Making a List, Checking It Twice: Year-End Guidance on Drug Cost Reporting

Employers and their benefit administrators have more detail and a more convenient way to submit “top 50” lists and other data—but no more time to comply with—daunting prescription drug cost reporting requirements in the Consolidated Appropriations Act, 2021 (CAA), under new interim final regulations.

The interim final regulations, published November 23, 2021, in the Federal Register by the U.S. Department of Health and Human Services (HHS), U.S. Department of Labor (DOL), and U.S. Department of the Treasury—also confirmed earlier guidance that initial reporting for 2020 and 2021 will be due by December 27, 2022. Under the CAA, initial reporting would have been due a year earlier (i.e., this month).

The new interim final rules also clarify that only limited data must be reported at the plan level. Instead, insurers, third-party administrators (TPAs), and pharmacy benefit managers (PBMs) may aggregate much of the drug cost data by state and by market segment (such as individual health coverage and large self-insured groups) within the state.

Specific Data to Be Reported

Under the interim rules, which implement section 725 of the Employee Retirement Income Security Act (ERISA), added by the CAA, group health plans and insurers are required to provide the following information:

• identifying information for the plan, plan sponsor, or insurer;
• “beginning and end dates of the plan year that ended on or before the last day of the reference year” (a “reference year” is defined as the calendar year immediately preceding the calendar year for which reporting is required);
• “the number of participants, beneficiaries, and enrollees, as applicable, covered on the last day of the reference year”; and
• “each state in which the plan or coverage is offered.”

This information is required for each specific individual plan or insurer. Other required data may be aggregated. The interim final regulations allow reporting entities such as TPAs and PBMs to aggregate data for multiple health plans by providing the information below for each state and market segment (e.g., individual, insured small group plans, and self-insured large employers). The required data includes the following:

• The (1) total annual spending by the plan or coverage; (2) total annual spending by participants, beneficiaries, and enrollees enrolled in the plan or coverage, …; (3) the number of participants, beneficiaries, and enrollees, … with a paid prescription drug claim; (4) total dosage units dispensed; and (5) the number of paid claims.”
• “[T]he 50 most frequently dispensed brand prescription drugs, and the total number of paid claims for each such drug.”
• “[T]he 50 most costly prescription drugs by total annual spending, and the annual amount spent by the plan or coverage for each such drug.”
• The 50 prescription drugs with the greatest increase in plan or coverage expenditures between the reference year and the reporting year.
• Note: A report must include the five data points described above (total annual spending, number of enrollees, etc.) for both the reference year and the reporting year for each of the top 50 drug lists.
• Total spending on health care services by the plan or coverage broken down by the type of costs (including hospital costs; health care provider and clinical service costs, for primary care and specialty care separately; costs for prescription drugs; and other medical costs, including wellness services).
• “[S]pending on prescription drugs by the plan or coverage as well as by participants, beneficiaries, and enrollees, as applicable.”
• Average monthly premiums paid by participants, beneficiaries, and enrollees and paid by employers on behalf of participants, beneficiaries, and enrollees, as applicable.”
• “[T]he total number of life-years” (“life-years” is defined as “the total number of months of coverage for participants and beneficiaries, or for enrollees, as applicable, divided by 12”).
• Total “prescription drug rebates, fees, and any other remuneration paid by drug manufacturers” (or wholesalers, retail pharmacies, or vendors) “to the plan or coverage or its administrators or service providers,” and “the difference between the amount that the plan pays the PBM and the amount that the PBM pays pharmacies.” (Note that “remuneration” is defined very broadly.)
• The following information: (i) prescription drug rebates, fees, and other remuneration (excluding bona fide service fees broken down by “amounts passed through to the plan or issuer, amounts passed through to participants, beneficiaries, or enrollees, as applicable, and amounts retained by the [PBM].”
• With respect to each therapeutic class, and for each of the 25 prescription drugs with the greatest amount of total “prescription drug rebates and other price concessions” for the reference year: (i) total annual spending by the plan or coverage; (ii) total annual spending by enrollees in the plan; (iii) number of enrollees with a paid prescription drug claim; (iv) total dosage units dispensed; and (v) number of paid claims.
• “The method used to allocate prescription drug rebates, fees, and other remuneration, if applicable.”
• “[A]ny reduction in premiums and out-of-pocket costs associated with these rebates, fees, or other remuneration.”

Release of Data

Under the guidance, HHS, the DOL, and the Treasury Department will publish a biannual report regarding prescription drug reimbursements, trends, and impacts on premiums. While some states have their own laws and guidance on reporting prescription drug and health care spending data, the federal agencies do not believe that these rules would have a substantial impact on how states collect data, or that the rules would impose direct costs on states or preempt state laws. The agencies anticipate that the first report will be released in June 2023.

Reporting Entity Responsibility

Under the interim final rules, if a fully insured group health plan requires its health insurer to report the required information pursuant to a written agreement, any failure to do so falls on the insurer. The guidance holds that the insurer, and not the plan, would be the entity in violation of the reporting requirements. By contrast, if a PBM or other reporting entity has agreed to report the data for a self-insured plan, but fails to do so properly, the plan itself will be deemed to violate the rules.

Rebates

Under the rules, “prescription drug rebates, fees, and other remuneration” is defined as “all remuneration received by or on behalf of a plan or issuer, its administrator or service provider … with respect to prescription drugs prescribed to participants, beneficiaries, or enrollees in the plan or coverage.” This includes “remuneration received by and on behalf of entities providing pharmacy benefit management services to the plan or issuer, with respect to prescription drugs prescribed to participants, beneficiaries, or enrollees in the plan or coverage, … regardless of the source of the remuneration.” The agencies listed a number of examples of remuneration, including “discounts, chargebacks or rebates, cash discounts, free goods contingent on a purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price services, grants, or other price concessions or similar benefits.”

Bona fide service fees are also included in the definition. The agencies defined such fees as those “paid by a drug manufacturer to an entity providing pharmacy benefit management services to the plan or issuer that represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement, and that are not passed on in whole or in part to a client or customer of the entity, whether or not the entity takes title to the drug.”