Retroactive DIR Fees Threaten Pharmacy Survival

Jan 17, 2020 at 03:40 pm by steve

Jennifer Cork

Page Dunlap enjoyed owning Fowler Pharmacy in Hartselle. Her customers were her neighbors. They trusted her, and they knew that she was happy to take the time to answer any questions they might have. Now Dunlap works for one of the big chain pharmacies.

Page Dunlap

Jennifer Cork manages a practice that had its own specialty pharmacy because many of its patients need medications that require extra counseling and follow up. Their pharmacist helped patients taking biologics understand the medication and taught them how to use it. They could always call their pharmacist for follow-up help. Now that pharmacy is gone, too. If patients have questions, they have to hope the pharmacy where they are currently getting their medications doesn't have a calling tree with long hold times, with little access to an actual pharmacist.

What put these pharmacies out of business? Retroactive DIR fees made it impossible for them to know how much a medication actually cost them until as much as three to six months after they filled the prescription. Too often, their costs were more than the patient paid--leaving the pharmacy to pay the difference.

"For specialty pharmacies like ours, many of our patients have conditions that require drugs for which there are no generics available. There is no way we can meet the generic to brand name ratio criteria to avoid higher DIR fees," said Cork, who manages Total Skin & Beauty Dermatology Center. "Our Dr. Krell treats the fourth largest number of psoriasis patients in the nation. We prescribe a huge volume of biologic drugs."

Direct and Indirect Remuneration, or DIR, was a fee originally created by the Centers for Medicare and Medicaid Services (CMS) to pass savings from rebates and other price adjustments on Part D plan medications back to CMS. It was quickly adopted by private insurance. Now the term has morphed into multiple meanings, and loopholes in regulations have created uncertainty in how much the fees will be and where the money is going that was intended to reduce costs to taxpayers and patients.

"DIR fees were originally meant to be handled by Plan Benefit Managers (PBMs) as part of their work to show that they could help reduce and manage costs," Dunlap said. "For that work, they are paid an administrative fee. The responsibility for DIR fees was passed on to pharmacies. The responsibility for meeting other goals was also passed on to pharmacies, even though some of them are not within the pharmacist's control. For example, although physicians rather than pharmacists are authorized to prescribe, if a diabetic isn't receiving all the medications the NIH treatment plan calls for, it counts against the pharmacy and can affect their costs."

Loopholes in the law appear to allow DIR fees to be set somewhat arbitrarily. There is little oversight and a lot of uncertainty about whether or how much of the DIR fees reach the payer or if some are being used to augment the administrative fees paid to some PBMs.

DIR fees only apply if a pharmacy is in a network. However opting out of a network is not really an option at all.

"If you aren't in a network, there are too many medications you can't get," Cork said. "Your shelves would be almost bare, and you couldn't really serve your customers."

Although small independent pharmacies and specialty pharmacies are experiencing the biggest impact from DIR fees, larger chain pharmacies are also feeling the pinch in spite of being able to spread the costs over a broader product line. This is occurring at a time that retail businesses in general are under pressure.

The hope for improving the situation lies in congress. A number of senators and congressmen are supporting legislation that could come before congress next year to tighten the loopholes and correct some of the problems.

"If we could just know at the time of sale how much the medication costs, it would make a huge difference," Dunlap said. "Patients would have a chance to benefit from any savings then and there. They are not seeing those savings now, because they have already paid their copays months before the DIR fees are known."

Cork said, "We're also hoping the new laws will recognize that specialty pharmacies have patients who may need very different types of medications that don't fit the typical pattern. They need to be exempted from requirements that can't be met."

If relief comes in the form of new legislation, will the pharmacies that have closed reopen?

"Our pharmacy wasn't something we did as a profit center," Cork said. "It was a service for our patients. We would love to be able to do that again, but we'll have to wait and see what happens in congress."

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