CMS Proposed Rule Revisits PBM Pricing Arrangements, Proposes Other Medicare Advantage And Part D Program Changes
Proposed changes to the Medicare Advantage, Medicare
Marketing, Part D and Retiree Drug Subsidy Programs include
mandatory use of "pass-through" methodology for Part
D drugs and new marketing requirements.
The Center for Medicare & Medicaid Services (CMS)
recently published a notice of proposed rulemaking seeking
comment on numerous new regulatory provisions that, if
ultimately promulgated, would substantially modify key aspects
of both the Medicare Advantage (MA) and Part D Prescription
Drug Programs (Programs).
Although CMS' press release focuses on marketing and
other beneficiary protection aspects of the proposed rule,
there are also substantial proposed modifications relating to
pricing and contractual relationships in Part D and the Retiree
Drug Subsidy.
The proposals would modify MA Organizations' and Part D
Plan Sponsors' (collectively, the Plans') methodology
for reflecting Part D-related administrative and drug costs,
which would affect Plans' contractual relationships as well
as their accounting methods for these costs. Enhanced marketing
requirements, including standards for commission payments,
potential expansion of CMS' authority for imposing civil
money penalties on a per beneficiary basis, and new
requirements for special needs plans (SNPs) also are
included.
The following are highlights of a few of the many important
provisions in the proposed rule, which was published on Friday,
May 16, 2008 and is available at
http://www.access.gpo.gov/su_docs/fedreg/a080516c.html.
Comments are due to CMS by July 15, 2008.
Requirements to Use "Pass Through" Price
Reporting Methodology for Part D
CMS has revised an earlier proposal to require Plans who
contract with pharmacy benefit managers (PBMs) to report costs
on a pass-through basis. The negotiated price that must be made
available to a member (when, the member is in a coverage gap,
for example) must be the price the PBM pays the
pharmacynot the price the Part D sponsor pays the
PBM.
Similarly, CMS proposes to require Plans to report drug
costs based on the price paid to the pharmacy or other
dispensing entity, rather than the price the Plans pay to a
PBM. CMS has taken the position that any net profit to the PBM
as a result of a difference between the amount the PBM pays the
pharmacy and the amount it collects from Plans is effectively a
risk premium paid to shield the sponsor from price
variabilities, and is therefore an administrative expense
rather than a drug cost. The amount of drug costs affects
reinsurance and risk corridor payments to the Part D sponsor.
The proposal would be effective for coverage year 2010.
Requirement to Report Rebates and Other Remuneration
Received and Retained by Intermediary Contracting Organizations
in Part D
CMS has proposed regulatory revisions to various definitions
to implement its existing policy that requires Plans to
subtract from their allowable drug costs all rebates and other
remuneration the Plans' PBMs (or other intermediary
contracting organization) receive from manufacturers or other
third-party, even if the PBM retains those rebates and other
price concessions.
New Regulations Would Require Reporting of
Pass-Through Prices and Rebates Retained by PBMs for the
Retiree Drug Subsidy, in Addition to Part D
One new and potentially...
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