Dive Brief:

  • The Biden administration is proposing sweeping new reporting requirements for employers and health insurers in a bid to collect more information on prescription drug pricing and its impacts on consumer healthcare costs.
  • The interim final rule from HHS, the Office of Personnel Management and the labor and treasury departments requires health insurance issuers, employer-based health plans and other group health plans to disclose detailed information about drug costs and coverage to the federal government, including the average monthly premiums and drug spending for patients, compared to their employers or plan issuers. The goal is to eventually publish a report on prescription drug pricing trends and rebates, as well as their impact on premiums and out-of-pocket costs.
  • The rule is the fourth in a series of regulations implementing surprise billing protections and transparency measures for consumers passed by Congress as part of its federal spending package last year.

Dive Insight:

Healthcare industry groups, including payers, providers and pharmaceutical manufacturers, have consistently tried to shift the blame for skyrocketing costs of care in the U.S. Drug prices rising faster than inflation is one key culprit, as prescription costs make up a significant — and growing — portion of nationwide healthcare spending.

Total drug spending is expected to grow from 13.7% of all national health expenditures in 2018 to about 13.9% in 2028.

The new final rule implements requirements to try to identify specific drivers of that projected cost increase. Payers and employers will need to give HHS an annual overview of the top 50 drugs across different areas, including the most frequently dispensed drugs, the most expensive prescription drugs and the drugs with the biggest increase in total annual plan spending over the previous year.

HHS said collecting the additional information on rebates, fees and other payments from drug manufacturers to plans and pharmacy benefit managers — including the top 25 drugs generating the highest rebate amounts — will help the government understand and report on prescription drug costs, and how they change over time.

“By collecting key data on the costs of prescription drugs, we are promoting competition and transparency in the health care industry as we continue to curb the rising costs of drugs and surprise medical bills,” HHS Secretary Xavier Becerra said.

Healthcare is getting increasingly expensive for consumers. Family premiums for employer-sponsored health insurance rose 4% this year, roughly in line with annual changes in wages and inflation. But since 2011, those premiums have increased 47%, significantly faster than wages (31%) or inflation (19%).

In Medicare, monthly premiums covering physician and outpatient care for Medicare beneficiaries will increase by 15% next year mostly due to potential use of just one drug: Biogen’s Aduhelm for Alzheimer’s, which has been dogged by criticism for its high price tag despite unclear efficacy for ameliorating dementia from the progressive neurological disease.

And research has shown relatively small amounts of drugs have a disproportionate impact on spending.

According to the Kaiser Family Foundation, the 250 top-selling drugs in Medicare Part D with no generic or biosimilar competition account for 60% of total spending in the prescription drug program, despite only making up 7% of all covered drugs in Part D.

Congress is currently considering Democrat-backed legislation to curb what Medicare pays for drugs. But the proposal has become increasingly watered down amid fierce lobbying from the deep-pocketed pharmaceutical industry and compromises between different factions of the party. Under the latest compromise on the Hill, Medicare wouldn’t be able to directly negotiate prices for newly launched drugs.

The new reporting requirements will apply starting with data from the 2020 calendar year, but HHS is deferring enforcement until Dec. 27, 2022, to give affected entities more time to come into compliance. So, required information from 2020 and 2021 doesn’t have to be submitted until 2022.

HHS plans to work through the Assistant Secretary for Planning and Evaluation to publish a report on prescription drug pricing trends using the influx of new data. The departments plan to release their first report in June 2023 and biennially after that.

It’s the latest regulation implementing consumer protection efforts codified by Congress last year, when Congress passed legislation including the No Surprises Act in an effort to shield patients from surprise medical bills — a persistent issue for American consumers receiving care from hospitals or doctors outside of their insurance networks.

Two interim final rules issued earlier this year banned surprise out-of-network and balance billing beginning in 2022 for people in employer-sponsored or individual marketplace plans and outlined the arbitration process for determining out-of-network payments, so that patients don’t receive surprise bills.

The Biden administration also proposed a rule in September that would require marketplace and short-term, limited-duration health plans to disclose their financial relationships with third-party agents, and require air ambulance operators to disclose detailed information about their operations.

The rules, which have been billed as some of the most significant consumer protections in healthcare in a decade, have been slammed by provider groups as favoring insurers, though payer and consumer groups alike support the process for reconciling any surprise billing disputes.

The Association of Air Medical Services and the Texas Medical Association, among other groups, have filed legal challenges to the regulations.