The Centers for Medicare and Medicaid (CMS) recently issued a memorandum is to provide Part D sponsors with draft guidance for implementing the Medicare Coverage Gap Discount Program (the “doughnut hole”), recently enacted into law.
Effective January 1, 2011, the Discount Program will make manufacturer discounts available to applicable Medicare beneficiaries receiving applicable covered Part D drugs while in the coverage gap. Part D sponsors must provide the discounts for applicable drugs in the coverage gap at point-of-sale (POS). Discounts apply to Part D drugs of manufacturers that have:
– Agreed to participate in the Discount Program;
– Entered into and have in effect an agreement with CMS to pay the discounts under the Discount Program for all its applicable drugs; and
– Entered into and have in effect a contract with CMS’ contractor.
The discount on each applicable covered Part D drug is fifty percent of an amount equal to the negotiated price. The discount applies to payment once a beneficiary has entered the gap. There is an exception to this however.
Since CMS plans to issue a proposed notice of a Model Manufacturer Agreement for public comment and finalize the model in the July-August timeframe, Part D sponsors could not have known which manufacturers would or would not have discount agreements in effect for 2011 when establishing their formularies. In addition, beneficiaries were not able to choose plans during the annual election period based on this information.
As a result, CMS must allow coverage in 2011 of Part D drugs irrespective of manufacturer discount agreements. This means that some of the brand-name drugs on plan formularies will not be discounted in the coverage gap unless all manufacturers of Part D drugs enter into agreements for 2011 by the CMS deadline in 2010.
If that happens, CMS will provide clear public guidance on why discounts are not available for some formulary brand name drugs. Only applicable drugs with labeler codes identified by CMS as having manufacturer discount agreements in place for 2011 shall be discounted in 2011.
Collection of discount payments from manufacturers and payment to Part D sponsors will involve a standard process for paying Part D sponsors based on new information submitted to CMS on prescription drug event (PDE) data. Discounts can be provided at POS only if the entity adjudicating the electronic pharmacy claim has the information necessary to determine at that point in time. The only entity capable of providing the discount at POS is the Part D sponsor because they can verify that:
– The drug is a discountable drug;
– The beneficiary is eligible for the discount;
– The claim is wholly or partially in the coverage gap; and
– The amount of the discount, taking into consideration plan supplemental benefits that pay first.
Starting on January 1, 2011, Part D sponsors must calculate the discount amount at the time of the initial claim adjudication and provide the discount amount in the adjudicated response and payment to the pharmacy. Sponsors must develop and implement processes to separately account for these amounts in order to populate PDEs and EOBs, as well as track receivables for reimbursement. CMS will incorporate changes into Part D contracts for purposes of implementing the requirement for Part D sponsors to provide the discount at POS.
Part D sponsors must reimburse the pharmacy for the applicable discount within the applicable number of calendar days, which is consistent with current Part D prompt payment requirements.
CMS will provide monthly prospective payments to Part D sponsors for the manufacturer discounts made available to their enrollees under the Discount Program. These prospective discount program payments will be calculated based on the projections in each Part D plan’s bid and their current enrollment. CMS will estimate the per member per month cost of the manufacturer discounts for each plan based on the coverage gap drug costs projected.
Part D sponsors will not be required to provide a separate estimate for these manufacturer discount amounts in the Part D Bid Pricing Tool. With the exception of potential changes in drug utilization, the Discount Program does not affect how drug costs are reported and projected in the Part D bids.
Part D sponsors, must include the administrative costs associated with administering the Discount Program in the administrative expense component of their Part D bids. Part D sponsors must not include manufacturer discounts in the rebate amounts reported in the Bid Pricing Tool.
Part D sponsors will be required to report the manufacturer discounts in a new field, “Reported Gap Discount,” which will be used for the cost based reconciliation of the prospective discount program payments made to each Part D sponsor. CMS is also adding several new fields to the PDE records including:
– Total Gross Covered Drug Cost Accumulator
– True Out-of Pocket Balance Accumulator
– Beginning Benefit Phase
– Ending Benefit Phase
– Brand/Generic Code
– Tier, and Formulary Code
The CMS contractor will invoice each manufacturer quarterly on the behalf of Part D sponsors to collect discount payments from manufacturers and payment to Part D sponsors that provided the discount to applicable beneficiaries. Manufacturers will be required to pay the invoiced amounts to Part D sponsors directly, and must pay the entire invoiced amount within 15 days of receipt including any amounts in dispute. CMS specifically requests comments on this proposed approach for manufacturer payments.
Beginning in 2012, Part D sponsors must provide prospective notice to affected Part D enrollees if a covered Part D drug will no longer be covered for failure of a manufacturer to sign a manufacturer discount agreement. If a drug is not covered by manufacturer discount agreements, CMS has the authority to cover that drug if:
– The availability of the drug is essential to the health of Part D enrollees; or
– There are extenuating circumstances for 2011.
CMS will inform Part D sponsors if any Part D drug not covered by a manufacturer agreement has been determined to be essential for the health of Part D enrollees and exempt from the manufacturer agreement requirement.
If a Part D sponsor offers supplemental Part D coverage, the discount will not be applied until after such supplemental coverage has been applied to the applicable drug. If the supplemental coverage eliminates the coverage gap (with the exception of routine cost sharing), no discount is available because the discount is only applied to the portion of the negotiated price that falls within a coverage gap.
Employer group health and waiver plans (EGHPs & EGWPs) that fill in the coverage gap would be excluded from the Discount Program. CMS specifically requests comments on this issue.
If an applicable beneficiary has a claim for an applicable drug that “straddles’ the coverage gap and another phase of the Part D benefit, Part D sponsors can only provide the discount on the portion of the negotiated price of the applicable drug that falls at or above the ICL and below the annual out-of-pocket threshold.
This means that beneficiaries that choose to have a prescription filled for a “better cash price” that is not processed through the Part D sponsor will not receive a manufacturer discount under the Discount Program on such prescription.
Oversight
CMS will periodically analyzing the PDE data, and require Part D sponsors to specify that a discount was provided on the claim and the amount of that discount. In addition, CMS will rely on its complaint tracking protocol to monitor beneficiary complaints related to the Discount Program. CMS will also establish metrics to monitor the effect of the Discount Program on the overall Part D program. These metrics will monitor potential impact on areas such as:
– Part D drug prices
– Number of beneficiaries reaching catastrophic coverage
– Generic utilization rates; and
– Benefit designs
Comments should be sent to partdbenefitimpl@cms.hhs.gov with the following subject line “Coverage Gap Discount Program,” and are due May 14, 2010. CMS will issue final guidance after considering all public comments.