CMS eliminates retroactive DIR fees
CMS has issued a final rule that put an end to PBM’s retroactive application of direct and indirect remuneration (DIR) fees, requiring that they be reflected in the negotiated price the patient pays at the pharmacy counter. The rule included all price concessions beginning on January 1, 2024.
CMS’ final rule also put an end to a proposed loophole that would have given authority to the Medicare Advantage Part D plans and PBMs to determine how much, if any, of the pharmacy price concessions they would pass through to patients at the point of sale during the coverage gap in the Medicare Part D program.
APhA and many of their members recommended the change to CMS and expressed gratitude that the agency took its advice. “APhA appreciates CMS’ efforts to end the uncertainty and lack of drug cost transparency at the pharmacy caused by retroactive DIR fees,” the organization wrote in a statement.
Between 2010 and 2020, CMS reported that retroactive DIR fees increased by a staggering 107,400%.
These price concessions negotiated between PBMs and pharmacies participating in Medicare Part D networks are assessed weeks, or even months, after Part D beneficiaries’ prescriptions are filled. Retroactive DIR fees resulted in pharmacies realizing only long after the prescription was filled that they did not recoup their costs. These retroactive fees also resulted in patients paying more at the pharmacy counter for their prescription drugs.
CMS’ final rule does not remove DIR fees, but instead moves them to the point-of-sale negotiated price. This change in policy benefits patients by lowering out-of-pocket costs and helps pharmacists increase predictability, consistency, and transparency.
More work to be done
“Eliminating the retroactive use of DIR fees is a step in the right direction, but it’s only the tip of the iceberg to end PBMs’ business practices that are harmful to patients and hurt our nation’s pharmacies,” said Scott J. Knoer, MS, PharmD, FASHP, APhA executive vice president and CEO.
Though CMS’ rule acknowledged the impact of retroactive DIR fees, it failed to address the transition period for pharmacies from calendar year (CY)2023 to (CY)2024. Medicare Part D beneficiaries will start seeing lower out-of-pocket costs and pharmacies will receive the “lowest possible reimbursement” in 2024. However, PBMs will continue to collect retroactive DIR fees from 2023, which will create significant cash flow issues for pharmacies during the transition.
CMS also did not tackle other PBM policies such as negative reimbursements (through which the PBM reimburses the pharmacy less than it costs to acquire the drug) and “patient steering” for brand, generic, and specialty drugs to PBM-affiliated pharmacies.
“Although it provides some predictability for pharmacies, more action is needed to address PBMs’ anticompetitive practices that are impacting the viability of neighborhood pharmacies,” said Theresa Tolle, BSPharm, FAPhA, APhA president.
Please see APhA’s website for more details.