This month, Congress sent the Patient Right to Know Drug Prices Act and the Know the Lowest Price Act of 2018 to President Trump’s desk for signature. These bills, which were sponsored by Sens. Susan Collins (R-Maine) and Debbie Stabenow (D-Mich.), help protect Medicare patients and those with private insurance from overpaying for prescription drugs by outlawing pharmacy “gag clauses.”

In some cases, a patient’s copayment may be more than the cost of a prescription medication, making it less expensive for patients to pay cash for the drug than to use insurance. Gag clauses are agreements between health plans or pharmacy benefit managers and pharmacies that allow pharmacies not to disclose that customers they can save money by paying for their medicines out-of-pocket.

Sen. Collins, who is the chairwoman of the Senate Aging Committee and serves on the Senate Health Committee, has worked with colleagues on both sides of the aisle to investigate causes of the high costs of prescription drugs and propose solutions to enhance their affordability and accessibility. The bans on gag clauses passed overwhelmingly with bipartisan support.

Nobody knows for sure how often patients pay their insurers more in copayments than the costs of their medicines. The Pharmaceutical Care Management Association, a trade organization that represents pharmacy benefit managers, is on record as opposing gag clauses but claims they are rare.

However, a University of Southern California study released this year suggests it may be common. In 2013 the authors found that nearly a quarter of pharmacy prescriptions involved a copayment that was greater than the average sale price of the drug. These overpayments are also known as “clawbacks.”

Given the estimated $348 billion dollars in retail spending in 2016, this could represent an enormous transfer of funds from consumers to pharmacy benefit managers and insurers. In a 2016 survey by the National Community Pharmacists Association (NCPA) a whopping 35 percent of pharmacies reported witnessing overpayments more than 50 times the previous month.

Elimination of gag clauses has been a priority of the Trump administration’s efforts to increase transparency in drug pricing and lower costs for patients. In fact, Medicare policy already requires that Plan D sponsors ensure that enrollees pay the lesser of the negotiated Part D price or the co-pay. However, the NCPA survey indicated that this requirement is sometimes ignored.

In a May 17 letter to sponsors of Part D plans, Centers for Medicare and Medicaid Services Administrator Seema Verma reinforced this policy, writing, “We want to make it clear that CMS finds any form of ‘gag clauses’ unacceptable and contrary to our efforts to promote drug price transparency and lower drug prices.”

Further, Verma informed plans that their network pharmacies must disclose the difference between the Part D drug price and the price of its lowest cost, therapeutically-equivalent generic version.

States have also been active in legislating to ensure that pharmacists can tell patients when it is cheaper for them to buy their medicines outright rather than utilizing insurance. As of August 2018, at least 26 state legislatures had prohibited insurance plans and pharmacy benefit managers from instituting gag clauses. Collins’ bills fill the gap, extending this fundamental patient protection nationwide.

Many experts blame the overall lack of transparency in the bio-pharmaceutical supply chain as a key contributor to our escalating drug prices. Elimination of gag clauses takes an important step in the direction of transparency and helps to ensure that patients understand their most cost-effective options for purchasing needed medications.

A Summary of Benefits and Coverage (SBC) is four-page (double-sided) communication required by the federal government. It must contain specific information, in a specific order and with a minimum size type, about a group health benefit’s coverage and limitations. In February 2016, the Department of Labor (DOL) issued proposed revisions to the template and related materials. The agency expects final templates and materials to apply to plan or policy years beginning on or after January 1, 2017. The proposal includes both a blank template and a sample completed template along with instructions for completion. The agency has also invited public comments on the proposed template, to be submitted on or before March 28, 2016. All information about current and proposed SBCs, including a proposed uniform glossary and more can be found on the DOL’s website.

For fully insured plans, the insurer is responsible for providing the SBC to the plan administrator (usually this is the employer). The plan administrator and the insurer are both responsible for providing the SBC to participants, although only one of them actually has to do this.

For self-funded plans, the plan administrator is responsible for providing the SBC to participants. Assistance may be available from the plan administrator’s TPA, advisor, etc., but the plan administrator is ultimately responsible. (The plan administrator is generally the employer, not the claims administrator.)

Proposed Changes

The proposed template is shorter than the original four-page (double sided) communication. It includes a new “important question” that asks “Are there services covered before you meet your deductible?” and requires family plans to disclose whether or not the plan has embedded deductibles or out-of-pocket limits. This is reported in the “why this matters” column in relation to the question “what is the overall deductible?” and plans must list “If you have other family members on the policy, they have to meet their own individual deductible until the overall family deductible has been met” or alternatively, “If you have other family members on the policy, the overall family deductible must be met before the plan begins to pay.”

Tiered networks must be disclosed and the question “Will you pay less if you use a network provider” is now included. The proposed SBC also includes language that warns participants that they could receive out-of-network providers while they are in an in-network facility. The SBC also indicates a consumer could receive a “balance bill” from an out-of-network provider.

The “explanatory coverage page” was dropped from the proposed template.

The provided coverage examples provide clarification to the “having a baby” example and the “managing type 2 diabetes” example, in addition to providing a third example of “dealing with a simple fracture.” The coverage example must be calculated assuming that a participant does not earn wellness credits or participate in an employer’s wellness program. If the employer has a wellness program that could reduce the employee’s costs, they must include the following language: “These numbers assume the patient does not participate in the plan’s wellness program. If you participate in the plan’s wellness program, you may be able to reduce your costs.
The column for “Limitations, Exceptions, & Other Important Information” must contain core limitations, which include:

• When a service category or a substantial portion of a service category is excluded from coverage (i.e., column should indicate “brand name drugs excluded” in health benefit plans that only cover generic drugs);

• When cost sharing for covered in-network services does not count toward the out-of-pocket limit;

• Limits on the number of visits or on specific dollar amounts payable under the health benefit plan; and

• When prior authorization is required for services.

The proposed template and instructions indicate that qualified health plans (those certified and sold on the Marketplace) that cover excepted abortions (such as those in cases of rape or incest, or when a mother’s life is at stake) and plans that cover non-excepted abortion services must list “abortion” in the covered services box. Plans that exclude abortion must list it in the “excluded services” box, and plans that cover only excepted abortions must list in the “excluded services” box as “abortion (except in cases of rape, incest, or when the life of the mother is endangered).” Health plans that are not qualified health plans are not required to disclose abortion coverage, but they may do so if they wish.