Tester Introduces Bipartisan Legislation to Bring Accountability to Pharmacy Benefit Managers, Protect Consumers and Small Businesses

Senator's legislation will eliminate retroactive "clawback" fees

To combat rising drug prices and the predatory practices of Pharmacy Benefit Managers (PBMs), U.S. Senator Jon Tester introduced bipartisan 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.”

The legislation is cosponsored by Sens. Shelley Moore Capito (R-W.Va.), Sherrod Brown (D-Ohio), James Lankford (R-Okla.), Roger Marshall (R-Kans.), and Cindy Hyde-Smith (R-Miss.), and the introduction was praised by pharmacies across Montana:

“We applaud Senator Tester on his work on legislation to bring forth much needed DIR fee reform,” said Logan Tinsen, Chair of the Montana Pharmacy Association Board of Directors. “By eliminating ‘claw backs’ and ensuring DIR fees are final at the point of sale, this will ensure our independent pharmacies stay healthy. These pharmacies are important to rural Montana and the patients we serve.”

“Senator Tester continues to fight for small businesses like mine,” said Karen Dove, Owner of Seeley Swan Pharmacy in Seeley Swan. “Access to life saving medication should not be left in the hands of middlemen PBMs. It should be left to healthcare professionals. This bill will allow us to continue to serve our patients and our community.”

“As a rural pharmacist in Montana, I don’t agree with any DIR fees,” said Nicole Seraday, Owner of Castle Mountain Drugs in White Sulphur Springs. “If Senator Tester can go to bat to ensure small pharmacies can continue to serve our patients and communities, then it will be a huge step in the right direction.”

“As a 2nd generation pharmacist, I want to thank Senator Tester for his efforts to ensure rural pharmacies continue to serve our patients and communities,” said Leanna Schwend, Co-Owner/Pharmacist at the Yellowstone Pharmacy in Forsyth. “This legislation is a huge step in the right direction, and I thank Senator Tester for looking out for us.”

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.