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Statement: The Complex Web of Prescription Drug Prices, Part II: Untangling the Web and Paths Forward

Senate Special Committee on Aging

March 7, 2019

ASHP (American Society of Health-System Pharmacists) respectfully submits the following statement for the record to the Senate Committee on Finance hearing on “The Complex Web of Prescription Drug Prices, Part II: Untangling the Web and Paths Forward.”

ASHP represents pharmacists who serve as patient care providers in acute and ambulatory settings. The organization’s nearly 50,000 members include pharmacists, student pharmacists, and pharmacy technicians. For more than 75 years, ASHP has been at the forefront of efforts to improve medication use and enhance patient safety.

ASHP’s vision is that medication use will be optimal, safe, and effective for all people all of the time. A primary tenet of that vision is access to affordable medications needed to save or sustain lives. Addressing the issue of skyrocketing drug prices, including excessive price increases on commonly used generic medications, is one of ASHP’s highest and longstanding public policy priorities.

According to a Kaiser Health Tracking Poll, 1 in 4 Americans cannot afford their medications.1 For seniors, 64.6% of respondents to a Truven Health Analytics–NPR Health Poll indicated that cost was the reason for not filling a prescription.2 Poor access to medications can lead to increased morbidity and mortality, and can cause healthcare costs to increase. This is especially concerning when considering Medicare Part D enrollees, who take an average of 54.5 prescriptions per year.3

ASHP has been proactively addressing challenges related to the rapid increase of prescription drug pricing on several fronts, including working with like-minded stakeholders and educating members of Congress about the unsustainable burdens faced by patients, healthcare providers, and the entire healthcare system.

ASHP is a lead member of the Steering Committee of the Campaign for Sustainable Rx Pricing (CSRxP), a coalition of prominent national organizations representing physicians, consumers, payers, hospitals, health systems, and patient advocacy groups. CSRxP has developed a policy platform promoting market-based solutions supported by three pillars: competition, value, and transparency.

The goal of the campaign is to identify policy options that have bipartisan support and, therefore, a greater likelihood of passage. To that end, CSRxP focuses on policies to incentivize a more competitive marketplace to help stimulate lower drug prices. The campaign has also expressed support for efforts to loosen restrictions that prevent generic drug companies from obtaining the samples necessary to manufacture a competing product.

The price increases have placed enormous budgetary pressure on healthcare organizations, including hospitals and health systems. ASHP, along with the American Hospital Association (AHA) and the Federation of American Hospitals (FAH), recently released a report on the impact that the cost of and access to prescription drugs are having on hospital budgets and operations.

Specifically, the report showed that:

  • Average total drug spending per hospital admission increased by 18.5% between fiscal year (FY) 2015 and FY2017.
  • Outpatient drug spending per admission increased by 28.7%, while inpatient drug spending per admission increased by 9.6%, between FY2015 and FY2017.
  • Hospitals experienced price increases of over 80% across different classes of drugs, including those for anesthetics, parenteral solutions, and chemotherapy.
  • Over 90% of surveyed hospitals reported having to identify alternative therapies to manage spending.
  • One in 4 hospitals had to cut staff to mitigate budget pressures.4

ASHP does not collect, store, or report drug pricing information. However, we continually hear from pharmacy leaders in hospitals and health systems that sudden, inexplicable, and unpredictable price increases in connection with some of the most commonly used, longstanding generic medications are becoming more prevalent — and are occurring on a nationwide basis.

The upward trend in medication pricing, coupled with sudden price spikes, can be particularly problematic for seniors, many of whom rely on a fixed income. According to the Kaiser Family Foundation, on average, seniors enrolled in traditional Medicare spent $4,400 out-of-pocket annually for premiums and other costs associated with their healthcare. Prescription drug costs added an additional $300 per beneficiary, although individuals with multiple acute or chronic conditions faced much higher medication costs.5 These costs continue to rise unabated.

As the committee is aware, drug prices are straining the Medicare program. According to MedPAC, drug spend for the Part D program alone rose 10.9% between 2009 and 2015.6 The increase in Part B expenditures during the same period is even higher. Neither the Medicare program nor the seniors it covers can continue to absorb these increases year over year.

As there is no single solution to spikes in the prices of certain drugs, there is no single cause either. In this statement, we address four additional issues as they relate to drug pricing: competition, Risk Evaluation and Mitigation Strategies (REMS), Direct and Indirect Remuneration (DIR Fees), and the 340B Drug Pricing Program.


In particular, ASHP would like to learn more about the marketplace dynamics that could contribute to this issue, as we have worked diligently to address the issue of drug shortages for nearly 15 years. Although drug shortages are caused by a number of factors, we have observed that drugs in short supply that are made by only one or two manufacturers often result in higher-than-normal prices. If, for example, there is a lack of competition in the generic marketplace, we urge the committee to look at ways to stimulate more marketplace presence. ASHP supports bills such as S. 64, the “Preserve Access to Affordable Generics and Biosimilars Act.” This bipartisan bill would potentially increase competition by prohibiting companies from engaging in “pay-to-delay” tactics to stifle generic and biosimilar entry into the market.


ASHP recognizes that there may be limited circumstances in which constraints on the traditional drug supply system may be appropriate for reasons of patient safety, including through the use of manufacturer-driven REMS. However, we believe that REMS should never be used to artificially inflate drug prices, nor should REMS interfere with the professional practice of pharmacists, physicians, nurses, and other providers. We believe that there may be current cases in which a manufacturer-driven REMS using restricted distribution is causing higher prices for those drugs, having adverse effects on patient access, and delaying treatment. In some cases, there may be evidence to suggest that the use of restricted or limited distribution channels has resulted in the inability of a potential competitor to acquire enough of a drug to conduct the required testing to bring a generic competitor to market. For this reason, ASHP thanks Chairman Grassley for introducing S. 340, the “Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act of 2019.” The CREATES Act will help ensure that brand-name pharmaceutical companies cannot manipulate regulatory rules to prevent competition, which is essential for patient access to affordable medications. Additionally, we recommend that Congress require the Food and Drug Administration (FDA) to investigate restricted distribution under a REMS as a means to artificially increase drug prices and limit access to critical medications. Restricting distribution of medications is often a means to push patients to a specific purchasing channel, which in some cases increases not only their out-of-pocket costs, but also systemic costs. Further, restricted distribution networks can complicate patient access to critical medications, potentially disrupting care.


Many factors contribute to high drug product costs; addressing the problem is made difficult by lack of transparency about the marketplace for those products. For example, DIR fees and other rebates negotiated by pharmacy benefit managers (PBMs) make it difficult to determine the actual cost of a drug. DIR fees are a growing nationwide concern among pharmacies that dispense medications in a community pharmacy or outpatient clinic setting. Created under the Medicare Part D Program, DIR fees were originally intended as a way for CMS to account for the true cost of the drug dispensed, including any manufacturer rebates. Often these rebates were unknown until the drug was dispensed and the claim adjudicated. Moreover, the fees themselves, which are often arbitrary in nature, have mushroomed over the past decade, to the point that pharmacies regularly see annual DIR fee totals in the tens of thousands of dollars.

Recently, a concerning trend has emerged in which PBMs have begun to charge DIR fees to their pharmacy providers. Under this scenario, PBMs are inappropriately applying their own plan performance measures as a way to assess fees on pharmacies. This is problematic for the following reasons:

  • It is an arbitrary and unintended application of quality measures meant for total plan performance as opposed to pharmacy-level metrics.
  • The quality measures applied tend to be based on maintenance medications such as blood pressure medications or medications used to treat diabetes. These measures were never intended to be applied to specialty medications or to other specialized disease states such as oncology, yet PBMs assess DIR fees against the gross reimbursement for all prescriptions received by pharmacy providers, not just maintenance medications.
  • Pharmacy providers are essentially being penalized with backdoor fees without any requirement that PBMs define, justify, or explain these charges to providers and to CMS.

DIR fees assessed on pharmacies providing specialty medications have been especially hard-hit, due to the fee structure. Fees could be a flat rate of per dollar per claim or a percentage (typically 3‒9%) of the total reimbursement per claim. Using the percentage-based structure, the fees would increase markedly for specialty drugs, which are typically much more expensive than maintenance medications, sometimes resulting in thousands of dollars. A 9% fee on a drug costing $100,000 is $9,000. Additionally, these fees are assessed retroactively, sometimes months after the claim has been adjudicated, providing no recourse for the pharmacy impacted by the assessment.

The result of imposing DIR fees has led to higher cost-sharing responsibilities for Medicare beneficiaries, which have, in turn, caused more of these beneficiaries to enter the Part D donut hole, where the patient is solely responsible for the cost of the drug. Along with the higher costs absorbed by patients, adherence rates tend to be lower among Medicare beneficiaries who are in the donut hole and may not have the financial resources to pay for their medications. This is in stark contrast to the very reason DIR fees targeting manufacturer rebates were created — so that savings could be passed on to patients.

Pharmacies are not alone in their concern. In January 2017, CMS published a fact sheet expressing concern over DIR fees and cited those fees as contributing to increased drug costs, which, in turn, increased patients’ out-of-pocket spending and Medicare spending overall.7 Additionally, questions remain as to whether Part D plan sponsors have the authority to assess these fees on pharmacies. There are no references to DIR fees collected on pharmacies in either the Part D statute or corresponding CMS regulations.

ASHP’s professional policy on DIR fees is as follows:

To advocate that payers and pharmacy benefit managers be prohibited from recovering direct and indirect remuneration fees from pharmacies on adjudicated dispensing claims; further,
To oppose the application of plan-level quality measures on specific providers, such as participating pharmacies.8


For 25 years, the 340B Drug Pricing Program has allowed safety-net hospitals “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” This program has been essential to expanding access to lifesaving prescription drugs and comprehensive healthcare services to low-income and uninsured individuals, at no cost to the federal government. The federal 340B program is not causing high drug prices. The program accounts for less than 5% of annual drug purchases in the United States, while safety-net providers give 30% of the care. There are many contributing factors to higher drug costs, but there is no objective evidence that the program has increased overall drug pricing. In fact, the 340B program is revenue-neutral, benefiting patients without increasing costs for federal payers.

The federal 340B program enables these hospitals to serve their communities by providing vital care such as:

  • Free or lower-cost medications to patients.
  • Programs to increase medication adherence, including clinical pharmacy services to high-risk patients who are on multiple and/or complex medications.
  • Increased access to primary care.
  • Screenings and preventive care services to detect health problems early and decrease morbidity and mortality, as well as to decrease healthcare costs and hospital admissions.

The federal 340B program is at risk because of a recent change in Medicare payment policy that reduces payment from average sales price plus 6% to average sales price minus 22.5%. Cuts of this magnitude undermine the intent of the program, reducing resources that hospitals use to expand access to care and services to vulnerable communities. Given the increasingly high cost of pharmaceuticals, the federal 340B program provides critical support to the entities eligible to participate in the program.


ASHP thanks the Special Committee on Aging for holding this important hearing. ASHP remains committed to working with Congress and industry stakeholders to ensure that patients have affordable access to lifesaving and life-sustaining medications.


1 DiJulio, Bianca, et al. “Kaiser Health Tracking Poll: August 2015.” The Henry J. Kaiser Family Foundation, The Henry J. Kaiser Family Foundation, 20 Aug. 2015, Accessed February 10, 2019.
2Truven Health Analytics®-NPR “Health Poll: Prescription Drugs.” June 2017, Accessed March 5, 2019
3Medpac June 2018 Data Book:, p.170. Accessed March 5, 2019.
4NORC at the University of Chicago. Recent Trends in Hospital Drug Spending and Manufacturer Shortages (2019). Accessed 25 Feb. 2019.
5Kaiser Family Foundation, How Much is Enough? Out-of-Pocket Spending Among Medicare Beneficiaries: A Chartbook (July 21, 2014), available at
6Medpac June 2018 Data Book:, p.170. Accessed March 5, 2019.
7Fact sheet Medicare Part D – Direct and Indirect Remuneration (DIR). Centers for Medicare & Medicaid Services, 19 January. 2017, Accessed February 10, 2019
8ASHP Policy 1814, Direct and Indirect Remuneration Fees.