RxDC reporting guidelines, which were established under the Consolidated Appropriations Act (CAA) of 2021, require health insurers and employer-based health plans to submit de-identified data on prescription drug and health care spending to the Centers for Medicare & Medicaid Services (CMS).
The purpose is to promote transparency into how prescription drug costs affect overall health care spending. Federal agencies use this data to analyze drug pricing trends, the role of rebates and how health care costs are shared between employers and health plan members.
Which health plans are subject to RxDC reporting?
Most major medical group health plans are subject to RxDC reporting, regardless of their funding arrangement. This includes both fully insured health plans and self-insured plans that provide comprehensive medical coverage.
Covered arrangements subject to RxDC reporting include:
- ERISA-covered group health plans sponsored by private employers
- Non-federal governmental plans sponsored by state and local governments
- Church plans that offer major medical coverage
- Level-funded plans
- Self-funded health plans, including those with carve-out pharmacy arrangements
Common exclusions from RxDC reporting include:
- Standalone Health Reimbursement Arrangements (HRAs)
- Standalone account-based plans that qualify as excepted benefits
- Limited-scope, standalone dental and vision insurance plans
- Excepted benefits, including qualifying Employee Assistance Programs (EAPs)
- Retiree-only plans
- Standalone wellness service programs
Medicare, Medicaid and other federal programs operate under separate reporting frameworks administered by CMS and are not part of the employer RxDC obligations described here. This distinction is important for employers who may offer retiree coverage that wraps around Medicare or coordinates with other federal programs.
If your organization sponsors multiple health plans under different structures, such as separate plans for certain employee populations or locations, each plan that meets the criteria must be included in the reporting process.
What data is included in RxDC reports?
RxDC reporting consists of multiple data files that paint a comprehensive picture of prescription drug and medical costs for covered plans. Understanding what goes into each data file can help employers anticipate what information they may need to provide.
Plan Information (P1, P2 and/or P3)
The plan information file contains plan identifiers and basic details. This includes the plan name, group health plan number, sponsor name, employer identification number, plan year dates and market segment.
There are three types of P files, and employers may need to submit one or more of these files depending on their plan types.
- P1: Individual and student marketplace plans
- P2: Employer-based group health plans (non-FEHB)
- P3: Federal Employee Health Benefits (FEHB) plans
It’s important to note that a P2 file must accompany every employer-based group health plan submission. This requirement applies even if an employer submits a single file directly through the CMS reporting system.
Data Files (D1-D8)
There are eight data files that may be required for RxDC reporting; as a whole, these files are meant to collect aggregate premium and spending information.
In general, files D1-D8 are required for plans with medical and pharmacy benefits. Files D1 and D2 are required for plans with only medical benefits, and files D1 and D3-D8 are required for plans with only pharmacy benefits. Employers should confirm current CMS guidance and vendor responsibilities for their specific arrangement.
Here’s a quick breakdown of what each file includes. More detailed instructions can be found on the CMS website.
- D1: Average monthly premiums (both employer- and employee-paid), life-years and additional premium information, the specifics of which depend on whether the plan is self-funded or fully insured
- D2: Spending by category; categories include hospital, primary care, specialty care, other medical costs and services and medical benefit drugs (both known and estimated amounts)
- D3: Paid claims by state, market and employer (EIN) for the top 50 most frequently dispensed brand name drugs
- D4: Ranking of the top 50 most costly (by total spending) prescription drugs for each state, market segment and employer
- D5: Top 50 drugs with the greatest increase in spending for each state, market segment and employer
- D6: Rx totals, including enrollment, total spending, PBM spread amounts and other data
- D7: Rx rebates by therapeutic class, including number of paid claims, number of dosage units, total spending, total cost sharing and other data
- D8: Top 25 drugs with the greatest amount of prescription rebates for each state, market segment and employer
Narrative Response
The narrative response should be submitted as a Word document or PDF. It must address the following topics:
- Net payments from federal or state reinsurance or cost-sharing reduction programs
- Any prescribed, covered drugs missing from the CMS crosswalk
- Method used to estimate the portion of bundled or alternative payment arrangements attributable to prescription drugs covered under the medical benefit (as reported in D2), including the allocation approach applied
- Types of rebates, fees and other remunerations that were included or excluded in the D6, D7 and D8 files, including explanations of any negative values
- Methods used to allocate prescription drug rebates, fees and other remuneration
- Impact of prescription drug rebates on premium and out-of-pocket costs, including differences based on plan type, market segment or tier assignment
Together, these files capture overall medical and prescription drug spending, including how much is spent on drugs, rebates and related fees. This information helps government agencies analyze prescription drug cost trends and their effect on what employers and members pay for health care.
Because different vendors hold different pieces of the required data, RxDC reporting depends on coordination among carriers, third-party administrators (TPAs), pharmacy benefit managers (PBMs) and employers. Because of this complexity, many organizations rely on a benefits broker to help oversee this coordination and reduce administrative strain.
Employer Responsibilities and Coordination with Vendors
Although vendors often prepare and submit RxDC files on the plan’s behalf, employers need to confirm who is doing what for their plan to help support complete reporting. Assumptions about vendor responsibilities can create gaps in compliance that could lead to penalties or disciplinary action.
The division of responsibility can vary, so it’s critical to confirm with your vendors; however, these are common divisions based on plan type:
- Fully insured plans: The insurance carrier generally handles all files, but employers may still need to supply plan design details or confirm premium data.
- Self-funded plans: TPAs and PBMs typically share responsibilities, with employers providing plan information and premium equivalent calculations.
- Level-funded plans: Often similar to fully insured arrangements, but employers should verify their insurance carrier’s approach.
A best practice is to obtain a written agreement or documentation from each vendor specifying which files they will submit. For example, a vendor confirmation might state: “TPA submits P2 and D1-D2; PBM submits D3–D8.” This can help prevent last-minute surprises.
Quick Vendor Coordination Checklist
- Verify which vendor is responsible for each file.
- Gather premium data and calculate monthly averages if needed.
- Review plan counts and enrollment figures for accuracy.
- Confirm the submission method each vendor will use.
- Respond promptly to vendor surveys and data requests.
Vendors often set internal deadlines weeks or months before the June 1 CMS deadline. Missing these vendor-specific cutoffs can create complications and may even require employers to submit information through CMS systems themselves, so it’s vital to respond promptly to all requests.
Key Dates and Submission Process
RxDC reports are due to CMS by June 1 each year for the prior reference year. For example, data from 2025 would be due by June 1, 2026. This is a recurring annual requirement tied to the calendar reference year, regardless of the plan year dates for individual plans.
RxDC submissions are made through the Health Insurance Oversight System (HIOS). If your vendors handle the entire submission, your organization may not need its own HIOS credentials. However, employers who miss vendor cutoffs or choose to self-report will need to allow adequate time to register and familiarize themselves with the system.
Practical Preparation Tips for Reporting
A structured approach to RxDC reporting can help to reduce administrative strain and support accurate submissions. The practices below can be incorporated into an annual benefits compliance routine.
- Build an internal calendar. Track the reference year, vendor data request dates and the June 1 CMS deadline. Align this calendar with other compliance tasks, such as Form 5500 preparation. Having visibility into multiple deadlines can prevent conflicts and missed dates.
- Maintain a central coordination file. Create a worksheet that includes plan names, identification numbers, funding arrangements, vendor contacts and a summary of which party is responsible for each RxDC data file. This document becomes a quick reference when questions arise and helps to support continuity if staff changes occur.
- Keep data current. Review the accuracy of enrollment counts, premium contributions and plan year dates on a regular basis. When vendors request information, having these numbers readily available can speed up response times and reduce errors. The average monthly premium figures and life-years data are particularly important to verify.
- Engage proactively with vendors. Do not wait for vendors to reach out. Contact your carriers, TPAs and pharmacy benefit managers early in the calendar year to confirm their plans for RxDC reporting and understand what they need from you. Employers that work with a benefits broker may choose to have their broker coordinate these communications and track responses.
Moving Forward with RxDC Compliance
RxDC reporting gives employers a clearer view into how their group health plan dollars are spent, and, when utilized correctly, this data can help to support more strategic benefits decisions. Given the number of vendors and data sources involved, many employers find value in centralized oversight to help support accurate and timely submissions.
Higginbotham helps employers manage compliance as part of a well-rounded employee benefits strategy. Our team offers guidance to help simplify regulatory requirements, coordinate with carriers and vendors, and support your organization’s long-term goals.
Connect with a Higginbotham employee benefits consultant to learn more.
