The Centers for Medicare & Medicaid Services is proposing to require that Medicare prescription drug plans report all rebates within six months of the end of the coverage year, in order to calculate payments to plan sponsors.

"Based on our current estimates, we expect that plans will report rebate information to CMS within six months of the end of the coverage year," the agency says in a "white paper" on Medicare Part D prescription drug event data records.

CMS' reporting requirements for sponsors of Part D plans could have a significant impact on the structure of rebate agreements between manufacturers and payers.

If CMS sticks to the six month deadline, plans will want to ensure that rebate contracts with manufacturers do not allow for any uncertainty in rebate amounts beyond that period.

CMS "discussed the complexity of rebate accounting practices and reporting" in the proposed rules implementing the Medicare law, the agency notes. "We also requested suggestions for allocating and applying rebates, especially to reinsurance."

The ¹ white paper outlines specific prescription drug event data CMS is proposing to gather for each prescription filled under Medicare Part D.

The data will be used to determine how much money plans receive from CMS in each of several forms: a direct subsidy; a low-income cost-sharing subsidy; reinsurance (covered drug costs above the beneficiary out-of-pocket threshold); and risk corridor payments (limiting plan exposure to unexpected expenses).

Rebate amounts will be used to calculate reinsurance and risk corridor payments to plans.

"Rebate dollars must be reported in full with no reduction for administrative costs or any other fees," CMS says.

"The expected rebate information will consist of three data points: total rebate dollars, rebate dollars for non-covered Part D drugs, and rebate dollars for covered Part D drugs."

"The differentiation between non-covered Part D drug rebate dollars and covered Part D drug rebate is necessary so that reinsurance and risk corridor calculations are based on covered Part D drug costs," CMS notes.

"This minimal data set will simplify plan reporting while meeting the need for timely reconciliation including reinsurance and risk corridor calculations."

The white paper defines different codes for the prescription drug event data to allow for proper payment.

For example, CMS will track the low-income cost-sharing subsidy through a separate field listing the payments made by plans on behalf of low-income beneficiaries.

The claim on which a beneficiary reaches or exceeds the out-of-pocket threshold - and the plan becomes eligible for reinsurance payments - will also be flagged.

Plans will also be required to report the true out-of-pocket spending amount for each beneficiary's claim.

TrOOP spending includes traditional out-of-pocket spending by beneficiaries, but also payments made on their behalf by family members, "bona fide" charities, through the low-income subsidy, and by qualified state pharmaceutical assistance programs.

During a Jan. 4 CMS "open door forum" on prescription drug event data, an attorney asked whether CMS would include codes to track out-of-pocket expenses covered by SPAPs or through the federal 340B drug discount program.

The attorney suggested that without appropriate tracking, manufacturers would be exposed to "double dipping": plans could collect rebates on the same prescription for which manufacturers have already paid rebates to a state or federal discount program.

Using CMS' proposed data set, "it would not be possible to identify those claims on which SPAPs are making payments," the attorney said. Under CMS' proposal, plans would only be required to report the total amount of patient spending; there would be no separate code to distinguish "out-of-pocket" spending for which a beneficiary received reimbursement from an SPAP.

"In rebate contracting, it is frequently the case that where a rebate is being paid to one plan or program, it's not also going to be payable to another plan or program," the attorney noted.

"It seems to me that it makes sense to allow for identification of the claim where the manufacturers are already providing other discounts, otherwise it could cause problems with respect to the rebate contract."

"It really goes to the overall issue of making Part D work, as much as manufacturer rebates are an important part of the financing scheme for the overall Part D benefit."

However, CMS expressed reluctance to require additional information from plan sponsors.

"We could consider creating another field, but that's just creating another field on the form that we did not have a business purpose for collecting," Medicare Drug Benefit Group Division of Program Analysis & Performance Acting Director Jeff Grant said.

In addition, Grant pointed out, it is unlikely that the plans will be aware of payments made by SPAPs on behalf of an individual beneficiary.

"As we at least envision this, the plan would see a patient pay amount...say it's $25." If "it turns out the SPAP later on pays $20 of that, that's somewhat invisible to the plan."

In any event, information collected by CMS about drug claims cannot be shared with manufacturers, Grant said.

The white paper outlines "the kind of information [plans] need to provide to us, for us to administer our portion of the benefit. It has nothing to do with the data they may need to collect to appropriately administer their portion of the benefit."

Part D Plans Must Report Rebates Within Six Months Under CMS Proposal

More from Archive

More from Pink Sheet