(a) Submission of bids—(1) Solicitation of bids. Separate from the risk bidding process under §423.265, CMS solicits bids from eligible fallback entities for the offering in all fallback service areas in one or more PDP regions of a fallback prescription drug plan during the contract period specified in §423.871(b).

(2) Timing of bids. CMS determines when to solicit bids for 2006 so that potential fallback prescription drug plans have enough time to prepare a bid. After that, bids are solicited on 3 year cycles, or annually thereafter as needed to replace contractors between contracting cycles.

(3) Format of bid. CMS specifies the form and manner in which fallback bids are submitted in separate guidance to bidders.

(b) Negotiation and acceptance of bids—(1) General rule. Except as provided in this section, the provisions of §423.272 apply for the approval or disapproval of fallback prescription drug plans. CMS enters into contracts under this paragraph with eligible fallback entities for the offering of approved fallback prescription drug plans in potential fallback service areas.

(2) Flexibility in risk assumed and application of fallback prescription drug plan. In order to ensure access in an area in accordance with §423.859(a), CMS may approve limited risk plans under §423.272(c) for that area. If the access requirement is still not met after applying §423.272(c), CMS provides for the offering of a fallback prescription drug plan in that area.

(3) Limitation of 1 Plan for all fallback service areas in a PDP region. All fallback service areas in any PDP region for a contract period must be served by the same fallback prescription drug plan.

(4) Competitive procedures. CMS uses competitive procedures (as defined in section 4(5) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(5)) to enter into a contract under this paragraph. The provisions of section 1874A(d) of the Act apply to a contract under this section in the same manner as they apply to a contract under that section.

(5) Timing of contracts. CMS approves a fallback prescription drug plan for a PDP region in a manner so that, if there are any fallback service areas in the region for a year, the fallback prescription drug plan is offered at the same time as prescription drug plans are otherwise offered. In the event of mid-year changes and as required by §423.859(b)(2), CMS approves a fallback prescription drug plan for a PDP region in a manner so that the fallback prescription drug plan is offered within 90 days of notice.

(6) No national fallback prescription drug plan. CMS may not enter into a contract with a single fallback entity for the offering of fallback prescription drug plans throughout the United States.