Earlier this month, two states – Maryland and Nevada – passed legislation aimed at controlling drug prices. The two laws are being touted by proponents as decisive action against pharmaceutical manufacturers. Opponents note that the laws have limitations and are really more of an annoyance for drug makers and will not do anything to help patients access or afford their medicines. Notably, both measures were enacted without the governors’ signatures (who are both Republican) but neither governor vetoed the legislation.
Pharmaceutical industry enforcement has been one of the hottest topics in the news in the past month. Last week, Ellyn Sternfield and Rodney Whitlock were quoted by cnbc.com regarding the recent Mylan settlement:
[T]he Justice Department ‘does not have the authority to settle states’ individual drug rebate claims against Mylan, which means any potential ‘global’ settlement with the states raises a variety of issues.’ Those issues include the fact ‘Medicaid Drug Rebate settlement terms for each individual state will have to be agreed to by each individual participating state’s Attorney General and in many states, also by the State Medicaid Agency.’
For more insight from Ellyn, Theresa Carnegie, and Larry Freedman, please join us this Wednesday, October 26 at 1pm (ET) for a webinar discussing health care fraud enforcement in the pharmacy and pharmaceutical industry. In addition to covering topics related to pharmaceutical manufacturers, the webinar will cover topics related to pharmacies, pharmacy benefit managers (PBMs), and health insurers.
The webinar is approved for CLE credit in California and New York.
You can register for the webinar here.
Please join Mintz Levin for a webinar discussing health care fraud enforcement in the pharmacy and pharmaceutical industry on October 26, 2016 at 1 pm (ET). My colleagues Theresa Carnegie, Larry Freedman, and Ellyn Sternfield, members of Mintz Levin’s Health Law and Health Care Enforcement Defense practices, will discuss enforcement trends facing the industry.
The webinar will cover topics relevant to virtually all sectors of the health care and life sciences industries, especially pharmaceutical manufacturers, pharmacies, pharmacy benefit managers (PBMs), and health insurers as well as those who invest in the health care and life sciences industries.
During the webinar, my colleagues will discuss:
- Litigation, investigations, and settlements involving pharmaceutical manufacturers, PBMs, specialty pharmacies, and health care providers;
- Federal (including the Department of Justice and the Office of Inspector General) and state enforcement focus on the financial relationships among the companies and providers involved in the pharmaceutical supply chain; and
- Emerging trends in government enforcement and what is fueling them.
The webinar is approved for CLE credit in California and New York.
You can register for the webinar here.
Last week, pharmacy benefit manager (PBM) and independent pharmacy representatives provided testimony to the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law in a congressional hearing examining the state of competition in the pharmacy and PBM marketplace. You can watch the hearing and read the filed testimony here. This was the third in a series of congressional hearings examining competition in healthcare markets. While the focus was on PBMs and pharmacies, some panelists and committee members recognized that a full discussion of certain issues, like drug pricing, needs to involve other players in the prescription drug supply chain.
The witness panel included 2 PBM industry representatives, an independent pharmacy owner, and an antitrust attorney who represents the interests of independent pharmacies:
- Amy Bricker, Vice President of Retail Contracting & Strategy, Express Scripts
- Natalie A. Pons, Senior Vice President and Assistant General Counsel, CVS Health
- Bradley J. Arthur, Owner, Black Rock Pharmacy
- David A. Balto, Law Offices of David Balto
Each panelist gave testimony aligned with his or her role in the debate and voiced well entrenched opinions regarding the role PBMs play in the health care industry. Ms. Bricker and Ms. Pons each focused on their PBM’s ability to use scale to keep prescription drug costs down for patients and their clients, and stressed that they rely on independent pharmacies to participate in their networks. Mr. Arthur focused on the scale of the PBMs compared to his independent pharmacy, while Mr. Balto pointed to market trends, like rising profit margins, to claim that the entire PBM marketplace is broken and needs regulation to require more transparency. Continue Reading Congressional Hearing Examines Competition in the PBM Industry
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
Written by: Bridgette A. Wiley
The Affordable Care Act (“ACA”) requires that non-grandfathered health plans make preventive care and screenings available to their members at no cost (i.e. no deductibles, coinsurance, or co-payments). The Department of Health and Human Services (“HHS”) determined that contraceptive services, including all Food and Drug Administration (“FDA”)-approved contraceptives, are part of the essential preventive care that must be made available to women.
This requirement was met with protests from religious employers who believe that forcing them to offer and pay for contraceptive services violates their first amendment right to religious freedom. To address these concerns, the Department of Labor (“DOL”) and HHS promulgated regulations creating an exception to the contraceptive coverage mandate for religious employers that qualify as an “eligible organization.” An “eligible organization” is one that self-certifies that it is an “eligible organization” and therefore is not required to contract, arrange, pay or refer for coverage of contraceptive services for its plan members. These regulations, discussed on our blog in greater detail here, result in a system where health plans and third party administrators (which include pharmacy benefit managers (“PBMs”) for the purpose of this regulation), must pay for these contraceptive services and then receive reimbursement for the services more than a year later, if at all.
Written by: Tara E. Swenson
Yesterday morning, the U.S. Supreme Court announced its decision in the much anticipated Burwell v. Hobby Lobby case, holding that closely-held corporations are protected by the Religious Freedom Restoration Act of 1993 (“RFRA”), and therefore cannot be required to pay for employee health plans that cover contraceptives if the corporation’s owners have religious objections.
The Affordable Care Act requires all health plans to cover preventive health services for women, which the Institute of Medicine has defined to include contraceptive products approved by the Food and Drug Administration. The owners of three closely-held corporations, Hobby Lobby Stores Inc., Conestoga Wood Specialties Corp., and Mardel, opposed certain contraceptives that operate after an egg is fertilized and argued that being forced to facilitate access to such drugs or devices violates their religious beliefs. The Supreme Court found that the requirement to provide contraceptive products substantially burdened the exercise of religious freedom and was not the least restrictive means to that ensure that women have access to these contraceptives.
As has been widely covered in the news, regulations and guidance developed under the Affordable Care Act (“ACA”) require that non-grandfathered health plans make preventive care and screenings available to their members at no cost (i.e. no deductibles, coinsurance, or co-payments). The Department of Health and Human Services (“HHS”) was charged with developing guidelines for preventive services and determined that contraceptive services, which include all Food and Drug Administration (“FDA”)-approved contraceptives, should be made available to plan members at no cost. This determination resulted in protests from religious employers who believe that forcing them to offer and pay for contraceptive services, something to which they are religiously opposed, violates their first amendment right to religious freedom.
Religious Freedom Exemption
Due to the concerns raised by religious employers, the government sought to create an exception to the contraceptive coverage mandate for religious employers that would protect the employer’s first amendment rights while still allowing women plan members to receive contraceptive services at no cost. The result is a convoluted system in which health plans and third party administrators, including pharmacy benefit managers (“PBMs”), must pay for these contraceptive services and then receive reimbursement for the services more than a year later, if at all.
To address religious freedom concerns, the Department of Labor (“DOL”) and HHS promulgated regulations creating an exception to the contraceptive coverage mandate for religious employers that qualify as an “eligible organization.” An “eligible organization” is one that self-certifies that it is an “eligible organization” and therefore is not required to pay for coverage of contraceptive services for its plan members. Although this portion of the regulations is intended to respect the religious freedom of the eligible organization, the Little Sisters of the Poor have challenged the certification requirement arguing that it violates their rights by forcing them to sign a permission slip that in essence instructs another entity (their plan administrator) to do something to which they are morally opposed, provide contraceptive services to their members. Other religious entities have begun to follow the Sisters’ lead. The U.S. Supreme Court granted the Little Sisters of the Poor an injunction while their case is pending in the Tenth Circuit Court of Appeals. Under current regulations, once the eligible organization has self-certified, the responsibility to provide contraceptive services at no cost passes to the eligible organization’s health plan or PBM. This portion of the regulations is intended to respect a woman’s right to access contraceptive services at no cost.
Stuck between the ACA contraceptive coverage requirement and the religious freedom exemption are the health plans and PBMs servicing these eligible organizations. Current HHS/DOL regulations require these health plans and PBMs to provide contraceptive services at no cost and without passing the cost of the services on to the eligible organization or its plan members. (It is unclear how health plans and PBMs should act when faced with a situation where an eligible organization refuses to self-certify, as the Little Sisters have done.) In addition, coverage for contraceptive services may not be built into the plan premiums charged to the employer or the member. This means that when an eligible organization’s plan member goes to a pharmacy to receive a contraceptive drug, the pharmacy must provide the drug to the member free of charge and charge the health plan or PBM for the drug. The health plan or PBM then pays the pharmacy for the drug, but no one reimburses the health plan or PBM. So when, if ever, are these companies reimbursed for the provided contraceptive services? Who pays for them? The answers vary based on whether the services are provided by a health plan or a PBM.
Health plans that provide the mandated free contraceptive coverage to eligible organization plan members are able to recoup these costs through a direct reduction in the Federal Facilitated Exchange (“FFE”) User Fee. The FFE User Fee is a tax that the health plan must pay in order to participate in a federally facilitated Exchange. A health plan’s Exchange tax will be reduced by the amount of money the health plan paid during the previous year for contraceptive services provided to eligible organization plan members. In addition, a health plan’s Exchange tax will be reduced by an “allowance” to cover the health plan’s administrative costs for providing free contraceptives. For 2014, HHS has proposed that the “allowance” equal 15% of the total dollar amount that the health plan pays for applicable contraceptive services. This mechanism provides a direct avenue for health plans to obtain reimbursement, but health plans will not receive this “tax credit” until the year after they paid for the services (tax credits will be granted in 2015 for services provided in 2014). This will result in health plans being forced to float the money for the contraceptive services and administrative services for at least a year.
Third Party Administrators (which for purposes of these regulations includes PBMs) that provide the mandated free contraceptive coverage to eligible organization plan members may recoup service costs only by contracting with a health plan that agrees to report the PBM’s contraceptive costs to the government. Under such an arrangement, the health plan would report the payments for contraceptive services provided by the PBM and, in return, receive a reduction in its Exchange tax, just as though the health plan itself had paid for the contraceptive services. The reduction would similarly include the administrative cost “allowance” of 15% for 2014. The health plan is then required to pass on to the PBM the amount of the Exchange tax reduction it received as a result of the PBM payments for contraceptive services, but it is not required to pass on to the PBM the administrative cost allowance. The health plan and PBM may negotiate to determine how the allowance will be divided between the two entities. PBMs that are able to find a health plan partner must inform HHS that they are planning to request reimbursement. This notice must be given at the later of January 1, 2014 or sixty (60) days after receiving an eligible organization’s self-certification.
Difficult Scenario for PBMs
In establishing this mechanism, DOL and HHS failed to consider the following:
First, providing and paying for services and not being compensated for over a year imposes a financial hardship on plans and PBMs. Second, the regulations create a difficult scenario for PBMs. Because PBMs do not have a direct reimbursement mechanism, the regulations heavily favor PBMs that are owned by health plans and therefore have a built-in partner for purposes of providing contraceptive services. If independent PBMs want to receive any reimbursement for these mandated services, they will have to expend significant resources and incur significant costs to identify a health plan partner. If a PBM is unable to identify a health plan partner, it will not be paid at all for the contraceptive services or its administrative costs. Even if a PBM is able to identify a health plan partner, the partner may not agree to pass on the administrative allowance. PBMs must expend resources (time, employees, claims processing systems, contracting, etc.) to provide the contraceptive services, but there is no guarantee that the health plan it convinces to be its partner will agree to pass through any of the “allowance,” therefore leaving the PBM with a loss.
Pending Supreme Court Cases
It is unclear how much money is at stake for plans and PBMs, but the amount could potentially increase significantly based on cases pending before the Supreme Court. In March of this year, the Supreme Court will consider cases involving for-profit, secular employers, such as Hobby Lobby, requesting on religious grounds the same contraceptive exception as that available for “eligible organizations.” The outcome of such cases could potentially increase the volume of services that fall under this mechanism, in turn increasing the burden on health plans and PBMs.
On January 10, the Centers for Medicare & Medicaid Services published proposed rules labeled as “policy and technical” changes to the Medicare Advantage (Part C) and Medicare Prescription Drug Benefit (Part D) Programs. If adopted as drafted, these rules will significantly impact how Medicare Advantage organizations and Part D Prescription Drug Plan sponsors operate and interact with their contractors, beneficiaries, and the government. The rules will also significantly impact the operations of all health care entities involved in providing drug products under Medicare Parts C and D, including pharmacy benefit managers, pharmacies, and physicians.
Additionally, we are hosting a webinar on January 29, 2014 at 1:30 pm EST. During the webinar we will discuss the practical implications of the proposed rules, provide a forum for an interactive discussion among interested parties, and answer questions. The Advisory and webinar will be of particular interest to the following parties:
- Plans that provide Medicare Parts C and D services;
- PBMs, TPAs and other entities that provide services to Medicare Advantage and Medicare Part D plans;
- Pharmacies, in particular pharmacies that provide Medication Therapy Management Services to Medicare beneficiaries;
- Physicians and other health care providers who write prescriptions for drugs covered by Medicare Part D; and
- Long term care facilities with financial arrangements involving the administration of Medicare Parts C and D covered drugs.
Register for the webinar here.