Pharmaceutical Care Management Association Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, Jan. 1 -- Tim Dube, assistant vice president for regulatory affairs at the Pharmaceutical Care Management Association, has issued a public comment on the Centers for Medicare and Medicaid Services proposed rule entitled "Patient Protection and Affordable Care Act: HHS Notice of Benefit and Payment Parameters for 2022 and Pharmacy Benefit Manager Standards". The comment was written on Dec. 28, 2020, and posted on Dec. 29, 2020:

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On December 4, 2020, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule entitled "Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2022 and Pharmacy Benefit Manager Standards; Updates to State Innovation Waiver (Section 1332 Waiver) Implementing Regulations." This proposed rule addresses plan year 2022 details for qualified health plans (QHPs) and includes technical revisions to reconcile regulatory language with a subregulatory data collection process related to pharmacy benefit managers (PBMs), among other topics.

PCMA is the national association representing America's PBMs, which administer prescription drug plans and operate specialty pharmacies for more than 266 million Americans with health coverage through Fortune 500 companies, health insurers, labor unions, Medicare, Medicaid, the Federal Employees Health Benefits Program, and through the exchanges established by the Affordable Care Act. Our members work closely with plans and issuers to secure lower costs for prescription drugs and achieve better health outcomes.

PCMA supports the Administration's commitment to lowering premiums in these markets and strengthening the health insurance markets to deliver more competition and choice for consumers. We offer in this letter comments on three main areas.

* First, we offer suggestions for CMS's proposed definition of "prescription drug rebates and other price concessions" for calculations under the Medical Loss Ratio (MLR) regulations.

* Second, we comment on CMS's PBM transparency subregulatory reporting program.

* Finally, we discuss several regulatory topics CMS should address stemming from the recent Transparency in Coverage final rule related to the issues in this rule.

I. Definitions Related to Medical Loss Ratio (MLR) Reporting

Background: Through its rulemaking for the 2021 plan year, CMS revised the calculation of MLR so that issuers would have to deduct from incurred claims not only prescription drug rebates received by the issuer, but also any other price concessions received and retained by the issuer, PBM, or other entity providing pharmacy benefit management services to the issuer. In the 2021 final rule, CMS acknowledged comments it received that it lacked a regulatory definition for prescription drug rebates and other price concessions./1

In this proposed rule, CMS offers a new definition for "prescription drug rebates and other price concessions." CMS states that a definition will allow issuers to more accurately and uniformly exclude "spread" amounts from their MLR numerators.

Discussion: PCMA is concerned that CMS's definition complicates the administration of the MLR program in this market. We offer specific suggested revisions to simplify the definition and specify exactly which price concessions should be deducted.

1. CMS should remove "direct and indirect remuneration" to avoid confusion The proposed definition speaks to "direct and indirect remuneration" and lists a number of items that it would incorporate. A definition already exists for this term in the regulations related to risk corridor administration./2

The term also has a separate, specific meaning in the Medicare Part D program./3

CMS should remove "direct and indirect remuneration" from the proposed definition of price concessions to avoid any further confusion.

2. CMS should further specify the issuers' treatment of coupons through the MLR program

Under the proposed rule, issuers will be required to deduct from their MLR numerators the value of coupons that are used to offset their costs. Coupons (as well as cash discounts, free goods contingent on a purchase agreement, and goods in kind) may directly benefit enrollees at the point-of-sale without reducing the issuer's expenses. In fact, as CMS has acknowledged in rulemaking published this year, these programs can increase issuer costs./4

We raise this in part due to the inability of PBMs to track all payments of this nature made to or on behalf of enrollees, since manufacturers and other third parties continue to innovate in their ways to offset plan-required cost-sharing./5

CMS therefore should specify that coupons that do not yield actual reductions in total plan cost for the issuer are not price concessions and should not be deducted from the incurred costs reported under the MLR program.

3. Bona Fide Service Fees are paid by entities other than drug manufacturers Very simply, CMS should broaden the qualifier attached to the definition of bona fide service fees. Vaccine and device makers, software vendors, and other third parties may also engage with PBMs and issuers for market rate services and pay qualifying fees. The recommended edits below align the proposed definition with that provided in 45 CFR 156.295 and proposed at 184.50.

4. CMS should exclude payments for quality improvement and fraud prevention from the definition of price concessions

CMS should exclude payments received by issuers or PBMs on their behalf for services related to quality improvement activities (QIA), as it does for Medicare Part D./6

PBMs operating on behalf of group health plans and health insurance issuers perform drug utilization review, utilization management activities, adherence programs and other clinical programs, which are designed to improve the safety and health of enrollees and reduce fraud, waste and abuse. These services are clinical in nature and intended to improve health care quality, and thus applicable to the numerator of the MLR calculation.

5. CMS should revise the regulatory text to address PCMA's concerns

Based on the points above, we propose the following edits to CMS's proposed definition:

45 CFR 158.103: Prescription drug rebates and other drug price concessions means all direct and indirect remuneration payments received or retained by or on behalf of or receivable by an issuer, including payments by and on behalf of and entities providing pharmacy benefit management services to the issuer, related to the provision that decrease the costs of a prescription drug covered by the issuer, regardless from whom the remuneration payment is received (for example, pharmaceutical manufacturer, wholesaler, retail pharmacy, vendor). Direct and indirect remuneration Drug price concessions includes discounts, charge backs 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 payments or similar benefits offered to some or all purchasers, and excluding bona fide service fees. This definition excludes

a) any of these enumerated payments if they are made to or on behalf of enrollees by third parties;

b) any payments made for quality improvement and fraud, waste, and abuse prevention; and

c) "bona fide service fees." mean fees which are paid by a drug third party manufacturer to the issuer or an entity providing pharmacy benefit management services to the issuer that represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer third party that the manufacturer it 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 an entity, whether or not the entity takes title to the drug.

PCMA Recommendation: CMS's definition for prescription drug rebates and other price concessions should be modified to reduce confusion and better reflect amounts that serve to decrease an issuer's drug costs.

II. PBM Transparency

Background: CMS is proposing to add a new section of regulatory text to implement Section 1150A of the Social Security Act (SSA), as mandated by Section 6005 of the ACA. This section of law requires the collection of data from PBMs under contract with QHPs related to prescription drug payments, brand and generic volume, payments from PBMs to pharmacies and from issuers to PBMs, and channel differences.

In January 2020, CMS issued an Information Collection Request (ICR) as required under the Paperwork Reduction Act (PRA), to inform the public of its intent to collect the data required under Section 1150A./7

PCMA and other stakeholders filed comments in March 2020, in part recommending that CMS first revise its regulations at 45 CFR 156.295, which were in conflict with the ICR's intended methods for data collection./8

CMS issued a revised set of ICR documents addressing stakeholder comments, and noted it would move forth with rulemaking to address these regulatory inconsistencies./9

PCMA filed additional comments on the revised forms in October 2020.

Discussion: This rule addresses two open topics satisfactorily. We agree with the proposed regulatory text at 45 CFR 1840.50 to name PBMs the reporting entity, and with retaining the language at 45 CFR 156.295, in case the issuer does not contract with a PBM. We also appreciate that CMS has removed from the regulation the requirement to report data for various types of pharmacies, as unnecessarily burdensome.

The release of the revised forms in September 2020 did not resolve all the concerns we and others have raised, however. We continue to contend that the statute directs CMS to collect drug payment data at the aggregate level. We also urge CMS to collect these data at the issuer level rather than the plan level. In addition, CMS should consider harmonizing these PBM reporting requirements with the Transparency in Coverage final rule and recently enacted legislation. Further details on each of these follows.

* Level of reporting - drugs

While the proposed rule is silent on the granularity of the data to be reported by PBMs, the regulatory impact analysis implies that issuers and PBMs will submit NDC-level information. In our most recent filing, we urged CMS to comply with the statutory direction to collect only aggregate level drug data. As we argued in that letter, the statute clearly limits CMS to prescription drug volume, rebates, discounts, price concessions, and PBM-paid amounts in the "aggregate" (three times) and in "total" (twice)./10

At no instance in the statute did Congress require these data at the NDC level, meaning it would be an unreasonable interpretation for CMS.

In our earlier filings we also commented upon the burden that NDC-level reporting would impose. Should CMS move forward, it should delay the entire program by at least a full year so that it can issue rulemaking, citing its authority and allowing comments. Also, plans will need to make necessary significant operational upgrades, if such a regulation is finalized.

Indeed, a delay may be necessary even if CMS corrects course to aggregate reporting.

CMS will need to update the forms posted and provide the public another 30-day comment period to review these changes. A technical clarification is also needed to the ICR forms prior to finalization. Appendix C of CMS-10725 states that submitters must establish an account within the "HIOS Pharmacy Benefits Managers Collection Module." This module does not yet exist on HIOS, so stakeholders have not been able to test any of these procedures at this time.

* Level of reporting - QHP issuer level

Our October 2020 letter to CMS also reiterated that PBMs should provide data at the QHP issuer level, rather than the plan level. A PBM is contracted to the QHP issuer and operates across all plans the issuer offers in a given market. We note that the proposed regulatory text at 184.50 (and the existing regulatory text at 156.295) is generally aligned with our recommendation. While Sections (a)(1) and (2) describe amounts paid by a QHP or attributable to a QHP, the data is reported at the PBM level under contract to the issuer. Section (a)(3) is clearly intended to be collected only at the Issuer level. CMS should update the ICR forms to reference the HIOS issuer ID level, not HIOS plan ID level, as currently displayed in Appendix B./11

A final clarification CMS should make is regarding the applicability of the ICR on off-exchange purchased plans, supported by the PBM contracted to the QHP issuer. The ICR would seem to exclude them, as would the definition of "QHP" at 45 CFR 155.20. To the extent that a PBM's contract with a QHP issuer spans both on- and off-exchange plans, CMS should grant issuers the discretion to include or exclude these as is most operationally expedient.

* Interaction with Transparency in Coverage final rule requirements and recent legislation

PCMA is concerned that issuers and PBMs are being asked to implement two similar but operationally distinct transparency efforts simultaneously, and presumably with a third set of requirements to come. The Transparency in Coverage final rule requires the creation of an enrollee-specific online self-service tool through which health plan enrollees can search for drug coverage and cost-sharing information for drugs they may be prescribed, starting in 2024. (The online tool must be operational by 2023, but for a more limited set of services.) The rule also mandates that issuers produce machine-readable files containing negotiated payment rates for medical services and prescription drugs, historical out-of-network allowed amounts, and historical net prices for prescription drugs, beginning in 2022.

This new rule's technical requirements differ from the PBM transparency reporting program's details. Our PBM members report that the same staff will be tasked with creating these new files and systems alongside their work on the 1150A procedures.

The Transparency in Coverage final rule and the PBM transparency requirements both increase compliance costs on PBMs, which will surely be passed along through issuers to enrollees in the form of higher premiums and to taxpayers in the form of higher Advanced Premium Tax Credits (APTC). CMS should consider these joint administrative burdens and work with stakeholders to try to minimize duplicated efforts where possible.

We will describe further concerns regarding the Transparency in Coverage final rule in the last section of this letter.

In addition, Congress recently enacted legislation to require all group health plans and issuers to report volume, spending, and rebate data for the top 25 or 50 drugs the plan covered in the plan year, beginning in June 2021./12

To satisfy this request PBMs will need to provide these data to their contracted issuers, at additional expense. When CMS takes up rulemaking to implement this provision, we ask that it consider whether the PBM transparency reporting ICR can be delayed by a year to harmonize reporting and production of data files.

PCMA Recommendation: CMS should align the ICR to the statute with regard to aggregate reporting of drug payment amounts and issuer-level rather than plan-level reporting. Given other activities in the arena of transparency, we also suggest CMS find ways to streamline the burdens imposed upon PBMs and issuers.

III. Implementation of the Transparency in Coverage final rule

Background: On November 12, 2020, the Departments of Health and Human Services, Treasury, and Labor (collectively The Departments) issued a final rule entitled "Transparency in Coverage."/13

With regard to prescription drug price transparency, the final rule would have issuers disclose historical net prices for drugs at the NDC level for each applicable plan, beginning in 2022, on machine readable files. The rule also requires issuers to create an enrollee self-service online tool that would return estimated cost sharing for covered items and services beginning in 2023 for a select set of services and in 2024 for drugs and all other items and services.

Discussion: Our PBM members are assessing their processes in light of the Transparency in Coverage final rule. We wish to point out affirmatively, as well, that the provision regarding historical net price was not included in the proposed rule, meaning specific feedback stakeholders might have otherwise provided was not accounted for in the final rule. We list below several substantive and process areas that CMS should address regarding implementation of this final rule, which we believe will require a delay of the delivery of machine-readable files to at least January 1, 2023.

* Substantive gaps. CMS should first address several open policy questions through additional rulemaking. For example, the final rule does not provide sufficient detail on "items and services"/14 and "accumulated amounts."/15

For the enrollee self-service tool, our PBM members also have questions regarding the level of detail that must be returned on a search./16

* Process and timing. The rule defers important details to "technical guidance" and an ICR process to develop the necessary data collection forms. Without the requisite technical details, issuers and their PBMs cannot begin to design processes to comply with the rule's requirements. The final rule correctly identifies millions of dollars in costs and thousands of hours of labor, but then assumes issuers and their PBMs can fit that in among their ongoing operations. It is highly unlikely the necessary ICR process can play out quickly enough for issuers and their PBMs to have final forms with enough time for programming and testing, by January 1, 2022. For example, CMS's PBM transparency reporting program ICR will begin collecting data in 2022 at the earliest. It was first outlined in January 2020 - 11 months earlier than the final rule's publication. Two years is a bare minimum to stand up a new reporting paradigm.

In summary, proceeding with the scheduled implementation dates will lead to confusing and inconsistent results. CMS should delay the machine-readable file requirement to at least 2023 to grant stakeholders certainty.

PCMA Recommendation: CMS should issue new notice-and-comment rulemaking to address the many open questions created by the Transparency in Coverage final rule, and delay implementation of the machine-readable file requirement to at least 2023.

Conclusion

We thank CMS for the opportunity to provide comments on this important proposed rule and other regulatory matters. PBMs support the Administration's efforts to bring appropriate levels of transparency to prescription drug and other health care costs. If you need any additional information, please reach out to me at [email protected].

Sincerely,

Tim Dube

cc: Jeff Wu, Deputy Director, CCIIO

Wendy Krasner, Senior Vice President, Regulatory Affairs, PCMA

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Footnotes:

1/ 85 Fed. Reg. 29164, May 14, 2020.

2/ See 45 CFR 153.150.

3/ In Part D, spread pricing and retained rebate contracts were disfavored, through a 2010 final rule.. See 74 Fed. Reg. 1494, January 12, 2009, with the preamble discussion at 1505-1514.

4/ 85 Fed. Reg. 29164, May 14, 2020.

5/ For example see SSR Health, "The Year in Pricing: US Rx Net Price Effects of COVID-19, Co-Pay Maximizers, and More." April 15, 2020.

6/ 78 Fed. Reg. 32184, February 23, 2013.

7/ 85 Fed. Reg. 4993, January 28, 2020.

8/ These comments were filed in response to both the PRA notice and the NBPP 2021 proposed rule.

9/ 85 Fed. Reg. 56227, September 11, 2020.

10/ SSA 1150A(b)(2) requires "The aggregate amount, and the type of rebates, discounts, or price concessions ... that the PBM negotiates that are attributable to patient utilization under the plan" and "the aggregate amount of the rebates, discounts, or price concessions that are passed through to the plan sponsor, and the total number of prescriptions that were dispensed." 1150A(b)(3) requires "The aggregate amount of the difference between the amount the health benefits plan pays the PBM and the amount that the PBM pays retail pharmacies, and mail order pharmacies, and the total number of prescriptions that were dispensed."

11/ Available at https://www.cms.gov/regulations-and-guidancelegislationpaperworkreductionactof1995pralisting/ cms-10725.

12/ Section 204 of H.R. 133, the Consolidated Appropriations Act, 2021. Public Law 116-68, enacted December 27, 2020.

13/ 85 Fed. Reg. 72158, November 12, 2020.

14/ For example, should plans include physician administration services for brown-bagged (pharmacy-paid) drugs that are not paid incident-to a physician's service?

15/ For example, how should plans report progress toward a maximum annual dose of a prescription drug, with regard to "cumulative treatment limitations"? Using the prescribed amount or the dispensed amount?

16/ For example, how many in-network and out-of-network providers must be returned? Can it be limited to a number, or must it be every single provider?

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The proposed rule can be viewed at: https://www.regulations.gov/document?D=CMS-2020-0151-0005

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