Senators Urge CMS Do More to Reduce Drug Costs

March 11, 2022 01:42 PM EST PharmaFDA+
Senators call on CMS to finalize pharmacy fee reforms to save seniors $21B in out-of-pocket expenses
Zachary Brennan
Senior Editor

A bipartisan group of 30 US senators from both sides of the aisle sent a letter earlier this week to Chiquita Brooks-LaSure, head of the Centers for Medicare and Medicaid Services, urging her to finalize certain pharmacy fee reforms that could significantly save seniors in out-of-pocket expenses.

As so-called direct and indirect remuneration (DIR) fees have grown by more than 107,000% in a decade, the senators are calling on CMS to finalize a proposed rule that would tweak DIR fees in a way to “reduce seniors’ out-of-pocket prescription drug costs by $21.3 billion over 10 years.”

“The meteoric rise of these fees, coupled with the lack of transparency in their application in the Part D program, is contributing to increasing prescription drug costs for patients and the closure of hundreds of pharmacies in communities across the country,” the letter sent March 7 to Brooks-LaSure says.

So how do DIR fees work, and what’s the 107,000% number?

A Medicare Part D sponsor or a pharmacy benefit manager (PBM) can receive compensation after the point-of-sale of a drug that serves to lower the final net amount paid by the sponsor to the pharmacy for the drug.

Under Medicare Part D, the post point-of-sale compensation is a DIR fee and is factored into CMS’s calculation of final Medicare payments to Part D plans.

“DIR includes rebates from manufacturers, administrative fees above fair market value, price concessions for administrative services, legal settlements affecting Part D drug costs, pharmacy price concessions, drug costs related risk-sharing settlements, or other price concessions or similar benefits offered to some or all purchasers from any source (including manufacturers, pharmacies, enrollees, or any other person) that would serve to decrease the costs incurred under the Part D plan,” CMS explains in its proposed rule.

What’s more, CMS says, is that pharmacy price concessions (which generally refers any sort of discounts, subsidies or rebates that a pharmacy pays to a Part D sponsor to reduce the costs incurred under Part D plans), net of all pharmacy incentive payments, have grown faster than any other category of DIR.

And it’s in this pharmacy price concession data where DIRs grew more than 107,00% between 2010 and 2020.

Part D sponsors and PBMs “have been recouping increasing sums from network pharmacies after the point-of-sale (pharmacy price concessions) for ‘poor performance,’ sums that are far greater than those paid to network pharmacies after the point-of-sale (pharmacy incentive payments) for ‘high performance,'” CMS explains, noting that beneficiaries “generally see lower premiums, but they do not benefit through a reduction in the amount they must pay in cost-sharing.”

CMS is therefore proposing to ban these retroactive clawback fees by moving nearly all pharmacy price concessions to the point of sale starting Jan. 1, 2023.

Finalizing this proposal and addressing DIR fees “is essential to ensure beneficiary access to pharmacies that provide lifesaving prescription drugs and other essential services,” the senators wrote, and also encouraged CMS to “take additional steps to protect beneficiary access to pharmacies by ensuring pharmacies’ actual reimbursement, inclusive of all DIR fees, is reasonable as required under existing statute.”