Community pharmacies call retroactive fees unfair, costly

WASHINGTON — Reps. Morgan Griffith (R., Va.) and Peter Welch (D., Vt.) have reintroduced the Improving Transparency and Accuracy in Medicare Part D Spending Act (H.R. 1038), which community pharmacies say would squelch a growing burden: retroactive direct and indirect remuneration (DIR) fees.

The bill, introduced Wednesday in the House of Representatives, would ban the application of DIR fees to pharmacies after the point of sale for prescription drugs dispensed to Medicare beneficiaries.

“If you fill up your gas tank when the price is $2.09 per gallon and the price later goes up to $2.15, you won’t receive a bill demanding payment for the extra 6 cents per gallon. The same principle should apply to our community pharmacists. They deserve to be reimbursed based on the price of drugs when they are dispensed, not when they are charged,” Griffith explained. “Unfortunately, pharmacy benefit managers (PBMs), which operate within insurance companies, have gotten into the habit of changing rates paid to your pharmacist for your prescriptions weeks and months after the prescriptions have been filled. This simple bill makes it so that the PBMs cannot unduly change their reimbursements to your pharmacist after the fact.”

According to Griffith and Welch, the legislation aims to ensure that pharmacies are reimbursed at the rate posted when prescriptions are filled.

“Rural pharmacies are essential to the delivery of health care in small communities across America. Vermont’s community pharmacies provide quality service and life-saving medication to Vermonters every day. Their long term viability is essential,” Welch said in a statement. “Retroactive fees are inappropriate and make it significantly harder for these small businesses to keep their doors open. Our legislation would put a stop to this practice.”

B. Douglas Hoey, NCPA

On Thursday afternoon, Sens. Shelley Moore Capito (R., W.Va.) and Jon Tester (D., Mont.) introduced S.413, companion legislation to the Improving Transparency and Accuracy in Medicare Part D Drug Spending Act.

The National Community Pharmacists Association has endorsed both bills. NCPA chief executive officer B. Douglas Hoey described DIR fees as a ” ‘Sword of Damocles’ hanging over pharmacies” and a threat to the viability of many independent operators.

“Pharmacies dispense medication and are reimbursed, only to have a portion of that payment clawed back by PBMs weeks or months after the transaction. There’s often little way to anticipate the fees, and pharmacists are seldom provided sufficient justification for the clawback,” Hoey stated. “It’s a maddening way to operate a business, so it’s no wonder community pharmacists identified this as their top 2017 priority. NCPA strongly supports H.R. 1038 because, when enacted, it would end retroactive pharmacy DIR fees.”

According to Hoey, there’s “broad, bipartisan alarm” in Congress and among Medicare officials over DIR fees on pharmacies. “S.413 and its House counterpart, H.R. 1038, will help address the abuses that pharmacy DIR fees visit upon patients and pharmacies as well as the Medicare program and taxpayers,” he commented. “We will work aggressively for passage of this legislation.”

The Pharmaceutical Care Management Association (PCMA), which represents the PBM industry, on Wednesday gave H.R. 1038 a thumbs-down, saying the measure would hoist costs.

“Medicare Part D is overwhelmingly popular with a 90% satisfaction rate among enrollees. While this bill might increase drug store profits, it would raise premiums for beneficiaries and increase costs for taxpayers,” PCMA said in a statement. “A recent report by the Centers for Medicare & Medicaid Services highlights how DIR reduces premiums for beneficiaries, which also leads to lower costs for the federal government.”

Released last month, the CMS report on DIR brought the simmering debate on DIR fees to a boil. The analysis cited “a growing disparity” in gross Medicare Part D drug costs and net Part D drug costs, which includes DIR.

Direct and indirect remuneration (DIR) fees refer to post-point-of-sale compensation received by PBMs and Part D plan sponsors for prescription drugs. Used in the calculation of final Medicare payments to Part D plans, these fees primarily are rebates paid by drug manufacturers but also include concessions paid by pharmacies, such as pay-for-performance network fees and reimbursement reconciliations. As a result, DIR fees affect the final cost of a drug for payers and the price paid to pharmacies for a drug.

“Since 2010, the growth in DIR has far outpaced the growth in Part D drug costs, on both a total and per-member-per-month (PMPM) basis,” CMS stated in the report. Between 2010 and 2015, total DIR rose about 22% annually and PMPM DIR grew almost 14% per year, whereas total Part D gross drug costs increased 12% and PMPM Part D gross drug costs gained 5% per year. “Gross drug costs and DIR have grown most dramatically since 2013,” CMS observed.

The impact of the growth in DIR, CMS said, has been a heavier cost burden on seniors and on the Medicare program, particularly as higher drug prices expedite beneficiaries’ entry into the catastrophic benefit phase — the “doughnut hole” coverage gap — where cost liability is higher for patients and Medicare. At the same time, though, rising DIR has checked total program expenses for Part D plan sponsors and moderated growth in beneficiary premiums, CMS noted.

Earlier this month, the Community Oncology Alliance (COA) blasted DIR fees, saying they “artificially inflate the costs paid by Medicare beneficiaries for prescription drugs, pushing them into the Medicare Part D ‘doughnut hole’ faster, fueling rising drug prices and ultimately adding to the burden on taxpayers.” The group’s comments were based on a white paper by the law firm Frier Levitt LLC that was commissioned to examine the DIR fees issue.

A day after the white paper was released, CVS Health issued a statement saying that it’s not profiting from the DIR program, which “ensures optimal pharmacy performance by driving better clinical performance” and helps rein in costs. The company operates CVS Caremark, the nation’s second-largest PBM.

“CVS Heath’s profitability would not be materially affected by a change in DIR pay-for- performance networks. If the DIR construct was removed unilaterally, which we view as highly unlikely given Congress and CMS’ movement toward value-based care, all Part D plans would be impacted in the same way,” CVS stated. “Furthermore, we believe that would lead to higher premiums for beneficiaries across the industry. Congress is supportive of pay-for-performance programs, and this is an important tool for the Medicare Part D program to provide higher quality care for beneficiaries at a lower cost.”

NCPA noted that the previous version of H.R. 1038 — introduced just weeks before the 114th Congress adjourned — drew strong bipartisan support from lawmakers. A letter sent in late September to congressional sponsors showed support for the bill (H.R. 5951/S. 3308) from a wide range of pharmacy providers and partners, including regional chain pharmacies, independent pharmacies and franchisees, wholesalers, grocery stores, buying groups and 40 state pharmacist associations.

*Editor’s Note: Article updated to include introduction of Senate legislation.