The original 2006 Lower Cash Price Policy anticipated that some Medicare Part D beneficiaries will be able to find lower costing Medicare Part D drugs using pharmacy drug discount cards or other discount program during their Initial Deductible or Coverage Gap (Donut Hole) - when the Medicare beneficiary was 100% responsible for the cost of their Medicare Part D drugs.

Medicare beneficiaries could then purchase medications at a lower-discounted price - and not use their Medicare Part D plan because the plan had a higher negotiated retail prices.  The Medicare Part D plan memeber could then submit the pharmacy receipts for their non-Part D purchases to the Medicare plan, and if the medications were found on their plan's formulary, the member would receive credit for the purchase toward their total drug spending or TrOOP limit (the Donut Hole Exit Point).

As noted in the original Lower Cash Price Policy, the policy was limited "in order to ensure that enrollees:
(1) do not unwittingly forego plan funded coverage, which in most cases will be the lowest price available given the price concessions built into the plan’s negotiated prices;
(2) have the benefit of plan drug utilization review and other safety edits that can only be provided if the plan adjudicates the claim; and
(3) proceed through the benefit as quickly as possible in order to reach catastrophic coverage."

The Lower Cash Price Policy was then updated or clarified slightly in the 2010 Medicare Prescription Drug Benefit Manual, Chapter 14, Coordination of Benefits (Rev. 12, 03/19/2010) and adds the consideration of enhanced Medicare Part D plans that have a $0 deductible and some form of coverage in the Donut Gap or Donut Hole. In such situations, the Lower Cash Price Policy would not apply unless the Medicare beneficiary is responsible for 100% of the drug cost.

In 2013, the Medicare Prescription Drug Benefit Manual, Chapter 14, Coordination of Benefits (Rev. 17, 08/23/2013) was updated again and this time changed the form of Section 50.4.2 away from the original 2006 CMS "Lower Cash Price" memo and include, not only recording receipts to calculate an accurate TrOOP, but also included comments on the "reimbursement" policy.  Section 50.4.2 concludes by referring to a new section in Manual 14, Section 50.4.3 "Direct Member Reimbursement", for replacement guidance regarding the CMS Cash Purchase Policy.

50.4.2 – Beneficiary Cash Purchases
(Rev. 17, Issued: 08-23-13, Effective Date: 06-07-10; Implementation Date: 01-01-11)
Previously, CMS permitted enrollees to purchase a covered Part D drug without using his or her Part D benefit or a supplemental card and have the cash price count toward the enrollees’ total drug spending and TrOOP.  The policy applied if the enrollee could obtain a lower price at a network pharmacy than the plan’s negotiated price in any applicable deductible or coverage gap when the enrollee incurs 100 percent of the drug cost.  The enrollee was required to submit the appropriate documentation to his or her plan for the incurred drug cost to be included in gross covered drug cost and TrOOP.

Since the beneficiary cash purchase policy was issued, the Part D benefit has undergone significant change. Beginning January 1, 2011, the changes created by the Affordable Care Act (the ACA) started closing the coverage gap for beneficiaries not receiving LIS. By establishing the Coverage Gap Discount Program, which makes manufacturer discounts available at point-of-sale to non-LIS beneficiaries in the coverage gap, and gradually increasing coverage in the coverage gap for both generic and brand name drugs and biologics, the ACA for the most part has eliminated the need for this policy.

Although beneficiaries can still purchase a covered Part D drug at a network pharmacy without using their Part D benefit or a supplemental card, CMS encourages beneficiaries to use their Part D benefit. Use of the benefit affords beneficiaries access not only to the plan’s negotiated prices, which in most cases are the lowest price available, but also to the plan’s drug utilization review and other safety edits that only can be provided when the plan adjudicates the claim. Beneficiaries who choose to make a cash purchase will continue to be responsible for submitting documentation to the plan for determination of whether they are eligible for reimbursement and for costs to be included in gross covered drug costs and TrOOP.  Guidance included in section 50.4.3 below replaces CMS’ former cash purchase policy and clarifies plan processing of beneficiary-submitted claims for cash purchases as well as enrollee costs and amounts to be included in the enrollee’s gross covered drug costs and TrOOP.”

50.4.3 – Direct Member Reimbursement
(Rev. 17, Issued: 08-23-13, Effective Date: 06-07-10; Implementation Date: 02-01-14)

[Referring to the publication of the Medicare Part D Final Rule in 2005 (70 Fed. Reg. 4194), CMS notes in this new Section that]... [t]he guidance was silent regarding the handling of the out-of-network differential for non-LIS-eligible individuals.  As a result, the policy was ambiguous and sponsors have chosen to handle the differential in different ways. For example, some sponsors include only the negotiated price for the drug in the enrollee’s total gross covered drug cost accumulator (Prescription Drug Event (PDE) record field 45,) but include the differential in TrOOP.

Additionally, aside from the beneficiary cash purchase policy explained in section 50.4.2 of this chapter, no clear guidance has been available to sponsors concerning the reimbursement of beneficiary paper claims for covered Part D drugs from network pharmacies. To ensure consistent handling of out-of-network claims for both LIS and non-LIS eligible beneficiaries as well as paper claims for drugs accessed from network pharmacies, effective beginning in 2013 CMS is providing consistent guidance on direct member reimbursement in this section.

Section 1860D-4(b)(1)(C)(iii) of the Social Security Act required CMS to establish pharmacy access standards that include rules for adequate emergency access to covered Part D drugs by Part D enrollees. The special rules for out-of-network access to covered Part D drugs at pharmacies are specified in regulation (42 CFR 423.124) and discussed in chapter 5, section 60.1 of this manual. For out-of-network claims to meet the conditions for emergency access requires that the enrollee cannot be reasonably expected to obtain the covered Part D drugs at an in-network pharmacy and such access cannot be routine.

CMS regulations and guidance specifically address the requirement for Part D sponsors to issue standardized cards that may be used by an enrollee to ensure access to negotiated prices under section 1860D - 2(d) of the Act. The only way that an enrollee can be assured access to the negotiated price at the point of sale is through online adjudication of the prescription drug claim. Therefore, to ensure access to these negotiated prices, the billing information on the standardized cards issued by the Part D sponsor must be used by the pharmacies at which beneficiaries fill their prescriptions to submit claims to an enrollee’s plan sponsor (or its intermediary). Thus, another price available to the beneficiary at the point of sale, for instance, the pharmacy’s “cash price,” would not be the negotiated price because it is not accessed by the use of the standardized card.

CMS encourages beneficiaries to use the Part D benefit, because generally it believes it is in the best interest of Part D enrollees to have their claims consistently processed through the Part D sponsor (or its intermediary). Not only does processing claims through the Part D sponsor ensure access to Part D negotiated prices, but it also ensures that proper concurrent drug utilization review (including safety checks) is performed (as required under 1860D - 4(c) of the Act). Only the plan can prevent payment to excluded providers or conduct accurate concurrent drug utilization review when a beneficiary uses multiple pharmacies. Online, real-time processing also facilitates accurate accounting for enrollees' true out-of-pocket (TrOOP) and total drug costs by the Part D sponsor so that each claim is processed in the appropriate phase of the benefit and accurate cost sharing assessed. Guidance in section 50.4 of this chapter instructs plan sponsor s to process all claims online and in real time. The requirements of accurate TrOOP accumulations, Part D benefit administration of multiple coverage intervals, and coordination of benefits with other payers all necessitate online, real-time adjudication of individual pharmacy claims. This guidance states further that CMS expects Part D sponsors will establish policies and procedures appropriately restricting the use of beneficiary-submitted paper claims to those situations in which online claims processing is not available to the beneficiary at point-of-sale (such as out-of-network pharmacies) in order to promote accurate TrOOP accounting as well as to minimize administrative costs to the Part D sponsors and the Medicare program and reduce opportunities for fraudulent duplicative claim reimbursements.”

You can read more about how reimbursements are handled in the Medicare Part D Manual here: https://www.cms.gov/ Medicare/ Prescription-Drug-Coverage /PrescriptionDrugCovContra/ Downloads/ Chapter14.pdf

So the next question is, how are Medicare prescription drug plans implementing the 2013 Lower Cost Price Policy?

An example 2015 Medicare Part D plan Evidence of Coverage document notes:

"In some cases, you should send copies of your receipts to us to help us track your out-of-pocket drug costs

There are some situations when you should let us know about payments you have made for your drugs. In these cases, you are not asking us for payment. Instead, you are telling us about your payments so that we can calculate your out-of-pocket costs correctly.  This may help you to qualify for the Catastrophic Coverage Stage more quickly.

Here are two situations when you should send us copies of receipts to let us know about payments you have made for your drugs:

1. When you buy the drug for a price that is lower than our price
Sometimes when you are in the Deductible Stage and Coverage Gap Stage you can buy your drug at a network pharmacy for a price that is lower than our price.

•    For example, a pharmacy might offer a special price on the drug. Or you may have a discount card that is outside our benefit that offers a lower price.
• Unless special conditions apply, you must use a network pharmacy in these situations and your drug must be on our Drug List.
• Save your receipt and send a copy to us so that we can have your out-of-pocket expenses count toward qualifying you for the Catastrophic Coverage Stage.
• Please note: If you are in the Deductible Stage and Coverage Gap Stage, we may not pay for any share of these drug costs. But sending a copy of the receipt allows us to calculate your out-of-pocket costs correctly and may help you qualify for the Catastrophic Coverage Stage more quickly.
  

2. When you get a drug through a patient assistance program offered by a drug manufacturer
Some members are enrolled in a patient assistance program [PAP] offered by a drug manufacturer that is outside the plan benefits. If you get any drugs through a program offered by a drug manufacturer, you may pay a copayment to the patient assistance program.

• Save your receipt and send a copy to us so that we can have your out-of-pocket expenses count toward qualifying you for the Catastrophic Coverage Stage.
• Please note: Because you are getting your drug through the patient assistance program and not through the plan’s benefits, we will not pay for any share of these drug costs. But sending a copy of the receipt allows us to calculate your out-of-pocket costs correctly and may help you qualify for the Catastrophic Coverage Stage more quickly.
  

Since you are not asking for payment in the two cases described above, these situations are not considered coverage decisions. Therefore, you cannot make an appeal if you disagree with our decision."

[highlights and emphasis added]