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Hy-Vee urges reform on pharmacy remuneration fees

CEO Randy Edeker joins with FMI and NGA in criticizing rule update

Russell Redman

May 28, 2019

5 Min Read
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Hy-Vee gave a thumbs-down to the Centers for Medicare & Medicaid Services (CMS) for a rule update that excluded reform on rising direct and indirect (DIR) remuneration fees in the Medicare Part D program, which are financially squeezing pharmacies.

In a statement, Hy-Vee Chairman and CEO Randy Edeker noted that CMS has acknowledged that DIR fees have skyrocketed 45,000% since 2010 and, in some cases, have tripled since last year.

DIR fees refer to post-point-of-sale compensation received by pharmacy benefit managers (PBMs) and Part D plan sponsors for prescription drugs. Used in the calculation of final Medicare payments to Part D plans, these fees primarily are rebates paid by drug manufacturers but also include concessions paid by pharmacies, such as pay-for-performance network fees and reimbursement reconciliations. As a result, DIR fees affect the final cost of a drug for payers and the price paid to pharmacies for a drug.

Randy_Edeker_Hy-Vee_headshot.png“Hy-Vee is urging lawmakers to support immediate action to reform the use of pharmacy direct and indirect remuneration (DIR) fees, also known as pharmacy price concessions, in the Medicare Part D program. We are shocked that the final rule published on May 17, 2019, by the Centers for Medicare & Medicaid Services (CMS) did not include this much-needed reform, despite countless meetings and discussions,” Edeker (left) stated. “We find it outrageous that DIR fee relief was not included in this year's rule, because it is absolutely critical for the sustainability of pharmacies across the U.S. to meet the needs of our patients.”

Related:Hy-Vee acquires Weber & Judd Pharmacies

A key focus of retail pharmacy industry efforts to crack down on DIR fees has been a lack of transparency for these costs and the fact that they’re often charged retroactively, after the point of sale for drugs dispensed to seniors under Part D. Small pharmacies have especially felt the financial impact.

“These fees are being inappropriately used by Medicare Part D plans and their pharmacy benefit managers (PBMs) to claw back reimbursements from pharmacies for the prescription medications that they provide to Medicare beneficiaries. We believe CMS should act to stop a practice that is not legal under current rules. If action is not taken, it inflicts even more of a catastrophic burden on our customers and our pharmacies,” Edeker explained. “Pharmacies are closing every day because of the increasing use of these fees, leaving senior citizens with no access to a pharmacy for their medications. Hy-Vee cannot be one of them, predominately because of the disruption this would create for our older customers, specifically those who live in rural communities and have no other option for a pharmacy.”

Related:Hy-Vee offering A1C hemoglobin screenings

Hy-Vee currently operates 268 in-store and freestanding pharmacies throughout its eight-state Midwestern trade area. The West Des Moines, Iowa-based food and drug retailer also owns and operates two specialty pharmacies: Amber Pharmacy and Hy-Vee Pharmacy Solutions.

“We urge lawmakers to communicate to CMS the need to take immediate action on pharmacy DIR reform. Specifically, we ask for lawmakers to support the Phair Pricing Act (S. 640) that would achieve many of our proposed DIR reforms and save patients billions of dollars while eliminating the economic pressures and uncertainties faced by pharmacies,” Edeker added.

The CMS final rule, published in the Federal Register, is slated to go into effect on July 5. The measure’s exclusion of DIR fee reform drew fire from supermarket and drug store industry trade groups.

“The administration missed the mark and an opportunity to effectively lower beneficiary out-of-pocket costs, while also stabilizing the operating environment for retail pharmacies. Specifically, DIR fees are being used strategically by pharmacy benefit managers to recoup funds from pharmacies retroactively, often weeks or even months after prescriptions were filled,” said Peter Matz, director of food and health policy at the Food Marketing Institute (FMI). “In an industry that operates on razor-thin profit margins, supermarket pharmacies have virtually no ability to absorb these unexpected costs. FMI will be looking at all options, including congressional action, to address the anti-competitive practices that are driving up drug prices and threatening both supermarket pharmacies and the customers they serve.”

The National Grocers Association (NGA) noted that the administration balked on DIR fee reform in CMS’ final rule after more than 4,000 comments were submitted on the exponential increase in DIR fees, including comments from NGA.

“While we are still reviewing the 200-page final rule, we were disappointed that the final rule fails to enact reforms to pharmacy DIR fees,” said Greg Ferrara, executive vice president at NGA. “Pharmacies operated by independent supermarkets have seen a tremendous and unexplainable increase in retroactive DIR fees in recent years. NGA will continue to call on the Trump administration and Congress to address these out-of-control fees that jeopardize the future of local, independently owned pharmacies across the country and the communities they serve.”

In a joint statement, the National Association of Chain Drug Stores and the National Community Pharmacists Association said they were “disappointed and frustrated” that CMS’ final drug pricing rule didn’t include pharmacy DIR reform as has been proposed. “Our organizations have been joined by many pharmacists, pharmacy stakeholder groups, patient advocacy organizations, patients and members of Congress in advocating that all pharmacy price concessions be included at the point of sale – or eliminated altogether — to provide senior patients with lower costs and pharmacies with more certainty,” the pharmacy trade groups said.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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