whom the labeler code is assigned by the FDA. (a) Identification of specified manufacturers. (i) Had a Coverage Gap Discount Program agreement in effect during 2021; or (ii) Participated in the Coverage Gap Discount Program in 2021 by means of an arrangement whereby its labeler code(s) was covered by another manufacturer's Coverage Gap Discount Program agreement in effect during 2021. (2) Part D total expenditures. (i) For purposes of calculating each manufacturer's Part D total expenditures for applicable drugs and percent share of Part D total expenditures for 2021, CMS will— (A) Identify the relevant NDCs attributable to the manufacturer as reported on the PDE record based on the manufacturer's FDA-assigned labeler code extracted from the first 5 digits of each NDC; (B) Calculate the Part D total expenditures for applicable drugs of the manufacturer by summing the 2021 Part D total expenditures for all relevant NDCs attributable to the manufacturer; and (C) Divide the 2021 Part D total expenditures for all applicable drugs of the manufacturer by the 2021 Part D total expenditures for all Part D drugs, then multiply by 100 to calculate the manufacturer's percent share. (ii) If the manufacturer's Part D total expenditures for its applicable drugs are less than 1.0 percent of the 2021 Part D total expenditures, CMS will consider the manufacturer to have satisfied the Part D total expenditure criterion for specified manufacturer phase-in eligibility, specified at § 423.2716(a)(2). (3) Part B total expenditures. (i) For purposes of calculating each manufacturer's Part B total expenditures for applicable drugs that are single source drugs and biological products and each manufacturer's percent share of Part B total expenditures for 2021, CMS will— (A) Map all identified HCPCS codes to NDCs; (B) Identify all mapped HCPCS codes in paragraph (a)(3)(i)(A) of this section that map to NDCs associated with single source drugs or biological products; (C) Identify all mapped HCPCS codes identified in paragraph (a)(3)(i)(B) of this section that map only to NDCs associated with single source drugs or biological products of the same manufacturer, consistent with the aggregation rule at § 423.2716(c), based on the manufacturer's FDA-assigned labeler code(s) extracted from the first 5 digits of each NDC; (D) Attribute 2021 Part B total expenditures for all applicable drugs that are single source drugs or biological products identified in paragraph (a)(3)(i)(C) of this section to each manufacturer, consistent with the aggregation rule at § 423.2716(c), based on the manufacturer's FDA-assigned labeler code(s) extracted from the first 5 digits of each NDC; and (E) Divide the 2021 Part B total expenditures attributed to each manufacturer in paragraph (a)(3)(i)(D) of this section by the 2021 Part B total expenditures for all drugs and biological products, then multiply by 100 to calculate the manufacturer's percent share. (ii) If the manufacturer's Part B total expenditures for its applicable drugs that are single source drugs and biologicals are less than 1.0 percent of the 2021 Part B total expenditures, CMS will consider the manufacturer to have satisfied the Part B total expenditure criterion for specified manufacturer phase-in eligibility, specified at § 423.2716(a)(3). (b) Identification of specified small manufacturers. (i) Identification of specified small manufacturer drugs. ( 1 ( 2 (B) CMS will identify the holder of the NDA or BLA as reported in Drugs@FDA or the FDA Purple Book, respectively. (C) If a drug is a fixed combination drug, as described in 21 CFR 300.50, with two or more active ingredients or active moieties, the distinct combination of active ingredients or active moieties will be considered one active ingredient or active moiety for the purpose of identifying a specified small manufacturer drug. (D) CMS will attribute 2021 Part D total expenditures for one specified small manufacturer drug, including authorized generic drugs and repackaged and relabeled drugs, as applicable, to a specified manufacturer based on the NDC(s) for the drug, as reported on PDE records, by matching the labeler code extracted from the first 5 digits of each NDC to the manufacturer to whom the labeler code is assigned by the FDA. (ii) Calculation of Part D total expenditures for each drug for 2021. (iii) Calculation of each specified drug's percent share of the specified manufacturer's Part D total expenditures for applicable drugs for 2021. (iv) Part D total expenditures for a specific drug for 2021 and small manufacturer phase-in eligibility. (2) [Reserved] (c) Written notice of determination. (2) In the case of a manufacturer that participates in the Manufacturer Discount Program by means of an arrangement whereby its labeler code(s) is covered by another manufacturer's Manufacturer Discount Program agreement, CMS will issue a phase-in eligibility determination notice to the agreement holder. § 423.2724 Effect of manufacturer acquisition on phase-in eligibility. For purposes of the Manufacturer Discount Program, when a manufacturer acquires another manufacturer after 2021 (that is, the acquired manufacturer becomes part of such acquiring manufacturer under the aggregation rule at § 423.2716(c)), the acquired manufacturer assumes the phase-in status of the acquiring manufacturer, effective at the beginning of the plan year immediately following the acquisition or, for an acquisition before 2025, effective January 1, 2025. § 423.2728 Recalculation of phase-in eligibility determination. (a) Right to request a recalculation. (b) Timeframe and method of filing. (c) Disposition and notification. (d) Limitation. § 423.2732 Use of third party administrator. (a) CMS will engage a third party administrator (TPA) to assist in the administration of the Manufacturer Discount Program, which may include and is not limited to facilitating— (1) Manufacturer Discount Program invoicing; (2) The receipt and distribution of funds of a manufacturer; and (3) The dispute resolution process described in § 423.2764. (b) Agreement holders must— (1) Enter into and have in effect, under the terms and conditions specified by CMS, an agreement with the TPA in order to participate in the Manufacturer Discount Program. The TPA agreement will only terminate upon the termination of the Manufacturer Discount Program agreement; and (2) Establish and maintain electronic connectivity with the TPA for the purpose of timely transmission of data and funds. § 423.2736 Requirement for point-of-sale discounts. (a) Point-of-sale discounts. (1) Whether an enrollee is an applicable beneficiary as described in § 423.100; (2) Whether a drug is an applicable drug as described in § 423.100; and (3) The amount of the discount, in accordance with § 423.2712. (b) Direct member reimbursement (DMR). (c) Pharmacy prompt payment. (d) Prescription drug event (PDE) requirements. (e) Retroactive adjustments. § 423.2740 Negative invoice payment process for Part D sponsors. (a) CMS will invoice negative amounts to Part D sponsors when a PDE(s) which had been previously invoiced is deleted or adjusted such that the reported Manufacturer Discount Program discount amount is less than originally invoiced. (b) Part D sponsors are required to pay such negative invoice amounts in the manner specified by CMS within 38 calendar days of receipt of the invoice. § 423.2744 Prospective payments to Part D sponsors. (a) General rule. (b) Exception. (c) Reconciliation. (d) Manufacturer bankruptcy. § 423.2748 Requirement to use the Health Plan Management System. Agreement holders are required to maintain Health Plan Management System (HPMS) access and use the HPMS to— (a) Provide and maintain required information, as specified by CMS; (b) Attest to the completeness and accuracy of data necessary for CMS to determine whether the manufacturer qualifies as a specified manufacturer or specified small manufacturer, as described at § 423.2716; (c) Execute a Manufacturer Discount Program agreement and a TPA agreement; and (d) As otherwise specified by CMS to administer the program. § 423.2752 Manufacturer Discount Program agreement. Manufacturers that are agreement holders, as defined in § 423.2704, must comply with all requirements of this section. (a) Requirements of agreement. (1) Reimburse, within the required 38-day timeframe, all applicable discounts invoiced to the manufacturer, consistent with the requirements at § 423.2756(b). (2) Provide CMS with all labeler codes covered by the agreement. (3) Ensure that the labeler codes provided to CMS under paragraph (a)(2) of this section include, at a minimum, all labeler codes assigned by the FDA to the manufacturer, in accordance with § 423.2756(c)(3). (4) Comply with the requirements established by CMS for purposes of administering the Manufacturer Discount Program and monitoring compliance with such program, including providing the manufacturer's Employer Identification Number (EIN) and other identifying information to CMS upon request. (5) Comply with the requirements related to the provision and maintenance of data at § 423.2756(c). (6) Enter into and have in effect, under the terms and conditions specified by CMS, an agreement with the TPA, as described at § 423.2732(b)(1), and comply with such agreement and all TPA instructions, processes, and requirements. (7) Provide and attest to information in the manner and form specified by CMS as necessary for CMS to determine eligibility for and implement the specified manufacturer and specified small manufacturer phase-ins described at § 423.2716. (8) Agree that, no less than 30 days after the date CMS determines that a primary manufacturer of a selected drug has, in accordance with paragraph (c)(1)(ii) of this section, provided notice to CMS of its decision not to enter into or continue its participation in the Medicare Drug Price Negotiation Program and to discontinue its applicable agreements under the Medicaid Drug Rebate Program and the Manufacturer Discount Program, none of the drugs of such primary manufacturer will be covered by the manufacturer's Manufacturer Discount Program agreement. (9) Comply with all other requirements of the Manufacturer Discount Program. (b) Agreement term and renewal. (2) For calendar year 2025, an agreement holder must enter into such agreement no later than March 1, 2024, and the initial 12-month term of such agreement begins on January 1, 2025 and ends on December 31, 2025. (3) For calendar year 2026 and subsequent years, a Manufacturer Discount Program agreement will become effective on the first day of a calendar quarter as follows: (i) An agreement holder must enter into the agreement no later than the last day of the first month of a calendar quarter in order for the agreement to be effective on the first day of the next calendar quarter. (ii) If an agreement holder enters into the agreement after the last day of the first month of a particular calendar quarter, the agreement becomes effective on the first day of the second calendar quarter after the calendar quarter in which the manufacturer entered into the agreement. (iii) An initial term that begins on January 1 will end on December 31 of the same calendar year. An initial term that begins on April 1, July 1, or October 1 will end on December 31 of the following calendar year. (c) Termination of Manufacturer Discount Program agreement Termination by CMS. (ii) CMS may terminate a Manufacturer Discount Program agreement for good cause, in the case of a primary manufacturer under the Medicare Drug Price Negotiation Program, upon submission of a request from such manufacturer to terminate its applicable agreements under the Manufacturer Discount Program in connection with a notice of the primary manufacturer's decision that it is unwilling to participate in, or continue its participation in, the Medicare Drug Price Negotiation Program. If CMS determines such a notice complies with all requirements set forth in applicable regulations and guidance for the Medicare Drug Price Negotiation Program, the primary manufacturer's request will constitute good cause under paragraph (c)(1) of this section to terminate the primary manufacturer's applicable agreements under the Manufacturer Discount Program. The primary manufacturer's applicable agreements include any Manufacturer Discount Program agreement for which the primary manufacturer is the agreement holder, as well as any arrangement under § 423.2708(b)(2) in which FDA-assigned labeler codes of the primary manufacturer are covered under the Manufacturer Discount Program agreement of another manufacturer. If applicable, CMS will effectuate termination of coverage of such FDA-assigned labeler codes of the primary manufacturer that are covered under the Manufacturer Discount Program agreement of another manufacturer in accordance with paragraph (c)(1)(v)(A)( 1 (iii) Any termination by CMS must not be effective earlier than 30 days from the date of the notice to the manufacturer of such termination. If a hearing is timely requested by the manufacturer in accordance with paragraph (c)(1)(iv) of this section, such termination must not be effective prior to resolution of timely appeal requests received in accordance with the requirements of this section. (iv) CMS will provide, upon written request, a manufacturer a hearing concerning a termination by CMS as follows: (A) This hearing will take place prior to the effective date of the termination with sufficient time for the termination to be repealed prior to the effective date if CMS determines repeal would be appropriate. If a manufacturer or CMS receives an unfavorable decision from the hearing officer, the manufacturer or CMS may request review by the CMS Administrator within 30 calendar days of receipt of the notification of such determination. The decision of the CMS Administrator is final and binding. (B) A timely request for a hearing before a hearing officer or review by the CMS Administrator will stay termination until the parties have exhausted their appeal rights under the Manufacturer Discount Program, which means either the timeframes to pursue a hearing before a hearing officer or review by the CMS Administrator have passed or a final decision by the Administrator has been issued and there is no remaining opportunity to request further administrative review. (C) In the case of a termination by CMS under paragraph (c)(1)(ii) of this section with respect to a primary manufacturer under the Medicare Drug Price Negotiation Program, the hearing will be held solely on the papers. The only question to be decided in such hearing is whether the primary manufacturer has asked to rescind its request to terminate under paragraph (c)(1)(ii) of this section prior to the effective date of the termination. If so, CMS will automatically grant such request from the primary manufacturer to rescind its request to terminate under paragraph (c)(1)(ii) of this section. (v) In addition to the termination under paragraph (c)(1)(ii) of this section of any Manufacturer Discount Program agreement for which the primary manufacturer is the agreement holder, CMS will effectuate the removal of labeler code(s) that are covered under the Manufacturer Discount Program agreement of another manufacturer and termination of coverage of any specific NDC(s) of applicable drugs and selected drugs of a primary manufacturer that are covered under the Manufacturer Discount Program agreement of another manufacturer as follows: (A) If a primary manufacturer provides notice to CMS that it is unwilling to participate in, or continue its participation in, the Medicare Drug Price Negotiation Program, consistent with paragraph (c)(1)(ii) of this section, no earlier than 30 days from the date CMS sends the notice of termination to the manufacturer in accordance with paragraph (c)(1)(iii) of this section, CMS will effectuate— ( 1 ( 2 2 (B) The removal of labeler code(s) in accordance with paragraph (c)(1)(v)(A)( 1 2 (2) Termination by the manufacturer. (i) If the agreement holder notifies CMS of its intent to terminate before January 31 of a calendar year, January 1 of the succeeding calendar year. (ii) If the agreement holder notifies CMS of its intent to terminate on or after January 31 of a calendar year, January 1 of the second succeeding calendar year. (3) Post-termination obligations. (4) Reinstatement. (d) Automatic assignment upon change of ownership. § 423.2756 Manufacturer requirements. Manufacturers that are agreement holders, as defined at § 423.2704, must comply with all requirements of this section. (a) Manufacturer invoicing. (1) Calculate the amounts owed for applicable discounts for applicable drugs having NDCs with a labeler code covered by the agreement holder's Manufacturer Discount Program agreement; (2) Itemize invoices at the NDC level; (3) Invoice the agreement holder on a quarterly basis, consistent with the published invoicing calendar; and (4) Invoice manufacturer discount amounts from accepted PDE data for 37 months following the end of the benefit year. (b) Requirement for timely payment. (2) If an invoice deadline falls on a Saturday, Sunday, or legal holiday, the payment timeframe is extended to the first day thereafter which is not a Saturday, Sunday, or legal holiday. (3) Agreement holders are not permitted to withhold payment for any invoiced amount, including a disputed amount while a dispute is pending under § 423.2764, except when the basis for the dispute is that the invoiced amount does not correspond to NDCs of labeler codes covered by the agreement holder's Manufacturer Discount Program agreement. If payment is withheld in such an instance, the agreement holder must notify the TPA within 38 calendar days of the manufacturer's receipt of the applicable invoice that payment is being withheld for this reason. (c) Reporting requirements General. (2) Manufacturer ownership. (i) Provide and attest to ownership and other data, in the form and manner specified by CMS, as necessary for CMS to determine eligibility for and implement the discount phase-ins described at § 423.2716; (ii) Notify CMS of a change in their ownership no later than 30 calendar days after the agreement holder executes a legal obligation for such an arrangement and no later than 45 calendar days prior to such change in ownership taking effect; and (iii) If the agreement holder covers the FDA-assigned labeler code(s) of another manufacturer by its Manufacturer Discount Program agreement in accordance with § 423.2708(b)(2), comply with the requirements of paragraphs (c)(2)(i) and (ii) of this section with respect to such other manufacturer. (3) Labeler codes. (ii) Consistent with § 423.2708(b)(2), an agreement holder may cover by its Manufacturer Discount Program agreement applicable drugs or selected drugs with labeler code(s) assigned by the FDA to another manufacturer, provided the other manufacturer has not executed and does not have in effect its own Manufacturer Discount Program agreement in accordance with § 423.2708(b)(1). (iii) Agreement holders must provide to CMS: (A) All labeler codes assigned by the FDA to the agreement holder that contain NDCs for the agreement holder's applicable drugs and selected drugs, consistent with paragraph (c)(3)(iv) of this section. (B) All labeler codes assigned by the FDA to another manufacturer that the agreement holder covers by its Manufacturer Discount Program agreement and for which the agreement holder agrees to pay discounts. (iv) Agreement holders must provide labeler code(s) newly assigned by the FDA to the agreement holder to CMS no later than 3 business days after receiving written notification of the labeler code(s) from the FDA, and in advance of providing any NDCs associated with such newly assigned labeler codes to electronic database vendors. (v) Agreement holders must maintain the list of labeler codes covered by their Manufacturer Discount Program agreement, in the manner specified by CMS. Failure to update labeler codes covered by a Manufacturer Discount Program agreement in accordance with the requirements in this section and applicable CMS guidance does not change an agreement holder's obligation to pay invoiced amounts for applicable drugs. (4) FDA and related records. (A) Ensure that all of their FDA-assigned labeler codes that contain NDCs for any of their applicable drugs or selected drugs are properly listed on the FDA NDC Directory; (B) Electronically list all NDCs of their applicable drugs or selected drugs with the FDA in advance of commercial distribution of the product(s); (C) Maintain up-to-date electronic FDA registrations and listings of all NDCs, including the timely removal of discontinued NDCs from the FDA NDC Directory; and (D) Maintain up-to-date listings with electronic database vendors to whom they provide their NDCs for pharmacy claims processing. (ii) If such agreement holder's Manufacturer Discount Program agreement covers labeler code(s) that are assigned by the FDA to another manufacturer that participates in the Manufacturer Discount Program in accordance with § 423.2708(b)(2), the agreement holder must ensure that the requirements of this section are met with respect to such labeler codes. (d) Transfer of labeler codes. § 423.2760 Audits. (a) Manufacturer audits of TPA data. (2) The agreement holder must provide the TPA with 60 calendar days' notice of the reasonable basis for the audit and a description of the information required for the audit. (3) The audit is limited as follows: (i) The data provided to the agreement holder conducting the audit is limited to a statistically significant random sample of data held by the TPA that were used to determine applicable discounts for applicable drugs having NDCs with labeler codes covered by the agreement holder's Manufacturer Discount Program agreement. (ii) Manufacturers are not permitted to audit CMS records or the records of Part D sponsors beyond the data provided to the TPA, which includes claim-level information. (iii) Audits must occur at a location specified by the TPA and, with the exception of work papers, audit data cannot be removed from such specified location. (iv) The auditor for the agreement holder may release only an opinion of the audit results and is prohibited from releasing other information obtained from the audit, including work papers, to its client, employer, or any other party. (b) CMS audits of manufacturers. (2) CMS must provide the agreement holder with 60 calendar days' notice of the reasonable basis for the audit and a description of the information required for the audit. (3) CMS has the right to audit appropriate data, including data related to labeler codes covered by the agreement holder's Manufacturer Discount Program agreement and related NDC last lot expiration dates, utilization, and pricing information relied on by the agreement holder to dispute quarterly invoices, and any other data CMS determines necessary to evaluate compliance with the requirements of the Manufacturer Discount Program. § 423.2764 Dispute resolution. (a) Initial disputes. (1) Timeframe and method of filing. (2) Timeframe for making a determination. (b) Independent review. (1) Timeframe and method of filing. (i) Thirty calendar days from the unfavorable determination on the initial dispute. (ii) Ninety calendar days from the dispute submission deadline, if no determination was made within 60 calendar days of the dispute submission deadline. (2) Information considered. (3) Timeframe for making a decision. (4) Notice requirements. (i) A clear statement indicating whether the decision is favorable or unfavorable to the agreement holder. (ii) An explanation of the rationale for the IRE's decision. (iii) Instructions on how to request a review by the CMS Administrator. (5) Effect of IRE decision. (c) Review by the CMS Administrator. (2) A request for review by the CMS Administrator must be filed, in the manner specified by CMS, no later than 30 calendar days from the date of the IRE decision. (3) The CMS Administrator issues a written decision to both parties. (4) A decision by the CMS Administrator is final and binding. (d) Adjustment to invoiced amounts. (e) Limitation. § 423.2768 Civil money penalties. (a) General rule. (b) Notice of non-compliance. (c) Determination of the civil money penalty amounts. (1) The amount an agreement holder would have paid with respect to the applicable discount; and (2) Twenty-five percent of such amount. (d) Notice to impose civil money penalties. (1) A description of the basis for the determination. (2) The basis for the penalty. (3) The amount of the penalty. (4) The date the penalty is due. (5) The agreement holder's right to a hearing as set forth in paragraph (e) of this section. (6) Information about where to file the request for a hearing. (e) Appeal procedures for civil money penalties. (f) Collection. (2) An agreement holder that has received from CMS a notice of determination to impose a civil money penalty must pay such civil money penalty in full within 60 calendar days of the date of the CMS notice of determination, except as provided in paragraph (f)(3) of this section. (3) If the agreement holder requests a hearing to appeal in accordance with subpart T of this part, the civil money penalty is due, as applicable, once the administrative process specified in subpart T has concluded. (4) CMS will initiate the collection of a civil money penalty owed by an agreement holder either following the expiration of 60 days from the date of the CMS notice of determination to impose a civil money penalty, or if later, the conclusion of the administrative process specified in subpart T of this part, as applicable. (g) Other applicable provisions. (h) Bankruptcy.

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