The Honorable Chiquita Brooks-LaSure, Administrator
Centers for Medicare & Medicaid Services
Department of Health and Human Services
P.O. Box 8013
Baltimore, MD 21244-8013
Re: CY 2023 Medicare Advantage and Part D Proposed Rule (CMS-4192-P)
Dear Administrator Brooks-LaSure:
On behalf of the Board of Directors of the Community Oncology Alliance (“COA”), we are pleased to offer comments on policies outlined in the CY 2023 Medicare Advantage and Part D Proposed Rule (CMS-4192-P) (the “Proposed Rule”).
As you know, COA is an organization dedicated to advocating for the complex care and access needs of patients with cancer and the community oncology practices that serve them. COA is the only nonprofit organization in the United States dedicated solely to independent community oncology practices, which serve the majority of Americans receiving treatment for cancer. COA’s mission since its grassroots founding close to 20 years ago has been to ensure that patients with cancer receive quality, affordable, and accessible cancer care in their own communities where they live and work, regardless of their racial, ethnic, demographic, or socioeconomic status.
Achieving this goal requires federal policies to correct misaligned financial incentives that drive spending and costs for some of the most vulnerable cancer patients: Medicare beneficiaries. For these reasons, COA is pleased to see provisions in the Proposed Rule to include pharmacy price concessions in the definition of “negotiated price” and clarify the definition of “price concessions.” We believe these provisions would increase transparency for both beneficiaries and pharmacy providers, lower beneficiary out-of-pocket costs, and provide greater clarity for pharmacy providers on expected final reimbursement. However, COA remains extremely concerned that the Proposed Rule does not go far enough to protect pharmacy providers, including retail pharmacies and community oncology, urology, and other medical practices with pharmacies and/or in-office dispensing facilities (collectively “Pharmacy Providers”). In the Proposed Rule, Centers for Medicare & Medicaid Services (“CMS”) must close any loopholes and unintended consequences of regulatory changes to prevent the top pharmacy benefit managers (“PBMs”) from using their concentrated market dominance to game the system for their own profits, while threatening the existence of Pharmacy Providers. Additionally, COA asks that CMS ensures that reimbursement provided to Pharmacy Providers is “reasonable and relevant.”
COA is also extremely concerned with proposals by the CMS to give Part D plan (“PDP”) sponsors (“PDP Sponsors”) and their PBMs flexibility about whether to apply pharmacy price concessions to negotiated prices in the coverage gap and about CMS’ clarification regarding pharmacy administrative service fees. Given the unchecked behavior of PBMs, it is likely that they will simply substitute inordinately high “administrative fees” for “direct and indirect remuneration” (“DIR”) fees based on so-called “quality performance programs” such that net reimbursement to Pharmacy Providers will be even lower than it is now, which is why independent Pharmacy Providers are being driven out of business by PBMs. Likewise, with respect to the treatment of negotiated prices during the coverage gap, given the track record of PBMs, we are very concerned that the lack of specific CMS directive related to this issue will allow PBMs to abuse the flexibility CMS proposes. As such, COA believes that additional policies – specifically explained in this comment letter – are necessary to address the negative impact that certain PBM practices have had on Pharmacy Providers and, very importantly, their patients. It is critical that CMS in its well-intended proposal to address the problems of DIR fees in artificially fueling drug costs for Medicare beneficiaries does not make the situation worse for Pharmacy Providers.
Comments on the Proposed Rule
In this letter, COA will provide specific comments, concerns, and recommendations on the following topic areas in the Proposed Rule:
- Inclusion of Pharmacy Price Concessions in Negotiated Price
- Lowest Possible Reimbursement Amount at Point-of-Sale
- Definition of Negotiated Price in the Coverage Gap
- Clarification of Pharmacy Administrative Service Fees and Price Concession
- Clarification on Any Willing Provider Law
- Proposed Enhancements to CMS Dispute Resolution Process
- Updated Pharmacy Quality Measures
Inclusion of Pharmacy Price Concessions in Negotiated Price
COA supports CMS’ proposal to amend the definition of negotiated price in Part D to include all pharmacy price concessions and require that those price concessions be passed through to beneficiaries at the pointof-sale (“POS”). However, we believe that this provision does not go far enough in addressing the financial solvency of Pharmacy Providers. We also offer additional recommendations on this topic.
As we have stated in comments to CMS on the Contract Year 2019 Policy and Technical Changes to the Medicare Advantage and Medicare Part D Proposed Rule, the Part D and Medicare Advantage Modernization proposed rule, the Stark/Anti-Kickback Statute (“AKS”) Rebate proposed rule, and the 2021 letter to the House Energy and Commerce Committee leadership on DIR fees, we believe that changing the definition of negotiated price will increase transparency and provide clarity on expected reimbursement for dispensed medications.
COA believes that the Proposed Rule’s provision to amend the definition of negotiated price in Part D will provide needed transparency and clarity to Pharmacy Providers on expected final net reimbursement, which could make payments to Pharmacy Providers more predictable. DIR fees create extreme financial risks for Pharmacy Providers because the amount owed is assessed retrospectively – or “claw-backed” – by PBMs, and, in many cases, fail to compensate Pharmacy Providers for their drug acquisition costs, let alone the professional services required in dispensing medications and managing patients. In some cases, murky DIR fees can subject Pharmacy Providers to legal risks. For example, in Zimmerman v. Diplomat Pharmacy, a PBM changed how it assessed DIR fees in a manner that caused Diplomat, a specialty pharmacy then traded as a public company, to owe higher than expected DIR fees, resulting in a lack of control over its financial reporting and allegations of securities fraud. COA believes that Pharmacy Providers should not be subjected to this lack of transparency and clarity which results in financial and legal risks.
COA supports accounting for pharmacy price concessions in the Part D negotiated price as it could also lower patient out-of-pocket (“OOP”) costs for high-cost specialty drugs to treat cancer and other complex diseases by eliminating the ability for PDP Sponsors and PBMs – often part of the same corporation – to account for pharmacy price concessions as DIR. However, COA remains concerned that especially the top three PBMs, accounting for 79 percent of prescription drug activity, will seek alternative ways to leverage their market dominance with Pharmacy Providers and make up for lost DIR fees by narrowing pharmacy networks, which would decrease access to medications for patients.
Especially with cancer and other specialty drugs, pharmacy DIR fees are typically based on a percentage of drug list prices, which creates an incentive for PBMs to seek increasingly larger amounts of pharmacy price concessions in the form of percentage-based fees, often to the detriment of patients in the form of higher OOP costs at the POS. For example, a $40,000 high-cost specialty drug prescribed to treat Hepatitis C with a 5.5 percent DIR fee would result in the PBM clawing back over $2,000 on that one claim. Given the high price of many specialty treatments, these DIR fees often place Pharmacy Providers underwater on each claim, especially those that involve high-touch care management services required by patients with complex medical needs.
It is also important for CMS to understand that PBMs charge DIR fees on all prescription drug claims while only “measuring” performance of Pharmacy Providers on as little as one percent of all claims. CMS needs to investigate the methodology of each PBM in calculating DIR fees that are “reasonable and relevant.”
Furthermore, pharmacy DIR has skyrocketed in recent years, subjecting Pharmacy Providers to increasingly high levels of financial risk. According to CMS, pharmacy DIR grew 107,400 percent between 2010 and 2020. Much of this growth occurred after 2012, when performance-based payment arrangements between PDP Sponsors and Pharmacy Providers became more prevalent. Additionally, pharmacy DIR in Part D totaled $11.2 billion in 2020, an increase of $2.1 billion from 2019 and an $11 billion increase from 2013. The Medicare Prescription Drug Benefit Manual makes it clear that PBMs cannot require network pharmacies to accept insurance risk as a condition of participation in their networks. The Medicare Prescription Drug Benefit Manual also makes clear that PDP Sponsors administering Part D benefits may not engage in sub-capitation arrangements with pharmacies. It is clear that PDP Sponsors are supposed to bear insurance risk; not Pharmacy Providers. We encourage CMS to take action to prevent PDP Sponsors from subjecting Pharmacy Providers to this type of risk.
We also appreciate the Biden administration’s focus on promoting competition in the prescription drug market discussed in Executive Order 14036 Promoting Competition in the American Economy. While CMS believes that this Proposed Rule would address competition issues among PDP Sponsors, it does not address the anticompetitive results of vertical integration among payers, where PDP Sponsors, PBMs, and retail and specialty pharmacies are vertically integrated under a single corporate structure. This vertically integrated corporate structure often creates narrower networks that frequently exclude Pharmacy Providers through restrictive fees and pharmacy “quality performance” programs that are inapplicable to specialized Pharmacy Providers, such as oncology and urology practices, resulting in pharmacy access issues for patients and higher OOP costs. We ask CMS to investigate whether PDP Sponsors award PBM contracts to their corporate affiliates without the type of bidding required for federal contracts.
COA appreciates the continued attention from both the Biden administration and Congress on the problems associated with the growth in pharmacy DIR fees and the need for reform. In 2021, House and Senate legislators introduced the Pharmacy DIR Reform to Reduce Senior Drug Costs Act to require price concessions, payments, and fees that are negotiated with a pharmacy to be included in a drug’s negotiated price (excluding incentive payments) and be provided to patients at the POS.
COA encourages CMS to address overall pharmacy underpayment concerns, ensure that terms, conditions, and quality performance metrics are both “reasonable and relevant,” and address loopholes in PDP Sponsors’ and their PBMs’ interpretations of network adequacy. We also request that CMS investigate how PBMs set reimbursement rates, especially for specialty drugs. As the definition of negotiated price has a downstream effect on administrative costs and pharmacy quality metrics, we ask CMS to ensure that Pharmacy Providers are sufficiently protected against unfair financial exposure, as underpayment increases the concentrated power of PBMs and PBM-owned specialty pharmacies, which causes widespread industry harm by consolidation. We also encourage CMS to close PBM loopholes that harm the financial health of Pharmacy Providers, raise patient drug costs, and create narrower pharmacy networks that limit patient access. CMS has long viewed it as having the ability to undertake this action regarding the definition of “negotiated prices.”
- COA generally supports CMS’ proposal to redefine negotiated price that accounts for pharmacy price concessions. Redefining negotiated price in this manner would provide Pharmacy Providers with much-needed transparency and greater clarity on expected financial reimbursement, potentially making payments more predictable and creating greater financial stability.
- COA also encourages CMS to consider the implementation of guardrails that would ensure PBMs do not design overly narrow preferred networks or assess new administrative fees to offset any perceived losses associated with the proposed changes to pharmacy DIR reporting.
Lowest Possible Reimbursement Amount at Point-of-Sale
COA is largely supportive of the Proposed Rule’s provision to redefine negotiated price as “the lowest possible reimbursement a network pharmacy will receive, in total, for a particular drug, taking into account all pharmacy price concessions”. However, this should in no way be interpreted that PBMs can use their market dominance to low-ball reimbursement to the point that Pharmacy Providers are driven out of business, as is happening now. COA also supports the proposed definition of negotiated price to include all pharmacy price concessions that could flow from network Pharmacy Providers to PBMs in addition to dispensing fees. While we are supportive of price concession transparency at the POS and claim level regarding the net amount of reimbursement, we are concerned that, absent other protections for Pharmacy Providers, this provision could result in increased downward pressure on reimbursement to Pharmacy Providers. As it currently stands, DIR fees can result in total reimbursement that is lower than acquisition costs for many Pharmacy Providers. Further lowering reimbursement would be catastrophic for Pharmacy
While we support CMS’ lowest possible reimbursement provision insofar as it reduces uncertainty around the final reimbursement amount, we believe that this provision may have unintended consequences that could harm Pharmacy Providers. Under CMS’ proposal, pharmacy payments to PBMs under a performance-based reimbursement arrangement would no longer be reported as DIR outside of the coverage gap, and any positive adjustments to Pharmacy Providers above the lowest possible reimbursement amount that may occur after the POS would be reported as negative DIR. As a result, PDP Sponsors and their PBMs may seek to offset upward premium pressure by using their leverage to drive even lower total reimbursement or exploit loopholes to levy punitive new fees on Pharmacy Providers. In fact, many DIR fee programs already contemplate this, with tentative lower “default” reimbursement rates in the event that DIR fees are prohibited. These “default” rates are significantly lower than current reimbursement rates and will put even more pressure on Pharmacy Providers.
Excessive DIR fees harm the financial health of Pharmacy Providers. For example, a pharmacy could see a 47 percent lower margin on average per prescription, and a low performing pharmacy could see an 81 percent lower margin on average per prescription due to DIR fees. Since specialty Pharmacy Providers, such as oncology and urology practices, dispense high levels of expensive brand drugs that have slimmer margins, a lowest possible reimbursement provision would put Pharmacy Providers that dispense high levels of specialty drugs at risk of receiving low reimbursement. In some cases, specialty Pharmacy Providers may receive reimbursement well below a drug’s acquisition cost. As noted below, CMS has the authority to ensure reimbursement to Pharmacy Providers is “reasonable and relevant,” which does not in any way conflict with the “non-interference clause.”
Congress enacted the “Any Willing Provider Law” (“AWP Law”) as part of the Social Security Act and CMS, through rulemaking, established that Plan Sponsors must contract with any pharmacy that meets the Plan Sponsor’s standard terms and conditions for network participation. The law also requires that Plan Sponsors offer a standard contract with “reasonable and relevant” terms and conditions of participation, where any willing pharmacy may access the standard contract and participate as a network pharmacy. Additionally, CMS has noted that “[i]t is within [CMS’] authority and appropriate for CMS to provide additional clarification of these regulatory requirements when necessary to help ensure they are being effectuated in accordance with the statutory requirement.” It is therefore well-within CMS’ authority to ensure that reimbursement rates are both “reasonable and relevant” for Pharmacy Providers. CMS should use this authority to improve the financial health of Pharmacy Providers since there is virtually no meaningful negotiation occurring between PBMs and Pharmacy Providers. In fact, it is a complete fallacy to even use the word “negotiation” – the dominant market power of the top PBMs is simply “take our terms and conditions or you don’t participate in our network.”
As we noted to CMS in 2019, when COA provided comments on the Part D and Medicare Advantage Modernization proposed rule and the Stark/AKS Rebate proposed rule, we believe that upfront POS reimbursement should be “reasonable and relevant,” and not be structured in a way that fails to compensate Pharmacy Providers for acquisition costs, particularly for expensive specialty drugs.
CMS previously noted that unreasonably low reimbursement rates for specialty drugs may not be used to circumvent convenient access standards, and we encourage the agency to adopt reforms to protect Pharmacy Providers. Since Pharmacy Providers bear a significant amount of financial risk, we encourage CMS to enforce this provision, which forbids Plan Sponsors from requiring participating Pharmacy Providers to bear risk as a condition of participation in their networks.
Finally, the current lack of specificity within the Proposed Rule leaves open the possibility that, while Plan Sponsors would be required to report the lowest possible reimbursement amount at the point-of-sale, nothing in the Proposed Rule requires Plan Sponsors’ PBMs to provide pharmacies with that reported reimbursement amount, thereby opening a loophole for Plan Sponsors and their PBMs to pay Pharmacy Providers even lower amounts and/or higher amounts to pharmacies affiliated with Plan Sponsors and PBMs.
- COA requests that CMS ensures that overall reimbursement to Pharmacy Providers is “reasonable and relevant.” CMS can accomplish this goal by addressing network adequacy, increasing the use of guardrails on PDP flexibility for narrower networks, and closing additional loopholes that PDP Sponsors and their PBMs use to extract price concessions from Pharmacy Providers.
- COA recommends that, in establishing reimbursement rates for specialty medications (given their unique distribution and handling complexities), CMS required that PDP Sponsors and their PBMs account for specific metrics, including (without limitation) acquisition cost, cost to dispense, and some reasonable margin.
- COA wants to underscore that although we support that CMS adopts a lowest possible reimbursement approach to make clear to Pharmacy Providers what the reimbursement will be at the POS – and, very importantly, lower patients’ OOP costs at the POS – this cannot provide a way for PBMs to low-ball reimbursement. PBMs are masters at finding loopholes and ways of profiting to the detriment of patients and Pharmacy Providers.
Definition of Negotiated Price in the Coverage Gap
COA opposes the Proposed Rule’s provision to provide PDP Sponsors and their PBMs flexibility on whether to apply pharmacy price concessions to negotiated prices in the coverage gap for applicable drugs. We are adamant that the definition of negotiated price should remain consistent throughout all stages of the prescription drug benefit. CMS must understand that granting PDP Sponsors and their PBMs flexibility in the treatment of pharmacy price concessions for applicable claims in the coverage gap undermines a key goal of the policy in the first place by allowing patient OOP costs to remain high. This provision also perpetuates the problems associated with PBM “claw-backs” for applicable claims in the coverage gap that financially strain Pharmacy Providers.
Additionally, COA is very concerned that this proposed provision would create unnecessary operational complexities for Pharmacy Providers, as they would be required to track two separate applications of negotiated price. These complexities will increase administrative and financial burdens for Pharmacy Providers, which already have to comply with arbitrary requirements imposed by PDP Sponsors and their PBMs.
We reiterate that the PBM market is essentially an oligopoly with three major corporations controlling nearly 80 percent of total PBM market share. CVS Caremark represented 34 percent of total adjusted claims in 2020, followed by Express Scripts (24 percent) and OptumRx (21 percent). As stated above, the top PBMs use this dominant market power to extract – some would say “extort” – unsustainable and unpredictable price concessions from Pharmacy Providers, who need sufficient protection from overly punitive network agreements. CMS has taken a positive first step in curtailing some of this behavior in the Proposed Rule but giving Plan Sponsors and PBMs flexibility to continue these extortionary practices in the coverage gap undermines the intent of the policy and dilutes the value of lower OOP costs to patients at the POS. COA believes that the Proposed Rule’s provision would create additional operational complexities for Pharmacy Providers, as well as harm their financial health. Therefore, CMS should not grant Plan Sponsors and PBMs flexibility on whether to apply pharmacy price concessions to negotiated prices in the coverage gap.
- COA strongly requests that CMS not finalize its proposal to provide Plan Sponsors and PBMs flexibility on whether to apply pharmacy price concessions to negotiated prices in the coverage gap. Instead, the proposed definition of negotiated price to include all pharmacy price concessions should be applied to all phases of the Part D benefit.
Clarification on Pharmacy Administrative Service Fees and Price Concessions
COA opposes language that would include administrative service fees as price concessions and recommends that service fees only be accounted for as administrative costs that are factored into the Part D bid. The proposed definition of price concessions would create a significant risk for Pharmacy Providers by allowing PBMs to respond to DIR reform by replacing DIR fees with dramatic increases to service fees. It is critical for CMS to understand that a specific and limited definition of administrative service fees would prevent this type of potential abuse. Treating administrative fees as an administrative cost that is accounted for in the Part D bidding process could mitigate the risks associated with this proposal.
CMS’ proposed definition of administrative service fees is too broad, putting Pharmacy Providers at risk for untenable increases in fees from PBMs. If PBMs can contrive administrative fees as a network fees, it would allow PBMs to make pharmacy network access contingent on payment of administrative fees operating under the guise of network fees. Taken to the extreme, these practices can be extortionary and abusive to Pharmacy Providers. An analysis conducted by the National Community Pharmacists Association (“NCPA”) found that PBMs have already increased DIR 1,600 percent between 2015-2020, which exceeds any possible increase to administrative costs. Additionally, PBMs maintain the ability to charge general compliance fees of up to $500 per day until the PBM determines a pharmacy is sufficiently compliant with the terms and conditions of its contract. PBMs also extract other “fees” from Pharmacy Providers, such as assessing audit fees up to 20 percent of any discrepancies identified by the PBM or requiring Pharmacy Providers to place $50,000 in escrow as a pre-condition to begin disputes against them. COA strongly advocates for CMS action to limit the use of these exorbitant and unfair fees, which allow PBMs to wield a disproportionate amount of power against Pharmacy Providers.
Furthermore, the definition of price concession in the Proposed Rule would include “all forms of discounts, direct or indirect subsidies, or rebates that serve to reduce the costs incurred under Part D plans by Part D sponsors.” The lack of specificity in this definition could create a situation where PBMs seek new fees outside of the definition to offset the loss of DIR fees associated with the proposed policy. As a result, a clearer, more specific definition that explicitly excludes post-POS quality program discounts is necessary.
COA implores CMS to further clarify the definition of price concessions due to the financial strain it places on Pharmacy Providers. For example, research conducted by the law firm Frier Levitt found that a five percent DIR fee on a $2,000 specialty drug nets PBMs $100 every time the drug is dispensed. Pharmacy Providers should not be subject to this extreme financial risk.
- COA recommends amending the definition of price concessions to treat all pharmacy administrative service fees as administrative costs that are accounted for in the Part D bid.
- A clearer, more specific, definition of “price concession” is needed to explicitly exclude post-POS “quality program” discounts. CMS must be aware that PBMs will look for any way to recoup lost revenue from current DIR fees by creating new administrative fees, network access fees, and similar contrived fees. This is exactly what they did when creating these “quality performance” programs as a mechanism of protecting DIR fees from Pharmacy Providers.
Clarification on Any Willing Provider Law
COA encourages CMS to strengthen interpretation and enforcement of the AWP Law, as COA is concerned that PBMs may respond to this policy by effectively narrowing pharmacy networks, which could limit beneficiary access to medications, especially drugs used to treat cancer and other serious diseases.
CMS has stated in Section 50.8.1 of Chapter 5 of the Medicare Prescription Drug Benefit Manual that Plan Sponsors must allow any pharmacy to participate in its plan network so long as the pharmacy is willing to accept the Plan Sponsor’s standard contracting terms and conditions, which must be “reasonable and relevant.” Plan Sponsors have circumvented this provision and established obstructive terms and conditions to exclude pharmacy participation and establish narrow networks. For example, in recent years, CVS Caremark refused to admit 35 Pharmacy Providers into its network even though they were willing to meet their terms and conditions.
In addition to limiting patient access and placing additional hurdles for care on individuals experiencing devasting diseases like cancer, narrow pharmacy networks imposed by PBMs with concentrated market power are anticompetitive. Overly narrow pharmacy networks run counter to President Biden’s goal of ensuring competition in the prescription drug market discussed in Executive Order 14036 Promoting Competition in the American Economy. By enforcing provisions that are not “reasonable and relevant” in the network contracts for Pharmacy Providers, PBMs can drive business to retail and specialty pharmacies in which they have a corporate affiliation or other financial interest. This effectively creates a market of vertical monopolies, to the detriment of Pharmacy Providers and their patients.
The recent consolidation among insurers and PBMs provides unprecedented market clout allowing Plan Sponsors and their PBMs to virtually do whatever they want in the prescription drug market. They are fueling drug prices and driving retail pharmacies out of business by hiding behind the Part D “noninterference clause” and essentially ignoring the AWP Law. They have become a law unto themselves.
CMS has clear authority to act regarding the AWP Law. The “non-interference clause” does not prohibit CMS from setting rules around how DIR fees can be assessed or calculated. As CMS has stated, “since the statute requires [CMS] to regulate many aspects of how drug costs are made available and displayed to beneficiaries and treated in Part D bidding and payment processes, it is clear that [it has] an important role to play in establishing rules for consistent treatment of drug costs in the program.” Most notably and importantly, CMS has expressly noted that “[i]t is within [CMS’] authority and appropriate for CMS to provide additional clarification of these regulatory requirements when necessary to help ensure they are being effectuated in accordance with the statutory requirement.” In line with the statutory mandate that CMS ensure Plan Sponsors offer a standard contract with “reasonable and relevant” terms and conditions of participation whereby any willing pharmacy may participate, CMS is more than authorized to take these additional and necessary steps to address unintended consequences of the Proposed Rule.
- COA recommends CMS solicit input from Pharmacy Providers and implement guardrails that would tailor terms and conditions to specific pharmacy types in order to ensure that pharmacy networks are not further restricted through PBM exploitation of the interpretation of the AWP Law. CMS has the authority to address the negative ramifications of AWP Laws by providing additional oversight of network terms and conditions during bid reviews to prevent overreach and ensure the AWP Law is being interpreted as intended.
- COA urges CMS to investigate how PDP Sponsors and their PBMs set reimbursement rates for specialty medications and its impact on negotiated prices and the requirements under 42 U.S.C. § 1395w-104(b). In no way would any investigation as to the “reasonableness and relevance” of reimbursement rates conflict with the “non-interference clause.”
- COA recommends that CMS issues warning letters, levy fines, and seek injunctive relief against Plan Sponsors and their PBMs for offering unreasonably low reimbursement that violates the AWP Law.
Proposed Enhancements to the CMS Dispute Resolution Process
Although CMS is not proposing a change to the current dispute resolution process, COA believes CMS has a duty to ensure that Plan Sponsors and their PBMs are acting within the scope of Medicare regulations.
As it stands, Plan Sponsors and their PBMs wield a disproportionate amount of power in doing whatever they want with Pharmacy Providers. We reiterate that there are no “negotiations” between PBMs and Pharmacy Providers. For example, in 2018, CVS Caremark increased its “audit chargeback” fee by 33 percent, which served as a tax on Pharmacy Providers within its network. PBMs typically ignore complaints from Pharmacy Providers about disparities in negotiating power through overzealous enforcement of confidentiality provisions. PBMs also limit the ability of Pharmacy Providers to bring legal disputes, such as arbitrations or litigations, through unreasonably short statutes of limitations, onerous arbitration costs for multiple arbitrators, requirements to post bonds in order to bring an action, and limitations on the scope and nature of permissible discovery, all of which prevent Pharmacy Providers from resolving disputes with PBMs. Given the unfair balance of power by PBMs, CMS needs to establish a more equitable dispute resolution process.
CMS has noted that its ability to intervene is limited to situations involving “negotiating parties” due to the “non-interference clause” and that it may, in “rare exceptions,” choose to involve itself in the process. However, consistent with CMS’ guidance, which states, “Part D sponsors must offer reasonable and relevant reimbursement for all Part D drugs” as required under the AWP Law, CMS can intervene to promote competition among Pharmacy Providers and protect patients’ rights to use a pharmacy of their choice. CMS’ actions to ensure Plan Sponsors’ terms are “reasonable and relevant” would therefore not violate the “non-interference clause.”
- COA recommends that CMS implement policies that strengthen process requirements for dispute resolution between Plan Sponsors and their PBMs and Pharmacy Providers. For example, CMS could allow Pharmacy Providers to appeal decisions made in disputes between Plan Sponsors and Pharmacy Providers and publish annual reports to identify how decisions were made and how the process could be improved.
Updated Pharmacy Quality Measures
COA believes that Pharmacy Providers should be assessed using quality measures relevant to the pharmacy type and drugs dispensed and also that reflect actions that Pharmacy Providers can truly take to influence patient behavior to adhere to their medications. In line with this, many existing quality metrics included in the Star Rating System simply do not apply to certain specialty Pharmacy Providers. CMS must stop Plan Sponsors, and their PBMs from assessing specialty Pharmacy Providers with performance measures focused on primary care – having nothing at all to do with specialty care, such as with cancer treatment – to justify extracting performance-based DIR fees. Senate Finance Committee Chairman Ron Wyden (D-OR) recently commented on the complicated nature of quality measures in which “the rules are so vague and so inconsistent,” PBMs regularly implement arbitrary policies to siphon funds from Pharmacy Providers.
We want to make this very clear – the top PBMs use “quality performance” as simply a front to extort DIR fees from Pharmacy Providers. This is a rigged game, just like 3-Card Monte, where Pharmacy Providers cannot possibly win. PBMs overwhelmingly penalize Pharmacy Providers for poor performance versus those few (and we would guess Pharmacy Providers under the same corporate umbrella as the PBMs) that are rewarded for superior performance. CMS must understand the rigged nature of this “quality performance” sham by PBMs. We challenge CMS to understand the attached actual “quality performance” report sent by CVS Caremark to a community oncology practice!
CMS must also understand the profit-seeking strategies and tactics pursued by the top PBMs. As drug rebates have come under employer, state, and federal government scrutiny, PBMs have gone “downstream” to Pharmacy Providers to make up for, and even increase, lost revenue from rebates. They first did this by assessing all types of network “access and administrative” fees on Pharmacy Providers. However, as these fees came under the spotlight (see the attached report from Frier Levitt, the first to publicly disclose DIR fees) and increased scrutiny, the top PBMs started implementing “quality performance programs” to justify
extracting DIR fees from Pharmacy Providers. However, the rigged, sham nature of these programs is evidenced by the huge imbalance of penalties to Pharmacy Providers versus rewards. As CMS notes in the Proposed Rule, “sponsors and PBMs have been recouping increasing sums from network pharmacies after the point-of-sale (pharmacy price concessions) for “poor performance,” sums that are far greater than those paid to network pharmacies after the point-of-sale (pharmacy incentive payments) for “high performance.”
Additionally, specifically to cancer treatment, the quality measures tied to adherence with oral cancer drugs are unsuitable for cancer patients, as their drugs are often changed to align with their dosage or therapy. If practices change their prescribing practices to meet adherence metrics, it could cause patients harm when medications are not stopped after experiencing side effects, potentially violating instructions on drug labels Tying adherence to DIR fees is unsuitable for oncology and urology practices treating cancer patients because adverse health outcomes tied to oral cancer drugs may lead to short-term discontinuation of a treatment, which is used as lack of adherence by PBMs. This results in measurements of poor performance as justification for penalties in the form of DIR fees. As we have previously indicated, CMS acknowledges in the Proposed Rule that DIR data reports and stakeholder feedback indicate Pharmacy Providers seldom receive an incentive payment above the original rate of reimbursement, which may be caused in part by the inability of most Pharmacy Providers to achieve the performance scores needed for significantly reduced penalties.
CMS noted that under the Contract Year 2022 Medicare Advantage and Part D Final Rule, plans are required to disclose pharmacy performance measures to CMS. While this is a positive first step in making measures more transparent, the AWP Law explicitly calls for “reasonable and relevant” terms and conditions of participation in a standard network contract. COA believes that current pharmacy performance measures utilized by Plan Sponsors and PBMs are not “reasonable and relevant” for different pharmacy types. This is specifically true in cancer care where adherence measures are often counterproductive.
Given that CMS has stated the “non-interference clause” does not prohibit CMS from establishing requirements necessary for implementing the AWP Law, the agency has a duty to ensure that Pharmacy Providers are subject to “reasonable and relevant” quality measures. In a September 2019 letter, the Senate Finance Committee encouraged CMS to accompany DIR reform with a standardized set of quality metrics. CMS must intervene and ensure Plan Sponsors and PBMs are implementing the AWP Law as it was intended.
- COA encourages CMS to adopt requirements for pharmacy performance measures that Plan Sponsors and their PBMs may use and ensure that performance is measured against similarly situated providers and is relevant to the type of care provided.
- COA requests that CMS evaluate how Plan Sponsors and their PBMs calculate adherence scores on specialty drugs, such as oncology drugs, to ensure compliance with the requirements for “reasonable and relevant” terms and conditions, as well as ensuring that quality metrics are aligned with patients’ safety and efficacy of treatment.
COA appreciates the opportunity to comment on the Proposed Rule and CMS’ efforts to lower OOP costs for beneficiaries and increase system transparency by requiring pharmacy price concessions to be included in the definition of negotiated price. We believe that these provisions are only a first step in leveling the playing field between Plan Sponsors and PBMs and Pharmacy Providers, which will decrease drug costs for patients, including those with cancer.
However, we remain very concerned that the Proposed Rule does not provide enough protection against loopholes PBMs use to extract unfair and unsustainable price concessions from Pharmacy Providers. Specifically, we are concerned with CMS’ provision to give plans flexibility on whether to apply pharmacy price concessions to negotiated prices in the coverage gap and the agency’s proposed definition of pharmacy administrative service fees. Due to substantial insurer and PBM consolidation in recent years, true “negotiation” between Plan Sponsors and Pharmacy Provider is simply a myth. As we have noted, 79 percent of prescription drug claims are processed by three PBMs, but if you add the next three largest PBMs, the top six PBMs control a staggering 97 percent of prescription drugs. And to make matters worse, the top PBMs are now vertically integrated with the largest health insurers, as well as with specialty and mail order pharmacies. This extraordinary market power prevents Pharmacy Providers from negotiating at all with Plan Sponsors and their PBMs, which is jeopardizing the financial health of Pharmacy Providers and fueling drug prices for Medicare seniors. Pharmacy Providers are unable to say “no” to PBMs and their punitive DIR fees and administrative burdens, any more than a deli owner is unable to say no to “protection” payments demanded by organized crime. If you think this is an absurdly hyped statement, please talk to Pharmacy Providers, especially independent retail pharmacies that are increasingly going out of business and specialty pharmacies that are being acquired by PBMs and/or their corporate owners.
COA applauds the Biden administration for its commitment to relaunching the Cancer Moonshot to end cancer in our lifetime and we look forward to collaborating with the President and his Moonshot team on this important initiative. However, to ensure that cancer patients receive timely and affordable access to prescription drugs, CMS must strengthen the Part D program and level the playing field for community oncology and urology Pharmacy Providers. This can be accomplished by addressing the deleterious effects of unchecked growth in DIR fees, closing loopholes that allow PBMs and Plan Sponsors to use their competitive advantage to assess new fees and further suppress overall pharmacy reimbursement, and by providing stronger oversight of quality metrics used by PBMs to ensure they are fair, relevant, and customized to a specific pharmacy type.
Importantly, CMS clearly has the authority not only to take the steps in the Proposed Rule, but also to adopt the policy recommendations set forth herein. While CMS has historically eschewed directly “interfering” in sponsor-pharmacy “negotiations,” CMS maintains a longstanding ability to set appropriate guardrails and rules around the nature of the relationship between Plan Sponsors and Pharmacy Providers. In this vein, CMS has highlighted numerous statutory provisions that require the agency to directly intervene in the contractual relationship between Plan Sponsors and Pharmacy Providers, including (relative to drugcost-related issues) “Interpretation of what ‘access to negotiated prices’ means, any-willing-pharmacy standard terms and conditions, prohibition on any requirement to accept insurance risk, prompt payment, and payment standard update requirements.” The actions we propose fall squarely in line with this legislative mandate.
Ultimately, these policy changes are critical not only to supporting the ability of community oncology and urology practices to provide the highest quality, most affordable care to vulnerable cancer patients but also to protecting the nation’s backbone of independent retail pharmacies, which are vanishing from the landscape, especially in rural and underserved areas.
We stand ready to answer any questions about our comments.
Kashyap Patel, MD
Federal Trade Commission
Hon. Richard Neal, Chair, House Committee on Ways and Means
Hon. Frank Pallone, Chair, House Committee on Energy and Commerce
Hon. Ron Wyden, Chair, Senate Committee on Finance
Hon. Kevin Brady, Ranking Member, House Committee on Ways and Means
Hon. Cathy McMorris Rodgers, Ranking Member, House Committee on Energy and Commerce
Hon. Michael Crapo, Ranking Member, Senate Committee on Finance