The recently passed Patient Right to Know Drug Prices Act (the “Act”) makes health insurers and health plans responsible for preventing pharmacist “gag” clauses. For those unfamiliar, “gag” clauses are restrictions that prevent pharmacists from telling patients that they can get their medicine more cheaply if they just pay out of pocket rather than submitting a claim to the health plan. This can happen, for example, where the cost of a generic drug is less than the participant’s co-payment or co-insurance under the plan.
In the past, some pharmacists were restricted from (or were penalized for) sharing this information under their network contracts. It is not clear how common these clauses were before the Act was passed. The bottom line, however, is that they were seen by some as a contributing factor to the increase in drug costs.
What the Act Does
The Act puts two requirements on health insurers and health plans (including self-funded health plans). First, plans and insurers cannot restrict a pharmacy from telling a plan participant that the participant may be able to get a drug cheaper by paying out of pocket. As a practical matter, these restrictions were not usually reflected in the terms of the plan or insurance contract. Therefore, this is unlikely to require a plan change.
However, the Act also requires is that an insurer or health plan “ensure” that the pharmacy benefits manager (PBM) “does not” impose a gag clause on pharmacists. For insured plans, the insurer will be responsible for this.
How can a self-funded health plan ensure that a PBM does not do this? The law does not give any guidance on this. One avenue is to amend the plan’s contract with the PBM to prohibit the PBM from using gag clauses. That would at least give the plan a contractual right to sue if the plan discovered the PBM was still using gag clauses.
Compliance does matter to the plan because the Act’s rules can be enforced by participants or the Department of Labor. In addition, the IRS or Health and Human Services can also impose penalties for failure to comply. The Act does not have an effective date for these new rules, which means they became effective on October 10, 2018 when the law was signed by the President.
Next Steps
All health plans (insured and self-funded) may want to check their plan documents to ensure that they do not impose a pharmacist “gag” clause. While plan documents are very unlikely to impose one directly, government auditors could read ambiguous language as imposing a “gag” indirectly. Conservative employers may consider amending their plans to ban “gag” clauses explicitly.
Employers with insured plans may want to check with their carriers to ensure they are complying with this law. Self-funded employers should ask their PBMs to amend their contracts to address this as well.
If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.
NOTICE OF DISCLAIMER
The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.