In 2018, CMS proposed a Medicare rule that would eliminate retroactive DIR fees. One of the rationales for the rule was a colossal growth of DIRs between 2010 and 2017. During this period of time, DIRs grew by 45,000%.
As a result of this aggressive “performance enforcement” by PBMs, many pharmacies are reimbursed below cost and many have closed their doors. The American Medical Association has published a study showing that many patients with cardiovascular problems cannot access their medications due to significant pharmacy closures across the country. (Access the study).
The proposed rule would implement a definition of ‘‘negotiated price’’ that is intended to ensure that the prices available to Part D enrollees at the point of sale are inclusive of all pharmacy price concessions. In CMS’s opinion, this rule will be in line with the Trump Administration Blueprint to lower drug prices and reduce out-of-pocket costs.
CMS explained that when price concessions are applied to reduce the negotiated price at the point of sale, some of the concession amount is apportioned to reduce beneficiary cost-sharing. In contrast, when price concessions are applied after the point of sale, as DIR, the majority of the concession amount accrues to the plan, and the remainder accrues to the government. For further discussion on this matter, please see the CMS Fact Sheet from January 19, 2017 ‘‘Medicare Part D Direct and Indirect Remunerations.’
According to CMS, pharmacy price concessions applied as DIR can lower plan premiums and increase plan revenues, result in cost-shifting to beneficiaries and the government, and reduce consumer and government knowledge about the true costs of prescription drugs. To avoid such outcomes, CMS has issued the proposed rule and is expected to rule on it shortly.
In addition, most DIR fees have migrated into private plans. While the legality of these fees is questionable, the ambiguity surrounding such DIRs is troublesome. Many pharmacies do not understand what the fees are for, how they are allocated, and do not request the break-down of DIR fees.
For example, in 2015 – when I first started researching the issue – the following DIR fees were in place:
|The majority of Caremark plans calculated DIRs as:
1. a difference between adjudicated amount and contractual rate, or
2. 2.75%-9.5% of ingredient cost
DIR was $2.80
|Some Caremark plans|
|Some ESI plans
DIR was $3.25
|Majority of ESI plans|
DIR was $5
If you ask me now, I will not be able to tell you how DIRs are currently calculated and which plans/PBMs do not implement DIRs. This ambiguity and lack of any explanations make conducting pharmacy business impossible. As a pharmacy owner or a manager, you are entitled to reports describing all DIRs and how they are calculated. Your PSAO should be able to obtain this information directly from the PBMs and guide you through your contractual obligations. The problem is… many PSAOs also have no idea about how DIRs are calculated.