In a surprise move, a leading federal regulator promises to look into the extensive fees assessed on pharmacies by drug chain intermediaries in what could be the first nationwide crackdown on pharmacy benefit managers.
What is at stake are billions of dollars in prescription drugs borne by consumers and taxpayers.
The investigation by the Centers for Medicare and Medicaid Services (CMS) will focus on the huge increases in direct and indirect compensation fees that PBMs charge pharmacies on Medicare prescriptions. These DIR fees were implemented as a way to get US pharmacies that raise millions of Medicare dollars to do more than just push pills.
But the assessment – billed long after a prescription drug sale is supposed to be completed – has evolved into a system that today only offers pharmacies penalties through ever-increasing fees, even whether each PBM performance standard is met. Fees now total $ 11.2 billion per year, up from $ 200 million in 2013
Administrator Chiquita Brooks-LaSure said in a four paragraph letter Tuesday that “CMS agrees that the significant growth in DIR amounts is troubling and plans to use our administrative authority to issue a regulatory proposal regarding price concessions ( pharmacy) and the DIR “.
An astonishing 91,500% increase in PBM DIR costs in just nine years
âI am cautiously optimistic,â said Scott Knoer, CEO of the American Pharmacists Association, the largest group of pharmacists in the United States. âRecognizing it publicly is a big deal. With all the money from PBM lobbying, it’s still a challenge.
Ted Okon, Executive Director of the Community Oncology Alliance, said: âAt first glance, it is certainly positive that CMS has woken up and realized that the 91,500% increase in DIR fees from 2010 to 2019 does not leave think there is a problem. However, what they intend to do about it won’t be clear until the agency publishes a proposed rule.
âAnd if they intend to do something meaningful, PBMs will fight it in court. Their business model is a house of cards and if the DIR fees are removed or even moderate, the house of cards will collapse.
A major question remains unanswered: Will CMS be looking at another PBM retroactive billing: recoveries? It is a cousin of the DIR fees, collected via convoluted contracts of âeffective rateâ PBM. Ohio Medicaid Director Maureen Corcoran acknowledged that these charges occur after the transaction is registered by the state and therefore are not included in drug spending data sent to the federal government.
But since that bogus data is included in the calculations to set the rates charged to taxpayers, she says taxpayers nationwide are likely overcharged for Medicaid prescription benefits.
Senator Sherrod Brown is part of the bipartisan group that sparked a new federal review
The fresh look at PBM’s fees was sparked by an October 14 letter from Democratic Senator from Ohio Sherrod Brown and fellow Democratic Senator Jon Tester from Montana, as well as from GOP Senator Shelly Moore Capito of West Virginia and James Langford of Oklahoma.
Noting the huge fee increases, the bipartisan quartet wrote: âThese astonishing increases in DIR are contributing to the increase in reimbursable fees for seniors and the permanent closure of 2,200 pharmacies nationwide between December 2017 and December 2020 These trends are unacceptable and cannot continue. . “
Brown said Thursday, âPharmacy intermediaries should pass their negotiated discounts on to consumers, not pocket the difference to pay their CEOs more. I’m glad the Centers for Medicare and Medicaid have agreed to take action to address this issue and bring relief to the elderly and the pharmacies that serve them.
Senate Finance Committee Chairman Ron Wyden, D-Oregon, sent a separate letter on Oct. 20, citing a recent announcement from a regional drugstore chain that it has started closing 56 pharmacies in the North. western Pacific.
Responding to CMS’s response, he said: âThese developments are an encouraging first step towards reforming unfair practices that compromise patient access to prescription drugs, patient education, chronic disease management. , preventive care and life-saving vaccines.
PBMs say if their fees are reduced, consumers will pay more for drugs
Charles CÃ´tÃ©, spokesperson for the Pharmaceutical Care Management Association, a trade group for pharmacy benefit managers, said the group is eagerly awaiting the CMS review.
âPharmacy Direct and Indirect Compensation (DIR) is an important tool in forcing independent pharmacies to do their part to improve beneficiary health outcomes, increase access and reduce prescription drug costs,â a- he declared.
âExcluding DIR from pharmacy in Medicare Part D would increase premiums for the elderly and increase costs for taxpayers, while decreasing the quality of pharmaceutical care for beneficiaries. Eliminating DIR from pharmacies, according to CMS analysis, will increase Part D premiums by $ 5.7 billion and costs to taxpayers by $ 16.6 billion over 10 years.
Pharmacy chain pays nearly $ 5 out of $ 100 in revenue to PBMs
Fruth Pharmacy, which operates multiple outlets in the Appalachian Mountains of Ohio, Kentucky, and West Virginia, is part of a lawsuit against the federal government for clearing skyrocketing DIR fees.
A Fruth executive told The Dispatch for a July story on DIR fees that payments rose from just under $ 1 million in 2017 to over $ 4.5 million in 2020, or nearly 4.5% of its total revenues. This has forced Fruth to shut down five sites since 2014, “all of which provided essential services to underserved communities with older and sicker populations,” the lawsuit says.
Meanwhile, Brown is one of the few active Democrats attempting to hold PBMs accountable; most of the other members of his party insist only on the role of the big drug companies. Democrats on the House Oversight Committee boycotted a hearing earlier this fall highlighting questionable PBM practices.
In 2019, Brown helped add provisions to the bipartisan drug pricing bill passed by the Senate Finance Committee that would have increased transparency requirements for PBMs and outlawed the practice of “price pricing.” . In June, he proposed a bipartisan measure that would prevent PBMs from retroactively assessing pharmacy fees.
The Fruth Pharmacy in Wellston, Ohio, is part of a small chain stretching as far as West Virginia and Kentucky that has been hit hard by the rapid rise in DIR fees for PBMs.