Association Perspective
Scott J. Knoer, MS, PharmD, FASHP, APhA EVP and CEO
We finally got an important win in our fight to revamp the abusive and costly practices of retroactive direct and indirect remuneration (DIR) fees in the Medicare Part D program! Thanks to the efforts of our APhA board of trustees, assertive government affairs team, and the outstanding grassroots efforts of our members, we were able to achieve greater financial predictability for our pharmacists, reduce opacity within the prescription drug transactions, and provide huge savings to our patients at the pharmacy counter.
CMS issued a final rule that eliminates PBMs’ retroactive application of DIR fees. Beginning in 2024, they must be reflected in the negotiated price the patient pays at the pharmacy counter.
We are pleased with this important milestone, and we are incredibly appreciative of the federal officials—particularly the team at CMS—who saw this policy change across the goal line.
The regulatory achievement was a product of years of APhA’s advocacy work with valued partners like National Association of Chain Drug Stores (NACDS) and National Community Pharmacists Association (NCPA), who have led the charge on DIR reform from the start. We are proud to partner with NCPA on the lawsuit against HHS that likely had an influence on this change.
While there is good reason to celebrate this successful policy achievement, PBMs are many steps ahead; thanks to the excessive market concentration of their industry and the conflicts that arise from vertical integration, we know that it’s far too early to hang up the “Mission Accomplished” banner.
CMS’ proposal sets a floor for pharmacy payment at the “lowest possible reimbursement” and allows for bonus payments for improved performance. Applying all pharmacy price concessions to the “negotiated price” at the point of sale will provide pharmacies with more information on the reimbursement they will receive for achieving or not achieving performance metrics, but it also means that there’s ambiguity surrounding the pharmacy’s complete financial picture after all dollars are accounted for. Under the final rule, PBMs will still be able to use DIR to extract arbitrary fees by moving them to the point of sale in addition to extracting other unreasonable concessions from pharmacies. Furthermore, the proposed rule continues to allow PBMs to arbitrarily determine the rates of reimbursement to pharmacies —often shouldering pharmacies of all shapes and sizes with crushing underpayments while steering more lucrative medications to the pharmacies owned by PBMs.
As we showed in our jointly sponsored March 2022 study with the American Pharmacy Cooperative, Inc. (APCI), a policy shift for Medicare away from its current PBM-controlled system of prescription pricing toward a more accurate and realistic model, such as the model used by Medicaid programs in most states, could save seniors and the government more than $18 billion annually while ending the current subjectivity in pricing that PBMs prey on.
Although we’ve wanted reforms to DIR for quite some time, we understand that exactly how the final rule is implemented could still create some very real uncertainty and financial impacts on pharmacies. Despite this important realignment of incentives that will reduce the cost of medications at the pharmacy counter, I know there is much more that must be done to address the harmful and anticompetitive business practices by PBMs.
I strongly believe that these new actions to modify DIR policy—which pharmacists have been waiting years for—is the proverbial breaking of the dam. CMS knows DIR has been a rip-off for many, which is a clear sign that they understand their important role in calibrating poor incentives and reining in unfair business practices.
This is the first step in CMS admitting they have a PBM problem. I look forward to working together with you and our other partners as we ensure their next steps are in fact giant leaps. ■