What employers need to know about drug cost reporting requirements

Drug price transparency has gained steam with legislators, but what do employers need to do to protect themselves? See our CEO's expert take.

Chris Blackley By: Chris Blackley

Prescryptive Health clients rest easy: You are several steps ahead of the federal regulations.

It’s no secret: drug price transparency has gained steam with legislators. As part of the Consolidated Appropriations Act (CAA), the government has requested comments in response to pharmacy benefits and prescription drug cost regulations that push for transparency.

This new law covers a lot of ground, and for self-insured employers who offer prescription drug plans, there’s a new annual requirement: employers must submit an informational report on pharmacy benefits and drug costs with several federal agencies. While some in the industry are doing all they can to derail it, we should all be welcoming this effort on the part of legislators.

But, as several employer groups have pointed out, there is a challenge with this legislation: Most employers don’t have access to the data they need to comply with these new reporting requirements.  

Let me say this differently – most employers can’t get access to the data that records the prices they’re paying for the drugs they cover for employees and their families. This is like the grocery store saying you can’t have a receipt for your groceries, but you must report the prices you paid for each item to the appropriate government agency. You would fire your grocery store.

Distorted pricing and a lack of data ownership put undue pressure on employers

The government is pushing for new legislation because transparency on drug prices is desperately needed. Thanks to pharmacy benefit managers (PBMs), the true cost of prescription drugs is not clear. This lack of transparency is at the heart of market distortions, including artificial mark-ups, rebates paid for market access instead of reducing drug costs, and related undisclosed fees collected by PBMs. These predatory business practices artificially drive up consumer out-of-pocket drug costs and employer benefit costs—a consequence that well-meaning legislators are working hard to address.

But there’s an even deeper truth at issue: employers don’t really own their data.

Employer health plans “do not currently have access to specific information related to their formulary and prescription drug savings from their contracted pharmacy benefit manager (PBM) and medical third-party administrator (TPA),” the ERISA Industry Committee and consulting firm Mercer said in a comment letter about the legislation.

The BlueCross BlueShield Association (BCBSA) also said health insurers don’t have the data to report all the information required “without seeking information from employers and PBMs.”

In fact, business groups – PBMs, in case you didn’t guess — have already sued the government to block transparency efforts, likely the first of several lawsuits to keep drug prices opaque. And recent guidance suggests the government may delay the new requirements—a consideration based on inaccurate assumptions that meeting these deadlines is impossible. (Spoiler alert: It’s not.)

Self-insured employers need to be ready for more questions on drug prices

Looking beyond the CAA, there are two other major regulations with requirements that stretch through 2024 that employers should know:

  • Transparency in Coverage, which is intended to provide consumers with real-time access to actual cost information through online tools.
  • The Interoperability Rule of the 21st Century Cures Act, which aims to drive patient access and sharing of electronic health information, allowing patients the ability to coordinate their own healthcare.

These upcoming regulations should raise questions for self-insured employers:

  • How will my plan gain access to the information needed to comply with the regulations?
  • How will my plan re-structure or re-negotiate current PBM contracts to ensure data access is available to meet their regulatory obligations?
  • How will my plan organize and update information that will have to be reported?
  • How will my plan cover costs to gain access to and maintain such data if my PBM provider does not?
  • How will my plan evaluate and address broker or consultant compensation based on the new disclosure requirements?

These questions are key – especially as employers consider a pharmacy benefits partner. PBMs should be at the table and ready to help employers comply.

What else can legislators do to have the greatest impact?

Establishing employers’ ownership and right of timely access to their historical benefit claims and related pricing data would do more than just about anything else to drive down prescription drug costs. Couple this with a private right of action and a statutory civil penalty for a PBM’s failure to comply, and you will finally see meaningful change.

This single move would accelerate real transparency, eliminate the information asymmetry in the market used to obfuscate drug prices, and lower drug costs faster than just about anything else.

Prescryptive Health: doing what’s right for price transparency

Mindful of the market’s growing demand for drug pricing transparency, Prescryptive Health has been focused on doing the right thing for employers, pharmacists, and individual healthcare consumers since our founding: offering unparalleled transparency, choice, and control.

When it comes to employers, we deliver price transparency to plan sponsors and their plan members through a HIPAA-compliant mobile experience at the point of care. And, we operate with transparency across pricing, data, and reporting – making it a standard for our clients to easily comply with the federal regulations. And we commit to these principles with the strongest contractual terms in the industry.

What’s more, we have a unique philosophy about our clients’ data: it’s theirs. Our clients own their data at no cost, have ready access to it, receive accurate and timely reporting, and may conduct audits at their discretion.

Prescryptive: Rewriting the script on pharmacy benefits from Prescryptive Health on Vimeo.

The market is demanding more for consumers. Employers and their members deserve it. And we’re delivering it.

With transparency, cutting-edge technology and advanced reporting as our foundation, we’re already positioned to help our clients address transparency regulations through 2024.

See more about our employer plans.

Chris Blackley
Chris Blackley CEO

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