Navigating the uncharted terrain of the Consolidated Appropriations Act: guidance for employer health plans

The Consolidated Appropriations Act (CAA) of 2021 is long overdue legislation aiming to improve prescription drug price transparency and shed light on the role of pharmacy benefit managers (PBMs). 

During the Payer Issues Roundtable hosted by Becker's Hospital Review, in a session sponsored by Capital Rx, a pharmacy benefit manager and a pharmacy benefit administrator, Phil Vecchiolli, senior vice president and general manager of PBA services at Capital Rx, moderated a discussion with the company's president, Matthew Gibbs, about drawbacks of the legislation and steps organizations can take to prepare for compliance. 

Three key takeaways were:

  1. The CAA provides a framework for how drug procurement should work in the future. It mandates that employer-based health plans and health insurers submit data about drug spending to the government to nudge plan sponsors toward making well-informed, cost-effective purchasing decisions. 

Gibbs noted that while the intentions behind the legislation are good, the requirements for how data will be submitted still need to be clarified. Further, he said that those requirements would put employers in a tight spot because the requirements force employers to disclose drug rebates they may be receiving from so-called aggregator services — which negotiate rebates on behalf of PBMs and the employers they serve.

"Employers are completely upset that the government wants to know their cost of healthcare. Employees' premiums go up every year, and [employees] wouldn't feel very good if they knew a broker was making $5/Rx [at their expense]," Gibbs said. "There are tons of fees being taken off the top by employers' channel partners doing weird things with rebates. It's not pretty."

  1. There can be heavy penalties for non-compliance with the CAA. While no employer is expected to go to jail for not reporting the data, those who choose not to do so will likely be subject to civil monetary penalties. The expectation is that the Department of Labor will look closely at large employers (> 100K covered employees) who spend billions of dollars on drug purchasing.

Gibbs said, "The DOL will ask, 'How much is your broker getting? What are you doing with the $200 million in rebates you get every year? Is it going to go into [capital] investments, or are you giving back to the employees who are actually using the drugs?'" 

"If you think as a fiduciary that this [legislation] will come and go, you're making a big mistake. I think it's going to get more intense," Vecchiolli added.

  1. To prepare for CAA, organizations would be wise to follow this checklist. Employer groups gearing up for compliance with CAA must prepare by addressing the following issues:
    • Plan oversight: identifying and naming all plan fiduciaries in writing, adopting health plan procurement standards, and having a documented process for interviewing and hiring third-party service providers.
    • Advisor relationships: identifying external advisors subject to fee disclosure rules outlined in the CAA, assessing whether the compensation paid to advisors is reasonable, and having advisors create a problem list to guide fiduciary oversight and action.
    • Third-party/PBM relationships: drafting agreements that include restrictions on employer access to health plan data and the employer’s ability to share health plan data with third-party business associates; limiting audit rights for claims processing, claims payment or provider contracts; limiting recovery rights for claims.

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