U.S. Congress introduces new drug pricing transparency requirements through the back door

With remarkably little fanfare, the U.S. Congress has passed legislation that introduces a range of new drug pricing transparency obligations on pharmaceutical companies and health insurers. The reforms are contained in the Consolidated Appropriations Act, 2021 (H.R. 133), which was passed by Congress on 21st December 2020 and signed into law by President Trump on 27th December 2020.

The main focus of the legislation is to provide an $892 billion COVID-19 relief package that will fund the federal government through September 2021. However, the new law contains a multitude of other measures, including several related to drug benefits and costs.

Expanded average sales price reporting obligations

Effective 1st January 2022, all drug manufacturers—including companies that do not participate in the Medicaid Drug Rebate Program—will be required to provide quartertly average sales price data for products that are payable under Medicare Part B as drugs and biologics to the Secretary of Health and Human Services (HHS). Beginning January 2023, the HHS Inspector General will be required to report to Congress the accuracy of ASP information submitted by manufacturers

Disclosure of rebate and discount data

The executive directors of the Medicare Payment Advisory Commission (MedPAC) and Medicaid and CHIP Payment and Access (MACPAC) will be entitled to have access to certain drug pricing and payment data, such as rebates, discounts, price concessions, or other forms of direct or indirect remuneration under Medicare Part D or Medicare Advantage plans. This information will be used to monitor, analyze and make recommendations with regard to the Medicare and Medicaid programs. Wider disclosure of identifiable drug pricing data by executive directors or commissioners will be prohibited.

Reporting on pharmacy benefits and drug costs

The Department of Health and Human Services will be required to publish a biannual report on drug pricing trends, including the influence of drug prices on health insurance premiums and out-of-pocket costs. Each year, group health plans and health insurers will be required to provide the following data for each plan:

• The 50 most frequently dispensed branded drugs and the total number of paid claims for each such drug.
• The 50 most costly prescription drugs by total annual spending, and the annual expenditure for each such drug.
• The 50 prescription drugs with the greatest increase in plan expenditures over the preceding year and the change in expenditure.
• Any impact on premiums by rebates, fees, and any other remuneration paid by drug manufacturers to the plan, its administrators or service providers, with respect to prescription drugs prescribed to enrollees, including the amounts paid for each therapeutic class of drugs and the amounts paid for each of the 25 drugs that yielded the highest amount of rebates and other  remuneration from drug manufacturers. Health plans must also account for any reduction in premiums and out-of-pocket costs associated with rebates, fees, or other remuneration.

Real-time drug benefit tools for Medicare Part D and Medicare Advantage beneficiaries

Sponsors of Medicare Part D and Medicare Advantage plans will be required to implement tools to provide beneficiaries with real-time information on drug benefits with a view to reducing beneficiaries’ costs. For covered Part D drugs, the tools will supply healthcare professionals with the following enrollee-specific data:

• A list of any clinically-appropriate alternatives to a drug included in the plan’s formulary.
• Cost-sharing information and the negotiated price for a drug and its alternatives at multiple pharmacy options, including the individual’s preferred pharmacy and, as applicable, other retail pharmacies and a mail-order pharmacy.
• The formulary status of a drug and such alternatives and any prior authorization or other utilization management requirements.

Implications for the pharmaceutical industry

The transparency mandated by H.R. 133 will help HHS to more clearly benchmark prices paid under Medicare and Medicaid. The data required will also be used to measure the impact of rebates, discounts, price concessions and other forms of remuneration on insurance premiums and out-of-pocket costs.

The reforms could have significant implications for future legislation to regulate rebate practices. In the past, pharmacy benefit managers (PBMs) were often criticized for retaining a substantial proportion of rebates they negotiated with manufacurers. These days, PBMs pass on virtually all of the rebates to plan sponsors, who argue that these savings help them to contain members’ premiums. However, some legislators would like to see rebates passed on in full to beneficiaries to reduce their out-of-pocket costs.

If nothing else, the changes introduced by H.R. 133 will advance the cause of pricing transparency, which looks set to gain momentum not just in the United States but around the world.