Feds Rely on Transparency Rule to Expose Rx Rebates
States have tried. Democrats in Congress have tried. The Trump Administration tried in a high-profile bid to change the rules for Medicare Part D. But none have been successful at requiring manufacturers and payers to disclose the amounts of rebates negotiated between the two parties. But it may be a rule on health care transparency, which doesn’t even apply to manufacturers, that finally shines some light on the issue.
On Thursday, October 29, the Departments of Health and Human Services, Labor, and Treasury released a final rule issuing new transparency requirements for most health plans sold in the country. If the rule holds up in court, beginning January 1, 2022, health plans would be required to publicly release machine-readable data files that include the “negotiated price” and “historical net price” of most drugs covered by the plan. Plans would be required to update the information monthly.
The agencies define “negotiated price” as the price used to determine a patient’s cost-sharing responsibility. The agencies define “historical net prices” as:
The retrospective average amount a plan or issuer paid for a prescription drug, inclusive of any reasonably allocated rebates, discounts, chargebacks, fees, and any additional price concessions received by the plan or issuer with respect to the prescription drug. Net price is the price for a prescription drug after discounts are deducted, and is paid at different points in the prescription drug distribution chain (for example, the plan or issuer to the pharmacy, the pharmacy to a wholesaler, and the wholesaler to the manufacturer).
The average would cover the 90-day period beginning 180 days prior to the date that a prescription drug file is published. If a drug is subject to a value-based payment agreement with a longer time horizon, plans are expected to use “a reasonable allocation and good faith estimate” of the total concession amount.
Drugs with fewer than 20 claims, or any other drug in which disclosure of historical net price could impact patient privacy protections, are exempt from historical net pricing reporting requirements, but plans must still report a negotiated price. The historical net price does not include the value of any copay assistance offered to patients, or any rebates negotiated between the manufacturer and a provider (in the case of a physician-administered drug). 340B discounts are also not required to be included in the calculations.
Non-product specific rebates would be allocated to all applicable drugs. The example provided in the rule included a $20,000 rebate paid on $100,000 in sales of two drugs; in this instance, a 20% rebate would be allocated to each of the two drugs. If Drug A included $60,000 in sales, and Drug B included $40,000 in sales, a $12,000 rebate and $8,000 rebate would be included in calculations of each drug’s historical net price, respectively.
The agencies point to data that demonstrate a positive correlation between rebate amounts and manufacturer list prices, and argue that, to the extent the “historical net price” disclosure discourages manufacturers and plans from negotiating rebates, the policy could have an overall positive impact on list prices.
It is clear that the agencies anticipate legal action in opposition to the rule, as a large section of the preamble in the final rule was dedicated to rebutting various legal arguments against the proposals that commenters submitted during the public comment period.
I would be remiss if I also didn’t point out that the authority to issue this rule comes from the Affordable Care Act (ACA). Therefore, if the ACA is struck down in its entirety by the U.S. Supreme Court, the rule would have to be reissued using a different statutory authority. Theoretically, the Department of Labor could use their authority under the Employment Retirement Income Security Act (ERISA), but that would only apply to self-funded, large group plans.
Other transparency requirements included in the rule:
January 1, 2021 – Hospitals are required to post negotiated rates with health plans and issuers.
January 1, 2022 – In addition to data files on negotiated and historical net prices for prescription drugs, health plans and issuers are required to post data files showing the in-network prices for all items, services, and providers and allowed amounts for all items and services for out-of-network providers.
January 1, 2023 – Health plans must provide personalized cost sharing services for customers for 500 most “shoppable” services. A “shoppable service” is defined as a service that can be scheduled by a health care consumer in advance and is routinely provided in non-urgent situation that do not require immediate action or attention to the patient.
In an effort to encourage the adoption of “shared savings” programs, in which members may share in the savings associated with using lower-cost, higher-value providers, the rule allows health plans to take credit for the shared savings when calculating their medical loss ratio (MLR), beginning with the 2020 MLR reporting year.
