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ASHP Statement for the Record: Drug Pricing in America: A Prescription for Change, Part III

Senate Committee on Finance

April 9, 2019

ASHP (American Society of Health-System Pharmacists) respectfully submits the following statement for the record to the Senate Committee on Finance hearing on “Drug Pricing in America: A Prescription for Change, Part III.”

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 includes 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.

Poor access to medications can lead to increased morbidity and mortality, and can cause healthcare costs to increase. According to a recent Kaiser Health Tracking Poll, 29% of adults report that they are not taking their medications as prescribed due to increased cost, with 8% of those individuals reporting that their condition has worsened as a result of poor medication adherence.
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.

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.

In January, ASHP, along with the American Hospital Association (AHA) and the Federation of American Hospitals (FAH), 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.

ASHP is committed to continuing to advance policy and other solutions that will improve transparency in drug pricing and promote competition in the marketplace.


Addressing the problem of high drug prices is complicated by a lack of transparency in the system, from drug manufacturer price-setting to pharmacy benefit manager (PBM) rebates. ASHP respects the need to protect trade secrets, but we also believe the system can benefit from transparency related to costs. Thus, we encourage the Committee to explore options for increasing transparency within the pharmacy benefit managers (PBMs) rebates system. Specifically, rebates on drugs should be disclosed to participants in the system, including plan sponsors.

The rebates and Direct and Indirect Remuneration Fees (DIR Fees), which are negotiated by 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 the Centers for Medicare & Medicaid Services (CMS) to account for the true cost of the drug dispensed, including any manufacturer rebates.

Often DIR fees are unknown until the drug is 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 totals in the tens of thousands to hundreds of thousands of dollars.

In addition, PBMs are now 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.

Due to the fee structure, DIR fees assessed on pharmacies providing specialty medications have been especially problematic. Fees range from a flat rate of per dollar per claim or a percentage (typically 3‒9%) of the total reimbursement per claim. 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. This has, 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 stands in stark contrast to passing on savings to patients —the very reason DIR fees targeting manufacturer rebates were created.

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. 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 thanks the Committee on Finance 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.