Could retroactive DIR fees become a thing of the past?

Under CMS proposed rule, price concessions would be reflected at point of sale

APhA and other pharmacy groups hailed a CMS proposed rule that, if finalized, would pass drug price concessions directly to Medicare Advantage (MA) and Part D beneficiaries at the pharmacy counter. The proposed rule would account for pharmacy price concessions, also known as direct and indirect remuneration (DIR) fees, at the point of sale (POS). CMS projects this policy would reduce beneficiary out-of-pocket costs and improve price transparency and market competition under the Part D program.

DIR fees refer to price concessions not reflected at POS for pharmacies participating in Medicare Part D networks. Assessed weeks or months after Part D beneficiaries’ prescriptions are filled, the retroactive fees complicate decisions about staffing and whether to expand or even keep open a business. Pharmacies may not realize until long after a prescription is filled that they didn’t even recoup their costs.

Since beneficiary cost-sharing is based on a drug’s price at POS and PBMs extract retroactive fees because the drug ended up costing less than expected after price concessions are applied, the patient—who has already paid the higher price at the counter—saves nothing. By charging patients the adjusted cost at POS, the proposed rule could help patients stay out of the Medicare donut hole, the point at which they begin paying a much higher portion of their prescription drug costs.

The move would not eliminate DIR fees—it would only end the practice of extracting them retroactively. The proposed rule fits into a larger Trump administration effort to tackle high drug prices.

In addition to passing savings on to beneficiaries, the proposed rule would also address concerns that retroactive DIR fees are anticompetitive. In May 2018, U.S. Health and Human Services Secretary Alex Azar testified before the U.S. Senate Appropriations HHS subcommittee that he’s asked the Office of the Inspector General (OIG) to look into DIR clawbacks, including whether “these DIR fees are essentially taxes imposed differentially and unpredictably on those independent pharmacies in a way that puts them at a competitive disadvantage from the [PBM-owned] ones.”

In the proposed rule, CMS states that “the one-sided nature of the pharmacy payment arrangements that currently exists also creates competition concerns by discouraging independent pharmacies from participating in a plan’s network and thereby increasing market share from the sponsors’ or PBMs’ own pharmacies. Thus, adopting policies that promote competition is an important and relevant consideration in protecting Medicare beneficiaries and the Medicare trust fund from unwarranted costs.”

The proposed rule includes a number of other provisions of interest to pharmacists.
•    Adding a definition of “price concession”: CMS is considering adding a “price concession” definition to use in the proposal to include all forms of discounts and direct or indirect subsidies or rebates that serve to reduce the costs incurred under Part D plans by Part D sponsors.
•    E-prescribing and the Part D prescription drug program: CMS is proposing to accelerate the use of electronic real-time benefit tools (RTBT) in the Part D program, which would require each Part D plan adopt a provider (i.e., EHR-integrated) RTBT of its choosing beginning on or before January 1, 2020. RTBTs have the capability to inform prescribers when lower-cost alternative therapies are available under the beneficiary’s prescription drug benefit, which can improve medication adherence, lower prescription drug costs, and minimize beneficiary out-of-pocket costs. CMS would also require Part D plans to use at least two pharmacists in producing RTBT software to identify clinically equivalent drugs.
•    Step therapy for Part B drugs: For Part B drugs, CMS is proposing to require MA plans to use a pharmacy and therapeutics (P&T) committee to review and approve step therapy programs. CMS would require MA plans to include at least one practicing physician member and one practicing pharmacist who are experts in the care of senior and disabled persons.
•    Allowing Part D plans to exclude protected classes of drugs: The proposal would make three exceptions that would allow Part D plans to: 1) implement broader use of prior authorization and step therapy for protected class drugs, including to determine use for protected class indications; 2) exclude a protected class drug from a formulary if the drug represents only a new formulation of an existing single-source drug or biological product, regardless of whether the older formulation remains on the market; and 3) exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look-back period. APhA has opposed similar proposals by the Obama administration, stating that “APhA respects CMS’s need to constrain costs, but we believe that the removal of antidepressants, antipsychotics, and immunosuppressants from the protected drug classes does so at the expense of beneficiary well-being.”
•    Prohibition against gag clauses in pharmacy contracts: CMS implements the statutory requirement that restricts Part D plans from prohibiting or penalizing a pharmacy from disclosing a lower cash price to an enrollee.