In theory, calculating profits from filling a script should not be all that difficult. Yet when direct and indirect remuneration fees, or DIRs, are added to the equation, things become endlessly confusing. What is warranted as a price concession? When will contingency fees be reported? Gray areas exist in all of these departments, but if one thing is for certain, it's that the large increase in DIR rates threatens the bottom line of independent pharmacies.
Since Medicare's Part D inception, the CMS has struggled to report the true costs associated with the Part D program and its impact on pharmacies. With little accountability from PBMs, DIR fees often leave pharmacists with a much smaller profit than initially calculated, at times even at a loss. It is especially complicated for pharmacists to calculate their profit because DIR fees are often not known until remittance statements are received. Occasionally, pharmacists may receive credit back from PBMs in the form of a "negative DIR". While this may help mitigate low returns pharmacies usually receive, negative DIRs only occur when a drug's maximum allowable cost (MAC) is below its contracted DIR rate. Last fall the CMS took a step forward in making this all a bit less hazy when they decided not to include all price concessions as chargebacks, but include some at the point of sale. For example, administrative and transaction fees will no longer be included on DIR reports, but instead will appear on a summary record called a prescription drug event (PDE). In another effort to clear the air, the CMS initiated a draft contract to redefine what applies as a negotiated price, or the amount pharmacies actually receive on their Part D claim. For 2016 CMS proposed Part D sponsors (or other intermediary contracting organizations) and network dispensing pharmacies set negotiation prices for covered Part D drugs that meet the following:
- A price both parties have negotiated as the amount the network will receive in total for a drug.
- All price concessions from network pharmacies are included, excluding concessions that cannot be predetermined.
- Include any dispensing fees there may be.
Additional contingency fees, such as incentive fees, are not to be included in negotiated prices and cannot be rebated back to Part D sponsors fully or in part. Of course where there are grey areas, there is room for risk. Under this new proposition, plan sponsors would only have to explain why they were unable to calculate a particular price concession at a point-of-sale. As many of you and others in healthcare noted to the CMS, all price concessions can have an approximate value at point-of sale. As a result, there would be very few exemptions from initial negotiated price reporting. While lower copays for customers are made possible when pharmacies pay DIR fees, an unclear outline of what qualifies as a DIR causes pharmacies to bear the brunt of the fees and receive insufficient reimbursements. For now CMS has halted the breaks on redefining DIR fees for 2016, and is instead looking for suggestions on how to determine front end and back end charges.