With the arrival of 2016 plans, it is important to note that DIR Fees are also getting a makeover for the upcoming year. Unfortunately, these fees have a history of hurting independent pharmacies' income. Many groups, such as The American Pharmacists Association, have vocalized concerns with the negative impacts of DIR Fees on pharmacies and patients. Since DIR Fees can be really confusing, we've done some research on your behalf. Here's what you need to know.

First, let's quickly go over the basics. DIR is the abbreviation of Direct and Indirect Remuneration. Occasionally these fees are called "network to plan rebates". Essentially, rates are established and then corresponding fees are taken out of pharmacy reimbursements. The fee might be a flat price (such as $3) or a percentage (such as 3% the full cost of each drug). DIR Fees seem hidden, because they are calculated alongside MAC rates. (You might remember our blog post about the MAC Transparency Act.) It's important to note that not every plan has DIR Fees. That said, DIR Fees are often associated with preferred plans.

With the basics out of the way, we can talk about DIR Fees in 2016. Next year, DIR Fees will be influenced by two factors: Star Ratings and Generic Dispensing Rates (GDR).

First, if your pharmacy has a better Star Rating, the DIR Fees will be smaller. The logic is simple. Pharmacies providing better service should be rewarded. (This prompts the philosophical question, is less punishment a reward?) Don't forget, integrated iMedicare accounts can use Star Ratings Reports to improve their pharmacies' ratings.

Second, the Generic Dispensing Rate affects DIR Fees. In 2016, there is an inverse relationship between the percentage of generics a patient is taking and associated DIR Fees. Put simply, if a patient is taking more generics, the DIR Fee is less. The GDR only accounts for drugs that have available generics. If a patient is prescribed a brand name drug for which no generic is available, this does not count toward the "percentage of generics a patient is taking" that calculates the GDR. In iMedicare, the Therapeutic Alternatives button can help you find appropriate generics covered by a patient's plan.

Hopefully these changes will help independent pharmacists keep the money they earn. To keep an eye on DIR Fees in your iMedicare account, select "Options" on the View and Compare page, and select "Show refill full cost". When this option is selected, any known DIR Fees will be shown on each plan. If you see a range (such as $0 - $3 DIR/Rx), now you know how to stay on the lower end of it.