Just last month the “Improving Transparency and Accuracy in Medicare Part D Spending Act” was introduced in the Senate to amend the Social Security Act.  The bill seeks to prohibit Part D plans (and their contracted pharmacy benefit managers (PBMs)) from retroactively reducing payments to pharmacies for clean claims.  The bill would allow Part D plans and PBMs to reduce an already completed payment to a pharmacy if a claim is found not to be clean.  Not surprisingly, Part D plans would also be allowed to increase payments to pharmacies under the bill.

This seems to be the latest chapter in the war over fees between Part D plans, PBMs and pharmacies.  As discussed here, CMS addressed Part D plans’ and PBM’s practice of charging pharmacies administrative and transaction fees at the point of sale or retroactively in its 2014 Call Letter published in April 2013.  Eventually, CMS amended the definition of “negotiated price” in the Part D regulations to take into account fees paid by pharmacies to Part D plans or PBMs that effectively reduce the price that a pharmacy is paid.  As a result of the change to the definition of “negotiated price” and CMS guidance, Part D plans were no longer allowed to report these fees/reductions in their direct and indirect remuneration (DIR) report if they were reasonably determinable at the point of sale.  Because certain reductions in price or fees charged to the pharmacies are not reasonably determinable at the point of sale, some are still reported by plans as DIR.  The bill introduced in September targets these reductions in price and fees that are applied to pharmacy claims retroactively.

Some plans and PBMs have been reducing the amounts paid to pharmacies by tying pharmacy payments to performance metrics that are determined after the claims have been paid.  Tying performance metrics to payments is something that CMS has appeared to be in favor of, so it is unclear what type of support the bill will receive from the agency.  If plans are no longer able to tie payment to performance in a way that results in some pharmacies receiving decreased payments, some plans may try to negotiate lower initial pharmacy prices and then pay performance “bonuses” to the pharmacies that it determines meet the required performance metrics.  It is unclear whether receiving less money initially or receiving more money upfront but having some of it at risk will be better for pharmacies.

This legislation has little likelihood of passage in 2016.  However, the current political conversation regarding drug pricing is certain to draw in PBMs as both the drug industry and pharmacists call for greater transparency.  Next year might be a busy year for PBMs as they will likely need to address other legislative proposals aimed at pricing and transparency.

 

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Photo of Susan Berson Susan Berson

Susan Berson is the Managing Member of the firm’s DC office, serves on the firm’s Policy Committee, and is Division Head of Mintz Levin’s Health Law, Communications, and Antitrust practices as well as ML Strategies. She has significant experience in the health care industry and regularly assists clients by providing industry insight and strategic guidance on the most complex and cutting edge health care issues.

Photo of Tara Dwyer Tara Dwyer

Tara Dwyer is a Member in the firm’s Washington, DC office. Tara focuses on advising private and public health care services entities, including managed care organizations, pharmaceutical services providers such as PBMs, and integrated delivery systems, on mergers and acquisitions, joint ventures, and complex service arrangements. She works closely with Medicare Advantage Organizations (MAOs) and Medicare Part D Plan Sponsors, including Employer Group Waiver Plans (EGWPs), and first tier and downstream entities to address regulatory and compliance matters that arise as a result of participating in Medicare Parts C and D.

Photo of Rodney Whitlock Rodney Whitlock

Rodney Whitlock is a veteran health care policy professional with more than 20 years of experience working with the US Congress, where he served as health policy advisor and as Acting Health Policy Director for Finance Committee Chairman Chuck Grassley of Iowa and, earlier, on the staff of former US Representative Charlie Norwood of Georgia. Rodney has been deeply engaged in health care reform legislation. In 2010, he became the Acting Health Policy Director for Senator Grassley, and shepherded the Medicare and Medicaid Extenders Act of 2010 into law.