House Lawmakers To CMS: Make Plans Share More Part D Rebates With Beneficiaries

Published by Inside Health Policy

A bipartisan group of 54 House lawmakers on Oct. 3 asked CMS to force plans and pharmacy benefit managers to give Part D beneficiaries a larger share of rebates, discounts and pharmacy price concessions. Although consumers are the focus of the letter, Pharmaceutical Care Management Association President and CEO Mark Merritt said pharmacies, which are trying to get out of paying discounts, would be the true beneficiaries of the proposed policies. Pharmacies counter that pharmacy benefit managers are charging fees that put pharmacies in the red and aren’t passed to beneficiaries.

Rep. Buddy Carter (R-GA) spearheaded the letter that says CMS isn’t using its power to police the opaque system of rebates, discounts and price concessions. The law gives CMS the “authority to negotiate the terms and conditions of the proposed bid submitted and other terms and conditions of a proposed plan.”

“The Act also requires plan sponsors to ‘provide enrollees with access to negotiated prices’ that ‘take into account … discounts, direct or indirect subsidies, rebates, and direct or indirect remunerations, for covered Part D drugs, and include dispensing fees for such drugs’,” the letter states.

The letter to HHS and CMS says the agency could accomplish that goal without violating a central tenet of the Part D program that bans CMS from interfering in negotiations over drug rebates and discounts, but Merritt said that’s arguable. Three years ago, lawmakers in both parties attacked CMS for a proposal that included a measure many lawmakers, mostly Republicans, said violated that non-interference clause. That proposal, which the agency dropped due to the backlash, called for opening preferred pharmacy networks to all pharmacies that accept the terms of those networks. That failed proposal differs from what lawmakers are now urging CMS to do, but Merritt said a key similarity is that both approaches would have CMS interfere in negotiations among stakeholders where the law prohibits the agency from interfering.

“It’s unusual to see Republicans pushing for new health mandates just to help one special interest group,” Merritt said, adding that the request runs counter to the administration’s efforts to cut red tape.

The letter predominantly has to do with the direct and indirect remuneration fees that pharmacy benefit managers use to reduce ingredient and dispensing costs for Part D plans, sources said. Those fees have tripled since 2010, and CMS this year reported that they’re not shared with consumers.

Medicare makes lump sum payments to private insurers for delivering prescription drug benefits to beneficiaries. After the point of sale, these plans or their pharmacy benefits managers often receive additional compensation, such as rebates or concessions from pharmacies.

Senior Care Pharmacy Coalition President and CEO Alan Rosenbloom praised lawmakers for prodding CMS to do its job of overseeing the private deals that are supposed to benefit beneficiaries. He said Carter is among a growing number of lawmakers who are aware of the subtleties in drug pricing and the impact of middlemen on pharmacies and consumers.

However, Rosenbloom cautions against a laser focus on direct and indirect remuneration. He said there are several other ways pharmacy benefit managers can take advantage of pharmacies, and CMS’ authority under current law, highlighted in the letter, gives the agency the power to restrict pharmacy benefit managers from taking advantage of pharmacies and to make the opaque system more transparent. If CMS were to clamp down on direct and indirect remuneration, pharmacy benefit managers could merely increase other fees, such as quality or performance fees. Pharmacy benefit managers also charge claims processing fees when claims are submitted, and pharmacy benefit managers often insist on contracts that let them change the pay rate for drugs daily.

If CMS doesn’t police the entire system, pharmacy benefit managers will merely hike other fees or lower pharmacy reimbursement in place of direct and indirect remuneration, Rosenbloom said.

He added that CMS has taken steps to police the system, but it needs to do more. The agency recently outlined parameters for pharmacy benefit managers’ contracts with pharmacies. CMS requires daily reports on changes to the pay rate for dispensing generic drugs. The proposal aims to give in-network pharmacies information about the rates they’ll receive each day. Pharmacy benefit managers are supposed to change the rate they pay pharmacies only when market conditions justify it, but pharmacies have no idea what is behind those changes.

CMS hasn’t enforced that rule. Pharmacy benefit managers often make it difficult for pharmacies to access the data on dispensing rates, and they provide that data in electronic formats that don’t allow pharmacies to import it into their systems. Pharmacy benefit managers are technically providing the information, Rosenbloom said, but the data is often useless to pharmacies. — John Wilkerson (

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