Battling DIR Fees

October 6, 2016

The profitability of both chain and independent pharmacies is being affected by direct and indirect remuneration fees that insurers are retroactively charging pharmacies after filling Medicare Part D prescriptions.

Retail pharmacies’ margins are dwindling. Many independent pharmacies have gone out of business in recent years and chains have formed new partnerships to survive. Now, the profitability of both chain and independent pharmacies is being affected by direct and indirect remuneration (DIR) fees that insurers are retroactively charging pharmacies after filling Medicare Part D prescriptions.

This year, some major pharmacy benefit managers (PBMs), including Aetna and CVS Caremark, are inappropriately collecting DIR fees from pharmacies, according to pharmacists and the National Community Pharmacists Association (NCPA).

“When the pharmacy processes a script, the PBM says how much they are going to pay for it,” said B. Douglas Hoey, RPh, NCPA CEO. “However, the DIR fees are breaking the PBM’s word. Let’s say the PBM says they are going to pay $25 per script. The DIR fee may come three months later, so they may only pay $18. It is a retroactive payment clawback.”

While PBMs claim that DIR fees are a form of pay-for-performance--rewarding top-performing pharmacies in Medicare Part D’s star ratings, the reality is that even top-performing pharmacies receive “very little, if anything, back in incentives compared to the fees collected,” according to Hoey.

Some pharmacies are also concerned about Humana’s Quality Network program for 2017, which will levy pharmacies $5 per Medicare Part D script filled when the script is run through Humana insurance.

An owner of several independent pharmacies told Drug Topics that his pharmacies will opt not to fill Medicare Part D scripts through Humana because of the fee. “The $5 in some cases is half of our profits and in some cases it is all of our profits. Plus, there are no savings to the patients,” the owner said.

However, Humana established the program so that pharmacies would not just be participating in a preferred network. Instead, the insurer aims to provide a “true value-based preferred network opportunity that is based solely on widely-accepted standards of quality performance,” said William Fleming, President of Humana Pharmacy Solutions. The program will use common pharmacy quality measures, including the rate of medication adherence for members taking diabetes, blood pressure, and cholesterol medications.

“We believe that inclusion in our preferred networks will allow community pharmacies to better compete for Humana members, potentially increasing patient volume, while pushing forward a movement in community pharmacy in improving quality of care,” Fleming said.

 

 

Here’s how the program works, according to Fleming: the highest performing pharmacies in Humana’s Quality Network, regardless of chain or independent affiliation, are rewarded at a higher level in order to recognize their superior performance. The highest performing pharmacies – those above the 80th percentile – receive up to $6 per eligible claim. Pharmacies in the 50th to 80th percentiles receive up to $2 per eligible claim.

“The program will also feature common sense exclusions to ensure that pharmacies are not negatively affected if they treat a small number of Humana members,” Fleming said.

However, the NCPA, the National Association of Chain Drug Stores (NACDS), and several pharmacies believe action must be taken to stem the profit loss from retroactive DIR fees. 

“As with any business, pharmacies need to be assured of their revenue stream for business planning purposes,” said Chris Krese, a spokesperson for NACDS. “NACDS advocates for policies that ensure that pharmacies can engage in reliable business planning with respect to their prescription drug reimbursement for all reimbursement models, including those that include fees that may be imposed post-adjudication, such as DIR fees.”

NCPA is urging passage of bipartisan legislation to boost transparency in Medicare Part D drug spending and to prohibit retroactive DIR fees. Senate Bill 3308 and the companion legislation, H.R. 5951, were introduced in early September. “Contact your representative and your two senators and make sure that they can spell DIR fees backwards and forwards – in other words, get RID of DIRs,” Hoey said.

In addition, NCPA believes the Centers for Medicare and Medicaid Services should intervene on DIR fees. “They should be more concerned about this, because the DIR fees are causing patients beneficiaries to be misled when they select their Part D plan,” Hoey said. “We also believe the DIR fees are pushing beneficiaries into the coverage gap (doughnut hole) more quickly.”

However, the proposed legislation and “the independent drugstore lobby agenda on DIR” would increase costs and reduce access to affordable medicines for Medicare enrollees, according to a Pharmaceutical Care Management Association (PCMA) statement provided to Drug Topics. “Lower cost preferred pharmacy plans, which have been chosen by 75% of Part D enrollees, have become the very foundation of Medicare Part D. It makes little sense for lawmakers to put these popular plans at risk,” according to the PCMA statement.

In addition, the proposed bills would “undermine the ability of Medicare Part D plans and PBMs to detect wasteful spending by limiting the use of audits and other tools to pursue suspected fraud in the pharmacy setting,” the PCMA statement said.

 

How DIR fees affect pharmacies

To get a better sense of the toll DIR fees are taking on independent pharmacies, NCPA surveyed 640 community pharmacists. Results include:

  • 87% of pharmacists said DIR fees significantly affect their pharmacy’s ability to provide patient care and remain in business.

  • 67% said that no information is given as to how much and when DIR fees will be collected or assessed, while 53% said they are assessed quarterly. Many noted this lag time makes it impossible to determine at the time of dispensing whether the net reimbursement will cover their costs.

  • While DIR fees started in the Medicare Part D program, 57% said they now appear in some commercial plans as well.