Recently, Congress introduced H.R. 1038, titled “Improving Transparency and Accuracy in Medicare Part D Spending Act.” The bill already has 30 cosponsors and there is discussion it could remove Direct or Indirect Remuneration (DIR) fees.
We investigated this bill to try to understand the implications for pharmacies.
The bill states that Part D plans “may not retroactively reduce payment on claims directly or indirectly through aggregated effective rate.”
While a few plans have moved DIR fees to point-of-sale, the majority of plans collect DIR retroactively, several times a year at remittance. Plans analyze all the pharmacy’s claims every 3-4 months, and depending on the metrics it decides, the plan takes back a percentage or flat rate of the total revenue a pharmacy made. This was made popular in the media when Diplomat’s stock price took a plunge due to DIR fees. It has been suggested the retroactive DIR fees allow plans to effectively bypass recent MAC transparency laws.
By moving all DIR to point-of-sale, this will enable pharmacies to immediately identify their margins at adjudication and if necessarily, take action to appeal it.
While moving all DIR to point-of-sale will increase transparency, it will not eliminate “pay-for-performance” programs. S. 413 / H.R. 1038 will allow health plans and PBMs to implement pharmacy pay-for-performance programs that are aligned with current Medicare value-based programs. In the case of plans that take a flat amount at point-of-sale ($5, for example) and then issue retroactive paybacks to “pay-for-performance”, we can expect a change in their design. Perhaps an up-front deduction based on past performance will be introduced.
As we explored in our article “5 Myths about Pharmacy Star Ratings and DIR Fees,” these current methods of retroactive DIR also affect patients by overcharging them on their copays.
For example when DIR is taken retroactively, if the point-of-sale negotiated price is $100, DIR is $5, and the patient’s copay is 25% of full cost, the patient ends up paying a $25 copay. However, the true price of the drug is $95 ($100 - $5 DIR). So the patient should have paid $23.75. Add this over 50 million seniors with 6 medications each, and it quickly becomes billions of dollars.
While this isn’t the panacea we were hoping for, it is an effort to constrain DIR fees and increase both transparency and PBM accountability. Let’s hope our legislators consider the other types of DIR fees in the future. In the mean time, let’s join the effort to start a Pharmacy-Friendly Medicare plan.