Administration to Lower Drug Costs for Montana Seniors, Protect Rural Pharmacies Following Tester Push

Centers for Medicare and Medicaid Services response comes after Senator’s called for action on his legislation to eliminate “clawback” fees

Following an aggressive push, U.S. Senator Jon Tester announced that the Centers for Medicare and Medicaid Services (CMS) agreed to help lower prescription drug costs for Medicare Part D beneficiaries by taking administrative action to address direct and indirect remuneration (DIR) fees.

Tester pushed hard for CMS to take this action after introducing bipartisan legislation earlier this year to combat the high cost of prescription drug prices and the predatory practices of corporate middlemen known as Pharmacy Benefit Managers (PBMs). Tester’s legislation, the Pharmacy DIR Reform to Reduce Senior Drug Costs Act, ensures that all pharmacy price concessions are made clear at the point of sale, eliminating the retroactive nature of DIR clawback fees. CMS estimates this change will save Medicare beneficiaries an estimated $7.1 to $9.2 billion in reduced cost sharing.

“Rural pharmacies are a cornerstone of Montana communities, and they’re critical to making sure folks in our frontier communities can access the medications they need to stay healthy,” said Tester. “But Montana’s small pharmacies are being hit with hidden fees charged by corporate middlemen, driving up drug costs for Montana seniors and families. I’m glad the Administration has agreed to work with me to lower costs, and I’m going to keep pushing to hold CMS accountable and make sure this forthcoming rule has real teeth that will protect Montana pharmacies and patients.”

Under Medicare Part D, Medicare makes payments to private Part D insurers for delivering prescription drug benefits to Medicare beneficiaries. Often, the Part D insurer or its PBM receives additional payments after the drug is sold to the patient that changes the final cost of the drug. These are called DIR fees.

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

In October, Tester and a bipartisan group of his colleagues sent a letter urging CMS to work with Congress to address DI fees to help lower prescription drug prices for Medicare Part D beneficiaries.

“We write today to discuss our serious concerns about the impact direct and indirect remuneration (DIR) fees are having on the cost of drugs for Medicare Part D beneficiaries and pharmacy bottom lines,” wrote the Senators. “We urge you to work with Congress to require pharmacy price concessions, payments, and fees be included at the point-of-sale under Part D of the Medicare program. It is time we stand up for seniors and address this broken system that sees people paying far too much for prescription drugs.”

They concluded: “We also note that Congress already provided the Centers for Medicare and Medicaid Services with sufficient authority to make the necessary changes administratively. With multiple avenues available to fix this problem, it is imperative that we work together to reform DIR fees, reduce drug costs, and protect pharmacies.”

More information about the legislation can be found HERE.

The Senators’ full letter can be found below or HERE.