Tester, Capito, Colleagues Introduce Bipartisan, Bicameral Legislation to Bring Accountability to Pharmacy Benefit Managers, Protect Consumers and Small Businesses

(U.S. Congress) – To combat rising drug prices and the predatory practices of Pharmacy Benefit Managers (PBMs), U.S. Senators Jon Tester and Shelley Moore-Capito (R-W.Va.) introduced legislation to protect consumers and small businesses by holding PBMs accountable for retroactively assessing fees on pharmacies.

The Pharmacy DIR Reform to Reduce Senior Drug Costs Act will ensure that all pharmacy price concessions are assessed at the point of sale and eliminate the retroactive nature of direct and indirect remuneration (DIR) clawback fees imposed by PBMs. The Centers for Medicare and Medicaid Services (CMS) estimates this change will save Medicare beneficiaries an estimated $7.1 to $9.2 billion in reduced cost sharing.

“Rural pharmacies are a lifeline to Montana communities, and are often the only place for miles where folks can get the prescriptions they need to stay healthy and safe,” said Senator Tester. “But I’ve heard from pharmacists across our state who are being driven toward bankruptcy by hidden fees charged by corporate middle men. This legislation will mandate transparency and accountability so that we can protect pharmacies and patients and ensure that folks in rural America can continue to get the prescriptions they need.”

“Pharmacists, including those in our small towns and rural areas, play a vital role in keeping our communities healthy – something that is especially true over this past year,” said Senator Capito. “Our legislation will help insure pharmacies remain open and our Medicare patients will continue to have access to the medications and information they need from those they trust.”

The legislation is cosponsored by Sens. Sherrod Brown (D-Ohio), James Lankford (R-Okla.), Roger Marshall (R-Kans.), and Cindy Hyde-Smith (R-Miss.) The House companion bill was introduced by Representatives Peter Welch (D-Vt.) and Morgan Griffith (R-Va.) and is cosponsored by Vicente Gonzalez (D-Tex.), Earl “Buddy” Carter (R-Ga.), Raja Krishnamoorthi (D-Ill.), John Rose (R-Tenn.), Abigail Spanberger (D-Va.), Diana Harshbarger (R-Tenn.), and Jim Cooper (D-Tenn.).

“It is past time that Big Pharma put patients ahead of profits and rebuild trust with Ohio pharmacies, consumers and taxpayers,” said Senator Brown. “There should be more transparency in the process, and we must get serious about lowering drug costs by prohibiting PBMs from price gouging hardworking Ohioans.”

“Oklahoma families need access to quality, affordable medication,” said Lankford. “Hidden fees on pharmacy drug purchases have increased astronomically over the years, which especially hurts Oklahoma families on a fixed income or small, family-owned, and rural pharmacies in Oklahoma. This bill is a step toward addressing just one of the complicated issues that cause skyrocketing drug prices for Oklahomans, and I look forward to working with my colleagues to continue to get at the root causes of these cost increases and end them.”

“Rural pharmacies are essential to the delivery of health care in communities across America,” said Representative Welch. “Vermont’s community pharmacies provide quality service and lifesaving medication to Vermonters every day. Their long-term viability is essential. Retroactive fees make it significantly harder for these small businesses to keep their doors open. Our legislation would put a stop to this practice and help reduce patient costs at the pharmacy counter.”

“Community pharmacies are essential providers for prescriptions in rural areas like Virginia’s Ninth District, but they are threatened by the retroactive fees of pharmacy benefit managers,” said Representative Griffith. “By limiting the ability to demand these fees and increasing transparency in drug pricing determinations, our bipartisan, bicameral bill would help preserve access to prescription drugs for the people in our communities.”

Under Medicare Part D, Medicare makes partially capitated payments to private insurers, also known as Part D sponsors, for delivering prescription drug benefits to Medicare beneficiaries. Often, the Part D sponsor or its PBM receives additional compensation after the point-of-sale that serves to change the final cost of the drug for the payer. These are called DIR fees.

In recent years, PBMs have increasingly returned to pharmacies days or even weeks after the point-of-sale to demand more in DIR fees. From 2010 to 2019, CMS documented a 91,500 percent increase in DIR fees paid by pharmacies.

The Pharmacy DIR Reform to Reduce Senior Drug Costs Act will increase transparency and hold PBMs accountable for retroactively assessing fees on pharmacies by:

• Redefining “negotiated price” under statute to include all pharmacy price concessions at the point-of-sale so that a senior’s cost-sharing will reflect all possible discounts.
• Eliminating the retroactive nature of DIR clawback fees.
• Improving transparency in price concessions and fees by requiring prescription drug plans and Medicare Advantage drug plans to report any pharmacy price concession or incentive payment they apply after the point-of-sale to a pharmacy on at least an annual basis.
• Establish a new pharmacy performance evaluation system to ensure that the measures a prescription drug plan or Medicare Advantage drug plan uses to assess pharmacy performance are fair, reliable, consistent, and transparent.