CMS Updates Could Help Employers on Second Round of Drug Cost Reporting

Employers facing a June 1, 2023, deadline for 2022 prescription drug cost reporting have important new clarification on issues such as plans that cover more than one employer, average monthly premium calculations, and medical plans that carve out prescription drug benefits.

That clarification and more come in updated instructions recently released by the Centers for Medicare and Medicaid Services (CMS). The updates respond to many questions raised during the initial round of reporting, which covered 2020 and 2021 data that was generally due December 27, 2022. Drug cost reporting is due each June 1 for the preceding calendar year under the Consolidated Appropriations Act, 2021. Reports are always based on a calendar-year basis, even for non-calendar-year plans.

CMS also announced several technical fixes, including allowing employer identification numbers (EINs) with more than one leading zero, allowing the submission of files greater than 50 MB (up to 100 MB for now, with a goal of accepting files up to 200 MB in the future), and allowing users to delete in-progress submissions without needing to contact the CMS help desk.

Interestingly, the instructions state that plans “should make their own determination on whether to include information about prescriptions filled in other countries.” While expatriate plans are not statutorily exempt from the drug reporting requirement, this language appears to address the questionable utility of foreign prescription information to the U.S. government. However, CMS has declined at this point to offer relief for expatriate plans.

Below, we highlight a few of the most significant updates to the instructions.

• Multiple vendors may submit the same data file on behalf of the same plan. For example, a plan’s third-party administrator (TPA), telehealth provider, and pharmacy benefit manager (PBM) may all submit data files for the same employer. CMS’s reporting system, the Health Insurance Oversight System (HIOS), will let reporting entities name submission files for the upcoming reporting period to facilitate multiple submissions.
• Employers will not need to create a HIOS account if all of their data is being reported by other entities (e.g., a TPA) on their behalf.
• CMS has extended the suspension of the requirement that entities provide detailed aggregation. Reporting entities submitting files D1 or D3–D8, relating to pharmacy benefits, are allowed to aggregate information at a less granular level than reporting entities that submit file D2, relating to medical benefits.
• Retiree-only plans are exempt from the reporting requirement.
• For the 2022 reference year, all plans must include U.S. territory drug cost information in their submissions. In the first round of submissions, only insured plans were required to do so.
• The “ASO/TPA Fees Paid” column in file D1 has been renamed “Admin Fees Paid” to reflect that fees paid to pharmacy benefit managers should be included.
• The “State” column in files D1–D8 has been changed to “Aggregation State” for clarity.
• Spending on compounded drugs should be included in file D6 (pharmacy benefit totals), but not in files D3–D5 and D7–D8.

Ogletree Deakins’ Employee Benefits and Executive Compensation Practice Group will continue to monitor developments with respect to drug cost reporting and will post updates on the firm’s Employee Benefits and Executive Compensation blog as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.