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05/06/2022

Pharmacy groups applaud CMS’ elimination of retroactive DIR fees

Several pharmacy groups commended CMS for issuing a final rule eliminating Part D plans’ and PBMs’ use of DIR fees beginning Jan. 1, 2024, but indicated that more actions are needed to address PBMs’ harmful business practice.
Sandra Levy
Senior Editor
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Several pharmacy groups, including the American Pharmacists Association, the National Community Pharmacists Association and the National Association of Chain Drug Stores, commended CMS for issuing a final rule eliminating Part D plans’ and PBMs’ use of retroactive direct and indirect remuneration, or DIR fees beginning on Jan. 1, 2024 (the contract year 2024).

The new rule — Medicare Program; Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs — was finalized by the Centers for Medicare & Medicaid Services. 

APhA shared its appreciation for CMS’ ongoing efforts to end the uncertainty and lack of drug cost transparency at the pharmacy caused by retroactive DIR fees. In addition, based on the feedback of its members, the organization said that CMS’ final rule also eliminated a proposed loophole that would have left it up to the Part D plans and PBMs to determine how much, if any, of the pharmacy price concessions they would pass through to patients at the point-of-sale during the coverage gap in the Medicare Part D program. 

[Read more: DIR fees: Executives weigh in on the implications for independent pharmacies]

“We thank our members who stepped up and sent comments to CMS to ensure that their patients’ voices were heard!” said Scott Knoer, APhA executive vice president and CEO. “Eliminating the retroactive use of DIR fees is a step in the right direction, but it’s only the tip of the iceberg to end PBMs’ business practices that are harmful to patients and hurt our nation’s pharmacies.”

Retroactive DIR fees are price concessions not reflected at the point-of-sale for pharmacies participating in Medicare Part D networks. The retroactive fees are assessed weeks or even months after Part D beneficiaries’ prescriptions are filled, resulting in pharmacies realizing only long after the prescription was filled that they did not recoup their costs. Between 2010 and 2020, CMS reported that retroactive DIR fees increased by a staggering 107,400%. These fees also result in patients paying more at the pharmacy counter for their prescription drugs.

The final rule merely moves the fees to the point-of-sale negotiated price. It does not eliminate these fees, APhA said.

“APhA will continue to work to eliminate these practices in the effort to help advance health equity in rural and underserved communities and keep pharmacy doors open in these communities, where the local pharmacy may be the only healthcare provider for miles,” Knoer said. 

[Read more: Pharmacy groups urge administration to finalize pharmacy DIR fee transparency rule]

“This decision benefits patients who often have to make difficult choices about paying for their medications,” said Theresa Tolle, APhA president. “This often leads to poorer health outcomes and increased healthcare costs. Although it provides some predictability for pharmacies, more action is needed to address PBMs’ anticompetitive practices that are impacting the viability of neighborhood pharmacies.”

Another organization that shared its praise was NCPA, which stated that the Biden administration’s decision to advance reforms to controversial, backdoor price concessions that increase patient drug costs is welcome progress, but delaying implementation until 2024 is a missed opportunity for patients and pharmacies.

Fixing pharmacy DIR fees has been NCPA’s top advocacy priority for years. NCPA has worked with Congress and previous administrations to minimize or eliminate pharmacy DIR fees. In 2021, NCPA also filed federal litigation to remedy the problem, NCPA said.

“There is overwhelming bipartisan support for swiftly reforming pharmacy DIR fees,” said Doug Hoey, NCPA CEO. “We’ve worked hard over the years to build that support among policymakers and grow our stable of allies across industries who understand exactly how these fees shake down seniors and local community pharmacies. And we thank the administration for moving to increase transparency so our members can soon know up front what their lowest reimbursement would be."

“However, we’re disappointed that PBMs and their insurer-partners/owners have been given another year to manipulate the system and continue charging higher costs to seniors. Further, the final rule does not prohibit PBM contract terms that allow for penalty payments after prescriptions leave the pharmacy; therefore, retroactive penalties could still occur. CMS must close this loophole to accomplish the meaningful pharmacy DIR reform that so many of us have been fighting for,” Hoey said.

[Read more: NCPA survey finds patients disapprove of PBMs]

NACDS also expressed appreciation for the new federal rule, stating that will help to reduce seniors’ out-of-pocket prescription drug costs by improving transparency of exorbitant DIR fees imposed by payers on pharmacies. NACDS insisted that comprehensive DIR fee reform now depends on further legislative and regulatory action to improve predictability, fairness and viability for pharmacies. 

“NACDS commends CMS for initiating long-overdue reform of these dire DIR fees in a way that will benefit seniors,” said Steve Anderson, NACDS president and CEO. “It is critically important that there be no further delays. Further, NACDS calls on Congress and on CMS to accomplish swiftly the additional comprehensive reforms that are essential for pharmacy viability and for patient access. The pro-patient and pro-pharmacy work that remains includes the establishment of standardized pharmacy quality measures, which merits an immediate legislative remedy.”

Anderson continued, “We appreciate that CMS finalized this rule and improved the proposed rule according to some of NACDS’ recommendations in our comments. CMS took action to address transparency for all components of Medicare — including prescriptions filled for patients in the ‘coverage gap.’ It is vital for additional regulatory guardrails to be put into place and to prevent any unintended consequences that could harm patients and pharmacies alike.”

“NACDS also thanks the members of Congress, patient groups, provider groups, pharmacy allies and others who have collaborated to bring to the forefront the extremely important issue of DIR fee reform. In advance, we thank you for your continued determination to build on this momentum. NACDS pays tribute to the diverse NACDS member companies of all formats and sizes that engaged with passion, particularly through the NACDS RxIMPACT grassroots advocacy program, to voice the need for DIR fee reform and to help make possible this achievement,”  Anderson said.

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