In a renewed push for healthcare price transparency, President Trump issued an Executive Order (EO) last month aimed at amplifying healthcare price transparency. While the order itself covers multiple price transparency requirements such as increasing compliance, one area we anticipate receiving additional presidential scrutiny is the long delayed Prescription Drug File requirement which was originally part of the Transparency in Coverage (TiC) ruling issued in 2022. In this blog, let's explore what these files could look like and how Life Science manufacturers might leverage the data that could become available.
A Quick Refresher on Transparency in Coverage Requirements
As a reminder, TiC mandates the publication of three machine readable files (MRFs) by Commercial payers across all of their sites of care.
These include:
- In Network rate file
- Allowed Amount file
- Prescription Drug file
The Prescription Drug file was indefinitely delayed back in 2022, but now we expect to see renewed movement in the wake of the executive order.
What might the Prescription Drug File TiC file include?
While CMS has yet to release an official schema for the prescription drug file, we’re already seeing early signals of what the MRFs could include based on preliminary files published by several plans, including those affiliated with Optum, Avera and BCBS TX.
We have reviewed these files and expect the following fields to be included with high likelihood:
- Pharmacy information (e.g., identifier NPI/NCPDP, name)
- Plan information (e.g., name, type)
- Drug information (e.g., NDC, name)
- Pricing information (e.g., historical net price; negotiated rates; fees such as admin fee, dispensing fee, transaction fee)
- Other fields (e.g., billing code, place of service)
The fields of highest interest are negotiated rate and historical net price. These are defined as:
- Negotiated rate: The contracted amount a payer or issuer agrees to pay an in-network pharmacy, either directly or through a PBM.
- Historical net price: The average retrospective payment made to an in-network provider (inclusive of rebates, discounts, chargebacks, and fees).
Why does this matter?
It’s increasingly clear that price transparency is in the best interest of patients and the broader healthcare ecosystem. Without transparent pricing, it's nearly impossible to measure—or address—the underlying drivers of increasing healthcare costs in the U.S.
An analysis by our team found that price transparency regulations have made positive strides in reducing the cost of the US healthcare ecosystem. For example, we found employers could cut healthcare costs by 27% across 500 common services. Moreover, the top 25% of most expensive service prices dropped by 6.3% annually after TiC implementation
What could Prescription Drug File TiC mean for Life Sciences manufacturers?
Assuming the ruling is passed, either via a new law enforcing Part D or the Trump administration's enforcement of federal regulations for the third TiC file, PBM TiC requirements offer an unprecedented opportunity for manufacturers to leverage real-world data to gain strategic commercial insights. Historically, to understand pharmacy reimbursement or payer net price, manufacturers needed to deploy primary market research, leverage field intelligence, or create assumptions.
Using negotiated rates allows manufacturers to:
- Market landscape: understand how your drugs are reimbursed across different pharmacies by payers
- Patient affordability strategy: help guide patients to identify which pharmacies offer the best out-of-pocket options based on their insurance plans
- Pharmacy engagement and segmentation: proactively assess drivers of pharmacy performance by understanding if they are above or below water
- Distribution strategy: evaluate which pharmacies are more likely to stock your products in their inventory versus competitors
The inclusion of historical net price could be groundbreaking pending the final schema. It could potentially shed light onto data that has been kept confidential between the payer/PBM and other stakeholders, including rebates/discounts offered by manufacturers to payer/PBM.
This information could be used by manufacturers in multiple ways, such as:
- Payer contracting strategy: Evaluate how rebate levels correlate with payer’s utilization management
- GTN modeling: Improve gross-to-net forecasting accuracy by benchmarking against expected drug’s (and competitor’s) rebate variability across PBMs
- Payer segmentation: Develop a data-driven payer customer perspective on how payer contracts are influencing a payer’s overall net cost; segment payers based based on their proclivity for higher rebates or lower cost
- Competitive benchmarking: Gauge rebate levels your competitors are offering— valuable intelligence for pricing strategy
- Pre-launch market access planning: Use data as a proxy to model net price trajectories for pipeline products
Additional considerations
At this juncture, we are operating under hypothetical assumptions, but over the years, we’ve learned many invaluable lessons on the use of price transparency data. If it were to become available, manufacturers should be mindful of the following:
- Having a standardized schema will be critical to ensure cross-plan / cross-drug comparability is possible
- Data quality will take time to mature. As each mandate has gone into effect, we’ve seen that early datasets require refinement before being ready for prime-time use
- Payer compliance and CMS enforcement actions will shape how quickly and consistently this data becomes usable
Turquoise Health has frequently been cited by CMS in the OPPS Final Rule and in the Trump Executive Order on price transparency. We will continue to provide updates on what to expect in the Prescription Drug file schema.
While the system still isn’t perfect as there are still gaps in the drug value chain, we are closer than ever to true end-to-end drug pricing transparency.