In a memorandum released yesterday, CMS announced that it is not finalizing the proposed guidance issued on September 29, 2014 regarding Direct and Indirect Remuneration and Pharmacy Price Concessions for Contract Year 2016.

The September 29th memorandum contained draft guidance that intended to implement changes to the Part D Program’s definition of “negotiated prices” that were finalized in May 2014 and effective for 2016. 79 FR 29844. Negotiated prices are, in short, the amounts that pharmacies actually receive and retain as payment on a Part D claim. Negotiated prices are reported by Part D sponsors to CMS via monthly Prescription Drug Event (PDE) submissions. Direct and Indirect Remuneration (DIR) are price concessions, including discounts and rebates, that serve to reduce the cost of the Part D drug. DIR is reported to CMS subsequent to the contract year to which the DIR relates. In the May 23rd final rule, CMS sought to clarify what comprises negotiated prices and therefore should be reported via PDEs. The amended definition of negotiated prices now includes “all price concessions from network pharmacies except those contingent price concessions that cannot reasonably be determined at the point-of-sale” and excludes “additional contingent amounts, such as incentive fees, if these amounts increase prices and cannot reasonably be determined at the point-of-sale”. 79 FR 29962. The additional contingent amounts that cannot be determined at the point-of-sale would be reported via the DIR reports. Okay, I’m following.

However, in the September 29th memo, CMS blurred the lines between DIR and negotiated prices: “We believe that determination at the point-of-sale includes an approximation of the price concession, even if the actual amount of the price concession is reconciled after the point-of-sale. In such an instance, we believe the amount that can reasonably be approximated at the point of sale would meet the standard in clause (2) of the definition of negotiated price and should be reported on the PDE. The difference between the amount determined in the final reconciliation of the price concession and the amount reported on the PDE would be reported as DIR.” Huh?

No surprise, commenters pointed out to CMS that the draft DIR guidance would require almost everything to be reported on the PDE as part of the negotiated price: Commenters advised CMS that “virtually all price concessions can be approximated to some degree at the point-of-sale and therefore CMS would effectively eliminate the regulatory exemption from negotiated price reporting for any price concessions.” The timing of the draft guidance was also unfortunate as many Part D sponsors are currently finalizing their pharmacy agreements for 2016. Thankfully, CMS saw the unintended impact of its proposed guidance. Acknowledging that it did “not intend to eliminate the regulatory exemption from negotiated price reporting”, CMS decided not to finalize the proposed guidance. As a result, for contract year 2016, Part D sponsors are instructed to evaluate what can be reasonably determined at the point-of-sale and include those amounts in the negotiated price. Amounts that cannot be reasonably determined at the point-of-sale will be reported as DIR. CMS is soliciting comment on specific examples of pharmacy price concessions and incentive payments that can and cannot reasonably be determined at the point-of-sale.