CMS-10137 2013 Application for New Prescription Drug Plan (PDP)

MEDICARE PRESCRIPTION DRUG BENEFIT
Solicitation for Applications for New Prescription Drug Plans (PDP) Sponsors
2013 Contract Year

PUBLIC REPORTING BURDEN: According to the Paperwork Reduction Act of 1995, no
persons are required to respond to a collection of information unless it displays a valid
OMB control number. The valid OMB control number for this information collection is
0938-0936. The time required to complete this information collection is estimated to
average 24.75 hours per response, including the time to review instructions, search
existing data resources, and gather the data needed, and complete and review the
information collection. If you have any comments concerning the accuracy of the time
estimate(s) or suggestions for improving this form, please write to: CMS, 7500 Security
Boulevard, C4-26-05, Baltimore, Maryland 21244-1850
Expiration:

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GENERAL INFORMATION ..................................................................................... 7
1.1

Purpose of Solicitation ...................................................................................... 7

1.2

Background ....................................................................................................... 7

1.3

Objectives and Structure ................................................................................... 7

1.4

Schedule ........................................................................................................... 8

1.5

Summary of Part D Sponsor Role and Responsibilities .................................... 9

1.6

Summary of CMS Role and Responsibilities................................................... 10

1.6.1

Application Approval, Part D Bid Review, and Contracting Processes .... 10

1.6.2

Part D Program Oversight........................................................................ 11

1.6.3

Education and Outreach .......................................................................... 12

1.6.4

Marketing Guidelines and Review ........................................................... 12

1.6.5

Eligibility for the Low Income Subsidy Program ....................................... 12

1.6.6

General Enrollment Processing ............................................................... 13

1.6.7

Payment to Part D Sponsors ................................................................... 13

INSTRUCTIONS .................................................................................................... 14
2.1

Overview ......................................................................................................... 14

2.2

Other Technical Support ................................................................................. 14

2.3

Health Plan Management System (HPMS) Data Entry ................................... 14

2.4

Instructions and Format of Qualifications ........................................................ 15

2.4.1

Instructions .............................................................................................. 15

2.4.2
Applicant Seeking to Offer New Employer/Union-Only Group Waiver Plans
(EGWPs) ................................................................................................................ 17
2.4.2.1
PDP EGWP Service Area ................................................................. 17
2.4.2.2
New PDP Sponsors Offering Individual and ―800 Series‖ Plans –
Pharmacy Access ............................................................................................... 17
2.4.2.3
New PDP Sponsors Only Offering ―800 Series‖ Plans – Pharmacy
Access
17
2.4.3

Applicant Seeking to Offer New Employer/Union Direct Contract PDPs .. 18

2.4.4

Applicant Entity Same as Contracting Entity ............................................ 18

2.4.5

Joint Enterprise as Applicant and Contracting Entity ............................... 18

2.4.6

Automatic Enrollment of Full-benefit Dual Eligible Individuals ................. 19

2.4.7

Withdrawal of a Part D Application .......................................................... 19

2.4.8

Technical Assistance ............................................................................... 20

2.5

Submission Software Training ........................................................................ 20

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2.6

System Access and Data Transmissions with CMS ........................................ 20

2.6.1

HPMS ...................................................................................................... 20

2.6.2

Enrollment and Payment.......................................................................... 21

2.6.3

Payment – Part D Sponsors .................................................................... 21

2.7

Summary Instruction and Format for Individual Market Bids ........................... 21

2.7.1

Format of Bids ......................................................................................... 22

2.7.2

CMS Review of Bids ................................................................................ 23

2.7.3

Overview of Bid Negotiation..................................................................... 23

2.8

Pharmacy Access ........................................................................................... 23

2.8.1

Retail Pharmacy Access .......................................................................... 24

2.8.2

Home Infusion Pharmacy Access ............................................................ 25

2.8.3

Long-Term Care Pharmacy Access ......................................................... 26

2.8.4
(I/T/U)

Indian Tribe and Tribal Organization, and Urban Indian Organization
26

2.8.5

Waivers Related to Pharmacy Access ..................................................... 26

2.9
Waivers Related to Attestations for PDP EGWP and PDP Direct Contract
Applicants .................................................................................................................. 26

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2.10

Standard Contract with PDP Sponsors ........................................................... 27

2.11

Protection of Confidential Information ............................................................. 27

APPLICATION ....................................................................................................... 29
3.1

Applicant Experience, Contracts, Licensure and Financial Stability ................ 29

3.1.1
Management and Operations 42 CFR Part 423 Subpart K; CMS issued
guidance 08/15/06 and 08/26/08 ............................................................................ 29
3.1.2
Licensure and Solvency 42 CFR Part 423, Subpart I; 2008 Call Letter;
CMS issued guidance 03/17/09 ............................................................................. 36
3.1.3
Program Integrity 2 CFR § 376 and Compliance Program 42 CFR §
423.504(b)(4)(vi); Prescription Drug Benefit Manual, Chapter 9 ............................ 37
3.1.4
HPMS Part D Contacts CMS Guidance issued 08/16/06, 08/22/07,
11/30/07, 08/06/07, 03/17/09, 07/09/09, 08/04/09, and 01/25/10 ........................... 38
3.2

Benefit Design................................................................................................. 41

3.2.1
Formulary/Pharmacy and Therapeutics (P&T) Committee Affordable Care
Act, §3307, 42 CFR §423.120(b), 42 CFR §423.272(b)(2); Prescription Drug
Benefit Manual, Chapter 6; CMS issued guidance 03/25/10 .................................. 41
3.2.2
Utilization Management Standards 42 CFR §423.153(b); Prescription Drug
Benefit Manual, Chapter 6 and Chapter 7 .............................................................. 46

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3.2.3
Quality Assurance and Patient Safety Affordable Care Act § 3310; 42 CFR
§423.153(c); Prescription Drug Benefit Manual, Chapter 7 .................................... 46
3.2.4
Medication Therapy Management 42 CFR §423.153(d); The Affordable
Care Act § 10328; Prescription Drug Benefit Manual, Chapter 7; .......................... 47
3.2.5
Electronic Prescription Program and Health Information Technology
Standards 42 CFR §423.159; Prescription Drug Benefit Manual, Chapter 7; P.L.
111-5 (2009); 2010 Call Letter ............................................................................... 50
3.2.6

Bids 42 CFR § 423.104, §423.265 and §423.272 .................................... 51

3.3
Service Area/Regions 42 CFR §423.112; Prescription Drug Benefit Manual,
Chapter 5 ................................................................................................................... 51
3.4
General Pharmacy Access 42 CFR §423.120(a); Prescription Drug Benefit
Manual, Chapter 5 ..................................................................................................... 52
3.4.1
Retail Pharmacy 42 CFR §423.120(a); 42 CFR §423.859(c); Prescription
Drug Benefit Manual, Chapter 5 ............................................................................. 53
3.4.2
Out of Network Access 42 CFR §423.124; Prescription Drug Benefit
Manual, Chapter 5.................................................................................................. 55
3.4.3
Mail Order Pharmacy 42 CFR §423.120(a)(10); Prescription Drug Benefit
Manual, Chapter 5.................................................................................................. 56
3.4.4
Home Infusion Pharmacy 42 CFR §423.120(a)(4); Prescription Drug
Benefit Manual, Chapter 5 ..................................................................................... 56
3.4.5
Long -Term Care (LTC) Pharmacy 42 CFR §423.120(a)(5); Prescription
Drug Benefit Manual, Chapter 5; CMS issued guidance 04/28/09 ......................... 57
3.4.6
Indian Health Service, Indian Tribe and Tribal Organization, and Urban
Indian Organization (I/T/U) Pharmacy 42 CFR §423.120(a)(6); Prescription Drug
Benefit Manual, Chapter 5 ..................................................................................... 58
3.4.7

Specialty Pharmacy Prescription Drug Benefit Manual, Chapter 5 .......... 59

3.5
Enrollment and Eligibility 42 CFR §423.30; Prescription Drug Benefit Manual,
Chapters 3, 4, and 13; Plan Communications User Guide; CMS issued guidance
07/21/09..................................................................................................................... 60
3.6
Complaints Tracking Prescription Drug Benefit Manual, Chapter 7; CMS issued
guidance 11/16/06, 07/28/2008, and 12/09/08 .......................................................... 63
3.7
Medicare Plan Finder Prescription Drug Benefit Manual, Chapter 7; CMS
issued guidance 07/17/06, 11/20/07, 08/21/08, 05/20/10 ......................................... 64
3.8
Grievances 42 CFR Part 423 Subpart M; Prescription Drug Benefit Manual,
Chapter 18 ................................................................................................................. 65
3.9
Coverage Determinations (including Exceptions) and Appeals 42 CFR Part
423 Subpart M; Prescription Drug Benefit Manual, Chapter 18; Part D QIC
Reconsideration Procedures Manual ......................................................................... 66

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3.10 Coordination of Benefits 42 CFR Part 423 Subpart J; Prescription Drug Benefit
Manual, Chapter 14 ................................................................................................... 69
3.11 Tracking Out-of Pocket Costs (TrOOP) Affordable Care Act § 3314; 42 CFR
Part 423 Subpart J; Prescription Drug Benefit Manual, Chapters 13 and Chapter 14 71
3.12 Medicare Secondary Payer 42 CFR §423.462; Prescription Drug Benefit
Manual, Chapter 14 ................................................................................................... 73
3.13 Marketing/Beneficiary Communications 42 CFR §423.50, 42 CFR §423.128;
42 CFR §423.505; Prescription Drug Benefit Manual, Chapter 2 .............................. 74
3.14

Provider Communications Prescription Drug Benefit Manual, Chapter 2 ........ 76

3.15 Reporting Requirements Affordable Care Act § 6005; 42 CFR §423.514; 2010
Reporting Requirements ............................................................................................ 78
3.16
(k)

Data Exchange between Part D Sponsor and CMS 42 CFR §423.505(c) and
80

3.17 Health Insurance Portability and Accountability Act of 1996 (HIPAA), Health
Information Technology for Economic and Clinical Health Act (HITECH), and Related
CMS Requirements 45 CFR Parts 160, 162, and 164; CMS issued guidance
08/15/2006 and 08/26/08 ........................................................................................... 82
3.18 Prohibition on Use of SSN or Medicare ID number on Enrollee ID Cards
Prescription Drug Benefit Manual, Chapter 2 ............................................................ 83
3.19

Record Retention 42 CFR §423.505(d) .......................................................... 83

3.20 Prescription Drug Event (PDE) Records; 42 CFR Part 423 Subpart G; CMS
issued guidance 04/27/2006, 06/23/2006, 12/17/20101, 03/01/2011, 03/04/2011,
04/28/2011, 05/16/2011 ............................................................................................. 84
3.21 Claims Processing; 42 CFR §423.120(c)(4); 42 CFR §423.466; CMS issued
guidance 04/26/2006, 01/13/2010, and 03/29/2010 .................................................. 84
3.22

Premium Billing 42 CFR §423.293; CMS issued guidance 03/08/2007 .......... 87

3.23 Consumer Assessment of Healthcare Providers and Systems (CAHPS) Survey
Administration 42 CFR §423.156 ............................................................................... 87
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CERTIFICATION ................................................................................................... 88

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APPENDICES ........................................................................................................ 90
APPENDIX I – Attestation for Employer/Union-Only Group Waiver Plans (800Series) ................................................................................................................ 91
APPENDIX II—Direct Contract PDP Attestation ................................................. 96
APPENDIX III -- Part D Financial Solvency & Capital Adequacy Documentation
......................................................................................................................... 100
APPENDIX IV – Federal Waiver of State Licensure ......................................... 108
APPENDIX V – Financial Solvency Documentation for Applicant Not Licensed as
a Risk-bearing Entity in Any State .................................................................... 117
APPENDIX VI—Organization Background and Structure ................................. 126

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APPENDIX VII – Crosswalks of Section 3.1.1D Requirements in Subcontracts
submitted as Attachments to Section 3.1.1 ...................................................... 127
APPENDIX VIII – Crosswalk for Retail Pharmacy Access Contracts ............... 131
APPENDIX IX – Crosswalk for Mail Order Pharmacy Access Contracts .......... 134
APPENDIX X – Crosswalk for Home Infusion Pharmacy Access Contracts .... 137
APPENDIX XI – Crosswalk for Long-Term Care Pharmacy Access Contracts 140
APPENDIX XII – Crosswalk for Indian Tribe and Tribal Organization, and Urban
Indian Organization (I/T/U) Pharmacy Access Contracts ................................. 145
APPENDIX XIII – Applicant Submission of P&T Committee Member List and
Certification Statement ..................................................................................... 149
APPENDIX XIV – I/T/U Revised Addendum ..................................................... 154
APPENDIX XV – Compliance Program Crosswalk .......................................... 162

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1 GENERAL INFORMATION
1.1 Purpose of Solicitation
The Centers for Medicare & Medicaid Services is seeking applications from qualified
entities to enter into contracts to offer Medicare Prescription Drug Plans (PDPs) as
described in the Medicare Prescription Drug Benefit Final Rule published in the Federal
Register on January 28, 2005 (70 Fed. Reg.4194). Please submit your applications
according to the process described in Section 2.0.
If your organization, or your parent or affiliated organization is already under a PDP
contract with CMS to offer the Part D benefit, and you are expanding your service area
offered under the existing contract please refer to the www.cms.hhs.gov/ website for the
Part D Service Area Expansion application for instructions to complete an application for
a Service Area Expansion (SAE). If your organization, or your parent or affiliated
organization already has a Medicare Advantage – Prescription Drug (MA-PD) or Cost
Plan contract with CMS to offer the Part D benefit, and you are seeking a PDP contract,
you are required to complete this PDP application package.

1.2 Background
The Medicare Prescription Drug Benefit program was established by section 101 of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), as
amended, and is codified in sections 1860D-1 through 1860 D-43 of the Social Security
Act (the Act).

1.3 Objectives and Structure
Effective January 1, 2006, MMA established an optional prescription drug benefit,
known as the Part D program for individuals who are entitled to Medicare Part A and/or
enrolled in Part B.
In general, coverage for the prescription drug benefit is provided predominantly through
prescription drug plans (PDPs) that offer drug-only coverage, or through Medicare
Advantage (MA) plans that offer integrated prescription drug and health care coverage
(MA-PD plans). PDPs must offer a basic drug benefit and may also offer an enhanced
or alternative basic drug benefit. MA-PD sponsors must offer either a basic benefit, or
broader coverage for no additional cost. If the MA-PD sponsor meets the basic
requirement, then it may also offer supplemental benefits through enhanced alternative
coverage for an additional premium. Medicare Cost Plans may, at their election, offer a
Part D drug plan as an optional supplemental benefit, subject to the same rules that
apply to an MA-PD plan. Program of All-Inclusive Care for the Elderly (PACE)
organizations may elect to offer a Part D plan in a similar manner as MA-PD local
sponsors in order to account for the shift in payor source from the Medicaid capitation
rate to a private Part D Sponsors.
Applicants who offer either a PDP or MA-PD plan may offer national plans (with
coverage in every region) or regional plans. MA-PD plan applicants may also offer local
plans. CMS has identified 26 MA Regions and 34 PDP Regions; in addition, each

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territory is its own PDP region. Additional information about the regions can be found on
the www.cms.hhs.gov/ website.
This solicitation is only for entities seeking to operate a PDP (either in the individual
market, employer market or a combination of both markets). Separate Part D
solicitations are also posted on the CMS website for entities offering MA Plans with a
Part D Drug benefit at the local or regional levels, entities offering Cost Plans with a Part
D benefit, and for entities offering PACE Plans with a Part D benefit. Reference
throughout this solicitation will be made to a Part D Sponsor, which is meant to
encompass stand-alone PDPs, MA Plans with a Part D benefit, PACE Plans, and Cost
Plans with a Part D benefit.
Part D Sponsors will have flexibility in terms of benefit design. This flexibility includes,
but is not limited to, authority to establish a formulary that designates specific drugs that
will be available within each therapeutic class of drugs, and the ability to have a costsharing structure other than the statutorily defined structure (subject to certain actuarial
tests). (Sponsors are required to follow our formulary guidance. See Section 2.8.1 of
this application for information regarding the submission of formulary materials). The
plans also may include supplemental benefits coverage such that the total value of the
coverage exceeds the value of basic prescription drug coverage.

1.4 Schedule
APPLICATION REVIEW PROCESS

Date

Milestone

November 11, 2011

Recommended date by which Applicants should
submit their Notice of Intent to Apply Form to CMS to
ensure access to Health Plan Management System
(HPMS) by the date applications are released

December 6, 2011

CMS User ID form due to CMS

January 10, 2012

Final Applications posted by CMS

February 7, 2012

Deadline for NOIA form submission to CMS

February 21 , 2012

Applications due

March 23, 2012

Release of Health Plan Management System
(HPMS) formulary submissions module

April 6, 2012

Plan Creation module, Plan Benefit Package (PBP),
and Bid Pricing Tool (BPT) available on HPMS

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April 16, 2012

Formulary submission due to CMS
Transition Policy Attestations and Policy due to
CMS

May 2012

CMS sends Part D contract eligibility determination
to Applicants, based on review of application.
Applicant‘s bids must still be negotiated (see below)

May 11, 2012

PBP/BPT Upload Module available on HPMS

June 4, 2012

All bids due

Early August 2012

CMS publishes national average Part D premium

September 2012

CMS completes review and approval of bid data.
CMS executes Part D contracts to those
organizations who submit an acceptable bid

October 15, 2012

2013 Annual Coordinated Election Period begins

NOTE: This timeline does not represent an all-inclusive list of key dates related to the
Medicare Prescription Drug Benefit program. CMS reserves the right to amend or
cancel this solicitation at any time. CMS also reserves the right to revise the Medicare
Prescription Drug Benefit program implementation schedule, including the solicitation
and bidding process timelines.

1.5 Summary of Part D Sponsor Role and Responsibilities
Key aspects of each Part D Sponsor shall include the ability to:
Submit a formulary (considered an element of the bid) each year for CMS approval.
Submit a Part D Sponsor plan bid each year for CMS approval.
Enroll all eligible Medicare beneficiaries who apply and reside within the Part D
Sponsor‘s approved service area. A sponsor must serve at least one entire region.
Administer the Part D benefit (consistent with the Part D Sponsor‘s approved bid),
including providing coverage for drugs included in a CMS-approved formulary,
administering appropriate deductibles and co-payments, managing the benefit using
appropriate pharmacy benefit managerial tools, making discounts for applicable
name brand drugs available to eligible enrollees (i.e., non-LIS beneficiaries in the
coverage gap) at the point of sale, and operating effective oversight of that benefit.
Provide access to negotiated prices on covered Part D drugs, with different
strengths and doses available for those drugs, including a broad selection of generic
drugs.
Ensure that records are maintained in accordance with CMS rules and regulations
and that both records and facilities are available for CMS inspection and audit.

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Disclose the information necessary for CMS to oversee the program and ensure
appropriate payments.
Offer a contracted retail pharmacy network, providing convenient access to retail
pharmacies.
Process claims at the point of sale.
Operate quality assurance, drug utilization review, and medication therapy
management programs.
Administer coverage determinations (including exceptions), grievances, and an
appeals process consistent with CMS requirements.
Provide customer service to beneficiaries, including enrollment assistance, toll-free
telephone customer service help, and education about the Part D benefit.
Protect the privacy of beneficiaries and beneficiary-specific health information.
Develop marketing materials and conduct outreach activities consistent with CMS
standards.
Develop and/or maintain systems to support enrollment, provide claims-based data
to CMS, accept CMS payment (including subsidies for low-income beneficiaries),
track true out-of-pocket costs and gross covered prescription drug costs, coordinate
benefits with secondary insurers (or primary insurers when Medicare is secondary)
and support e-prescribing.
Provide necessary data to CMS to support payment (including Prescription Drug
Event (PDE) records and data on direct and indirect remuneration), oversight, and
quality improvement activities and otherwise cooperate with CMS oversight
responsibilities.
Provide accurate drug pricing and pharmacy network data that will be published on
the Medicare Plan Finder tool. Sponsors must submit data based on the format and
schedule provided by CMS.

1.6 Summary of CMS Role and Responsibilities
1.6.1

Application Approval, Part D Bid Review, and Contracting Processes

There are three distinct phases to the overall review to determine whether CMS will
enter into a contract with an Applicant. The first phase is the application review process.
CMS will review all applications submitted on or by February 21, 2012 to determine
whether the Applicant meets the qualifications we have established to enter into a Part
D contract.
The second phase has two steps – the formulary upload which begins March 23, 2012
and the bid upload which begins May 11, 2012. The formulary review entails
determining that the proposed formulary (if one is used) has at least two drugs in every
therapeutic category and class (unless special circumstances exist that would allow only
one drug); does not substantially discourage enrollment by certain types of Part D
eligible individuals; includes adequate coverage of the types of drugs most commonly

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needed by Part D enrollees; includes all drugs in certain classes and categories as
established by the Secretary, and includes an appropriate transition policy. CMS will
contact Applicants if any issues are identified during the review for discussion and
resolution. The intent is to provide an opportunity for Applicants to make any necessary
corrections prior to the Part D bid submission date which is on the first Monday in June
each year. The second step involves the bid review and negotiations with applicants to
ensure valuations of the proposed benefits are reasonable and actuarially equivalent.
The third phase involves contracting. Applicants judged qualified to enter into a Part D
contract as a result of successfully completing phase one and two will be offered a Part
D contract by CMS.

1.6.2

Part D Program Oversight

CMS has developed a Medicare Prescription Drug Benefit program monitoring system
to ensure that the Part D sponsors deliver good value through defined benefits and are
compliant with program requirements. We focus on several operational areas critical to
the value of the benefit, including beneficiary access to and satisfaction with their Part D
benefit and protection of the financial integrity of the program. Specific areas include
pharmacy access, adequacy and value of the benefit, benefit management, enrollment
and disenrollment, marketing, program safeguard activities, customer service,
confidentiality and security of enrollee information, and effectiveness of tracking true
out-of-pocket costs and gross covered prescription drug costs. The types of reporting
that CMS requires of Part D sponsors are presented in the application. For additional
information on reporting requirements, refer to the www.cms.gov/ website. (NOTE:
Part D sponsors, as covered entities under the Health Insurance Portability and
Accountability Act of 1996, are subject to investigation and penalties for findings of
HIPAA violations as determined by the Department of Health and Human Services
Office for Civil Rights and the Department of Justice.)
We monitor compliance through the analysis of data we collect from Part D sponsors,
CMS contractors, and our own systems. The types of data we collect from sponsors
include: certain benefit data, PDE records, direct and indirect remuneration data, cost
data, benefit management data, marketing review information, customer satisfaction
and complaints data, and information used to determine low-income subsidy (LIS)
match rates. We also conduct beneficiary satisfaction surveys and operate a
complaints tracking system to monitor and manage complaints brought to our attention
that are not satisfactorily resolved through PDP sponsors‘ grievance processes as well
as conduct periodic site visits to verify PDP sponsor compliance with Part D program
requirements. We use information from all the specified sources to analyze the
appropriateness and value of the benefit delivered, and to evaluate the opportunity for
additional value and quality improvement. We publish the results of our monitoring
activities on CMS‘ websites, including performance ratings on the Medicare Plan Finder,
and we also post information regarding the issuance of Corrective Action Plans on our
website.
If any trends we identify indicate less than satisfactory performance (as described in 42
CFR §423.505(n) ), contract violations, significant departures from the marketed Part D
offering, or fraud or other violations of State or Federal laws, appropriate action is taken

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consistent with 42 CFR §423.509 and Part 423, Subpart O. We also make referrals if
appropriate to the Office of the Inspector General or to Federal and State authorities
where violations of laws under the jurisdictions of these agencies are in question.

1.6.3 Education and Outreach
CMS is committed to educating Medicare beneficiaries about the Part D program. CMS
plans to continue to educate beneficiary and consumer groups, health care providers,
States, and other interested groups about the Part D program. Among the topics
discussed with these groups is the identification and reporting of possible fraud and/or
abuse. CMS also engages in other activities that publicize or otherwise educate
beneficiaries about the program. For example, the Medicare Plan Finder assists
beneficiaries in finding a plan to meet their specific needs; refer to the
www.medicare.gov/find-a-plan website. CMS displays data that allow comparisons of
plans‘ costs, quality and operational performances. As described above, these data
may also be used for monitoring purposes.

1.6.4 Marketing Guidelines and Review
Marketing Guidelines are posted on the www.cms.gov/ website. Part D sponsors are
required to adhere to these guidelines in developing their marketing materials and
marketing strategy. Part D sponsors are required to submit materials to CMS based on
the marketing guidelines.

1.6.5 Eligibility for the Low Income Subsidy Program
Low-income Medicare beneficiaries receive full or partial subsidies of premiums and
reductions in cost sharing under the Part D benefit. Certain groups of Medicare
beneficiaries are automatically eligible for the low-income subsidy program. These
beneficiaries include Medicare beneficiaries who are full-benefit dual eligible individuals
(eligible for full benefits under Medicaid), Medicare beneficiaries who are recipients of
Supplemental Security Income benefits; and participants in Medicare Savings Programs
as Qualified Medicare Beneficiaries (QMBs), Specified Low-Income Medicare
Beneficiaries (SLMBs), and Qualifying Individuals (QIs). Beneficiaries who are lowincome and who do not fall into one of the automatic subsidy eligibility groups apply for
a low-income subsidy and have their eligibility determined by either the state in which
they reside or the Social Security Administration (SSA). CMS has developed a
database to track individuals who are automatically deemed subsidy-eligible or who are
determined subsidy-eligible by states or SSA, and communicates the names and
eligibility category of those individuals to Part D sponsors as part of the enrollment files
from the enrollment processing system described below. Occasionally, due to time
lags, CMS‘s database does not reflect a low-income subsidy eligible individual true
maximum cost sharing amount under the program or an individual‘s correct low-income
subsidy status. Part D Sponsors are required to adhere to CMS‘s Best Available
Evidence policy under 42 CFR §423.800(d), under which an individual can provide
acceptable evidence supporting a revised cost-sharing amount that the sponsor must
accept for the purpose of administering the benefit. For additional information regarding
the low income subsidy program, refer to the www.cms.gov/ website.

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1.6.6 General Enrollment Processing
CMS has a system to receive and process enrollment, disenrollment and membership
information provided by Part D sponsors. CMS tracks enrollments and ensures that the
beneficiary does not enroll in more than one Part D plan. Also, CMS tracks low-income
subsidy status and auto-enrollments of full-benefit dual eligible individuals into Part D
plans and facilitated enrollments for other low-income Medicare beneficiaries. Finally,
CMS tracks disenrollments from Part D plans and will deny new enrollments during any
given year unless the enrollment occurs during an allowable enrollment period. For
additional information regarding enrollment processing, refer to the www.cms.gov/
website.

1.6.7 Payment to Part D Sponsors
CMS provides payment to Part D sponsors in the form of advance monthly payments
(consisting of the Part D Sponsor plan‘s standardized bid, risk adjusted for health
status, minus the beneficiary monthly premium), estimated reinsurance subsidies,
estimated low-income subsidies (low-income cost sharing and premiums), and
estimated gap discount payments. After the end of the payment year, CMS reconciles
the actual amounts of low-income cost sharing subsidies, reinsurance amounts, and
gap discount amounts reported on PDE records against the amount paid as a part of
the prospective monthly payments. Risk sharing amounts (if applicable) are determined
after all other reconciliations have been completed. For a more complete description
refer to CMS‘ prescription drug event reporting instructions that are posted at
www.csscoperations.com and on the www.cms.gov website.

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2 INSTRUCTIONS
2.1 Overview
There are six types of entities with which CMS contracts to offer the Medicare
prescription drug benefit: PDP sponsors, Medicare Advantage organizations that offer
MA-PDs (including local HMO plans, local, PPOs, regional PPOs, and Private Fee-forService plans); organizations with Cost Plans under section 1876 of the Social Security
Act, Employer Groups, and PACE organizations. This application is to be completed
only by entities seeking to offer new PDPs during 2013 in either the individual and/or
employer markets.

2.2 Other Technical Support
CMS conducts technical support calls, also known as User Group calls, for Applicants
and existing Part D sponsors. CMS operational experts (e.g., from areas such as
enrollment, information systems, marketing, bidding, formulary design, and coordination
of benefits) are available to discuss and answer questions regarding the agenda items
for each meeting. Registration for the technical support calls and to join the list serve to
get updates on CMS guidance can be found at www.mscginc.com/Registration/.
CMS also conducts special training sessions, including a user group call dedicated to
addressing issues unique to sponsors that are new to the Part D program.
CMS provides two user manuals to assist applicants with the technical requirements of
submitting the Part D application through the Health Plan Management System
(HPMS). The Basic Contract Management User‟s Manual provides information on
completing and maintaining basic information required in Contract Management. These
data must be completed prior to the final submission of any application. The Online
Application User‟s Manual provides detailed instructions on completing the various
online applications. Both manuals can be found in HPMS by clicking on Contract
Management>Basic Contract Management>Documentation.

2.3

Health Plan Management System (HPMS) Data Entry

Part D organizations that submit a Notice of Intent to Apply form are assigned a pending
contract number (S number) to use throughout the application and subsequent
operational processes. Once the contract number is assigned, and Part D Applicants
apply for, and receive, their CMS User ID(s) and password(s) for HPMS access, they
are required to input contact and other related information into the HPMS (see section
3.1.5). Applicants are required to provide prompt entry and ongoing maintenance of
data in HPMS. By keeping the information in HPMS current, the Applicant facilitates the
tracking of their application throughout the review process and ensures that CMS has
the most current information for application status updates, guidance and other types of
correspondence.

14

In the event that an Applicant is awarded a contract, this information will also be used
for frequent communications during implementation and throughout the contract year. It
is important that the information in HPMS is accurate at all times.

2.4 Instructions and Format of Qualifications
Applications may be submitted until February 21, 2012. Applicants must use the 2013
solicitation. CMS will not accept or review in anyway those submissions using the prior
versions of the solicitation, including the use of CMS provided templates from prior
years (e.g. 2012 and earlier).

2.4.1 Instructions
Applicants will complete the entire solicitation via HPMS.
In preparing your application in response to the prompts in Section 3 of this solicitation,
please mark ―Yes‖ or ―No‖ or ―Not Applicable‖ in sections organized with that format
within HPMS.
In many instances Applicants are directed to affirm within HPMS that they meet
particular requirements by indicating ―Yes‖ next to a statement of a particular Part D
program requirement. By providing such attestation, an Applicant is committing that its
organization complies with the relevant requirements as of the date your application is
submitted to CMS, unless a different date is stated by CMS.
CMS will not accept any information in hard copy. If an Applicant submits the
information via hard copy, the application will not be considered received.
Organizations will receive a confirmation number from HPMS upon clicking final submit.
Failure to obtain a confirmation number indicates that an applicant failed to properly
submit its Part D application by the CMS-established deadline. Any entity that
experiences technical difficulties during the submission process must contact the HPMS
Help Desk and CMS will make case by case determinations where appropriate
regarding the timeliness of the application submission.
CMS will check the application for completeness shortly after its receipt. Consistent
with the 2010 Call Letter, CMS will make determinations concerning the validity of each
organization‘s submission. Some examples of invalid submissions include but are not
limited to the following: Applicants that fail to upload executed agreements or contract
templates, Applicants that upload contract crosswalks instead of contracts, or
Applicants that fail to upload any pharmacy access reports. CMS will notify any
Applicants that are determined to have provided invalid submissions.
For those Applicants with valid submissions, CMS will notify your organization of any
deficiencies and afford a courtesy opportunity to amend the applications. CMS will only
review the last submission provided during this courtesy cure period.
CMS will provide communication back to all Applicants throughout the application
process via email. The email notifications will be generated through HPMS, so
organizations must ensure that the Part D application contract information provided
through the ―Notice of Intent to Apply‖ process is current and correct, and that there are

15

no firewalls in place that would prevent an email from the [email protected] web
address from being delivered.
CMS has established that all aspects of the program that the Applicant attests to must
be ready for operation by the application due date.
CMS clarified its Part D application review standards in a final rule (4085-F) published in
the Federal Register on April 15, 2010, with an effective date of June 7, 2010.
Applicants must demonstrate that they meet all (not substantially all) Part D program
requirements to qualify as a Part D sponsor in their proposed service area.
As with all aspects of a Part D sponsor‘s operations under its contract with CMS, we
may verify a sponsor‘s compliance with qualifications it attests it meets through on-site
visits at the Part D sponsor‘s facilities as well as through other program monitoring
techniques. Failure to meet the requirements attested to in this solicitation and failure to
operate its Part D plan(s) consistent with the requirements of the applicable statutes,
regulations, call letter, and the Part D contract may delay a Part D sponsor‘s marketing
and enrollment activities or, if corrections cannot be made in a timely manner, the Part
D sponsor will be disqualified from participation in the Part D program.
An individual with legal authority to bind the Applicant shall execute the certification
found in Section 4. CMS reserves the right to request clarifications or corrections to a
submitted application. Failure to provide requested clarifications within the time period
specified by CMS for responding could result in the applicant receiving a notice of intent
to deny the application, in which case, the Applicant will then have 10 days to seek to
remedy its application. The end of the 10-day period is the last opportunity an Applicant
has to provide CMS with clarifications or corrections. CMS will only review the last
submission provided during this cure period. Such materials will not be accepted after
this 10-day time period.
This solicitation does not commit CMS to pay any cost for the preparation and
submission of an application.
CMS will not review applications received after 11:59 P.M. Eastern Standard Time
on February 21, 2012. CMS will lock access to application fields within HPMS as of
this time. CMS will not review any submissions based on earlier versions of the
solicitation. Applicants must complete the 2013 solicitation in order to be considered
for Part D sponsorship.
If a subsidiary, parent, or otherwise related organization is also applying to offer Part D
benefits, these entities MUST submit separate applications. There are four types of
Part D solicitations for which applications are due on February 21, 2012; they are PDP,
MA-PD, Cost Plan solicitations, and the Service Area Expansion Application.
Organizations that intend to offer more than one of these types of Part D contracts must
submit a separate application for each type. (PACE sponsors will also have separate
solicitations). For example, a MA-PD and PDP product may not be represented in the
same application. Entities intending to have both local MA-PD and Regional PPO
contracts must submit separate MA-PD applications.

16

2.4.2 Applicant Seeking to Offer New Employer/Union-Only Group Waiver
Plans (EGWPs)
All new PDP Sponsor Applicants seeking to offer new ―800 series‖ EGWPs – with or
without corresponding individual plans, including applicants that have not previously
applied to offer plans to individual beneficiaries or ―800 series‖ EGWPs must complete
the appropriate EGWP attestation provided in Appendix I. The Appendix provides the
Applicant with the ability to choose between only offering ―800 series‖ plans and
participating in both the individual and group markets. The attestation provided in
Appendix I specifies those individual market requirements that are not applicable in the
employer market.

2.4.2.1PDP EGWP Service Area
New PDP Sponsor Applicants and existing PDP Sponsors will be able to enter their
EGWP service areas directly into HPMS during the application process (refer to HPMS
User Guide). PDP Sponsor Applicants may provide coverage to employer group
members wherever they reside (i.e., nationwide). However, in order to provide
coverage to retirees wherever they reside, PDP Applicants must set their service area
to include all areas where retirees reside during the plan year (i.e., set national service
areas).

2.4.2.2New PDP Sponsors Offering Individual and ―800 Series‖ Plans
– Pharmacy Access
PDP Sponsors offering both individual and ―800 series‖ plans are not required to submit
separate pharmacy access lists (retail, mail order, home infusion, long-term care, I/T/U)
for their ―800 series‖ service areas in addition to those required to be submitted for their
individual plan service areas. PDP sponsors will not initially be required to have retail
and other pharmacy networks in place for those designated EGWP service areas
outside of their individual plan service areas. However, in accordance with employer
group waiver pharmacy access policy, pharmacy access sufficient to meet the needs of
enrollees must be in place once the PDP Sponsor enrolls members of an employer or
union group residing in particular geographic locations outside of its individual plan
service area.

2.4.2.3New PDP Sponsors Only Offering ―800 Series‖ Plans –
Pharmacy Access
PDP sponsors that intend to only offer ―800 series‖ plans (i.e., no plans will be offered to
individual Medicare beneficiaries under this contract number) will be required to submit
retail and other pharmacy access information (mail order, home infusion, long-term
care, I/T/U) for the entire defined EGWP service area during the application process
and demonstrate sufficient access in these areas in accordance with employer group
waiver pharmacy access policy.

17

2.4.3 Applicant Seeking to Offer New Employer/Union Direct Contract PDPs
New Direct Contract PDP Applicants will be able to enter their service area directly into
HPMS during the application process.
In general, Part D sponsors can only cover beneficiaries in the service areas in which
they are licensed and approved by CMS to offer benefits. CMS has waived these
requirements for Direct Contract PDP Sponsors. Direct Contract PDP Sponsors can
extend coverage to all of their retirees, regardless of whether they reside in one or more
PDP regions in the nation. In order to provide coverage to retirees wherever they
reside, Direct Contract PDP Applicants must set their service areas to include all areas
where retirees may reside during the plan year.
Direct Contract PDP applicants are required to submit retail and other pharmacy access
information for the entire defined service area during the application process and
demonstrate sufficient access in these areas in accordance with employer group waiver
pharmacy access policy.
Those employers or unions seeking to directly contract with CMS to become PDP
Sponsors for their Medicare-eligible retirees must complete the following materials:
The 2013 Solicitation for Applications for New Prescription Drug Plan Sponsors
Appendix III-- 2013 Part D Financial Solvency & Capital Adequacy
Documentation for Direct Contract PDP Sponsor Applicants
Appendix II—2013 Direct Contract PDP Attestation

2.4.4

Applicant Entity Same as Contracting Entity

The legal entity that submits this application must be the same entity with which CMS
enters into a Part D contract, or in the case of an MA-PD and Cost Plan sponsor, the
same legal entity seeking an addendum to an MA or Cost Plan contract. An entity that
qualifies for a Part D contract, or for an addendum to an MA or Cost Plan contract, may
hold multiple contracts for the same plan type (e.g. PDP, MA-PD, or Cost Plan) in the
service area described in the application.

2.4.5

Joint Enterprise as Applicant and Contracting Entity

CMS will recognize as Applicants those joint enterprises formed by agreement among
multiple state-licensed organizations (or organizations that have applied to CMS for a
licensure waiver) for the purpose of administering a Medicare Prescription Drug Plan in
at least one entire PDP region. Each member of the joint enterprise will be contractually
liable to CMS for the administration of the Part D benefit in the State(s) in which it is
licensed or for which it has received a CMS licensure waiver.
The joint enterprise need submit only one application on behalf of the enterprise‘s
member organizations and such application shall represent the joint enterprise‘s
commitment to offering a uniform benefit in each PDP region in which it will offer Part D
benefits. However, the information requested in Section 3.1 of this solicitation must be
provided for each member of the joint enterprise with separate accompanying
Appendices as necessary. For example, each joint enterprise member must provide

18

identifying information about its organization, copies of its executed contracts with
entities performing critical tasks related to the delivery of the Part D benefit, and
information related to its business integrity. The responses provided in the remainder of
the application may be made once by the joint enterprise applicant and will be
considered binding on each member of the joint enterprise. Also, a separate
certification statement, shown in Section 4.0, must be provided for each joint enterprise
member organization. Each certification statement must be signed by an individual
specifically granted the authority to bind the member organization.
Joint enterprise applicants are required to submit to CMS for approval a copy of the
executed agreement among the joint enterprise member organizations. Please see
Section 3.1.2.G, for instructions concerning this requirement.
Upon CMS‘ determination that the members of the joint enterprise are qualified to enter
into a Part D contract and approval of the bid(s) submitted by the joint enterprise, CMS
will enter into a multiple-party contract signed by authorized representatives of CMS and
each member of the joint enterprise.

2.4.6

Automatic Enrollment of Full-benefit Dual Eligible Individuals

As provided for in 42 CFR §423.34(d), individuals who are dually eligible for Medicare
and full Medicaid benefits, and who fail to enroll in a Part D plan, will be enrolled
automatically in a plan with a beneficiary premium that does not exceed the low-income
premium subsidy amount or has waived the de minimis amount above the low-income
benchmark premium amount. If there is more than one PDP with a premium that meets
this description, CMS will enroll the beneficiaries in those PDPs, on a random basis.
For this purpose, CMS will count the Applicant and its parent and affiliates as a single
PDP, regardless of how many of those entities have bids that are at or below the low
income subsidy threshold.
Applicants eligible to receive auto-enrolled and reassigned beneficiaries as a result of
the price of their approved bid(s) may expect a readiness audit from CMS. These
audits are conducted to verify that all systems and processes are in place to ensure the
Applicant is prepared to receive enrollments. In those instances where an Applicant fails
to pass the readiness audit, CMS will not allow auto-enrollments or reassignments to
occur until such time as CMS is satisfied that all systems and processes are properly in
place.

2.4.7 Withdrawal of a Part D Application
In those instances where an organization seeks to withdraw its application or reduce the
service area of a pending application prior to the execution of a Part D contract, then the
organization must send an official notice to CMS. The notice should be on organization
letterhead and clearly identify the pending application number and service area (as
appropriate). The notice should be delivered via email to [email protected]
and the subject line of the email should read ―Pending application withdrawal or
reduction to pending service area.‖ The withdrawal will be considered effective as of
the date of the email.

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2.4.8

Technical Assistance

For technical assistance in the completion of this Application, contact:
Linda Anders by email at [email protected], or by phone at 410-786-0459.
As stated in section 2.4.1, Applicants must contact the HPMS Help Desk if they are
experiencing technical difficulties uploading or completing any part of this solicitation
within HPMS prior to the submission deadline. Applicants requesting technical
assistance with uploading or completing any part of the online HPMS application after
the published CMS application deadline will not be granted technical assistance, nor the
opportunity to complete their application submission.

2.5 Submission Software Training
Applicants use the CMS Health Plan Management System (HPMS) during the
application, formulary, and bid processes. Applicants are required to enter contact and
other information collected in HPMS in order to facilitate the application review process.
Applicants are required to upload their plan formularies to HPMS using a pre-defined file
format and record layout. The formulary upload functionality will be available on March
23, 2012. The deadline for formulary submission to CMS is 11:59 PM EDT on April 16,
2012. CMS will use the last successful upload received for an Applicant as the official
formulary submission.
In order to prepare plan bids, Applicants will use HPMS to define their plan structures
and associated plan service areas and then download the Plan Benefit Package (PBP)
and Bid Pricing Tool (BPT) software. For each plan being offered, Applicants will use
the PBP software to describe the detailed structure of their Part D benefit and the BPT
software to define their bid pricing information. The formulary must accurately
crosswalk to the PBP.
Once the PBP and BPT software has been completed for each plan being offered,
Applicants will upload their bids to HPMS. Applicants will be able to submit bid uploads
to HPMS on their PBP or BPT one or more times between May 11, 2012 and the CY
2013 bid deadline of June 4, 2012. CMS will use the last successful upload received
for a plan as the official bid submission.
CMS will provide technical instructions and guidance upon release of the HPMS
formulary and bid functionality as well as the PBP and BPT software. In addition,
systems training will be available at the Bid Training in April 2012.

2.6 System Access and Data Transmissions with CMS
2.6.1 HPMS
Part D sponsor organizations will use HPMS to communicate with CMS in support of the
application process, formulary submission process, bid submission process, ongoing
operations of the Part D program, and reporting and oversight activities. Part D
applicants are required to secure access to HPMS in order to carry out these functions.

20

2.6.2 Enrollment and Payment
All Part D sponsors must submit information about their membership to CMS
electronically and have the capability to download files or receive electronic information
directly. Prior to the approval of your contract, Part D sponsors must contact the MAPD
Help Desk at 1-800-927-8069 for specific guidance on establishing connectivity and the
electronic submission of files. Instructions are also on the MAPD Help Desk web page,
www.cms.gov/mapdhelpdesk, in the Plan Reference Guide for CMS Part C/D systems
link. The MAPD Help Desk is the primary contact for all issues related to the physical
submission of transaction files to CMS.
Daily CMS provides responses to Sponsor submitted information and reports to each
Part D sponsor for each of their plans with member and plan-level information. Part D
sponsors must compare the membership and payment information in those reports on
an ongoing basis with their records and report any discrepancies to CMS according to
the instructions and within the timeframes provided by CMS for that purpose. Each Part
D Sponsor must complete and submit the monthly CEO certification of enrollment data
for payment on or before the due date each month. The due date is provided in the
Plan Monthly MARx Calendar, which is updated annually. Definitive information about
the format and submission of files, as well as the MARx calendar, can be found in the
Plan Communications User‘s Guide (available at
http://www.cms.gov/MAPDHelpDesk/02_Plan_Communications_User_Guide.asp#TopO
fPage). The MAPD Help Desk also provides additional system and technical
information at www.cms.gov/mapdhelpdesk/.

2.6.3 Payment – Part D Sponsors
Payments will be wired to sponsor accounts on the first day of each month (or the last
business day of the prior month if the first day of the month is not a business day).
CMS must receive current banking information at a minimum of 6 weeks prior to the first
payment to your organization. The specific banking information form and instructions
may be obtained from the CMS Central Office contacts listed in Appendix B of the Plan
Communication User‘s Guide found at www.cms.gov/MAPDHelpDesk.
The monthly payment includes premiums that SSA or other agencies are deducting
from beneficiary Social Security payments or other payments as well as those
premiums CMS is paying on behalf of low-income individuals. Estimated monthly
reinsurance subsidies, low-income subsidies, and estimated gap discount amounts are
also included.

2.7 Summary Instruction and Format for Individual Market Bids
Each Part D Applicant must submit to CMS a bid for each prescription drug plan it
intends to offer. Applicants using this solicitation may apply to offer full or limited risk
plans. CMS reviews bids for limited risk plans only in those regions where there are not
at least two prescription drug plans, one of them being a PDP plan. Note, that only PDP
sponsor Applicants and not MA organizations may submit a bid to be limited risk.
Furthermore, in the event a PDP region does not have two prescription drug plans,
CMS will approve at a maximum two partial risk plans. (Please note that Applicants that

21

indicate in their applications that they intend to offer limited risk plans are not precluded
from later submitting full risk bids, but a PDP sponsor Applicant that does submit a
limited risk bid must apply the same limitation of risk to all PDPs offered by the sponsor
in the PDP region). Where there are not at least two plans offering qualified prescription
drug coverage, one of them being a PDP plan, CMS will contract with entities to offer
fallback plans. Applicants must submit their formularies to HPMS on or before April 16,
2012 and the PBPs and BPTs on or before the bid submission date.

2.7.1 Format of Bids
Bid-Related Sections Due Prior to Bid Submission Date
To facilitate the timely review of all the bid submissions, CMS requires Applicants to
submit the portion of their bid related to formulary and covered drugs from March 23April 16, 2012. CMS reviews areas of each proposed drug plan formulary by tier and
drug availability and evaluates each element against evidence-based standards such as
widely accepted treatment guidelines. Elements include, but may not be limited to the
list of drugs, the categories and classes, tier structures (not cost sharing), and utilization
management tools such as quantity limits, step therapy, and prior authorization. CMS
makes the review criteria available to Applicants well in advance of the date Applicants
must submit this information to CMS. Outliers are selected for further evaluation during
the formulary review process prior to CMS approval of the bid. CMS makes reasonable
efforts to inform Applicants of their outliers so that they may substantiate their offering.
If such substantiation is not satisfactory to CMS, the Applicant is given the opportunity
to modify the formulary. CMS intends to complete as much of this work as possible
before the PBP and BPT submissions so that any modification may be reflected in those
documents.
Bid Submissions
The Applicant‘s bid represents the expected monthly cost to be incurred by the
Applicant to provide qualified prescription drug coverage in the approved service area
for a Part D-eligible beneficiary on a standardized basis. The costs represented in each
bid should be those for which the Applicant would be responsible. These costs would
not include payments made by the plan enrollee for deductible, coinsurance, copayments, or payments for the difference between the plan‘s allowance and an out-ofnetwork pharmacy‘s usual and customary charge. The bid requires the separate
identification, calculation, and reporting of costs assumed to be reimbursed by CMS
through reinsurance. CMS requires that the bid represent a uniform benefit package
based upon a uniform level of premium and cost sharing among all beneficiaries
enrolled in the plan. The benefit packages submitted must be cross walked
appropriately from the formulary. Pursuant to 42 CFR §423.505(k)(4), the CEO, CFO,
or a designee with the authority to sign on behalf of one of these officers, and who
reports directly to such officer, must certify (based on best knowledge, information and
belief) that the information in the bid submission, and assumptions related to projected
reinsurance and low-income cost sharing subsidies, is accurate, complete, and truthful,
and fully conforms to the requirements in 42 CFR §423.265. In addition, consistent with
42 CFR §423.265(c)(3), the pricing component of the bid must also be certified by a
qualified actuary.

22

As part of its review of Part D bids, CMS conducts an analysis to ensure that multiple
plan offerings by a sponsor represent meaningful variations based on plan
characteristics that will provide beneficiaries with substantially different options.
Pursuant to section 42 CFR §423.265(b), multiple bid submissions must reflect
differences in benefit packages or plan costs that CMS determines represent substantial
differences relative to a sponsor‘s other bid submissions. In order to be considered
―substantially different,‖ each bid must be significantly different from the sponsor‘s other
bids with respect to beneficiary out-of-pocket costs or formulary structures. Applicants
should review the CMS guidance on the submission of bids that are meaningfully
different released on April 16, 2010.

2.7.2 CMS Review of Bids
CMS evaluates the bids based on four broad areas: 1) administrative costs, 2)
aggregate costs, 3) benefit structure, and 4) plan management. CMS evaluates the
administrative costs for reasonableness in comparison to other bidders. CMS also
examines aggregate costs to determine whether the revenue requirements for qualified
prescription drug coverage are reasonable and equitable. In addition, CMS reviews the
steps the Part D sponsor is taking to control costs, such as through various programs
that encourage use of generic drugs. Finally, CMS examines indicators concerning plan
management, such as customer service.
CMS is also required to make certain that bids and plan designs meet statutory and
regulatory requirements. We conduct actuarial analysis to determine whether the
proposed benefit meets the standard of providing qualified prescription drug coverage.
Also, CMS reviews the structure of the premiums, deductibles, co-payments, and
coinsurance charged to beneficiaries and other features of the benefit plan design to
ensure that it is not discriminatory (that is, that it does not substantially discourage
enrollment by certain Part D eligible individuals).

2.7.3 Overview of Bid Negotiation
CMS evaluates the reasonableness of bids submitted by Part D sponsors by means of
an actuarial valuation analysis. This requires evaluating assumptions regarding the
expected distribution of costs, including average utilization and cost by drug coverage
tier. CMS may test these assumptions for reasonableness through actuarial analysis
and comparison to industry standards and other comparable bids. Bid negotiation may
take the form of negotiating changes upward or downward in the utilization and cost per
script assumptions underlying the bid‘s actuarial basis. We may exercise our authority
to deny a bid if we do not believe that the bid and its underlying drug prices reflect
market rates.

2.8 Pharmacy Access
An integral component of this Solicitation concerns the pharmacy access standards
established under section 1860D-4(b)(1)(C) of the Social Security Act. The standards
require in part that each Part D sponsor must secure the participation in their pharmacy
networks of a sufficient number of pharmacies to dispense drugs directly to patients
(other than by mail order) to ensure convenient access to covered Part D drugs by Part

23

D plan enrollees. To implement this requirement, specific retail pharmacy access rules
consistent with the standards delineated in 42 CFR §423.120. Furthermore, Part D
sponsors must provide adequate access to home infusion and convenient access to
long-term care, and Indian Health Service, Indian Tribe and Tribal Organization, and
Urban Indian Organization (I/T/U) pharmacies in accordance with 42 CFR § 423.120
and related CMS instructions and guidance.

2.8.1 Retail Pharmacy Access
Applicants must ensure that their retail pharmacy network meets the criteria established
under 42 CFR §423.120. Applicants must ensure the pharmacy network has a
sufficient number of pharmacies that dispense drugs directly to patients (other than by
mail order) to ensure convenient access to Part D drugs. CMS rules require that
Applicants establish retail pharmacy networks in which:
In urban areas, at least 90 percent of Medicare beneficiaries in the Applicant‘s
service area, on average, live within 2 miles of a retail pharmacy participating in the
Applicant‘s network;
In suburban areas, at least 90 percent of Medicare beneficiaries in the Applicant‘s
service area, on average, live within 5 miles of a retail pharmacy participating in the
Applicant‘s network; and
In rural areas, at least 70 percent of Medicare beneficiaries in the Applicant‘s service
area, on average, live within 15 miles of a retail pharmacy participating in the
Applicant‘s network.
Applicants may count I/T/U pharmacies and pharmacies operated by Federally
Qualified Health Centers and Rural Health Centers towards the standards of
convenient access to retail pharmacy networks.
Applicants may use their contracted PBM‘s existing 2012 Part D network to
demonstrate compliance with retail pharmacy access standards. If an Applicant is
creating a new Part D network, the submission must be based on executed contracts for
Year 2013. CMS conducts the review of Retail Pharmacy Access based on the service
area that the Applicant has provided in HPMS by February 21, 2012. In an effort to
reduce Applicant errors, CMS has automated the retail pharmacy access review.
Applicants are required to input their pending service area into HPMS per the
instructions at section 3.3, and as explained in section 3.4.1B Applicants must upload
the retail pharmacy list in HPMS. Based on the pending service area documented in
HPMS, the retail pharmacy list uploaded by the Applicant, and the Medicare Beneficiary
Count file available on the CMS application guidance website, CMS will generate
access percentages for all applicants. (In prior years, applicants provided their georeports as part of the pharmacy uploads.) In addition, CMS will use the information
gathered from the pharmacy list upload to identify pharmacy addresses.
With limited exceptions, this information gathered from the pharmacy lists will be used
by CMS to geo-code the specific street-level locations of the pharmacies to precisely
determine retail pharmacy access. Exceptions to this process may include, but not be
limited to, those instances where a street-level address cannot be precisely geo-coded.

24

In those situations, CMS will utilize the ZIP code-level address information to geo-code
the approximate pharmacy location.
In previous years CMS allowed Part D applicants to use one of several geo-coding
methodologies: representative ZIP code geo-coding, or the more precise geo-coding
methods including ZIP+4 Centroid Method, ZIP+@ Centroid Method, referred to as
address-based geo-coding. As a result, some organizations may previously have
coded all pharmacy addresses at the ZIP code/county level as opposed to the more
precise street-level coding. CMS strongly encourages applicants conduct a closer and
more precise inspection of their retail pharmacy locations and network access prior to
submitting their pharmacy list.
The retail pharmacy lists may contain contracted pharmacies that are outside of the
Applicant‘s pending service area (to account for applicants who contract for a national
pharmacy network); however, CMS will only evaluate retail pharmacy access for the
pending service area.
The retail pharmacy access calculations must meet the established standards at one of
the following points in time:
At the HPMS gate closing time of the initial application submission (a fully passing
retail access review at this point in the application process will not require a
subsequent review even if the service area is later reduced), or
At the HPMS gate closing time of the courtesy submission window after CMS has
issued an interim deficiency notice, if the initial application retail submission is found
to contain retail access related deficiencies of any type (a fully passing retail access
review at this point in the application process will not require a subsequent review
even if the service area is later reduced), or
At the HPMS gate closing time of the final submission window after CMS has issued
a Notice of Intent to Deny (see Section 2.4), if the courtesy retail submission is found
to contain retail access related deficiencies of any type.
While Applicants are required to demonstrate that they meet the Part D pharmacy
access requirements at the time this application is submitted to CMS, CMS expects that
pharmacy network contracting will be ongoing in order to maintain compliance with our
retail pharmacy access requirements.

2.8.2 Home Infusion Pharmacy Access
Applicants must demonstrate that their contracted pharmacy network provides adequate
access to home infusion pharmacies. In order to demonstrate adequate access to home
infusion pharmacies, Applicants must provide a list of all contracted home infusion
pharmacies (see section 3.4.4). CMS uses this pharmacy listing to compare Applicants‘
home infusion pharmacy network against existing Part D sponsors in the same service
area to ensure that Applicants have contracted with an adequate number of home
infusion pharmacies. The adequate number of home infusion pharmacies is developed
based on data provided by all Part D sponsors through the annual Part D Reporting
Requirements. A reference file entitled ―Adequate Access to Home Infusion
Pharmacies‖ is provided on the CMS website.

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2.8.3 Long-Term Care Pharmacy Access
Applicants must demonstrate that their contracted pharmacy network provides
convenient access to long-term care pharmacies. In order to demonstrate convenient
access to long-term care pharmacies, Applicants must provide a list of all contracted
long-term care pharmacies (see section 3.4.5). CMS uses this pharmacy listing, as well
as information reported as part of Applicants‘ reporting requirements and complaints
data, to evaluate initial and ongoing compliance with the convenient access standard.

2.8.4 Indian Tribe and Tribal Organization, and Urban Indian Organization
(I/T/U)
Applicants must demonstrate that they have offered standard contracts to all I/T/U
pharmacies residing within the Applicants‘ service areas. In order to demonstrate
convenient access to I/T/U pharmacies, Applicants must provide a list of all I/T/U
pharmacies to which they have offered contracts (see section 3.4.6). CMS provides the
current national list of all I/T/U pharmacies to assist Applicants in identifying the states
in which I/T/U pharmacies reside at the www.cms.gov/PrescriptionDrugCovContra/
website.

2.8.5 Waivers Related to Pharmacy Access
Waivers for Plans in the Territories (excluding Puerto Rico). To ensure access to
coverage in the territories, §1860D-42(a) of the Social Security Act grants CMS the
authority to waive the necessary requirements to secure access to qualified prescription
drug coverage for Part D eligible individuals residing in the territories. The regulations
at 42 CFR §423.859(c) allow CMS to waive or modify the requirement for access to
coverage in the territories either at an Applicant‘s request or at CMS‘ own
determination. Under that authority, CMS will consider waiving the convenient access
requirements for a plan‘s Part D contracted retail pharmacy network, found in 42 CFR
§423.120(a)(1) for the Territories, if an Applicant requests such a waiver, and
demonstrates that it has made a good faith effort to meet the requirements described in
Section 3.4.1E of this solicitation.

2.9 Waivers Related to Attestations for PDP EGWP and PDP Direct
Contract Applicants
As a part of the application process, those organizations seeking to offer 800 series
plans may submit individual waiver/modification requests to CMS. Applicants should
submit an attachment via an upload in the HPMS Part D Attestations section that
addresses the following:
Specific provisions of existing statutory, regulatory, and/or CMS policy
requirement(s) the entity is requesting to be waived or modified (please identify the
specific requirement (e.g., 42 CFR §423.32, Section 30.4 of the Part D Enrollment
Manual) and whether you are requesting a waiver or a modification of these
requirements);

26

How the particular requirement(s) hinder the design of, the offering of, or the
enrollment in, the employer-sponsored group plan;
Detailed description of the waiver/modification requested including how the
waiver/modification will remedy the impediment (i.e., hindrance) to the design of, the
offering of, or the enrollment in, the employer-sponsored group prescription drug
plan;
Other details specific to the particular waiver/modification that would assist CMS in
the evaluation of the request; and
Contact information (contract number, name, position, phone, fax and email
address) of the person who is available to answer inquiries about the
waiver/modification request.
Note: Applicants should review the waivers currently approved by CMS in Chapter 12
of the Medicare Prescription Drug Benefit manual to assess whether the sponsoring
organization is similarly situated to qualify for an existing waiver prior to submitting a
request to CMS.

2.10 Standard Contract with PDP Sponsors
Successful Applicants will be deemed qualified to enter into a Part D contract with CMS
to operate one or more Medicare prescription drug plans after CMS has reviewed the
Applicant‘s entire submission. Only after the qualified Applicant and CMS have reached
agreement on the Applicant‘s bid submissions will the Applicant be asked to execute its
Part D contract. Approved Part D applications are valid for the forthcoming contract
year. Should an applicant decide to not execute a contract after receiving application
approval, then the organization will need to submit a new application if it chooses to
enter the Part D market in a future contract year.

2.11 Protection of Confidential Information
Applicants may seek to protect their information from disclosure under the Freedom of
Information Act (FOIA) by claiming that FOIA Exemption 4 applies. The Applicant is
required to label the information in question ―confidential‖ or ―proprietary‖, and explain
the applicability of the FOIA exemption it is claiming. This designation must be in
writing. When there is a request for information that is designated by the Applicant as
confidential or that could reasonably be considered exempt under Exemption 4, CMS is
required by its FOIA regulation at 45 CFR §5.65(d) and by Executive Order 12,600 to
give the submitter notice before the information is disclosed. To decide whether the
Applicant‘s information is protected by Exemption 4, CMS must determine whether the
Applicant has shown that— (1) disclosure of the information might impair the
government's ability to obtain necessary information in the future; (2) disclosure of the
information would cause substantial harm to the competitive position of the submitter;
(3) disclosure would impair other government interests, such as program effectiveness
and compliance; or (4) disclosure would impair other private interests, such as an
interest in controlling availability of intrinsically valuable records, which are sold in the
market. Consistent with our approach under the Medicare Advantage program, we

27

would not release information under the Medicare Part D program that would be
considered proprietary in nature.

28

3 APPLICATION
Note: Nothing in this application is intended to supersede the regulations at 42 CFR
Part 423. Failure to reference a regulatory requirement in this application does not
affect the applicability of such requirement, and PDP sponsors and/or Applicants are
required to comply with all applicable requirements of the regulations in Part 423 of 42
CFR. In particular, the attestations in this application are intended to highlight examples
of key requirements across a variety of functional and operational areas, but are in no
way intended to reflect a complete or thorough description of all Part D requirements.
For most of the Part D program requirements described in this solicitation, CMS has
issued operational policy guidance that provides more detailed instructions to Part D
sponsors. Organizations submitting an application in response to this solicitation
acknowledge that in making the attestations stated below, they are also representing to
CMS that they have reviewed the associated guidance materials posted on the CMS
web site and are in compliance with such guidance. Applicants must visit the CMS web
site periodically to stay informed about new or revised guidance documents.
NOTE: All uploads and templates will be accessed in HPMS through the HPMS
Contract Management Module. Applicants should refer to the Contract Management –
Online Application User‘s Guide Version 2.0 for further instructions.

3.1 Applicant Experience, Contracts, Licensure and Financial
Stability
SPECIAL INSTRUCTIONS FOR JOINT ENTERPRISE APPLICANTS: If an application
is being submitted by a joint enterprise, as described above in Section 2.4, a separate
set of responses to the requirements in Section 3.1 must be provided as part of this
application by each member organization of the joint enterprise.

3.1.1 Management and Operations 42 CFR Part 423 Subpart K; CMS issued
guidance 08/15/06 and 08/26/08
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ or, if permitted, ―NA‖, to each of
the following qualifications to be approved for a Part D
contract. Attest ‗yes‘ or ‗no‘ to each of the following
qualifications by clicking on the appropriate response in
HPMS:
1. Applicant is a non-governmental legal entity that intends to
enter into a Medicare Prescription Drug Plan contract with CMS.
2. Applicant does not have any other related entities offering a
Prescription Drug Plan.

29

Yes

No

NA

3. If Applicant, Applicant‘s parent organization, or any subsidiaries
of Applicant‘s parent organization has an existing contract(s)
with CMS to operate a Prescription Drug Plan(s), at least one of
those contracts has been in effect since January 1, 2011 or
earlier.
4. Applicant abides by all applicable Federal laws, regulations and
CMS instructions.
5. Applicant has administrative and management arrangements
that feature a policy-making body (e.g., board of directors)
exercising oversight and control over the PDP sponsor‘s
policies and personnel (e.g., human resources) to ensure that
management actions are in the best interest of the organization
and its enrollees.
6. Applicant has administrative and management arrangements
that feature personnel and systems sufficient for the Part D
sponsor to organize, implement, control and evaluate financial
and marketing activities, the furnishing of prescription drug
services, the quality assurance, medication therapy
management, and drug and drug utilization management
programs, and the administrative aspects of the organization.
7. Applicant has administrative and management arrangements
that feature an executive manager whose appointment and
removal are under the control of the policy-making body.
8. Applicant has administrative and management arrangements
that feature a fidelity bond or bonds, procured by the Applicant,
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.
9. Applicant has administrative and management arrangements
that feature insurance policies secured and maintained by the
Applicant, and approved by CMS to insure the Applicant against
losses arising from professional liability claims, fire, theft, fraud,
embezzlement, and other casualty risks.
10. Applicant maintains contracts or other legal arrangements
between or among the entities combined to meet the functions
identified in subsection 3.1.1C.

30

11. Applicant does not have any covered persons who also served
as covered persons for an entity that nonrenewed a contract
pursuant to 42 CFR §423.507(a), or that terminated its contract
with CMS by mutual consent, pursuant to 42 CFR §423.508, or
unilaterally, pursuant to 42 CFR §423.510, since June 6, 2011.
―Covered persons‖, as defined at 42 CFR §§ 423.507(a)(4),
423.508(f), 423.510(e)(2), include:
All owners of nonrenewed or terminated organizations who are
natural persons, other than shareholders who have an
ownership interest of less than 5 percent;
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 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; and
A member of the board of directors or board of trustees of the
entity, if the organization is organized as a corporation.
B. Upload in HPMS, organizational background and structure information.
Submit this information by downloading the appropriate template found in HPMS
that mimics the Appendix entitled, Organization Background and Structure. Also
upload into HPMS proof of your organization‘s incorporation, such as articles of
incorporation or a certificate of good standing from your state of incorporation.
C. First tier, Downstream and Related entities Function Chart
In HPMS, on the
Contract &
Management/Part
D Information/Part
D Data Page,
provide names of
the first tier,
downstream and
related entities you
will use to carry out

Function

First tier,
Downstream and
Related entities

A pharmacy benefit
program that performs
adjudication and
processing of pharmacy
claims at the point of
sale.

31

Off-Shore
yes/no

each of the
functions listed in
this chart and
whether the first
tier, downstream
and related entities
are off-shore:
(Indicate with
―name of
Applicant‘s
Organization‖
where applicant will
perform those
functions)

A pharmacy benefit
program that performs
negotiation with
prescription drug
manufacturers and
others for rebates,
discounts, or other price
concessions on
prescription drugs.
A pharmacy benefit
program that performs
administration and
tracking of enrollees‘
drug benefits in real
time, including TrOOP
balance processing.
A pharmacy benefit
program that performs
coordination with other
drug benefit programs,
including, for example,
Medicaid, state
pharmaceutical
assistance programs, or
other insurance.
A pharmacy benefit
program that develops
and maintains a
pharmacy network.
A pharmacy benefit
program that operates
an enrollee grievance
and appeals process
A pharmacy benefit
program that performs
customer service
functionality, that
includes serving seniors
and persons with a
disability.

32

A pharmacy benefit
program that performs
pharmacy technical
assistance service
functionality.
A pharmacy benefit
program that maintains a
pharmaceutical and
therapeutic committee.
A pharmacy benefit
program that performs
enrollment processing.
D. In HPMS, upload copies of executed contracts, fully executed letters of
agreement, administrative services agreements, or intercompany agreements (in
.pdf format) with each first tier, downstream or related entity identified in Sections
3.1.1 C and with any first tier, downstream, or related entity that contracts with
any of the identified entities on the applicant‘s behalf. All contracts must:
1. Clearly identify the parties to the contract (or letter of agreement). If the applicant is
not a direct party to the contract (e.g., if one of the contracting entities is entering
into the contract on the applicant‘s behalf), the applicant must be identified as an
entity that will benefit from the services described in the contract.
2. Describe the functions to be performed by the first tier, downstream or related entity,
and the reporting requirements the first tier, downstream, or related entity has to the
Applicant. 42 CFR §423.505(i)(4)(i)
3. Contain language clearly indicating that the first tier, downstream, or related entity
has agreed to participate in your Medicare Prescription Drug Benefit program
(except for a network pharmacy if the existing contract would allow participation in
this program).
4. Contain flow-down clauses requiring that their activities be consistent and comply
with the Applicant‘s contractual obligations as a Part D sponsor. 42 CFR
§423.505(i)(3)(iii)
5. Describe the payment the first tier, downstream, or related entity will receive for
performance under the contract, if applicable.
6. Clearly indicate that the contract is for a term of at least the initial one-year contract
period (i.e., January 1 through December 31) for which this application is being
submitted. Where the contract is for services or products to be used in preparation
for the next contract year‘s Part D operations (e.g., marketing, enrollment), the initial
term of such contract must include this period of performance (e.g., contracts for
enrollment-related services must have a term beginning no later than October 15
extending through the full contract year ending on December 31 of the next year).

33

7. Be signed by a representative of each party with legal authority to bind the entity.
8. Contain language obligating the first tier, downstream, or related entity to abide by
all applicable Federal laws and regulations and CMS instructions. 42 CFR
§423.505(i)(4)(iv)
9. Contain language obligating the first tier, downstream, or related entity to abide by
State and Federal privacy and security requirements, including the confidentiality
and security provisions stated in the regulations for this program at 42 CFR
§423.136.
10. Contain language ensuring that the first tier, downstream, or related entity will make
its books and other records available in accordance with 42 CFR §423.505(e)(2) and
42 CFR §423.505(i)(2). Generally stated these regulations give HHS, the
Comptroller General, or their designees the right to audit, evaluate and inspect any
books, contracts, records, including medical records and documentation involving
transactions related to CMS‘ contract with the Part D sponsor and that these rights
continue for a period of 10 years from the final date of the contract period or the date
of audit completion, whichever is later. 42 CFR §423.505(e)(2) and (i)(2)
11. Contain language that the first tier, downstream, or related entity will ensure that
beneficiaries are not held liable for fees that are the responsibility of the Part D
sponsor. 42 CFR §423.505(i)(3)(i)
12. Contain language that if the Applicant, upon becoming a Part D sponsor, delegates
an activity or responsibility to the first tier, downstream, or related entity, that such
activity or responsibility may be revoked if CMS or the Part D sponsor determines
the first tier, downstream, or related entity has not performed satisfactorily. Note:
The contract/administrative services agreement may include remedies in lieu of
revocation to address this requirement. 42 CFR § 423.505(i)(4)(ii)
13. Contain language specifying that the Applicant, upon becoming a Part D sponsor,
will monitor the performance of the first tier, downstream, or related entity on an
ongoing basis. 42 CFR §423.505(i)(4)(iii)
14. If the first tier, downstream, or related entity will establish the pharmacy network or
select pharmacies to be included in the network contain language that the Part D
sponsor retains the right to approve, suspend, or terminate any arrangement with a
pharmacy. 42 CFR §423.505(i)(5)
15. If the first tier, downstream, or related entity will establish the pharmacy network or
select pharmacies to be included in the network contain language that payment to
such pharmacies (excluding long-term care and mail order) shall be issued, mailed,
or otherwise transmitted with respect to all clean claims submitted by or on behalf of
pharmacies within 14 days for electronic claims and within 30 days for claims
submitted otherwise. 42 CFR §§423.505(i)(3)(vi) and 423.520
16. If the first tier, downstream, or related entity will establish the pharmacy network or
select pharmacies to be included in the network contain language that if a
prescription drug pricing standard is used for reimbursement, identify the source
used by the Part D sponsor for the standard of reimbursement. 42 CFR
§§423.505(b)(21) and 423.505(i)(3)(viii)(B)
34

17. If the first tier, downstream, or related entity will establish the pharmacy network or
select pharmacies to be included in the network and a prescription drug pricing
standard is used for reimbursement, contain a provision that updates to such a
prescription drug pricing standard occur not less frequently than once every 7 days
beginning with an initial update on January 1 of each year, to accurately reflect the
market price of acquiring the drug. 42 CFR §423.505(b)(21) and (i)(3)(viii)(A)
18. If the first tier, downstream, or related entity will establish the pharmacy network or
select pharmacies to be included in the network contain language requiring the
network pharmacies to submit claims to the Part D sponsor or first tier, downstream
or related entity whenever the membership ID card is presented or on file at the
pharmacy unless the enrollee expressly requests that a particular claim not be
submitted. 42 CFR § 423.120(c)(3)
19. If the first tier, downstream, or related entity will adjudicate and process claims at the
point of sale and/or negotiate with prescription drug manufacturers and others for
rebates, discounts, or other price concessions on prescription drugs contain
language that the first tier, downstream, or related entity will comply with the
reporting requirements established in Section 6005 of the Affordable Care Act.
Each complete contract must meet all of the above requirements when read on its own.
E. Upload in HPMS electronic lists of the contract/administrative service
agreement/intercompany agreement citations demonstrating that the
requirements of Section 3.1.D are included in each contract and administrative
service agreement. Submit these data by downloading the appropriate
spreadsheet found in HPMS that mimics the Appendix entitled, Crosswalk of
Citations of Section 3.1.1D to location in contracts/administrative service
agreements/intercompany agreements submitted as attachments to Section 3.1.1.
If the Applicant fails to upload crosswalks for executed agreements and contract
templates, CMS cannot guarantee that the Applicant will receive notice of any
deficiencies in the contracting documents as part of this courtesy review.
F. In HPMS, complete the table below:
Attest ‗yes‘ or ‗no‘ to the following qualification by clicking on
the appropriate response in HPMS:

Yes

No

1. Applicant is applying to operate as a Part D sponsor through a
joint enterprise agreement.
G. Special Requirement for Joint Enterprise Applicants: If Applicant answered
3.1.1F1 (table above) as YES, then Joint Enterprise Applicants must upload (in
.pdf format) a copy of the agreement executed by the State-licensed entities
describing their rights and responsibilities to each other and to CMS in the
operation of a Medicare Part D benefit plan. Such an agreement must address at
least the following issues:

35

Termination of participation in the joint enterprise by one or more of the member
organizations; and
Allocation of CMS payments among the member organizations.

3.1.2 Licensure and Solvency 42 CFR Part 423, Subpart I; 2008 Call Letter;
CMS issued guidance 03/17/09
A. In HPMS, on the Contract Management/General Information/NAIC Data Page,
provide the National Association of Insurance Commissioners (NAIC) number if
currently licensed. _______
B. In HPMS, complete the table below:
Attest ‗Yes,‘ ‗No,‘ or ―Does Not Apply‖ to the
following licensure requirements.
1. Applicant is licensed under State law as a risk-bearing
entity eligible to offer health insurance or health
benefits coverage in each State in which the Applicant
proposes to offer Part D drug benefits.
If the answer to this attestation is ―YES,‖ then upload
in HPMS the documentation (e.g., licensing certificate
or letter), from each state licensing authority of your
organization‘s status as an entity entitled to bear risk.
If the answer to this attestation is ―NO‖ see Attestation
#2.
2. If the Applicant is not State licensed as a risk-bearing
entity eligible to offer health insurance or health
benefits coverage in each State in which the Applicant
proposes to offer Part D benefits, is the Applicant
licensed as a risk-bearing entity in at least one State?
If the answer to this attestation is ―YES,‖ then upload
in HPMS the documentation (e.g., licensing certificate
or letter), from each state licensing authority of your
organization‘s status as an entity entitled to bear risk.
If the answer to this attestation is ―NO,‖ the Applicant
must submit via HPMS the Appendix entitled Financial
Solvency Documentation.
3. Applicant maintains a fiscally sound operation by at
least maintaining a positive net worth, as required by
42 CFR §423.505(b)(23).
4. If the Applicant does not meet Requirement #1, then,
as part of this application, the Applicant has completed

36

Yes

No

Does Not
Apply

and provided to CMS via HPMS the Appendix entitled
Application to Request Federal Waiver of State
Licensure Requirement for Prescription Drug Plan
(PDP) for each State in which it is not licensed but
seeks to offer Part D drug benefits.
5. If Applicant is seeking a waiver of the licensure
requirement, the Applicant meets the CMS-published
financial solvency and capital adequacy requirements.
6. Applicant is currently under supervision, corrective
action plan or special monitoring by the State licensing
authority in any State.
If the answer to this attestation is ―Yes‖, upload in
HPMS an explanation of the specific actions taken by
the State license regulator. In these cases, CMS
reserves the right to require the Applicant to
demonstrate that it meets the CMS-published financial
solvency and capital adequacy requirements.

3.1.3 Program Integrity 2 CFR § 376 and Compliance Program 42 CFR §
423.504(b)(4)(vi); Prescription Drug Benefit Manual, Chapter 9
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ or ‗no‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗yes‘ or
‗no‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:

Yes

No

1. Applicant, applicant staff, and its affiliated companies, subsidiaries
or first tier, downstream and related entities, and staff of the first
tier, downstream and related entities agree that they are bound by
2 CFR Part 376 and attest that they are not excluded by the
Department of Health and Human Services Office of the Inspector
General or by the General Services Administration exclusion lists.
Please note that this includes any member of its board of directors,
and any key management or executive staff or any major
stockholder. Additionally, given Medicare payment may not be
made for items or services furnished by an excluded provider or
entity, applicant should follow the guidance provided in the January
13, 2010 HPMS memo entitled Claims for Drugs Prescribed or
Dispensed by Excluded Providers.
B. Provide as an upload via HPMS, in a .pdf format, a copy of your organization‘s
Medicare Part D Compliance Program that you intend to use for this contract.

37

The Part D compliance program must be in accordance with 42 CFR 423.504(b)(4)(vi).
The compliance program must explicitly include the name of the applicant. (The name
of a parent organization is insufficient.) The Part D compliance program must include
all 7 elements in the regulation and in Chapter 9 and are specific to the issues and
challenges presented by the Part D program. The compliance plan must explicitly state
that it encompasses Medicare Part D. A general compliance program applicable to
healthcare operations is not acceptable.
Please be advised that the Applicant is ultimately responsible for the implementation
and monitoring of the day-to-day operations of its Part D compliance program. 42 CFR
§ 423.504(b)(vi)(B)(1) and section 40.1 of Chapter 9 of the Prescription Drug Benefit
Manual indicates that the compliance officer and compliance committee functions may
not be delegated or subcontracted. This means that the Medicare Compliance Officer
identified in HPMS contacts (see section entitled HPMS Part D Contacts) must be an
employee of the Applicant, the Applicant‘s parent organization, or a corporate affiliate of
the Applicant. A compliance program adopted and operated by an Applicant‘s first tier,
downstream, and related entities is not sufficient to demonstrate that the Applicant
meets the compliance program requirement.
C. In HPMS, complete and upload the table in Appendix XV for the Compliance
Plan.

3.1.4 HPMS Part D Contacts CMS Guidance issued 08/16/06, 08/22/07,
11/30/07, 08/06/07, 03/17/09, 07/09/09, 08/04/09, and 01/25/10
A. In HPMS, in the Contract Management/Contact Information/Contact Data page
provide the name/title; mailing address; phone number; fax number; and email
address for the following required Applicant contacts:
Note: The same individual should not be identified for each of these contacts. If a
general phone number is given then CMS requires specific extensions for the individual
identified. Under no circumstances should these numbers merely lead to a company‘s
general automated phone response system. Further, Applicants must provide specific
email addresses for the individuals named.
Note: Contact definitions are provided in HPMS in the Contract Management/Contact
Information/Contact Data/Documentation link entitled Contact Definitions.
Contact

Name/Title

Mailing
Address (PO
Boxes may
not be used)

Corporate Mailing
CEO – Sr. Official for
Contracting
Chief Financial Officer

38

Phone/Fax
Numbers

Email
Address

Medicare Compliance
Officer
Enrollment Contact
Medicare Coordinator
System Contact
Customer Service
Operations Contact
General Contact
User Access Contact
Backup User Access
Contact
Marketing Contact
Medical Director
Bid Primary Contact
Payment Contact
Part D Claims
Submission Contact
Formulary Contact
Pharmacy Network
Management Contact
Medication Therapy
Management Contact
Part D Benefits Contact
Part D Quality Assurance
Contact
Part D Application
Contact
Pharmacy Director

39

HIPAA Security Officer
HIPAA Privacy Officer
Part D Price File Contact
(Primary)
Part D Price File Contact
(Back-up)
Part D Appeals
Government Relations
Contact
Emergency Part D
Contact
Pharmacy Technical
Help Desk Contact
Processor Contact
CMS Casework
Communication Contact
Part D Exceptions
Contact
Coordination of Benefits
Contact
CEO – CMS
Administrator Contact
Plan to Plan
Reconciliation Contact
Bid Audit Contact
Plan Directory Contact
for Public Website
CAP Report Contact for
Public Website
Financial Reporting

40

Contact
Best Available Evidence
Contact
Automated TrOOP
Balance Transfer
Contact
Agent/Broker
Compensation Data
Contact
Complaint Tracking
Module (CTM) Contact
Part D Reporting
Requirement Contact
Fraud Investigations
Contact
Reconciliation Contact
DIR Contact

B.

In HPMS, complete the table below:

Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗yes‘
or ‗no‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:

Yes

No

1. Applicant agrees that CMS may release contact information to
States, SPAPs, providers, Part D sponsors, and others who need
the contact information for legitimate purposes.

3.2 Benefit Design
3.2.1 Formulary/Pharmacy and Therapeutics (P&T) Committee Affordable
Care Act, §3307, 42 CFR §423.120(b), 42 CFR §423.272(b)(2);
Prescription Drug Benefit Manual, Chapter 6; CMS issued guidance
03/25/10
A. In HPMS, complete the table below:

41

Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗yes‘
or ‗no‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:
1. Applicant will submit a formulary to CMS for the Part D benefit by
the date listed in section 1.4.
2. Applicant will link all associated contracts to an initial formulary
submission on or before the formulary submission deadline;
otherwise, Applicant will be considered to have missed the
formulary submission deadline.
3. Applicant complies with formulary guidance that is contained in
Chapter 6 of the Prescription Drug Benefit Manual, the HPMS
Formulary Submission Module and Reports Technical Manual,
and all other formulary instructions.
4. Applicant agrees, when using a formulary, to meet all formulary
submission deadlines established by CMS. Applicant further
agrees that CMS may discontinue its review of the Applicant‘s
formulary submission upon the Applicant‘s failure to meet any of
the formulary submission deadlines. Applicant acknowledges that
failure to receive CMS approval of its formulary may prevent CMS
from approving the Applicant‘s bid(s) and contracting with the
Applicant for the following benefit year.
5. Applicant agrees that its formulary includes substantially all drugs
in the protected classes that are specified as of the CMSestablished formulary submission deadline. Applicant further
agrees that any new drugs or newly approved uses for drugs
within the protected classes that come onto the market after a
CMS-established formulary submission deadline will be subject to
an expedited P&T committee review. The expedited review
process requires P&T committees to make a decision within 90
days, rather than the normal 180-day requirement.
6. Applicant provides for an appropriate transition for new enrollees
into Part D plans following the annual coordinated election period,
newly eligible Medicare enrollees from other coverage,
individuals who switch from one plan to another after the start of
the contract year, and current enrollees remaining in the plan
affected by formulary changes prescribed Part D drugs that are
not on its formulary. This transition process satisfies the
requirements specified in Chapter 6 of the Prescription Drug
Benefit Manual.

42

Yes

No

7. Applicant attests that its organization‘s approach to transitioning
beneficiaries on drug regimens that are not on the plan‘s Part D
approved formulary meets CMS criteria. The transition policy
attestation will be completed in HPMS by close of business on
the CMS-established formulary submission deadline in section
1.4.
8. Applicant agrees to submit its organization‘s transition policy and
a description of how the transition policy will be implemented
within the applicant‘s claims adjudication system, including
pharmacy notification via email to [email protected]
by close of business on the CMS-established formulary
submission deadline in section 1.4.
9. Applicant extends, where appropriate, transition periods beyond
30 days for enrollees using non-formulary drugs that have not
been transitioned to a formulary drug or gone through the plan
exception process within 30 days.
10. Applicant ensures that staff is trained and information systems
are in place to accommodate administration of the transition
policy. This includes adoption of necessary information system
overrides.
11. Applicant provides an emergency supply of non-formulary Part D
drugs (31-day supplies, unless the prescription is written for fewer
days) for long-term care residents to allow the plan and/or the
enrollee time for the completion of an exception request to
maintain coverage of an existing drug based on reasons of
medical necessity.
12. Applicant has appropriate timeframes and ―first fill‖ procedures for
non-formulary Part D medications in long-term care and retail
settings.
13. Applicant abides by CMS guidance related to vaccine
administration reimbursement under Part D.

B. In HPMS, complete the table below:
If Applicant is intending for its Part D benefit to include the use
of a formulary, then Applicant must also provide a P&T
committee member list either directly or through its pharmacy
benefit manager (PBM). Applicant must attest ‗yes‘ or ‗no‘ that
it is using its PBM‘s P&T committee, in order to be approved for

43

Yes

No

a Part D contract. Attest ‗yes‘ or ‗no‘ by clicking the appropriate
response in HPMS:
1. Applicant is using the P&T Committee of its PBM for purposes of
the Part D benefit.
2. If answered yes to B1, Applicant‘s PBM is operating under a
confidentiality agreement for purposes of the P&T Committee
(meaning Applicant has no knowledge of the membership of the
PBM‘s P&T Committee). (If not applicable, check ―NO.‖) Note: If
answer is YES, then Applicant must complete P&T Committee
Certification Statement and PBM must complete the P&T
Committee Member List located in the Appendix entitled
Applicant Submission of P&T Committee Member List and
Certification Statement.
3. Applicant develops and uses a P&T committee to develop and
review the formulary and to ensure that the formulary is
appropriately revised to adapt to both the number and types of
drugs on the market.
4. Note: While the P&T committee may be involved in providing
recommendations regarding the placement of a particular Part D
drug on a formulary cost-sharing tier, the ultimate decision maker
on such formulary design issues is the Part D plan sponsor, and
that decision weighs both clinical and non-clinical factors.
5. Applicant‘s P&T committee first looks at medications that are
clinically effective. When two or more drugs have the same
therapeutic advantages in terms of safety and efficacy, the
committee may review economic factors that achieve appropriate,
safe, and cost-effective drug therapy.
6. Applicant assures that the P&T committee uses appropriate
scientific and economic considerations to consider utilization
management activities that affect access to drugs, such as
access to non-formulary drugs, prior authorization, step therapy,
generic substitution, and therapeutic interchange protocols.
7. Applicant‘s P&T committee reviews and approves all clinical prior
authorization criteria, step therapy protocols, and quantity limit
restrictions applied to each covered Part D drug.
8. Applicant adheres to P&T guidelines that will, from time to time,
be promulgated with regard to such subject areas as
membership, conflict of interest, meeting schedule, meeting
minutes, therapeutic classes, drug review and inclusion,
formulary management, utilization management and review,

44

formulary exceptions, and educational programs for providers.
9. Applicant‘s P&T committee makes a reasonable effort to review a
new FDA approved drug product within 90 days, and will make a
decision on each new drug product within 180 days of its release
onto the market, or a clinical justification will be provided if this
timeframe is not met. These timeframes also include the review
of products for which new FDA indications have been approved.
10. Applicant‘s P&T committee approves inclusion or exclusion of the
therapeutic classes in the formulary on an annual basis.
11. The majority of the membership of the Applicant‘s P&T committee
are practicing physicians and/or practicing pharmacists.
12. The membership of the Applicant‘s P&T committee includes at
least one practicing physician and at least one practicing
pharmacist who are both free of conflict with respect to the
Applicant organization and pharmaceutical manufacturers.
13. The membership of the Applicant‘s P&T committee includes at
least one practicing physician and at least one practicing
pharmacist who are experts in the care of the elderly or disabled
persons.
14. Applicant‘s P&T committee recommends protocols and
procedures for the timely use of and access to both formulary and
non-formulary drug products.
15. Applicant verifies that their P&T Committee members (listed in
3.2.1 C) do not appear on the HHS Office of Inspector General‘s
Exclusion List. This list can be found at
http://exclusions.oig.hhs.gov/search.html
C. If Applicant is intending for its Part D benefit to include use of a formulary,
then the members of the P&T committee must be provided either directly by the
Applicant or by the Applicant‘s PBM. The membership of the P&T committee
must be comprised as described in items B, 10, 11 and 13 above. If Applicant is
providing names of P&T committee directly, then provide the membership in
HPMS‘ Contract Management/Part D Data page. If the PBM operates under a
confidentiality agreement (where the Applicant does not know the membership of
the PBM‘s P&T Committee) refer to the Appendix entitled Applicant Submission
of P & T Committee Member List and Certification Statement for additional
instructions.

45

3.2.2 Utilization Management Standards 42 CFR §423.153(b); Prescription
Drug Benefit Manual, Chapter 6 and Chapter 7
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗yes‘
or ‗no‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:

Yes

No

1. Applicant maintains policies and procedures to prevent overutilization and under-utilization of prescribed medications,
including but not limited to the following elements:
Programs designed to improve adherence/compliance with
appropriate medication regimens
Monitoring procedures to discourage over-utilization through
multiple prescribers or multiple pharmacies
Quantity versus time edits
Early refill edits
2. Applicant maintains methods to ensure cost-effective drug
utilization management. Examples of these tools include, but are
not limited to:
Step therapy
Prior authorization
Tiered cost-sharing
3. Applicant makes enrollees aware of utilization management (UM)
program requirements through information and outreach
materials.
4. Applicant has incentives to reduce costs when medically
appropriate such as, but not limited to encouragement of generic
utilization.
5. Applicant agrees to submit corresponding utilization management
criteria for each drug identified on the Applicant‘s formulary flat
file with prior authorization or step therapy via HPMS.

3.2.3 Quality Assurance and Patient Safety Affordable Care Act § 3310; 42
CFR §423.153(c); Prescription Drug Benefit Manual, Chapter 7
A. In HPMS, complete the table below:

46

Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗yes‘
or ‗no‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:

Yes

No

1. Applicant has a concurrent drug utilization review program that
includes but is not limited to, the following checks each time a
prescription is dispensed:
Screening for potential drug therapy problems due to therapeutic
duplication;
Age/gender-related contraindications;
Over-utilization and under utilization;
Drug-drug interactions;
Incorrect drug dosage or duration of drug therapy;
Drug-allergy contraindications; and
Clinical abuse/misuse.
2. Applicant performs retrospective drug utilization review.
3. Applicant develops and implements internal medication error
identification and reduction systems.
4. Applicant reduces wasteful dispensing of outpatient prescription
drugs in long-term care facilities by utilizing specific, uniform
dispensing techniques, such as weekly, daily, or automated dose
dispensing as established by CMS.

3.2.4 Medication Therapy Management 42 CFR §423.153(d); The Affordable
Care Act § 10328; Prescription Drug Benefit Manual, Chapter 7;
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗yes‘
or ‗no‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:
1. Applicant develops and implements a Medication Therapy
Management (MTM) Program designed to :
Ensure optimum therapeutic outcomes for targeted beneficiaries
through improved medication use
For targeted beneficiaries, reduce the risk of adverse events,

47

Yes

No

including adverse drug interactions
2. Applicant develops the MTM program in cooperation with
licensed and practicing pharmacists and physicians.
3. Applicant targets beneficiaries for enrollment in the MTM program
based on all three of the following criteria:
Beneficiary must have multiple chronic diseases, with three
chronic diseases being the maximum number an Applicant may
require for targeted enrollment;
Beneficiary must be taking multiple covered Part D drugs, with
eight Part D drugs being the maximum number of drugs an
Applicant may require for targeted enrollment; and
Beneficiary must be identified as likely to incur annual costs for
covered Part D drugs in an amount greater than or equal to
$3000 increased by the annual percentage specified in 42 CFR §
423.104(d)(5)(iv).
4. Applicant has an appropriate MTM enrollment policy which
enrolls targeted beneficiaries using an opt-out method of
enrollment only.
5. Applicant has an appropriate MTM enrollment policy which
targets beneficiaries for enrollment at least quarterly during each
year.
6. Applicant has appropriate policies and procedures for offering a
minimum level of MTM services for each beneficiary enrolled in
the MTMP that includes all of the following:
Interventions for both beneficiaries and prescribers;
An annual comprehensive medication review (CMR) with written
summaries. The CMR must include an interactive, person-toperson , or telehealth consultation performed by a pharmacist or
other qualified provider unless the beneficiary is in a long-term
care setting. The Summary resulting from the CMR must comply
with the requirements for a standardized format as specified by
CMS, and
Quarterly targeted medication reviews with follow-up
interventions when necessary.
7. The Applicant agrees to submit a description of its MTM program
including, but not limited to, policies, procedures, services,
payments and criteria provided in item #3 above used for
identifying beneficiaries eligible for the MTM program. Note:

48

Instructions to submit a description of your MTM program will be
forthcoming in future guidance from CMS and this description is
not due at the time of this application.
8. Applicant has an appropriate policy on how they will set MTM
fees paid to pharmacists or others providing MTM services for
covered Part D drugs. The policy will explain how the Applicant‘s
fee or payment structure takes into account the resources used
and the time required for those providing MTM services.
9. The Applicant agrees to submit a description of how they will set
MTM fees paid to pharmacists or others providing MTM services
for covered Part D drugs. The policy will explain how the
Applicant‘s fee or payment structure takes into account the
resources used and the time required for those providing MTM
services. Note: Instructions to submit a description of MTM fees
with a description of your MTM program will be forthcoming in
future guidance from CMS and is not due at the time of this
application.
10. Applicant has appropriate policies and procedures to meet CMS
expectations for administering the MTM program, including, but
not limited to, services, payments and criteria used for identifying
beneficiaries eligible for the MTM program. Such expectations
include:
Once enrolled, beneficiaries will not be disenrolled from the
MTMP program if they no longer meet one or more of the MTMP
eligibility criteria (as determined by the organization) and will
remain in the MTMP program for the remainder of the calendar
year.
Applicant‘s MTMP will serve and provide interventions for
enrollees who meet all three of the required criteria as defined
above regardless of setting (e.g., ambulatory, long term care,
etc.)
Applicant‘s MTMP will not include discriminatory exclusion
criteria. If an enrollee meets all three of the required criteria as
described by your organization, the enrollee should be eligible for
MTM intervention.
Applicant will consider the provision of other prescription drug
quality improvement interventions to beneficiaries who do not
meet all three of the required MTMP criteria as described by your
organization, however, these beneficiaries cannot be considered
for MTM reimbursement by CMS.
Applicant will put into place safeguards against discrimination

49

based on the nature of their MTM interventions (i.e., TTY if phone
based, Braille if mail based, etc.)
Applicant will promote continuity of care by performing an end-ofyear analysis that identifies current MTM program participants
who will continue to meet eligibility criteria for the next program
year for the same plan.
Applicant will have procedures in place to drive participation and
follow-up with beneficiaries that do not respond to initial offers for
MTM services.
Applicant will consider using more than one approach when
possible to reach all eligible patients who may wish to receive
MTM services.
Applicant will analyze and evaluate their MTMP and make
changes to continuously improve their programs.

3.2.5 Electronic Prescription Program and Health Information Technology
Standards 42 CFR §423.159; Prescription Drug Benefit Manual,
Chapter 7; P.L. 111-5 (2009); 2010 Call Letter
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗yes‘
or ‗no‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:
1. Applicant supports and complies with electronic prescription
standards relating to covered Part D drugs for Part D enrollees.
2. Applicant has an electronic prescription drug program that
complies with final Part D standards for transmitting, directly or
through an intermediary, prescriptions and prescription-related
information using electronic media for covered Part D drugs for
Part D eligible individuals.
3. Applicant obtains the Prescription Origin Code on original
prescriptions submitted via the NCPDP 5.1 option field 419 DJ
and reports this code on their PDE submissions.
4. Applicant agrees that as it implements, acquires, or upgrades
health information technology (HIT) systems, where available, the
HIT systems and products meet standards and implementation
specifications adopted under section 3004 of the Public Health
Services Act as added by section 13101 of the American

50

Yes

No

Recovery and Reinvestment Act of 2009, P.L. 111-5.

3.2.6 Bids 42 CFR § 423.104, §423.265 and §423.272
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗yes‘
or ‗no‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:

Yes

No

1. Applicant limits the number of submitted bids in a service area to
those that would demonstrate meaningful differences in benefit
packages or plan costs to a beneficiary.
2. Applicant has reviewed Section 2.4 of this application and
understands that for the purpose of assigning autoenrollments, all
bids that are below the low income subsidy threshold for all PDP
contracts offered by the applicant‘s parent organization, its
affiliates and itself will be counted as one.
3. Applicant agrees to offer the plan to all Part D eligible
beneficiaries residing in the applicant‘s service area; and at a
uniform premium, with uniform benefits and level of cost-sharing
throughout the plan service area.

3.3 Service Area/Regions 42 CFR §423.112; Prescription Drug
Benefit Manual, Chapter 5
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗Yes‘
or ‗No‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:

Yes

No

1. Applicant offers a prescription drug plan in at least one Part D
region (e.g. PDP region, MA-PD region).
2. For all regions in which the applicant offers a prescription drug
plan, the Applicant provides coverage in the entire region.
B. Complete in HPMS, in the Contract Management/Contract Service
Area/Service Area Data page, the service area information indicating the regions
(including territories) you plan to serve. PDP and MA-PD region and Territory
information may be found on the www.cms.gov/ website. Be sure to list both the

51

region/territory name and associated number. Note: CMS bases its pharmacy
network analyses on the service area your organization inputs into HPMS. Please
make sure that the service area information you input into HPMS corresponds to
the pharmacy lists that are provided under the Pharmacy Access section of the
application.

3.4 General Pharmacy Access 42 CFR §423.120(a); Prescription Drug
Benefit Manual, Chapter 5
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗Yes‘
or ‗No‘ to each of the following qualifications by clicking on the
appropriate response in HPMS:

Yes

No

1. Applicant permits in its plan networks any pharmacy that accepts
and meets the plans‘ standard terms and conditions. However,
terms and conditions may vary, particularly with respect to
payment terms to accommodate geographical areas (e.g. rural
pharmacies) or different types of pharmacies (e.g. mail order and
retail), provided that all similarly-situated pharmacies are offered
the same standard terms and conditions.
2. Applicant does not require a pharmacy to accept insurance risk
as a condition of participation in the Part D sponsor‘s network.
3. Applicant agrees to notify CMS when the Applicant changes its
pharmacy benefit manager.
4. Applicant agrees to notify CMS about any substantive change in
its pharmacy network that may impact its ability to maintain a Part
D pharmacy network that meets CMS‘ requirements.
B. Upload in HPMS a contract template in .pdf format for each for the following
types of pharmacies: Retail, Mail Order, Home Infusion, Long-Term Care and
I/T/U. The mail order contract template is only necessary if the plan is offering
mail order. The I/T/U template is only necessary if the Applicant‘s service area
includes states in which I/T/U pharmacies reside. If Applicant has contracted with
a Pharmacy Benefit Manager to provide a pharmacy network, those downstream
contract templates must also be uploaded. If there are several different types of
standard terms and conditions for the same type of pharmacy, please provide a
contract template for all versions and label according to type of pharmacy. For
example, if different terms for retail pharmacies apply depending upon
geographic location, a separate template representing each variation must be
provided. Each contract template type must contain the unsigned standard terms
and conditions, including the provisions listed in the Appendices entitled

52

Crosswalk for Retail Pharmacy Contracts
Crosswalk for Mail Order Pharmacy Contracts
Crosswalk for Home Infusion Pharmacy Access Contracts
Crosswalk for Long-Term Care Pharmacy Access Contracts
Crosswalk for I/T/U Pharmacy Access Contracts.
C. Upload in HPMS crosswalks of the Pharmacy Access Contract Citations [for
Retail, Mail Order (if offered), Home Infusion, Long-Term Care and I/T/U Pharmacy
networks] demonstrating that all applicable requirements are included in such
contracts. Submit this data by downloading the Microsoft Excel worksheets from
HPMS that are located on the Pharmacy Upload page, complete the worksheets
and upload the finished document back into HPMS for each of the Appendices
entitled
Crosswalk for Retail Pharmacy Contracts
Crosswalk for Mail Order Pharmacy Contracts
Crosswalk for Home-Infusion Pharmacy Access Contracts
Crosswalk for Long-Term Care Pharmacy Access Contracts
Crosswalk for I/T/U Pharmacy Access Contracts.

3.4.1 Retail Pharmacy 42 CFR §423.120(a); 42 CFR §423.859(c);
Prescription Drug Benefit Manual, Chapter 5
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following
qualifications to be approved for a Part D contract. Attest ‗yes‘
or ‗no‘ to each of the following qualifications by clicking on
the appropriate response in HPMS:

Yes

No

1. Applicant meets the CMS Standards for Convenient Access [42
CFR §423.120 (a)(1) and (2) no later than the application
submission date.
2. Applicant agrees that when Applicant is offering extended
supplies via mail order, it also has contracts with a sufficient
number of network retail pharmacies so as to ensure that
enrollees have reasonable access to the same extended day
supply benefits at retail that are available at mail-order.
B. Upload in HPMS the Retail Pharmacy List:
To submit retail pharmacy listings to CMS, Applicants must download the Microsoft
Excel worksheet from HPMS that is located specifically on the Pharmacy Upload page,
complete the worksheet and upload the finished document back into HPMS.

53

C. Submission of Supporting Discussion in Areas Failing to Meet Access
Standards
CMS will consider supporting discussion provided by an Applicant in evaluating the
applicant‘s application to determine if Applicant is qualified to be a Part D Sponsor.
While you have the opportunity to provide this discussion, CMS‘ expectation is that your
organization will meet the required access standards in all cases. Providing the
discussion below does not mean CMS will allow you to fail the access standards, but in
extreme or unusual circumstances, we may consider this information.
Provide as an upload in HPMS, in .pdf format, the following information to demonstrate
that meeting the access standard within the service area is not practical or is
impossible.
1. Indicate the geographic areas in which the applicant cannot demonstrate that it
meets the retail pharmacy convenient access standards
2. Explain why these standards cannot be met. Include in the discussion relevant
information such as geographic barriers, pharmacy infrastructure barriers, and/or
market barriers.
3. Describe how the pharmacies in the Applicant‘s retail contracted network will provide
access to all eligible Part D individuals enrolled in the Applicant‘s plan(s) in each of
the geographic areas defined in item 1 above.
D. In HPMS, indicate whether you are seeking a waiver of the convenient access
standards for the territories in which your organization intends to offer the Part D
benefit. If your organization is not intending to offer the Part D benefit in the
territories check N/A within HPMS.
Request for a Waiver of Convenient Access Standards for the
Territories

Yes

No

N/A

Region 35 – American Samoa
Region 36 – Guam
Region 37 – Northern Mariana Islands
Region 39 – US Virgin Islands
E. Complete the following if you marked YES to requesting a waiver of
convenient access standards for any of the territories in 3.4.1D. In HPMS, in .pdf
format, provide the following information:
1. Explain why your organization cannot demonstrate compliance with the access
standards or why these standards cannot be met.
2. Describe the Applicant‘s efforts to identify and contract with all of the retail
pharmacies in each of the applicable territories.

54

3. Describe how the pharmacies in the Applicant‘s contracted network demonstrate
convenient access to all eligible Part D individuals enrolled in the Applicant‘s plan(s)
in each of the territories listed above as not meeting the standards in §423.120(a)(1).

3.4.2 Out of Network Access 42 CFR §423.124; Prescription Drug Benefit
Manual, Chapter 5
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications
to be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of
the following qualifications by clicking on the appropriate
response in HPMS:
1. Applicant agrees that enrollees have adequate access to covered
Part D drugs dispensed at out-of-network pharmacies when an
enrollee cannot reasonably be expected to obtain such drugs at a
network pharmacy and provided such enrollees do not access Part
D drugs at an out-of-network pharmacy on a routine basis. The
coverage rules applicable to covered Part D drugs dispensed at outof-network pharmacies may generally mirror those applicable to
covered Part D drugs dispensed at network pharmacies (to the
extent that the out-of-network pharmacy has the ability to effectuate
those coverage rules). However, Applicant agrees to develop
policies and procedures governing reasonable rules for
appropriately limiting out-of-network access (for example, quantity
limits, purchase of maintenance medications via mail-order for
extended out-of-area travel, or plan notification or authorization
processes).
2. Applicant agrees that enrollees have adequate access to covered
Part D drugs dispensed at physician offices for covered Part D
drugs that are appropriately dispensed and administered in
physician offices (e.g. Part D-covered vaccines).
3. Applicant abides by 42 CFR §423.124(b) relating to the financial
responsibility for out-of-network access to covered Part D drugs and
may require its Part D enrollees accessing covered Part D drugs to
assume financial responsibility for any differential between the outof-network pharmacy‘s usual and customary price and the PDP
sponsor plan allowance, consistent with the requirements of 42 CFR
§§ 423.104(d)(2)(i)(B) and 423.104(e).
4. Applicant does not routinely permit coverage of more than a
month‘s supply of medication to be dispensed at an out-of-network
pharmacy. Applicant may override the one month limit only on a
case-by-case basis when warranted by extraordinary

55

Yes

No

circumstances.

3.4.3 Mail Order Pharmacy 42 CFR §423.120(a)(10); Prescription Drug
Benefit Manual, Chapter 5
A. In HPMS, complete the table below:
Applicants may offer a mail order option in addition to their
contracted Part D pharmacy network but mail order pharmacies
do not count in meeting network adequacy standards. Indicate in
HPMS ‗yes‘ or ‗no‘ whether such mail order pharmacy is offered.

Yes

No

1. Applicant offers mail order pharmacy as part of its Part D plans.
2. If Applicant attests ‗Yes‘ to 3.4.3A1, does Applicant‘s mail order
contract include an extended (e.g., 90) day supply?
3. If Applicant attests ‗YES‘ to 3.4.3A2 , then Applicant includes in its
contracts with at least some retail pharmacies a provision that
allows a retail pharmacy to offer an extended supply of drugs to any
Plan beneficiary at the same price, reimbursement rate and cost
sharing as the Plan‘s mail order pharmacy or pharmacies—the
network mail order pharmacy rate; or an Applicant may use an
alternative retail/mail order pharmacy rate with a higher contracted
reimbursement rate provided that any differential in charge between
the Network Mail Order Pharmacy rate and the higher contract
reimbursement rate would be reflected in higher cost sharing paid
by the beneficiary. Applicant must ensure that the availability of an
extended day supply at retail does not increase the costs to the
government and that enrollee cost-sharing for an extended day
supply never exceeds what the enrollee would have paid had
he/she filled his/her prescription in multiple one-month supply
increments at retail pharmacy rates.
B. Mail Order Pharmacy List
To submit mail order pharmacy listings to CMS, Applicants must download the Microsoft
Excel worksheet from HPMS that is located on the Pharmacy Upload page, complete
the worksheet and upload the finished document back into HPMS.

3.4.4 Home Infusion Pharmacy 42 CFR §423.120(a)(4); Prescription Drug
Benefit Manual, Chapter 5
A. Home Infusion Pharmacy List
To submit home infusion pharmacy listings to CMS, Applicants must download the
Microsoft Excel worksheet template from HPMS that is located on the Pharmacy Upload
page, complete the worksheet and upload the finished document back into HPMS.

56

3.4.5

Long -Term Care (LTC) Pharmacy 42 CFR §423.120(a)(5);
Prescription Drug Benefit Manual, Chapter 5; CMS issued guidance
04/28/09

A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications
to be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of
the following qualifications by clicking on the appropriate
response in HPMS:
1. Applicant offers standard contracting terms and conditions to all
long-term care pharmacies in its service area. These terms and
conditions must include all the performance and service criteria for
long-term care pharmacies that are cited in section 50.5.2 of
Chapter 5 of the Prescription Drug Benefit Manual.
2. Applicant attests that all of the Part D contracted pharmacies in
Applicant‘s LTC network have signed directly or through a power of
attorney a contract that meets the LTC performance and service
criteria established by CMS.
3. Applicant recognizes the CMS special election period (SEP) or
open enrollment period for institutionalized individuals for Part D
drug plan enrollment and disenrollment for beneficiaries entering,
living in, or leaving a long-term care facility.
4. Applicant ensures convenient access to network LTC pharmacies
for all of their enrollees residing in an IMD or ICF-MR designated by
the State as an institution and in which any institutionalized
individuals reside.
5. Applicant provides convenient access to network LTC pharmacies
for all of their enrollees who are inpatients in a hospital that is a
―medical institution‖ under section 1902(q)(1)(B) of the Act – and
therefore would meet the Part D definition of a LTC facility – and
whose Part A benefits have been exhausted.
6. Applicant contracts with a sufficient number of LTC pharmacies to
provide all of the plan‘s institutionalized enrollees‘ convenient
access to the plan‘s LTC pharmacies.
7. Applicant does not rely upon beneficiary SEPs or on out-of-network
access in lieu of contracting with a sufficient number of pharmacies
to ensure that an enrollee can remain in his or her current plan for
as long as he/she reside in an LTC facility in Applicant‘s service
area.

57

Yes

No

8. Applicant ensures that LTC pharmacy contracting activity is ongoing
as Applicant continues to identify LTC facilities and LTC
pharmacies, and as Applicant examines auto-enrollment
assignments and incoming enrollments.
9. Applicant agrees that the appropriate action to take when a
beneficiary is enrolled in its plan and Applicant does not have a
contract with an LTC pharmacy that can serve the LTC facility in
which that enrollee resides is to sign a contract with the facility‘s
contracted pharmacy, or – if that pharmacy will not sign a contract –
with another pharmacy that can serve that facility. Applicant
recognizes that, in some cases, a retroactive contract may be
necessary to ensure convenient access to LTC pharmacies.
10. Applicant readily negotiates with States with regard to contracting
with State-run and operated LTC pharmacies in facilities such as
ICFs/MR, IMDs, and LTC hospitals. States may not be able to agree
to certain clauses in some LTC standard contracts because of
constitutional and legal restraints. Applicants should be prepared to
negotiate with States to address these issues.
11. Applicant utilizes CMS data on beneficiary residence in LTC
facilities to facilitate its LTC contracting efforts.
12. Applicant, in contracting with LTC pharmacies, does not agree to
particular contracting terms and conditions containing provisions
that have the net result of creating a non-uniform benefit for plan
enrollees served by those LTC pharmacies relative to those residing
in LTC facilities serviced by other network LTC pharmacies whose
contracts with the Applicant may not include the same provisions.
B. LTC Pharmacy List
To submit LTC pharmacy listings to CMS, Applicants must download the Microsoft
Excel worksheet template from HPMS that is located on the Pharmacy Upload page,
complete the worksheet and upload the finished document back into HPMS.

3.4.6 Indian Health Service, Indian Tribe and Tribal Organization, and
Urban Indian Organization (I/T/U) Pharmacy 42 CFR §423.120(a)(6);
Prescription Drug Benefit Manual, Chapter 5
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ or ‗no‘ to each of the following
qualifications by clicking on the appropriate response in
HPMS to be approved for a Part D contract:

58

Yes

No

N/A

1. Using the list of I/T/U pharmacies provided at the
www.cms.gov/PrescriptionDrugCovContra/ indicate whether
your service area includes at least one state in which an
I/T/U pharmacy resides.
Not all Part D regions have I/T/U pharmacies. If the Applicant‘s service area covers
any region that includes I/T/U pharmacies, then the Applicant must attest ‗yes‘ to
each of the following qualifications to be approved for a Part D contract. If all of
the Applicant‘s service area does not include I/T/U pharmacies, then the Applicant
may answer ‗no‘ or n/a and still be approved for a Part D contract since these
requirements do not apply. Attest ‗yes,‘ ‗no‘ or n/a to each of the following
qualifications by clicking on the appropriate response in HPMS:
2. Applicant offers standard terms and conditions that conform
to the model contract addendum provided by CMS to all
I/T/U pharmacies in its service area by sending a conforming
contract offer to all such pharmacies. The model contract
addendum is posted on the
www.cms.gov/PrescriptionDrugCovContra/ website. The
model contract addendum account for differences in the
operations of I/T/U pharmacies and retail pharmacies.
3. Applicant agrees to submit documentation upon CMS‘
request to demonstrate offering all I/T/U pharmacies in its
service area a conforming contract. Such documentation
may be proof of fax or U.S. postage or other carrier‘s receipt
of delivery.
B. I/T/U Pharmacy List
In order to demonstrate that a Part D Applicant meets these requirements, Applicants
must submit a complete list of all I/T/U pharmacies to which it has offered contracts.
CMS provides the current list of I/T/U pharmacies, including the official name, address,
and provider number (when applicable). The Applicant‘s list must be submitted using
the Microsoft Excel template provided by CMS on the HPMS Pharmacy Upload page,
and must include all I/T/U pharmacies residing in any and all states within its service
area.
To submit I/T/U pharmacy listings to CMS, Applicants must first download the Microsoft
Excel worksheet template from HPMS that is located on the Pharmacy Upload page,
complete the worksheet and upload the finished document back into HPMS.

3.4.7 Specialty Pharmacy Prescription Drug Benefit Manual, Chapter 5
A. In HPMS, complete the table below.
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the

59

following qualifications by clicking on the appropriate response in
HPMS:

Yes

No

1. Applicant does not restrict access to Part D drugs by limiting
distribution through a subset of network pharmacies, except when
necessary to meet FDA limited distribution requirements or to ensure
the appropriate dispensing of Part D drugs that require extraordinary
special handling, provider coordination, or patient education when
such extraordinary requirements cannot be met by a network
pharmacy. Applicant agrees that additional education or counseling
alone does not qualify a drug for limited distribution within the overall
pharmacy network.
2. Applicant does not restrict access solely on the placement of a Part D
drug in a ―specialty/high cost‖ tier because this tier placement alone is
not indicative of any special requirements associated with such drug.
Applicant further agrees that any drug-by-drug requirements for
network pharmacies only apply to special handling and dispensing
that may be required for a particular ―specialty‖ drug and not to
reimbursement or other standard terms and conditions.
3. Applicant does not require a pharmacy to be a ―specialty‖ pharmacy
in order to dispense any drug that requires special handling if the
network pharmacy is capable of appropriately dispensing the
particular Part D drug or drugs in question.

3.5 Enrollment and Eligibility 42 CFR §423.30; Prescription Drug
Benefit Manual, Chapters 3, 4, and 13; Plan Communications User
Guide; CMS issued guidance 07/21/09
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant complies with the CMS Enrollment and Disenrollment
Guidance documents that are provided on the www.cms.gov/ website.
2. Applicant complies with CMS operational guidance on Creditable
Coverage and the Late Enrollment Penalty.
3. Applicant permits the enrollment of all Medicare beneficiaries who are
eligible for Part D and reside in the PDP service area during allowable
enrollment periods according to CMS requirements.

60

Yes

No

4. Eligible applicant accepts auto-enrollments and facilitated enrollments
in accordance with procedures adopted by CMS and provided in CMS
Enrollment and Disenrollment Guidance documents.
5. Applicant collects and transmits data elements specified by CMS for
the purposes of enrolling and disenrolling beneficiaries in accordance
with the CMS Eligibility Enrollment and Disenrollment Guidance and
CMS systems instructions including technical specifications and
format requirements.
6. Applicant \transmits enrollment and disenrollment and change
transactions within the timeframes provided in CMS Enrollment and
Disenrollment Guidance and in accordance with the published MARx
Processing Calendar.
7. Applicant provides all current and newly enrolled individuals all
required enrollment material and notices within the timeframes
provided in the CMS PDP Enrollment and Disenrollment Guidance.
8. Applicant has and operates a process for enrolling Medicare
beneficiaries in the PDP that includes: communicating with
beneficiaries who are requesting enrollment in the PDP within
timeframes specified by CMS, including requirements for initiating
appropriate follow up with beneficiaries who submit incomplete
enrollment requests; and making enrollments effective according to
the effective date requirements associated with the enrollment period
in which the enrollment is received.
9. Applicant accepts voluntary disenrollment requests in accordance
with CMS PDP Enrollment and Disenrollment Guidance only during
allowable periods as specified in CMS requirements.
10. Applicant accepts and processes voluntary disenrollment requests
from beneficiaries, including providing all required notices and
information to beneficiaries, communicating these requests to CMS,
and establishing the disenrollment effective date according to the
effective date requirements associated with the enrollment period in
which the disenrollment request is received.
11. Applicant provides advanced notice to all enrollees in the event of a
contract termination, describing the implications of the termination
and alternatives for obtaining prescription drug coverage under Part D
in accordance with Part 423 regulations and CMS non-renewal
instructions.
12. Applicant has and implements policies and procedures (including
appropriate notice and due process requirements) for optional

61

involuntary disenrollment as permitted by CMS.
13. Applicant ensures that information necessary to access all plan
benefits, such as an ID card, is provided to new enrollees prior to the
enrollment effective date, or no later than 10 days after receipt of the
enrollment request, according to the timeframes described in the PDP
Enrollment and Disenrollment Guidance.
14. Applicant collects, reviews, and transmits creditable coverage
information in accordance with CMS operational guidance and
policies.
15. Applicant has business processes for quickly resolving urgent issues
affecting beneficiaries, such as late changes in enrollment or copay
status, in collaboration with CMS caseworkers.
16. For each enrollment request received, Applicant queries the Batch
Eligibility Query (BEQ) or the User Interface (UI) prior to the
submission of an enrollment transaction to the MARx system to
receive:
Verification of Medicare Entitlement and Part D Eligibility,
Periods of enrollment in a Medicare plan that provides prescription
drug coverage,
Periods of enrollment in a retiree prescription drug plan whose
sponsor receives a retiree drug subsidy from Medicare, and
Information regarding the Low Income Subsidy applicable to each
new enrollee.
17. Applicant uses the information provided by CMS, including the LowIncome Subsidy/Part D Premium Report Data File to determine match
rates of their information to that of CMS within 72 hours of receipt.
Applicant further agrees that their match rate should achieve 95
percent and that non-matches are resolved within 72 hours.
18. Applicant adheres to CMS‘s Best Available Evidence policy under 42
CFR § 423 .800(d), under which an individual can provide acceptable
evidence supporting a revised cost-sharing amount tha t the sponsor
must accept for the purpose of administering the benefit, and to
submit information to CMS with respect to Best Available Evidence in
accordance with CMS procedures outlined in Chapter 13 of the
Prescription Drug Benefit Manual.
19. Applicant has a process is in place to transmit plan-generated
enrollment transactions that include active 4Rx data, and for CMSgenerated enrollments, to transmit active 4Rx data on an update

62

transaction within 3 business days of receipt of the TRR transmitting
the enrollments.
20. Applicant does not disenroll members for failure to pay premiums (or
notify them of impending disenrollment) in cases where the individual
is considered to be in premium withhold status by CMS as provided in
CMS Enrollment and Disenrollment Guidance and Premium Payment
policies.
21. Applicant does not disenroll a member or initiate the disenrollment
process if the organization has been notified that a State
Pharmaceutical Assistance Program (SPAP) or other payer intends to
pay the entire Part D premium on behalf of an individual.
22. Applicant downloads at least daily and processes all enrollment
elections made via the on-line enrollment center (OEC) hosted by
CMS.
23. Applicant reviews all systems responses, files and reports received
from CMS and compares these to its internal data to identify
discrepancies and reconcile enrollment information, beneficiary status
(such as LIS) and payment data.
24. Applicant completes the reconciliation of all enrollment, membership
and payment data, and submits requests for valid discrepancy
corrections in compliance with the 45-day schedule to submit the
monthly CEO certification of enrollment data for payment.
25. Applicant allows a temporary absence from a PDP service area for up
to 12 months before disenrollment would be mandatory.

3.6 Complaints Tracking Prescription Drug Benefit Manual, Chapter
7; CMS issued guidance 11/16/06, 07/28/2008, and 12/09/08
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant resolves 95% of complaints designated as immediate needs
complaints via the CMS Complaints Tracking Module within 2
calendar days.
2. Applicant is expected to resolve at least 95% of complaints
designated as ―urgent‖ via the CMS Complaints Tracking Module in

63

Yes

No

accordance with CMS issued guidance.
3. Applicant is expected to resolve at least 95% of complaints without an
issue level via the CMS Complaints Tracking Module in accordance
with CMS issued guidance.
4. Applicant monitors and documents complaint resolutions for
complaints attributed to their contracts in the CMS‘ Complaint
Tracking Module in accordance with CMS‘ Standard Operating
Procedures for Part D sponsors.
5. Applicant maintains Standard Operating Procedures that address how
its organization will handle and quickly resolve immediate action
cases, as well as, outline the steps the organization intends to take to
have enrollees call your customer service directly for the prompt
resolution of all inquiries.

3.7 Medicare Plan Finder Prescription Drug Benefit Manual, Chapter
7; CMS issued guidance 07/17/06, 11/20/07, 08/21/08, 05/20/10
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant provides current and accurate calendar year drug pricing
and pharmacy network data for publishing on the ―Medicare Plan
Finder (MPF)‖ in the format and on a schedule required by CMS.
2. Applicant performs quality checks for data submitted to CMS for
display on the MPF and agrees that failure to conduct quality checks
may result in suppression of the Applicant‘s pricing data from the
website.
3. Applicant agrees that errors or omissions identified by CMS during
analyses of the data will also result in the suppression of the
Applicant‘s pricing data from the website.
4. Applicant agrees to respond to CMS‘ MPF quality assurance outlier
emails as directed by CMS, and agrees that failure to respond in
accordance with these directions will result in the suppression of the
Applicant‘s pricing data from the website.

64

Yes

No

3.8 Grievances 42 CFR Part 423 Subpart M; Prescription Drug Benefit
Manual, Chapter 18
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant processes beneficiary grievances consistent with 42 CFR
§423 subpart M.
2. Applicant abides by Chapter 18 of the Prescription Drug Benefit
Manual.
3. Applicant, consistent with 42 CFR §423.564:
Tracks and addresses enrollees‘ grievances,
Processes enrollees‘ grievances within the appropriate timeframes,
Works with the QIO to resolve quality of care grievances when
appropriate,
Provides appropriate and timely notification to enrollees of grievance
dispositions, and
Trains relevant staff and first tier, downstream and related entities on
all regulatory requirements.
4. Applicant informs enrollees aware of the grievance process through
information and outreach materials.
5. Applicant accepts grievances from enrollees at least by telephone
and in writing (including facsimile).
6. Applicant maintains, and provides to CMS upon request, records on
all grievances received both orally and in writing. At a minimum, such
records must track the:
Date of receipt of the grievance
Mode of receipt of grievance (i.e. fax, telephone, letter, etc.)
Person who filed the grievance
Subject of the grievance
Final disposition of the grievance
Date the enrollee was notified of the disposition

65

Yes

No

Note: A grievance is any complaint or dispute, other than one that involves a coverage
determination, expressing dissatisfaction with any aspect of a PDP sponsor‘s
operations, activities, or behavior, regardless of whether remedial action is requested.
Examples of subjects of a grievance include, but are not limited to:
Timeliness, appropriateness, access to, and/or setting of services provided by the
PDP sponsor
Concerns about waiting times, demeanor of pharmacy or customer service staff
A dispute concerning the timeliness of filling a prescription or the accuracy of filling
the prescription.

3.9 Coverage Determinations (including Exceptions) and Appeals 42
CFR Part 423 Subpart M; Prescription Drug Benefit Manual,
Chapter 18; Part D QIC Reconsideration Procedures Manual
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant processes beneficiary coverage determinations (including
exceptions) and appeals consistent with 42 CFR Part 423 subpart M
and relevant provisions of subpart U.
2. Applicant uses a uniform exceptions and appeals process, including
procedures for accepting oral and written requests for coverage
determinations and redeterminations per § 423.128(b)(7) and
(d)(1)(iii). Applicant ensures access to a uniform model form to
request a coverage determination and redetermination, to the extent
such model forms have been approved for use by CMS. Applicant
provides immediate access to the coverage determination and
redetermination processes via an Internet Website.
3. Applicant employs a medical director who is a physician with a current
and unrestricted license to practice medicine in a State, Territory,
Commonwealth of the United States, or the District of Columbia, per
the requirements set forth in § 423.562(a)(5). The medical director is
responsible for ensuring the clinical accuracy of all coverage
determinations and redeterminations involving medical necessity.
4. Applicant retains the services of physicians or other appropriate
health care professionals per the requirements in 423.566(d) for
medical necessity reviews in cases where the applicant expects to
issue a partially or fully adverse coverage determination.

66

Yes

No

5. Applicant abides by the coverage determination and appeals policies
contained in Chapter 18 of the Prescription Drug Benefit Manual and
the Part D QIC Reconsideration Procedures Manual.
6. Applicant has arrangements with its network pharmacies for the
standardized pharmacy notice (―Notice: Your Prescription Cannot be
Filled‖/CMS-10147) to be distributed to enrollees in accordance with
the requirements set out in 42 CFR §§423.562 (a)(3) and
423.128(b)(7)(iii).
7. Applicant, in accordance with 42 CFR Part 423 subpart M:
Tracks coverage determination (including exceptions) and
redetermination requests received both orally and in writing,
Processes coverage determinations (including exceptions) and
redeterminations within the appropriate timeframes,
Provides appropriate and timely notification to enrollees (and
prescribing physicians or other prescribers, when appropriate) of
coverage determination (including exceptions) and redetermination
decisions, and
Trains relevant staff and first tier, downstream and related entities on
all regulatory requirements.
8. At a minimum, Applicant must track the:
Date and time of receipt of a coverage determination request
(including an exception request) or redetermination request,
Mode of receipt (i.e. fax, telephone, letter, etc.),
Person who filed the request,
Type of request made (i.e., standard or expedited),
Date and time of receipt of a physician's or other prescriber‘s
supporting statement (for an exception request),
Disposition of request, and
Date and time of decision notice to the enrollee and/or prescriber.
9. Applicant notifies the enrollee (and the prescribing physician or other
prescriber involved, as appropriate) of an expedited coverage
determination for benefits as expeditiously as the enrollee‘s health
condition requires, but no later than 24 hours after receipt of the
request.
10. Applicant ensures that an enrollee is notified of a standard coverage
determination for benefits as expeditiously as the enrollee‘s health

67

condition requires, but no later than 72 hours after receipt of the
request.
11. Applicant ensures that an enrollee is notified of a standard coverage
determination regarding reimbursement and receives reimbursement
(when appropriate) no later than 14 calendar days after receipt of the
request.
12. Applicant ensures that an enrollee is notified of a decision on an
exception request in accordance with regulatory timelines applicable
to coverage determinations. For exceptions involving requests for
benefits, the processing timeframe begins upon receipt of the
physician's or other prescriber‘s supporting statement. For
exceptions involving requests for payment, the processing timeframe
begins upon receipt of the request for payment.
13. Applicant notifies the enrollee (and the prescribing physician or other
prescriber involved, as appropriate) of an expedited redetermination
as expeditiously as the enrollee‘s health condition requires, but no
later than 72 hours after receipt of the request.
14. Applicant ensures that an enrollee is notified of standard
redeterminations as expeditiously as the enrollee‘s health condition
requires, but no later than 7 calendar days after receipt of the request.
15. Applicant automatically forwards coverage determination (including
exception) and redetermination requests to the Independent Review
Entity (IRE) when the notification timeframes are not met, consistent
with the rules set forth in Chapter 18 of the Medicare Prescription
Drug Benefit Manual. Applicant auto-forwards cases timely to the
proper IRE filing location and notifies the enrollee that the case has
been sent to the IRE.
16. Applicant maintains an exceptions process that includes a written
description of how the organization will provide for standard and
expedited tiering exception requests and non-formulary exception
requests (including exceptions to utilization management tools), and
how the organization will comply with such description. Such policies
and procedures will be made available to CMS on request.
17. Applicant complies with 42 CFR §423.578(a) and (b) which require a
PDP sponsor to:
Grant a tiering or non-formulary exception (including an exception to a
utilization management tool) when it is medically appropriate to do so,
and
Provide the criteria for evaluating whether approval is appropriate.

68

These requirements also apply to exceptions requests by Medicare
eligible children for off-formulary Part D pediatric drugs and doses that
are medically appropriate.
18. Applicant‘s exceptions process is not overly burdensome or onerous.
For example, a Part D Sponsor may not require that ALL exception
requests be accompanied by laboratory evidence.
19. Applicant‘s approved non-formulary drugs are assigned to a single
existing tier, unless Applicant elects to apply a second less expensive
level of cost sharing for approved formulary exceptions for generic
drugs, so long as the second level of cost sharing is associated with
an existing formulary tier and is applied uniformly to all approved
formulary exceptions for generic drugs. Applicant may not create a
tier specifically designed for non-formulary exceptions.
20. Applicant does not restrict the number of exception requests
submitted by an enrollee.
21. Applicant will:
Timely effectuate favorable decisions issued by the IRE, an
Administrative Law Judge, the Medicare Appeals Council, or a federal
court, and
Timely notify the IRE when a favorable decision has been effectuated.
22. Applicant will timely forward case files to the IRE (upon request by the
IRE) when an enrollee requests a reconsideration by the IRE and will
prepare and submit the case file consistent with instructions in the
Part D QIC‘s Reconsideration Procedures Manual.
23. Applicant informs its enrollees about the coverage determination
(including exceptions) and appeals process through information
provided in the Evidence of Coverage and outreach materials.
24. Applicant makes available to CMS upon request, coverage
determination (including exceptions) and appeals records and is able
to track all levels of appeal by the appeal number assigned by the
adjudicator (e.g., IRE).

3.10 Coordination of Benefits 42 CFR Part 423 Subpart J; Prescription
Drug Benefit Manual, Chapter 14
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the

69

following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant complies with Chapter 14 of the Prescription Drug Benefit
Manual.
2. Applicant has a system for notifying enrollees when CMS‘ systems
indicate other prescription drug coverage, and requesting enrollees to
concur with new/changed information.
3. Applicant permits SPAPs, ADAPs, IHS, and other third party payers
to coordinate benefits as required by the regulations in 42 CFR Part
423, Subpart J, and Chapter 14 of the Prescription Drug Benefit
Manual. For example, an SPAP may require agreements be signed
in order for the state to pay premiums on behalf of a beneficiary.
CMS expects Part D sponsors to execute these trading partner
agreements within a reasonable timeframe.
4. Applicant pays user fees as required under 42 CFR §423.6 and as
may be required under 42 CFR §423.464 (c).
5. Applicant does not impose fees on SPAPs or other third-party
insurers that are unreasonable and/or unrelated to the cost of
coordination of benefits.
6. Applicant sends updated information captured in the beneficiary COB
notification process about its enrollees‘ other sources of prescription
drug coverage via electronic updates to the COB contractor.
7. Applicant agrees to receive COB files from CMS and update its
systems with these data at least weekly in accordance with the most
current version of the Plan Communications User Guide.
8. When a supplemental payer wishes to pay premiums on behalf of
plan enrollees, Applicant:
As may be required by a supplemental payer, enters into agreements
with, and accept premium payments made by these supplemental
payers;
Suppresses premium billing to the beneficiaries for whom it accepts
premium payments from supplemental payers;
Informs enrollees not to use the SSA withhold when another payer is
paying their premium (in whole or in part); and
Ensures that, the overall premium payment made by or on behalf of a
beneficiary does not vary among plan enrollees (e.g., Sponsor cannot
charge a different premium to SPAPs for their members versus all

70

Yes

No

other enrollees).
9. If Applicant agrees to enter into an agreement with SPAPs, accepting
a risk-based, per capita amount to administer a wrap-around benefit
on behalf of the beneficiary, the Applicant must follow the
requirements set forth in Chapter 14 of the Prescription Drug Benefit
Manual.
10. When the Applicant‘s service area includes States that subsidize a
portion of beneficiary cost-sharing through their SPAPs through a
non-risk lump-sum contract with reconciliation, Applicant:
Enters into an agreement to receive such subsidies;
Applies such subsidies to the first dollar of beneficiary cost sharing
under the Applicant‘s Part D plan; and
Submits claims information to the State to support reconciliation.
11. Applicant provides clear and prominently displayed information
identifying the SPAP as a co-sponsor of benefits when the Applicant
participates in a risk- or non-risk lump sum per capita contract with an
SPAP to provide wrap-around benefits to Part D enrollees.
12. Applicant receives and processes plan to plan reconciliation reports
on a monthly basis.
13. Applicant coordinates the reconciliation of claims when a Part D
sponsor other than the Part D sponsor of record paid claims or when
a non-Part D payer (e.g., SPAP) paid claims and should not have
paid at all or paid out of the correct payer order in accordance with
Chapter 14 of the Prescription Drug Benefit Manual.
14. Applicant coordinates benefits with SPAPs, other entities providing
prescription drug coverage, beneficiaries, and others paying on the
beneficiaries‘ behalf for a period not to exceed three years from the
date on which the prescription for a covered Part D drug was filled.

3.11 Tracking Out-of Pocket Costs (TrOOP) Affordable Care Act §
3314; 42 CFR Part 423 Subpart J; Prescription Drug Benefit
Manual, Chapters 13 and Chapter 14
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:

71

Yes

No

1. Applicant tracks each enrollee‘s true out of pocket (TrOOP) costs
reflecting the amount the enrollee has spent out of pocket during a
program year on covered Part D drugs.
2. Applicant accepts data concerning third party payers in a format
specified by CMS and uses these data in the Applicant‘s TrOOP
calculation process.
3. Applicant processes claims and tracks TrOOP in real time using the
current HIPAA-approved NCPDP standard.
4. Applicant provides enrollees with a report on their TrOOP status at
least monthly if the enrollee‘s TrOOP status has changed.
5. Applicant provides enrollees daily access to their current TrOOP
status through the organization‘s toll-free customer service phone
number.
6. In the event of disenrollment, Applicant provides the TrOOP status of
the beneficiary as of the effective date of the disenrollment to the
beneficiary, if there has been a change in these data since the last
report to the beneficiary.
7. Applicant retroactively adjusts claims and recalculates TrOOP
balances based on Nx transactions received from the TrOOP
Facilitation Contractor that were created based on other than realtime TrOOP-eligible claims.
8. Applicant retroactively adjusts claims and recalculates TrOOP
balances based on receipts received from its Medicare enrollees that
reflect amounts the enrollee paid on other than real-time TrOOPeligible claims.
9. Applicant agrees that when it receives an Nx transaction, but has no
supplemental payer information on file to identify the payer, the
Applicant contacts the beneficiary to identify the payer and sends the
payer information to the COB Contractor via ECRS verification.
10. Applicant retroactively adjusts claims, recalculates TrOOP balances,
and reimburses other payers (when applicable) whenever it receives
information (e.g., an LIS status change) that affects how the Applicant
previously adjudicated a claim, or that indicates an error in the order
of payment when another payer(s) was involved.
11. Applicant may count other payer paid amounts as satisfying the Part
D deductible whether or not the entire amount counts toward TrOOP.

72

12. Applicant has the systems capability to receive and respond to realtime (or batch) transactions requesting TrOOP-related data for
disenrolling Part D beneficiaries as well as to receive these data for
newly enrolling Part D beneficiaries transferring mid-year from
another plan.
13. Applicant agrees that, when an exception to the ATBT process is
required, the Applicant sends TrOOP-related data manually for
disenrolling Part D beneficiaries as well as receives these data
manually for newly enrolling Part D beneficiaries transferring mid-year
from another plan.
14. Applicant has the capacity to integrate data received via electronic
transactions (as well as data received manually when the exception
process is required) into those systems that track and apply
beneficiary-level TrOOP and gross covered prescription drug costs.
15. Applicant treats costs incurred by AIDS Drug Assistance Programs
and Indian Health Services in providing prescription drugs toward the
annual out-of-pocket threshold.

NOTE: For information regarding the TrOOP facilitator, Applicant may link to
http://medifacd.ndchealth.com/home/medifacd_home.htm

3.12 Medicare Secondary Payer 42 CFR §423.462; Prescription Drug
Benefit Manual, Chapter 14
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant is familiar with rules that determine when other payers are
primary or secondary to Medicare as referenced in 42 CFR §423.462.
2. Applicant adheres to MSP laws and any other Federal and State laws
in establishing payers of last resort.
3. Applicant follows the Rules for Coordination of Benefits adopted in the
most current National Association of Insurance Commissioner
Coordination of Benefits Model Regulation.
4. Applicant processes claims in real time to support the TrOOP
facilitation process when it is a secondary payer in accordance with

73

Yes

No

the application of MSP rules.
5. Applicant collects mistaken primary payment from insurers, group
health plans, employer sponsors, enrollees and other entities.
6. Applicant agrees that in situations involving workers‘ compensation,
Black Lung, No-Fault, or Liability coverage to make conditional
primary payment and recover any mistaken payments, unless the
Applicant is already aware that the enrollee has workers‘
compensation, Black Lung, No-Fault, or Liability coverage and has
previously established that a certain drug is being used exclusively to
treat a related injury.

3.13 Marketing/Beneficiary Communications 42 CFR §423.128; 42 CFR
§423.505; Prescription Drug Benefit Manual, Chapter 2
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant complies with marketing guidelines and approval
procedures that are contained with Chapter 2 of the Prescription Drug
Benefit Manual and posted on the www.cms.gov/ website, including
the requirements of the File and Use Certification process.
2. Applicant makes available to beneficiaries only those marketing
materials, notices, and other standardized letters that comply with
CMS‘ marketing guidelines and have been appropriately filed with
CMS through HPMS.
3. Annually and at the time of enrollment, the Applicant provides
enrollees information about the following Part D features, as
described in the marketing guidelines:
Enrollment and Disenrollment Procedures
Beneficiary Procedural Rights
Potential for Contract Termination
Benefits
Types of Pharmacies in the Pharmacy Network
Out-of-network Pharmacy Access
Formulary

74

Yes

No

Premiums and cost-sharing
Service Area
Plan ratings information
4. Applicant provides general coverage information, as well as
information concerning utilization, grievances, appeals, exceptions,
quality assurance, and sponsor financial information to any
beneficiary upon request.
5. Applicant discloses to its enrollees and potential enrollees information
concerning the organization‘s performance and contract compliance
deficiencies as described by CMS.
6. Applicant makes marketing materials available in any language that is
the primary language of at least 5% of the general population in an
Applicant‘s plan benefit package service area.
7. Applicant maintains a toll-free customer service call center that
provides customer telephone service to current and prospective
enrollees in compliance with CMS standards. This means that the
Applicant complies with at least the following:
Call center operates during normal business hours, seven days a
week from 8:00 AM to 8:00 PM for all time zones in which the
Applicant offers a Part D plan during the annual enrollment period and
45 days thereafter.
On Saturdays, Sundays and holidays, from February 15 until the
following annual enrollment period, a customer service representative
or an automated phone system may answer beneficiary calls.
If a beneficiary is required to leave a message in voice mail box due
to the utilization of an automated phone system, the applicant
ensures that a return call to a beneficiary is made in a timely manner,
but no later than one business day from the leaving of the message
by the beneficiary.
The average hold time for a beneficiary to reach a customer service
representative is two minutes or less.
The disconnect rate of all incoming customer calls does not exceed 5
percent.
Call center provides thorough information about the Part D benefit
plan, including co-payments, deductibles, and network pharmacies.
Call center features an explicit process for handling customer
complaints.
Call center provides service to non-English speaking, limited English

75

proficient (LEP), and hearing impaired beneficiaries.
8. Applicant operates an Internet Web site that includes all items
identified in Chapter 2 of the Prescription Drug Benefit Manual and 42
CFR §423.505..
9. Applicant ensures that the marketed and adjudicated formularies are
consistent with the HPMS approved formulary file.
10. Applicant provides its plan enrollees, in a form understandable to
enrollees and on at least a monthly basis for those months in which
the enrollees use their Part D benefits, an explanation of benefits that
states a) the item or service for which payment was made; b) notice
of the enrollee‘s right to an itemized statement; c) a year-to-date
statement of the total Part D benefits provided in relation to
deductibles, coverage limits, and annual out-of-pocket thresholds; d)
cumulative year-to-date total of incurred costs; and e) applicable
formulary changes.
11. Applicant does not include co-branding names and/or logos of
contracted providers or names and/or logos that are substantially
similar to a contracted provider‘s name and/or logo on member
identification cards.
12. Applicant agrees that the subsequent CY Annual Notice of Change
(ANOC) / Summary of Benefits (SB) / Formulary must be received by
members (if applicable) no later than 15 days prior to the start of the
annual election period.
13. Applicant notifies its enrollees that the Applicant will release the
enrollee‘s information, including the enrollee‘s prescription drug event
data, to CMS which may release it for research and other purposes
consistent with all applicable Federal statutes and regulations.
14. Applicant provides initial and renewal compensation to a broker or
agent for the sale of a prescription drug plan consistent with CMSestablished requirements in 42 CFR §423.2274.
15. Applicant ensures that brokers and agents selling Medicare products
are trained and tested on Medicare rules and the specifics of the
plans they are selling, and that they pass with a minimum score as
specified in CMS guidance.

3.14 Provider Communications Prescription Drug Benefit Manual,
Chapter 2
A. In HPMS, complete the table below:

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Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant operates a toll-free call center to respond to inquiries from
pharmacies and providers regarding the Applicant‘s Medicare
prescription drug benefit. Inquiries will concern such operational
areas as claims processing, benefit coverage, claims submission, and
claims payment. This means that the Applicant complies with at least
the following:
Be available 24 hours a day when the pharmacy network includes
pharmacies that are open 24 hours a day;
The average hold time for a pharmacist to reach a customer service
representative is two minutes or less.
The disconnect rate of all incoming calls does not exceed 5 percent.
2. Applicant agrees that it has a ―one-stop‖ area on its website that
provides needed information on the procedures, the forms and the
contact information for their prior authorization, coverage
determination (including exceptions), and appeals processes.
3. Applicant operates a toll-free call center to respond to physicians and
other prescribers for information related to prior authorizations,
coverage determinations (including exceptions), and appeal requests.
The call center operates during normal business hours and never less
than 8:00 a.m. to 6:00 p.m., Monday through Friday according to the
time zones for the regions in which their plans operate.
Applicant may use voicemail provided the message:
Indicates that the mailbox is secure.
Lists the information that must be provided so the case can be
worked (e.g., provider identification, beneficiary identification, type of
request (coverage determination, exception, or appeal), and whether
the request is an expedited or standard request).
For coverage determination (including exception) requests:
articulates and follows a process for resolution within 24 hours of call
for expedited requests, or 72 hours for standard requests.
For appeal requests: articulates and follows a process for resolution
within 72 hours for expedited appeals, and 7 calendar days for
standard appeals.
Provides and follows a process for immediate access in situations

77

Yes

No

where an enrollee‘s life or health is in serious jeopardy.

3.15 Reporting Requirements Affordable Care Act § 6005; 42 CFR
§423.514; 2010 Reporting Requirements
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
Reporting Requirements Guidance
1. Applicant complies with the Reporting Requirements Guidance that is
posted on the www.cms.gov/ website.
2. Applicant agrees that an individual with authority to sign on behalf of
your organization attests that the reporting requirements data has
been audited internally for accuracy.
3. Applicant subjects reporting requirement data to a yearly
independent audit to determine its reliability, validity, completeness,
and comparability in accordance with CMS guidance.
Business Transactions and Financial Requirements
4. Applicant reports, consistent with 42 CFR §423.514(b), information
related to significant business transactions between the Part D plan
sponsor and a party in interest within 120 days of the end of each
fiscal year. This qualification includes combined financial statements,
where required under 42 CFR §423.514(b)(2).
5. Applicant notifies CMS of any loans or other special financial
arrangements made with contractors, first tier, downstream and
related entities as that term is defined in 42 CFR §423.501.
6. Applicant submits audited financial statements to CMS annually.
Claims Data
7. The Applicant or the Applicant‘s representative, such as a first tier,
downstream or related entity, has data management processes and
data systems capable of collecting, storing and protecting electronic
eligibility and claims data. Data to be collected encompasses
quantity, type, and costs of pharmaceutical prescriptions filled for
enrollees. The plan must link this information to Medicare beneficiary

78

Yes

No

identification numbers (HIC#s).
8. The Applicant or the Applicant‘s representative, such as a first tier,
downstream or related entity, has data management processes and
data systems capable of creating and submitting PDE records for
Medicare enrollees for every Part D drug prescription in the format
required by CMS, using batch submission processes. Data to be
submitted encompasses quantity, type and costs of pharmaceutical
prescriptions filled for enrollees. The plan must link this information to
Medicare beneficiary identification numbers (HIC#s).
9. The Applicant or the Applicant‘s representative, such as a first tier,
downstream or related entity, has data management processes and
data systems capable of submitting data to CMS via the Medicare
Data Communications Network (MDCN).
10. The Applicant or the Applicant‘s representative, such as a first tier,
downstream or related entity, has data management processes and
data systems capable of performing data edit and quality control
procedures (including resolution of rejected claims) to ensure
accurate and complete prescription drug data.
11. The Applicant or the Applicant‘s representative, such as a first tier,
downstream or related entity, has data management processes and
data systems capable of correcting all data errors identified by CMS.
12. The Applicant or the Applicant‘s representative, such as a first tier,
downstream or related entity, has data management processes and
data systems capable of collecting data for dates of service within the
coverage year with a 3-month closeout window for the submission of
remaining unreported claims data.
13. The Applicant or the Applicant‘s representative, such as a first tier,
downstream or related entity, has data management processes and
data systems capable of providing additional information for the
purposes of reconciliation of risk factors, low income subsidy
payments, reinsurance payments, and risk corridor as required by
CMS.
Rebate Data
14. The Applicant reports direct and indirect remuneration (DIR) dollars
for payment reconciliation on an annual basis at the Plan Benefit
Package (PBP) level/plan level in the manner specified by CMS. In
addition, the Applicant maintains records and documentation to verify
the DIR data reported to CMS.

79

Other Data
15. Applicant reports at a frequency determined by CMS specified data
(pursuant to 42 CFR §423.514(a)) on a variety of measures to
support payment, program integrity, program management, and
quality improvement activities in a manner prescribed by CMS. Such
data submissions will be accurate and timely.
16. The Applicant provides CMS with routine administrative reports
(pursuant to 42 CFR §423.514 (a)) on a variety of measures that
concern the Applicant‘s performance in the administration of the Part
D benefit. Such reports shall be submitted according to instructions
issued with timely notice by CMS.
Supporting www.medicare.gov
17. The Applicant submits pricing and pharmacy network information to
be publicly reported on www.medicare.gov in order to provide
Medicare beneficiaries with necessary information regarding
prescription drug costs under the respective plans. Details regarding
this data requirement are posted on www.cms.gov by April of the prior
year.
Conflict of Interest
18. The Applicant provides financial and organizational conflict of interest
reports to CMS.
PBM Transparency
19. The Applicant‘s PBM provides information related to PBM
transparency as specified in Section 6005 of the Affordable Care Act.

3.16 Data Exchange between Part D Sponsor and CMS 42 CFR
§423.505(c) and (k)
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
HPMS
1. Applicant uses HPMS to communicate with CMS in support of the
application process, formulary submission process, bid submission

80

Yes

No

process, ongoing operations of the Part D program, and reporting and
oversight activities. Part D sponsors are required to secure access to
HPMS in order to carry out these functions.
Enrollment & Payment
2. Applicant establishes connectivity to CMS as noted in the instructions
provided by the MAPD Help Desk at 1-800-927-8069 or via the MAPD
HelpDesk webpage, www.cms.gov/mapdhelpdesk, in the Plan
Reference Guide for CMS Part C/D Systems link.
3. Applicant obtains CMS User ID and Password.
4. Applicant submits enrollment, disenrollment and change transactions
to communicate membership information to CMS within the
timeframes provided by CMS.
5. Applicant reconciles Part D data to CMS enrollment/payment reports
received daily, weekly and monthly.
6. Applicant completes the review of monthly reports, including
submitting all requests for discrepancy corrections, and submits the
CEO Certification of enrollment data for plan payment within 45 days
of CMS monthly membership payment report availability.
7. Applicant participates in connectivity testing and other system testing
measures as provided to the Applicants prior to contract execution to
validate system setup.
8. Applicant has system(s) to process enrollment and payment
transactions as exchanged with CMS in accordance with system
development lifecycle standards.
9. Applicant ensures appropriate security safeguards and protocols are
in place to protect the protected health information in the system(s).
10. Applicant maintains all pertinent system security and disaster
recovery plans and procedures.
11. In accordance with 42 CFR §423.322, the Applicant provides CMS
with any data required to ensure accurate prospective, interim, and/or
final reconciled payments including, but not limited to, the following:
test data, Prescription Drug Event (PDE) records, enrollment
transactions, Direct and Indirect Remuneration (DIR) data,
discrepancy records, and premium payment data.

81

3.17 Health Insurance Portability and Accountability Act of 1996
(HIPAA), Health Information Technology for Economic and
Clinical Health Act (HITECH), and Related CMS Requirements 45
CFR Parts 160, 162, and 164; CMS issued guidance 08/15/2006
and 08/26/08
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant complies with all applicable standards, implementation
specifications, and requirements in the Standards for Privacy of
Individually Identifiable Health Information, and Security Standards
under 45 CFR Parts 160, 162, and 164.
2. Applicant encrypts all hard drives or other storage media within the
device as well as all removable media.
3. Applicant has policies addressing the secure handling of portable
media that is accessed or used by the organization.
4. Applicant complies with all applicable standards, implementation
specifications, and requirements in the Standard Unique Health
Identifier for Health Care Providers final rule under 45 CFR Parts 160
and 162.
5. Applicant agrees that when its organization receives a National
Provider Identifier (NPI) in prescription drug event data, that the
organization must report an NPI.
6. Applicant agrees to implement a contingency plan related to
compliance with the NPI provisions.
7. Applicant complies with all applicable standards, implementation
specifications, and requirements in the Standards for Electronic
Transactions under 45 CFR Parts 160 and 162.
8. Applicant transmits payment and remittance advice consistent with
the HIPAA-adopted ACS X12N 835, Version 4010/4010A1: Health
Care Claim Payment and Remittance Advice Implementation Guide
(―835‖).
9. Applicant submits the Offshore Subcontract Information and
Attestation via HPMS for each offshore subcontractor (first tier,

82

Yes

No

downstream and related entities) (including downstream offshore
subcontractors‘ first tier, downstream and related entities) that
receive, process, transfer, handle, store, or access Medicare
beneficiary protected health information (PHI) by the last Friday in
September for the upcoming contract year.

3.18 Prohibition on Use of SSN or Medicare ID number on Enrollee ID
Cards Prescription Drug Benefit Manual, Chapter 2
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:

Yes

No

Yes

No

1. Applicant does not use an enrollee‘s Social Security Number (SSN) or
Medicare ID Number on the enrollee‘s identification card.

3.19 Record Retention 42 CFR §423.505(d)
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. The Applicant maintains books, records, documents, and other
evidence of accounting procedures and practices consistent with 42
CFR §423.505(d).
2. Applicant has pharmacies, contracted for the Part D benefit, maintain
prescription records in their original format for the greater of 3 years
or the period required by State law and allow those records to be
transferred to an electronic format that replicates the original
prescription for the remaining 7 years of the 10 year record retention
requirement.
3. Applicant keeps all other records—except prescription records—that
must be retained for Medicare under Part C and Part D in the
format(s) required by State law or at the Applicant‘s discretion.

83

3.20 Prescription Drug Event (PDE) Records; 42 CFR Part 423 Subpart
G; CMS issued guidance 04/27/2006, 06/23/2006, 12/17/20101,
03/01/2011, 03/04/2011, 04/28/2011, 05/16/2011
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:

Yes

No

1. Applicant abides by CMS guidance related to PDE data. Such
guidance includes the 2008 Regional Prescription Drug Event Data
Participant Training Guide and Technical Assistance Resource Guide
which can be found at www.csscoperations.com/new/pdic/pddtraining/pdd-training.html.
2. Applicant submits data and information necessary for CMS to carry
out payment provisions.
3. Applicant submits PDE data on the schedule required by applicable
regulations and CMS guidance.
4. Applicant submits the PDE data in the format described by CMS and
in accordance with the National Council for Prescription Drug
Programs (NCPDP) industry standard format.
5. Applicant meets all data submission deadlines.
6. Applicant pays all Plan-to-Plan payables on time.
7. Applicant complies with Medicare Coverage Gap Discount Program
requirements.
8. Applicant complies with timely response requirements for PDE Data
Quality Reviews posted on the Data Quality Validation website.

3.21 Claims Processing; 42 CFR §423.120(c)(4); 42 CFR §423.466; CMS
issued guidance 04/26/2006, 01/13/2010, and 03/29/2010
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant has an on-line claims processing system that operates in
real time to ensure accurate and timely payment of all claims

84

Yes

No

submitted by network pharmacies on behalf of Part D plan enrollees.
System operates according to the following standards:
98% response within 4 seconds;
99% of all claims paid with no errors;
99% system availability.
2. Applicant has a system designed to:
Pay non-electronic claims submissions from network pharmacies in
accordance with 42 CFR §423.520; and
Pay requests for reimbursement from beneficiaries in accordance with
42 CFR §423.568(b).
3. Applicant has available for CMS inspection a complete description of
your claims adjudication system including:
Hardware and software;
Operating system;
Commercial organization from which Applicant receives pricing files,
including file revision history;
Number of sites processing claims (including disaster recovery backup system);
System volume in covered lives, including the number of transactions
the system can support per day and per hour.
4. Applicant has available to CMS upon request policies and procedures
that include a complete description and flow chart detailing the claims
adjudication process for each:
Contracted network pharmacies;
Paper claims;
Out-of-network pharmacy claims submitted by beneficiaries;
Non-electronic claims submitted by network pharmacies, and other
payers seeking to coordinate benefits;
Batch-processed claims; and
Manual claim entry (e.g. for processing direct member
reimbursement).
5. Applicant has available to CMS upon request policies and procedures
that include a complete description of claim detail management,
including:

85

The length of time that detailed claim information is maintained online
(not less than 12 months);
The data storage process after it is no longer online; and
The length of time that detailed claim information is stored when it is
no longer online (not less than 10 years).
6. Applicant has available to CMS upon request policies and procedures
that include a complete description of the accessibility of this
information for data capture purposes and flow chart of the claims
data retrieval process for each:
Entire claims history file;
File claims adjustments including records of reimbursements and
recoveries due to network pharmacies and beneficiaries; and
Deductible files/ TrOOP/ and gross covered prescription drug cost
accumulator.
7. Applicant has a robust testing process that will identify and correct
any plan configuration errors prior to implementation.
8. Applicant uses HIPAA compliant transactions where applicable.
9. Applicant documents the manner and extent to which it has tested
benefit designs such as drug exclusions or quantity limitations and
plan parameters such as co-payments and benefit intervals (phases).
10. Applicant rapidly adopts any new messaging approved by the
NCPDP Workgroup to adjudicate a Part D claim and appropriately
coordinate benefits in real time.
11. Applicant regularly updates their systems with the most current
information on sanctioned providers and has processes in place to
identify and prevent payment of Part D claims at point-of-sale when
such claims have been prescribed by excluded providers.
12. Applicant assigns and exclusively uses unique Part D identifiers
(RxBin or RxBin/RxPCN) for each individual Part D member.
13. Applicant agrees when it receives information that necessitates a
retroactive claims adjustment, the applicant processes the adjustment
and issues refunds or recovery notices within 45 days of the
applicant‘s receipt of complete information regarding the claims
adjustment.

86

3.22 Premium Billing 42 CFR §423.293; CMS issued guidance
03/08/2007
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:

Yes

No

1. Applicant takes steps to ensure that members are not over billed or
double billed for their monthly premiums. The Applicant will promptly
refund members when billing errors occur.
2. Applicant agrees it cannot prevent excessive billing when a member
exercises their right to have Social Security withholding and has a
secondary payer (e.g., SPAP) paying part of their premium. In such
cases the Applicant promptly reimburses members for overpayments.
3. Applicant does not direct bill a member when the member is already
in Premium Withholding status until the status change with both CMS
and SSA has been confirmed.
4. Applicant agrees that when a member is in Premium Withholding
status and the withheld amount has not been issued by CMS in the
monthly plan payments, the Applicant resolves the matter with CMS
not with the member.

3.23 Consumer Assessment of Healthcare Providers and Systems
(CAHPS) Survey Administration 42 CFR §423.156
A. In HPMS, complete the table below:
Applicant must attest ‗yes‘ to each of the following qualifications to
be approved for a Part D contract. Attest ‗yes‘ or ‗no‘ to each of the
following qualifications by clicking on the appropriate response in
HPMS:
1. Applicant agrees once its enrollment is more than 600 enrollees (as of
July in the preceding contract year), it will contract with an approved
CAHPS survey vendor and pay for the CAHPS data collection costs.
2. Applicant agrees to abide by CMS guidance to the process for
contracting with approved CAHPS survey vendors.

87

Yes

No

Upload in HPMS, in a .pdf format, the following certification:

4 CERTIFICATION
I,

, attest to the following:
(NAME & TITLE)

1. I have read the contents of the completed application and the information contained
herein is true, correct, and complete. If I become aware that any information in this
application is not true, correct, or complete, I agree to notify the Centers for
Medicare & Medicaid Services (CMS) immediately and in writing.
2. I authorize CMS to verify the information contained herein. I agree to notify CMS in
writing of any changes that may jeopardize my ability to meet the qualifications
stated in this application prior to such change or within 30 days of the effective date
of such change. I understand that such a change may result in termination of the
approval.
3. I agree that if my organization meets the minimum qualifications and is Medicareapproved, and my organization enters into a Part D contract with CMS, I will abide
by the requirements contained in Section 3.0 of this Application and provide the
services outlined in my application.
4. I agree that CMS may inspect any and all information necessary including inspecting
of the premises of the Applicant‘s organization or plan to ensure compliance with
stated Federal requirements including specific provisions for which I have attested. I
further agree to immediately notify CMS if despite these attestations I become aware
of circumstances which preclude full compliance by January 1 of the upcoming
contract year with the requirements stated here in this application as well as in Part
423 of 42 CFR of the regulation.
5. I understand that in accordance with 18 U.S.C. §1001, any omission,
misrepresentation or falsification of any information contained in this application or
contained in any communication supplying information to CMS to complete or clarify
this application may be punishable by criminal, civil, or other administrative actions
including revocation of approval, fines, and/or imprisonment under Federal law.
6. I further certify that I am an authorized representative, officer, chief executive officer,
or general partner of the business organization that is applying for qualification to
enter into a Part D contract with CMS.
7. I acknowledge that I am aware that there is operational policy guidance, including
the forthcoming Call Letter, relevant to this application that is posted on the CMS
website and that it is continually updated. Organizations submitting an application in
response to this solicitation acknowledge that they will comply with such guidance
should they be approved for a Part D contract.
Authorized Representative Name (printed)

Title

88

Authorized Representative Signature

Date (MM/DD/YYYY)

89

5 APPENDICES

90

APPENDIX I – Attestation for Employer/Union-Only Group Waiver
Plans (800-Series)
DESIGNATION OF APPLICATION AS ―800 SERIES‖ EGWP ONLY (NO INDIVIDUAL PLANS
WILL BE OFFERED)
Checking the box below is optional. Only check the box below if you are applying to only offer
“800 series” plans under this contract (no plans to individual beneficiaries will be offered). Do
not check the box below if you intend to offer plans to individual beneficiaries and “800 series”
plans under this contract number.
I am hereby designating this application as one which will only offer ―800 series‖ plans. No
plans will be offered to individual Medicare beneficiaries under this contract number.
{Entity MUST complete if it is applying to only offer ―800 series‖ EGWPs (no plans will be
offered to individual Medicare beneficiaries under this contract number).}
EGWP Attestation for Contract _________
1. EGWP SERVICE AREA & PHARMACY ACCESS REQUIREMENTS
PDP Sponsor Applicants may provide coverage to employer group members wherever they
reside (i.e., nationwide). However, in order to provide coverage to retirees wherever they
reside, PDP Sponsor Applicants must set their service areas to include all areas where retirees
may reside during the plan year (i.e., set national service areas).
New PDP Sponsors Offering Individual and “800 Series” Plans – Pharmacy Access:
PDP Sponsors will not initially be required to have retail and other pharmacy networks in place for
those designated EGWP service areas outside of their individual plan service areas. However, in
accordance with employer group waiver pharmacy access policy, pharmacy access sufficient to
meet the needs of enrollees must be in place once the PDP Sponsor enrolls members of an
employer or union group residing in particular geographic locations outside of its individual plan
service area.
New PDP Sponsors Only Offering “800 Series” Plans – Pharmacy Access:
PDP Sponsors only offering ―800 series‖ plans (i.e., no plans will be offered to individual Medicare
beneficiaries under this contract number) will be required to submit retail and other pharmacy
access information (mail order, home infusion, long-term care, I/T/U) for the entire defined EGWP
service area during the application process and demonstrate sufficient access in these areas in
accordance with employer group waiver pharmacy access policy.
I certify that I am an authorized representative, officer, chief executive officer, or general
partner of the business organization that is applying for qualification to offer employer/union-only
group waiver plans in association with my organization‘s Prescription Drug Plan Contract with
CMS. I have read, understand, and agree to comply with the above statement about service
areas and pharmacy access. If I need further information, I will contact one of the individuals
listed in the instructions for this application.

91

{Entity MUST complete for a complete application.}
2. CERTIFICATION
This appendix, along with the underlying 2013 Solicitation for Applications for New Prescription
Drug Plans (PDP) Sponsors, comprises the entire ―800 series‖ EGWP application for PDP
Sponsor. All provisions of the 2013 Solicitation for Applications for New Prescription Drug Plans
(PDP) Sponsors apply to all employer/union-only group waiver plan benefit packages offered by
PDP Sponsor except where the provisions are specifically modified and/or superseded by
particular employer/union-only group waiver guidance, including those waivers/modifications set
forth below (specific sections of the 2013 Solicitation for Applications for New Prescription Drug
Plans (PDP) Sponsor that have been waived or modified for new PDP Sponsor Applicants are
noted in parentheses).
For existing PDP Sponsors, this appendix comprises the entire ―800 series‖ EGWP application
for PDP Sponsor. All provisions of the PDP Sponsor‘s existing contract with CMS apply to all
employer/union-group waiver plan benefit packages offered by PDP Sponsor except where the
provisions are specifically modified and/or superseded by particular employer/union-only group
waiver guidance, including those waivers/modifications set forth below.
I, the undersigned, certify to the following:
1) Applicant is applying to offer new employer/union-only group waiver (―800 series‖)
prescription drug plans (PDPs) and agrees to be subject to and comply with all CMS
employer/union-only group waiver guidance.

In order for new PDP Sponsors to be eligible for the CMS employer group waiver
that allows PDP Sponsors to offer employer/union-only group waiver plan benefit
packages without offering plans to individual beneficiaries, Applicant must
complete the underlying 2013 Solicitation for Applications for New Prescription
Drug Plans (PDP) Sponsors in addition to this appendix.
In order for new PDP Sponsors to be eligible for the CMS employer group waiver
that allows PDP Sponsors to offer employer/union-only group waiver plan benefit
packages without offering plans to individual beneficiaries, Applicant must be
licensed in at least one state. (Section 3.1.2B)
Applicant understands and agrees that it is not required to submit a 2013 Part D
bid (i.e., bid pricing tool) to offer its employer/union-only group waiver plans.
(Section 3.2.6A1)
In order for new PDP Sponsors to be eligible for the CMS employer group waiver
that allows PDP Sponsors to offer employer/union-only group waiver plan benefit
packages without offering plans to individual beneficiaries, Applicant understands
and agrees that as part of its completion of the 2013 Solicitation for Applications
for New Prescription Drug Plan (PDP) Sponsors, it submits retail pharmacy lists
and other pharmacy access submissions (mail order, home infusion, long-term

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care, I/T/U) required at the time of application in Section 3.4 for its entire
designated service area. (Section 3.4)
PDP Sponsor Applicants applying to offer employer/union-only group waiver
plans and plans to individual beneficiaries understand and agree that they are
not initially required to have networks in place for those designated EGWP
service areas outside of their individual plan service areas or submit retail
pharmacy and other pharmacy access submissions (mail order, home infusion,
long-term care, I/T/U) required in Section 3.4 for its designated EGWP service
area. However, access sufficient to meet the needs of enrollees must be in place
once an Applicant enrolls members of an employer or union group residing in
particular geographic locations outside of its individual plan service area.
(Section 3.4)
2) In order to be eligible for the CMS retail pharmacy access waiver of 42 CFR §423.120(a)(1),
Applicant attests that its retail pharmacy network is sufficient to meet the needs of its
enrollees throughout the employer/union-only group waiver PDP‘s service area, including
situations involving emergency access, as determined by CMS. Applicant acknowledges
and understands that CMS may review the adequacy of the Applicant‘s pharmacy networks
and potentially require expanded access in the event of beneficiary complaints or for other
reasons it determines in order to ensure that the Applicant‘s network is sufficient to meet the
needs of its employer group population. (Section 3.4.1A)
3) Applicant agrees to restrict enrollment in its employer/union-only group waiver PDPs to
those Part D eligible individuals eligible for the employer‘s/union‘s employment-based retiree
prescription drug coverage. (Section 3.5A3)
4) Applicant understands that its employer/union-only group waiver PDPs are not included in
the processes for auto-enrollment (for full-dual eligible beneficiaries) or facilitated enrollment
(for other low income subsidy eligible beneficiaries). (Section 3.5A4)
5) Applicant understands that its employer/union-only group waiver plans are not subject to the
requirements contained in 42 CFR §423.48 to submit information to CMS, including the
requirements to submit information (e.g., pricing and pharmacy network information) to be
publicly reported on www.medicare.gov and the Medicare Plan Finder. (Sections 3.7A and
3.16A17)
6) Applicant understands that dissemination materials for its employer/union-only group waiver
PDPs are not subject to the requirements contained in 42 CFR §423.128 to be submitted for
review and approval by CMS prior to use. However, Applicant agrees to submit these
materials to CMS at the time of use in accordance with the procedures outlined in Chapter
12 of the Prescription Drug Benefit Manual. Applicant also understands CMS reserves the
right to review these materials in the event of beneficiary complaints or for any other reason
it determines to ensure the information accurately and adequately informs Medicare
beneficiaries about their rights and obligations under the plan. (Section 3.13A1)
7) Applicant understands that its employer/union-only group waiver PDPs is not subject to the
requirements regarding the timing for issuance of certain dissemination materials, such as
the Annual Notice of Change/ Evidence of Coverage (ANOC/EOC), Summary of Benefits

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(SB), Formulary, and LIS rider when an employer‘s or union‘s open enrollment period does
not correspond to Medicare‘s Annual Coordinated Election Period. For these employers
and unions, the timing for issuance of the above dissemination materials should be
appropriately based on the employer/union sponsor‘s open enrollment period. For example,
the Annual Notice of Change/Evidence of Coverage (ANOC/EOC), Summary of Benefits
(SB), LIS rider, and Formulary are required to be received by beneficiaries no later than 15
days before the beginning of the employer/union group health plan‘s open enrollment
period. The timing for other dissemination materials that are based on the start of the
Medicare plan (i.e., calendar) year should be appropriately based on the employer/union
sponsor‘s plan year. (Section 3.13A12)
8) Applicant understands that the dissemination requirements set forth in 42 CFR §423.128 do
not apply to its employer/union-only group waiver PDPs when the employer/union sponsor is
subject to alternative disclosure requirements (e.g., the Employee Retirement Income
Security Act of 1974 (―ERISA‖)) and complies with such alternative requirements. Applicant
complies with the requirements for this waiver contained in employer/union-only group
waiver guidance, including those requirements contained in Chapter 12 of the Prescription
Drug Benefit Manual. (Sections 3.13A1-A2, A10)
9) Applicant understands that its employer/union-only group waiver plans is not subject to the
Part D beneficiary customer service call center hours and call center performance
requirements. Applicant ensures that a sufficient mechanism is available to respond to
beneficiary inquiries and provides customer service call center services to these members
during normal business hours. However, CMS may review the adequacy of these call
center hours and potentially require expanded beneficiary customer service call center
hours in the event of beneficiary complaints or for other reasons in order to ensure that the
entity‘s customer service call center hours are sufficient to meet the needs of its enrollee
population. (Section 3.13A7)
10) Applicant understands that CMS has waived the requirement that the employer/union-only
group waiver plans must provide beneficiaries the option to pay their premium through
Social Security withholding. Thus, the premium withhold option is not available for enrollees
in Applicant‘s employer/union-only group waiver plans. (Sections 3.5A20 and 3.23A2-A4)
11) This Certification is deemed to incorporate any changes that are required by statute to be
implemented during the term of the contract, and any regulations and policies implementing
or interpreting such statutory provisions.
12) I have read the contents of the completed application and the information contained herein
is true, correct, and complete. If I become aware that any information in this application is
not true, correct, or complete, I agree to notify CMS immediately and in writing.
13) I authorize CMS to verify the information contained herein. I agree to notify CMS in writing
of any changes that may jeopardize my ability to meet the qualifications stated in this
application prior to such change or within 30 days of the effective date of such change. I
understand that such a change may result in termination of the approval.
14) I understand that in accordance with 18 U.S.C. §1001, any omission, misrepresentation or
falsification of any information contained in this application or contained in any
communication supplying information to CMS to complete or clarify this application may be

94

punishable by criminal, civil, or other administrative actions including revocation of approval,
fines, and/or imprisonment under Federal law.
15) I acknowledge that I am aware that there is operational policy guidance, including the
forthcoming Call Letter, relevant to this application that is posted on the CMS website and
that it is continually updated. Organizations submitting an application in response to this
solicitation acknowledge that they comply with such guidance at the time of the application
submission date.
I certify that I am an authorized representative, officer, chief executive officer, or general
partner of the business organization that is applying for qualification to offer employer/union-only
group waiver plans (―800 series‖ EGWPs) in association with my organization‘s PDP Contract
with CMS. I have read and agree to comply with the above certifications.
{Entity MUST check box for a complete application.}
{Entity MUST create 800-series PBPs during plan creation and designate EGWP service areas.}

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APPENDIX II—Direct Contract PDP Attestation
Direct Contract PDP Attestations For Contract _________
1. SERVICE AREA & PHARMACY ACCESS REQUIREMENTS
In general, Part D plans can only cover beneficiaries in the service areas in which they are licensed
and approved by CMS to offer benefits. CMS has waived this requirement for Direct Contract PDP
Sponsors. Direct Contract PDP Sponsors can extend coverage to all of their retirees, regardless of
whether they reside in one or more other PDP regions in the nation. In order to provide coverage to
retirees wherever they reside, Direct Contract PDP Sponsors must set their service areas to include
all areas where retirees may reside during the plan year (no mid-year service area expansions
will be permitted). Applicants are required to submit retail and other pharmacy access information
(mail order, home infusion, long-term care, I/T/U) for the entire defined service area during the
application process and demonstrate sufficient access in these areas in accordance with employer
group waiver pharmacy access policy.
I certify that I am an authorized representative, officer, chief executive officer, or general
partner of the business organization that is applying for qualification to offer employer/union-only
Direct Contract PDP. I have read, understand, and agree to comply with the above statement
about service areas and pharmacy access. If I need further information, I will contact one of the
individuals listed in the instructions for this application.
{Entity MUST complete for a complete application.}
2. CERTIFICATION
All provisions of the underlying 2013 Solicitation for Applications for New Prescription Drug
Plans (PDP) Sponsors apply to all plan benefit packages offered by PDP Sponsor except where
the provisions are specifically modified and/or superseded by particular employer/union-only
group waiver guidance, including those waivers/modifications set forth below (specific sections
of the underlying application that have been waived or modified for new PDP Sponsor
Applicants are noted in parentheses).
I, the undersigned, certify to the following:
1) Applicant is applying to offer new employer/union Direct Contract prescription drug plans
(PDPs) and agrees to be subject to and comply with all CMS employer/union-only group
waiver guidance.
2) Applicant must complete and submit the underlying 2013 Solicitation for Applications for
New Prescription Drug Plans (PDP) Sponsors in addition to this Appendix in its entirety.
The 2013 Solicitation for Applications for New Prescription Drug Plans (PDP) Sponsors
along with the Appendix entitled ―Part D Financial Solvency & Capital Adequacy
Documentation‖ and this attestation comprise a new Direct Contract PDP Sponsor
Applicant‘s entire application.
3) A Part D Sponsor must 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
its coverage (42 CFR §423.504(b)(2)). However, CMS has waived the state licensing
requirement for all Direct Contract PDP Sponsors along with the requirement to be a
nongovernmental legal entity (42 CFR §423.4). As a condition of this waiver, Applicant

96

meets the financial solvency and capital adequacy standards contained in the Appendix
entitled ―Part D Financial Solvency and Capital Adequacy Documentation‖ of this
application. (Sections 3.1.1A1 and 3.1.2)
4) Applicant is not required to submit a 2013 Part D bid (i.e., bid pricing tool) to offer its Direct
Contract PDP. (Section 3.2.6A1)
5) Applicant restricts enrollment in its Direct Contract PDP to those Part D eligible individuals
eligible for the Direct Contract PDP‘s employment-based retiree prescription drug coverage.
Applicant does not enroll active employees into its Direct Contract PDP. (Sections 3.5A3)
6) In order to be eligible for the CMS retail pharmacy access waiver of 42 CFR §423.120(a)(1),
Applicant attests that its retail pharmacy network is sufficient to meet the needs of its
enrollees throughout the Direct Contract PDP‘s service area, including situations involving
emergency access, as determined by CMS. Applicant acknowledges and understands that
CMS reviews the adequacy of the Applicant‘s pharmacy networks and may potentially
require expanded access in the event of beneficiary complaints or for other reasons it
determines in order to ensure that the Applicant‘s network is sufficient to meet the needs of
its employer group population. (Section 3.4.1A1)
7) Applicant understands and agrees that as part of its completion of the underlying 2013
Solicitation for Applications for New Prescription Drug Plans (PDP) Sponsors, submits retail
pharmacy access and other pharmacy access submissions (mail order, home infusion, longterm care, I/T/U) required at the time of application in Section 3.4 for its entire designated
service area. (Section 3.4)
8) Applicant understands that its Direct Contract PDP is not included in the processes for autoenrollment (for full-dual eligible beneficiaries) or facilitated enrollment (for other low income
subsidy eligible beneficiaries). (Sections 3.2.6A2 and 3.5A4)
9) Applicant understands that CMS has waived the requirement that the Direct Contract PDP
provide beneficiaries the option to pay their premium through Social Security withholding.
Thus, the premium withhold option is not available for enrollees in Applicant‘s Direct
Contract PDP. (Sections 3.5.A20 and 3.23A2-A4)
10) Applicant understands that dissemination materials for its Direct Contract PDP are not
subject to the requirements contained in 42 CFR §423.128 to be submitted for review and
approval by CMS prior to use. However, Applicant agrees to submit these materials to CMS
at the time of use in accordance with the procedures outlined in Chapter 12 of the
Prescription Drug Benefit Manual. Applicant also understands that CMS reserves the right
to review these materials in the event of beneficiary complaints or for any other reason it
determines to ensure the information accurately and adequately informs Medicare
beneficiaries about their rights and obligations under the plan. (Section 3.13A1)
11) Applicant understands that its Direct Contract PDP is not subject to the requirements
regarding the timing for issuance of certain dissemination materials, such as the Annual
Notice of Change/ Evidence of Coverage (ANOC/EOC), Summary of Benefits (SB),
Formulary, and LIS rider when an employer‘s or union‘s open enrollment period does not
correspond to Medicare‘s Annual Coordinated Election Period. For these employers and
unions, the timing for issuance of the above dissemination materials should be appropriately
based on the employer/union sponsor‘s open enrollment period. For example, the Annual

97

Notice of Change/Evidence of Coverage (ANOC/EOC), Summary of Benefits (SB), LIS rider,
and Formulary are required to be received by beneficiaries no later than 15 days before the
beginning of the employer/union group health plan‘s open enrollment period. The timing for
other dissemination materials that are based on the start of the Medicare plan (i.e.,
calendar) year should be appropriately based on the employer/union sponsor‘s plan year.
(Section 3.13A12)
12) Applicant understands that the dissemination requirements set forth in 42 CFR §423.128 do
not apply to its Direct Contract PDP when the employer/union sponsor is subject to
alternative disclosure requirements (e.g., the Employee Retirement Income Security Act of
1974 (―ERISA‖)) and complies with such alternative requirements. Applicant complies with
the requirements for this waiver contained in employer/union-only group waiver guidance,
including those requirements contained in Chapter 12 of the Prescription Drug Benefit
Manual. (Sections 3.13A1-A2, A10)
13) Applicant understands that its Direct Contract PDP is not subject to the requirements
contained in 42 CFR §423.48 to submit information to CMS, including the requirements to
submit information (e.g., pricing and pharmacy network information) to be publicly reported
on www.medicare.gov and the Medicare Plan Finder. (Sections 3.7A and 3.16A17)
14) Applicant understands that its Direct Contract PDP is not subject to the Part D beneficiary
customer service call center hours and call center performance requirements. Applicant has
a sufficient mechanism available to respond to beneficiary inquiries and provides customer
service call center services to these members during normal business hours. However,
CMS may review the adequacy of these call center hours and potentially require expanded
beneficiary customer service call center hours in the event of beneficiary complaints or for
other reasons in order to ensure that the entity‘s customer service call center hours are
sufficient to meet the needs of its enrollee population. (Section 3.13A7)
15) Applicant understands that the management and operations requirements of 42 CFR
§423.504(b)(4)(i)-(iii) are waived if the employer or union (or to the extent applicable, the
business associate with which it contracts for prescription drug benefit services) is subject to
ERISA fiduciary requirements or similar state or federal law standards. However, Applicant
understands that it (or its business associates) are not relieved from the record retention
standards applicable to other Part D Sponsors set forth in 42 CFR §423.505(d). (Section
3.20A1-A3)
16) In general, Part D plan Sponsors must report certain information to CMS, to their enrollees,
and to the general public (such as the cost of their operations and financial statements)
under 42 CFR §423.514(a). Applicant understands that in order to avoid imposing
additional and possibly conflicting public disclosure obligations that would hinder the offering
of employer sponsored group plans, CMS modifies these reporting requirements for Direct
Contract PDPs to allow information to be reported to enrollees and to the general public to
the extent required by other law (including ERISA or securities laws), or by contract.
(Section 3.16.A15-A16)
17) This Certification is deemed to incorporate any changes that are required by statute to be
implemented during the term of the contract, and any regulations and policies implementing
or interpreting such statutory provisions.

98

18) I have read the contents of the completed application and the information contained herein
is true, correct, and complete. If I become aware that any information in this application is
not true, correct, or complete, I agree to notify CMS immediately and in writing.
19) I authorize CMS to verify the information contained herein. I agree to notify CMS in writing
of any changes that may jeopardize my ability to meet the qualifications stated in this
application prior to such change or within 30 days of the effective date of such change. I
understand that such a change may result in termination of the approval.
20) I understand that in accordance with 18 U.S.C. §1001, any omission, misrepresentation or
falsification of any information contained in this application or contained in any
communication supplying information to CMS to complete or clarify this application may be
punishable by criminal, civil, or other administrative actions including revocation of approval,
fines, and/or imprisonment under Federal law.
21) I acknowledge that I am aware that there is operational policy guidance, including the
forthcoming Call Letter, relevant to this application that is posted on the CMS website and
that it is continually updated. Organizations submitting an application in response to this
solicitation acknowledge that they will comply with such guidance at the time of the
application submission date.
I certify that I am an authorized representative, officer, chief executive officer, or general
partner of the business organization that is applying for qualification to offer employer/union-only
Direct Contract plans in association with my organization‘s PDP Contract with CMS. I have
read and agree to comply with the above certifications.
{Entity MUST check box for a complete application.}

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APPENDIX III -- Part D Financial Solvency & Capital Adequacy
Documentation
(For Direct PDP Contract applicants only)
Background and Instructions:
A PDP Sponsor generally must be licensed by at least one state as a risk-bearing entity (42
CFR §423.401(a)(1)). CMS has waived the requirement for Direct Contract PDP Sponsors.
Direct Contract PDP Sponsors are not required to be licensed, but must meet CMS Part D
financial solvency and capital adequacy requirements. Each Direct Contract PDP Sponsor
Applicant must demonstrate that it meets the requirements set forth in this Appendix and
provide all required information set forth below. CMS may in its discretion approve, on a caseby-case basis, waivers of such requirements upon a demonstration from the Direct Contract
PDP Sponsor Applicant that its fiscal soundness is commensurate with its financial risk and that
through other means the entity can assure that claims for benefits paid for by CMS and
beneficiaries will be covered. In all cases, CMS requires that the employer‘s/union‘s contracts
and sub-contracts provide beneficiary hold harmless provisions.
The information required in this Appendix must be submitted electronically through HPMS as a
supporting documentation upload to the Licensure and Solvency section of the Part D
supporting file section in accordance with the instructions contained in this application.

I. EMPLOYER/UNION ORGANIZATIONAL INFORMATION
A. Complete the information in the table below.
IDENTIFY YOUR ORGANIZATION BY PROVIDING THE FOLLOWING INFORMATION:
Organization‘s Full Legal Name:

Full Address of Your Organization‘s Headquarters (Street, City, State, Zip):

Type of Entity (place a checkmark in all applicable boxes):
Employer
Fund established by one or more employers or labor organizations
Union
Government

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Church Group
Publicly-Traded Corporation
Privately- Held Corporation
Other (list type) ____________
Name of Your Organization‘s Parent Organization, if any:

Is Applicant subject to ERISA?
Yes

Tax Status:

No

For Profit

Not-for-Profit

State in Which your Organization is Incorporated or Otherwise Organized to do Business:

B. Summary Description
Briefly describe the organization in terms of its history and its present operations. Cite significant
aspects of its current financial, general management, and health services delivery activities.
Please include the following:
1.

2.

3.

4.

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5.

If the Applicant is a state agency, labor organization, or a trust established by one or
more employers or labor organizations, Applicant must provide the required
information listed below:
1. State Agencies:
If Applicant is a state agency, instrumentality or subdivision, please provide the
relationship between the entity that is named as the Direct Contract PDP Applicant and
the state or commonwealth with respect to which the Direct Contract PDP Applicant is
an agency, instrumentality or subdivision. Also, Applicant must provide the source of
Applicant‘s revenues, including whether applicant receives appropriations and/or has the
authority to issue debt.
2. Labor Organizations:
If Applicant is a labor organization including a fund or trust, please provide the
relationship (if any) between Applicant and any other related labor organizations such as
regional, local or international unions, or welfare funds sponsored by such related labor
organizations. If Applicant is a jointly trusteed Taft-Hartley fund, please include the
names and titles of labor-appointed and management-appointed trustees.
3. Trusts:
If Applicant is a trust, such as a voluntary employee beneficiary association under
Section 501(c)(9) of the Internal Revenue Code, please provide the names of the
individual trustees and the bank, trust company or other financial institution that has
custody of Applicant‘s assets.
D. Policymaking Body (42 CFR §423.504(b)(4)(i)-(iii)
In general, an entity seeking to contract with CMS as a Direct Contract PDP Sponsor must have
policymaking bodies exercising oversight and control to ensure actions are in the best interest of
the organization and its enrollees, appropriate personnel and systems relating to medical
services, administration and management, and an executive manager whose appointment and
removal are under the control of the policymaking body.
An employer or union directly contracting with CMS as a Direct Contract PDP Sponsor may be
subject to other, potentially different standards governing its management and operations, such
as ERISA fiduciary requirements, state law standards, and certain oversight standards created
under the Sarbanes-Oxley Act. In most cases, they will also contract with outside vendors (i.e.,
business associates) to provide health benefit plan services. To reflect these issues and avoid
imposing additional (and potentially conflicting) government oversight that may hinder
employers and unions from considering applying to offer Direct Contract PDPs, the
management and operations requirements under 42 CFR §423.504(b)(4)(i)-(iii) are waived if the
employer or union (or to the extent applicable, the business associate with which it contracts for

102

health benefit plan services) is subject to ERISA fiduciary requirements or similar state or
federal laws and standards. However, such entities (or their business associates) are not
relieved from the record retention standards applicable to other PDP Sponsors. In accordance
with the terms of this waiver, please provide the following information:
1. List the members of the organization's policymaking body (name, position, address,
telephone number, occupation, term of office and term expiration date). Indicate
whether any of the members are employees of the Applicant.
2. If the Applicant is a line of business versus a legal entity, does the Board of Directors of
the corporation serve as the policymaking body of the organization? If not, describe the
policymaking body and its relationship to the corporate Board.
3. Does the Federal Government or a State regulate the composition of the policymaking
body? If yes, please identify all Federal and State regulations that govern your
policymaking body (e.g., ERISA).

II. FINANCIAL DOCUMENTATION
A. Minimum Net Worth: $1.5 Million - Documentation of Minimum Net Worth
The Direct Contract PDP Applicant must demonstrate financial solvency through furnishing two
years of independently audited financial statements to CMS. If the Direct Contract PDP
Applicant has not been in operation at least twelve months, it may choose to: 1) obtain
independently audited financial statements for a shorter time period; or 2) demonstrate that it
has the minimum net worth through presentation of un-audited financial statements that contain
sufficient detail to allow CMS to verify the validity of the financial presentation. The un-audited
financial statement must be accompanied by an actuarial opinion from a qualified actuary
regarding the assumptions and methods used in determining loss reserves, actuarial liabilities
and related items.
A ―qualified actuary‖ for purposes of this application means a member in good standing of the
American Academy of Actuaries, a person recognized by the Academy as qualified for
membership, or a person who has otherwise demonstrated competency in the field of actuarial
science and is satisfactory to CMS.
If the Direct Contract PDP Applicant‘s auditor is not one of the 10 largest national accounting
firms in accordance with the list of the 100 largest public accounting firms published by the CCH
Public Accounting Report, the Applicant should enclose proof of the auditor‘s good standing
from the relevant state board of accountancy.
B. Liquidity
The Direct Contract PDP Applicant must have sufficient cash flow to meet its financial
obligations as they become due. The amount of the minimum net worth requirement to be met
by cash or cash equivalents is $750,000. Cash equivalents are short-term highly liquid
investments that can be readily converted to cash. To be classified as cash equivalents,
investments must have a maturity date not longer than 3 months from the date of purchase.
1. In determining the ability of a Direct Contract PDP Applicant to meet this requirement,
CMS will consider the following:

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a) The timeliness of payment,
b) The extent to which the current ratio is maintained at 1:1 or greater, or
there is a change in the current ratio over a period of time; and

whether

c) The availability of outside financial resources.
2. CMS may apply the following corresponding corrective remedies:
a) If a PDP Sponsor fails to pay obligations as they become due, CMS will require the
PDP Sponsor to initiate corrective action to pay all overdue obligations.
b) CMS may require the PDP Sponsor to initiate corrective action if any of the
following are evident:
(i) The current ratio declines significantly; or
(ii) A continued downward trend in the current ratio. The corrective action may
include a change in the distribution of assets, a reduction of liabilities, or
alternative arrangements to secure additional funding to restore the current ratio
to at least 1:1.
c) If there is a change in the availability of outside resources, CMS will require the PDP
Sponsor to obtain funding from alternative financial resources.
C. Methods of Accounting
A Direct Contract PDP Applicant generally must use the standards of Generally Accepted
Accounting Principles (GAAP). Generally Accepted Accounting Principles (GAAP) are those
accounting principles or practices prescribed or permitted by the Financial Accounting
Standards Board. However, a Direct Contract PDP Sponsor whose audited financial statements
are prepared using accounting principles or practices other than GAAP, such as a governmental
entity that reports in accordance with the principles promulgated by the Governmental
Accounting Standards Board (GASB), may utilize such alternative standard.
D. Bonding and Insurance
A Direct Contract PDP Applicant may request a waiver in writing of the bonding and/or
insurance requirements set forth at 42 CFR §423.504(b)(4)(iv) and (v). Relevant considerations
will include demonstration that either or both of the foregoing requirements are unnecessary
based on the entity‘s individualized circumstances, including maintenance of similar coverage
pursuant to other law, such as the bonding requirement at ERISA Section 412.
E. Additional Information
A Direct Contract PDP Applicant must furnish the following financial information to CMS to the
extent applicable:
1. Self-Insurance/Self Funding: If the Direct Contract PDP Applicant‘s health plan(s) are
self-insured or self-funded, it must forward proof of stop-loss coverage (if any) through
copies of policy declarations.

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2. Trust: If the Direct Contract PDP Applicant maintains one or more trusts with respect to
its health plan(s), a copy of the trust documents, and if the trust is intended to meet the
requirements of Section 501(c)(9) of the Internal Revenue Code, the most recent IRS
approval letter.
3. Forms 5500 and M-1: The two most recent annual reports on Forms 5500 and M-1 (to
the extent applicable) for the Direct Contract PDP Applicant‘s health plans that cover
prescription drugs for retirees that are Part D eligible individuals.
4. ERISA Section 411(a) Attestation: Each applicant (including an applicant that is
exempt from ERISA) must provide a signed attestation that no person serves as a
fiduciary, administrator, trustee, custodian, counsel, agent, employee, consultant,
adviser or in any capacity that involves decision-making authority, custody, or control of
the assets or property of any employee benefit plan sponsored by the Direct Contract
PDP Applicant if he or she has been convicted of, or has been imprisoned as a result of
his or her conviction of, one of the felonies set forth in ERISA Section 411(a), for 13
years after such conviction or imprisonment (whichever is later).
5. Defined Benefit Pension Plan: If the Direct Contract PDP Applicant sponsors one or
more defined benefit pension plans (within the meaning of ERISA Section 3(35)) that is
subject to the requirements of Title IV of ERISA, the latest actuarial report for each such
plan.
6. Multi-Employer Pension Plan: If the Direct Contract PDP Applicant is a contributing
employer with respect to one or more multi-employer pension plans within the meaning
of ERISA Section 3(37), the latest estimate of contingent withdrawal liability.
7. Tax-Exempt Applicants Only: A copy of the most recent IRS tax-exemption.

III. INSOLVENCY REQUIREMENTS
A. Hold Harmless and Continuation of Coverage/Benefits
A Direct Contract PDP Applicant shall be subject to the same hold harmless and continuation of
coverage/benefit requirements as Medicare Advantage contractors.
B. Insolvency Deposit
A Direct Contract PDP Applicant generally must forward confirmation of its establishment and
maintenance of an insolvency deposit of at least $100,000, to be held in accordance with CMS
requirements by a qualified U. S. Financial Institution. A ―qualified financial institution‖ means
an institution that:
1. Is organized or (in the case of a U.S. office of a foreign banking organization) licensed
under the laws of the United States or any state thereof; and
2. Is regulated, supervised, and examined by the U.S. Federal or State authorities having
regulatory authority over banks and trust companies.

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A Direct Contract PDP Applicant may request a waiver in writing of this requirement.

IV. GUARANTEES (only applies to an Applicant that utilizes a Guarantor)
A. General Policy
A Direct Contract PDP Applicant, or the legal entity of which the Direct Contract PDP Applicant
is a component, may apply to CMS to use the financial resources of a Guarantor for the purpose
of meeting the requirements of a Direct Contract PDP Applicant set forth above. CMS has the
sole discretion to approve or deny the use of a Guarantor.
B. Request to Use a Guarantor
To apply to use the financial resources of a Guarantor, a Direct Contract PDP Applicant must
submit to CMS:
1. Documentation that the Guarantor meets the requirements for a Guarantor under
paragraph (C) of this section; and
2. The Guarantor's independently audited financial statements for the current year-to-date
and for the two most recent fiscal years. The financial statements must include the
Guarantor's balance sheets, profit and loss statements, and cash flow statements.
C. Requirements for Guarantor
To serve as a Guarantor, an organization must meet the following requirements:
1. Is a legal entity authorized to conduct business within a State of the United States.
2. Not be under Federal or State bankruptcy or rehabilitation proceedings.
3. Have a net worth (not including other guarantees, intangibles and restricted reserves)
equal to three times the amount of the PDP Sponsor guarantee.
4. If a State insurance commissioner or other State official with authority for risk-bearing
entities regulates the Guarantor, it must meet the net worth requirement in Section II.A
above with all guarantees and all investments in and loans to organizations covered by
guarantees excluded from its assets.
5. If the Guarantor is not regulated by a State insurance commissioner or other similar
State official, it must meet the net worth requirement in Section II.A above with all
guarantees and all investments in and loans to organizations covered by a guarantee
and to related parties (subsidiaries and affiliates) excluded from its assets.
D. Guarantee Document
If the guarantee request is approved, a Direct Contract PDP Applicant must submit to CMS a
written guarantee document signed by an appropriate Guarantor. The guarantee document
must:
1. State the financial obligation covered by the guarantee;

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2. Agree to:
a) Unconditionally fulfill the financial obligation covered by the guarantee; and
b) Not subordinate the guarantee to any other claim on the resources of the Guarantor;
3. Declare that the Guarantor must act on a timely basis, in any case not more than 5
business days, to satisfy the financial obligation covered by the guarantee; and
4. Meet any other conditions as CMS may establish from time to time.
E. Ongoing Guarantee Reporting Requirements
A Direct Contract PDP Sponsor must submit to CMS the current internal financial statements
and annual audited financial statements of the Guarantor according to the schedule, manner,
and form that CMS requires.
F. Modification, Substitution, and Termination of a Guarantee
A Direct Contract PDP Sponsor cannot modify, substitute or terminate a guarantee unless the
Direct Contract PDP Sponsor:
1. Requests CMS's approval at least 90 days before the proposed effective date of the
modification, substitution, or termination;
2. Demonstrates to CMS's satisfaction that the modification, substitution, or termination will
not result in insolvency of the Direct Contract PDP Applicant; and
3. Demonstrates how the Direct Contract PDP Applicant will meet the requirements of this
section.
G. Nullification
If at any time the Guarantor or the guarantee ceases to meet the requirements of this section,
CMS will notify the Direct Contract PDP Sponsor that it ceases to recognize the guarantee
document. In the event of this nullification, a Direct Contract PDP Sponsor must:
1. Meet the applicable requirements of this section within 15 business days; and
2. If required by CMS, meet a portion of the applicable requirements in less than the 15
business days in paragraph (G.1.) of this section.

V. ONGOING REPORTING REQUIREMENTS
An approved Direct Contract PDP Applicant is required to update financial information set forth
in Sections II and III above to CMS on an ongoing basis. The schedule, manner, and form of
reporting will be in accordance with CMS requirements.

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APPENDIX IV – Federal Waiver of State Licensure
Only if applying to request a federal waiver of state licensure requirement for
Prescription Drug Plan then download, complete and upload into HPMS the following
form:
Application to Request Federal Waiver of State Licensure Requirement for
Prescription Drug Plan (PDP)
I. Complete the table below.
Contract# ________________
Identify the corporation seeking waiver of state licensure requirement for PDP
plan
Full Legal Corporate Name:

D.B.A:

Full Address of Corporation: (Street, City, State, Zip – No Post Office Boxes):

Corporation Telephone Number:

Corporation Fax Number:

Provide the corporation‘s contact information for the person who will act as the
main contact
Name of Individual:

Title:

Address of Individual: (Street, City, State, Zip – No Post Office Boxes):

Direct Telephone Number:

Fax Number:

Email Address:

II. Request
I, on behalf of the legal entity identified in Section A, above, hereby request that the
Secretary of the Department of Health and Human Services, pursuant to the authority
granted under Section 1855(a) (2) and Section 1860D-12(c) of the Social Security Act,
grant a waiver of the requirement that our organization be licensed under (Name of
State or for Regional Plan Waiver, States) ________________ State laws as a riskbearing entity eligible to sponsor prescription drug benefits coverage.
III. Certification

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The undersigned officer has read this completed request for federal waiver form and
does hereby declare that the facts, representations, and statements made in this form
together with any attached information are true and complete to the best of my
knowledge, information, and belief. The information herein declared by me represents
matters about which I am competent, qualified, and authorized to represent the
corporation. If any events, including the passage of time, should occur that materially
change any of the answers to this request for federal waiver, the corporation agrees to
notify the Centers for Medicare & Medicaid services immediately.
Corporate Name: __________________________
Date: _______________________________
By: ______________________________________
Print Name: _______________________________
Title: _____________________________________
Witness/Attest: ____________________________
IV. Instructions for completing the cover sheet of licensure waiver application
Section A

Contract #____________

Enter the corporate name
Enter the name under which your PDP will do business (D.B.A)
Enter the street address, telephone number and facsimile number of the Corporation
at its corporate headquarters
Enter the name, title, telephone number, fax number, and email address of the main
contact person
Section B
Indicate the State for which you are requesting a waiver or the States for which you
are requesting a Regional Plan Waiver
Section C
Have a duly appointed corporate officer sign and date this form in the presence of a
witness
If you have any questions regarding this form please contact:
Joseph Millstone
410-786-2976
Instructions Follow

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(THIS SECTION FOR OFFICIAL USE ONLY)

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Supporting Documentation for Request of Federal Waiver of State Licensure
Requirement for Prescription Drug Plan (PDP) Sponsors
Complete Sections II and IV
I. Background and Purpose
This waiver request form is for use by Applicants who wish to enter into a contract with
the Centers for Medicare and Medicaid Services (CMS) to become Prescription Drug
Plan (PDP) sponsors and provide prescription drug plan benefits to eligible Medicare
beneficiaries without a State risk-bearing entity license.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
generally requires Applicants who wish to become PDP sponsors to be licensed under
State law as a risk-bearing entity eligible to offer health insurance or health benefits
coverage in each State in which the Applicant wishes to offer a PDP. However, the
MMA created several exceptions to this State licensure requirement.
In general, there are 2 types of waivers – both of which are more fully explained in
Section II below. The waivers are: (1) Single State waivers. For these waivers, the
Applicant should submit a separate waiver request for each State, and the waiver is
effective only with respect to the single State. (2) Regional plan waivers. These waivers
may be obtained if an Applicant is licensed in one State in a region and wishes to
receive a waiver for all the other States in the region in which it is not licensed. In this
case, the entity need only submit one waiver request – not one for each and every State
in which it is not licensed.
Waiver requests should be submitted to CMS using the criteria described below.
Approval of a waiver request, in no way suggests that the Applicant is approved for a
Medicare contract with CMS. In addition to approval of a waiver request, the Applicant is
required to submit a Medicare contract application that demonstrates that the Applicant
meets the Federal definition of a PDP sponsor and that the prescription drug plan being
offered meets all plan requirements for PDPs.
Waiver Applicants must also comply with CMS standards for financial solvency and
capital adequacy.
II. Waiver Eligibility
The following constitute the waivers available to Applicants. These are the sole grounds
for receiving waivers.
A. Single State Waiver

The Applicant is requesting a single state waiver for the following state: _________.

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Please indicate in your response to section IV. (Information to be included in this
request/ the grounds upon which you are requesting a waiver (cover all applicable
areas).)
1. The State has failed to complete action on a licensing application within 90 days

of the date of the State‘s receipt of a substantially complete application. 42 CFR
§423. 410(b) (1).
a) In order to apply for a CMS waiver based on the ground that a State did not

act within 90 days of receiving a substantially complete application, the State
must have had a substantially complete application for at least 90 days at the
time the waiver applicant applies to CMS for a waiver. Therefore, in order to
use this ground as a basis for a waiver, any new State license application
must have been received by a State(s) no later than November 1, 2011. This
will insure that the State had time to confirm ―the receipt and completeness of
the application‖ which is necessary to establish that the 90-day period has
been met. A state‘s denial of an application that was not complete does not
create grounds for waiver approval.
2. The State does not have a licensing process in effect with respect to PDP

sponsors. 42 CFR §423.410(c).
3. The State has denied the license application on the basis of one of the following:
a) 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
b) the State requires, as a condition of licensure, the Applicant to offer any

product or plan other than a PDP. 42 CFR §423.410(b)(2).
4. The State has denied the licensure application, in whole or in part, for one of the
following reasons:
a) on the basis of the Applicant‘s failure to meet solvency requirements that are
different from the solvency standards developed by CMS; or
b) the State has imposed, as a condition of licensing, any documentation or

information requirements relating to solvency that are different from the
information or documentation requirements in the solvency standards
developed by CMS. 42 CFR §423.410(b)(3).
5. The State has denied the licensure application on the basis of grounds other than

those required under Federal law. 42 CFR §423.410(b)(4).

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NOTE: To meet the conditions for CMS to grant a state licensure waiver
pursuant to 42 CFR §423.410(b), the waiver applicant must demonstrate that by
the time the waiver application is submitted to CMS, either:
a) The State failed to complete action on the licensing application within 90 days

of the date that the state received a substantially complete application.
States must confirm the receipt and completeness of the application, which is
necessary to establish that the 90-day period has been met; or
b) The State denied the substantially complete license application for one of the

reasons specified in 42 CFR §423.410 (b)(2) through (b)(4), relating to Single
State Waivers.
B. Regional Plan Waivers

The Applicant is State-licensed in the State(s) of __________________ and is applying
for a regional plan waiver in the following region(s): __________________________ as
provided under 42 CFR §423.415(a). The Applicant must demonstrate that it submitted
a substantially complete licensure application in each State in the region for which it
does not already have State licensure, except that no such application is necessary if
CMS determines that the State does not have a licensing process for potential PDP
sponsors.
III. Waiver Duration
A. Single State Waiver

The Single State waiver listed in II.A is effective for up to 36 months only and cannot be
renewed unless CMS determines that the State in question does not have a licensing
process in effect with respect to PDP sponsors. Thus, prior to the CMS renewal notice
deadline for the fourth year the PDP sponsor must be State-licensed if it wishes to
continue as a PDP sponsor and receive a contract for the subsequent year, unless CMS
determines that the State in question has chosen not to create a licensing process for
PDP sponsors – in which case the waiver can continue until CMS determines that a
licensure process has been created. Single State waivers automatically terminate if the
PDP sponsor obtains State licensure.
B. Regional Plan Waivers

The Regional Plan waivers expire at the end of the time period the Secretary
determines is appropriate for timely processing of the licensure application, but in no
case will a waiver extend beyond the end of the calendar year.
C. All Waivers

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For both Single State and Regional Plan waivers, the waiver will terminate if the
contract with Medicare terminates.
IV. Information to be Included in this Request
While the applicant should provide information concerning each of the following areas,
the specific information and documentation requested below are not necessarily all
inclusive for CMS to approve or deny the request. Applicants should provide any
information and all documentation necessary to substantiate their request.
A. Single-State Waiver:
1. Specify the grounds from section II.A above, upon which you are requesting a

waiver. Provide a narrative of the circumstances leading to the PDP‘s eligibility
for a waiver based on one of the grounds listed above. Include information about
the state risk-bearing entity license for which the PDP applied, the application
process that the PDP followed, and any relevant interaction with the state.
2. Provide documentation to substantiate the narrative required in (1). Depending

on the grounds for waiver eligibility, this documentation should include but is not
necessarily limited to the list below:
a) Evidence of state‘s failure to act on a licensure application on a timely basis,

including a copy of the dated cover sheet to the application submitted to the
state, state confirmation of the receipt and completeness of the application,
state requests for additional information, and all pertinent correspondence
with the state relating to the status of the application, etc.
b) Evidence of denial of the application based on discriminatory treatment,
including:
(i) Documentation in 2.a above, and,
(ii) Copy of denial letter from the state, copy of ―discriminatory‖ material

requirements (including, state laws and regulation), procedures or
standards to which the PDP was required to comply that are not generally
applicable to other entities engaged in a substantially similar business, a
copy of state licensure requirements that the PDP offer a particular
product or plan in addition to a Medicare plan, and any supplemental
material received from the state explaining its rationale for the denial, etc.
3. PDPs seeking a waiver on the grounds that they are subject to requirements,

procedures and standards not applicable to entities engaged in a ―substantially
similar business‖ must demonstrate through submission of these and other
appropriate materials:

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a)

The types of entities subject to the different requirements, procedures and
standards are engaged in a ―substantially similar business‖.

b) The state requirements, procedures and standards imposed on the PDP

entity are not applicable to other ―substantially similar business‖ entities.
4. Evidence of denial of the application based on solvency requirements
a) Documentation in 2.a above, and,
b) Copy of denial letter from the state, copy of state solvency requirements,

demonstration of the difference between state solvency requirements,
procedures and standards and Federal PDP solvency requirements,
procedures and standards, any other state information regarding
documentation, information, and other material requirements, procedures or
standards relating to solvency, or any correspondence detailing the reason
the application was denied, etc.
5. Evidence of State denial of the application based on licensure standards other

than those required by Federal law
a) Documentation in 2.a above, and,
b) Copy of denial letter from the state, memo identifying the state licensure

standards by reference to relevant state law, regulation, or policy guidance
and describing how those standards differ from those required by Federal
law.
6. Provide the name, address and telephone number of all state regulatory officials

involved in the state application and/or denial proceedings.
7. Provide any other information that you believe supports your request for a

waiver.
B. Regional Plan Waivers
1. Evidence of licensure in one state within the region and
2. Copy of the dated cover sheet to the application(s) submitted to the unlicensed

state(s), state confirmation of the receipt and completeness of each application,
state requests for additional information, and all pertinent correspondence with
the state(s) relating to the status of the application, etc. – unless CMS
determines that there is no PDP licensing process in effect in a state.
3. Provide the name, address and telephone number of all state regulatory officials

involved in the state application and/or denial proceedings.

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4. Provide any other information that you believe supports your request for a

waiver.
V. Overview of Waiver Request Process
For single-state waivers, section 1860D-12(c) and section 1855(a)(2) of the Act require
the Secretary to grant or deny this waiver request within 60 days after the date the
Secretary determines that a substantially complete application has been filed. Upon
receipt of a waiver request, CMS will review it to determine whether it contains sufficient
information to approve or deny the request. The 60-day review period begins at the time
CMS determines that the application is substantially complete.

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APPENDIX V – Financial Solvency Documentation for Applicant Not
Licensed as a Risk-bearing Entity in Any State
(For individual market applicants only)
Upload all appropriate documentation in pdf format into HPMS on the Part D Financial
Solvency Upload Page.
I. DOCUMENTATION
A. Documentation of Net Worth - Minimum Net Worth: $1.5 million

At the time of application, the potential PDP Sponsor not licensed in any state must
show evidence of the required minimum net worth. The PDP Sponsor must demonstrate
this through an independently audited financial statement if it has been in operation at
least twelve months.
If the organization has not been in operation at least twelve months it may choose to 1)
obtain an independently audited financial statement for a shorter time period; or 2)
demonstrate that it has the minimum net worth through presentation of an unaudited
financial statement that contains sufficient detail that CMS may verify the validity of the
financial presentation. The unaudited financial statement must be accompanied by an
actuarial opinion by a qualified actuary regarding the assumptions and methods used in
determining loss reserves, actuarial liabilities and related items.
A qualified actuary for the purposes of this application means a member in good
standing of the American Academy of Actuaries or a person recognized by the
Academy as qualified for membership, or a person who has otherwise demonstrated
competency in the field of actuarial determination and is satisfactory to CMS.
B. Financial Plan
1. Plan Content and Coverage

At the time of application, the PDP Sponsor must upload in HPMS on the Part D
Financial Solvency Upload page a business plan (with supporting financial
projections and assumptions, satisfactory to CMS), covering the first twelve
months of operation under the Medicare contract and meeting the requirements
stated below. If the plan projects losses, the business plan must cover the period
for twelve months past the date of projected break-even.

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The business plan must include a financial plan with:
a) A detailed marketing plan;
b) Statements of revenue and expense on an accrual basis;
c) A cash flow statement;
d) Balance sheets;
e) The assumptions in support of the financial plan;
f)

If applicable, availability of financial resources to meet projected losses; (if no
projected losses this does not preclude applicant from calculating projected losses
as prescribed by CMS in 2. b. below)and

g) Independent actuarial certification of business plan assumptions and plan feasibility
by a qualified actuary.
2. Funding for Projected Losses
a) Allowable sources of funding:

In the financial plan, the PDP Sponsor must demonstrate that it has the
resources available to meet the projected losses for the time-period to
breakeven. Except for the use of guarantees as provided in section (i) below,
letters of credit as provided in section (ii) below, and other means as provided
in section (iii) below, the resources must be assets on the balance sheet of
the PDP Sponsor in a form that is either cash or is convertible to cash in a
timely manner (i.e. cash or cash equivalents), pursuant to the financial plan.
(i) Guarantees will be acceptable as a resource to meet projected losses under the
conditions detailed in Section III, Guarantees.
(ii) An irrevocable, clean, unconditional, evergreen letter of credit may be used in
place of cash or cash equivalents if prior approval is obtained from CMS. It must
be issued or confirmed by a qualified United States financial institution as defined
in Section II.B, Insolvency, below. The letter of credit shall contain an issue date
and expiration date and shall stipulate that the beneficiary need only draw a sight
draft under the letter of credit and present it to obtain funds and that no other
document need be presented.

(a) ―Beneficiary‖ means the PDP sponsor for whose benefit the credit has
been established and any successor of the PDP sponsor by operation
of law. If a court of law appoints a successor in interest to the named
beneficiary, then the named beneficiary includes the court appointed
bankruptcy trustee or receiver.

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(b) The letter of credit also shall indicate that it is not subject to any
condition or qualifications any other agreement, documents or entities.
(c) CMS must be notified in writing thirty days prior to the expiration
without renewal or the reduction of a proposed or existing letter of
credit or replacement of a letter of credit by one for a reduced amount.
(d) Prior written approval of CMS should be secured by the PDP sponsor
of any form of proposed letter of credit arrangements before it is
concluded for purposes of funding for projected losses.
(iii) If approved by CMS, based on appropriate standards promulgated by CMS, a
PDP sponsor may use the following to fund projected fund losses for periods
after the first year: lines of credit from regulated financial institutions, legally
binding agreements for capital contributions, or other legally binding contracts of
a similar level of reliability.

NOTE: A plan needs to maintain its $1.5 million in net worth to meet the
net worth standard (Section A, above) and may not use any portion of the
$1.5 million in net worth to fund the projected losses. Net worth in excess
of $1.5 million, which is funded through the forms allowable for meeting
projected losses (i.e., cash, or cash equivalents,) may be counted in the
projected losses funding however the minimum $750,000 liquidity
requirement (Section C, below) must still be met and may not be used to
meet the projected losses.
b) Calculation of projected losses:
(i) An applicant that has had state licensure waived must demonstrate that in order
to cover projected losses, the applicant possesses allowable sources of funding
sufficient to cover the greater of:

(a) 7.5 percent of the aggregated projected target amount for a given year
(aggregated projected target amount is calculated by estimating the
average monthly per capita cost of benefits (excluding administrative
costs) and multiplying that amount by member months for a 12 month
period), or
(b) Resources to cover 100% of any projected losses, if the business plan
projects losses greater than 7.5% of the aggregated projected target
amount.
(ii) The applicant must upload in HPMS with the application, a worksheet calculating
the aggregated projected target amount as defined above.
(iii) Enrollment projections, once submitted to CMS as part of the Applicant‘s
originally submitted financial solvency documentation, may be revised only when
accompanied by supporting documentation providing an explanation for the

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revision along with a revised financial plan. CMS will not accept revisions made
solely to ensure that the calculation of required funding for projected losses
results in an amount less than or equal to the Applicant‘s available financial
resources. Additionally, the Applicant must upload in HPMS an attestation
signed by the CEO, CFO, or an individual designated to sign on his or her behalf
and who reports directly to the officer, describing the basis for the changes in
enrollment projections (e.g., updated Medicare Part D market analysis
information).
C. Liquidity

The PDP Sponsor must have sufficient cash flow to meet its financial obligations as
they become due. The amount of minimum net worth requirement to be met by cash or
cash equivalents is $750,000. Cash equivalents are short term highly liquid investments
that can be readily converted to cash. To be classified as cash equivalents these
investments must have a maturity date not longer than 3 months from the date of
purchase
1. In determining the ability of a PDP Sponsor to meet this requirement, CMS will consider
the following:
a) The timeliness of payment,
b) The extent to which the current ratio is maintained at 1:1 or greater, or whether there
is a change in the current ratio over a period of time, and
c) The availability of outside financial resources.
2. CMS may apply the following corresponding corrective action remedies:
a) If the PDP Sponsor fails to pay obligations as they become due, CMS will require the
PDP Sponsor to initiate corrective action to pay all overdue obligations.
b) CMS may require the PDP Sponsor to initiate corrective action if any of the following
are evident:
(i) The current ratio declines significantly; or
(ii) A continued downward trend in the current ratio. The corrective action may
include a change in the distribution of assets, a reduction of liabilities or
alternative arrangements to secure additional funding to restore the current ratio
to at least 1:1.
3. If there is a change in the availability of the outside resources, CMS will require the PDP
Sponsor to obtain funding from alternative financial resources.
D. Methods of Accounting
1. The PDP Sponsor may use the standards of Generally Accepted Accounting Principles
(GAAP) or it may use the standards of Statutory Accounting Principles (SAP) applicable

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to the type of organization it would have been licensed as at the state level if a waiver
were not granted by CMS. Whether GAAP or SAP is utilized however, there are certain
additional differences cited below for waivered PDP Sponsors.
a) Generally Accepted Accounting Principles (GAAP) are those accounting principles or
practices prescribed or permitted by the Financial Accounting Standards Board.
b) Statutory Accounting Principles are those accounting principles or practices
prescribed or permitted by the domiciliary State insurance department in the State in
which the PDP Sponsor operates.
2. Waivered organizations should note that the maximum period of waiver is limited by
Federal regulation. At such time as the waiver expires, the PDP Sponsor would have to
obtain a risk bearing license.
3. Waivered PDP Sponsors should adjust their balance sheets as follows:
a) Calculation-Assets: The following asset classes will not be admitted as assets:
(i) Good will;
(ii) Acquisition costs;
(iii) Other similar intangible assets.
b) Calculation- Liabilities: Net worth means the excess of total admitted assets over
total liabilities, but the liabilities shall not include fully subordinated debt.
(i) Subordinated debt means an obligation that is owed by an organization, that the
creditor of the obligation, by law, agreement, or otherwise, has a lower
repayment rank in the hierarchy of creditors than another creditor. The creditor
would be entitled to repayment only after all higher ranking creditor‘s claims have
been satisfied. A debt is fully subordinated if it has a lower repayment rank than
all other classes of creditors and is payable out of net worth in excess of that
required under Section IA, Net Worth and under Section IC, Liquidity above.
(ii) In order to be considered fully subordinated debt for the purpose of calculating
net worth, the subordinated debt obligation must be a written instrument and
include:

(a) The effective date, amount, interest and parties involved.
(b) The principal sum and/or any interest accrued thereon that are subject
to and subordinate to all other liabilities of the PDP sponsor, and upon
dissolution or liquidation, no payment of any kind shall be made until all
other liabilities of the PDP sponsor have been paid.
(c) The instrument states that the parties agree that the PDP sponsor
must obtain written approval from CMS prior to the payment of interest
or repayment of principal.

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E. Financial Indicators and Reporting
1. The PDP Sponsor must upload a Health Blank Form (in the same format as utilized by
the National Association of Insurance Commissioners) to CMS. The portion of the Health
Blank Form submitted to CMS will be limited to the following pages:
a) Jurat Page;
b) Assets;
c) Liabilities, Capital and Surplus;
d) Statement of Revenue and Expenses;
e) Capital and Surplus Account;
f)

Cash Flow;

g) Actuarial Opinion (the actuarial opinion is required only of annual report filings).
2. In addition, the PDP Sponsor shall submit an annual independently audited financial
statement with management letter.
3. Reporting shall be on the following schedule:
a) Quarterly reporting PDP sponsors shall report within 45 days of the close of a
calendar quarter ending on the last day of March, June and September. No separate
quarterly report shall be required for the final quarter of the year.
b) Annually reporting and quarterly reporting PDP sponsors shall report annually within
120 days of the close of the calendar year i.e. by April 30th or within 10 days of the
receipt of the annual audited financial statement, whichever is earlier.
c) Note: Future frequency of reporting will be both quarterly (first, second, and third
quarters only) and annually to CMS. CMS may choose to initiate monthly reporting
from certain PDP Sponsors who because of their financial status CMS deems may
require additional monitoring.
4. Financial reporting may be the General Accepted Accounting Principles (GAAP) or
under Statutory Accounting Principles (SAP) applicable to similar organizations of similar
type within the state where the organization is based. However, if an organization
chooses to report under GAAP, it may not report under GAAP for a period longer than
36 months unless a state has chosen to not license such organizations.

II. INSOLVENCY
A. Hold Harmless and Continuation of Coverage/Benefits

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PDP Sponsors shall be subject to the same hold harmless and continuation of
coverage/benefit requirements as Medicare Advantage contractors.
B. Insolvency Deposit

$100,000 held in accordance with CMS requirements by a qualified U. S. Financial
Institution. A qualified financial institution means an institution that:
1. Is organized or (in the case of a U. S. office of a foreign banking organization) licensed,
under the laws of the United States or any state thereof; and
2. Is regulated, supervised and examined by U. S. Federal or State authorities having
regulatory authority over banks and trust companies.

III. GUARANTEES
A. General policy.

A PDP Sponsor, or the legal entity of which the PDP Sponsor is a Component, may
apply to CMS to use the financial resources of a Guarantor for the purpose of meeting
the requirements of a PDP Sponsor. CMS has the discretion to approve or deny
approval of the use of a Guarantor.
B. Request to use a Guarantor.

To apply to use the financial resources of a Guarantor, a PDP Sponsor must upload in
HPMS:
1. Documentation that the Guarantor meets the requirements for a Guarantor under
paragraph (C) of this section; and
2. The Guarantor's independently audited financial statements for the current year-to-date
and for the two most recent fiscal years. The financial statements must include the
Guarantor's balance sheets, profit and loss statements, and cash flow statements.
C. Requirements for Guarantor.

To serve as a Guarantor, an organization must meet the following requirements:
1. Be a legal entity authorized to conduct business within a State of the United States.
2. Not be under Federal or State bankruptcy or rehabilitation proceedings.
3. Have an adjusted net worth (not including other guarantees, intangibles and restricted
reserves) equal to three times the amount of the PDP Sponsor guarantee.
4. If a State insurance commissioner regulates the Guarantor, or other State official with
authority for risk-bearing entities, it must meet the adjusted net worth requirement in this

123

document with all guarantees and all investments in and loans to organizations covered
by guarantees excluded from its assets.
5. If the Guarantor is not regulated by a State insurance commissioner, or other similar
State official it must meet the adjusted net worth requirement in this document with all
guarantees and all investments in and loans to organizations covered by a guarantee
and to related parties (subsidiaries and affiliates) excluded from its assets and
determination of adjusted net worth.
D. Guarantee document.

If the guarantee request is approved, a PDP Sponsor must upload in HPMS a written
guarantee document signed by an appropriate Guarantor. The guarantee document
must:
1. State the financial obligation covered by the guarantee;
2. Agree to:
a) Unconditionally fulfill the financial obligation covered by the guarantee; and
b) Not subordinate the guarantee to any other claim on the resources of the Guarantor;
3. Declare that the Guarantor must act on a timely basis, in any case not more than 5
business days, to satisfy the financial obligation covered by the guarantee; and
4. Meet other conditions as CMS may establish from time to time.
E. Reporting requirement.

A PDP Sponsor must submit to CMS the current internal financial statements and
annual audited financial statements of the Guarantor according to the schedule,
manner, and form that CMS requests.
F. Modification, substitution, and termination of a guarantee.

A PDP Sponsor cannot modify, substitute or terminate a guarantee unless the PDP
Sponsor:
1. Requests CMS' approval at least 90 days before the proposed effective date of the
modification, substitution, or termination;
2. Demonstrates to CMS' satisfaction that the modification, substitution, or termination will
not result in insolvency of the PDP Sponsor; and
3. Demonstrates how the PDP Sponsor will meet the requirements of this section.
G. Nullification.

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If at any time the Guarantor or the guarantee ceases to meet the requirements of this
section, CMS will notify the PDP Sponsor that it ceases to recognize the guarantee
document. In the event of this nullification, a PDP Sponsor must:
1. Meet the applicable requirements of this section within 15 business days; and
2. If required by CMS, meet a portion of the applicable requirements in less than the time
period granted in paragraph (G.1.) of this section.

125

APPENDIX VI—Organization Background and Structure
Instructions: Applicants must complete and upload in HPMS the following information.
A. Legal Entity Background
Date Legal Entity Established: _________________
State of Incorporation
(Applicant must upload proof of incorporation, such as articles of incorporation or a
certificate of good standing from the state of incorporation.)
B. Management of Legal Entity
Identify the staff with legal authority to sign/enter into contracts on behalf of the legal
entity
Identify all covered persons of the legal entity. ―Covered persons‖, as defined at 42
CFR §§423.507(a)(4), 423.508(f), and 423.510(e)(2), include:
All owners of nonrenewed or terminated organizations who are natural persons,
other than shareholders who have an ownership interest of less than 5 percent;
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 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; and
A member of the board of directors or board of trustees of the entity, if the
organization is organized as a corporation.
C. Parent Organization Information
Name of Parent Organization
Date Parent Organization established
D. Organizational Charts
Provide an organizational chart of the legal entity‘s parent organization, affiliates,
subsidiaries and related entities.
Provide an organizational chart solely of the internal structure of the legal entity by
department (i.e., marketing, compliance, pharmacy network/contracting, and claims
adjudication). Do not provide the internal structure of the parent organization.

126

APPENDIX VII – Crosswalks of Section 3.1.1D Requirements in
Subcontracts submitted as Attachments to Section 3.1.1
INSTRUCTIONS: Applicants must complete and upload in HPMS the following chart for
each contract/administrative services agreement submitted under Section 3.1.1D.
Applicants must identify where specifically (i.e., the pdf page number) in each
contract/administrative services agreement the following elements are found.
Section

Requirement

Location in
Subcontract
by Page
number and
Section

3.1.1D1

The parties to the contract

3.1.1D2

The functions to be performed by the first tier,
downstream, or related entity. Describe the reporting
requirements the first tier, downstream, or related entity
identified in Section 3.1.1C of the application has to the
applicant. 42 CFR §423.505(i)(4)(i)

3.1.1D3

Language clearly indicating that the first tier, downstream,
or related entity has agreed to participate in your
Medicare Prescription Drug Benefit program (except for a
network pharmacy if the existing contract would allow
participation in this program).

3.1.1D4

Contains flow-down clauses requiring the first tier,
downstream, or related entity‘s activities to be consistent
and comply with the Applicant‘s contractual obligations as
a Part D sponsor. 42 CFR §423.505(i)(3)(iii)

3.1.1D5

The payment the first tier, downstream, or related entity
will receive for performance under the contract, if
applicable.

3.1.1D6

Are for a term of at least the one-year contract period for
which application is submitted. Note: Where the contract
is for services or products to be used in preparation for
the next contract year‘s Part D operations (marketing,
enrollment), the initial term of such contract must include
this period of performance (e.g., contracts for enrollmentrelated services must have a term beginning no later than
October 15 extending through the full contract year
ending on December 31 of the next year).

127

3.1.1D7

Are signed by a representative of each party with legal
authority to bind the entity.

3.1.1D8

Language obligating the first tier, downstream, or related
entity to abide by all applicable Federal laws and
regulations and CMS instructions. 42 CFR
§423.505(i)(4)(iv)

3.1.1D9

Language obligating the first tier, downstream, or related
entity to abide by State and Federal privacy and security
requirements, including the confidentiality and security
provisions stated in the regulations for the program at 42
CFR §423.136.

3.1.1D10

Language ensuring that the first tier, downstream, or
related entity will make its books and other records
available in accordance with 42 CFR 423.505(e)(2) and
42 CFR 423.505(i)(2). Generally stated these regulations
give HHS, the Comptroller General, or their designees the
right to audit, evaluate and inspect any books, contracts,
records, including medical records and documentation
involving transactions related to CMS‘ contract with the
Part D sponsor and that these rights continue for a period
of 10 years from the final date of the contract period or
the date of audit completion, whichever is later. 42 CFR
§423.505

3.1.1D11

Language stating that the first tier, downstream, or related
entity will ensure that beneficiaries are not held liable for
fees that are the responsibility of the Applicant. 42 CFR
§423.505(i)(3)(i)

3.1.1D12

Language ensuring that if the Applicant, upon becoming a
Part D sponsor, delegates an activity or responsibility to
the first tier, downstream, or related entity, that such
activity or responsibility may be revoked if CMS or the
Part D sponsor determines the first tier, downstream, or
related entity has not performed satisfactorily. Note: The
contract/administrative services agreement may include
remedies in lieu of revocation to address this requirement.
42 CFR §423.505(i)(4)(ii)

3.1.1D13

Language specifying that the Applicant, upon becoming a
Part D sponsor, will monitor the performance of the first
tier, downstream, or related entity on an ongoing basis.
42 CFR §423.505(i)(4)(iii)

128

3.1.1D14

Language that the Part D sponsor retains the right to
approve, suspend, or terminate any arrangement with a
pharmacy if the first tier, downstream, or related entity will
establish the pharmacy network or select pharmacies to
be included in the network. 42 CFR §423.505(i)(5)

3.1.1D15

Language that if the first tier, downstream, or related
entity will establish the pharmacy network or select
pharmacies to be included in the network contain
language that payment to such pharmacies (excluding
long-term care and mail order) shall be issued, mailed, or
otherwise transmitted with respect to all clean claims
submitted by or on behalf of pharmacies within 14 days
for electronic claims and within 30 days for claims
submitted otherwise. 42 CFR §423.505(i)(3)(vi)

3.1.1D16

Language that if the first tier, downstream, or related
entity will establish the pharmacy network or select
pharmacies to be included in the network and a
prescription drug pricing standard is used for
reimbursement,identifies the source used by the Part D
sponsor for the prescription drug pricing standard of
reimbursement. 42 CFR §423.505(i)(3)(viii)(B)

3.1.1D17

If the first tier, downstream, or related entity will establish
the pharmacy network or select pharmacies to be
included in the network and a prescription drug pricing
standard is used for reimbursement, a provision requiring
that updates to such a standard occur not less frequently
than once every 7 days beginning with an initial update on
January 1 of each year, to accurately reflect the market
price of acquiring the drug. 42 CFR §423.505(i)(3)(viii)(A)

3.1.1D18

If the first tier, downstream, or related entity will establish
the pharmacy network or select pharmacies to be
included in the network, language requiring the network
pharmacies to submit claims to the Part D sponsor or first
tier, downstream or related entity whenever the
membership ID card is presented or on file at the
pharmacy unless the enrollee expressly requests that a
particular claim not be submitted. 42 CFR §423.120(c)(3)

129

3.1.1D19

Language that if the first tier, downstream, or related
entity will adjudicate and process claims at the point of
sale and/or negotiate with prescription drug
manufacturers and others for rebates, discounts, or other
price concessions on prescription drugs contain language
requiring that the first tier, downstream, or related entity
will comply with the reporting requirements established in
Section 6005 of the Affordable Care Act.

130

APPENDIX VIII – Crosswalk for Retail Pharmacy Access
Contracts
INSTRUCTIONS: Applicants must complete and upload in HPMS the following chart
(which contains applicable Section 3.11D requirements AND additional requirements
specific to Pharmacy Access) for each Retail pharmacy contract template submitted
under Section 3.4. Applicants must identify where specifically (i.e., the .pdf page
number) in each contract template the following elements are found.
The provisions listed below must be in all pharmacy contracts. If contracts
reference policies and procedures to with which the pharmacy must comply,
provide the relevant documentation as evidence and cite this documentation
accordingly.
Section

Requirement

Citation

3.1.1D2

The functions to be performed by the first tier,
downstream, or related entity. Describes the reporting
requirements the first tier, downstream, or related entity
identified in Section 3.1.1C of the application has to the
Applicant. 42 CFR §423.505(i)(4)(i)

3.1.1D8

Language obligating the first tier, downstream, or related
entity to abide by all applicable Federal laws and
regulations and CMS instructions. 42 CFR
§423.505(i)(4)(iv)

3.1.1D9

Language obligating the first tier, downstream, or related
entity to abide by State and Federal privacy and security
requirements, including the confidentiality and security
provisions stated in the regulations for the program at 42
CFR §423.136.

3.1.1D10

Language ensuring that the first tier, downstream, or
related entity will make its books and other records
available in accordance with 42 CFR 423.505(e)(2) and
42 CFR 423.505(i)(2). Generally stated these regulations
give HHS, the Comptroller General, or their designees the
right to audit, evaluate and inspect any books, contracts,
records, including medical records and documentation
involving transactions related to CMS‘ contract with the
Part D sponsor and that these rights continue for a period
of 10 years from the final date of the contract period or
the date of audit completion, whichever is later. 42 CFR
§423.505

131

3.1.1D11

Language stating that the first tier, downstream, or related
entity will ensure that beneficiaries are not held liable for
fees that are the responsibility of the Applicant. 42 CFR
§423.505(i)(3)(i)

3.1.1D12

Language ensuring that if the Applicant, upon becoming a
Part D sponsor, delegates an activity or responsibility to
the first tier, downstream, or related entity, that such
activity or responsibility may be revoked if CMS or the
Part D sponsor determines the first tier, downstream, or
related entity has not performed satisfactorily. Note: The
contract may include remedies in lieu of revocation to
address this requirement. 42 CFR §423.505(i)(4)(ii)

3.1.1D13

Language specifying that the Applicant, upon becoming a
Part D sponsor, will monitor the performance of the first
tier, downstream, or related entity on an ongoing basis.
42 CFR §423.505(i)(4)(iii)

3.1.1D15

Provisions requiring that payment shall be issued, mailed
or otherwise transmitted with respect to all clean claims
submitted by or on behalf of pharmacies within 14 days
for electronic claims and within 30 days for claims
submitted otherwise. 42 CFR §423.505(i)(3)(vi)

3.1.1D16

For those contracts that use a prescription drug pricing
standard for reimbursement, a provision indicating the
source used by the Part D sponsor for the prescription
drug pricing standard of reimbursement. 42 CFR
§423.505(i)(3)(viii)(B)

3.1.1D17

For those contracts that use a prescription drug pricing
standard for reimbursement, a provision that updates to
such a standard occur not less frequently than once every
7 days beginning with an initial update on January 1 of
each year, to accurately reflect the market price of
acquiring the drug.42 CFR §423.505(i)(3)(viii)(A)

3.1.1D18

Language requiring the network pharmacy to submit
claims to the Part D sponsor or first tier, downstream or
related entity whenever the membership ID card is
presented or on file at the pharmacy unless the enrollee
expressly requests that a particular claim not be
submitted. 42 CFR §423.120(c)(3)

132

3.4A3

Provisions governing submitting claims to a real-time
claims adjudication system. 42 CFR §423.505(j) and
§423.505(b)(17)
Note: Applicant may indicate for I/T/U pharmacies and for
certain pharmacies that are allowed to submit claims in
the X 12 format that these may be batch processed.

3.4A4

Provisions governing providing Part D enrollees access to
negotiated prices as defined in 42 CFR 423.100. 42 CFR
§423.104(g)

3.4A5

Provisions regarding charging/applying the correct costsharing amount. 42 CFR §423.104

3.4A6

Provisions governing informing the Part D enrollee at the
point of sale (or at the point of delivery for mail order
drugs) of the lowest-priced, generically equivalent drug, if
one exists for the beneficiary's prescription, as well as any
associated differential in price. 42 CFR §423.132

133

APPENDIX IX – Crosswalk for Mail Order Pharmacy Access
Contracts
INSTRUCTIONS: Applicants must complete and upload in HPMS the following chart
(which contains applicable Section 3.1.1D requirements AND additional requirements
specific to Pharmacy Access) for each Mail Order pharmacy contract template
submitted under Section 3.4. Applicants must identify where specifically (i.e., the .pdf
page number) in each contract template the following elements are found.
The provisions listed below must be in all pharmacy contracts. If contracts
reference policies and procedures with which the pharmacy must comply,
provide the relevant documentation as evidence and cite this documentation
accordingly.
Section

Requirement

Citation

3.1.1D2

The functions to be performed by the first tier,
downstream, or related entity, and describes the
reporting requirements the first tier, downstream, or
related entity identified in Section 3.1.1C of the
application has to the Applicant. 42 CFR
§423.505(i)(4)(i)

3.1.1D8

Language obligating the first tier, downstream, or
related entity to abide by all applicable Federal laws
and regulations and CMS instructions. 42 CFR
§423.505(i)(4)(iv)

3.1.1D9

Language obligating the first tier, downstream, or
related entity to abide by State and Federal privacy
and security requirements, including the
confidentiality and security provisions stated in the
regulations for the program at 42 CFR §423.136.

3.1.1D10

Language ensuring that the first tier, downstream,
or related entity will make its books and other
records available in accordance with 42 CFR
423.505(e)(2) and 42 CFR 423.505(i)(2). Generally
stated these regulations give HHS, the Comptroller
General, or their designees the right to audit,
evaluate and inspect any books, contracts, records,
including medical records and documentation
involving transactions related to CMS‘ contract with
the Part D sponsor and that these rights continue
for a period of 10 years from the final date of the
contract period or the date of audit completion,

134

whichever is later. 42 CFR §423.505

3.1.1D11

Language stating that the first tier, downstream, or
related entity will ensure that beneficiaries are not
held liable for fees that are the responsibility of the
Applicant. 42 CFR §423.505(i)(3)(i)

3.1.1D12

Language ensuring that if the Applicant, upon
becoming a Part D sponsor, delegates an activity or
responsibility to the first tier, downstream, or related
entity, that such activity or responsibility may be
revoked if CMS or the Part D sponsor determines
the first tier, downstream, or related entity has not
performed satisfactorily. Note: The contract may
include remedies in lieu of revocation to address
this requirement. 42 CFR §423.505(i)(4)(ii)

3.1.1D13

Language specifying that the Applicant, upon
becoming a Part D sponsor, will monitor the
performance of the first tier, downstream, or related
entity on an ongoing basis. 42 CFR
§423.505(i)(4)(iii)

3.1.1D16

For those contracts that use a prescription drug
pricing standard for reimbursement, a provision
indicating the source used by the Part D sponsor for
the prescription drug pricing standard of
reimbursement. 42 CFR §423.505(i)(3)(viii)(B)

3.1.1D17

For those contracts that use a prescription drug
pricing standard for reimbursement, a provision that
updates to such a standard occur not less
frequently than once every 7 days beginning with an
initial update on January 1 of each year, to
accurately reflect the market price of acquiring the
drug.42 CFR §423.505(i)(3)(viii)(A)

3.1.1D18

Language requiring the network pharmacy to submit
claims to the Part D sponsor or first tier,
downstream or related entity whenever the
membership ID card is presented or on file at the
pharmacy unless the enrollee expressly requests
that a particular claim not be submitted. 42 CFR

135

§423.120(c)(3)

3.4A3

Provisions governing submitting claims to a realtime claims adjudication system. 42 CFR
§423.505(j) and §423.505(b)(17)
Note: Applicant may indicate for I/T/U pharmacies
and for certain pharmacies that are allowed to
submit claims in the X 12 format that these may be
batch processed.

3.4A4

Provisions governing providing Part D enrollees
access to negotiated prices as defined in 42 CFR
423.100. 42 CFR §423.104(g)

3.4A5

Provisions regarding charging/applying the correct
cost-sharing amount. 42 CFR §423.104

3.4A6

Provisions governing informing the Part D enrollee
at the point of sale (or at the point of delivery for
mail order drugs) of the lowest-priced, generically
equivalent drug, if one exists for the beneficiary's
prescription, as well as any associated differential in
price. 42 CFR §423.132

136

APPENDIX X – Crosswalk for Home Infusion Pharmacy Access
Contracts
INSTRUCTIONS: Applicants must complete and upload in HPMS the following chart
(which contains applicable Section 3.1.1D requirements AND additional requirements
specific to Pharmacy Access) for each Home Infusion pharmacy contract template
submitted under Section 3.4. Applicants must identify where specifically (i.e., the .pdf
page number) in each contract template the following elements are found.
The provisions listed below must be in all pharmacy contracts. If contracts
reference policies and procedures with which the pharmacy must comply,
provide the relevant documentation as evidence and cite this documentation
accordingly.
Section

Requirement

Citation

3.1.1D2

The functions to be performed by the first tier,
downstream, or related entity, and describes the
reporting requirements the first tier, downstream, or
related entity identified in Section 3.1.1C of the
application has to the Applicant. 42 CFR
§423.505(i)(4)(i)

3.1.1D8

Language obligating the first tier, downstream, or
related entity to abide by all applicable Federal laws
and regulations and CMS instructions. 42 CFR
§423.505(i)(4)(iv)

3.1.1D9

Language obligating the first tier, downstream, or
related entity to abide by State and Federal privacy
and security requirements, including the confidentiality
and security provisions stated in the regulations for the
program at 42 CFR §423.136.

3.1.1D10

Language ensuring that the first tier, downstream, or
related entity will make its books and other records
available in accordance with 42 CFR 423.505(e)(2)
and 42 CFR 423.505(i)(2). Generally stated these
regulations give HHS, the Comptroller General, or their
designees the right to audit, evaluate and inspect any
books, contracts, records, including medical records
and documentation involving transactions related to
CMS‘ contract with the Part D sponsor and that these
rights continue for a period of 10 years from the final
date of the contract period or the date of audit
completion, whichever is later. 42 CFR §423.505

137

3.1.1D11

Language stating that the first tier, downstream, or
related entity will ensure that beneficiaries are not held
liable for fees that are the responsibility of the
Applicant. 42 CFR §423.505(i)(3)(i)

3.1.1D12

Language ensuring that if the Applicant, upon
becoming a Part D sponsor, delegates an activity or
responsibility to the first tier, downstream, or related
entity, that such activity or responsibility may be
revoked if CMS or the Part D sponsor determines the
first tier, downstream, or related entity has not
performed satisfactorily. Note: The contract may
include remedies in lieu of revocation to address this
requirement. 42 CFR §423.505(i)(4)(ii)

3.1.1D13

Language specifying that the Applicant, upon
becoming a Part D sponsor, will monitor the
performance of the first tier, downstream, or related
entity on an ongoing basis. 42 CFR §423.505(i)(4)(iii)

3.1.1D15

Provisions requiring that payment shall be issued,
mailed or otherwise transmitted with respect to all
clean claims submitted by or on behalf of pharmacies
within 14 days for electronic claims and within 30 days
for claims submitted otherwise. 42 CFR
§423.505(i)(3)(vi)

3.1.1D16

For those contracts that use a standard for
reimbursement, a provision indicating the source used
by the Part D sponsor for the standard of
reimbursement. 42 CFR §423.505(i)(3)(viii)(B)

3.1.1D17

For those contracts that use a standard for
reimbursement, a provision that updates to such a
standard occur not less frequently than once every 7
days beginning with an initial update on January 1 of
each year, to accurately reflect the market price of
acquiring the drug.42 CFR §423.505(i)(3)(viii)(A)

3.1.1D18

Language requiring the network pharmacy to submit
claims to the Part D sponsor or first tier, downstream
or related entity whenever the membership ID card is
presented or on file at the pharmacy unless the
enrollee expressly requests that a particular claim not
be submitted. 42 CFR §423.120(c)(3)

138

3.4A3

Provisions governing submitting claims to a real-time
claims adjudication system. 42 CFR §423.505(j) and
§423.505(b)(17)
Note: Applicant may indicate for I/T/U pharmacies and
for certain pharmacies that are allowed to submit
claims in the X 12 format that these may be batch
processed.

3.4A4

Provisions governing providing Part D enrollees
access to negotiated prices as defined in 42 CFR
423.100. 42 CFR §423.104(g)

3.4A5

Provisions regarding charging/applying the correct
cost-sharing amount. 42 CFR §423.104

3.4A6

Provisions governing informing the Part D enrollee at
the point of sale (or at the point of delivery for mail
order drugs) of the lowest-priced, generically
equivalent drug, if one exists for the beneficiary's
prescription, as well as any associated differential in
price. 42 CFR §423.132

3.4.4A5

Provisions ensuring that before dispensing home
infusion drugs, pharmacy ensures that the professional
services and ancillary supplies are in
place.423.120(a)(4)(iii)

3.4.4A6

Provisions ensuring that a pharmacy that delivers
home infusion drugs provides delivery of home
infusion drugs within 24 hours of discharge from an
acute care setting, or later if so prescribed.
423.120(a)(4)(iv)

139

APPENDIX XI – Crosswalk for Long-Term Care Pharmacy Access
Contracts
INSTRUCTIONS: Applicants must complete and upload in HPMS the following chart
(which contains applicable Section 3.1.1D requirements AND additional requirements
specific to Pharmacy Access) for each Long-Term Care pharmacy contract template
submitted under Section 3.4. Applicants must identify where specifically (i.e., the .pdf
page number) in each contract template the following elements are found.
The provisions listed below must be in all pharmacy contracts. If contracts
reference policies and procedures with which the pharmacy must comply,
provide the relevant documentation as evidence and cite this documentation
accordingly.
Section

Requirement

Citation

3.1.1D2

The functions to be performed by the first tier, downstream, or
related entity, and describes the reporting requirements the
first tier, downstream, or related entity identified in 3.1.1C of
the application has to the Applicant. 42 CFR §423.505(i)(4)(i)

3.1.1D8

Language obligating the first tier, downstream, or related
entity to abide by all applicable Federal laws and regulations
and CMS instructions. 42 CFR §423.505(i)(4)(iv)

3.1.1D9

Language obligating the first tier, downstream, or related
entity to abide by State and Federal privacy and security
requirements, including the confidentiality and security
provisions stated in the regulations for the program at 42 CFR
§423.136. 42 CFR §423.136

3.1.1D10

Language ensuring that the first tier, downstream, or related
entity will make its books and other records available in
accordance with 42 CFR 423.505(e)(2) and 42 CFR
423.505(i)(2). Generally stated these regulations give HHS,
the Comptroller General, or their designees the right to audit,
evaluate and inspect any books, contracts, records, including
medical records and documentation involving transactions
related to CMS‘ contract with the Part D sponsor and that
these rights continue for a period of 10 years from the final
date of the contract period or the date of audit completion,
whichever is later. 42 CFR §423.505

140

3.1.1D11

Language stating that the first tier, downstream, or related
entity will ensure that beneficiaries are not held liable for fees
that are the responsibility of the Applicant. 42 CFR
§423.505(i)(3)(i)

3.1.1D12

Language ensuring that if the Applicant, upon becoming a
Part D sponsor, delegates an activity or responsibility to the
first tier, downstream, or related entity, that such activity or
responsibility may be revoked if CMS or the Part D sponsor
determines the first tier, downstream, or related entity has not
performed satisfactorily. Note: The contract may include
remedies in lieu of revocation to address this requirement. 42
CFR §423.505(i)(4)(ii)

3.1.1D13

Language specifying that the Applicant, upon becoming a
Part D sponsor, will monitor the performance of the first tier,
downstream, or related entity on an ongoing basis. 42 CFR
§423.505(i)(4)(iii)

3.1.1D16

For those contracts that use a standard for reimbursement, a
provision indicating the source used by the Part D sponsor for
the standard of reimbursement. 42 CFR §423.505(i)(3)(viii)(B)

3.1.1D17

For those contracts that use a standard for reimbursement, a
provision that updates to such a standard occur not less
frequently than once every 7 days beginning with an initial
update on January 1 of each year, to accurately reflect the
market price of acquiring the drug.42 CFR
§423.505(i)(3)(viii)(A)

3.1.1D18

Language requiring the network pharmacy to submit claims to
the Part D sponsor or first tier, downstream or related entity
whenever the membership ID card is presented or on file at
the pharmacy unless the enrollee expressly requests that a
particular claim not be submitted. 42 CFR 423.120(c)(3)

3.4A3

Provisions governing submitting claims to a real-time claims
adjudication system. 42 CFR §423.505(j) and
§423.505(b)(17)
Note: Applicant may indicate for I/T/U pharmacies and for
certain pharmacies that are allowed to submit claims in the X
12 format that these may be batch processed.

3.4A4

Provisions governing providing Part D enrollees access to
negotiated prices as defined in 42 CFR 423.100. 42 CFR
§423.104(g)

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3.4A5

Provisions regarding charging/applying the correct costsharing amount. 42 CFR §423.104

3.4A6

Provisions governing informing the Part D enrollee at the
point of sale (or at the point of delivery for mail order drugs) of
the lowest-priced, generically equivalent drug, if one exists for
the beneficiary's prescription, as well as any associated
differential in price. 42 CFR §423.132
Provide that long-term care pharmacies 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. 42 CFR §
423.504(b)(20)
Provisions requiring that long-term care pharmacies dispense
drugs and report information as required by 42 CFR
§423.154.

Elements Specific to Long-Term Care Contracts
Note: CMS Long-Term Care Guidance included in Chapter 5 of the Prescription Drug
Benefit Manual contains an updated list of performance and service criteria for
contracting with long-term care pharmacies. Applicants must, at a minimum,
incorporate these criteria in ALL LTC pharmacy network contracts.
Performance and Service Criteria

Citation

Comprehensive Inventory and Inventory Capacity – Network Long Term
Care Pharmacies [NLTCPs] must provide a comprehensive inventory of
Plan formulary drugs commonly used in the long term care setting. In
addition, NLTCPs must provide a secured area for physical storage of
drugs, with necessary added security as required by federal and state law
for controlled substances. This is not to be interpreted that the pharmacy
will have inventory or security measures outside of the normal business
setting.
Pharmacy Operations and Prescription Orders -- NLTCPs must provide
services of a dispensing pharmacist to meet the requirements of pharmacy
practice for dispensing prescription drugs to LTC residents, including but
not limited to the performance of drug utilization review (DUR). In addition,
the NLTCP pharmacist must conduct DUR to routinely screen for allergies
and drug interactions, to identify potential adverse drug reactions, to identify
inappropriate drug usage in the LTC population, and to promote cost
effective therapy in the LTC setting. The NLTCP must also be equipped
with pharmacy software and systems sufficient to meet the needs of
prescription drug ordering and distribution to an LTC facility. Further, the

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NLTCP must provide written copies of the NLTCP‘s pharmacy procedures
manual and said manual must be available at each LTC facility nurses‘ unit.
NLTCPs are also required to provide ongoing in-service training to assure
that LTC facility staff is proficient in the NLTCP‘s processes for ordering
and receiving of medications. NLTCP must be responsible for return and/or
disposal of unused medications following discontinuance, transfer,
discharge, or death as permitted by State Boards of Pharmacy. Controlled
substances and out of date substances must be disposed of within State
and Federal guidelines.
Special Packaging -- NLTCPs must have the capacity to provide specific
drugs in Unit of Use Packaging, Bingo Cards, Cassettes, Unit Dose or other
special packaging commonly required by LTC facilities. NLTCPs must
have access to, or arrangements with, a vendor to furnish supplies and
equipment including but not limited to labels, auxiliary labels, and packing
machines for furnishing drugs in such special packaging required by the
LTC setting.
IV Medications -- NLTCPs must have the capacity to provide IV
medications to the LTC resident as ordered by a qualified medical
professional. NLTCPs must have access to specialized facilities for the
preparation of IV prescriptions (clean room). Additionally, NLTCPs must
have access to or arrangements with a vendor to furnish special equipment
and supplies as well as IV trained pharmacists and technicians as required
to safely provide IV medications.
Compounding /Alternative Forms of Drug Composition -- NLTCPs must be
capable of providing specialized drug delivery formulations as required for
some LTC residents. Specifically, residents unable to swallow or ingest
medications through normal routes may require tablets split or crushed or
provided in suspensions or gel forms, to facilitate effective drug delivery.
Pharmacist On-call Service -- NLTCP must provide on-call, 24 hours a day,
7 days a week service with a qualified pharmacist available for handling
calls after hours and to provide medication dispensing available for
emergencies, holidays and after hours of normal operations.
Delivery Service -- NLTCP must provide for delivery of medications to the
LTC facility up to seven days each week (up to three times per day) and inbetween regularly scheduled visits. Emergency delivery service must be
available 24 hours a day, 7 days a week. Specific delivery arrangements
will be determined through an agreement between the NLTCP and the LTC
facility. NLTCPs must provide safe and secure exchange systems for
delivery of medication to the LTC facility. In addition, NLTCP must provide
medication cassettes, or other standard delivery systems, that may be
exchanged on a routine basis for automatic restocking. The NLTCP

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delivery of medication to carts is a part of routine ―dispensing‖.
Emergency Boxes -- NLTCPs must provide ―emergency‖ supply of
medications as required by the facility in compliance with State
requirements.
Emergency Log Books -- NLTCP must provide a system for logging and
charging medication used from emergency/first dose stock. Further, the
pharmacy must maintain a comprehensive record of a resident‘s medication
order and drug administration.
Miscellaneous Reports, Forms and Prescription Ordering Supplies -NLTCP must provide reports, forms and prescription ordering supplies
necessary for the delivery of quality pharmacy care in the LTC setting.
Such reports, forms and prescription ordering supplies may include, but will
not necessarily be limited to, provider order forms, monthly management
reports to assist the LTC facility in managing orders, medication
administration records, treatment administration records, interim order
forms for new prescription orders, and boxes/folders for order storage and
reconciliation in the facility.

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APPENDIX XII – Crosswalk for Indian Tribe and Tribal Organization,
and Urban Indian Organization (I/T/U) Pharmacy Access Contracts
INSTRUCTIONS: Applicants must complete and upload in HPMS the following chart
(which contains applicable Section 3.1.1D requirements AND additional requirements
specific to Pharmacy Access) for each I/T/U pharmacy contract template submitted
under Section 3.4. Applicants must identify where specifically (i.e., the .pdf page
number) in each contract template the following elements are found.
The provisions listed below must be in all pharmacy contracts. If contracts
reference policies and procedures with which the pharmacy must comply,
provide the relevant documentation as evidence and cite this documentation
accordingly.
Section

Requirement

Citation

3.1.1D2

The functions to be performed by the first tier, downstream,
or related entity, and describes the reporting requirements
the first tier, downstream, or related entity identified in
Section 3.1.1C of the application has to the Applicant. 42
CFR §423.505(i)(4)(i)

3.1.1D8

Language obligating the first tier, downstream, or related
entity to abide by all applicable Federal laws and regulations
and CMS instructions. 42 CFR §423.505(i)(4)(iv)

3.1.1D9

Language obligating the first tier, downstream, or related
entity to abide by State and Federal privacy and security
requirements, including the confidentiality and security
provisions stated in the regulations for the program at 42
CFR §423.136.

3.1.1D10

Language ensuring that the first tier, downstream, or related
entity will make its books and other records available in
accordance with 42 CFR 423.505(e)(2) and 42 CFR
423.505(i)(2). Generally stated these regulations give HHS,
the Comptroller General, or their designees the right to
audit, evaluate and inspect any books, contracts, records,
including medical records and documentation involving
transactions related to CMS‘ contract with the Part D
sponsor and that these rights continue for a period of 10
years from the final date of the contract period or the date of
audit completion, whichever is later. 42 CFR §423.505

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3.1.1D11

Language stating that the first tier, downstream, or related
entity will ensure that beneficiaries are not held liable for
fees that are the responsibility of the Applicant. 42 CFR
§423.505(i)(3)(i)

3.1.1D12

Language ensuring that if the Applicant, upon becoming a
Part D sponsor, delegates an activity or responsibility to the
first tier, downstream, or related entity, that such activity or
responsibility may be revoked if CMS or the Part D sponsor
determines the first tier, downstream, or related entity has
not performed satisfactorily. Note: The contract may
include remedies in lieu of revocation to address this
requirement. 42 CFR §423.505(i)(4)(ii)

3.1.1D13

Language specifying that the Applicant, upon becoming a
Part D sponsor, will monitor the performance of the first tier,
downstream, or related entity on an ongoing basis. 42 CFR
§423.505(i)(4)(iii)

3.1.1D15

Provisions requiring that payment shall be issued, mailed or
otherwise transmitted with respect to all clean claims
submitted by or on behalf of pharmacies within 14 days for
electronic claims and within 30 days for claims submitted
otherwise. 42 CFR §423.505(i)(3)(vi)

3.1.1D16

For those contracts that use a standard for reimbursement,
a provision indicating the source used by the Part D sponsor
for the standard of reimbursement. 42 CFR
§423.505(i)(3)(viii)(B)

3.1.1D17

For those contracts that use a standard for reimbursement,
a provision that updates to such a standard occur not less
frequently than once every 7 days beginning with an initial
update on January 1 of each year, to accurately reflect the
market price of acquiring the drug.42 CFR
§423.505(i)(3)(viii)(A)

3.1.1D18

Language requiring the network pharmacy to submit claims
to the Part D sponsor or first tier, downstream or related
entity whenever the membership ID card is presented or on
file at the pharmacy unless the enrollee expressly requests
that a particular claim not be submitted. 42 CFR
§423.120(c)(3)

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3.4A3

Provisions governing submitting claims to a real-time claims
adjudication system. 42 CFR §423.505(j) and
§423.505(b)(17)
Note: Applicant may indicate for I/T/U pharmacies and for
certain pharmacies that are allowed to submit claims in the
X 12 format that these may be batch processed.

3.4A4

Provisions governing providing Part D enrollees access to
negotiated prices as defined in 42 CFR 423.100. 42 CFR
§423.104(g)

3.4A5

Provisions regarding charging/applying the correct costsharing amount. 42 CFR §423.104

Elements Specific to Indian Tribe and Tribal Organization, and Urban Indian
Organization (I/T/U) Pharmacy Contracts
Note: Provisions listed below are in the model I/T/U Addendum, located at
Appendix XV and at
www.cms.gov/10_RxContracting_SpecialGuidance.asp#TopOfPage and all I/T/U
Contracts must contain language consistent with the model addendum that addresses
the following.
Item 1

Supersession of the addendum from underlying agreement.

Item 3

The description of the provider.

Item 4

Counting of costs paid for by provider toward any
deductibles.

Item 5

Persons eligible for services of the provider.

Item 6

The applicability of certain Federal law.

Item 7

The non-taxable status of the provider.

Item 8

Insurance and indemnification.

Item 9

Applicability of state licensing law to provider‘s employees.

Item 10

Provider eligibility for payments

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Item 11

Dispute resolution.

Item 12

Federal law as the governing law.

Item 13

The contract will apply to all pharmacies and dispensaries
operated by the provider.

Item 14

The contract will not affect the provider‘s acquisition of
pharmaceuticals.

Item 15

The provider‘s point of sale processing capabilities.

Item 16

Claims processing.

Item 17

Reasonable and appropriate payment rates.

Item 18

Any information, outreach or enrollment materials prepared
by the Applicant will be supplied at no cost to the provider.

Item 19

The provider determines the hours of service for the
pharmacies or dispensaries of the provider.

Item 20

Endorsement

Item 21

Sovereign Immunity

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APPENDIX XIII – Applicant Submission of P&T Committee Member
List and Certification Statement
This appendix summarizes CMS policy on Part D Applicant/Sponsor and PBM
submission of P&T Committee membership, and the accountability that each Part D
Applicant/Sponsor holds regarding the integrity of the P&T Committee whose
membership is submitted either directly by the Part D Applicant/Sponsor or by the
applicant/sponsor‘s PBM. This appendix also instructs Part D Applicants (or their
PBM‘s) on how to submit the Applicant‘s P&T Committee membership list, and a
Certification of P&T Integrity and Quality in the event the Applicant is planning to
operate under a confidentiality agreement with its PBM (such that the PBM does not
disclose the membership to the Applicant).
I. P&T Committee Member Disclosure to CMS
As provided in the regulation at CFR 423.120 (b)(1), a Part D Sponsor‘s P&T
Committee list must contain a majority of members who are practicing physicians and/or
pharmacists, include at least one practicing physician and one practicing pharmacist
who are experts regarding care of the elderly or disabled individuals, and includes at
least one practicing physician and one practicing pharmacist who are independent and
free of conflict relative to the Part D Sponsor or Plan and pharmaceutical
manufacturers.
In the event the Part D Applicant/Sponsor has entered into a confidential agreement
such that the PBM will not disclose its P&T Committee membership to the Part D
Applicant/Sponsor, then it is the Part D Sponsor‘s responsibility to notify CMS that this
information will be submitted by the Sponsor‘s PBM. Moreover, the Part D
Applicant/Sponsor must ensure that the PBM notifies CMS of the P&T Committee
membership. Also, the Part D Applicant/Sponsor should ensure that the PBM notifies
the Sponsor that this information has been successfully submitted to CMS.
II. Instructions to Plans and PBMs
A. If the Part D Applicant sub-contracts with a PBM for its P&T Committee and

operates under a Confidentiality Agreement (such that its members are not
disclosed to the Part D Applicant) then the Applicant must (1) complete the attached
Certification in HPMS, and (2) forward the attached P&T Committee Member
Disclosure form to the sub-contracted PBM and direct the PBM to submit the form to
CMS by February 21, 2012. The PBM should email the P&T Committee Member
Disclosure form to the following email box: [email protected].
B. In the event of any future changes to the membership of the Part D Sponsor‘s P&T

Committee or the PBM‘s P&T Committee, Part D Sponsors must (or in the case of a
confidential agreement the Part D Sponsor) assure that the PBM will notify the
appropriate CMS account manager (to be assigned at a future date) and make the

149

correct changes in HPMS on the Contract Management/Part D Data page within 30
days of the effective date of such change.
III. PHARMACY AND THERAPEUTICS COMMITTEE MEMBER DISCLOSURE
PBM must email the following form to [email protected] by February 21,
2012.
Name of Part D Plan or PBM: ______________________________________
If Part D Plan, provide Part D Contract number(s):_________________
Contact Person: ______________________________________
Phone Number: ______________________________________
Email: _____________________________________________
A. Complete the table below.

PROVIDE THE NAMES OF THE MEMBERS OF YOUR ORGANIZATION‘S P&T
COMMITTEE. INDICATE WHICH MEMBERS ARE PRACTICING PHYSICIANS OR
PRACTICING PHARMACISTS. FURTHER, INDICATE WHICH MEMBERS ARE
EXPERTS IN THE CARE OF THE ELDERLY OR DISABLED, AND FREE OF ANY
CONFLICT OF INTEREST WITH YOUR ORGANIZATION AND PHARMACEUTICAL
MANUFACTURERS. (APPLICANTS SHOULD MARK THE INFORMATION AS
PROPRIETARY.) SUBMIT THIS DATA BY CREATING A SPREADSHEET IN
MICROSOFT EXCEL THAT MIMICS THE TABLE BELOW.

Full Name
of Member
Start Date
and End
Date

Practice/Expertise

Free of Any Conflict of Interest

Mark an „X‟ in Appropriate Column

Type Yes or No

Practicing
Physician

Practicing

Elderly/Disabled With
With
Expert
Pharmaceutical
Pharmacist
Your
Organization? Manufacturers?

B. Complete the table below if a PBM submitting on behalf of Part D plan.

PROVIDE THE NAMES OF THOSE APPLICANTS FOR THE PART D BENEFIT FOR
WHICH YOUR ORGANIZATION IS PROVIDING PHARMACY BENEFIT MANAGEMENT
SERVICES, THE TYPE OF APPLICATION, AND THE CONTRACT NUMBER(S). ADD

150

ADDITIONAL ROWS AS NECESSARY.

Organization Name

Type of Application

151

Contract Number(s)

Applicant must upload in HPMS:
CERTIFICATION FOR PART D SPONSORS USING A PHARMACY BENEFIT
MANAGER‘S PHARMACY& THERAPEUTICS COMMITTEE UNDER A
CONFIDENTIALITY AGREEMENT
I, attest, on behalf of LEGAL NAME OF PART D SPONSOR APPLICANT (―Applicant‖),
to the following:
I certify that APPLICANT has entered into a contract with LEGAL NAME OF PBM
(―PBM‖) to perform pharmacy benefit management services related to the operation of a
Medicare Part D benefit plan(s) on behalf of APPLICANT.
I agree, to the best of my knowledge, that ―PBM,‖ has a Pharmacy and Therapeutics
(P&T) Committee that contains a majority of members who are practicing physicians
and/or pharmacists, includes at least one practicing physician and one practicing
pharmacist who are experts regarding the care of the elderly or disabled individuals,
and includes at least one practicing physician and one practicing pharmacist who are
independent and free of conflict relative to my plan and organization and
pharmaceutical manufacturers.
I agree that the PBM will supply to CMS the following information, including but not
limited to, the full legal name of each member of its P&T Committee designated as a
practicing physician or pharmacist specializing in elderly and/or disabled care. Each
member must also disclose any conflict of interest with my organization, and/or
pharmaceutical manufacturers.
I agree that my organization has policies and procedures to ensure and confirm the
ongoing integrity, qualifications and expertise of the PBM‘s P&T Committee.
I agree that in the event CMS identifies a PBM‘s P&T Committee member is listed on
the OIG exclusion list, my organization will be notified by CMS of such a problem. In
such an instance, my organization must assure that the PBM takes appropriate steps to
correct the problem or my organization will be at risk of being subject to a corrective
action plan and sanctions, depending on the nature of the problem.
I agree that CMS may inspect the records and premises of my organization or my
subcontractor (first tier, downstream and related entities) to ensure compliance with
the statements to which I have attested above.
I certify that I am authorized to sign on behalf of the Applicant.

152

Part D Applicant‘s Contract Number: _____________________

__________________________

___________________________

Authorized Representative Name (printed)

__________________________________
Authorized Representative Signature

Title

___________________________
Date (MM/DD/YYYY)

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APPENDIX XIV – I/T/U Revised Addendum
Note: All Part D sponsors will be required to use the attached revised version of the
I/T/U Addendum.
Indian Health Addendum to Medicare Part D Plan Agreement
1. Purpose of Indian Health Addendum; Supersession.
The purpose of this Indian Health Addendum is to apply special terms and conditions to
the agreement by and between __________________________(herein ―Part D
Sponsor‖) and _____________________________(herein ―Provider‖) for administration
of Medicare Prescription Drug Benefit program at pharmacies and dispensaries of
Provider authorized by the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, and implementing regulations in Parts 403, 411, 417, 422,
and 423 of Title 42, Code of Federal Regulations. To the extent that any provision of
the Part D Sponsor‘s agreement or any other addendum thereto is inconsistent with any
provision of this Indian Health Addendum, the provisions of this Indian Health
Addendum shall supersede all such other provisions.
2.

Definitions.

For purposes of the Part D Plan Sponsor's agreement, any other addendum thereto,
and this Indian Health Addendum, the following terms and definitions shall apply:
(a) The term "Part D Plan Sponsor" means a nongovernmental entity that is
certified under 42 CFR 417.472, 42 CFR Part 423 or 42 CFR Part 422 as meeting the
requirements and standards that apply to entities that offer Medicare Part D plans.
(b) The terms "Part D Plan" means prescription drug coverage that is offered
under a policy, contract, or plan that has been approved as specified in 42 CFR
423.272, 42 CFR 422.502 or 42 CFR 417.472 and that is offered by a PDP sponsor that
has a contract with the Centers for Medicare and Medicaid Services that meets the
contract requirements under subpart K of 42 CFR Part 423 or subpart K of 42 CFR Part
422.
(c) The term "Provider" means the Indian Health Service (IHS) and all
pharmacies and dispensaries operated by the IHS, or an Indian tribe, tribal organization
or urban Indian organization which operates one or more pharmacies or dispensaries,
and is identified by name in Section 1 of this Indian Health Addendum.
(d) The term "Centers for Medicare and Medicaid Services" means the agency
of that name within the U.S. Department of Health and Human Services.
(e) The term "Indian Health Service" means the agency of that name within the
U.S. Department of Health and Human Services established by Sec. 601 of the Indian
Health Care Improvement Act (―IHCIA‖), 25 USC §1661.
(f) The term "Indian tribe" has the meaning given that term in Sec. 4 of the
IHCIA, 25 USC §1603.

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(g) The term "tribal organization" has the meaning given than term in Sec. 4 of
the IHCIA, 25 USC §1603.
(h) The term "urban Indian organization" has the meaning given that term in Sec.
4 of the IHCIA, 25 USC §1603.
(i) The term "Indian" has the meaning given to that term in Sec. 4 of the IHCIA,
25 USC §1603.
(j) The term "dispensary" means a clinic where medicine is dispensed by a
prescribing provider.
3.

Description of Provider.

The Provider identified in Section 1 of this Indian Health Addendum is (check
appropriate box):
/_/ IHS operated health care facilities located within the geographic area
covered by the Provider Agreement, including hospitals, health centers and one
or more pharmacies or dispensaries (―IHS Provider‖). Where an IHS Provider
operates more than one pharmacy or dispensary all such pharmacies and
dispensaries are covered by this Addendum.
/_/ An Indian tribe that operates a health program, including one or more
pharmacies or dispensaries, under a contract or compact with the Indian Health
Service issued pursuant to the Indian Self-Determination and Education
Assistance Act, 25 USC §450 et seq.
/_/ A tribal organization authorized by one or more Indian tribes to operate a
health program, including one or more pharmacies or dispensaries, under a
contract or compact with the Indian Health Service issued pursuant to the Indian
Self-Determination and Education Assistance Act, 25 USC §450 et seq.
/_/ An urban Indian organization that operates a health program, including one or
more pharmacies or dispensaries, under a grant from the Indian Health Service
issued pursuant to Title V of the IHCIA.
4.

Deductibles; Annual Out-of-Pocket Threshold.

The cost of pharmaceuticals provided at a pharmacy or dispensary of Provider
or paid for by the Provider through a referral to a retail pharmacy shall count toward the
deductible and the annual out-of-pocket threshold applicable to an IHS beneficiary
enrolled in a Part D Plan.
5.

Persons eligible for services of Provider.

(a) The parties agree that the IHS Provider is limited to serving eligible IHS
beneficiaries pursuant to 42 CFR Part 136 and section 813(a) and (b) of the IHCIA, 25
USC §1680(a) and (b), who are also eligible for Medicare Part D services pursuant to
Title XVIII, Part D of the Social Security Act and 42 CFR Part 423. The IHS Provider
155

may provide services to non-IHS eligible persons only under certain circumstances set
forth in IHCIA section 813(c) and in emergencies under section 813(d ) of the IHCIA.
(b) The parties agree that the persons eligible for services of the Provider who is
an Indian tribe or a tribal organization or a Provider who is an urban Indian organization
shall be governed by the following authorities:
(1) Title XVIII, Part D of the Social Security Act and 42 CFR Part 423;
(2) IHCIA sections 813, 25 USC §1680c;
(3) 42 CFR Part 136; and
(4) The terms of the contract, compact or grant issued to the Provider by the
IHS for operation of a health program.
(c) No clause, term or condition of the Part D Plan Sponsor's agreement or any
addendum thereto shall be construed to change, reduce, expand or alter the eligibility of
persons for services of the Provider under the Part D Plan that is inconsistent with the
authorities identified in subsection (a) or (b).
6.

Applicability of other Federal laws.

Federal laws and regulations affecting a Provider include but are not limited to the
following:
(a) An IHS provider:
(1)

The Anti-Deficiency Act 31 U.S.C. § 1341;

(2)
The Indian Self Determination and Education Assistance Act
(―ISDEAA‖); 25 USC § 450 et seq.;
(3)

The Federal Tort Claims Act (―FTCA‖), 28 U.S.C. § 2671-2680;

(4)

The Federal Medical Care Recovery Act, 42 U.S.C. §§ 2651-2653;

(5)
The Federal Privacy Act of 1974 (―Privacy Act‖), 5 U.S.C. § 552a,
45 CFR Part 5b;
(6)

Confidentiality of Alcohol and Drug Abuse Patient Records, 42 CFR

Part 2;
(7)
The Health Insurance Portability and Accountability Act of 1996
(―HIPAA‖), 45 CFR Parts 160 and 164; and
(8)

The IHCIA, 25 U.S.C. § 1601 et seq.

(b) A Provider who is an Indian tribe or a tribal organization:
(1)

The ISDEAA, 25 USC §450 et seq.;

(2)

The IHCIA, 25 USC §1601, et seq.;

(3)

The FTCA, 28 USC §§2671-2680;

(4)

The Privacy Act, 5 USC §552a and regulations at 45 CFR Part 5b;

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(5)

The HIPAA and regulations at 45 CFR parts 160 and 164; and

(6)
Sec. 206(e)(3) of the IHCIA, 25 USC § 1624e(e)(3), regarding
recovery from tortfeasors.
(c) A Provider who is an urban Indian organization:
(1)

The IHCIA, 25 USC §1601, et seq.;

(2)

The Privacy Act, 5 USC §552a and regulations at 45 CFR Part 5b;

(3)

The HIPAA and regulations at 45 CFR parts 160 and 164; and

(4)
Sec. 206(e)(3) of the IHCIA, 25 USC §1621e(e)(3), regarding
recovery from tortfeasors, as made applicable to urban Indian organizations by
Sec. 206(i) of the IHCIA.
7.

Non-taxable entity.

To the extent the Provider is a non-taxable entity, the Provider shall not be required by a
Part D Plan Sponsor to collect or remit any Federal, State, or local tax.
8.

Insurance and indemnification.

(a) As an IHS provider, FTCA coverage obviates the requirement that IHS carry
private malpractice insurance as the United States consents to be sued in place of
federal employees for any damages to property or for personal injury or death caused
by the negligence or wrongful act or omission of federal employees acting within the
scope of their employment. 28 U.S.C. § 2671-2680. Nothing in the Part D Plan
Sponsor‘s Agreement shall be interpreted to authorize or obligate any IHS employee to
perform any act outside the scope of his/her employment. The IHS Provider shall not be
required to acquire insurance, provide indemnification, or guarantee that the Plan will be
held harmless from liability.
(b) A Provider which is an Indian tribe or a tribal organization shall not be
required to obtain or maintain professional liability insurance to the extent such Provider
is covered by the Federal Tort Claims Act (FTCA) pursuant to Federal law (Pub.L. 101512, Title III, §314, as amended by Pub.L. 103-138, Title III, §308 (codified at 25 USC
§450 F note); and regulations at 25 CFR Part 900, Subpt. M. To the extent a Provider
that is an urban Indian organization is covered by the FTCA pursuant to section 224(g)(n) of the Public Health Service Act, as amended by the Federally Supported Health
Centers Assistance Act, Pub.L. 104-73, (codified at 42 USC §233(g)-(n)) and
regulations at 42 CFR Part 6, such Provider shall not be required to obtain or maintain
professional liability insurance. Further, nothing in the Part D Plan Sponsor‘s
agreement or any addendum thereto shall be interpreted to authorize or obligate
Provider or any employee of such Provider to operate outside of the scope of
employment of such employee, and Provider shall not be required to indemnify the Part
D Plan Sponsor.

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9.

Licensure.

(a) States may not regulate the activities of IHS-operated pharmacies nor
require that the IHS pharmacists be licensed in the State where they are providing
services, whether the IHS employee is working at an IHS-operated facility or has been
assigned to a pharmacy or dispensary of a tribe, tribal organization, or urban Indian
organization. The parties agree that during the term of the Part D Plan Sponsor‘s
Agreement, IHS pharmacists shall hold state licenses in accordance with applicable
federal law, and that the IHS facilities where the pharmacies and dispensaries are
located shall be accredited in accordance with federal statutes and regulations. During
the term of the Part D Plan Sponsor‘s Agreement, the parties agree to use the IHS
facility‘s Drug Enforcement Agency (DEA) number consistent with federal law.
(b) Federal law (Sec. 221 of the IHCIA) provides that a pharmacist employed directly
by a Provider that is an Indian tribe or tribal organization is exempt from the licensing
requirements of the state in which the tribal health program is located, provided the
pharmacist is licensed in any state. Federal law (Sec. 408 of the IHCIA) further provides
that a health program operated by an Indian tribe or tribal organization shall be deemed to
have met a requirement for a license under state or local law if such program meets all the
applicable standards for such licensure, regardless of whether the entity obtains a license or
other documentation under such state or local law. The parties agree that these federal
laws apply to the Part D Plan Sponsor's Agreement and any addenda thereto. This
provision shall not be interpreted to alter the requirement that a pharmacy hold a license
from the Drug Enforcement Agency.
(c) To the extent that any directly hired employee of an urban Indian Provider is
exempt from State regulation, such employee shall be deemed qualified to perform
services under the Part D Plan Sponsor's agreement and all addenda thereto, provided
such employee is licensed to practice pharmacy in any State. Federal law (Sec. 408 of
the IHCIA) provides that a health program operated by an urban Indian organization
shall be deemed to have met a requirement for a license under state or local law if such
program meets all the applicable standards for such licensure, regardless of whether
the entity obtains a license or other documentation under such state or local law. This
provision shall not be interpreted to alter the requirement that a pharmacy hold a license
from the Drug Enforcement Agency.
10.

Provider eligibility for payments.

To the extent that the Provider is exempt from State licensing requirements, the
Provider shall not be required to hold a State license to receive any payments under the
Part D Plan Sponsor‘s agreement and any addendum thereto.
11.

Dispute Resolution.

a.
For IHS Provider. In the event of any dispute arising under the Participating
Part D Plan Sponsor‘s Agreement or any addendum thereto, the parties agree to meet
and confer in good faith to resolve any such disputes. The laws of the United States
shall apply to any problem or dispute hereunder that cannot be resolved by and

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between the parties in good faith. Notwithstanding any provision in the Part D Plan
Sponsor‘s Agreement or any addendum thereto to the contrary, IHS shall not be
required to submit any disputes between the parties to binding arbitration.
b.
For Tribal and Urban Providers. In the event of any dispute arising under the
Participating Part D Plan Sponsor‘s Agreement or any addendum thereto, the parties
agree to meet and confer in good faith to resolve any such disputes. Any dispute
hereunder that cannot be resolved by and between the parties in good faith shall be
submitted to the dispute resolution procedure pursuant to the Participating Part D Plan
Sponsor‘s Agreement.
12.

Governing Law.

The Part D Plan Sponsor's agreement and all addenda thereto shall be governed and
construed in accordance with Federal law of the United States. In the event of a conflict
between such agreement and all addenda thereto and Federal law, Federal law shall
prevail. Nothing in the Part D Plan Sponsor's agreement or any addendum thereto shall
subject an Indian tribe, tribal organization, or urban Indian organization to State law to
any greater extent than State law is already applicable.
13.

Pharmacy/Dispensary Participation.

The Part D Plan Sponsor's agreement and all addenda thereto apply to all pharmacies
and dispensaries operated by the Provider, as listed on the attached Schedule -------- to
this Indian Health Addendum. A pharmacy is required to use a National Provider
Identifier (NPI) number.
14.

Acquisition of Pharmaceuticals.

Nothing in the Part D Plan Sponsor's agreement and all addenda thereto shall affect the
Provider‘s acquisition of pharmaceuticals from any source, including the Federal Supply
Schedule and participation in the Drug Pricing Program of Section 340B of the Public
Health Service Act. Nor shall anything in such agreement and all addenda thereto
require the Provider to acquire drugs from the Part D Plan Sponsor or from any other
source.
15.

Drug Utilization Review/Generic Equivalent Substitution.

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Where the Provider lacks the capacity to comply with the information technology
requirements for drug utilization review and/or generic equivalent substitution set forth in
the Part D Plan Sponsor's agreement, the Provider and Part D Plan Sponsor agree that
the Provider shall comply with the Part D Plan Sponsor's drug utilization review and/or
generic equivalent substitution policies and procedures through an alternative
method. Nothing in this paragraph shall be interpreted as waiving the applicability of the
drug utilization review and/or generic equivalent substitution policies and procedures
adopted by Part D sponsor in accordance with 42 C.F.R.§§ 423.153(b) and (c), as
approved by CMS, to covered Part D drugs dispensed by the Provider to enrollees in
the Part D Plan[s]. As specified at 42 C.F.R. §423.132(c)(3), the requirements related
to notification of price differentials is waived for the Provider .
16.

Claims.

The Provider may submit claims to the Part D Plan by telecommunication through an
electronic billing system or by calling a toll-free number for non-electronic claims; in the
case of the latter, Provider shall submit a confirmation paper claim.
17.

Payment Rate.

Claims from the provider shall be paid at rates that are reasonable and appropriate.
18.

Information, Outreach, and Enrollment Materials.

(a) All materials for information, outreach, or enrollment prepared for the Part D
Plan shall be supplied by the Part D Plan Sponsor to Provider in paper and electronic
format at no cost to the Provider.
(b) All marketing or informational material listing a provider as a pharmacy must
refer to the special eligibility requirements necessary for service to be provided,
consistent with the eligibility requirements as described in this Indian health addendum
in paragraphs 5(a) for IHS providers and 5(b) for tribal and urban providers.
19.

Hours of Service.

The hours of service of the pharmacies or dispensaries of Provider shall be established
by Provider. At the request of the Part D Plan Sponsor, Provider shall provide written
notification of its hours of service.
20.

Endorsement

An endorsement of a non-Federal entity, event, product, service, or enterprise may be
neither stated nor implied by the IHS provider or IHS employees in their official
capacities and titles. Such agency names and positions may not be used to suggest
official endorsement or preferential treatment of any non-Federal entity under this
agreement.
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21.

Sovereign Immunity

Nothing in the Part D Plan Sponsor‘s Agreement or in any addendum thereto shall
constitute a waiver of federal or tribal sovereign immunity.

Signature of Authorized Representative

Title of Authorized Representative

161

Printed Name of Authorized Representative

APPENDIX XV – Compliance Program Crosswalk
INSTRUCTIONS: Applicants must complete and upload in HPMS the following chart
(which contains the requirements for a Compliance Plan). Applicants must identify where
specifically (i.e., the .pdf page number) in its compliance plan the following elements are
found.
Compliance Plan Elements
A. Written policies, procedures, and standards of conduct must
include the following seven components:

Page, paragraph
where element
located
§ 423.504(b)
(4)(vi)(A)

1. Articulate the applicant‘s commitment to comply with all applicable
Federal and State standards.
2. Describe compliance expectations as embodied in the standards
of conduct.
3. Describe the implementation and operation of the compliance
program.
4. Provide guidance to employees and others on dealing with
potential compliance issues.
5. Identify how to communicate compliance issues to appropriate
compliance personnel.
6. Describe how potential compliance issues will be investigated and
resolved by the applicant.
7. Include a policy of non-intimidation and non-retaliation for good
faith participation in the compliance program, including, but not
limited to, reporting potential issues, investigating issues,
conducting self-evaluations, audits and remedial actions, and
reporting to appropriate officials.
B. Designation of a compliance officer and a compliance
committee who report directly to and are accountable to
applicant‘s chief executive or senior management and include
the following three components:
1. The compliance officer, vested with the day-to-day operations of
the compliance program, must be an employee of the MA
applicant, parent organization or corporate affiliate. The

162

§ 423.504(b)
(4)(vi)(B)

compliance officer may not be an employee of the MA applicant‘s
first tier, downstream or related entity.
2. The compliance officer and the compliance committee must
periodically report directly to the governing body of the MA
applicant on the activities and status of the compliance program,
including issues identified, investigated, and resolved by the
compliance program.
3. The governing body of the MA applicant must be knowledgeable
about the content and operation of the compliance program and
must exercise reasonable oversight with respect to the
implementation and effectiveness of the compliance programs.
C. Establish, implement and provide effective training and
education for employees including the chief executive and
senior administrators or managers, governing body members,
first tier, downstream, and related entities must include the
following components:

§ 423.504(b)
(4)(vi)(C)

1. Training and education must occur at least annually and must be
part of the orientation for new employees, new first tier,
downstream and related entities, and new appointments to chief
executive, senior administrator, or governing body member.
2. An indication that first tier, downstream, and related entities who
have met the fraud, waste, and abuse certification requirements
through enrollment into the Medicare program or accreditation as
a Durable Medical Equipment, Prosthetics, Orthotics, and
supplies (DMEPOS) are deemed to have met the training and
educational requirements for fraud, waste, and abuse.
D. Establishment and implementation of effective lines of
communication, ensuring confidentiality, between:

§ 423.504(b)
(4)(vi)(D)

1. The compliance officer, members of the compliance committee,
the MA applicant‘s employees, managers and governing body.
2. The MA applicant‘s first tier, downstream, and related entities.
3. Such lines of communication must be accessible to all.
4. 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-publicize disciplinary standards and implementation of

163

§ 423.504(b)

procedures, which encourage good faith participation in the
compliance program by all affected individuals, that are
enforced and include the following three policies:

(4)(vi)(E)

1. Articulate expectations for reporting compliance issues and assist
in their resolution.
2. Identify non-compliance or unethical behavior.
3. Provide for timely, consistent, and effective enforcement of the
standards when noncompliance or unethical behavior is
determined.
F. Establish 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 MA applicant,
including first tier entities‘, compliance with CMS requirements
and the overall effectiveness of the compliance program.

§ 423.504(b)
(4)(vi)(F)

G. Establishment and implementation of procedures and a
system for promptly responding to compliance issues as they
are raised, investigating potential compliance problems
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. The procedures must include the following
components:

§ 423.504(b)
(4)(vi)(G)

1. If the MA applicant discovers evidence of misconduct related to
payment or delivery of items or services under the contract, it
must conduct a timely, reasonable inquiry into that conduct.
2. The MA applicant must conduct appropriate corrective actions
(e.g., repayment of overpayments and disciplinary actions against
responsible individuals) in response to the potential violation.
3. The MA applicant should have procedures to voluntarily selfreport potential fraud or misconduct related to the MA program to
CMS or its designee.

164