New Transparency Requirements Issued for Pharmacy Benefit Managers

On April 12, 2012, the Centers for Medicare & Medicaid Services (CMS) codified the new reporting requirements, confidentiality protections, and penalty provisions for pharmacy benefits manager (PBM) data.

Section 1150A of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), as amended by section 6005 of the Act, requires Medicare Part D sponsors and other entities that provide pharmacy benefits management services (PBMs) to report various data elements to CMS. The statute specifies that this data is confidential and generally must not be disclosed by the government or by a plan receiving the information, except in certain instances when the government is allowed to disclose the information in a non-identifiable form. These new requirements will be codified at 42 C.F.R. section 423.514(d) effective June 1, 2012.  There are severe penalties for those that fail to meet these requirements.

 Reporting Requirements

The new regulations require each entity that provides pharmacy benefits management services to provide to the Part D sponsor, and for each Part D sponsor to provide to CMS:

  • The total number of prescriptions that were dispensed.
  • The percentage of all prescriptions that were provided through retail pharmacies compared to mail order pharmacies.
  • The percentage of prescriptions for which a generic drug was available and dispensed, by pharmacy type, that are paid by the Part D sponsor or PBM under the contract. The pharmacy types include independent, chain, supermarket, or mass merchandiser pharmacies that are licensed by the State and that dispense medication to the general public.  
  • The aggregate amount and type of rebates, discounts, or price concessions that the PBM negotiates that are attributable to patient utilization under the plan. This data does not include bona fide service fees, which CMS newly defines in 42 C.F.R. 423.501 as fees paid by a manufacturer to an entity that represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer that would otherwise be performed (or contracted for) by the manufacturer in the absence of the service arrangement, and that are not passed on in whole or in part to a customer of an entity, whether or not the entity takes title to the drug.
  • 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.
  • The aggregate amount of the difference between the amount the Part D sponsor pays the PBM and the amount that the PBM pays retail pharmacies, and mail order pharmacies.

 Data Confidentiality

 The data disclosed by a Part D sponsor or PBM under these rules is confidential and must not be disclosed by the Secretary of HHS or by any plan receiving the data. The Secretary, however, may disclose the data as necessary to carry out the provisions of PPACA, Part D of Title XVIII, or to permit the review of the data by the Comptroller General or the Director of the Congressional Budget Office.  In addition, when disclosing the data, the Secretary must only disclose it in a form which does not reveal the identity of a specific PBM, plan, or prices charged for drugs.

Penalties

If a Part D sponsor or PBM fails to provide the required data on a timely basis or knowingly provides false data, the penalty provisions of section 1927(b)(3)(C) of the Social Security Act  are applicable. Failure to provide data on a timely basis may result in a penalty of up to $10,000 per day. Knowingly providing false information may result in a civil money penalty in an amount not to exceed $100,000 for each item of false information.  The financial penalty for knowingly providing false information is in addition to any other that may be imposed by law.