AH011 - Navigating CMS' M3P, PDE, and Other Regulatory Changes, with Jason Barretto

March 29, 2024

Capital Rx

In this podcast episode, Jason Barretto, Vice President of Government Program Operations at Capital Rx, joins Justin Venneri to shed light on the complexities of regulatory compliance and the importance of meeting the intent of legislation and regulations, including the CENTERS for MEDICARE & MEDICAID SERVICES’ Medicare Prescription Payment Plan (M3P) requirements and new Prescription Drug Event (PDE) requirements.

Jason emphasizes the importance of collaboration with health plan partners to ensure alignment and minimize the need for "requesting grace" from governing agencies. Additionally, he explained the significant impact the M3P requirements will have on health plans, pharmacies, and PBMs. He highlights the disruptive nature of this program and introduces Capital Rx's comprehensive end-to-end solution to support health plan pharmacy directors in managing the new requirements. Lastly, he shares a story about an astonishing conference call, which he had to stay on with little to add. Listen below, and don't forget to subscribe on Apple, Spotify, or YouTube Music!


Lightly edited for clarity.

Justin Venneri: Hello and thank you for joining us for this episode of the Astonishing Healthcare podcast. This is Justin Venneri, your host and Director of Communications at Capital Rx. And today I have Jason Barretto, Vice President of Government Program Operations, joining us for a discussion that's a little bit heavier on government programs. But like always, we're going to try to cover everything in an understandable way for all. Jason, thank you so much for joining us today.

Jason Barretto: Thank you for having me, Justin.

[00:51] Justin Venneri: So, let's start off. Can you go into a little bit more detail about your background just to frame the discussion for listeners?

Jason Barretto: Sure. My background is fully in the health plan space, mainly in managed care. I've been supporting health plans, leading pharmacy departments for most of my career, if not all of my career, and joined Capital Rx about two years ago, mainly because of the mission. But as I spoke to the founders and got a little bit of insight into the technology, JUDI really blew me away in just the ability to do all sorts of great fun things that I've been wanting to do my career and just detect it and enable it. So I was really excited to join Capital Rx. And now that I'm here, really focusing on supporting health plans in executing their intent and ensuring that their members get best possible outcomes and experience that point of sale.

[01:56] Justin Venneri: Awesome. And this interview really follows up on a series we worked on last year, which I'll link in the show notes. Just highlighting what you do, how you do it, and I'd love to get into, because you're talking to health plan executives all the time and things are changing. It's rapidly evolving space, and I really do want to make this episode as helpful and interesting as we can to folks that are managing pharmacy benefit programs or administering pharmacy benefit programs. So maybe let's tackle three current pain points or topics of interest and explain how they can be addressed. One higher level. Let's just start off with regulatory compliance and meeting the intent, as you mentioned, of legislation or regulation broadly. How do you go about doing that?

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Jason Barretto: Yeah, so that for me, is my mission and objective here at Capital Rx. Being on the health plan sponsor side for my entire career, that was one of my biggest pain points, is new policy, new regulation, new direction, whether it's from federal or state agencies, come down. And my PBMs were building solutions but didn't really include me in the process.  

And so, there were times in which the solution didn't really meet the intent, meet the need. And that caused us to either request some sort of grace from the agency that was governing us, to see if we can get some more time to implement, or we would miss our implementation. And that just, you know, puts us in a position as the contract holder where we have to beg for forgiveness. And so I take that very, very seriously here at Capital Rx and my role of leading regulatory change management.  

First thing we do is we have our legal team who intakes the policy, summarizes it. They use, you know, their own experience, their own background, as well as outside sources to provide us with a good summary. We then intake that and break it down into requirements for operational execution. And so, before we actually move a muscle as far as implementation, we actually share it with our clients, say, hey, this is what the requirement is. This is what we plan on doing. We just want to make sure that we're aligned before we start the work. That's really how we meet. Intent is collaborating with our client partners to ensure that there is an understanding of what we're doing. It aligns with what they're hearing on the ground, conversations that they may be having with their peers, with the regulators. We may not be privy to all that. And so, it is imperative that we get their point of view, get their perspective, and we use that as part of our regulatory change management process.

[04:48] Justin Venneri: And how the problem you described of having to ask for grace or be in a position where you missed a window, how frequent of an occurrence was that previously? Cause it definitely comes through that you want to ensure that our client that you're collaborating with understands where we're coming from and how we're going to approach these problems.

Jason Barretto: It would happen a few times a year. One of the things that, again, if you're on a health plan side, on the sponsor side, you have an appreciation for, but your PBM may not, is that when you're going to a regulator asking for grace, you're not doing it on behalf of the pharmacy department or the PBM, you're doing it on behalf of the organization. And so, policy is constantly being created that affects sponsors holistically, whether it's on the medical side or something else. And so, if the health plan is having challenges on the non-pharmacy side of the house, and they're also asking for some grace, that creates a bit of an issue from an optics perspective with the health plan.  

And so, it's just best that when we're contemplating operational changes, we just take that into account and get our clients points of view so that we can avoid them having to reach out to the regulator and ask for any type of concession or any type of grace. It just shouldn't happen. And we try to avoid that as much as possible here.

[06:24] Justin Venneri: Okay. So recently, the Centers for Medicare and Medicaid Services (CMS) launched this prescription payment plan, better known as M3P. So, what is that and what should health plan pharmacy directors know about it?

Jason Barretto: Yeah, honestly, I think it's the biggest change to Medicare Part D since Medicare Part D. It is a very robust program that's designed to drive affordability with medications as well as increase adherence. And so, the crux of what it's supposed to do is it's a lot. It's supposed to allow a member who has cost share to walk away with the prescription from the pharmacy, paying $0 upfront and then being able to pay that cost share over the rest of the plan. You're in monthly payments, and so it's a great thing for the member, but it is a challenge for the rest of the industry. Whether you're talking about if you're a pharmacy, if you're a PBM, if you're a sponsor, it is a very disruptive policy.

[07:30] Justin Venneri: Why is that?

Jason Barretto: It's going to change a lot of things. On the health plan side, it's now going to change their cash flow. So now the members will have a new maximum out of pocket of $2,000 for the year. So theoretically, the sponsor could be at risk for that $2,000 because the member can get, you know, let's say a specialty medication in January. They decide they want to be part of the M3P program. They pay $0 out of pocket and take the drug home, and now they can pay it over time. And that process in itself is very, very new because you're talking about collecting payments from members directly on a monthly basis that goes beyond their premium payments.  

So collecting credit card debit information, checks, ach on a monthly basis, invoicing them, ensuring that you're not going beyond the monthly cap amount that's required by CMS. So, the calculations, the process, the cash flow is all very disruptive for the health plans.

[08:43] Justin Venneri: So this adds to the hundreds of things that a pharmacy benefit administrator has to do on the back end already to manage the program and take care of the membership.

Jason Barretto: Oh, 100%. It also puts some onus on the pharmacy themselves. So, part of the new policy is that pharmacies will be required to send an additional claim transaction to the PBM via the switch specifically for the M3P. And so this will be for every single pharmacy, regardless of channel. So we're talking about retail mail, specialty. It doesn't matter what channel you're in, your process will be changing, effectively 1125. And so that also creates disruption, because essentially 65,000+ pharmacies across the nation are going to have to get retrained in submitting pharmacy claims for Medicare. So that's a big change for them.  

And then when you think about the PBMs, PBMs will have to create processes to notify the pharmacy when the member is either enrolled in a program or is likely to benefit from the program. There are no NCPDP standards for that yet, and so we're trying to, you know, sort through it. There are also requirements once the members enrolled in a program.  

Now you have to process the claim in the correct order. First you have to submit it to the health plan, the primary health plan, and then you may get a message that says, hey, this member has a secondary payer. And so now you have to submit another claim to the secondary payer. And then, oh, by the way, this member is also enrolled in the M3P. So, if there's still a member balance owed after the secondary payer, then the pharmacist has to submit a third transaction to the M3P in PCN combination, which will then wipe out the rest of that cost year at point of sale and allow the member to walk away with $0 upfront and then pay that balance over time. So all those changes are extremely new and will require a lot of educating, staffing. It's just a very, very huge change just because it's so different than what we do today.

[11:17] Justin Venneri: Okay. And given the newness of all of this, including all of these processes, what can you share about what Capital Rx is doing about it?

Jason Barretto: We're actually rolling out a full end-to-end solution within our adjudication platform, JUDI, that will allow our clients, as well as non-clients will be offering us as a standalone product as well, where we could support non clients in the end-to-end process, from M3P transaction processing to ensuring that members are billed appropriately. The M3P calculators, which derive the maximum monthly cap amount, can be utilized. We'll do full billing and collections as well as notifications, whether they're at point of sale or, you know, the snail mail that we are required to submit to the members based on CMS guidelines. So, we're actually rolling out a very comprehensive product to the market. And one thing that has been made abundantly clear to the industry by CMS is that 2025 will be the first year, and that's the year that we should focus on. They will continue to evaluate this program throughout the year to see what adjustments are warranted for future years.  

So we are laser focused on 2025, making sure that we deploy a solution to market that is comprehensive and meets the needs of our clients, as well as CMS, and ensuring that we make this modular in a way where clients can elect certain things and can opt to keep certain things in house, as well as ensuring that we're flexible for future years.

[13:09] Justin Venneri: Okay. And then I mentioned three pain points or topics of interest in my opening here. So, I was kind of going through some notes and I noticed PDE -- prescription drug events. Looks like there have been some changes recently. What can you tell us there?

Jason Barretto: Yeah, CMS has decided -- at the same time, they're rolling out the M3P -- to also make a massive change to the PDE process. And so, this is another major project Capital Rx is working on.

Starting 1/1/25, we will be required to submit PDE's in the new layout. So, the current layout is about 500 bytes in length. The new layout will be about 1000. So, it's doubling in size. CMS is adding tons of fields to both the inbound and outbound layout. They're changing some processes in how fields are leveraged, which requires some systemic changes on our end. And they're also requiring everyone in the industry to recertify. So before you can submit PDE's to the government, you need to be certified to do so.

[14:25] Justin Venneri: And what are prescription drug events? Is it just what it sounds like to anybody that's not familiar with it?  

Jason Barretto: It’s a receipt. You go to the pharmacy; you fill a claim. We receive a paid claim transaction for that event, and then we turn that paid claim into a prescription drug event, which is defined by CMS. And they tell us exactly what they're looking for, how to submit it, when to submit it, and it is a financial receipt that sponsors must submit to CMS. And it's utilized for not only reconciliation, a financial reconciliation between a sponsor and CMS, but it's also used for clinical performance evaluation.  

So it's leveraged in the Stars measures, and it's also leveraged to ensure or really validate how the sponsor is administer, administrating the Part D program so it's used for different reasons, which is why it's extremely important.

[15:30] Justin Venneri: Got it. Okay. Thanks for explaining that. So last question and I ask everybody this. What is one of the most astonishing things you've seen that you can share, of course, over the course of your career working with PBMs on the health plan side or even here at Capital Rx that relates to, you know, government programs, pharmacy benefits, just the conversation topics of today? Tell us a good story.

Jason Barretto: I mean, you know, I think one of the better stories is probably something that happened to me very early on here at Capital Rx when we implemented our first government programs client.  

New York state decided to carve the Medicaid program back to fee-for-service. And so they were moving it away from the managed care organizations and bringing it back to fee-for-service. And that was in the making for years. And, you know, no one was clear on when it would happen, if it would happen, and actually did. And so, as we were talking through with the state and the NCO's, the Medicare organizations in the state, how we would do this. Very interesting ask, or it started off as an ask and became an obligation by the state of New York -- we want to make sure that we do this right. And so, yes, we continue to educate the pharmacies on this population migration from the managed care organizations to fee for service. But yet we know that there will be those that just aren't aware of this huge change.  

And so, we want to educate the pharmacy at point of sale. And the way we want to do that is we want you guys, you guys, meaning our contract holders and your PBMs, to -- once the carve out occurs -- we want you to trigger specific messaging at point of sale. And it must be the primary messaging because pharmacies typically do not page through messaging. So we want to make sure that they see it front and center and they know what to do.  

And so, you know, me being in the industry for so long, I knew that that was going to be a big ask, because to change the order of operations and claim adjudications, at least in my experience, because I used the legacy PBMs that you use, kind of that legacy tech, I knew it'd be a kind of big ask, and so didn't initially know how to react to the question.  

So, I brought the question back internally while we were on the call with the state and just put it in one of our public channels to our tech team and said, “Hey, if we wanted to do this, could we do it, and how long would it take us?” And within, I'd say 30 seconds, I got a response saying, hey, we could do that pretty quickly. Take us about ten minutes, and then we do some testing. So maybe about two days to do testing and make sure that we got the messaging right and make sure that we can test all our scenarios. It's like, oh, okay.  

So went back to the conversation and said, “On behalf of Capital Rx, we could do this and we could do it pretty quickly.” Gave them the estimate, and that was maybe 20 minutes into an hour-long call. The rest of the call was spent by the legacy PBMs trying to redirect the state that this was a bad idea and they should just allow the standard operating procedure to occur, which is the pharmacy would get messaging that the member is no longer enrolled or the group is no longer active, which really isn't great messaging when you're talking about this type of, you're moving 6 million members from managed care to fee-for-service. You want to be a bit more precise as to what the pharmacy should be doing.  

So, I think that, for me, was an amazing kind of thing for me personally because that's what really cemented in my mind that I landed in the right place, and we could do some great things here.

Justin Venneri: But you also had to listen to the rest of that call.

Jason Barretto: Oh, yes. Which, you know, honestly, I felt, you know, I felt great pride in the sense that we were able to support our client in the way they needed us to. And again, going back to the whole, how do you support your clients in a way that they don't have to go back to, whether it's a federal agency, a state agency, and ask for grace because you can't execute something as their delegate vendor. That, for me, is very critical.

Justin Venneri: Got it. Well, Jason, thanks so much for sharing your thoughts with us, taking the time to speak with us. As I mentioned earlier, I'll include some links to our government programs content, and to our listeners out there if you'd like to learn more about our suite of solutions here. I'm sure Jason and the team would love to hear from you. Jason, thanks. Thanks so much for joining us today.

Jason Barretto: Have a good rest of your day.

If you would like to learn more about Capital Rx’s full-service PBM or PBA solutions, including our clinical programs, CLICK HERE to get in touch with our team.

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