FMI Lauds Introduction of Pharmacy DIR Reform Bill

On May 27, Sen. Jon Tester (D-Mont.) introduced to the Senate a bipartisan bill that would amend title XVIII of the Social Security Act to reform requirements regarding direct and indirect remuneration (DIR) fees under Medicare Part D.

The Pharmacy DIR Reform to Reduce Senior Drug Costs Act was introduced in the House earlier in the week by Congressman Peter Welch (D-Vt.).

DIR fees were designed to be applied at the point-of-sale to reduce the cost of prescription drugs for Medicare beneficiaries; however, industry associations, including FMI–The Food Industry Association, have said a vast majority of DIR fees are clawed back from pharmacies by pharmacy benefit managers (PBMs) long after a drug has been dispensed to the customer. According to the federal government, DIR fees charged to pharmacies increased by an 45,000% from 2010 to 2017.

Andy Harig, VP of tax, trade, sustainability and policy for FMI, told WGB after a “Day in Washington” event earlier this year that these fees have made it difficult for pharmacies to operate, with many struggling to make money or break even and others shuttering their doors. “We have a tough time really understanding where our margins are going to be because of that, because essentially a month after the fact, you could be dealing with a different set of numbers based upon the formulas that the PBMs provide vs. when you would dispense the drug,” Harig said.

If passed, the Pharmacy DIR Reform to Reduce Senior Drug Costs Act would work to address the transparency and fairness of these fees, requiring that all price concessions (pharmacy DIR fees) be included in the “negotiated price” at the point-of-sale to a Medicare beneficiary so that a senior’s cost-sharing for drugs under Medicare Part D will reflect all possible discounts. Additionally, plans and PBMs would no longer be permitted to use their own arbitrary performance measures to justify the excessive growth of pharmacy DIR fees. Instead, the legislation would require the Department of Health and Human Services to develop and oversee standardized, evidence-based measures to assess the performance of a pharmacy in a manner that is specific to the pharmacy type (specialty, retail, etc.) and the drugs a pharmacy dispenses and manages. 

“Health plans and their PBMs attribute the excessive growth of DIR fees to pharmacy performance assessments, but the assessments and metrics lack transparency, are arbitrary, and have no oversight—all areas this legislation attempts to address,” FMI President and CEO Leslie Sarasin said. “By putting a stop to the predatory practice of imposing fees on pharmacies long after the point-of-sale while charging patients more up front for their drugs, this legislation would generate savings and create pricing transparency for both pharmacies and their patients. FMI thanks the bill sponsors for their leadership and looks forward to working with them to advance this legislation."

Sarasin added that nearly one-third of FMI’s members rank pharmacy DIR fees as having among the most negative effect on their sales and profits. “As a result, some FMI members have shuttered or sold their pharmacies while others are considering having to do so in the future, leading to significantly reduced access for consumers,” she said.

In a joint release, allied pharmacy trade associations, including FMI and the National Grocers Association, said, "DIR fees are exerting unnecessary and devastating pressures on patients, on pharmacies, and on communities—particularly the most vulnerable and the underserved. We welcome the introduction of the Pharmacy DIR Reform to Reduce Senior Drug Costs Act, and we urge its passage this year."