CMS proposes price transparency rule that targets PBMs
The new rule would shed light on the actual cost of drugs covered by Medicaid, building on the Biden administration’s efforts to lower prices.
Manufacturers, pharmacy benefit managers and managed care plans would have to be more transparent about Medicaid drug prices under a rule proposed this week by the Centers for Medicare & Medicaid Services.
“This proposed rule prioritizes CMS’ role as a good steward of Medicaid dollars while also strengthening program integrity and the management of pharmacy benefits for people with Medicaid coverage,” CMS Administrator Chiquita Brooks-LaSure said. “We’re committed to preserving access to life-saving treatments and securing fiscal sustainability for the Medicaid program, which remains a lifeline for millions of people.”
Managed care plans cover more than three-fourths of Medicaid beneficiaries, according to CMS. Although PBMs in these plans often negotiate and administer the pharmacy benefit, there has been a lack of transparency into the amount plans have paid to PBMs for administering the drug benefit and the amount pharmacies have been paid for the drugs. This lack of transparency has raised concerns about PBMs using spread pricing arrangements.
The proposed rule would:
- Establish a Medicaid drug price verification survey, which would require manufacturers of some high-cost drugs to submit detailed pricing information to CMS. Non-proprietary data would be made publicly available and would help state agencies negotiate Medicaid drug prices with manufacturers.
- Require PBMs to report the cost of dispensing and administering drugs to managed care plans separately from any additional costs charged by the PBM. The agency said this would cut down on inflated medical loss ratios and bring down capitation rates, which pay a set amount for each enrolled person assigned to them per period of time, whether or not that person seeks care.
- Give CMS increased oversight of drug classifications in Medicaid and the ability to require corrective actions from manufacturers if a drug is incorrectly classified as brand name rather than generic. The proposed rule also would ensure that states get the appropriate rebates from manufacturers.
Related: Biden’s drug price reform rollout: What to expect in 2023 and 2024
“With today’s proposed rule, we are advancing unprecedented efforts to increase transparency in prescription drug costs, being good stewards of the Medicaid program and protecting its financial integrity,” said Xavier Becerra, secretary of the U.S. Department of Health and Human Services. “This proposed rule will save both states and the federal government money.”
The notice of proposed rulemaking follows the administration’s April 1 launch of the Medicare Prescription Drug Inflation Rebate Program, which requires drug companies to pay rebates to Medicare when their prescription drug prices rise faster than the rate of inflation.
The proposed rule is available in the Federal Register on May 26 and will be open for public comment through July 25.