Part D Plans and PBMs Face New Reporting Requirements

A rule from CMS requires, in part, that Medicare Advantage organizations and Medicare Part D plan sponsors have the ability to obtain data.

Medicare Part D plans, Medicare Advantage (MA) organizations, and pharmacies serving Medicare beneficiaries have long maligned the unequal bargaining power between themselves and the nation’s largest pharmacy benefit managers (PBMs) and the lack of data transparency available to them under their PBM contracts. Compounding this stress, the Centers for Medicare & Medicaid Services (CMS) has been on an auditing rampage in the last several years, auditing the data submitted by Medicare drug plans and seeking additional information that, under their contract with the PBMs, the drug plans do not have.

Pharmacies, too, are increasingly frustrated with their PBM relationships. Pharmacies generally have contractual relationships with multiple PBMs, but the information made available to pharmacies by PBMs makes it difficult for pharmacies to know if they are being paid accurately in accordance with the terms of their contracts. On May 23, 2013, tucked inside a final rule on medical loss ratio reporting, CMS made its first attempt to solve this data disparity.

NEW RULING

The May 23 rule requires, in part, that MA organizations and Part D plan sponsors have the ability, regardless of contractual relationships with third-party vendors (like PBMs), to obtain and validate “all underlying data associated with their services” prior to reporting their medical loss ratio to CMS. In essence, CMS, fed up with claims by drug plans that only PBMs have access to the data necessary to audit all of their claims, has now empowered these plans to circumvent any contractual limitations in order to ensure that the information they submit to CMS (on drug claims, rebates paid, direct and indirect remuneration, etc) is fully accurate.

For Medicare drug plans the ruling comes as a blessing and a curse. While CMS has empowered these organizations to ensure they are not overpaying their PBMs, they have also removed the perennial excuse these plans have used with CMS that only the PBMs have the claims-level information. PBMs are now faced with federal rule-making that may contradict, in part, the language of their contracts with drug plans and they may now be forced to disclose to the plans all claims-level data.

IMPROVING TRANSPARENCY

For pharmacies, the picture is brighter. Requiring Part D plan sponsors to obtain more granular information from PBMs will improve the transparency of the pharmacy-PBM relationship, which cascades to bring efficiency and pricing awareness to other arenas of the pharmacy benefit market.

For better or worse, CMS’ final rule is somewhat vague. The final rule does not specify the types of data that must be provided to the Part D plan sponsor, nor does it specify a time frame for this reporting to occur. The agency could have required third-party vendors, such as PBMs, disclose the amount paid to the pharmacy for each transaction versus the amount that was charged to the plan for the same transaction.

Depending on your role in the pharmacy benefit supply chain, CMS’ new data transparency requirements will have different meaning. For all involved, however, the new requirement will likely mean more data and eventually more audits.

About the Author

Ross Margulies, JD, MPH, is a health policy specialist at Foley Hoag LLP with expertise in federal and state health law and policy issues including Medicare and Medicaid, community health, and the impact of health care reform.