Letter to Tommy Thompson Secretary Department of Health and Human Services

January 6, 2004

The Honorable Tommy Thompson
Secretary
Department of Health and Human Services
200 Independence Avenue, SW
Washington, DC 20201

Dear Secretary Thompson,

I was delighted to see that the Department of Health and Human Services (HHS) in its proposed rule, noticed today in the Federal Register (42 CFR Part 447), agreed to modify materially a final rule that established, among other things, a new, 10-year record keeping requirement for drug manufacturers under the Medicaid Drug Rebate Program.

In the original rule, HHS set forth a three-year time limitation during which manufacturers were to report changes to average manufacturer price and best price for purposes of reporting data to HHS. I strongly opposed that provision in a letter to you dated October 17, 2003, because it would have had a severe and adverse impact upon the False Claims Act, whistleblowers and related anti-fraud provisions.

Today, I see that HHS is removing the three-year record-keeping requirement and replacing it with a 10-year record-keeping requirement. In addition, HHS proposed that manufacturers must retain records beyond the 10-year period if the records are the subject of an audit or a government investigation.

There is one remaining issue that I would appreciate your addressing. The interim final rule with comment period that was published today sets forth a sunset provision in the Background Section. In essence, it provides that the record retention requirements will be in effect until December 31, 2004, about one year from now, or when HHS publishes a final record-keeping requirement in the Federal Register. At the same time, the Proposed Rule, also published today, states that the HHS proposes that the 10-year record-keeping requirement be effective without a sunset date provision (emphasis added). Could you please explain the interaction of these two provisions? I would appreciate a response to this matter by February 2, 2004.

In closing, I wish to again thank you for your assistance and should you have any questions, please do not hesitate to contact me.

Sincerely,

Charles E. Grassley
Chairman