Home Pharmacy practice Federal Litigation Update and Pharmacy Benefits Managers Proposed Rule – Employee Benefits and Compensation

Federal Litigation Update and Pharmacy Benefits Managers Proposed Rule – Employee Benefits and Compensation


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Court strikes down CMS Hospital salary level settlement

On March 2, 2022, the United States District Court for the District of Columbia ruled in favor of a hospital group challenging the 2019 “Low Wage Index Hospital Policy” adopted by Health and Human Services (“ HHS”). The settlement was intended to address wage disparities among hospitals by increasing the amount that hospitals in certain low-wage geographic areas receive in Medicare reimbursement while offsetting that increase by reducing reimbursements for all hospitals.

The hospital group alleged that this policy would ultimately result in reduced Medicare reimbursement for hospitals and that HHS had no legal authority to adjust Medicare reimbursement for low-wage hospitals in the way that He did it. In summary, the Court concluded that “because HHS must use salary data to calculate the relative salary levels of hospitals in particular geographic areas relative to the national average, the agency exceeded its statutory authority when it changed the salary index for hospitals in the bottom quartile, so that the salary index values ​​for these hospitals were based neither on survey data nor on rough approximations of the relative levels of hospital salaries.

As a result, the Court ultimately concluded that the hospitals had discharged “the burden of demonstrating that the salary indices violated the Medicare Act” and therefore “that the [low wage index hospital
policy] must be struck down as contrary to the statutory directive of Congress.”

Court upholds Hospital Medicare’s denial of resident education reimbursement

On March 7, 2022, the Tenth Circuit Court of Appeals upheld a decision of the United States District Court for the District of Oklahoma denying the challenge of three teaching hospitals appealing Medicare’s denial of reimbursement despite news rules under the Affordable Care Act (“ACA”) that would allow reimbursement if applied retroactively.

In that case, the suing hospitals shared the cost of offsite resident education from 2001 to 2006 despite the fact that at that time a teaching hospital could only obtain reimbursement by incurring “the substantially all” of a resident’s training costs under the Omnibus Reconciliation Act of 1986, Pub. L. no. 99-509, § 9314, 100 Stat. 1874, 2005. Because of these costs shared by the hospitals, the government refused reimbursement and the hospitals filed their administrative appeal. However, while the appeal was pending, Congress enacted the ACA, which created a new reimbursement standard that allowed costs to be shared on a proportional basis.

The hospitals argued that the ACA’s changes to resident education cost sharing should be retroactive and that their appeal of Medicare’s denial of reimbursement should therefore be upheld in their favor. The Court disagreed and concluded that “[w]When the teaching hospitals incurred the training costs, Medicare statutes did not allow reimbursement of shared costs.”

As such, the Court found that although the ACA “relaxed” the disputed restrictions when it was passed in 2010, these changes were not to be made retroactively and hospitals were therefore not entitled to reimbursement of their shared residency training costs from 2001. to 2006.

CMS seeks to reduce cost sharing with beneficiaries by limiting PBM recoveries

On January 6, 2022, the Centers for Medicare and Medicaid Services (“CMS”) issued a proposed rule, 87 FR 1842, that would require, in part, Medicare Part D plans to apply all “price concessions” that they receive from network pharmacies at the point of sale in order to reduce the beneficiary’s participation in the costs.

This proposed rule, which will come into effect on January 1, 2023 if it becomes final, responds to a practice of Pharmacy Benefit Managers (“PBMs”) whereby they enter into agreements with pharmacies called “price concessions” whereby the PBM can “claw back” payments to pharmacies if certain measures are not followed.

Currently, the rules require “negotiated prices” for drugs to include all network pharmacy price concessions, except for contingent amounts that cannot “reasonably be determined” at the point of sale. This exception ultimately allows negotiated prices to not reflect these performance-based pharmacy price concessions.

The new rule would eliminate this exception and redefine “negotiated price” as “the lowest amount that a pharmacy could receive in reimbursement for a covered Part D drug under its contract with the plan sponsor of the Party D or the promoter’s intermediary’. CMS further proposes that a definition be added for “price concession” “broadly to include all forms of direct or indirect discounts and subsidies or rebates which serve to reduce costs incurred under the plans of the party D by the sponsors of part D”.

CMS has released an information sheet for the proposed rule.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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