What a Part D Plan Must Do When It Drops a Drug Mid-Year

Answer first: negative changes are the regulated category

42 CFR 423.120(e) opens with a flat statement: "A Part D sponsor may not make any negative formulary changes to its CMS-approved formulary except as specified in this section." Everything else in the change rules follows from that sentence. Additions and improvements are handled loosely; removals and restrictions are handled tightly.

The regulation's later notice paragraph tells us what a negative change consists of, because it lists what a written notice has to disclose: whether the plan is "removing the covered Part D drug from the formulary, moving it to a higher cost-sharing tier, or adding or making more restrictive PA, ST, or QL requirements." Prior authorization, step therapy and quantity limits are therefore not separate from the formulary in the regulation's accounting — tightening one of them is a formulary change with the same procedural consequences as removing the drug.

The default route for such a change is a request to CMS. Under paragraph (e)(1), before implementing a negative formulary change a sponsor must submit a negative formulary change request to CMS at a time and in a form and manner CMS specifies. Paragraph (e)(3) splits what happens next: negative change requests for maintenance changes are deemed approved 30 days after submission unless CMS notifies the sponsor otherwise, while non-maintenance changes may not be implemented until the sponsor receives notice of approval — and, in a provision that decides a great deal, "affected enrollees are exempt from non-maintenance changes for the remainder of the contract year."

There is a window in which negative changes are barred

Paragraph (e)(4) draws a hard line around the period when people are choosing plans and settling into them. Except for the immediate changes described below, a sponsor "may not make a negative formulary change that takes effect between the beginning of the annual coordinated election period described in § 423.38(b) and 60 days after the beginning of the contract year associated with that annual coordinated election period."

The reason for the window is visible in its endpoints. It starts when people begin comparing plans and ends two months into the year they chose. A formulary a person relied on while choosing cannot be narrowed underneath them during that stretch.

A related limit sits in paragraph (b)(4). Except as CMS may permit to account for new therapeutic uses and newly approved Part D drugs, a sponsor "may not change the therapeutic categories and classes in a formulary other than at the beginning of each plan year." The architecture of the formulary — which categories exist at all — is an annual decision, distinct from which specific drugs sit inside those categories.

Two changes may happen immediately, and each carries its own notice

Paragraph (e)(2) exempts two situations from the change-request requirement.

The first is an immediate substitution. A sponsor may make negative formulary changes to a brand name drug, a reference product or a brand name biological product within 30 days of adding a corresponding drug to its formulary on the same or lower cost-sharing tier and with the same or less restrictive prior authorization, step therapy or quantity limit requirements — but only where the sponsor previously could not have included the corresponding drug when it submitted its initial formulary for CMS approval because that drug was not yet available on the market, and only where the sponsor has provided the advance general notice described in paragraph (f)(2).

The second is a market withdrawal. A sponsor "may immediately remove from its formulary any Part D drugs withdrawn from sale by their manufacturer or that the Food and Drug Administration (FDA) determines to be withdrawn for safety or effectiveness reasons."

Both exemptions come with notice conditions rather than no conditions. Advance general notice under paragraph (f)(2) must go to all current and prospective enrollees and other specified entities, in the formulary and other applicable beneficiary communication materials, advising that the sponsor may make such immediate changes at any time. It must include information about how to access the plan's online formulary, how to contact the plan, and that written notice of any change made will describe the specific drugs involved. For immediate substitutions the advance general notice must also specify that the written notice will contain information on the steps enrollees may take to request coverage determinations and exceptions.

Retrospective notice follows under paragraph (f)(3): for a change made under the immediate-change exemption, the sponsor must provide notice to other specified entities and written notice to affected enrollees as soon as possible, but no later than by the end of the month following any month in which the change takes effect, and must submit the change to CMS in its next required or scheduled formulary update.

The ordinary notice rule gives the sponsor a choice

For a negative formulary change that is not in the immediate category, paragraph (f)(1) requires notice to CMS and other specified entities at least 30 days before the change becomes effective. For the affected enrollee, the sponsor "must either: provide written notice to affected enrollees at least 30 days prior to the date the change becomes effective, or when an affected enrollee requests a refill of the Part D drug, provide such enrollee with an approved month's supply of the Part D drug under the same terms as previously allowed and written notice of the formulary change."

That is a genuine either-or, and the second branch changes what a person experiences. Under it, the first sign of the change may be at the pharmacy counter — accompanied by a supply on the old terms and a written notice, rather than by a letter a month earlier.

Whichever branch is used, paragraph (f)(4) fixes the contents of the written notice. It must state the name of the affected drug; whether the plan is removing it, moving it to a higher cost-sharing tier, or adding or tightening prior authorization, step therapy or quantity limit requirements; the reason for the change; appropriate alternative drugs on the formulary in the same or a lower cost-sharing tier and the expected cost sharing for those alternatives; and, for changes other than market withdrawals, the means by which enrollees may obtain a coverage determination under § 423.566, including an exception to a coverage rule under § 423.578.

Non-negative changes get a lighter treatment. Under paragraph (f)(5), a sponsor provides notice of all other formulary changes by giving advance general notice that it may make such changes at any time, with information on accessing the online formulary and contacting the plan, plus specific notice to other specified entities and to CMS in the next scheduled formulary update.

The transition process is a separate obligation with its own trigger

Paragraph (b)(3) requires a sponsor to provide an appropriate transition process for enrollees prescribed Part D drugs that are not on the plan's formulary — and the parenthesis widens that to include "Part D drugs that are on a sponsor's formulary but require prior authorization or step therapy under a plan's utilization management rules."

The process must apply to four groups: new enrollees into Part D plans following the annual coordinated election period, newly eligible Medicare enrollees coming 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 who are affected by formulary changes. It does not apply to the immediate changes permitted under paragraph (e)(2).

The substance is a temporary supply. The transition process must ensure access to a temporary supply of drugs within the first 90 days of coverage under a new plan, and the regulation states that this 90-day timeframe applies to retail, home infusion, long-term care and mail-order pharmacies. Where an enrollee requests a fill of a non-formulary drug during that period, the sponsor must provide "a one-time, temporary supply of at least an approved month's supply of medication, unless the prescription is written by a prescriber for less than an approved month's supply," in which case multiple fills must be allowed up to that total.

Notice attaches to the fill itself. Written notice must be provided to each affected enrollee within 3 business days after adjudication of the temporary fill, and the sponsor must make reasonable efforts to notify the prescribers of enrollees who receive such a notice.

Cost sharing during a transition fill is constrained too. For low-income subsidy enrollees, the sponsor must not charge higher cost sharing for transition supplies than the statutory maximum copayment amounts. For other enrollees, the sponsor must charge the same cost sharing for a non-formulary drug that would apply for a non-formulary drug approved through a formulary exception under § 423.578(b), and the same cost sharing for a formulary drug subject to utilization management edits that would apply once those criteria are met.

Why the notice content is the part worth reading

A person affected by a formulary change generally learns three things from the required notice: what changed, what the plan considers an alternative, and how to contest it. The third item is the one the regulation ties to the rest of the appeals machinery, by requiring the notice to state the means of obtaining a coverage determination under § 423.566 including an exception under § 423.578. Those sections carry their own deadlines and their own consequence for a sponsor that misses them.

The alternatives item deserves attention for a different reason. The notice must list alternatives "on the formulary in the same or a lower cost-sharing tier" and the expected cost sharing for them. That is a statement about the plan's formulary, not a clinical recommendation, and the regulation does not treat it as one. Whether a listed alternative is appropriate for a particular person is a question for a prescriber who can see that person's records.

Finally, one structural point about who these rules bind. Everything described here is a duty of a Part D plan sponsor under part 423. Employer and individual-market drug lists are governed by different rules entirely, and Medicaid preferred drug lists by different rules again. A change described in a plan document as a formulary update means something specific under this part and something else elsewhere.