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New rules to watch: Summer 2022

How the work of national and local lawmakers will impact you.

Published: June 2022

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Here is a quick summary of this edition of the Regulatory Update: As a plan sponsor, you should review these updates with your legal counsel and/or benefit consultant partners to determine any implications for your benefit plans.

  • Insulin Costs. A bipartisan group of lawmakers released plans for limiting insulin costs that would impact existing cost management strategies commonly used by plans and PBMs.
  • 2023 Notice of Benefits and Payment Parameters Final Rule.  The latest rules applying to the individual and small group health insurance market may require some benefit design changes.
  • 2023 Medicare Advantage and Part D Final Rule. The Centers for Medicare & Medicaid Services requires Medicare Part D plans to apply price concessions received from network pharmacies at the point of sale (POS).
  • Medicare Coverage Policy for Aduhelm. CMS released a national policy saying it would provide coverage for certain people with Medicare participating in studies for the controversial Alzheimer’s drug.

Insulin Costs

In April, a group of four bipartisan House and Senate lawmakers released a list of top policy priorities for limiting insulin costs, which include:

  • Prohibiting plans and PBMs from collecting rebates on insulin that is priced at 2006 or equivalent levels;
  • Limiting cost-sharing on insulin to no more than $35 per month and waiving deductibles; and
  • Restricting prior authorization or other medical management requirements on insulin.

These priorities follow the House passage of the Affordable Insulin Now Act on April 1. Under the Act, private group or individual plans would be required to cover one of each insulin dosage form (vial, pen) and insulin type (rapid-acting, short-acting, intermediate-acting, and long-acting) for no more than $35 per month. Medicare Part D plans, both stand-alone drug plans and Medicare Advantage drug plans, would be required to charge no more than $35 for whichever insulin products they cover in 2023 and 2024, and for all insulin products beginning in 2025. This Act is now with the Senate for consideration and is expected to be passed and implemented for plan years beginning on or after January 1, 2023.

Why this Matters: Capping member copays for a specific supply of drugs at a fixed dollar amount can end up shifting the high costs of prescription drugs to health plans and drive health insurance premiums higher. The Build Back Better Act that passed the House in November 2021 included a similar requirement. With that legislation stalled, pieces of it, including the drug pricing provisions, may be advanced through separate legislation.

2023 Notice of Benefits and Payment Parameters Final Rule

On April 28, CMS released the 2023 Notice of Benefits and Payment Parameters Final Rule (“NBPP”). The NBPP is issued on an annual basis to adopt regulatory changes to the Affordable Care Act (ACA) that apply to individual and small group health insurance markets during the next plan year. The following changes were included in this year’s NBPP for application in the 2023 plan year:

  • Refinement of the Essential Health Benefits (EHBs) Nondiscrimination Policy for Health Plan Designs: EHBs are a set of 10 categories of services health insurance plans must cover under the ACA. The NBPP revised the existing prohibition on discrimination rule in the ACA to specify that a non-discriminatory benefit design that provides EHBs must be clinically based.
  • Prohibition of Inclusion of Indirect Quality Improvement Activity (QIA) Expenses in Medical Loss Ratio (MLR): QIA expenses that may be for MLR reporting and rebate calculation purposes are only those expenses that included are directly related to activities that improve health care quality. The ACA’s MLR requirements affected by this change apply to all issuers offering group or individual health insurance coverage.

Why this matters: These changes may require some adjustment or modification in the determination of benefit design for EHB plans and related to MLR reporting/rebate calculation.

2023 Medicare Advantage and Part D Final Rule

The Centers for Medicare & Medicaid Services (CMS) issued the 2023 Medicare Advantage and Part D Final Rule on April 29, 2022. The annual proposed rule included a proposal that would require Medicare Part D plans to apply price concessions received from network pharmacies at the point of sale (POS) with the intent to reduce beneficiary out-of-pocket costs. This Final Rule adopts this proposal but delays its effective date from 2023 to 2024.

Why this matters: The new price concession requirements will impact how Part D plan sponsors operationalize pharmacy performance via direct and indirect remuneration (DIR). A delay of this provision’s effective date to 2024 is important as the proposed effective date of January 1, 2023 was too late for changes to be included in the Medicare Part D contracts and bids for plan year 2023.

Medicare Coverage Policy for Alzheimer's disease treatments

In early April, CMS released a national policy for coverage of aducanumab (brand name Aduhelm™) and any future monoclonal antibodies (mABs) treatments for Alzheimer’s disease.

These treatments target amyloid plaques which are thought to play a central role in Alzheimer’s disease. The National Coverage Determination (NCD) is specific to individuals who have a clinical diagnosis of mild cognitive impairment (MCI) due to Alzheimer’s Disease or mild dementia with a confirmed presence of plaque on the brain.

In accordance with the published NCD, Medicare will cover mABs treatments that receive traditional approval from the Food and Drug Administration (FDA) under coverage with evidence development (CED). Under the policy, CMS will provide enhanced access and coverage for people with Medicare participating in CMS-approved studies. In addition, for drugs that the FDA has not determined to have shown a clinical benefit (or that receive an accelerated FDA approval), Medicare will cover in the case of FDA or National Institutes of Health (NIH) approved trials.

Why this matters: As we have noted, FDA decision to approve Aduhelm has far-reaching implications. Based on the CMS’ decision and the lack of studies showing patient benefit from the drug, several major insurers are expected to align their coverage policies to Medicare’s by covering the drug for people in clinical trials and requiring prior authorization.

State Update

California (Defeated and Active Legislation)

California SB 1361 failed to pass out of the Senate Appropriations Committee and is therefore dead for the session. The bill would have required that rebates be applied to reduce member cost share at point-of-sale (POS) and prohibited traditional (spread) pricing. Another PBM bill, SB 958, is moving forward in the legislature and would prohibit health plans from mandating a practice that is commonly known as “white bagging.” White bagging is where clinician-administered drugs are delivered by a specialty pharmacy to the provider where they are held until the patient arrives for scheduled treatment. Such an arrangement via a specialty pharmacy can provide meaningful savings for employers, other health plan sponsors, and government health care payors.

Kentucky (Defeated Legislation)

Several PBM-related bills in Kentucky failed to make it out of the State’s legislature during this year’s session. Most importantly, the PBM omnibus bill was defeated and attempts to include some of its provisions in other active legislation failed. Additionally, SB 134 (requiring that rebates be used to reduce member cost share at POS); HB 90 (setting a maximum insulin cost sharing amount); and HB 343 (mandating exceptions to prior authorization for prescribers who meet specific criteria, such as previous prior authorization approval history, (“gold carding”)) all died in the legislature.

Michigan (Enacted Legislation)

On February 23, 2022, Governor Whitmer signed into law three bills regulating various PBM activities for both employer and fully insured clients. HB 4348 prohibits traditional (spread) pricing, pharmacy transmission fees and transaction fees, and post-POS recoupment of amounts paid to pharmacy unless adjustments are made through an audit. HB 4351 and HB 4352 provide that PBMs cannot have different contracting or reimbursement policies for pharmacies contracted with a 340B covered entity than the policies they have for non-340B pharmacies.

Mississippi (Defeated Legislation)

Recently two potentially impactful PBM-related bills failed to pass out of their respective legislative committees before the legislature adjourned. HB 780 focused on the growing trend of “gold carding” that requires PBMs to suspend prior authorization requirements for providers who meet specific criteria. Prior authorization requirements are essential as certain medications should always be reviewed for safety, appropriateness, or high cost when there is a more cost-effective alternative. The second bill, HB 787, limited formulary changes, in effect “freezing” management of the formulary throughout the plan year. Formulary management encourages the use of drugs that are lower cost to help our clients achieve the lowest net cost for their plan. ‘Freezing’ a formulary disregards new brand, generic or over-the-counter medications that have been recently approved and released.

Missouri (Defeated Legislation)

Missouri’s HB 1677 failed to pass out of committee before the legislature adjourned. This legislation had several concerning anti-PBM provisions, including mandating pharmacy reimbursements at the pharmacy’s acquisition cost. Mandated pharmacy reimbursements increase costs to plans and consumers and decrease competition by eliminating any incentive for pharmacies to procure drugs at lower prices. The legislation also contained provisions that could constrain a PBM’s ability to offer or develop criteria, whether financial, performance and/or credentialing, for participation in preferred networks.

Oklahoma (Enacted and Defeated Legislation)

Governor Stitt signed SB 737 into law on April 21st. This legislation prohibits traditional (spread) pricing arrangements and fees related to participation in retail pharmacy networks. Additionally, the legislation requires PBMs to allow the Insurance Commissioner and clients unrestricted audit rights covering pricing data and contracts with pharmaceutical manufacturers and pharmacies. Several additional PBM bills were defeated: SB 1860 (anti-steering and any willing pharmacy); SB 1633 (fiduciary duty); SB 1324 / HB 4087 (POS rebates, pharmacy & therapeutics (P&T) committee mandates and transparency); and SB 1635 (mandated pharmacy reimbursement).

Tennessee (Enacted Legislation)

A new law in Tennessee has been enacted that requires a PBM to reimburse a pharmacy at an amount that is no less than the pharmacy’s actual cost for the drug. It also requires a $11.98 dispensing fee for “low volume” pharmacies and includes any willing pharmacy and anti-steering provisions.

Vermont (Enacted Legislation)

On May 24th, the Vermont Governor signed into law an omnibus anti-PBM bill that requires reimbursement parity for PBM-affiliated and non-affiliated pharmacies, prohibits specialty pharmacy accreditation and white bagging mandates, and imposes comprehensive anti-steering provisions related to mail pharmacies, PBM-affiliated pharmacies and preferred pharmacy networks.

Optum Rx is committed to advancing solutions to improve affordability across the health care system. We continue to monitor legislation that impacts pharmacy and advocate solutions to lower drug prices and reduce out-of-pocket costs for members.

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This article is directed solely to its intended audience about important developments affecting the pharmacy benefits business. It is not intended to promote the use of any drug mentioned in the article and neither the author nor Optum Rx has accepted any form of compensation for the preparation or distribution of this article.