A male pharmacist is examining a drug from a pharmacy inventory.

HHS’ New Prescription Drug and Health Care Spending Rule

By Cathy Zhang

Today, the Department of Health and Human Services — alongside the Department of Labor, the Department of the Treasury, and the Office of Personnel Management — published an interim final rule requiring health insurance plans and issuers on the marketplace to report data on prescription drug and health care spending to the three Departments.

This rule is part of a series of rules issued by the Biden Administration to implement Title I (No Surprises Act) and Title II (Transparency) of the Consolidated Appropriations Act, 2021.

What the rule requires

The interim final rule requires health plans, health insurance issuers offering group or individual health insurance coverage, and health benefits plans offered to federal employees to submit data to the Departments, who will then issue public reports on prescription drug pricing trends and their impact on premiums and out-of-pocket costs every two years. This reporting is “expected to enhance transparency and shed light on how prescription drugs contribute to the growth of health care spending and the cost of health coverage.”

The specific prescription drug data that each plan or issuer must report includes the fifty most frequently dispensed brand name drugs; the fifty costliest drugs by total annual spending; the fifty prescription drugs with the greatest yearly increase in plan or coverage expenditures; and rebates, fees, and other payments from drug manufacturers for each therapeutic class of drugs. Other information to be reported includes enrollment data; average monthly premiums paid by employees versus employers; and breakdown of total health care spending by type of cost (e.g., hospital care, primary care, prescription drugs).

What this means for consumers

This rule impacts consumers through the long-term savings it enables. The No Surprises Act that it helps to implement is aimed at reducing surprise billing, and is expected by the Congressional Budget Office to reduce private insurance premiums by 0.5%-1% on average and to reduce the federal deficit by $17 billion over 10 years. Beyond combatting surprise billing, the data collected will empower policymakers, in the words to the rule itself, to “identify[] any excessive pricing of prescription drugs driven by industry concentration and monopolistic behaviors, promot[e] the use of lower-cost generic drugs, and address[] the impact of pharmaceutical manufacturer rebates, fees, and other remuneration on prescription drug prices and on plan, issuer, and consumer costs.”

Because the required data is submitted to the Departments, consumers will have access to the information through the biannual reports that the Departments publish, rather than directly from the plans and issuers. This is unlikely to hurt consumers, as studies show that consumer-facing price transparency requirements, including Trump’s 2019 hospital price transparency rule, don’t work, in part because the data is largely uninterpretable. In fact, by requiring the Departments to act on and analyze the data from plans and issuers, the Prescription Drug and Health Care Spending rule will ensure that the data is processed in a way that is usable to policymakers.

Timeline for implementation and commenting

Under the Consolidated Appropriations Act, plans and issuers must begin submitting required information to the Departments by December 27, 2021. However, the Departments have announced that they will not begin enforcing this rule until December 27, 2022, giving plans and issuers another year to submit the required data. The Departments will begin issuing the biannual reports from that data beginning in 2023.

As an interim final rule, the Prescription Drug and Health Care Spending rule goes into immediate effect upon publication. However, agencies can still receive public comments and can technically alter an interim final rule if they decide that change is necessary in light of comments. Comments on the rule can be submitted to the Departments until 5 p.m. on January 24, 2022.

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