Full Rebate Pass Through to Plan; Exception for Innocent Plan Fiduciaries

What the document says

“remits 100 percent of rebates, fees, alternative discounts, and other remuneration received from any applicable entity that are related to utilization of drugs or drug spending under such health plan or health insurance coverage, to the group health plan”

Section 6702 adds a new subparagraph (C) to section 408(b)(2) of the Employee Retirement Income Security Act of 1974. For plan years beginning 30 months or more after enactment, a contract for pharmacy benefit management services entered, renewed or extended on or after that date is not reasonable unless the entity remits all rebates, fees, alternative discounts and other remuneration related to drug use or spending to the plan, or to the issuer on the plan's behalf, and does not itself contract with an applicable entity unless the same full pass-through applies.

What the document says

“on a quarterly basis, to the group health plan or, in the case of a health insurance issuer offering group health insurance coverage in connection with a group health plan, to the group health insurance issuer on behalf of the plan, not later than 90 days after the end of each quarter; or”

The money must be sent each quarter, no later than 90 days after the quarter ends, or as soon as practicable and within 90 days of notice where a prior quarter was underpaid. It must be fully disclosed and enumerated to the plan or issuer, and any excess must be returned to the covered service provider where an audit shows too much was paid over. The Secretary may issue regulations on the remittance procedures, on audits and on the timing, manner and content of the disclosure.

What the document says

“a rebate aggregator (or other purchasing entity designed to aggregate rebates) and an applicable group purchasing organization shall remit such rebates to the entity providing pharmacy benefit management services not later than 45 days after the end of each quarter.”

So that a pharmacy benefit manager can meet its own deadline, a rebate aggregator or other rebate-pooling entity, and an applicable group purchasing organization, must remit the rebates to the manager within 45 days of the end of each quarter.

What the document says

“Audits carried out under clauses (ii)(III) and (iv) shall be performed by an auditor selected by the responsible plan fiduciary. Payment for such auditors shall not be made, whether directly or indirectly, by the entity providing pharmacy benefit management services.”

The records of the rebates and disclosures must be available for audit by the plan at least once a plan year. A third-party administrator, issuer or covered service provider must make rebate contracts with rebate aggregators or manufacturers available for audit, subject to reasonable confidentiality restrictions the Secretary determines. The auditor is chosen by the responsible plan fiduciary and may not be paid, directly or indirectly, by the pharmacy benefit manager.

What the document says

“``(aa) The responsible plan fiduciary did not know that the covered service provider failed or would fail to make required remittances and reasonably believed that the covered service provider remitted such required amounts.”

Section 6702 adds a new subclause providing that subparagraphs (C) and (D) of section 406(a)(1) do not apply to a responsible plan fiduciary despite a failure to remit, where the fiduciary did not know of the failure and reasonably believed the amounts were remitted, where on discovering it the fiduciary asked in writing for the money, and where, if the provider does not comply within 90 days, the fiduciary notifies the Secretary. The section adds that this does not relieve the fiduciary of the duty to monitor the provider's practices.

What the document says

“prohibit reasonable payments to entities offering pharmacy benefit management services for bona fide services using a fee structure not described in this subparagraph, provided that such fees are transparent and quantifiable to group health plans and health insurance issuers;”

Nothing in the new subparagraph bars reasonable payments to a manager for bona fide services under another fee structure, so long as the fees are transparent and quantifiable to the plan or issuer. Nothing in it requires a third-party administrator or covered service provider to remit bona fide service fees to the plan, limits a plan's ability to pass rebates through to members, changes the health privacy regulations, or limits the existing disclosure requirements.

What the document says

“in subitem (AA) by striking ``Brokerage services,'' and inserting ``Services (including brokerage services),''; and”

Subsection (c) of section 6702 widens the definition of covered service provider. Brokerage services becomes services including brokerage services, and consulting becomes other services covering plan design, insurance or product selection, recordkeeping, medical management, benefits administration selection, stop-loss insurance, pharmacy benefit management services, wellness design and management, transparency tools, group purchasing agreements, preferred vendor panels, disease management, compliance services, employee assistance programs and third-party administration, or consulting on any of them. A contract in which a plan's service provider itself hires a pharmacy benefit manager counts as indirect furnishing, and such a manager may still claim relief where the conditions are met.