Legislators Push HHS to Stop Pharmacy DIR Fees

Separate letters sent by a group of senators and congress members request Health and Human Services Secretary Alex Azar to halt retroactive direct and indirect remuneration fees.

Momentum is increasing on Capitol Hill to eliminate one of the more controversial issues affecting the pharmacy space.

A group of 21 senators and 83 members of the House of Representatives sent letters to Health and Human Services Secretary Alex Azar asking he advance a proposal to effectively eliminate retroactive pharmacy direct and indirect remuneration (DIR) fees by requiring all price concessions be accounted for at the pharmacy counter.

“Retroactive fees charged to pharmacies weeks or months after a prescription is dispensed artificially inflate costs to patients,” National Community Pharmacists Association CEO B. Douglas Hoey, RPh, MBA, said in a press release. “Any comprehensive plan aimed at reducing patient prescription drug costs simply must address this issue.”

Click here for further coverage of DIR fees.

The Centers for Medicare and Medicaid Services (CMS) defines DIR fees as additional compensation paid to Part D sponsors or pharmacy benefit managers (PBMs) following the point-of-sale in order to change the final cost of the drug for the payer or the price paid to the pharmacy. This compensation includes manufacturer rebates and concessions paid by pharmacies, which CMS uses to calculate final Medicare payments to Part D plans.

DIR fees have raised consternation among pharmacy stakeholders due to payments at times being based on the performance of the pharmacy. This allows PBMs to take money back from pharmacies, which can prevent them from gaining adequate reimbursement to cover the cost as a result of what some stakeholders deem as arbitrary standards.

“DIR fees imposed on pharmacies participating in Medicare Part D networks by plan sponsors and their pharmacy benefit managers have exploded in recent years and have had a crippling impact on patients, Medicare, and pharmacies,” the legislators wrote to Azar. “The retroactive nature of these fees means beneficiaries face higher cost-sharing for drugs and are accelerated into the coverage gap (or ‘donut hole’) phase of their benefit. What’s more, beneficiaries more quickly reach the catastrophic phase of the benefit, for which Medicare incurs more of the cost of the drugs.”

The Pharmaceutical Care Management Association (PCMA), a support organization that advocates for PBMs, counters that DIR fees ultimately reduce costs for consumers.

“They don’t harm the health industry in any way. They only help it,” PCMA President and CEO Mark Merritt told Specialty Pharmacy Times in a previous interview. “It reduces costs for consumers and for Medicare. The reason people attack DIR is they sign a contract to pay for it and then they don’t want to hold up their end of the bargain. The reality is payers are going to demand discounts, concession, and rebates to reduce costs to pass those savings along to consumers.”

However, a white paper authored by True North Political Solutions counters this stance and states that DIR fees have expanded well beyond CMS’ intended use of its definition.

“Patients are likely to pay more out of pocket costs, as many PBMs will charge a co-pay that is higher than the drug’s price without insurance. Later, they will ‘clawback’ the difference from the pharmacy. There is no evidence that the clawback obtained from the pharmacy is ever credited back to the patient,” the authors wrote. “This happens more frequently with generics and it can vary by pharmacy. Also, this practice drives patients faster into the Medicare Part D doughnut hole. Once a patient reaches the doughnut hole, they may be responsible for the full cost of the drugs until they reach a higher spending level. Many patients have extra insurance or help to cover the costs, though this results in higher premiums.”

Last month, 153 pharmacy stakeholder organizations sent a letter to Azar with a message similar to the recent efforts by legislators.

“I’m heartened by the unified and coordinated efforts of the pharmacy community and the thousands of grassroots messages sent by individual pharmacists that have raised awareness and garnered support for these letters,” Hoey said in the release. “I’m also very grateful for the strong leadership of Sens. Shelley Moore Capito (R-WVa) and Jon Tester (D-Mont) in the Senate and Reps. Morgan Griffith (R-Va) and Peter Welch (D-Vt) in the House, who spearheaded these letters. Patients, taxpayers, and pharmacies would all benefit from the enhanced pricing transparency resulting from addressing retroactive pharmacy DIR fees.”