Millions of American seniors would soon receive price reductions on their prescription drugs during a renewal of Medicare fees by a federal authority.
But even as pharmacy executives devised ways to avoid that multi-billion dollar fix, the Biden administration suddenly backtracked late on Friday afternoon. Centers for Medicaid and Medicare Services delayed proposed changes until at least 2024.
“CMS has once again bowed to PBMs and their insurance companies affiliated with the companies,” said the head of a national group treating cancer patients, Ted Okon.
“The integration and consolidation between PBM and insurance companies has given them extraordinary market power, even over the federal government. CMS has the clear regulatory power to stop fee abuse but refuses to use it.”
The three largest PBMs, intermediaries in the tangled network of drug pricing and distribution, control about 80% of the market. These Fortune 15 companies include health insurance companies.
The trade group for PBM – Pharmaceutical Care Management Association – applauded the deal.
“This extra year will help reduce disruption to Medicare recipients by giving Part D plans time to adjust their pharmacy performance payment agreements,” said Greg Lopes, the association’s vice president of strategic communications.
More than 50 million people are enrolled in either a Medicare Advantage plan with prescription drug coverage or stand-alone Medicare Part D, the federal prescription drug program for those 65 and older.
What are these unclear fees that cause Medicare drug price increases?
Drive the controversy: an obscure assessment in pharmacies called direct and indirect compensation charges. These DIR fees zoomed up by 91,500% between 2010 and 2019, CMS calculated. Fees increased to $ 11.2 billion per year, up from $ 200 million in 2013.
The agency’s administrator, Chiquita Brooks-LaSure, called the fee increases “worrying” when she announced the potential change to the federal rule in December. The agency said its proposal would save Medicare recipients $ 21.3 billion over 10 years, a cost savings of 2%.
In its press release on Friday, announcing the changes, the agency said the change “promotes CMS’s strategic vision to expand access to affordable health care and improve health in Medicare Advantage and Part D through lower prescription drug costs and improved consumer price protection.”
A couple of weeks before the delay was announced, a spokesman for the agency told The Dispatch: “CMS is determined to continue working with Congress and other stakeholders to ensure that senior Americans and those with disabilities served by the Medicare program have access to quality, affordable healthcare and reduce the cost of prescription drugs to make them more accessible to people with Medicare. “
The belated response overwhelmed Scott Knoer, president of the American Pharmacists Association:
“We have a fleeting win that does not mean much since Goliath changed the pitch while we were on the way to the goal. It is better for transparency but does not solve the problems with DIR (fees).”
PBMs already planning roads around the new federal pricing rules
Perhaps the worst aspect of the DIR fees for pharmacists: They are assessed retroactively, sometimes months after the Medicare recipient refills the prescription, and their amount can not be determined. In theory, the rule change of one and a half years would require that the fees be assessed at the point of sale.
But PBM is using its dominant position in the market to demand new take-it-or-let-it contracts for medicines provided by local pharmacies.
For example, CVS Caremark included an “escalator clause” in its new pacts last year that essentially allows PBM to simply increase its fees to compensate for any changes in DIR fees. In a March update that The Dispatch watched, Caremark gives himself the power to unilaterally amend the contract “to preserve the relative economy” for all parties that exist before any CMS intervention.
Express Scripts Inc. has done much the same thing, informing pharmacies about contract changes that would take effect if CMS acts.
The new language, contained in a confidential seven-page document obtained by The Dispatch, includes a sweeping language that gives PBM broad powers. The contract states: “ESI may, in its sole discretion, apply different prices and fees.
Due to a maze of transactions, the calculation of DIR charges often varies from PBM to PBM and from contract to contract. Many derive from quality measures for pharmacies that many experts and members of Congress consider irrelevant. Some are based on the cost of pharmaceutical ingredients.
Okon, executive director of the Community Oncology Alliance, called PBM’s characterization of DIR fees as value-based contracts a “manufacturing”. Instead, the fees are a tactic “to empty pharmacies” and create pharmacy searches in many inner cities and rural areas in the United States, he said.
PBM says that if drug costs are reduced for seniors whose prescriptions are covered by Medicare, prices for all recipients must go up to compensate for that reduction. Critics pan with the zero-sum game and say that PBMs and health insurance companies are cost-shifting – which means that the sick subsidize health insurance for everyone.
Sherrod Brown’s request for two-pronged senators to cut drug prices has now been rejected
Late. Sherrod Brown, an Ohio Democrat whose October request helped trigger the proposed changes, sent a letter to the federal government last month in which he tried to interrupt the maneuver after Dispatch eventually wrote about PBM’s attempt.
Also signs the letter: Sens. Shelley Moore Capito, R-West Virginia, Jon Tester, D-Montana, and James Lankford, R-Oklahoma.
The proposed change to the CMS rule “will not only reduce costs for seniors and people with disabilities across the country; it will help maintain the beneficiary’s access to pharmacies and the key services they provide,” the two-party quartet wrote.