New Study: Medicare Could Save Seniors Billions by Fixing Part D Incentives

Author: APCI Staff/Monday, March 7, 2022/Categories: APCI News

Plan sponsors and PBMs that manage prescription drug benefits under Medicare Part D are shifting costs and risks to America’s seniors and taxpayers by artificially inflating prescription drug costs at the pharmacy counter, according to a groundbreaking new study released today.

The study, “Deserving of Better: How American Seniors Are Paying for Misaligned Incentives Within Medicare Part D,” reveals how practices and tactics employed by prescription drug plan sponsors and PBMs in Part D result in soaring drug costs at the counter for America’s seniors – to the detriment of patients, taxpayers, and pharmacies, and for the benefit of the Part D plans and PBMs themselves. The study was performed by analytics firm 3 Axis Advisors and was sponsored by American Pharmacy Cooperative, Inc. (APCI) and the American Pharmacists Association (APhA).

“It is unconscionable that our nation’s senior citizens, who depend on Medicare Part D for their life-saving medications, are spending more and more of their money each year while the stock prices and profits of these prescription drug plans and PBMs are skyrocketing,” said Tim Hamrick, APCI CEO. “Many have long asked why the United States pays more than any other country in the world for prescription medications, and this study provides a long, hard look at some of the contributing factors as to why that is.”

While the study identifies how misaligned incentives and poorly-defined “Direct and Indirect Renumeration” (DIR) fees are increasing costs for seniors, it also reveals a path forward for increasing transparency in the system while saving seniors and the government more than $18 billion annually. The study examines a policy shift for Medicare to move away from its current system of utilizing over-inflated list prices for prescription pricing to a more accurate and realistic model, such as the model used by Medicaid programs in most states.

The findings in the study are particularly salient as the Centers for Medicare and Medicaid Services (CMS) is currently considering a proposed rule to address retroactive DIR fees, which have increased 107,400 percent between 2010 and 2020.

“When we call out PBMs for their behind-the-curtain dealings, we’re not just spewing rhetoric. We’ve got the evidence to prove our point. This study is further proof that we need to fix the broken pharmacy payment model. APhA has realistic solutions to share,” stated Scott J. Knoer, MS, PharmD, FASHP, APhA executive vice president and CEO.

“This study is groundbreaking. We knew DIR fees were wreaking havoc on drug prices, beneficiaries, and pharmacies but this study reveals the lengths some PBMs and plans will go to pad their profits, including deliberately raising drug prices and clawing back money not just from pharmacies but from the patients themselves.  It is time for CMS and Congress to take a sledgehammer to the status quo to protect America’s seniors, taxpayers, and community pharmacies. This study provides a road map to doing just that,” said Greg Reybold, APCI’s Director of Public Policy and General Counsel.


About APhA

APhA is the only organization advancing the entire pharmacy profession. Our expert staff and strong volunteer leadership, including many experienced pharmacists, allow us to deliver vital leadership to help pharmacists, pharmaceutical scientists, student pharmacists, and pharmacy technicians find success and satisfaction in their work and advocate for changes that benefit them, their patients, and their communities. For more information, please visit www.pharmacist.com.

About APCI

APCI is a member-owned cooperative of 1,700 member pharmacies in 30 states. Established in 1984 and headquartered in Bessemer, Ala., APCI is proud to lead the fight for prescription drug pricing transparency and reform.