As the COVID-19 pandemic enters its third year, the public health emergency (PHE) declaration that has underpinned the country’s COVID-19 response efforts by providing the federal government with emergency powers, regulatory flexibilities and additional resources is currently set to expire in early 2023. However, the Biden administration has pledged to give 60 days’ notice before ending the PHE, and no such announcement has been made, indicating the declaration is likely to be extended beyond January.

Peter Matz

Building on the PHE declaration, the federal government temporarily removed a wide range of regulatory barriers to allow pharmacies to more effectively respond to the public health crisis and meet their communities’ needs. These actions paved the way for pharmacists to increase access to COVID-19 vaccines, testing and oral antivirals, while allowing them to administer childhood vaccinations, which provided a backstop against sliding pediatric vaccination numbers. Pharmacists were also granted prescribing authority for COVID-19 oral antivirals to maximize the administration’s Test to Treat initiative, which allows Americans to get tested for COVID-19 at a pharmacy and immediately be prescribed antiviral treatment on site if they test positive. Additionally, pharmacists and pharmacy technicians have been allowed to operate across state lines and conduct routine pharmacy tasks remotely as necessary. As we enter 2023, FMI – The Food Industry Association is urging policy makers to make permanent the many regulatory flexibilities that have allowed pharmacists to support our nation’s public health response in the face of the pandemic.

FMI member companies operate roughly 12,000 supermarket pharmacies, which have always played an important role in protecting public health and providing services that support patient and grocery shoppers’ health and well-being. However, the last three years have shined a light on the ways supermarkets and their pharmacies have been vital to helping communities weather the COVID-19 storm. Since the onset of the health emergency, grocery stores have been a critical component of ensuring the availability of food, pharmacy and health care services in communities across this nation. Moreover, supermarket pharmacies have played an outsized role in the COVID-19 vaccination effort while serving as a bridge between our communities and other providers, offering patients immediate care that is close and convenient to home.

Ensuring the financial strength of supermarket pharmacies is even more important during these trying times. Despite our members’ heroic efforts in response to the pandemic, the anticompetitive practices of pharmacy benefit managers continue to threaten the viability of supermarket pharmacies. These pharmaceutical middlemen create endless schemes to reduce reimbursement to the country’s most accessible and trusted health care professionals — pharmacists — effectively forcing pharmacies to provide drugs below cost. Although supermarket pharmacies are critically important access points for consumers across the country — particularly in underserved, low-income communities — the unfair and manipulative tactics of PBMs are driving food retailers out of the pharmacy business, leading to fewer choices and increased costs for consumers.

Although unknown to much of the American public, PBMs are powerful middlemen at the center of the U.S. prescription drug system. Among other things, PBMs negotiate rebates and fees with drug manufacturers, create drug formularies and policies for health care plans and reimburse pharmacies for patients’ prescriptions. What’s troubling is that PBMs control around 80% of the market share for prescription drug access. The six largest PBMs have merged with the biggest health insurance companies and pharmacies they’ve acquired, forming fully integrated businesses and giving them enormous influence over everything from which medicines are prescribed to patients and which pharmacies patients can access to how much patients pay at the pharmacy counter and the amount pharmacies are ultimately reimbursed. Yet PBMs are one of the least regulated sectors of the health care system.

The biggest PBMs control so much of the prescription drug market that they can essentially force supermarket pharmacies of all sizes to accept take-it-or-leave-it contracts, with little to no ability to negotiate the terms. The supermarket pharmacy must either accept a PBM’s mandated contract terms or give up the ability to serve the many customers whose health plans contract with the PBM — including existing customers who have long-standing relationships with their pharmacists. On top of that, these contracts typically include egregiously low reimbursement rates, effectively forcing pharmacies to provide drugs below cost, while allowing the PBMs to impose retroactive direct and indirect remuneration (DIR) fees weeks or months after the patient has picked up their medication on an opaque methodology. No wonder so many supermarket companies have stopped opening new pharmacies, or in some cases, left the pharmacy business altogether.

The clawback of pharmacy DIR fees is among the most egregious and damaging of PBM practices. These payments were originally designed to be applied at the point,of,sale to reduce the cost of prescription drugs for Medicare beneficiaries. However, PBMs frequently “claw back” DIR fees from pharmacies long after a drug has been dispensed to the customer. Since there is no way to anticipate these arbitrary and unpredictable fees, pharmacies often realize long after a prescription is filled that they lost money on the transaction. Furthermore, DIR fees are rarely used as intended to reduce the cost of a drug, and according to the federal government, these fees have grown by more than 107,000% since 2010! The impact of pharmacy DIR has been devastating to supermarket pharmacies and the patients who depend on them, as FMI members point to rising DIR fees as the greatest contributing factor to both closures and decisions not to expand.

For years, FMI has advocated to reform the pharmacy DIR system and eliminate these exorbitant, after-the-fact clawbacks. Earlier in 2022, we scored a significant victory when the Centers for Medicare and Medicaid Services (CMS) released a final rule that will improve DIR fee transparency when it takes effect in 2024. However, although the rule was a good first step, a partial approach to DIR reform will not provide pharmacies with the certainty they need to remain in business and continue serving their communities. Therefore, FMI will continue working with Congress and the administration to achieve the comprehensive DIR fix our pharmacy members so desperately need.

Unfortunately, pharmacy DIR fees and below-cost reimbursement are just two of the many ways PBMs leverage their market power to the detriment of pharmacies and consumers. That is why FMI has been supportive of the Federal Trade Commission’s inquiry into the PBM industry. Launched in June, the study will scrutinize the impact of the biggest PBMs on the prescription drug market, while examining several PBM practices FMI’s government relations team has consistently raised with policy makers as unfair and anticompetitive.

FMI was very engaged with the FTC leading up to the launch of the study, submitting written comment letters to and presenting oral testimony before the commission and facilitating meetings between FTC staff and our supermarket pharmacy executives. We are hopeful the investigation will demonstrate the urgent need for increased antitrust enforcement, regulation and transparency to help address skyrocketing consumer drug costs and preserve access to supermarket pharmacies.

There have also been several legislative efforts aimed at addressing the anticompetitive practices of PBMs and achieving meaningful PBM oversight. As just one example, the Pharmacy Benefit Manager Transparency Act, which would help prevent PBM abuses and bring much-needed transparency to the shroud of secrecy in which the PBMs operate, was passed over the summer on a bipartisan basis by the Senate Commerce Committee.

FMI and our pharmacy allies continue making progress on the state level, where several governors and legislatures are implementing reform measures to keep PBMs in check and level the playing field for pharmacies and patients, and we are pleased the federal government has begun to hear our long-held concerns about predatory PBM practices. As we head into 2023, FMI will continue working with policy makers to achieve the PBM reform measures necessary to control consumers’ drug costs and preserve their access to supermarket pharmacies.

Peter Matz is director of food and health policy at FMI.