top of page
  • AIPC Rx

PBM Cuts, DIR Fees And Audits Add Dour Note to the New Year

Pharmacy benefit managers (PBMs) have responded to the new Centers for Medicare & Medicaid Services (CMS) rule requiring them to account for all remuneration—including direct and indirect reimbursement (DIR) fees—at the time prescriptions are filled by imposing dramatic up-front reimbursement cuts for contracted pharmacies.

In the early fall, KFF Health News reported, Express Scripts—one of the top three PBMs—sent out confidential contracts announcing that it would pay pharmacies approximately 10% below average wholesale price (AWP), “meaning they could lose money on every prescription they fill, according to two independent pharmacists who received the documents” (

Some specialty pharmacies have been receiving new contracts with even more drastic cuts, as much as AWP minus 20%, said Julie Allen, a lobbyist with Powers Pyles Sutter & Verville who represents the National Association of Specialty Pharmacy. “For the last few years, PBMs have blatantly told pharmacies, ‘This is what your rate is today, but if CMS issues any reform—DIR or otherwise—we will reassess your rates.’ So here we are. We have a new rule, and they’re following through on that promise with these drastic up-front cuts.”

Specialty pharmacies have been particularly hard-hit, “but I think pharmacies across the board of all types have seen their 2024 contract agreements tank in terms of the rates,” Ms. Allen told Specialty Pharmacy Continuum.

Ms. Allen added that the new rule, which took effect this January, does not prohibit DIR fee clawbacks; instead, all fees have to be assessed at the point of sale only for the purpose of assessing the Medicare beneficiary’s cost-sharing obligation. “PBMs can continue to claw back fees from pharmacies even with this new rule.”

The fallout extends to health-system pharmacies as well. Angie Amado, PharmD, the director of specialty pharmacy services for Visante, noted that health systems lack the flexibility of independent pharmacies to opt out of contracts, potentially leading to significant revenue losses.

Health Systems Lack Flexibility To Respond

“We’re definitely hearing from our outside partners that rates are changing and not in a positive way; they’re anticipating taking big hits on that front,” Ms. Amado said. “And health systems don’t always have the flexibility that an independent pharmacy might have to opt out of contracts that will actually result in lost revenue. They’re not able to lose the patients associated with those contracts who are already being seen by their providers, so their hands are tied. They are having to accept the rates being set by these contracts and find other ways to cut costs, or bring in additional revenue to offset the losses they’re seeing.”

The CMS rule is important because it addresses the strategy employed by some PBMs that has led to the growth of clawbacks, Ms. Allen said—but it does not do nearly enough to support the financial interests of pharmacies, nor the ability of patients to get their prescriptions filled at their pharmacy of choice. “Of course, you can’t continue to allow PBMs to assess all these concessions after the point of sale.

Of the 107,400% growth in clawbacks over the past 10 years, as reported by [CMS], by far most of that has been attributed to performance-based metrics applied to pharmacies []. But now we’re faced with pharmacies being reimbursed below their acquisition cost and cost to dispense. We have to address both of those things. We need a regulatory or legislative fix to ensure that pharmacies are protected.”

Such a fix “may happen in the new year,” Ms. Allen added. “Right now, there is tremendous alignment on pharmacy issues in the Senate and House, which doesn’t happen often.”

Audit Trends

In addition to new contracted rates, pharmacies are also facing an increase in PBM audits leading to significant monetary penalties, disruption of network operations, and investigations by licensing authorities such as state boards of pharmacy. This troubling trend was highlighted by attorneys in a recent year-end webinar on PBM audit trends by the healthcare law firm Frier Levitt.

“We have seen increased scrutiny of pharmacies that have entered into hub pharmacy arrangements,” noted Harini Bupathi, JD, a Frier Levitt attorney whose practice focuses on counseling pharmacy providers on their relationships with PBMs. “PBMs have different terms and conditions as to the extent a pharmacy can participate in a hub, so while a hub pharmacy arrangement might be completely OK from a regulatory perspective, it might not be from the PBM’s perspective. For example, we have seen PBMs are raising concerns about the outsourcing of collection of copays by the hub versus the pharmacy.”

With the lifting of the federal COVID-19 public health emergency, PBMs are reverting to older requirements that define retail pharmacies as those dispensing medications in person at the point of sale, rather than mailing or shipping products to patients. “That is bizarre in this day and age, to require retail pharmacies to stick with brick-and-mortar locations,” said Dae Lee, PharmD, JD, a pharmacist attorney in Frier Levitt’s life sciences practice group. “But major PBMs have rolled back their mailing or shipping waivers, and now pharmacies are getting audited on these claims. Major PBMs will send cease-and-desist notices prompting the pharmacy to stop mailing or be terminated from the network or require that the pharmacy be credentialed as a mail-order pharmacy, which is quite onerous.”

Although pharmacies have the right to appeal findings of an audit—even so-called “final” findings—the process is complicated and time-consuming, Dr. Lee said, sharing a case involving a PBM disputing $100,000 in claims related to COVID-19 test kits, because the PBM alleged that the pharmacy was short on purchases compared with the claims the pharmacy had billed to the PBM. “The pharmacy actually had all the purchases, and ultimately the PBM reversed the finding, but the pharmacy had to dedicate staff time and money to fight the allegations. PBMs can withhold money at any point.”

Other audit trends noted during the webinar were invoice reconciliations, where PBMs review total purchases and dispensed amounts over a specific period, potentially creating illusions of drug inventory shortages. “This is the bread and butter of PBMs, as we see drug invoice shortage discrepancies in most audits because of the limited review period,” said Adam Farkas, JD, an associate in Frier Levitt’s life sciences practice group. “Pharmacies’ existing drug inventories might not be considered, presenting the illusion of shortages that don’t actually exist.”

With PBMs facing legislative pressure on both the federal and state levels, the Frier Levitt attorneys predict that PBMs will be more aggressive this year with increased audits and a focus on maintaining the integrity of their network pharmacies. Pharmacies are urged to be cautious amid these challenges and advocate for protective measures in the evolving healthcare landscape.

Next Steps

Congress has yet to pass PBM reform bills that include the pharmacy protections NASP has advocated—specifically, enforcement of the “any willing pharmacy statute” and requiring reasonable contact terms and reimbursement for pharmacies under Part D, Ms. Allen noted.

“Negotiations on a broader legislative package to address PBM reforms that include the pharmacy protections are ongoing, and the next anticipated opportunity for Congress to advance the legislation is in early March,” she said. “It is essential for any reform effort to establish protections for pharmacies, especially now that the [Medicare] Part D rule has gone into effect.”

Reporter: Gina Shaw


bottom of page