APhA, NCPA Join as Partners in Suit Against HHS on Retroactive Pharmacy DIR Fees

The APhA has joined a federal lawsuit filed by the NCPA in January to challenge DIR fees.

The American Pharmacists Association (APhA) has joined a federal lawsuit filed by the National Community Pharmacists Association (NCPA) in January to challenge direct and indirect remuneration (DIR) fees.

DIR fees have been a point of contention since they were loosely established in 2014 because they allow pharmacy benefit managers (PBMs) to retroactively impose these fees on pharmacies and, indirectly, on patients long after the point of sale.

“HHS has acknowledged on multiple occasions that retroactive pharmacy DIR fees inflict harm on pharmacies and increase costs for their patients, but it has repeatedly neglected to address the problem,” said APhA EVP and CEO Scott J. Knoer, MS, PharmD, FASHP, in a press release. “This lawsuit puts pharmacy in the driver’s seat. We demand that HHS meet its obligations and use its authority to stop PBMs from operating without accountability.”

NCPA filed the suit on behalf of independent pharmacies at the beginning of this year after the Department of Health and Human Services (HHS) did not take action to address the complaints of several leading pharmacy groups on the aggressively increasing rate of DIR fees.

“Independent pharmacies are buckling under the weight of pharmacy DIR fees, and we’ve been fighting them for years in Congress, the regulatory agencies, and now the courts,” said NCPA CEO B. Douglas Hoey, PharmD, MBA, in a press release. “We are very pleased to be joined by APhA and the additional plaintiffs who all share the same concern—pharmacy DIR fees are hurting patients and local pharmacies. We believe the rule that allowed pharmacy DIR fees violates Congress’ language and intent, and that it was written so broadly as to invite massive abuse. We cannot let this go on any longer.”

In July 2020, prominent pharmacy groups had written a letter to the HHS explaining that action needed to be taken specifically to address these retroactive fees. In an executive order that President Donald Trump signed addressing manufacturer rebates that were getting collected by PBMs, drug rebates were redirected to patients instead of PBMs; however, pharmacy groups were concerned that DIR fees remained unaddressed within the order.

The pharmacy groups explained in their letter to HHS Secretary Alex Azar, JD, “The system contemplated by the rebate rule cannot go into effect without, at a minimum, ensuring that retroactive pharmacy DIR fees are eliminated, therefore saving Medicare beneficiaries at least $7.1 to $9.2 billion in reduced cost sharing over 10 years.”

Currently, the issue of DIR fees directed at pharmacies and patients remain unaddressed, which has added an additional burden to both during the struggles of the pandemic, according to the suit.

In light of this, new plaintiffs also joined the suit along with NCPA and APhA, including the Coalition of State Rheumatology Organizations (CSRO), Fruth Pharmacy, Hi-School Pharmacy Services, Kare Drug, and Tyson Drug Co.

CSRO president Madelaine Feldman, MD, noted that pharmacy DIR fees have driven medicine costs to heights that have even made medication adherence difficult for patients.

“Providers who treat patients with chronic diseases know that high out-of-pocket costs for medications pose a barrier to adherence,” Feldman said in the press release. “Medicare beneficiaries deserve access to the lowest possible cost at the time they pick up their prescriptions, but our current system enables middlemen to line their pockets at the expense of patients. This litigation is a critical first step in fixing these distortions and lowering patient cost-sharing at the pharmacy counter for Part D beneficiaries.”

In 2014, the HHS had introduced a rule that had a loophole present in its language that allowed PBMs to have unlimited license to apply retroactive DIR fees. In a 2020 analysis conducted by XIL Health, the data showed that pharmacy DIR fees totaled $8.5 billion between 2013 and 2017. However, these fees continued to grow beyond this period, totaling an estimated $9 billion in 2019, according to the Drug Channels Institute.

Weeks or months after prescriptions are dispensed to Medicare Part D patients, a typical community pharmacy now pays tens of thousands of dollars to PBMs in pharmacy DIR fees each year. These costs are not only significant, but also arbitrary, and have driven some pharmacies to close their doors and patients to pay increasingly high out-of-pocket costs.

In October 2019, research was published in JAMA Internal Medicine demonstrating 1 in 8 pharmacies needed to close down during the period from 2009 to 2015. The majority of the independent pharmacies that were forced to close during this period were also based in medically underserved areas throughout the country.

A subsequent proposed rule issued by the HHS in 2018 did note that retroactive pharmacy DIR fees had increased by more than 45,000% between 2010 and 2017. However, the plaintiffs in the suit explained that this growth has been caused by the government’s loose language in the original HHS rule, which now needs to be addressed to end the problem.

According to a statement released by APhA, the plaintiffs in the case are focused on the elimination of the retroactive nature of the fees in particular. By moving these fees to the point of sale, Part D patients would be able to negotiate discounts and pharmacies would have reimbursement transparency, according to the APhA.


APhA Joins NCPA Suit Against Backdoor Pharmacy Fees. Washington, DC: American Pharmacists Association; April 29, 2021. [email]. Accessed May 3, 2021.