On December 14, 2023, the Centers for Medicare and Medicaid Services (CMS) proactively issued a letter to pharmacy benefit managers (PBMs), Medicare Part D plan sponsors and leading private insurers encouraging them to, among other things, ensure adequate payment for and access to medications.
Over the past few years, PBMs have been the focal point of multiple state and federal agencies due, in large part, to multiple complaints by independent pharmacies about their ability to participate in networks of insured individuals and receive adequate reimbursement rates, which are often far below the pharmacies' wholesale costs to purchase medications.
The ramifications of this anti-competitive conduct has increased as PBMs have vertically integrated by merging with health insurance companies and owning their own pharmacies. Due to the increasing level of anti-competitive PBM conduct, federal government agencies and Congress, in particular, have taken aggressive measures to rein in PBMs and the extent to which they are eliminating independent pharmacy competition. CMS implemented a new regulation, effective January 1, 2024, that will no longer permit PBMs to charge pharmacies retroactive fees, known as direct and indirect remuneration fees. The Federal Trade Commission launched a 6(b) investigation into PBM conduct that disadvantages independent pharmacies, including, but not limited to, steering patients away from, levying arbitrary fees on and decreasing reimbursement payments to independent pharmacies. Additionally, Congress is on the verge of passing comprehensive PBM reform bills that will increase transparency into PBM operations and create incentives for more favorable reimbursement rates for independent pharmacies.
Despite increasing scrutiny and government regulations by CMS and other agencies, those agencies continue to receive complaints and hear "an increasing number of concerns about certain practices by some plans and pharmacy benefit managers that threaten the sustainability of many pharmacies, impede access to care, and put increased burden on health care providers."
In response to these ongoing concerns, ahead of its January 1, 2024, rule prohibiting PBMs from charging retroactive fees to pharmacies, CMS issued the December 14 letter reiterating it expects PBMs to fairly reimburse pharmacies for medications, engage in fair practices with all pharmacies and ensure they are providing full coverage, without cost sharing, for preventive services. CMS further reminded PBMs that "CMS will be conducting robust oversight to ensure Medicare Advantage organizations are complying with these new requirements."
CMS' warning that PBMs should now expect "robust oversight" to ensure they treat independent pharmacies fairly is not a mere threat. Pursuant to CMS' Enforcement Action guidance, CMS has the authority to investigate and initiate enforcement actions against PBMs to make sure that they are engaged in conduct "in a manner that is consistent with the efficient and effective administration of the Medicare" program. Where CMS identifies PBMs that are not acting in such manner, it has the right to impose against them civil monetary penalties and various other sanctions, including termination from participation in the Medicare program.
For independent pharmacies that have sought government action for anticompetitive PBM conduct, CMS' December 14 letter again demonstrates that PBMs will no longer be permitted to put profits before consumers and pharmacies.
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For more information on this Alert, please contact Jonathan L. Swichar, Bradley A. Wasser, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.
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