New Prescription Drug and Health Care Spending Reporting Requirements from a Carrier and Plan Service Provider Perspective

21 December 2021 Health Care Law Today Blog
Author(s): Hannah R. Demsien Nick J. Welle

Under the Consolidated Appropriations Act, 2021 (the “CAA”), group health plans and health insurance issuers are required to submit certain information related to prescription drug and other health care spending to the Department of Labor, Department of Health and Human Services, and the Department of the Treasury (the “Departments”).1 The Departments published interim final rules with request for comments titled “Prescription Drug and Health Care Spending” on November 23, 2021 (the “IFR”).2

Who Must Report?

Under the IFR, a group health plan or health insurance issuer offering group or individual health insurance (including student coverage) must submit an annual report to the Departments on specified prescription drug and health care spending information. Reporting requirements do not apply to excepted benefits.

The Departments expect that reporting will generally fall on issuers, third party administrators (“TPAs”), pharmacy benefit managers (“PBMs”) and other plan service providers. The IFR allows a sponsor of a fully insured group health plan to enter into a written agreement with an issuer under which the issuer agrees to provide the report to the Departments and accepts liability for failure to do so. However, under the IFR, ultimate liability for the reporting will remain with a group health plan sponsor in circumstances where the plan sponsor has this type of agreement with a non-issuer entity such as a TPA or PBM. Note that this liability may still be covered in indemnities in the underlying agreement with the plan sponsor.

When Are Reports Due?

Reporting is run on a calendar year basis, with a reporting year referred to as a “reference year” (i.e., the prior calendar year) in the IFR. The Departments have deferred enforcement of the reporting deadlines for the 2020 and 2021 reference years to December 27, 2022. Thereafter, reporting will have a deadline of June 1 of the year following the end of the reference year (e.g., the 2022 reference year report is due June 1, 2023).

What Data Must Be Included in the Reports?

Data required to be included in the reports falls into two categories: (1) information that cannot be aggregated and must be provided for each plan or insurance coverage, and (2) information that can be aggregated across plans or insurance coverage in the same state and market segment.3 Reports will need to list out the information falling under category (1) separately for each plan or coverage before providing the information falling under category (2).

The following items cannot be aggregated and must be included in a report for each plan:

  1. Identifying information for plans, issuers, plan sponsors and any other reporting entities;
  2. The beginning and end dates of the plan year that ended on or before the last day of the reference year;
  3. The number of participants and beneficiaries covered on the last day of the reference year; and
  4. Each state in which the plan or coverage is offered.

The following items can be aggregated and must be included in a report with respect to plans for each state and market statement for the reference year:

  1. Top 50 prescription drug listings, including:
    • The 50 brand prescription drugs most frequently dispensed by pharmacies (and the data under #3 below for each drug listed);
    • The 50 most costly prescription drugs (and the data under #3 below for each drug listed); and
    • The 50 prescription drugs with the greatest increase in expenditures from the past year (and the data under #3 below for each drug listed).
  2. Total annual spending on health care services by the plan or coverage broken down by hospital costs, health care provider and clinical service costs (separately for primary care and specialty care), costs for prescription drugs (separately for those covered under the pharmacy benefit and hospital/medical benefit), and other medical costs.
  3. Prescription drug spending and utilization information, including:
    • Total annual spending by the plan or coverage;
    • Total annual spending by participants or beneficiaries;
    • Number of participants or beneficiaries with a paid prescription drug claim;
    • Total dosage units dispensed; and
    • The number of paid claims.
  4. Premium amounts, including the average monthly premium paid by employers or plan sponsors, the average monthly premium paid by participants and beneficiaries, and the total annual premium amount and total number of months of coverage for participants and beneficiaries, divided by twelve.
  5. Prescription drug rebates, fees and other remuneration (“Rebates”) information including:
    • Total amount of Rebates and the difference in total amounts paid to the PBM by the plan or issuer and amounts paid by the PBM;
    • Rebates broken down by the amounts passed through to the plan or issuer, the amounts passed through to participants and beneficiaries, and amounts retained by the PBM; and
    • The information from #3 above for each therapeutic class and for each of the 25 prescription drugs with the greatest amount of total Rebates for the reference year.
  6. The method used to allocate Rebates.
  7. The impact of Rebates on premium and cost sharing amounts.

How Does Reporting Work?

A separate report must be submitted for each state and for each market segment4 in which group health coverage was provided. Reporting data may be aggregated by state and market segment. Experience with respect to each fully-insured policy must be included on the report for the state where the contract was issued.5 Experience with respect to each self-funded group health plan must be included on the report for the state where the plan sponsor has its principal place of business. As an example, if TPA X manages 30 self-funded large group health plans for plan sponsors located in a specific state, it may submit a single aggregated report for the self-funded large group health plan market segment in that specific state, aggregating the data from all 30 plans.

Reporting may be performed by multiple entities. If multiple reporting entities submit the required data related to one or more plans in a state and market segment, the data submitted by each entity must not be aggregated at a less granular level than the entity that submits the data on total annual spending on health care services on behalf of the plans.

As an example: assume there are 60 self-funded large group health plans in a specific state, which are using three different TPAs for reporting total annual spending on health care data (20 plans use TPA #1, 20 use TPA #2 and 20 use TPA #3). All 60 plans use the same PBM, which is performing other reporting related to prescription drug spending. Each of the three TPAs may submit a single aggregated report on its 20 covered plans, but the PBM must submit three separate reports, aggregating the data of plans covered by TPA #1, TPA #2 and TPA #3 separately. Additional guidance is forthcoming on data aggregation and the submission of data by multiple reporting entities.


Given the interim nature of the rule and that the Departments have requested comments on the IFR, the requirements of the IFR are subject to change. However, the reporting requirements are substantial, and issuers, TPAs and PBMs should start preparing now so that they are able to meet the extended deadline for filing reports for the 2020 and 2021 reference years.

1 See Section 204 of Division BB of the CAA; codified in the PHSA at 42 U.S.C. § 300gg-120, ERISA at 29 USC § 1185n, and the Internal Revenue Code at 26 USC § 9825.

2 The IFR may be viewed here.

3 The Departments indicated that they intend to build a data collection system that will allow multiple reporting entities to submit different subsets of the required information with respect to the same plan or issuer.

4 The IFR defines “market segment” to include seven different types of coverage: (1) self-funded plans offered by large employers, (2) self-funded plans offered by small employers, (3) the fully-insured large group market, (4) the fully-insured small group market, (5) the individual market, (6) the student market, and (7) Federal Employees Health Benefits (FEHB) Program.

5 However, for individual market business sold through an association, experience must be attributed to the issue State of the certificate of coverage.


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