Potential Medicare Rx plan sponsors will need to tell the Centers for Medicare & Medicaid Services how they intend to participate in the Part D benefit by early February.

A CMS ¹ draft document entitled "Solicitation for Applications for Prescription Drug Plans" sets a February deadline for sponsors to submit a "notice of intent" to participate in Part D.

Sponsors will be expected to inform CMS of which regions they intend to compete in and in what capacity: Medicare Advantage Rx plan, stand-alone drug insurance plan or "fallback" administrator.

The notice of intent does not bind the sponsor to submit an application, CMS noted, but the agency will disregard any applications from sponsors who do not declare their intent in February.

CMS is facing a tight schedule to ensure that the drug benefit starts up on Jan. 1, 2006. The February deadline looks like the first key milestone in determining whether the private drug insurance model will work.

Although the notice of intent is non-binding, the Medicare rules prohibit any entity that submits a bid to be a "fallback" provider from serving as a stand-alone Part D plan (² Also see "Medicare Rx “Fallback” Plans Ensured Small Role Under CMS Rule" - Pink Sheet, 9 August, 2004., p. 17).

CMS is warning sponsors that it will be on the lookout for any effort to circumvent the fallback rules: "CMS will be looking closely at the entities that apply for a Fallback Entity contract as well as their applications to identify situations where applicants have set up 'sham' arrangements to evade this prohibition."

Plan sponsors received the first critical piece of information to determine their plans when CMS published the maps defining regional competition in Part D and Medicare Advantage (see ³ Also see "Medicare Rx Regions Favor Large Insurers, Small PBMs" - Pink Sheet, 13 December, 2004.).

Final decisions, particularly for the stand-alone drug insurance side of the benefit, will depend on the requirements spelled out in the final rules implementing the benefit. Those rules are not expected to be published until January, giving potential sponsors a very short time to decide on a strategy for 2006.

However, CMS has been talking with PBMs and other potential plan sponsors about how best to design the benefit to encourage participation in the risk-bearing side of the benefit. If the recent public statements by Medco are a guide, CMS appears to be making headway in encouraging sponsors to focus on the at-risk approach rather than the "fallback" plan (⁴ Also see "Medco Says It Is Ready For Part D: Will CMS Be?" - Pink Sheet, 15 November, 2004., p. 15).

The "notice-of-intent" deadline will "assist CMS in planning for the review of applications and ensure that potential applicants are notified of any additional guidance posted on the web," the agency said.

The early notice requirement would also give CMS one last chance to tinker with the risk-sharing formula if there does not appear to be sufficient interest in the stand-alone insurance benefit.

Confirmation of widespread interest from sponsors, on the other hand, would help the agency preempt any efforts on Capitol Hill to revise the Medicare Modernization Act (see ⁵ Also see "HHS Price Negotiators: Wyden, Thompson And “Non-Interference”" - Pink Sheet, 13 December, 2004.).

Congress made a down payment for the drug benefit in the recently passed omnibus appropriations bill for fiscal year 2005: $5.22 bil. was appropriated "to ensure the prompt payment of Medicare prescription drug benefits" in FY 2006. The funding should ensure that CMS will not be held up in launching the benefit if the appropriations process is bogged down again next year.

Applications from entities seeking a contract to administer a PDP will be due in mid-March 2005. Applicants will receive notice if they are eligible to enter a Part D contract in late spring; unsuccessful applicants will have an opportunity to reapply.

Proposed drug formularies will be due on April 18; CMS will grant "preliminary approval" by May 16 in order to allow revisions. That will be the first time for CMS to apply its still-evolving rules for Medicare formularies.

The final deadline for submitting complete bids is expected to be June 6. If that date holds, it may be remembered in the pharmaceutical industry as "Part D-Day."

CMS will negotiate bids with plans and grant final approval Sept. 2. Enrollment begins Nov. 15.

Medicare Rx Sponsors Must Notify CMS Of Part D Intentions In February

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