§ 423.104 Requirements related to qualified prescription drug coverage.

(a) General. Subject to the conditions and limitations set forth in this subpart, a Part D sponsor must provide enrollees with coverage of the benefits described in paragraph (c) of this section. The benefits may be provided directly by the Part D sponsor or through arrangements with other entities. CMS reviews and approves these benefits consistent with § 423.272, and using written policy guidelines and requirements in this part and other CMS instructions.

(b) Availability of prescription drug plan. A PDP sponsor offering a prescription drug plan must offer the plan—

(1) To all Part D eligible beneficiaries residing in the plan's service area; and

(2) At a uniform premium, with uniform benefits and level of cost-sharing throughout the plan's service area.

(c) Types of benefits. The coverage provided by a Part D plan must be qualified prescription drug coverage.

(d) Standard prescription drug coverage. Standard prescription drug coverage includes access to negotiated prices as described under paragraph (g)(1) of this section, provides coverage of Part D drugs, and must meet the following requirements

(1) Deductible. An annual deductible equal to—

(i) For 2006. $250; or

(ii) For years subsequent to 2006. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $5.

(2) Cost-sharing under the initial coverage limit. (i) Subject to paragraph (d)(4) of this section, coinsurance for actual costs for covered Part D drugs covered under the Part D plan above the annual deductible specified in paragraph (d)(1) of this section, and up to the initial coverage limit under paragraph (d)(3) of this section, that is—

(A) Equal to 25 percent of actual cost; or

(B) Actuarially equivalent to an average expected coinsurance of no more than 25 percent of actual cost, as determined through processes and methods established under § 423.265(c) and (d).

(ii) Tiered copayments. A Part D plan providing actuarially equivalent standard coverage may apply tiered copayments, provided that any tiered copayments are consistent with paragraphs (d)(2)(i)(B) and (d)(4) of this section and are approved as described in § 423.272(b)(2).

(iii) Tiered cost sharing under paragraph (d)(2)(ii) of this section may not exceed levels annually determined by CMS to be discriminatory.

(iv) Specialty tier means a formulary cost sharing tier dedicated to high-cost Part D drugs with ingredient costs for a 30-day equivalent supply (as described in paragraph (d)(2)(iv)(A)(2) of this section) that are greater than the specialty tier cost threshold specified in paragraph (d)(2)(iv)(A) of this section.

(A) Specialty-tier cost threshold. CMS sets the specialty-tier cost threshold for a plan year in accordance with this paragraph (d)(2)(iv)(A), using the following steps:

(1) 30-day equivalent ingredient cost. Using the PDE data as specified in paragraph (d)(2)(iv)(C) of this section, CMS uses the ingredient cost reflected on the prescription drug event (PDE) to determine the ingredient cost in dollars for a 30-day equivalent supply of the Part D drug.

(2) 30-day equivalent supply. CMS determines the 30-day equivalent supply as follows: If the days' supply reported on a PDE is less than or equal to 34, the number of 30-day equivalent supplies equals one. If the days' supply reported on a PDE is greater than 34, the number of 30-day equivalent supplies is equal to the number of days' supply reported on each PDE divided by 30.

(3) Top 1 percent. CMS determines the amount that equals the lowest 30-day equivalent ingredient cost that is within the top 1 percent of all 30-day equivalent ingredient costs reflected in the PDE data.

(4) Determination. Except as provided in paragraph (d)(2)(iv)(B) of this section, the amount determined in paragraph (d)(2)(iii) of this section is the specialty-tier cost threshold for the plan year.

(5) Claims history. Except for newly FDA-approved Part D drugs only recently available on the market for which Part D sponsors would have little or no claims data, CMS approves placement of a Part D drug on a specialty tier when that Part D sponsor's claims data from the time period specified in paragraph (d)(2)(iv)(C) of this section demonstrates that greater than 50 percent of the Part D sponsor's PDEs for a given Part D drug, when adjusted for 30-day equivalent supplies, have ingredient costs for 30-day equivalent supplies, as described in paragraph (d)(2)(iv)(A)(2) of this section, that exceed the specialty-tier cost threshold.