Medicare Part D Drug “Negotiated Prices”

RDS Services, LLC Releases Position Paper on Revised Definition of Medicare Part D Drug “Negotiated Prices”

The National Director of Accounts George Fox has released excerpts from several white papers that provide insight on the Centers for Medicare and Medicaid Services [CMS] soon to be implemented changes in Medicare Advantage Prescription Drug [MAPD] or Employer Group Waiver Plan [EGWP] drug pricing.

?In 2003, the United States Congress passed the Medicare Modernization Act [MMA 2003] and with it, the Retiree Drug Subsidy. The “MMA 2003” legislation enabled important financial support to municipal governments and the retiree benefit obligations. Specifically, the law contained an unprecedented effort in Federal subsidy funding to support legacy obligation of municipal governments, Unions and Enterprise employers to fund Retiree Drug benefits, or what is commonly known as “Part D”. However, as the “Part D” environment has evolved, the regulatory environment will respond to perceived deviations from the program’s legislative intent.

“The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule that outlined major regulatory changes for MA and Part D starting in 2023. “Today’s proposed actions follow our guiding principles by improving health equity and enhancing access to prescription medications,” said CMS Administrator Chiquita Brooks-LaSure in a statement .” (Policy and Medicine, January 2022)

The proposed rules change can have a significant impact on plan sponsors in the Retiree Drug Subsidy [RDS] program by massively enhancing the tremendous value embedded in the RDS program for retiree plan sponsors.

“The Biden administration wants Medicare Part D plans to apply any price concessions they get from drug makers to the point-of-sale and require Medicare Advantage plans to be more transparent in how they spend money on supplemental benefits.” (Policy and Medicine, January 2022)

?Here is what happened:

“On January 6, 2022, the Centers for Medicare & Medicaid Services (“CMS”) issued a proposed rule entitled “Medicare Program; Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs” (the “2022 Proposed Rule”). Of great significance to Medicare Part D plan sponsors, pharmacies, and beneficiaries, the 2022 Proposed Rule includes proposed changes to the way Medicare determines the “negotiated price” (i.e., the price upon which beneficiary cost-sharing is based at the pharmacy counter), and consequently could affect Part D plan sponsors’ reporting of costs to CMS. If finalized in its current form, the 2022 Proposed Rule could enhance predictability of cash flow for pharmacies, reduce out-of-pocket prescription drug costs for Medicare Part D enrollees, and lead Part D plan sponsors to raise premiums, thereby causing increased competition among Part D plan sponsors for beneficiaries. The 2022 Proposed Rule would take effect on January 1, 2023.” (Ropes & Gray, January 18, 2022)

This is bad news for retiree plan sponsors that migrated over to Medicare Advantage Prescription Drug [MAPD] or Employer Group Waiver Plan [EGWP] from the Retiree Drug Subsidy [RDS] program. The move from the fully transparent RDS program to the completely opaque MAPD and EGWP is popular because of the transfer of plan administration to an insurance company. The MAPD and EGWP plan formats are fully insured retiree drug benefits and only require the payment of a “premium”. Because the term “premium” is defined as a known loss; the new CMS rule implies there will premiums increases coming in 2023. Its apparent that because the MAPD and EGWP plans are “opaque” concerning the financial aspects of how the drug cost are paid or disbursed, it was just a matter of time before regulators would shut the party down. It really all stems from how much the Prescription Benefit Manager [PBM] is making and not passing onto the plan sponsor in the form of rebates and concessions. The attraction of the MAPD and EGWP formats is the absence of administrative requirements to these types of benefits. The plan sponsor would simply pay a “premium”, but in effect, lost control because of the lack of transparency.

“The proposed rule also would add a broad definition of “price concession” at 42 C.F.R. § 423. 100 that would include “all forms of discounts, direct or indirect subsidies, or rebates that serve to reduce the costs incurred under Part D plans by Part D sponsors.” “(Ropes & Gray, January 18, 2022)

The specifics of the current law that MAPD and EGWP plans operate are cloudy at best and often use complex and voluminous contracts to cloak the ultimate goal. However, if you focus in on one aspect of how retiree drug benefits are paid, you can see how the new rule will ultimately affect the current premiums that are paid for an MAPD or EGWP plan.

Currently, ““negotiated prices” must include all network pharmacy price concessions, with the exclusion of contingent pharmacy price concessions that cannot “reasonably be determined” at the point of sale. As proposed in the rule, the term “negotiated prices,” as it relates to prescription drugs under?Part?D, would be redefined to eliminate this exception. CMS is also proposing to define the term “price concession” to include all forms of discounts, direct or indirect subsidies, or rebates that work to reduce the costs incurred under?Part?D?plans by?Part?D?sponsors. In order to implement these provisions, both?Part?D?sponsors and their pharmacy benefit managers (PBMs) would be required to transmit — via their claims processing systems that interface with contracted pharmacies — revised drug pricing tables that reflect the lowest possible reimbursement at the point of sale. If finalized, these changes would be effective January 1, 2023.” (Policy and Medicine, January 2022)

“CMS is proposing several changes to the MA and?Part?D?plans in an effort to increase oversight.?To address transparency concerning the use of Medicare Trust Fund dollars, CMS is proposing to reinstate the Medical Loss Ratio (MLR) reporting requirements?—?in effect for CY 2014 through 2017?—?that required MA organizations and?Part?D?sponsors to report the underlying cost and revenue information needed to calculate and verify the MLR percentage and remittance amount.” (Policy and Medicine, January 2022)

What will all this mean plan sponsors when it takes effect. It simply means that MAPD and EGWP providers will most likely be increasing your “premiums” for these types of plans and there is no way for you to deal with the premium increase except “shop around”.

In contrast, if you are currently in the Retiree Drug Subsidy [RDS] program you should know that these changes will not change how the RDS program currently operates. ?If you are currently in an MAPD or EGWP plan, you should strongly consider returning to the RDS program which provides total transparency, and complete control over the cost of prescription drugs.

“In sum, if CMS were to finalize the 2022 Proposed Rule in its current form, the agency’s changes to the definition of “negotiated prices” could have notable effects on Medicare beneficiaries and pharmacies, as well as Part D plan sponsors, and PBMs, including reduced out-of-pocket prescription drug costs for Medicare Part D enrollees, lower payments at the point of sale but enhanced predictability of cash flow for pharmacies, and higher premiums by Part D plan sponsors yielding potentially increased competition for beneficiaries.” (Ropes & Gray, January 18, 2022)

To find out more, call the RDS Services, LLC National Sales Director, George Fox at (516) 361-9404 or e mail [email protected] Visit our webpage at www.rdsservices.us

RDS Services, LLC is the preeminent Federal Retiree Drug Subsidy Recovery Specialist in the nation with offices based in Troy, Michigan and New York City, New York. To request your plans “Benchmark 360” report on how much additional drug subsidy your retiree plan is due, or RDS Effect, RDS Plan 360 report, or any of the other reports available from RDS Services, LLC, please call to speak with George Fox, National Sales Director or visit www.RDSServices.us for more information. RDS Services, LLC was founded by Mark Manquen, a Certified Public Accountant who also holds a Master of Science in Taxation.

Inquires: Patty Kanaras, Director of HR (248) 878- 2162????????????www.rdsservices.us

RDS Services, LLC

50 West Big Beaver, Suite 220

Troy MI 48084

(516) 361-9404

[email protected]