12/20/2023

CMS Issues Warning Letter to Pharmacy Benefit Managers and Plans Over Fair Reimbursements and Practices

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.

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