The benefit for a patient to fill his or her medications at a preferred pharmacy within their Part D Plan’s network is clear: lower prescription drug copays. What might not be apparent right away are the sacrifices retail pharmacies must make to be a part of the preferred network. Though they might attract more patients with the lure of lower copays, some preferred pharmacies might be losing money in the long run due to the implementation of DIR logic into reimbursement rates (Direct and Indirect Remuneration).

What does this mean?

Direct and Indirect Remuneration includes discounts, charge-backs or rebates, cash discounts, free goods contingent on a purchase agreement, post point of sale price concessions, etc. from any source that would serve to decrease costs incurred under the Part D plan. One aspect of DIR that retail pharmacies must be aware of is the amount of money a PBM might reclaim after initial reconciliation.</p>

One specific example is the 5.25% DIR ratefor preferred pharmacies initiated by Caremark in 2013.  This means that the Caremark will take back 5.25% of the pharmacy's reimbursement for a drug. The ruling stated that a pharmacy could not be awarded the preferred contract unless they agreed to at least that percentage point.  This may not seem like much for an inexpensive drug, but for example, the amount of money Caremark would reclaim for a $2,000 drug would be a bit over $100! This loss could potentially exceed the profit for that drug, meaning that the pharmacy (perhaps unwittingly) is losing money per refill! In addition specific to Caremark, patient copays do not differ with the Silverscript Basic plan (more popular than Choice or Plus) between preferred and non-preferred pharmacies.  A hypothetical pharmacy in network with Caremark that has the majority of patients on the Silverscript Basic plan is making reimbursement sacrifices without any perks!

Other PBMS may use a percentage, similar to Caremark, or they might implement a flat rate.  It is important to be knowledgeable of the DIR policies out there.

What is the significance of DIR? Why does it exist? Preferred pharmacy network plans are projected to reduce federal Medicare spending by approximately $870 million this yearTable one breaks down the different cost-reducing strategies.  DIR falls under the first category: Pharmacy Contract Improvement Savings, which accounts for 85% of total savings.

We now show DIR fees! When you are on the plan comparison page, click 'Options' then click 'Show Refill Full Cost', then press save. When the plans repopulate, the applicable DIR fees will appear next to the reimbursement.

iMedicare can also help take the guesswork out of estimating refill full costs and preferred networks.  With only a few clicks, you can find out if you are a preferred pharmacy on various Part D plans! We just added a new feature that will let you only see preferred plans for your pharmacy.With this empowering knowledge in mind, you can better prepare for the future.