May 26, 2021

Legislation would Reduce Drug Costs for Consumers and Help to Stabilize the Operating Environment for Pharmacies

Arlington, VA – On behalf of the 12,000 supermarket pharmacies operated by our member companies, FMI – The Food Industry Association applauds the introduction of the bipartisan Pharmacy DIR Reform to Reduce Senior Drug Costs Act.  This important legislation would work to address the lack of transparency and fairness in hidden “clawback” fees charged by drug middlemen that are shuttering pharmacies and costing patients more at the pharmacy counter. 

These payments, known as Direct and Indirect Remuneration (DIR), were designed to be applied at the point-of-sale to reduce the cost of prescription drugs for Medicare beneficiaries. However, a vast majority of DIR fees are clawed back from pharmacies by pharmacy benefit managers (PBMs) long after a drug has been dispensed to the customer, and the DIR fees collected by PBM’s are never used to reimburse or otherwise reduce the cost of a drug. According to the federal government, pharmacy DIR fees have grown by 91,500% between 2010 and 2019.

FMI President and CEO Leslie G. Sarasin offered the following comments:

“Supermarket pharmacies are proud to serve as health and well-being destinations, providing customers with the full range of pharmacy products and services – including COVID-19 vaccines – at the same location where they already purchase nutritious food and other household essentials. Despite their essential role in serving communities, however, supermarket pharmacies are struggling to stay in business due to the anticompetitive practices of PBMs, of which the clawback of DIR fees is perhaps the most egregious and damaging. In fact, nearly one-third of our members rank pharmacy DIR fees as having among the most negative effect on their sales and profits (U.S. Food Retailing Industry Speaks, 2020). As a result, some FMI members have shuttered or sold their pharmacies while others are considering having to do so in the future, leading to significantly reduced access for consumers.

“Health plans and their PBMs attribute the excessive growth of DIR fees to pharmacy performance assessments, but the assessments and metrics lack transparency, are arbitrary, and have no oversight – all areas this legislation attempts to address. 

“By putting a stop to the predatory practice of imposing fees on pharmacies long after the point of sale while charging patients more up front for their drugs, this legislation would generate savings and create pricing transparency for both pharmacies and their patients. FMI thanks the bill sponsors for their leadership and looks forward to working with them to advance this legislation."