Due to the new Medicare Part D requirements effective the next year, direct and indirect remunerations (DIR) fees – that are so favored by PBMs – must be included and deducted from reimbursements at point-of-sale. In other words, starting with 2024 (still unclear when exactly), there will be no more retroactive DIR fees. Currently PBMs recoup DIR fees at a much later date after the actual claim adjudication.
In 2024, PBMs will be implementing something known as “Double DIR Cliff” when PBMs will be deducting DIR fees retroactively but at the same time at the point-of-sale. Many experts anticipate that this would leave pharmacies with negative cash flow.
For example, in January 2024, PBMs will be collecting DIR fees for May-August of 2023 and in March 2024, PBMs will still be collecting fees for the claims submitted for the last quarter of 2023. But at the same time, PBMs will be collecting DIR fees at point-of-sale. This double DIR issue has been a great concern for my independent pharmacy clients.
Terry Cater (RPh, MBA) – who has helped many of my clients with improving cash flow, compliance, and pharmacy every-day operations – is asked the questions of “What to do with the upcoming DIR changes” on a daily basis. Below are some of his tips to the independent pharmacies on how to minimize their financial exposure. With Terry’s permission, I would like to share them with my audience.
Tips on facing DIR Double Cliff from Terry Cater, RPh, MBA:
Here is my take on dealing w/ the DIR “Hangover” or “Cliff” or DIR Armageddon,” which will likely occur towards end of first quarter 2024.
This is a cash flow issue.
Build liquidity – Hoard cash.
Start Tax planning NOW !!!
Meet with your banker and set up a line of credit.
This is HUGE: Inventory management.
Take a look at technology like Datarithm or CIM (Cardinal customers).
You can free up a lot of cash by managing what you have on the shelves.
Make sure your financial documents are up to date, ESPECIALLY your P&L.
Do you know what DIR fees are as percentage of revenue?
Do you use a reconciliation program for A/R?
This will show you DIR & service fees & claims adjustments.
It’s Med Part D open enrollment. Review various plans in your
locale and work with patients to assist them in finding the best
plan that they can use at their pharmacy (that would be you).
Diversify revenue sources ie OTC, immunizations, DME, etc
To reduce DIR fees on an ongoing basis:
Understand how DIR fees are part of Star ratings.
Easiest (but NOT easy!) path is to drive adherence.
Suggest offer Med Sync or Auto Refill program.
Consider offering Compliance Packaging to seniors.
Call me if you need to discuss.
Terry Cater, R.Ph., M.B.A.
If you would like to discuss this complex issue with Terry, you can contact him through his website.