Q: How do DIR fees drive up costs for prescription drugs?
A: Sticker shock at the pharmacy counter continues to hammer patients when they pick up their prescription medicines. Coupled with historic inflation that pushed up prices for groceries, rent and gas, U.S. households are stretched thin to afford their medications. Iowans may not realize the sticker shock at the pharmacy counter goes both ways. Community pharmacies are being pinched by excessive fees and surprise bills that are forcing some of them to close their doors. These fees and bills come from middlemen called pharmacy benefit managers (or PBMS) who are often vertically integrated with a large chain store pharmacy. So-called direct and indirect renumeration (DIR) fees took root from a loophole in Medicare regulations intended to reward quality care not harm it. It fostered an opaque payment scheme that forces pharmacies to make retroactive “clawback” payments for filling Medicare prescriptions, sometimes long after the patient received the medication. According to the Centers for Medicare and Medicaid Services (CMS), the use of DIR fees has exploded by 107,400 percent between 2010 and 2020. Now that’s sticker shock. Closing the loophole that enabled DIR fees to explode would save patients tens of billions of dollars from inflated out-of-pocket costs over the next decade and give pharmacies more predictability. What’s more, lowering prescription drug costs for patients will help ensure patients are taking their medications as prescribed by their health care provider, resulting in better outcomes, fewer hospital stays and taxpayer savings in the long run.
From my committee assignments in the U.S. Senate, I’m leading efforts to drive down the cost of prescription drugs. Specifically, I’m working to deliver a dose of common sense to these federal regulations that will have a detrimental impact on pharmacies integral to our health care system, particularly in Rural America. Pharmacy closures in rural areas would pull the rug out from patients who may no longer have access to a local pharmacist to provide essential health care services. According to one recent study by Drake University and the University of Iowa Carver College of Medicine, nearly 100 pharmacies in Iowa have closed their businesses since 2008. What’s more, rural pharmacies accounted for 75 percent of the closures, reflecting a shrinking footprint of community pharmacies. If this trend continues, our state could see a pharmacy desert that leaves rural residents high and dry. Although mail-order services are an option, prescriptions take time to deliver and don’t give patients the benefit of having the opportunity to have a face-to-face consultation with a pharmacist.
Q: What are you doing to help community pharmacies stay in business?
A: Throughout the last year, I’ve supported a bipartisan effort urging the Biden administration to end the unsustainable growth in DIR clawback fees. As former chairman of the Senate Finance Committee with jurisdiction over Medicare policies, I spokedirectly with the CMS Administrator to take urgent action ahead of the final rule that will hit rural drugstores and their patients on Jan. 1, 2024. That’s because the transition to a new and much-needed regulatory update to Medicare will put pharmacies and patients between a rock and a hard place, what many in the industry are calling a DIR cliff. As Iowa’s senior U.S. Senator, I’m pulling out all the stops to prevent our community drugstores from getting pushed off the cliff because of unfair reimbursements and unreasonable payment arrangements involving CMS and powerful PBMs.
If the Biden administration doesn’t take action before the New Year, a combination of lower reimbursements and high clawback risks will create cash flow challenges for community pharmacies. So, I’ve been pressing CMS and PBMs to work with drugstores so they can keep their employees on the payroll, keep their doors open and lights on and continue serving patients. Iowans share their concerns about community pharmacy closures during my annual 99 county meetings across the state. Following my call with the CMS Administrator, I’m glad CMS on November 6 finally issued a public memo to Part D plans and their PBMs, acknowledging pharmacies’ concerns and backing the adoption of some solutions I’ve proposed. This is what I’ve been asking the agency to do for months. This is good news, but action better follow suit. CMS and PBMs need to step up and do what’s right on behalf of Medicare patients and the pharmacies they depend on to get prescription drugs, receive preventative care and other essential health care services. In the meantime, I’ll continue pushing to get my bipartisan legislation to boost transparency and hold PBMs accountable across the finish line in the 118th Congress.