To Help Seniors Served by LTC Pharmacies, DIR Fees Should Simply be Prohibited

Tired of being kept in the dark about the mysterious prescription drug cost pricing process, Congress has proposed a variety of bipartisan legislative reforms designed to shed light on, and make more accountable, a system seemingly designed at the outset to confuse, befuddle and bewilder. Yet, one obvious idea has yet to get the attention it deserves.

At a past Senate Health, Education, Labor and Pensions Committee hearing regarding the distribution chain and its impact on patient costs, Chairman Lamar Alexander (R-Tenn.) expressed exasperation about pricing determinations and “where the money goes.”

For her part, Sen. Lisa Murkowski (R-Alaska) noted, “Even those of us that are listening to [witnesses] as supposed experts, it’s all Greek, and we’re not doing anything to help the consumer.” The chairman highlighted the hearing when he asked the obvious question — why have rebates at all?

Policymakers should go one step further to ask “why have post-point-of-sale charges and fees at all?”  

The middlemen that increasingly dominate the drug distribution and payment system, pharmacy benefit managers, have long been successful in operating out of the glare of public scrutiny. With growing focus on skyrocketing drug prices, PBMs have been unable to sidestep growing skepticism about the nature of their business model, which includes demanding that pharmacies “pay to play” — with charges at point-of-sale and post-POS that have no programmatic or market justification other than exploiting an oligopolistic market position to extract super profits. Most of these transaction fees and retroactive clawbacks are known as direct and indirect remuneration fees.

As policymakers scrutinize and revamp more obvious drivers of higher drug costs such as manufacturer rebates, it is predictable that Part D plans and PBMs will search for other methods to protect excess profits and DIR fees, which are already excessive — unless policymakers act.

While a bipartisan group of Senate and House lawmakers back a well-intentioned effort to “redirect” or “reform” these fees, we believe that such efforts may end up being ineffective — particularly for seniors living in skilled nursing facilities, assisted living facilities and other long-term care settings. For LTC pharmacies, at least, DIR fees should simply be eliminated — not “reformed.”

The proposed reform, focused on passing through fees at the “point of sale,” would not be effective for LTC pharmacies and the elderly beneficiaries they serve in SNFs or other facilities where there is no “point” of sale because a very large percentage of LTC residents are “dual eligible” for both Medicare and Medicaid. “Duals” do not pay for their medications at all (they do not pay Part D premiums, copays or deductibles). Further, they are exempt from the “donut hole” in the Part D program.

Thus, for these beneficiaries, “passing through” pharmacy fee DIRs at the point of sale POS is not a solution. It simply is not possible for their out-of-pocket costs to be lower than $0.

More broadly, passing DIR fees on to consumers does not mean that pharmacies won’t suffer. Now, PBMs demand that pharmacies “pay to play” if pharmacies wish to participate in Part D networks. They must pay POS and post-POS charges to PBMs. If these fees were passed through to beneficiaries, pharmacies would still have to pay those fees and charges.

If there were programmatic or market reasons for DIR fees, then passing those payments through might make sense. But there is no such rationale. DIR fees are nothing more than “pay to play” demands that simply should be eliminated.

The Senior Care Pharmacy Coalition’s views differ from others in the pharmacy sector and reinforce the fact that LTC pharmacies and their patients are distinct and different from the pharmacy market writ large and the general patient population. LTC patients and LTC pharmacies require a different framework to address the issues and concerns embodied in the drug pricing debate and more broadly underscore the need for a federal definition of LTC pharmacy.

The days when LTC pharmacies were considered part of a monolithic “pharmacy sector” are behind us, and ending DIR fees outright for LTC pharmacies at least is a good place to start. It truly is time for policymakers to ask why we need DIR fees at all. They will find, as SCPC did, that the answer is simple: We don’t need DIR fees. Patients, taxpayers and LTC pharmacies will be grateful for our government to act accordingly.


Alan G. Rosenbloom is president and CEO of the Senior Care Pharmacy Coalition.

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