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Tara Dwyer is Of Counsel 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.

On Friday, June 23, 2017, CMS released the Final Medicare Part D DIR Reporting Requirements for 2016.  Part D sponsors may begin submitting their DIR information on June 30, 2017 and must finish their submissions by the end of July 31, 2017.  As explained in our earlier post, CMS publishes Part D DIR Reporting requirements each year and sets the deadline for DIR submissions.

These DIR Reporting Requirements are the first to require Part D plan sponsors to report as DIR price concessions from and additional contingent payments to network pharmacies that could not reasonably be determined at the point of sale.  This change is caused by the update to the definition of “negotiated prices” that was effective January 1, 2016.  Not surprisingly, most of the comments and responses included in CMS’s Reporting Requirements focus on this change.  Additional topics addressed in the comments and responses include, but are not limited to: (i) plan sponsors no longer being able to report negative amounts in the rebate fields, (ii)  the timeliness of the DIR data submitted by July 31, 2017; and (iii) confidentiality of DIR data reported to CMS.

Yesterday, CMS released the Proposed Part D DIR (Direct and Indirect Remuneration) Reporting Requirements for 2016 and postponed the 2016 DIR Reporting deadline.

Each year, CMS releases Proposed Part D DIR Reporting Requirements for interested parties to review and comment on. The DIR Reporting Requirements tend to change slightly from year-to-year as the Part D program has developed and CMS gains further understanding of rebates and price concessions that a Part D plan sponsor may receive or pay.  Additionally, some changes in DIR Reporting Requirements are the result of changes to Part D regulations.  After reviewing the comments, CMS publishes the Final Part D DIR Reporting Requirements, typically in late May, and then plan sponsors submit their DIR Report by June 30th.

These Proposed DIR Reporting Requirements are the first that reflect the change in the definition of “negotiated prices” as set forth at 42 C.F.R. § 423.100. Although the discussion regarding changing the definition of negotiated prices started multiple years ago and was finalized in 2014, the change was not effective until January 1, 2016.  CMS’s proposed changes related to the updated definition of negotiated prices are captured in Summary DIR Report columns DIR #8 and DIR #9.

The deadline for submitting comments is June 2, 2017.

Typically, Part D plan sponsors must submit their DIR reports to CMS by June 30th of the year following the close of the plan year (June 30, 2017 for 2016 DIR).  CMS is postponing the deadline for 2016 DIR submission so that it has time to review the comments it receives and so that Part D plan sponsors have adequate time to analyze and categorize their data in the manner required by the upcoming Final Part D DIR Reporting Requirements.  CMS will announce the 2016 DIR submission deadline in the Final Part D DIR Reporting Requirements for 2016 and it appears that plan sponsors will have approximately 30 days to analyze and categorize their data.

shutterstock_428983732Last week, the California Assembly Committee on Business and Professions voted in favor of Assembly Bill 315.  AB 315 seeks to amend the California Business and Professions Code: (a) to require PBMs to obtain licensure from the Board of Pharmacy, (b) to state that PBMs have fiduciary duties to their “purchaser” clients (i.e., health plans), and (c) to require PBMs to disclose to their purchaser clients data regarding drug costs, rebates, and fees earned. The favorable vote moves the bill to the Committee on Appropriations.

California is not the only state that is considering adopting a PBM “transparency” law.  New York’s Governor Cuomo released a proposal that seeks to require PBMs to both register with the State and obtain a license (from the Department of Financial Services) as well as disclose financial incentives or benefits for promoting the use of certain drugs and financial arrangements that affect customers.  The Governor would also like to impose price controls on pharmaceutical manufacturers.  New York has a long history of regulating PBMs through a handful  of systems because the services that PBMs offer often result in a PBM needing to hold a specific non-PBM license and to adopt a specific corporate structure.  In addition, Senator Wyden (D-Ore.) introduced the C-THRU Act to the Senate Finance Committee in March.  The C-THRU Act seeks to make PBM rebate data publicly available, require the Secretary of HHS to adopt a minimum percentage of drug rebates that a PBM would need to pass through to certain of its health plan clients, and amend the definition of “negotiated prices” under the Medicare Part D Program.  Continue Reading California Advances PBM Licensing and “Transparency” Law

As described in last week’s post, Senator Wyden has introduced the C-THRU Act that seeks to require public disclosure of PBM rebate amounts, establish a minimum rebate percentage that PBMs must pass on to Part D and Exchange Plan clients, and intends to change the definition and/or application of “negotiated prices” under the Part D program.  This post focuses on the portion of the C-THRU Act that relates to Part D negotiated prices.

According to the Summary of The Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act (“Summary”) released by the Senate Finance Committee prior to the release of the actual bill, Part D enrollee cost-sharing is based off the price at which the pharmacy acquires the drug.  The Summary provides the following example:  “a drug maker sets a drug[‘]s price at $100.  Under current law, Part D beneficiaries pay co-insurance based on the $100 price, not the lower price, say, $80, that a PBM negotiates with a drug maker.  Seniors in Medicare ought to benefit from these negotiations.”  This example is inaccurate, ignores the definition of and parties involved in negotiated prices as defined under the Part D regulations, and assumes that Medicare seniors currently do not benefit from manufacturer rebates.  In fact, CMS recently recognized that manufacturer rebates are helping keep Part D enrollee premiums down. Continue Reading C-THRU’s Proposed Changes to Negotiated Prices – A Demonstration of the Part D Program’s Complexities and Misunderstandings

Last week, Senate Finance Committee Ranking Member Ron Wyden (D- Ore.) introduced the “Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act of 2017.”  As its name suggests, it seeks to require parties (e.g., PBMs) that contract with pharmaceutical manufacturers for drug rebates to be more transparent regarding the rebates they receive on behalf of their health plan clients, specifically Part D plans and qualified health benefit plans that participate on ACA Exchanges (“Exchange Plans”). The Act would: (1) require the Secretary of the Department of Health & Human Services (HHS) to make available on its website the PBM transparency data submitted by PBMs that contract with Part D Sponsors or Exchange Plans, (2) require the Secretary of HHS to adopt a minimum percentage of drug rebates that a PBM would need to pass through to its Part D or Exchange Plan clients, and (3) amend the definition of negotiated price under the Part D program to change what price concessions would have to be reflected at the point-of-sale.  This post focuses on the first two changes.  The third change will be addressed in a separate post. Continue Reading Wyden’s C-THRU Act – Publicizing PBM Rebate Data

Last week, CMS published the Revised Draft 2018 Medicare Marketing Guidelines and requested feedback from all interested parties.

The draft includes many small changes to the Marketing Guidelines, including but not limited to those in the following areas:

  • Multi-language inserts – CMS wants to defer to the more robust requirements established by Section 1557 of the Affordable Care Act
  • Non-English Language Disclaimer – Plan Sponsors will be required to include the non-English language disclaimer on ANOC/EOC, LIS Rider, Comprehensive or Abridged Formulary, Star Ratings, Summary of Benefits, Part D Transition Letters.
  • Use of Star Ratings – The draft includes multiple changes relating to how and when a Plan Sponsor can use its Star Ratings, including that CMS will provide a Gold Star icon each fall to 5 Star Plans that the Plans can use on their marketing material.  Plans may not create their own gold star icon.
  • Unsolicited Electronic Communication – Plan Sponsors will be required to include an opt-out process for enrollees and the draft instructs Plan Sponsors that an individual “liking” the Plan’s social media page does not constitute the individual agreeing to receive communications from the Plan Sponsor outside of the social media forum.
  • Provider Affiliation Announcements – Plan Sponsors and providers will be allowed to announce new or continuing affiliations only once an agreement between the parties has been approved and the draft clarifies that such announcements that describe plan benefits, premiums, or cost sharing are marketing materials and must be submitted to HPMS, and that the Plan Sponsor is responsible for ensuring that providers comply with the MMG distribution and mailing guidance for Provider-Based Activities.
  • Review of Materials in the Marketplace – Plan Sponsors are reminded that they must report to CMS all self-identified errors in all marketing materials.
  • Third-Party Websites – This is a new section, at 100.7.  The draft requires Plan Sponsors to submit third-party marketing websites to HPMS, even if there is no benefit information included on the third-party website.  CMS recognizes that website owners may work with multiple Plan Sponsors and recommends that the Plan Sponsors coordinate the multi-plan submission.  The section also lists activities that third-party websites are prohibited from doing.

CMS explains that it is interested in comments on all sections and changes, but is particularly interested in comments regarding changes to provider-affiliation announcements and the newly added section regarding third-party websites.   Comments on the draft are due to CMS by 5:00pm (ET) Friday, February 3, 2017 and may be submitted through CMS’s survey site.

Last week, the OIG posted its Work Plan for 2017.  In it, the OIG announced many goals touching on programs including, but not limited to, Medicare, Medicaid, Insurance Marketplace (Health Exchanges), Indian Health Service, TANF and Head Start.  Below are some of the OIG’s action items that Medicare Advantage and Part D plans should be aware of.  As in years past, most of the OIG’s goals relating to the Medicare program focus on whether CMS is properly administering and monitoring the programs. Although the OIG often targets CMS, this focus can result in increased OIG and CMS scrutiny for plans and plans’ first tier, downstream, and related entities. Continue Reading 2017 OIG Work Plan: For Medicare Plans

CMS issued its Audit Protocols and Data Requests for Medicare Advantage and Part D plans on November 4, 2016 (the “Protocols”).  The Protocols have been updated based on the over 500 comments CMS received in response to the draft released in June.  The Protocols are open for comments until December 5, 2016.

A review of the crosswalk detailing the changes made to 2016’s Audit Protocols and Data Requests shows that CMS largely retained the same elements as in years past and made a few notable changes.

  • CMS is no longer asking for “self-identified issues.”  Self-identified issues were issues that had been discovered by the plan but not reported to CMS prior to the audit.  Practically speaking, this now means that plans only receive “credit” for reporting issues to CMS, whereas previously plans received some favorable treatment for reporting self-identified issues through the audit.
  • CMS added language to provide plans more instruction regarding what documentation and detail expected for tracer cases.
  • The Protocols added more emphasis on fraud, waste, and abuse policies and operations as applied to a plan’s first tier, downstream and related entities (“FDR”).
  • The Protocols asked plans in multiple areas to identify whether they classify actions as compliance or FWA.
  • CMS modified (edited, deleted, and added) many questions that appear in the Protocols questionnaires.  Some changes include:
    • Providing more detail to plans about what should be produced when conducting a formal audit under the plan’s compliance program.
    • Asking for examples of issues the plan had to deal with that involved an FDR and impacted a significant number of enrollees.
    • Asking for an example of when communicating compliance issues to the senior management/governing body was challenging.
    • Asking for a plan to share best practices.

All plans should carefully review the Protocols, consider how they would perform under the updated structure, and consider how they would update their internal audit and monitoring activities to reflect changes that CMS is considering.  As all plans know, undergoing a CMS audit requires an enormous amount of time and resources and CMS’s audit findings can greatly impact plans in many ways, including how a plan performs in the Star ratings system.

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.

 

Last week, the Centers for Medicare & Medicaid Services (“CMS”) released its 2018 Notice of Benefit and Payment setting out payment parameters for the Health Insurance Marketplace for upcoming years.  With several insurers withdrawing from the Marketplace and others still threatening their departure, CMS is releasing this proposed Notice nearly two months early with significant proposals seeking to strengthen the program.

At the core of CMS’s proposals to strengthen the Marketplace are updates to the HHS risk adjustment model and methodology.  Specifically, CMS is proposing: (1) an adjustment for members who are only enrolled for part of the year; (2) the inclusion of select prescription drug utilization data in the risk adjustment model; and (3) modifications to establish transfers for costs associated with high-cost enrollees so a portion of the costs exceeding $2 million for an individual would be shared among all issuers. Continue Reading 2018 Notice of Benefits and Payment: Proposed Updates to the HHS Risk Adjustment Model