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CMS asks health plans, PBMs to ease up on independent pharmacies

A new letter urges payers to put in place special payment arrangements with pharmacies before a new policy kicks in that could reduce how much pharmacies are paid upfront.


Dive Brief:


  • The Biden administration has fired a warning shot against health insurers and pharmacy benefit managers over business practices that could threaten the financial health of pharmacies, as independent pharmacies continue to close in droves across the U.S.

  • The CMS sent a letter to the industry on Thursday urging payers to reconsider how they’re reimbursing pharmacies and reminding them that the government is investigating certain anticompetitive practices. The letter does not threaten any additional enforcement.

  • In particular, the letter asks payers to put special payment arrangements with pharmacies in place before a new policy takes effect in 2024 that could reduce how much pharmacies are paid upfront when they dispense medications.


Dive Insight:


Last year, the CMS finalized a regulation to prevent payers in Medicare’s prescription drug benefit from retroactively hitting pharmacies with performance-based adjustment fees.

Those fees, in which payers adjust pharmacy reimbursement after the fact based on whether or not they reached certain quality measures, are a major source of friction between payers and pharmacies. An independent pharmacy is currently suing CVS Caremark over the PBM’s alleged use of unfair and exorbitant performance adjustment fees in Medicare Part D.


The rule does allow payers to adjust pharmacy reimbursement based on quality at the point of sale.


The CMS rule was originally supposed to kick in this year, but regulators delayed it until Jan. 1, 2024 to give pharmacies and payers more time to prepare for the change.


“We continue to hear urgent concerns from pharmacies, and we strongly encourage Part D plan sponsors and their PBMs to make necessary cash flow arrangements with network pharmacies in preparation for these upcoming changes,” the CMS wrote.


The National Association of Chain Drug Stores, which represents regional and national pharmacy chains, said it appreciated the CMS’ letter, but urged the government to do more on PBM reform.


“The tactics of market-dominant middlemen have pushed pharmacies of all types and sizes to breaking points that can only inflict negative consequences on the Americans who rely on trusted and convenient access to medications and to pharmacy services,” said NACDS President and CEO Steven Anderson said in a statement.


Independent pharmacies and PBMs have long been at loggerheads over contracts that include fees the pharmacies say are too high, and reimbursement that the pharmacies say is too low.


Independent pharmacies have been closing across the U.S. but especially in rural areas due to increased financial pressures — including from PBMs, which reimburse independent pharmacists at lower levels than their own in-house pharmacies, independent pharmacists say. Currently, almost half of U.S. counties are considered pharmacy deserts as a result of the closures.


In the Thursday letter, regulators also put plans on notice for payment arrangements that disincentivize pharmacies from offering vaccines and make it difficult for people to access contraception. The CMS also warned payers over excessive use of prior authorization to delay medical care, and said that vertical integration could be creating anticompetitive business practices, putting independent pharmacies at a disadvantage.


“We are closely monitoring plan compliance with CMS network adequacy standards and other requirements,” the CMS wrote.


Reporter: Rebecca Pifer, Senior Reporter

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