U.S. Senators Urge OMB to Lower Prescription Drug Costs for Seniors

Apr 15 · Advocacy

Letter Asks Office of Management and Budget (OMB) to Act Swiftly to Review CMS’ Pharmacy DIR Fee Reform Proposal Which Will Lower Costs for Older Ohioans, Support Community Pharmacies  

CMS Issued Proposed Rule Following Senators’ Letter, Proposed Rule Now Under Review at OMB

WASHINGTON, DC – Today, U.S. Senators Sherrod Brown (D-OH), Shelley Moore Capito (R-WV), Jon Tester (D-MT), and James Lankford (R-OK), sent a letter urging the Office of Management and Budget (OMB) to move forward quickly with review of the Centers for Medicare and Medicaid Services’ (CMS) proposed rule to lower out-of-pocket prescription drug costs for seniors by bringing so-called pharmacy direct and indirect remuneration (DIR) fees under control. The senators are urging OMB to review this rule so that these important reforms can be implemented as quickly as possible. CMS issued the rule following a letter from the senators to either work with Congress to eliminate DIR fees to help lower prescription drug prices for Medicare Part D beneficiaries or take administrative action to address the problem.

“Finalizing CMS’ DIR fee reform proposal will help save Medicare Part D beneficiaries more than $20 billion in prescription drug costs, while also providing increased transparency and predictability for pharmacies and the communities they serve. We urge you to move forward with review of this rule so that these important reforms can be implemented as quickly as possible,” wrote the senators.

DIR fees, which are often levied on community pharmacies retroactively by middlemen companies known as Pharmacy Benefit Managers (PBMs), increase the cost of prescription drugs for older Ohioans at the pharmacy counter and make it harder for local pharmacies in Ohio to serve their communities.

CMS’ proposed rule would improve price transparency and competition in the Medicare Part D program, thereby reducing out-of-pocket costs for the nearly 2 million Part D beneficiaries in Ohio. The rule would require Part D plans and their PBMs to apply all discounts they receive at the point of sale so that those paying for drugs at the pharmacy counter can benefit from those discounts. This policy is estimated to reduce prescription drug costs for Part D beneficiaries by $21.3 billion over the next 10 years.

In some cases, fees from PBMs can be so high that small pharmacies can go out of business. A recent report shows that DIR fees total $11.2 billion a year – up from $200 million in 2013 – and, according to Ernest Boyd, the Executive Director of the Ohio Pharmacists Association, over the last two years, 250 independent pharmacies in Ohio have closed. In today’s letter, the senators also encourage the Biden Administration to take additional steps to ensure the comprehensive reform and transparency requirements necessary to address any remaining anticompetitive tactics employed by supply chain middlemen that could threaten beneficiary access to care in the future.

In October, the senators sent a letter urging CMS to either work with Congress to eliminate DIR fees to help lower prescription drug prices for Medicare Part D beneficiaries or take administrative action to address the problem. CMS committed to taking action in its response to the Senators’ letter, and the proposed rule released on January 6, 2021 represents its formal proposal to address this issue. OMB is now reviewing the CMS proposed rule.

The full text of the letter is available here and below.

The Honorable Shalanda Young
Director, Office of Management and Budget
725 17th Street NW
Washington, DC 20503

Dear Director Young:

We write in support of the Centers for Medicare and Medicaid Services (CMS) proposal to help lower the cost of prescription drugs for Part D beneficiaries through certain pharmacy direct and indirect remuneration (DIR) fee reform in Medicare, included in its proposed rule for Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Program (CY23 proposed rule), which is now at the Office of Management and Budget (OMB) for review. Comprehensive DIR fee reform will help to lower costs for the more than 48 million beneficiaries enrolled in Medicare Part D, which is why we urge you to prioritize and efficiently review CMS’ CY23 proposed rule, particularly the provisions related to DIR fee reform, so that CMS can finalize and implement DIR reform for the FY23 contract year, helping to both lower costs for Medicare beneficiaries and provide certainty for pharmacies and the communities they serve.

According to the CMS, pharmacy DIR fees grew more than 107,400 percent between 2010 and 2020. As these fees have increased in size and scope, they have contributed to the rising cost of prescription drugs costs for patients and the closure of hundreds of pharmacies in communities across the country. Pharmacy DIR fees applied after the point-of-sale artificially increase patients’ out-of-pocket costs for Part D drugs, which is why CMS’ proposed reforms to bring these fees to the point-of-sale are expected to reduce seniors’ out-of-pocket prescription drug costs by $21.3 billion over 10 years. CMS’ proposed policy will also ensure additional transparency and help provide pharmacies with the certainty they need to provide high quality care for underserved and at-risk communities. Finally, the CMS proposal would help prevent retroactive pharmacy DIR fee claw-backs and provide certainty for pharmacies and patients at the point of sale. Allowing CMS’ proposed pharmacy DIR fee reform proposal to move forward will not only lower costs for seniors and individuals with disabilities across the country; it will help sustain beneficiary access to pharmacies and the essential services they provide. We urge you to review the CY23 proposed rule as quickly as possible so that CMS has time to finalize and implement pharmacy DIR fee reform in the Medicare program in advance of contract year 2023 and help put an end to post-sale concessions charged to pharmacies, including those assessed in the Medicare coverage gap.

Finalizing the CMS rule to rein in DIR fees and lower costs for consumers is an important first step; however, more can and should be done to deliver comprehensive pharmacy DIR fee reform. Additional efforts to standardize pharmacy performance metrics, ensure reasonable reimbursement, and protect the rights of pharmacies who wish to participate in Medicare Part D are necessary to maintain robust pharmacy networks and protect patient choice.

We support CMS’ continued efforts to address these remaining challenges, and we encourage you to work closely with CMS to ensure the final rule includes the comprehensive reform and transparency requirements necessary for CMS to address any remaining anticompetitive tactics employed by supply chain middlemen that could threaten beneficiary access to care in the future.

Finalizing CMS’ DIR fee reform proposal will help save Medicare Part D beneficiaries more than $20 billion in prescription drug costs, while also providing increased transparency and predictability for pharmacies and the communities they serve. We urge you to move forward with review of this rule so that these important reforms can be implemented as quickly as possible.

Thank you for your attention to this important matter.

Sincerely,

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