Earlier this month, the Centers for Medicare & Medicaid Services (CMS)—the government agency that regulates the Medicare Part D Program—issued a letter to Pharmacy Benefit Managers (PBMs), Medicare Part D Plans, Medicaid Managed Care Plans, and Private Insurance Plans urging them to “work with providers and pharmacies to alleviate [certain] issues and safeguard access to care.” The letter is issued just as a portion of the Final Rule titled, “Medicare Program; Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs” comes into effect on January 1, 2024, effectively ending the collection of Direct and Indirect Remuneration (DIR) fees months after the point of sale. Frier Levitt has discussed this Final Rule on multiple occasions, most recently urging pharmacies to prepare for the start of the year, when the final DIR fees from 2023 will be collected and up-front reimbursement will also be reduced. Judging from the letter, CMS is also concerned that pharmacies will be hit hard by this change, and appears to be monitoring “vertically integrated” payors’ activities and considering increased oversight. This is a welcome development for independent pharmacies in the New Year.
CMS Raises Concerns About Independent Pharmacies’ Sustainability
The letter expresses CMS’s concern “about the sustainability of these businesses, especially small and independent pharmacies, and their potential closures that may leave pharmacy services out of reach for many people, especially those in rural and underserved areas.” Although CMS’s recent concern is welcome, it comes fairly late in the game, as Frier Levitt and independent pharmacies around the country have been raising these concerns for years. Notwithstanding CMS’s delayed reaction to the PBM landscape, it is encouraging that CMS in its letter recognizes that these pharmacies “serve a critical role in delivering health care and providing access to medications across the country.” Through the letter, CMS urges PBMs and other payors to take action to prevent more pharmacy closures.
CMS’s requests to payors include, among other things, that “Part D plan sponsors and their PBMs … make necessary cash flow arrangements with network pharmacies in preparation for these upcoming changes.” This echoes Frier Levitt’s recent advice to pharmacies to prepare for case flow issues in the coming months, and demonstrates the imminent concern among independent pharmacies for the New Year. Additionally, CMS has warned that they “will closely monitor plan compliance with pharmacy access and prompt payment standards to ensure that all people with Medicare Part D continue to have access to pharmacies and medications.” Whether this means CMS will take action on issues like “below water”/”lowball” reimbursement remains to be seen, but the letter brings some rays of hope.
CMS Highlights Problems with Vertical Integration
In addition to raising cash flow issues, CMS also “urge[s] plans and PBMs to engage in sustainable and fair practices with all pharmacies – not just pharmacies owned by PBMs – and … are closely monitoring plan compliance with CMS network adequacy standards and other requirements,” in recognition that the trend of vertical integration “among plans, PBMs, and their own pharmacies has the potential to result in anticompetitive behavior and place independent pharmacies at a disadvantage.” Frier Levitt has been warning about the anti-competitive effects of Pharmacy/PBM/Plan vertical integration for years, and the issue has been the focus of congressional and Federal Trade Commission investigations. Again, it is heartening that CMS is now signaling it intends to finally examine the issue as well.
Concerns About Prior Authorization
Finally, CMS also expressed concern about the “impact of plans’ utilization management tools, including prior authorization,” the inappropriate use of which the agency recognized “can impede access to needed care for people and delay essential treatments, as well a take clinician time away from direct care.” Frier Levitt has previously identified abuse and even fraud employed by payors in the Prior Authorization process, and a thorough investigation of PBMs’ practices is long overdue.
The CMS Letter is a Positive Sign for Future Oversight
Overall, and although the CMS letter on its own does not indicate any action will be taken against PBMs, it represents a positive federal trend of increased oversight and accountability for PBMs. To increase the likelihood that CMS does take action, Pharmacies should continue to file complaints with the agency to bring further attention to PBM abuses.
How Frier Levitt Can Help
Frier Levitt attorneys have accumulated decades of experience in confronting and, where appropriate, litigating against PBMs over their abuses of independent pharmacies. Frier Levitt has helped pharmacies and other providers make sure CMS and other governmental entities are aware of PBM abuses in the market to advocate for increased action against PBM abuses. Call Frier Levitt today to learn more.
