Pharmacy Groups: DIR Fee Reform Needed in Drug Pricing Executive Order

President Trump recently signed 4 executive orders on drug pricing, directing the Secretary of the Health and Human Services (HHS) Alex Azar to take action to lower costs for patients on prescription drugs.

The executive order focused on pharmacy benefit managers (PBMs) and the process by which PBMs negotiate discounts, sometimes up to 50%, on the list price of drugs that work in their favor and allow them to collect large rebate checks; Medicare patients, on the other hand, continue to overpay for their medications.¹

Though the administration’s executive order would conceivably save many patients covered under the Medicare Part D program hundreds or thousands of dollars per year, it fails to implement stipulations addressing the impact that DIR fees are having on the viability of American pharmacies. ^1,2

Several pharmacy organizations are urging the Trump Administration to do away with direct and indirect remuneration (DIR) fees in the Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen.¹

“Our organizations write to reiterate the urgent need to include a provision to address pharmacy [DIR] fees as you work to implement the Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen, more commonly discussed as the ‘rebate rule’,” wrote the National Association of Community Drug Stores (NACDS), the American Pharmacists Association (APhA), the National Community Pharmacists Association (NCPA), the National Association of Specialty Pharmacy (NASP), the Food Industry Association (FMI), and the National Grocers Association (NGA) in a letter to HHS Secretary Alex Azar.²

In addition to eliminating kickbacks for middlemen, the executive orders require federally qualified health centers that purchase insulins and epinephrine in the Medicare 340B program to pass the savings from discounted drug prices directly on to medically underserved patients.

The orders also finalize a rule allowing states to develop safe importation plans for certain prescription drugs and creates a pathway for “safe personal importation through the use of individual waivers to purchase drugs at lower cost from pre-authorized US pharmacies,” HHS said.

“Pharmacy DIR fees are growing beyond CMS’ projection of 10% year-over-year,” the groups stressed. “This growth of pharmacy DIR fees is especially unsustainable during the current COVID-19 PHE when our members, representing every aspect of the pharmacy industry, care for patients, while also providing desperately needed access to COVID-19 tests and related services,” they wrote.

“As the Administration continues to work towards the goal of reducing the costs of drugs for the consumer, we request you consider the current situation where pharmacies are under immense and unfair financial pressure and patients pay higher out-of-pocket costs for medications they need without benefiting from lower prices at the pharmacy counter,” the groups added.

The rebate rule cannot go into effect without, at a minimum, ensuring that retroactive pharmacy DIR fees are eliminated, “therefore saving Medicare beneficiaries at least $7.1 to $9.2 billion in reduced cost sharing over 10 years,” the organizations asserted.

“If pharmacy DIR fees are not addressed in a forthcoming rebate rule, the impact on our members and their ability to care for patients in such a system will prove detrimental,” they added.

Unless Congress acts, the order in its current form would take effect on August 24, 2020.³

References:

1. Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen. July 24, 2020. Accessed July 30, 2020. https://www.whitehouse.gov/presidential-actions/executive-order-lowering-prices-patients-eliminating-kickbacks-middlemen/
2. Pharmacy DIR Fee Reform Inclusion with Administration Executive Order. July 28, 2020. Accessed July 30, 2020. https://ncpa.org/sites/default/files/2020-07/PharmacyOrgsRebateRuleEODIRResponse.7.28.20.pdf
3. Trump Administration announces historic action to lower drug prices for Americans. HHS; July 24, 2020. Accessed July 30, 2020. https://www.hhs.gov/about/news/2020/07/24/trump-administration-announces-historic-action-lower-drug-prices-americans.html#:~:text=The%20President%20signed%20four%20Executive,price%20possible%20for%20their%20drugs.