Important Reminder About CMS Guidance on Calculating and Reporting Rebates - UPDATED
On June 6, 2008, the Centers for Medicare & Medicaid Services (CMS) issued updated guidance on calculating and reporting rebates and similar price concessions under the Retiree Drug Subsidy (RDS) Program. The guidance specifically addressed rebates and similar price concessions retained by a Pharmacy Benefit Manager (PBM), including that RDS Plan Sponsors must account for rebates in the same manner as Medicare Part D plans. Please note the guidance specifically states as follows:
"Under 42 CFR §423.882, 'allowable retiree costs' (ARC) means gross covered retiree plan-related prescription drug costs (gross costs) that are actually paid (net of any manufacturer or pharmacy discounts, charge-backs, rebates, and similar price concessions) by either the qualified retiree prescription drug plan or the qualifying covered retiree (or on the qualifying covered retiree's behalf). Under 42 CFR §423.886(a)(1), the RDS subsidy payment is calculated by first determining gross retiree costs between the cost threshold and cost limit (i.e., gross eligible costs), and then determining ARC attributable to gross eligible costs. For purposes of providing data for CMS to use to calculate ARC attributable to gross eligible costs for the RDS, a sponsor must take into account manufacturer rebates that are retained by a Pharmacy Benefit Manager (PBM)..."
On the issue of manufacturer rebates retained by a PBM, the guidance also specifically states:
"CMS expects that, for plans with RDS plan years starting January 1, 2007 and beyond, sponsors will take the necessary steps to comply with the requirement to report all rebates, including negotiating contractual provisions in PBM contracts that ensure reporting to the sponsor of 100% of the manufacturer rebates paid for Medicare Part D drugs, including the portion of such rebates retained by the PBM. If a sponsor has a PBM contract that was executed before that date and that does not include such provisions, the sponsor may make a reasonable good faith estimate of the manufacturer rebates retained by the PBM, using a reasonable accounting or actuarial methodology, with such estimate reflected in the calculation of ARC attributable to gross eligible costs. CMS expects such sponsors to include the appropriate contractual provisions in any new, renegotiated, or renewed PBM contract."
Please note that, as stated above, the requirement for plans with RDS plan years starting January 1, 2007 and beyond to report manufacturer rebates retained by a PBM applies regardless of the terms of the contract between the Plan Sponsor and the PBM.
Please also note that Plan Sponsors, with respect to RDS plan years starting before January 1, 2007, are not required to report manufacturer rebates retained by a PBM for those plan years only. This approach is similar to that utilized for Medicare Part D plans.
To view the full CMS guidance, see the document entitled "CMS Retiree Drug Subsidy Guidance: Rebates and Other Price Concessions" at http://www.cms.hhs.gov/EmployerRetireeDrugSubsid/.
