Study: DIR Fees Harmful to All Except PBMs

Additionally, DIR fees provide PBMs with financial incentive to dramatically increase, rather than decrease, drug costs, the study found. PBMs have long vowed to decrease costs for patients and the healthcare system through implementing various tools.

However, percentage-based DIR fees encourage PBMs to increase costs so they can claw back a larger amount of money from pharmacies. In cases with Mylan, Novo Nordisk, and Amgen, PBMs pressured the manufacturers to increase drug costs through the demand for higher rebates and fees, which the PBMs keep a portion of, according to the report.

Higher drug costs, in turn, increase out-of-pocket costs for patients, pharmacies, and insurers. These costs may cause pharmacies to shut down businesses, and could result in patients struggling to pay for their medication.

Federal lawmakers have only begun to understand the impact of DIR fees on Americans. The CMS previously voiced concerns over negotiated price reporting where plan sponsors, which are sometimes PBMs, were failing to report DIR fees as price concessions included in the negotiated price, according to the report.

The negotiated price is the payment that pharmacy providers will receive for a certain drug claim. By reporting these fees in varied ways, the CMS feels that Part D pricing data may be inaccurate, and may lead to further issues with bidding and cost reporting.

In response, the CMS revised the definition of negotiated price to ensure the data was standardized, and providers could receive an accurate picture of how they would be reimbursed. However, several opponents of the changes challenged the CMS, alleging that the proposed regulations would violate federal law.

Although the revisions were not adopted, Senators and Representatives have tried to persuade CMS to move forward to increase the availability of accurate data for beneficiaries, according to the study.

More recently, lawmakers introduced a bill to stop the use of DIR fees by Part D sponsors and PBMs, but it expired at the end of 2016. However, it is very likely that the bill will be reintroduced this year due to mounting concerns over DIR fees and increasing drug costs.

The authors wrote that the implementation of DIR fees benefits only PBMs, with Medicare, patients, and providers bearing the costs. These fees are not based on Medicare regulation, and may even violate federal laws, according to the study.

DIR fees result in overall Medicare spending, which is paid by taxpayers, and inflates negotiated prices due to inaccurate reimbursement claims.

To prevent further harm to Medicare patients who may stop taking their prescribed medications due to high costs, CMS and lawmakers must take action against PBM DIR fees, according to the authors. The Obama administration started the scrutiny of these actions, and it is up to the Trump administration to continue expressing concerns over the lack of transparency and drug costs, the study concluded.

“The dirty little secret is that PBMs—once seen as the key to controlling drug costs—are actually driving them up for everyone,” said Ted Okon, executive director of COA, in a press release. “As we begin to focus on the cost of drugs, part of the conversation must be DIR Fees, another example of a made-up, contrived tool used by PBMs to feed profits at the expense of patients, the Medicare program, and Pharmacy Providers. President Trump has vowed to tackle prescription drug costs—a good place to start is looking at what the PBMs are doing to fuel those costs.”

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