Drug Pricing Transparency Expands Under Several Policies

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Transparency disclosures could provide significant insight into pricing and rebating activities.

After years of delays, new drug price transparency requirements may be on the horizon. The “Prescription Drug File,” as finalized under a 2020 rule, would disclose information on negotiated drug prices between plans and providers, along with information on historical pricing activity that accounts for rebating. Taken together, these data elements would provide new information to the public and may be leveraged by health plans, pharmaceutical manufacturers, and pharmacy benefit managers. This is one of several transparency initiatives that have progressed in recent years, along with requirements for hospital price transparency and reporting under the Consolidated Appropriations Act, 2021 (CAA).


The 2020 Transparency in Coverage (TiC) final rule requires group health plans and issuers in the individual and group markets to satisfy requirements associated with two types of disclosure: an enrollee disclosure to provide information on negotiated rates and cost sharing to enrolled plan members, and a public disclosure of three machine-readable files (MRFs) that must be posted on each plan sponsor’s website. The three MRFs required under public disclosure are:

In-Network Rate File Allowed Amount File Prescription Drug File
Rates with in-network providers, including negotiated rates, derived amounts, and underlying fee schedule rates Billed charges and allowed amounts a plan has paid for services furnished by out-of-network providers Negotiated rates and historical net prices for prescription drugs furnished by in-network providers or pharmacies
Implemented July 2022 Implemented July 2022 Delayed, awaiting guidance

An August 2021 FAQ document released by the Center for Medicare and Medicaid Services (CMS) indicated that enforcement would be indefinitely delayed for the Prescription Drug File pending additional rulemaking to ensure that the requirements did not conflict with reporting requirements in Section 204 of the CAA. CMS delayed enforcement for the other two machine-readable files by six months, to July 1, 2022. Plans have been required to update the In-Network Rate and Out-of-Network Allowed Amount files monthly since that time.

Enforcement Delay Ends

In September 2023, CMS released another FAQ document stating that there was no “meaningful conflict between the reporting requirements in section 204 of the CAA and the TiC Final Rules, because the CAA requires disclosure of different and additional information than required in the TiC Final Rules.” The agency found that “a general or categorical exercise of enforcement discretion is no longer warranted.” Because of this finding, plan sponsors now await further technical guidance related to the exact definition of variables included in the Prescription Drug File and a timeline for enforcement action. This guidance could come before the end of 2024 or potentially 2025, depending on agency priorities.

Consolidated Appropriations Act, Section 204

The CAA requires plans to report on broader trends related to negotiated drug prices and rebating. Specifically, plans must report information on the most frequently dispensed drugs, most costly drugs by total annual spending, the top drugs with highest spending increases year over year, total spending on drugs net of rebates and remuneration, spending on pharmacy and medical benefit products, total rebates, fees, and remuneration received (with additional detail for drugs with the highest total rebates), and information on how rebates impact premiums and patient out-of-pocket (OOP) liability. This information is not required to be reported publicly, but is sent instead to key agencies including CMS, the Department of Labor, and the Department of the Treasury. The first reporting deadline for this information was in December 2022, and CMS is expected to release a report on the findings this year.

Hospital Price Transparency

Since 2019, hospitals have been required to publish their standard charges for all items and services (i.e., their chargemasters). The policy was expanded in 2021, when hospitals were required to disclose their gross charge, payer-specific negotiated charge, discounted cash price, de-identified minimum negotiated charge, and the de-identified maximum negotiated charge. However, there was not a standard template provided for reporting the data, which limited comparability and some hospitals chose not to comply. Despite the lack of standardization, this reporting did provide some insights on negotiated drug prices, particularly for physician-administered products. In the CY 2024 OPPS final rule, CMS finalized a set of revised requirements to standardize transparency file formats, building on 2023 policies that increased penalties for non-compliance. Files that meet the revised standards were required to be posted by hospitals starting July 1, 2024. In 2025, hospitals will be required to add certain data elements specific to drug units.

Key Considerations

Stakeholders should consider several implications stemming from the increased availability of information related to negotiated prices on drugs and other services.

  • Competitive Environment: As more information becomes available on negotiated rates and inputs into drug pricing, stakeholders will likely access the data to see rates offered for or by competitors. However, doing so will require significant effort, given the size of the files and non-centralized storage of information. Therefore, it is likely that third parties will emerge to collect and store transparency data in one location for easier comparison. As stakeholders start to access this information, it will likely influence provider-plan negotiations, plan-manufacturer negotiations, manufacturer-provider negotiations, and distributor-group purchasing organization negotiations.
  • Product-Specific Impacts: While stakeholders will broadly access the information and leverage it in negotiations, some products may face more acute impacts than others. Drugs that are in competitive classes and highly rebated may be more likely to be impacted by the availability of information among competitors. The transparency data could also place additional scrutiny on pricing and OOP liability faced by patients utilizing high-cost specialty products or products with generic alternatives.
  • Patient Behavioral Responses: Most transparency initiatives have a stated goal of enabling consumer decision making and several policies include consumer “shopping” tools. However, as noted above, machine-readable files will be very large and technically difficult to navigate for a casual consumer. The availability of this information could lead certain savvy patients to consider switching products in attempts to lower OOP costs or to have conversations with providers about how expensive their current treatment is relative to alternatives. Additionally, if third parties make the reported data more accessible to consumers, it may be more broadly leveraged in decision-making.

Stakeholders should monitor regulatory requirements for transparency reporting and should prepare for potential impacts of data being made public. To discuss how Avalere can support your business on issues related to transparency policy developments, connect with us.


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