A recent series in the Bedford Gazette has opened a window into critical challenges faced by independent community pharmacies: unfair business practices by Pharmacy Benefits Managers (PBMs). Despite playing a crucial role in healthcare, independent community pharmacies are quietly grappling with an unsustainable reimbursement system controlled by PBMs. This situation has gone largely unnoticed by local media, with a few noted exceptions.
The first part of the Bedford Gazette series focuses on the adverse effects of PBM policies on local pharmacies in the Bedford area, exploring the predatory practices of PBMs. PBMs often set low reimbursement rates for medications, usually well below a pharmacy’s actual cost. This means local Bedford pharmacies, already navigating tighter margins, can lose money simply for helping patients access their prescriptions, even for common medications. Moreover, PBMs employ “contracts of adhesion,” which are “take-it-or-leave-it” contracts permitting no negotiation, and without which providers cannot treat their patients. Notably, Frier Levitt has successfully argued that this may render many of the contract terms unenforceable.
The Bedford Gazette series also examines the complex issue of Direct and Indirect Remuneration (DIR) fees. DIR fees, which are “performance” fees in the Medicare Part D Program, are applied months after the initial claim for a drug. Although PBMs argue DIR fees reduce Medicare Part D expenses and consumer costs, DIR fees often lead to higher out-of-pocket expenses for consumers and accelerates their entry into the Medicare Part D “coverage gap.” Indeed, as Frier Levitt has reported before, DIR fees are often assessed inaccurately and unfairly, and where possible, can be challenged. In fact, under Medicare Part D, “Part D sponsors must offer reasonable and relevant reimbursement terms for all Part D drugs as required by 42 CFR 423.505(b)(18)” to participating pharmacies, and Frier Levitt has successfully leveraged this requirement to force PBMs to return DIR fees in certain circumstances.
The financial strain faced by independent pharmacies as highlighted in the Bedford Gazette series, mirrors a larger trend affecting the pharmacy industry. Independent pharmacies in cities like Seattle struggle to remain open, while rural areas grapple with the lack of nearby pharmacies, resulting in “pharmacy deserts” where large swathes of rural communities lack access to pharmacy services. Although Congress continues to work on legislation to address PBM abuses, continued attention is needed, and series like the Bedford Gazettes demonstrates that local communities are becoming increasingly aware of the danger PBMs pose to independent pharmacies. Frier Levitt remains committed to leveraging existing laws and contracts to aid independent pharmacies in their fight to continue serving their communities.
How Frier Levitt can Help
Frier Levitt’s attorneys have extensive experience in handling disputes between independent pharmacies and PBMs and have fought for years to assist pharmacies in contract negotiations, as well as in litigation over contract terms that violate state and federal law. These include successful arbitrations where Frier Levitt recovered millions for our clients. Pharmacies facing reimbursement issues are encouraged to reach out to Frier Levitt to explore potential solutions.
