Tester Successfully Fights to Lower Drug Costs After Biden Administration Agrees to Close Loophole That Was Jacking Up Prices

Effort is expected to reduce costs for Medicare beneficiaries by $21.3 billion over 10 years

After a bipartisan effort, U.S. Senator Jon Tester announced today that he has successfully pushed the Biden Administration to lower prescription drug costs for Montana seniors by closing a Center for Medicare and Medicaid Services (CMS) loophole that allowed Pharmacy Benefit Managers (PBMs) to retroactively charge excessive fees. This will benefit patients by lowering out-of-pocket costs and help rural pharmacies stay in business by increasing predictability and transparency.

“Folks across Montana have seen the price of prescription drugs skyrocket over the past several decades, and bureaucrats in Washington have failed to take action,” said Tester. “Pharmacy Benefit Managers (PBMs) have been preying on our pharmacies and Medicare patients for years, but after working with this Administration and my colleagues across the aisle, we’ve finally succeeded in holding PBMs accountable. With the support of Montana’s patients and providers alike, this new rule will put a stop to predatory practices in the pharmaceutical industry and save billions of dollars in out of pocket costs.”

Under Medicare Part D, pharmacy middlemen known as Pharmacy Benefit Managers (PBMs) required additional payments from pharmacies after the drug is sold to the patient that changes the final cost of the drug. These are called DIR fees. In recent years, these middlemen have increasingly returned to pharmacies days or even months after the final sale to demand more in DIR fees. From 2010 to 2020, CMS documented a 107,400 percent increase in DIR fees paid by pharmacies.

Following Tester’s bipartisan push, starting in the fall of 2021, CMS announced last week they would be finalizing a rule to stop all retroactive direct and indirect remuneration (DIR) fees. CMS’ finalized rule would improve price transparency and competition in the Medicare Part D program, thereby reducing out-of-pocket costs for Montanans. 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.

Tester pushed hard for CMS to take administrative action after introducing bipartisan legislation last year to combat the high cost of prescription drug prices and the predatory practices of PBM). Tester’s legislation, the Pharmacy DIR Reform to Reduce Senior Drug Costs Act, would ensure that all DIR fees are made clear at the point of sale, eliminating the retroactive nature of DIR clawback fees.