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.

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.

 

Since the beginning of the Medicare Part D program, CMS has introduced many reporting mechanisms for trying to understand drug pricing, price concessions, and the cost of providing services to Part D members.  The tool CMS has turned to most often is the direct and indirect remuneration (“DIR”) report.  The stated purpose of DIR reporting is for a plan sponsor to report all price concessions it received throughout the plan year that impacted how much it cost to provide Part D services to its members.  CMS then reconciles its payments to plan sponsors based on their DIR reports.  Over the last eight years, CMS has continuously expanded DIR reporting requirements trying to further understand the costs associated with the Part D program.  The DIR reports required to be filed this year for contract year 2013 included more than twice the number of DIR categories and columns as when the Part D program started in 2006.  The number of new columns and newly discovered or created categories of DIR or other remuneration that need to be reported on a DIR report (even though it is not DIR, for example, bona fide service fees) grow so quickly that at times it has been nearly impossible to obtain substantive guidance from CMS regarding what types of amounts go into what categories, often leaving plan sponsors in a frustrating and at times scary position. Continue Reading Front End Changes and, Again, More DIR Columns