The Centers for Medicare & Medicaid Services (CMS) issued a final rule on May 9th, 2022 with the goal of expanding access to affordable healthcare and improving health equity in Medicare Advantage (MA) and Part D. This final rule will revise the Medicare Advantage (MA) (Part C) program and Medicare Prescription Drug Benefit (Part D) program regulations to implement changes related to marketing and communications, past performance, Star Ratings, network adequacy, medical loss ratio reporting, special requirements during disasters or public emergencies, and last but not least, direct and indirect remuneration (DIR) fees. Below, we have compiled an overview of the 2023 Medicare Part D Final Rule and how it will impact community pharmacies.
Individuals receive their Medicare benefits through Medicare Advantage including plans that offer Medicare Prescription Drug Benefit (Part D) coverage.
Individuals receive Part D coverage through standalone Part D plans.
The final rule is effective on June 28, 2022, except for amendatory instructions 27 and 36 (regarding the definition of “negotiated price” change), which are effective on Jan. 1, 2024.
Positives for Pharmacies in the 2023 Medicare Part D Final Rule
The 2023 Medicare Part D Final Rule affects all stakeholders – plan sponsors, pharmacies, and beneficiaries. Fortunately, the changes to come from this final rule lean in favor of pharmacies and beneficiaries rather than sponsors. While the changes won’t solve all of the problems for community pharmacies, it is a tremendous step in the right direction when it comes to reimbursement transparency.
National Community Pharmacy Association’s (NCPA) Role in the Final Rule
For many years the National Community Pharmacy Association (NCPA) has advocated for pharmacy DIR fee reform and fought against plan sponsor/PBM activity that harms both Part D beneficiaries and community pharmacies. After the CMS released the proposed rule on January 6th, 2022, the NCPA, along with thousands of independent pharmacists and stakeholders expressed concerns that the rule will fail to achieve its intended results unless resolutions and clarifications are made.
Below are the areas of concern that were expressed by the NCPA that have since been addressed in the 2023 Medicare Part D Final Rule:
✅ Closed the coverage gap loophole
Pharmacy price concessions will now be applied to the negotiated price across all phases of the Part D benefit, including the coverage gap phase.
✅ Addressed the effects on pharmacy cash flow
While CMS claims it does not have the authority to mandate payment plans between Part D plan sponsors and pharmacies, they are encouraging Part D sponsors to consider options such as payment plans or alternative payment arrangements to minimize cash flow impacts on community pharmacies. According to the NCPA, CMS will be particularly attuned to plan compliance with pharmacy access standards to ensure that all Medicare Part D beneficiaries have adequate access to pharmacies.
✅ Enforces existing network adequacy and contract provision requirements
CMS will now be requiring MA applicants to show they have a sufficient network of contracted providers to care for beneficiaries before they will approve an application for a new or expanded MA contract. The goal of this requirement is to ensure that MA enrollees are met with an appropriate network of providers from organizations. On January 1st, when the coverage year starts, all organizations must be in full compliance.
✅ Ensures transparency of pharmacy reimbursement at the point of sale
CMS is finalizing a policy that requires Part D plans to apply all price concessions they receive from network pharmacies to the negotiated price at the point of sale so that the beneficiary can also share in the savings. Specifically, CMS is redefining the negotiated price as the baseline, or lowest possible, payment to a pharmacy, effective January 1, 2024. According to the NCPA, this will close the “reasonably determined” loophole from the previous definition in a 2014 final rule that led to the 107,400 percent rise in pharmacy DIR fees since 2010. This new definition should reduce beneficiary out-of-pocket costs for beneficiaries, improve price transparency of pharmacy reimbursement and make per-claim revenue more predictable.
Other Positives from the Medicare Part D Final Rule
✅ Addressed pharmacy administrative service fees
The CMS restated the conclusion from the May 2014 final rule, which states when fees are charged to network pharmacies—such as “network access fees,” “administrative fees,” “technical fees,” and “service fees”– such costs are price concessions and must be reflected in the negotiated price of the Part D bid.
✅ Defined pharmacy “price concession”
“Price concession” was defined as any discount, direct or indirect subsidy, or rebate received by the Part D sponsor or its intermediary from any source that serves to decrease the costs incurred under the Part D plan by the Part D sponsor. This definition also includes chargebacks, manufacturer rebates, cash discounts, free goods contingent on a purchase agreement, coupons, free or reduced-price services, and goods in-kind.
✅ Discussed reasonable pharmacy reimbursement.
CMS established safeguards to guarantee that pharmacies participating in Medicare Part D receive the lowest possible reimbursement such have negotiated as the lowest possible reimbursement, for a particular drug ensuring. The negotiated price at a minimum meets all of the following:
- Includes all price concessions from network pharmacies or other network providers;
- Includes any dispensing fees; and
- Excludes additional contingent amounts, such as incentive fees, if these amounts increase prices; and
- Is reduced by non-pharmacy price concessions and other direct or indirect remuneration that the Part D sponsor passes through to Part D enrollees at the point of sale.
Areas of Concern for Pharmacies in the 2023 Medicare Part D Final Rule
❌ Implementation date delayed to Jan. 1, 2024.
The CMS delayed the implementation date from the originally proposed rule going into effect Jan. 1, 2023. The reason for this delay, according to the CMS, is due to concerns related to contracting and operational timelines that could disrupt successful implementation.
❌ Amount paid to the pharmacy or the timing of payments and adjustments not mandated
The final rule did not govern payment arrangements or eliminate post-point-of-sale price concessions. While sponsors must comply with payment requirements, unfortunately, they will continue to have discretion over the timeframes for settling payment incentives and penalties.
❌ Pharmacy performance metrics were not established
CMS does establish any restrictions on performance-based pharmacy payment arrangements and the new definition of negotiated price does not mandate how sponsors contract with, incentivize or pay pharmacies in their network.
❌ Impact of the rule on small business pharmacies was not addressed
In response to concerns presented by the NCPA on the impact of the rule on small business pharmacies, the CMS stated that it does not have sufficient data to determine impacts by type of pharmacy. Therefore, no amendments were made to the impact analysis from the proposed rule, which CMS assumes that pharmacies will seek to retain 2 percent of the existing pharmacy price concessions which is speculated to result in a slight increase in pharmacy payments of 0.2 percent of Part D gross drug cost.
For a more detailed summary of the final rule and its impact on community pharmacies, be sure to check out the NCPA Member Summary of the CY 2023 Part D Final Rule
Resources for Community Pharmacies
We greatly appreciate the NCPAs ongoing advocacy for independent pharmacies and their role in the resolutions that have been established in the final rule. Here at Digital Pharmacist, we strive to help pharmacies by aligning with and supporting organizations that advocate for the best interests of community pharmacies and provide resources that will help our customers achieve success. Below is a list of organizations that we recommend checking out for the latest news and resources to help you stay-in-the know and make the best business decisions for your pharmacy:
- National Community Pharmacy Association (NCPA)
- Pharmacy Development Services (PDS)
- The American Pharmacists Association (APhA)
If you are looking for ways to increase your pharmacy revenue and engage your patients, reach out to us at firstname.lastname@example.org or call us at 877-959-7550.