Rx for Medicare Transparency, Ending Retroactive Pharmacy Clawbacks

Most businesses offer goods and services that are paid for directly by customers or clients. However, the health care industry operates differently due to the role of third party payers. The complexity of the system can be aggravating for patients and independent community pharmacists alike trying to “follow the money.” The most frustrating current tactic utilized by PBM corporations are direct and indirect remuneration (DIR) fees levied on pharmacy providers in the Medicare Part D prescription drug program. These fees often result in enormous clawbacks taken from community pharmacies weeks or months after prescriptions are filled. Such retroactive fees on pharmacies can artificially inflate patient costs and force Medicare beneficiaries into the “coverage gap” sooner.

Imagine being an independent community pharmacy owner with a financial sword of Damocles hanging over your businesses. At some point the PBM corporations will cut that precarious thread keeping the sword afloat. But when and how much damage will be inflicted through these retroactive charges remains shrouded in a mystery. Thus, independent community pharmacies cannot properly plan for the future — a maddening reality.

This past summer the National Community Pharmacists Association conducted a survey and released a short online video based on its independent community pharmacy members’ assessment of DIR fees. Approximately 67 percent of respondents said that PBMs provide no information as to how much and when DIR fees will be collected or assessed, and 87 percent of pharmacists said “DIR fees” significantly affect their pharmacy’s ability to provide patient care and remain in business.

NCPA led the charge to address DIR fees, working with its members, industry partners and federal officials. A bipartisan coalition of U.S. Senators and Representatives has written to the Centers for Medicare & Medicaid Services (CMS), the agency that oversees Medicare, to urge it to implement proposed guidance to address pharmacy price concessions like DIR fees. In recognition of the issue, CMS stated “variations in the treatment of costs and price concessions affect beneficiary cost sharing, CMS payments to plans, federal reinsurance and low income cost-sharing (LICS) subsidies, manufacturer coverage gap discount payments, and plan bids.”

New bipartisan legislation has been introduced to address this issue and provide more clarity into Medicare drug spending: The Improving Transparency and Accuracy in Medicare Part D Spending Act, S. 3308 / H.R. 5951, which prohibits retroactive DIR fee clawbacks on community pharmacies.

The legislation’s original sponsors in the U.S. House are Reps. Morgan Griffith (R-Va.), Peter Welch (D-Vt.), Lou Barletta (R-Pa.), Rod Blum (R-Iowa), Earl “Buddy” Carter (R-Ga.), Doug Collins (R-Ga.), Rick Crawford (R-Ark.), Walter Jones (R-N.C.), Cathy McMorris Rodgers (R-Wash.), Austin Scott (R-Ga.) and Pete Sessions (R-Texas), and in the U.S. Senate are Sens. Shelley Moore Capito (R-W.Va.), Jon Tester (D-Mont.), John Boozman (R-Ark.) and Tom Cotton (R-Ark.).

 In addition to understanding what this bipartisan legislation does, it’s also important to recognize what it will not do.

First, the companion bills will not increase Medicare Part D costs. The legislation simply prompts plans to account for pharmacies’ effective reimbursement rates, including any “DIR fees,” up front.

Second, the bill will not hamper PBMs’ ability to implement “pay-for-performance” programs for pharmacies. PBMs will be pushed to implement programs that are better aligned with Medicare’s value-based programs, instead of the “penalty-for-performance” dynamic that currently exists.

The U.S. Congress must act swiftly to pass S. 3308 / H.R. 5951. To allow PBMs to game the system with these retroactive DIR fees is unfair, it clearly hurts the viability of community pharmacies, and inevitably endangers Medicare beneficiaries’ access to prescription drugs.


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

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