Senate Finance Committee Issues Report on Modernizing & Ensuring PBM Accountability Act
Here are excerpts:
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I. LEGISLATIVE BACKGROUND
General Background on Pharmacy Benefit Managers
Pharmacy benefit managers (PBMs) manage prescription drug benefits and pharmacy networks on behalf of health plans, employers, and other payers. PBMs may perform a variety of functions for their clients, including processing prescription drug claims, negotiating discounts with pharmaceutical manufacturers, developing formularies (covered drug lists), establishing pharmacy networks, and reimbursing pharmacies that dispense prescription drugs to patients.
PBMs emerged in the late 1960s and early 1970s as claims processors, as more and more health insurers began to offer prescription drug benefits. Up until the 1990s, PBMs primarily filled this limited administrative role. As the scope and cost of prescription drugs grew, claims processing became digitized, and programs like Medicare Part D expanded drug coverage in the
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/1/Motheral, Brenda. et al. "Changes in PBM Business Practices in 2019: True Innovation or More of the Same?"
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Today, the PBM market is concentrated in three companies--CVS Caremark, Express Scripts, and
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/2/Mader, Josh. "Pharmacy Benefit Mangers: Market Landscape and Strategic Imperatives."
/3/Myshko, Denise and
/4/Fein, Adam. "Drug Channels News Roundup,
/5/Dresser, Jesse. "Considerations for Maintaining Payer Network Access in the World of Vertical Integration--Part 1: The Pharmacy Benefits Landscape." Pharmacy
/6/Fein, Adam. "Mapping the Vertical Integration of Insurers, PBMs, Specialty Pharmacies, and Providers: A 2022 Update." Drug Channels.
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PBM Compensation
PBMs operate in a multi-sided market--meaning they may earn revenue on both sides of a single transaction, from both their traditional clients (e.g. health plans, employers, and payers) and the vendors or contractors with whom they negotiate (e.g. pharmaceutical manufacturers, pharmacies). Any multi-sided market introduces the potential for conflicts of interest and perverse incentives.
PBMs often receive compensation from health plans in the form of fees per prescription dispensed (flat fees or percentage of drug price), flat per member per month (PMPM) fees, and retention of a portion of manufacturer rebates. PBMs also often guarantee health plans a certain level of rebates. Client fees account for a substantial portion of PBM revenue, including in Part D./7//8/
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/7/"Medicare Part D: Use of Pharmacy Benefit Managers and Efforts to Manage Drug Expenditures and Utilization."
/8/"Understanding the Evolving Business Models and Revenue of Pharmacy Benefit Managers."
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PBMs also receive revenue from the pharmaceutical manufacturers. PBMs leverage the volume of covered lives they serve across all of their health plan clients to negotiate lower prices and secure larger discounts, rebates, and fees from manufacturers. PBMs may retain a portion of these discounts. Manufacturers also pay PBMs administrative fees for access to services and data.
Historically, a significant portion of PBM compensation came from retaining a percentage of the rebates they negotiate with drug manufacturers. In recent years, as critiques about the lack of transparency around rebate retention have grown, PBMs appear to be passing more rebates through to their clients. Between 2017 and 2019, PBM-retained rebates decreased from
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/9/3
/10/ "Medicare Part D: Use of Pharmacy Benefit Managers and Efforts to Manage Drug Expenditures and Utilization."
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PBM compensation structures have evolved over the years. Administrative fees paid by manufacturers are a growing revenue source for PBMs. They appear to be replacing rebate retention as a key source of PBM revenue. These fees may be less likely than rebates to be passed through, or shared, by PBMs to health plans.11}12 A PEW survey found that administrative fees paid by manufacturers to PBMs have increased as rebate retention has declined, offsetting potentially over
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/11/Feldman, Robin. "Perverse Incentives: Why Everyone Prefers High Drug Prices--Except for Those Who Pay the Bills."
/12/Part D plans are required to report bona fide service fees in excess of fair market value paid to PBMs as Direct and Indirect Remuneration (DIR), regardless of whether such amounts as passed onto the Part D plan.
/13/"The Prescription Drug Landscape Explored." Pew.
/14/3
/15/"Medicare Part D: Use of Pharmacy Benefit Managers and Efforts to Manage Drug Expenditures and Utilization."
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Administrative fees paid to PBMs are often based on a percentage of Wholesale Acquisition Cost (WAC), or a drug's list price, and volume of utilization, mirroring the structure of post-sale rebates.16}17 For example, the
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/16/Feldman, Robin. "Perverse Incentives: Why Everyone Prefers High Drug Prices--Except for Those Who Pay the Bills."
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/18/
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Experts have noted that payments from manufacturers to PBMs may create conflicts of interest between PBMs and their health plan clients. Furthermore, linking PBM payment to a drug's list price could create incentives for PBMs to drive utilization of higher-priced drugs, rather than lower-priced, clinically equivalent alternatives, to achieve higher rebates and higher administrative fees.19}20}21
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/19/Feldman, Robin. "Perverse Incentives: Why Everyone Prefers High Drug Prices--Except for Those Who Pay the Bills."
/20/Shepherd, Joanna. "Pharmacy Benefit Managers, Rebates, and Drug Prices: Conflicts of Interest in the Market for Prescription Drugs." The Yale Law and Policy Review.
/21/
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/22/42 C.F.R. Sec. 423.100.
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Part D plan sponsors are required to establish pharmacy networks sufficient to ensure access to Medicare covered drugs for all enrollees. As part of the "
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/23/42 U.S.C. Sec. 1395w-104(b)(1)(A).
/24/42 C.F.R. Sec. 423.505(b)(18).
/25/CMS, "Medicare Program: Contract Year 2019 Policy and Technical Changes to Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program," 83
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PBMs recently began imposing retrospective, post-sale fees on pharmacies for not meeting contractually specified quality metrics or as a condition of preferred network participation. These fees tend to substantially increase PBM revenue, ranging from 1.5 percent to 11 percent of a manufacturer list price, and are generally levied on pharmacies three to six months after dispensing./26/ These fees must be disclosed to the
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/26/"Pharmacy Benefit Manager Expose: How PBMs Adversely Impact Cancer Care While Profiting at the Expense of Patients, Providers, Employers, and Taxpayers."
/27/"Medicare Program; Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs; Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency; Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency."
/28/"CY 2023 Medicare Advantage and Part D Final Rule (CMS-4192-F)."
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Evidence suggests that some PBMs engage in a practice known as "spread pricing," which occurs when PBMs charge their health plan clients a higher amount than what the PBM actually reimburses the pharmacy for the same dispensed drug--with the PBM retaining the difference./29/ Across markets, PBM clients often lack line of sight into the extent of such spreads. Spread pricing has been widely documented in Medicaid. For example, a 2018 audit of
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/29/Garfield, Rachel,
/30/Meltzer, Rose. "Ohio Cracks Down on PBM Contracts After Audit Shows Egregious Spread Pricing in Medicaid."
/31/
/32/"Medicare Part D: Use of Pharmacy Benefit Managers and Efforts to Manage Drug Expenditures and Utilization." GAO.
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Senate Finance Committee Engagement on PBM Issues
In 2015, then-Ranking Member
In addition to producing written work products on drug pricing issues, the
On
II. EXPLANATION OF THE BILL
SECTION 1.
This section sets out the name of the bill--the "Modernizing and Ensuring PBM Accountability Act"--and lists the Table of Contents of the legislation.
SECTION 2. ARRANGEMENTS WITH PHARMACY BENEFIT MANAGERS WITH RESPECT TO PRESCRIPTION DRUG PLANS AND MA-PD PLANS
Current Law
Medicare Part D is a voluntary outpatient prescription drug benefit, enacted in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; Pub. L. 108-173), effective
Part D plan sponsors often contract with PBMs to design and administer Part D benefits. Since the program inception,
Federal statutes and regulations govern annual CMS contracting with Part D plan sponsors./33/ PBM contract terms and service agreements with Part D plan sponsors vary from sponsor to sponsor, including with regard to the level and type of compensation (i.e., flat fees or retention of volume-based rebates), whether a contract includes PBM performance incentives, whether a contract includes Part D plan drug price guarantees and the specifications of such guarantees, and definitional terms. Neither statute or regulation govern the forms of compensation PBMs can generate from plan sponsors and entities in the supply chain related to prescription drugs dispensed under Part D. Further, PBM revenue streams have evolved considerably since 2003, when the MMA was enacted.
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/33/Part D contract regulations are at 42 CFR Sec. 423.505.
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Under current law, Part D plans and their PBMs must report all price concessions that affect the price of Part D drugs to CMS via two main mechanisms:
(i) Prescription Drug Event (PDE): A PDE report is generated each time a beneficiary fills a prescription at a network pharmacy. The PDE includes information on the negotiated price, including the amount paid to the pharmacy for the drug, the quantity dispensed, the out-of-pocket spending by the beneficiary, and any coverage by qualified third parties, such as other insurers.
(ii) Direct and Indirect Remuneration (DIR): DIR reporting applies to price concessions that are not passed on to enrollees at the point of sale. DIR includes discounts, rebates, pharmacy fees, and other price concessions or similar benefits from manufacturers, pharmacies, or similar entities that are obtained by an intermediary organization, such as a PBM, with which the Part D plan sponsor has contracted./34/
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/34/42 CFR Sec. 423.308.
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Provisions
These provisions would require that, beginning in plan year 2026, each Part D plan sponsor must have a written agreement with any PBM acting on its behalf under which the PBM agrees to meet the requirements outlined below. All of these requirements would apply to MA-PD plans, as well as PDPs.
These provisions also would define "pharmacy benefit manager" as any entity that acts as a price negotiator or group purchaser, manages prescription drug benefits, processes and pays prescription drug claims, performs drug utilization reviews, processes prior authorization requests, adjudicates drug plan appeals or grievances, contracts with network pharmacies, controls the cost of covered Part D drugs, or provides related services on behalf of a Part D plan. These provisions would define an "affiliate" as any entity owned by, controlled by, or related under a common ownership structure with a PBM.
I. Bona Fide Service Fees
This provision would require that a PBM and any affiliate of a PBM may not derive remuneration for services provided in connection with the use of Part D covered drugs, except in the form of bona fide service fees. The provision would define a "bona fide service fee" as a fee that reflects the fair market value for a bona fide, itemized service. A bona fide service fee would be required to be a flat dollar amount not based on the drug's price or other related drug price benchmarks and factors. Remuneration would be subject to audit, including by the
Part D plan sponsors could continue to collect rebates, discounts, or price concessions that lower net costs for covered part D drugs. Nothing in this provision would be construed as prohibiting a PBM from reimbursing entities that acquire prescription drugs for the ingredient cost of the products./35/
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/35/In general, the ingredient cost is the amount paid by the pharmacy or wholesaler for the drug. It does not include pharmacy dispensing fees.
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II. Transparency Regarding Guarantees and Cost Performance Evaluations
This provision would institute transparency standards for written agreements between Part D plan sponsors and PBMs. Specifically, the provision would require PBMs to define and apply drug and drug pricing terms in written agreements with plan sponsors in a transparent and consistent manner for the purposes of calculating or evaluating PBM performance against pricing guarantees or similar cost performance measurements. PBMs would also have to identify any exceptions to such guarantees and provide a calculation of such guarantees using either the WAC or an equivalent, in addition to any other benchmarks used.
III. PBM Data Reporting Requirements
This provision would set out new requirements for PBMs to annually report drug price and other information to Part D plans and to HHS. PBMs would be required to include several categories of information in their reports, including the following:
Lists of all drugs covered; Information about dispensing of such drugs;
Information about enrollee cost sharing and access to generics and biosimilars, including the relative formulary tier placement of such generics and biosimilars, if a plan covers the brand-name drugs or biologic reference products;
Information on financial relationships between the PBM and other entities in the drug pricing supply chain;
Information related to net and gross prices and total drug spending; and Information about the PBM's affiliates.
PBMs that are affiliated with a pharmacy must also report the following categories of information:
Information related to dispensing and drug costs by affiliate pharmacies;
Information related to drug acquisition costs; and
Information related to drugs subject to 340B arrangements.
This provision would also require PBMs or their affiliates to provide Part D plans with a written explanation of contracts or arrangements with a drug manufacturer (or affiliate) that makes rebates, discounts, payments, or other financial incentives related the drug manufacturer's drug(s) contingent upon coverage, formulary placement, or utilization management conditions on other prescription drugs. The PBM would be required to provide this information shortly after the contract or arrangement with the drug manufacturer is finalized. The written agreement must be certified and would include information about the manufacturers and drugs subject to such arrangement.
IV. Confidentiality
This provision would bar the HHS Secretary from publicly disclosing information obtained from a Part D sponsor or PBM under the required agreements and reports that is not otherwise publicly available, except in limited circumstances, including:
By the HHS Secretary to carry out this part;
To the GAO, the
To permit oversight and enforcement by government agencies.
These agencies would not be permitted to report on or disclose the information in a way that would identify a specific supply chain stakeholder or prices for specific drugs.
V. Audit Rights
This provision would permit audits, by an auditor of the Part D plan sponsor's choice, of a PBM, no less than once a year, if requested by a Part D sponsor, including to ensure the accuracy of drug price information reported under these provisions. The PBM would be required to provide information to the auditor necessary to perform the audit and confirm the accuracy of PBM reporting, including information owned or held by a PBM's affiliate, in a timely manner. The HHS Secretary would be allowed to include reasonable restrictions on how the information is reported to prevent redisclosure.
VI. Enforcement
This provision would require a PBM to:
Disgorge remuneration received by the PBM, or an affiliate of such PBM, in violation of the bona fide service fee requirements;
Reimburse the Part D sponsor for any civil money penalty imposed on the sponsor due to the failure of the PBM to meet the requirements of these provisions; and
Be subject to punitive remedies for breach of contract for failing to comply with the requirements of these provisions.
This provision would also require each Part D sponsor to provide the HHS Secretary an annual certification of compliance with the provisions outlined above, as well as such additional information as the Secretary determines necessary to carry out this subsection.
VII. Funding
This provision would provide
VIII. GAO Report on Certain Pricing Requirements
This provision would require GAO to conduct a study of federal and state reporting requirements for health plans and PBMs regarding the transparency of prescription drug costs and prices. Study results would be required to include recommendations for legislation and administrative actions to streamline and reduce burden with respect to the reporting requirements for health plans and PBMs.
IX. MedPAC Reports on PBM Reported Information
This provision would require MedPAC to issue two reports and related recommendations to
SECTION 3. ENSURING FAIR ASSESSMENT OF PHARMACY PERFORMANCE AND QUALITY UNDER MEDICARE PART D
Current Law
Part D plan sponsors and PBMs create contracted networks of retail pharmacies that dispense covered drugs at negotiated reimbursement rates. Part D regulations/36/ require plan sponsors to have standard pharmacy contracts with reasonable and relevant terms and conditions of participation, and to allow any willing pharmacy to participate in their basic pharmacy network. Actual contract terms vary across Part D plans, however, meaning that retail pharmacies, which often contract with multiple Part D plans, may have to navigate differing plan contracts, payment rates, and other terms.
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/36/42 CFR Sec. 423.505.
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Many plans and PBMs use quality measures to evaluate pharmacy performance in various areas, such as medication adherence and generic dispensing. In recent years, however, pharmacies have reported that the quality measures imposed by plans and PBMs are unpredictable, assessing items outside the scope of the pharmacy practice, and/or measuring outcomes over which pharmacies have limited control./37/
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/37/Frier Levitt and the
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Provision
This provision would require the HHS Secretary to institute standard Part D measures for assessing network pharmacy performance, beginning in 2025. Under the provision, a Part D sponsor that wanted to institute fees, price concessions, or incentive payments based on network pharmacy performance would only be able to do so if the plan sponsor/PBM used performance measures that were: (1) established or adopted by the HHS Secretary; and (2) relevant to the pharmacy, as determined by pharmacy type.
The HHS Secretary would be required to establish or adopt standardized pharmacy performance measures that were: (1) evidence-based and reasonable; and (2) focused on pharmacy performance related to patient health outcomes and other areas that pharmacies can reasonably impact, as determined by the Secretary. The Secretary's determination may be based on data and information from relevant stakeholders.
Rather than establishing some or all of the required performance measures, the Secretary may adopt measures endorsed by a multi-stakeholder consensus organization (such as the
This provision would provide
SECTION 4. PROMOTING TRANSPARENCY FOR PHARMACIES UNDER MEDICARE PART D
Current Law
Just as drug pricing and formulary coverage vary among Part D plans, Part D plan reimbursements to pharmacies also differ according to formulary requirements, plan specifications, and a plan's negotiated price for a covered drug. Pharmacies dispense billions of Part D drugs each year, and payments from Part D plan sponsors are processed in real time at the point of sale through electronic systems that aggregate plan-specific data, including the drug ingredient cost, dispensing fees, cost-sharing requirements, and other third-party sources of payment.
In recent years, CMS has noted a sharp rise in pharmacy fees and other price concessions that plan sponsors and PBMs extracted from retail pharmacies after the point of sale and reported as DIR. Part D pharmacy DIR includes administrative fees, network access fees, and fees for not meeting plan quality metrics. Part D plan sponsors may provide incentive payments to pharmacies for meeting specified goals, but CMS data indicate that extracted fees, or penalties, far outpace additional compensation to pharmacies. According to CMS, pharmacy fees are the fastest-growing category of DIR, accounting for nearly 5 percent of gross Part D drug costs (
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/38/CMS, "Medicare Program: Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs," 87
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In
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/39/CMS, "Medicare Program: Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs," 87
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Provision
This provision would establish a process by which Part D plan sponsors provide their network pharmacies with comprehensive information about the pricing of prescription drug claims. The new system would be required to take effect in 2025.
This provision would provide
SECTION 5. PREVENTING THE USE OF ABUSIVE SPREAD PRICING IN MEDICAID
Current Law
State Medicaid programs reimburse statutorily defined retail community pharmacies for covered outpatient drugs (CODs) dispensed to Medicaid beneficiaries. The payment to retail community pharmacies has two components: (1) an amount to cover the cost of acquiring the drug (ingredient cost); and (2) an amount for the pharmacist's professional services in filling a prescription (dispensing fee).
The Patient Protection and Affordable Care Act (ACA, Pub. L. 111-148) required drug manufacturers that participate in the Medicaid Drug Rebate Program to provide rebates on CODs that are dispensed to beneficiaries covered under a managed care organization (MCO) that contracts with the state Medicaid program. Most MCOs and other entities that provide Medicaid prescription drug benefits contract with PBMs to manage and administer their drug benefits. Generally, MCOs pay PBMs for drugs supplied to Medicaid beneficiaries based on a published price, such as a percentage of the average wholesale price (AWP), while PBMs separately determine pharmacy reimbursement. Although the difference (spread) between the MCO payments to PBMs and the PBM payments to pharmacies may be small for each individual drug, it can be substantial when aggregated across all drugs dispensed by an MCO.
Contracts between Medicaid MCOs and PBMs are sometimes based on the margin (spread) between the amount charged to the MCO for a COD and the amount paid by a PBM to the pharmacy provider./40/ Effective
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/41/CMS,
/42/CMS, Medicaid Program; Misclassification of Drugs,
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Provision
The provision requires a pass-through pricing model for CODs reimbursed under Medicaid, including when services are provided under contract with MCOs. This section would require payment for PBM services to be limited to the ingredient cost and a professional dispensing fee equivalent to no less than the professional dispensing fee paid under FFS through a state plan or waiver and passed through in its entirety to the dispensing pharmacy. The provision would allow an exception to the pass-through payment requirement for drugs purchased by 340B covered entities.
Payments to PBMs for administrative services would be limited to the fair market value of those services. PBMs and other entities would be required to make available to state Medicaid programs, and the Secretary upon request, all specified costs and payments related to CODs and accompanying administrative services.
This provision would also prohibit any form of spread pricing that exceeds the amount paid to pharmacies or providers on behalf of the state for purpose of claiming federal Medicaid matching payments. State Medicaid programs would be prohibited from making payments to certain specified health plans unless the contract between the state and the entity met the Medicaid Drug Rebate Program and other prescription drug requirements.
This provision would apply to state Medicaid program contracts between MCOs, other specified entities, and PBMs with an effective date that begins 18 months after this law's enactment date.
SECTION 6. ENSURING ACCURATE PAYMENTS TO PHARMACIES UNDER MEDICAID
Current Law
State Medicaid programs reimburse statutorily defined retail community pharmacies for CODs dispensed to Medicaid beneficiaries based on two components: (1) the cost of the medicine, the ingredient cost; and (2) a payment for the cost to the pharmacy of administering and filling a prescription (i.e., the professional dispensing fee). State Medicaid programs, subject to CMS approval, determine pharmacy ingredient payment rates, as well as professional dispensing fees.
For multiple source drugs with generic equivalent products, state Medicaid programs are subject to annual aggregate upper limits on payments. Prices available for multiple source drugs can vary widely, so upper payment limits ensure states pay competitive prices. State Medicaid programs are required to have a CMS-approved methodology to determine multiple source drug payments, including addressing the ingredient costs and pharmacy dispensing fees. Medicaid regulations require states to base the ingredient cost component for multiple source drugs on each product's actual acquisition cost (AAC). State Medicaid programs have discretion in determining AAC, such as using a state administered pharmacy survey to determine a drug's average cost or using the results of a national drug acquisition cost survey of retail community pharmacies authorized in Medicaid statute.
The Deficit Reduction Act of 2005 (DRA, Pub. L. 109-171) amended SSA Section 1927 by adding a new subsection (f) that required the
Provision
This provision would require the Secretary to survey retail community pharmacies drug prices in the 50 states and the
The HHS Secretary may enforce noncompliance with the NADAC survey through monetary penalties or by fully or partially suspending Medicaid payments until the pharmacy complies. State Medicaid programs would be required to report additional information including the basis for setting drug dispensing fees as well as payment rates under Medicaid managed care plans.
This provision would be effective 18 months after this law's enactment date. The Secretary would receive a
SECTION 7. HHS OIG STUDY AND REPORT ON DRUG PRICE MARK-UPS IN MEDICARE PART D
Current Law
The past several decades have seen rapid consolidation in the health care sector, including among PBMs. The early 2000s saw horizontal integration as freestanding PBMs merged. More recently, there has been vertical integration, with major PBMs now owned by, or affiliated with, retail pharmacy chains, insurers, and health care providers such as hospitals. As a result of the consolidation, the three largest PBMs were expected to account for nearly 80 percent of prescription claims processed in 2022./43/ In addition, some PBMs have entered into strategic agreements with insurers and retail pharmacies to provide certain services to insurers and retail pharmacies.
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/43/
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It can be difficult to determine the pricing structure and flow of funds within these vertically integrated entities. MedPAC's
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/44/MedPAC
/45/Lalani, H. et al. (
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Provision
This provision would require the HHS OIG to study how vertical integration between Part D plans, PBMs, and pharmacies affects Part D plan negotiated prices (i.e., the prices Part D plans charge the Medicare program for drugs dispensed to Part D enrollees). The study would include an analysis of the following:
Affiliate acquisition costs within vertically integrated entities;
Transfer pricing and margin created between affiliates;
The impact of such transactions on Part D;
and Other issues determined to be relevant and appropriate by the Inspector General.
The Inspector General would submit the study under a specified timeframe to the Senate Finance and House Energy and Commerce and Ways and Means Committees. The provision would provide
SECTION 8. MEDICARE IMPROVEMENT FUND
Current Law
The Medicare Improvements for Patient and Providers Act (MIPPA) established the
Provision
This provision would direct
SECTION 9. P&T COMMITTEE CONFLICTS OF INTEREST
Current Law
Under the Part D statute, pharmacy and therapeutic (P&T) committees must develop and review formularies of covered drugs for prescription drug plans. The statute stipulates that at least one practicing pharmacist and at least one practicing physician on every such P&T committee must be free of conflicts of interest with respect to the PDP sponsor, but neither statute nor regulations and guidance extend these limitations to PBMs explicitly, and a number of oversight reports have indicated inconsistent or unclear enforcement and compliance with respect to conflict of interest provisions under Part D.
Provision
This provision would amend Section 1860D-4 of the Social Security Act (SSA) to require that at least one practicing physician and one practicing pharmacist is independent and free of conflict with respect to any pharmacy benefit manager.
SECTION 10. ENHANCING PBM TRANSPARENCY REQUIREMENTS
Current Law
The Social Security Act (SSA) includes a set of reporting requirements for pharmacy benefit managers, including with respect to generic dispensing rates (including by pharmacy dispensing channel), rebates and price concessions received from drug manufacturers (and the amount of such concessions passed along), and prescription volume, among other data elements. These reporting requirements currently exclude transparency regarding service fees collected and retained by PBMs. Additionally, the codification of these requirements largely predated the establishment and, in some cases, acquisition of certain downstream PBM affiliates that serve as rebate negotiators and aggregators for a growing share of the PBM market.
Provision
This provision would amend Section 1150A of the SSA to expand the type of entities that must report data to the HHS Secretary to include certain PBM affiliates, to add data elements that would be required to be reported (to include fees received from manufacturers), and to add a requirement for CMS to produce an annual report with confidentiality protections.
SECTION 11. FACILITATING MIDYEAR FORMULARY CHANGES FOR BIOSIMILARS
Current Law
In the case of small-molecule drugs, a Part D plan may generally make a negative formulary change (i.e., placement on a higher or otherwise less favorable tier) with respect to the reference product for a generic drug if said plan simultaneously (or prior to doing so) places the generic drug on the formulary, subject to a number of guidelines and beneficiary safeguards. With respect to biologics, however, CMS has not established regulatory or subregulatory guidelines along these lines. A number of reports from HHS OIG, MedPAC, and other entities suggest that greater biosimilar uptake and adoption under Part D would produce both gross and net savings for beneficiaries and the Medicare program.
Provision
This provision would allow PDP sponsors to change the preferred or tiered cost-sharing status of a reference biological product if such sponsor adds a biosimilar for such reference product to the formulary. The PDP sponsor would need to submit a request to the Secretary in order to make such a change. This provision would take effect beginning in plan year 2025.
SECTION 12. STRENGTHENING PHARMACY ACCESS FOR SENIORS
Current Law
Current Part D statute, regulations, and guidance bar PDP sponsors from inappropriately steering beneficiaries towards affiliated pharmacies, including specialty pharmacies. Through guidance, for instance, CMS has established criteria for the limited circumstances under which a sponsor may subject the dispensing a covered part D drug to a subset of network pharmacies.
Provision
This provision would mitigate PBMs from steering patients to PBM-owned pharmacies for medicines that do not qualify as "limited access drugs" by codifying a portion of the Part D manual. The provision would also increase transparency of PBM practices in the prescription drug supply chain related to the dispensing of limited access drugs.
SECTION 13. INITIATING MEANINGFUL PATIENT REVIEW OF VARIOUS EXISTING PART D REGULATIONS
Current Law
The Part D statute includes a number of beneficiary protections with respect, for instance, to prescription drug plan disclosures, utilization management requirements, and appeals processes. Beneficiary experience, however, varies on these fronts, as well as on navigation of comparison tools and other resources provided by CMS or by PDP sponsors.
Provision
This provision would direct CMS to conduct beneficiary-focused listening sessions open to the public on potential Medicare Part D improvements.
SECTION 14. REPORTING ON ENFORCEMENT AND OVERSIGHT OF PHARMACY ACCESS REQUIREMENTS
Current Law
The Part D statute includes a number of requirements related to ensuring pharmacy access for beneficiaries. The "any willing pharmacy" provision, for instance, specifies that a PDP sponsor must permit any pharmacy willing to meet its terms and conditions into its network, and regulations further stipulate that these terms must be reasonable and relevant, including with respect to reasonable reimbursement.
Provision
This provision would require the HHS Secretary to publish biennial reports on enforcement actions and oversight activities undertaken by the Department with respect to the pharmacy access requirements under section 1860D 4(b)(1) of the Social Security Act.
SECTION 15. STUDY ON PRICE LINKED COMPENSATION ACROSS THE SUPPLY CHAIN
Current Law
As numerous government oversight reports in the past have illustrated, a wide range of stakeholders included in the outpatient prescription drug supply chain engage in compensation arrangements tied to drug prices or other related benchmarks.
Provision
This provision would require GAO to complete a study of compensation and payment structures related to drug prices in the retail prescription drug supply chain.
SECTION 16. REPORTS ON INAPPROPRIATE PHARMACY REJECTIONS
Current Law
PDP sponsors employ a number of cost-containment measures, including utilization management tools (i.e., prior authorization, step therapy, quantity limits). Under current law, CMS must approve the use of these mechanisms. In practice, however, oversight agencies, including HHS OIG, have found that inappropriate pharmacy rejections and coverage denials sometimes prevent beneficiaries from accessing covered part D drugs, sometimes as a result of the use of unapproved utilization management tools, as well as other factors. Moreover, a number of data collection efforts and other initiatives intended to identify such practices have lapsed in recent years.
Provision
This provision would require the Secretary to publicly post a biennial report related to preventing, identifying, or addressing inappropriate pharmacy rejections and inappropriate coverage denials under Part D.
SECTION 17. STUDY ON DRUG SHORTAGES
Current Law According to the
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/46/https://www.ashp.org/drug-shortages/shortage-resources/drug-shortages-statistics.
/47/Note: FDA also maintains a list of drug shortages, although the agency's criteria differ. https://www.accessdata.fda.gov/scripts/ drugshortages/default.cfm.
/48/https://www.ashp.org/drug-shortages/shortage-resources/drug-shortages-statistics.
/49/https://www.hsgac.senate.gov/wp-content/uploads/Drug-Shortages-HSGAC-Majority-Staff-Re port-2023-03-22.pdf.
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Provision
This provision would require GAO to complete a study of factors across the outpatient prescription drug supply chain that influence prescription drug shortages.
SECTION 18. REPORT ON BIOSIMILAR AND GENERIC ACCESS UNDER PART D
Current Law
Part D has generally offered high generic dispensing rates, while the retail outpatient biosimilar market has only begun to emerge in recent years. A number of agencies, including HHS OIG, have found that biosimilar uptake and adoption in Part D plans has remained relatively low, particularly with respect to low-wholesale acquisition cost (WAC) options that would translate into lower cost sharing for beneficiaries.
Provision
This provision would direct HHS OIG to conduct a study and generate a report on biosimilar and generic drug access under Part D, including with respect to Part D plan features that discourage or encourage low-priced biosimilar and generic drug adoption and utilization under the program, along with trends in such adoption and utilization.
III. BUDGET EFFECTS OF THE BILL
A. COMMITTEE ESTIMATES
In compliance with paragraph 11(a) of rule XXVI of the Standing Rules of the
B. BUDGET AUTHORITY
In compliance with section 308(a)(1) of the Budget Act, the Committee states that the extent to which the provisions of the bill as reported involve new or increased budget authority or affect levels of tax expenditures will be included in the statement from the
C. CONSULTATION WITH CONGRESSIONAL BUDGET OFFICE
In accordance with section 403 of the Budget Act, the Committee advises that the
IV. VOTES OF THE COMMITTEE
In compliance with paragraph 7(b) of rule XXVI of the Standing Rules of the
V. REGULATORY IMPACT AND OTHER MATTERS
A. REGULATORY IMPACT
Pursuant to paragraph 11(b) of rule XXVI of the Standing Rules of the
Impact on individuals and businesses, personal privacy and paperwork
In carrying out the provisions of the bill, individuals and businesses across the drug supply chain including drug manufacturers, PBMs, health plans, and pharmacies that provide prescription drugs to individuals with Medicare or Medicaid coverage will be subject to new reporting requirements. The requirements range from PBMs reporting drug cost and dispensing information to pharmacies reporting acquisition cost information. The new information will be reported to Part D plan sponsors and the HHS Secretary. In some cases, the Secretary will share certain reported information with other entities and the public.
The provisions of the bill do not impact personal privacy.
B. UNFUNDED MANDATES STATEMENT
The Committee adopts as its own the estimate of federal mandates prepared by the Director of the
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In the opinion of the Committee, it is necessary in order to expedite the business of the
* * *
The report is posted at: https://www.congress.gov/congressional-report/118th-congress/senate-report/122/1?s=1&r=35
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