CMS Proposes Regulation to Reform DIR fees

Jan 10, 2022

On January 6, CMS issued a proposed rule (see pages 212-238) that would reduce unpredictability for pharmacies created by PBMs and health plans taking post point of sale “clawbacks” of uncertain amounts up to several months after the pharmacy counter transactions.

  • While the primary projected impact would be to create stability, CMS “assumes” that pharmacy business decisions resulting from the rule “will result in a slight increase in pharmacy payments of 0.1-0.2 percent of Part D gross drug cost.” (see page 313).

CMS, in the proposed rule:

  • Would redefine the negotiated price as the baseline, or lowest possible, payment to a pharmacy, effective January 1, 2023.
    • All price concessions from network pharmacies, negotiated by Part D sponsors and their contracted PBMs, would have to be reflected in the negotiated price that is made available to the patient at the point-of-sale and reported to CMS on a PDE (prescription drug event) record through the plans applying all the price concessions at that sales point. 
  • Estimates that the proposal will, over 10 years:
    • Reduce beneficiary cost sharing by $21.3 billion;
    • Increase Part D costs for the government by $40 billion due to increases in direct subsidy and low-income premium subsidy payments; and
    • Save manufacturers $14.6 billion.
  • States in page 213 of the proposed rule (see also its fact sheet and press release) that pharmacy price concessions, net of all pharmacy incentive payments, grew more than 107,400 percent between 2010 and 2020.

Recreating TABLE 3: PHARMACY PRICE CONCESSIONS BY YEAR (2010–2020) on p. 213:

Contract Year Total Pharmacy Price Concessions % Change
2010 $ 8,869,347 -
2011 $ 8,582,354 -3.2%
2012 $ 68,086,163 693.3%
2013 $ 228,573,206 235.7%
2014 $ 538,421,239 135.6%
2015 $ 1,719,179,214 219.3%
2016 $ 2,125,460,000 23.6%
2017 $ 4,001,741,355 88.3%
2018 $ 6,339,517,817 58.4%
2019 $ 8,130,024,785 28.2%
2021 $ 9,535,197,775 17.3%
  • NCPA called the proposed rule an “encouraging development” and its release comes after years of growing concerns and advocacy before Presidential Administrations, CMS and Congress. The Physician/patient advocacy group Community Oncology Alliance (COA) has also been critical of PBMs and DIR fees and today issued an initial overview, saying the proposed rule has “interesting implications for pharmacy providers, including community oncology practice”. COA also concludes: “Lastly, CMS notes that this policy does not violate the noninterference clause given that it “only directly impacts the price that is used to determine beneficiary cost-sharing and the information that is populated and reported on the PDE record, but it does not dictate the amount that is ultimately paid to the pharmacy or the timing of payments and adjustments.””
  • Comments are due March 7, and AB GA&P will work closely with our business leaders and industry stakeholders to carefully review the proposed rule and submit comments.