Through its passage, the Inflation Reduction Act (IRA) ushered in several reforms directed at rising prescription drug costs, aiming to lower costs for Medicare enrollees and reduce spending by the federal government. Included in these reforms is the establishment of the Medicare Prescription Payment Plan (M3P), a monthly installment plan that allows enrollees to pay back prescription drug costs overtime instead of all at once at the pharmacy. While M3P will reduce monthly out-of-pocket costs for enrollees, it requires plan sponsors to cover all up-front costs until payments are collected. Given the potential for non-payment, Medicare Part D plans would be well advised to prepare and account for potential financial losses.

Overview

The M3P requires Medicare Part D plans and Medicare Advantage Part D plans (collectively Part D plan sponsors) to offer enrollees the option to pay out-of-pocket (OOP) prescription drug costs via capped monthly payments over a plan year. Part D Enrollees will pay $0 in cost sharing at the point-of-sale and will be billed monthly by the plan sponsor thereafter. Monthly payments will be calculated based on the aggregate unpaid balance.

An enrollee’s monthly payment will fluctuate throughout the plan year if the unpaid balance for additional cost sharing increases (e.g., additional prescriptions). Fluctuating monthly bills may prove difficult for fixed income patients and accurate billing is likely to require significant resource expenditure by Part D plan sponsors.

To implement the M3P, Part D plan sponsors are required to provide Part D enrollees with promotional and educational materials on the program both prior to, and during, the plan year. CMS also requires that Part D plan sponsors work with their network pharmacies to provide additional information on the M3P through a point-of-sale notification to Part D enrollees who are eligible for, but have not yet elected to participate in, the M3P.

Notification Requirements

Once a Part D plan sponsor determines that a Part D enrollee is eligible for the M3P, the Centers for Medicare and Medicaid Services (CMS) requires the sponsor to ensure that pharmacies provide the enrollee with a point-of-sale notification that the enrollee is likely to benefit from the M3P. Per CMS guidelines, the pharmacy point-of-sale notification requirement will be effectuated through the pharmacy’s contract with the applicable Part D plan sponsor, including provisions outlining the methods for and certifying compliance with the notification.

Part D plan sponsors are expected to use a reasonableness standard when contracting with pharmacies for the implementation of the point-of-sale notification, taking into consideration the pharmacy type (e.g., mail order versus retail pharmacies) and utilizing typical patient touchpoints (e.g., telephone versus in-person contact). CMS encourages Part D sponsors to work with pharmacies to establish and maintain reasonable procedures related to the timing and number of attempts for prompt notification of identified Part D enrollees.

Given the operational impact on pharmacies, CMS strongly encourages Part D plan sponsors to ensure that pharmacies receive adequate reimbursement for services provided in furtherance of the M3P, such as remuneration for administrative services or an increase in applicable dispensing fees.

In addition to the pharmacy’s responsibility to provide notification of M3P eligibility at the point-of-sale, CMS also requires the Part D sponsor to provide various notifications to enrollees, including notification of acceptance of election into the M3P, notification of a failure to make payment under the M3P, and notification of withdrawal.

Reimbursement Under the M3P

If a Medicare enrollee opts into the M3P with their Part D plan sponsor, the reimbursement process will proceed as follows:

• The pharmacy enters the prescription and receives a point-of-sale adjudication from the Part D plan sponsor.
• The enrollee receives their prescription from the pharmacy and pays $0 for the covered Part D drug at the point-of-sale.
• Within 14 days (or no later than 30 days after the date on which the claim is received for any other claim), the Part D plan sponsor pays the pharmacy both the allowed amount for the prescription under the terms of the plan as well as what the enrollee would have paid in cost-sharing if they were not in the M3P program.
• The Part D plan sponsor bills the enrollee monthly throughout the plan year for any cost-sharing incurred.

It should be noted that enrollees cannot choose which covered prescriptions to include in the M3P—all covered Part D drugs must be included until the OOP threshold is reached or the enrollee opts out of the program.

Plan Sponsor Obligations

While pharmacies play an important role in operationalizing the M3P, the legal obligation to disseminate program information and facilitate the M3P process resides with Part D plan sponsors. Namely, the Part D plan sponsor is required to facilitate enrollee registration into the program, pay its network pharmacies the OOP cost-sharing amount that the enrollee would have paid if not for the M3P, and bill and collect the monthly cost-sharing amount from enrollees.

Penalties

CMS has not yet designated any specific penalties for Part D plan sponsors or network pharmacies that fail to meet the disclosure/notification requirements (except with respect to the ability to claim retiree drug plan subsidies). Though CMS has reserved certain auditing and monitoring rights, it is unclear how CMS will ultimately enforce the M3P requirements.

For now, the primary monetary risk associated with the program is related to enrollee non-payment of cost-sharing amounts as billing and collection of cost-sharing lies entirely with the Part D plan sponsor. Since the Part D plan sponsor is obligated to promptly reimburse the pharmacy within 14 days after the point-of-sale, the Part D plan sponsor alone bears the risk of outstanding enrollee debts.

Key Takeaways

While the legal responsibility for dissemination of program information and to facilitate the M3P process resides with Part D plan sponsors, the reality is that compliance cannot happen without pharmacy involvement and cooperation. While penalties for non-compliance have not yet been designated, Part D plan sponsors would be well advised to ensure they have processes and procedures in place to meet all M3P program notification and enrollment requirements.

More importantly, however, Part D plan sponsors need to ensure that pharmacy contracts are updated to include terms that will ensure M3P program compliance. Likewise, pharmacies should ensure that contracts accurately reflect pharmacy capabilities and resources. For more information about the issues discussed in this post, please contact the authors.