An End to PBM Pick-Pocketing

Usually when your pocket has been picked, you discover the loss pretty quickly. But many of America’s more than 22,000 independent community pharmacies are finding their reimbursements for prescription drugs reduced well after the patient hands over the co-pay and leaves with their medicine. The technical term for this transaction is a “retroactive pharmacy direct and indirect remuneration (DIR) fee.” That’s one way of putting it.

DIR fees pick the pockets of community pharmacies and their patients.

Pharmacies dispense medication and are reimbursed, only to have a portion of that reimbursement then “clawed back” by pharmacy benefit managers weeks or months after the transaction. There’s often no way to anticipate the fees, and pharmacists are seldom provided sufficient justification for the clawback.

A medication on which the pharmacy looks to break even or even turn a modest, fair profit at the time it’s dispensed can become a loss weeks after the fact when the PBM claws back a portion of the proceeds. And those losses? Well, you can’t make up for those in volume, as they say. It’s a maddening way to have to operate a business.

Pharmacies’ pockets aren’t the only ones picked. Patients get fleeced, too. DIR fees distort the accuracy of drug cost information on the Medicare Plan Finder — the only publicly available resource accessible to Part D beneficiaries who rely on this information to make critical decisions about their health care. In addition, DIR fees increase beneficiary out-of-pocket costs for needed medications and in doing so push seniors more quickly into the “donut hole”— the point at which they are responsible for 100 percent of their prescription drug costs until they reach the catastrophic coverage threshold when the taxpayers pay 80 percent of the cost In other words, Part D beneficiaries who need and use their drug plan are punished the most by DIR fees.

PBMs are health care’s shadowy middlemen, exerting tremendous control over which prescription drugs a health plan will cover and how much the pharmacies that dispense them will be reimbursed. Unfortunately for patients, pharmacies and taxpayers, PBMs have long avoided both the spotlight and the typical marketplace constraints of meaningful regulatory oversight or transparency.

This explains, at least in part, how they can clawback funds from a pharmacy so readily: no one seems to be telling them they can’t. Operating in that virtual black box enables them to extract money from the prescription drug supply chain and profit mightily — all while prescription drug prices spiral out of control.

Now, there’s a move afoot to catch the pickpocket. Bipartisan legislation has been introduced in both the U.S. Senate and House to prohibit retroactive pharmacy DIR fees. If The Improving Transparency and Accuracy in Medicare Part D Drug Spending Act (S.413 / H.R. 1038), is enacted, PBMs will no longer be able to employ pharmacy DIR fees retroactively. All of the criteria for reimbursement would be determined at the point of sale, assuring that Medicare patients are properly charged.

To be clear, the proposed legislation does not eliminate or cut pharmacy DIR fees. Instead, it ensures that all charges are included when PBMs determine the pharmacy’s reimbursement for a senior’s prescription drug. No pick-pocketing after the fact.

Congress can stop this pick-pocketing and stand up for patients and independent pharmacies by passing S. 413 and H.R. 1038.


B. Douglas Hoey is CEO of the National Community Pharmacists Association.

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