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Published on Thursday, April 29, 2021

APhA Joins NCPA Suit Against Backdoor Pharmacy Fees

Litigation aims to overturn HHS rules allowing pharmacy benefit managers to wring fees out of pharmacies and consumers long after the point of sale

WASHINGTON, DC—The American Pharmacists Association (APhA) today joined the National Community Pharmacists Association (NCPA) as an equal partner in a federal lawsuit challenging a confusing scheme of retroactive fees imposed on pharmacies and, indirectly, their patients.

“HHS has acknowledged on multiple occasions that retroactive pharmacy DIR fees inflict harm on pharmacies and increase costs for their patients, but it has repeatedly neglected to address the problem,” said APhA Executive Vice President and CEO Scott J. Knoer, MS, PharmD, FASHP. “This lawsuit puts pharmacy in the driver’s seat. We demand that HHS meet its obligations and use its authority to stop PBMs from operating without accountability.”

NCPA CEO B. Douglas Hoey, pharmacist, MBA, whose organization filed suit in January on behalf of independent pharmacies, said the fees, known as direct and indirect remuneration (DIR) fees, have spiraled out of control in recent years.

“Independent pharmacies are buckling under the weight of pharmacy DIR fees, and we’ve been fighting them for years in Congress, the regulatory agencies, and now the courts,” said Hoey. “We are very pleased to be joined by APhA and the additional plaintiffs who all share the same concern—pharmacy DIR fees are hurting patients and local pharmacies. We believe the rule that allowed pharmacy DIR fees violates Congress’ language and intent, and that it was written so broadly as to invite massive abuse. We cannot let this go on any longer.”

Also joining the case as plaintiffs are the Coalition of State Rheumatology Organizations (CSRO), Fruth Pharmacy, Hi-School Pharmacy Services, Kare Drug, and Tyson Drug Co.

Madelaine Feldman, MD, CSRO president, said pharmacy DIR fees drive the cost of medicine so high that many patients have a difficult time sticking to their medication regimen.

“Providers who treat patients with chronic diseases know that high out-of-pocket costs for medications pose a barrier to adherence,” she said. “Medicare beneficiaries deserve access to the lowest possible cost at the time they pick up their prescriptions, but our current system enables middlemen to line their pockets at the expense of patients. This litigation is a critical first step in fixing these distortions and lowering patient cost-sharing at the pharmacy counter for Part D beneficiaries.”

A 2014 HHS rule introduced, and subsequent agency publications reinforced, a loophole that gave PBMs unlimited license to use retroactive pharmacy DIR fees.   PBMs profit considerably by destabilizing pharmacy businesses, pocketing savings that rightly belong to Part D patients, and endangering access to pharmacist-provided patient care. An analysis by XIL Health that was released in 2020 shows that pharmacy DIR fees totaled $8.5 billion between 2013 and 2017. The fees continue to grow each year and are estimated to have totaled over $9 billion in 2019 according to Drug Channels Institute.   

PBMs impose the fees on pharmacies weeks or months after they dispense prescriptions to Medicare Part D patients. A typical local pharmacy pays tens of thousands of dollars in pharmacy DIR fees every year. The massive cost and arbitrary application of the fees are killing pharmacies and driving up out-of-pocket costs for patients. An October 2019 paper published in JAMA Internal Medicine reported that one in eight pharmacies closed between 2009 and 2015. Independent pharmacies operating in underserved areas bore the brunt of the closures, but retroactive pharmacy DIR fees affect pharmacies of all sizes.

HHS issued a subsequent proposed rule that noted the runaway growth of retroactive pharmacy DIR fees — their use increased by more than 45,000% between 2010 and 2017. That can’t be sustained, say the plaintiffs, and the runaway growth is due to the government’s loose language added to the original rule at the eleventh hour and without public comment. 

A ruling that sides with the plaintiffs would eliminate the sizable retroactive clawbacks by moving them to the point of sale, allowing Part D patients to benefit from negotiated discounts and giving pharmacies much needed reimbursement transparency.


About the American Pharmacists Association

The American Pharmacists Association is the United States’ largest association advancing the entire pharmacy profession. Our expert staff and strong volunteer leadership, including many experienced pharmacists, allow us to deliver vital resources to help pharmacists, pharmaceutical scientists, student pharmacists, and pharmacy technicians succeed. We tirelessly advocate for policy changes that benefit pharmacists, their patients, and their communities. For more information, please visit


About the National Community Pharmacists Association

Founded in 1898, the National Community Pharmacists Association is the voice for the community pharmacist, representing more than 21,000 pharmacies that employ 250,000 individuals nationwide. Community pharmacies are rooted in the communities where they are located and are among America's most accessible health care providers. To learn more, visit


Contact: Frank Fortin


Note: To contact plaintiffs except APhA for comment, please contact NCPA


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Author: Jamila Negatu

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