CMS Releases a Policy Statement of Pharmacy Network Gag Clauses

A bipartisan group of U.S. senators introduced legislation on Wednesday, March 14, that would prohibit pharmacy benefit managers (PBMs) from imposing “gag clauses” in pharmacy contracts that bar pharmacists from telling patients when the out-of-pocket cost of drugs is less than the copayment through their insurance. If pharmacists violate the gag clauses, PBMs may end the contracts or otherwise impose penalties—a practice widely criticized for inhibiting price transparency and contributing to rising healthcare costs for patients.

On May 11, President Trump proposed a bold set of changes to lower the price of prescription drugs for the American people. The President’s American Patients First blueprint is more sweeping than any other drug pricing initiative ever and includes strategies that will improve competition, support better negotiation of drug discounts, create incentives for pharmaceutical companies to lower list prices, and reduce consumer out-of-pocket spending at the pharmacy and other care settings.

On May 17, a memo from Seema Verma, Administrator, Centers for Medicare & Medicaid Services (CMS), stated its existing policy requires plan sponsors to ensure enrollees pay the lesser of the Part D negotiated price or copayment or be subject to CMS compliance actions. CMS wants to make it clear that CMS finds any form of “gag clauses” unacceptable and contrary to its efforts to promote drug price transparency and lower drug prices.

CMS also reminded in the memo that Part D plan sponsors must require their network pharmacies to disclose any differential between the price of a Part D drug and the price of the lowest cost therapeutically-equivalent generic version of that Part D drug.

CFR 423.132 states, “[A] Part D sponsor must require a pharmacy that dispenses a covered Part D drug to inform an enrollee of any differential between the price of that drug and the price of the lowest priced generic version of that covered Part D drug that is therapeutically equivalent and bioequivalent and available at that pharmacy, unless the particular covered Part D drug being purchased is the lowest-priced therapeutically equivalent and bioequivalent version of that drug available at that pharmacy [and] must be provided after the drug is dispensed at the point of sale or, in the case of dispensing by mail order, at the time of delivery of the drug.”

While this provision had been codified under Part D regulations since 2010, it has generally been largely ignored by both plan sponsors and point-of-sale pharmacies. To date, we have not seen compliance action taken on this requirement. However, as we are early in preparation for the 2019 plan year, it is a good time for plan sponsors to review PBM contracts with network pharmacies to ensure they do not contain “gag clauses” and that differential costs between the usual and customary charge and the network rates are being disclosed to plan members.

We look forward to seeing additional guidance on this issue from CMS.

A PBM delegated function audit is a good opportunity to ensure your PBM contract is current and CMS compliant and the PBM has operationalized your plan’s benefit accurately and appropriately,” said Deb Devereaux, Gorman Health Group’s SVP of Pharmacy Solutions. “Our Pharmacy consultants welcome the opportunity to partner with you to conduct your annual PBM delegation oversight audit.”




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Wayne Miller
Wayne Miller

Wayne Miller is Senior Director of Pharmacy Solutions at Gorman Health Group (GHG). In this role, he is responsible for supporting the Senior Vice President of Pharmacy Solutions in the oversight and development of projects and services in Medicare Part D, Medicaid, and industry relations. In addition, he manages a variety of client projects in compliance, Centers for Medicare & Medicaid Services (CMS) audit support and remediation, Pharmacy Benefit Manager (PBM) audits and Requests for Information (RFIs). Wayne brings GHG clients 28 years of experience in the health care industry, with broad Medicare and Medicaid pharmacy operations leadership experience in multiple practice settings.

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