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Evolving Financial Impact
CMS created DIR as a reporting structure to track rebates, chargebacks, cash discounts and other price adjustments re- ceived by Part D plan sponsors that affect the nal or net cost of Part D medications. As originally contemplated, Part D plan sponsors would pass the post point-of-sale savings realized on Part D medications back to the Medicare program and help keep program costs down for Medicare Part D bene ciaries, plan sponsors and the Medicare program.
In recent years, however, DIR has evolved into an expansive array of fees imposed largely by Part D plans and pharmacy bene ts managers (PBMs) onto pharmacy providers as a condition of participation in the Part D program. DIR fees are part of con dential contracts, but are typically categorized into “pay to play” payments, brand-generic dispense rates and perfor- mance metrics.
Types of DIR Fees
Preferred Pharmacy Fee
Percentage of total PBM reimbursement to a particular preferred pharmacy measured at a given interval, typically quarterly or annually.
Effective or Contracted Rates
Dispensing of brand, generic and total ef- fective rates expressed in the aggregate.
Performance Metrics
Achievement on re ll rates/extended supply rates, generic dispensing rates, preferred dispensing rates and adher- ence metrics related to Part D plan performance measured by Star Ratings.
Some plans have at per-prescription DIR fees that range from $2 to $7 per prescrip- tion claim, while other plans calculate DIR fees as a percentage of the prescription’s ingredient cost — typically ranging from 3 to 5 percent — for a brand-name pre- scription. The DIR fees create signi cant reductions in pharmacy providers’ operat- ing income. Moreover, the vast majority of these fees are collected well after the point of sale, causing unpredictable reimburse- ment rates for pharmacy providers.
Pharmacy Providers Begin to Coalesce to Increase Transparency of DIR Fees
Over the last few years, DIR fees have disproportionately affected indepen- dent and retail pharmacies, with many paying tens of thousands of dollars an- nually. In 2016, PBMs began imposing DIR fees on specialty pharmacy providers. Diplomat Pharmacy, for example, reportedly paid $8 million in DIR fees in 2016. Health system pharmacies are also beginning to feel the effects of DIR fees, most notably in ambulatory settings. In addition, a recent white paper supported
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by the Community Oncology Alliance (COA) shows that physician-dispensing practices are also increasingly subject to DIR fees, which can amount to hundreds of dollars per prescription for novel oncolytic products.
In response to the heightened sensitivity around DIR fees, many pharmacy groups and organizations, as well as congres- sional members, initiated action to bring greater certainty and transparency for DIR fee assessments. CMS proposed draft guidance in 2014 that sought increased transparency in DIR processes; to date, the agency has not nalized the guidance. The National Association of Chain Drug Stores (NACDS), the National Community Pharmacist Association (NCPA) and other pharmacy groups have called on CMS to nalize the guidance. Additionally, Senator Shelley Moore Capito (R-WV) and Rep. Morgan Grif th (R-VA) introduced HR 1038/S 413, the Improving Transparency and Accuracy in Medicare Part D Spending Act, which prohibits retroactive DIR fees on clean claims. The practical effect would cause fees assessed only at the point-of-sale and create more certainty
in pharmacy reimbursement.
Other proposals oated by policy experts are to revamp quality measures so that they align with the setting type (i.e., retail vs. specialty) or imposing a at fee vs. percentage based fee.
General consensus among pharmacy groups is DIR fees lack predictability and transparency. Although pharmacy has not coalesced around a speci c proposal, increased media attention and congressional awareness regarding the impacts of DIR fees ensures the issue will remain relevant and topical.
About the author
Jason Money is a Director of Government Affairs at AmerisourceBergen.
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