Stealing With Our Eyes Open

Drug Topics JournalDrug Topics January/February 2024
Volume 168
Issue 01

How much longer can independent pharmacists survive with the current method of reimbursement?

In 1979, I started working at my first independent pharmacy. I was an intern, trying to complete the required 750 intern hours. I worked with Louie Rinovato, a 5-ft 6-in Italian who came from a poor Italian family in Johnsonburg, Pennsylvania. Rinovato was a formative force in my early years of exposure to this profession. He loved his customers, speaking Italian to many of them, and was always full of sage advice.

Peter A. Kreckel, RPh

Peter A. Kreckel, RPh

One afternoon we were discussing overdue in-house charge accounts. A lot of “friends” owed Rinovato a lot of money, and he was struggling to figure out how to collect these past-due accounts. As always, he had a wise saying: “Not paying your bills is stealing; shoplifting from my store is stealing. One occurs when my eyes are open, and the other is when my eyes are closed. Stealing is stealing, and it happens when you take something that does not rightfully belong to you.”

Because I’ve worked for independent pharmacies my whole career, not a day goes by that I do not hear of (or at least think of) direct and indirect remuneration (DIR) fees. These fees are paid by pharmacies to pharmacy benefit managers (PBMs)—or, maybe stolen from pharmacies by the PBMs would be more accurate. These fees are based on a variety of factors including performance metrics, such as patients taking their medications, answering phones when a pharmacist calls to do a comprehensive medication review, and drug prices. Each of these metrics is out of the pharmacist’s hands, and the PBM clawback is typically calculated retroactively. At the time of dispensing, pharmacists have no idea they owe DIR fees until months after they have dispensed a drug.

Data show that pharmacy price concessions, the net of all pharmacy incentive payments, grew more than 107,400% between 2010 and 2020. These data also show that much of this growth occurred after 2012, when the use by Part D sponsors of performance-based payment arrangements with pharmacies became increasingly prevalent. In 2010, PBMs stole $8,869,347 from pharmacies across the nation. Ten years later, PBMs increased this thievery more than 10-fold. In 2020, PBMs lined their pockets with $9,535,197,775 stolen from community pharmacies’ cash drawers.1

READ MORE: DIR Fee Changes Are Coming in 2024. Are You Prepared?

Patients suffer greatly from these practices, as well. Medicare patients pay for a prescription drug that is based on the cost of the drug. Until 2024, DIR fees were not included in this calculation, as the cost to the patient is based on the cost of the medication. The patients pay these inflated costs because the calculation is based on a figure that is higher than what the plans really pay—because DIR fees are not included. It sounds to me like PBMs are not only stealing from pharmacies but also from patients. Or, as Rinovato would put it, “stealing with my eyes closed.”

As of January 1, 2024, PBMs will be stealing from pharmacies and patients with their eyes open. We pharmacists can’t possibly consider this a win. The updated DIR fee guidelines are likely to impact 2024 cash flows, particularly during the first 5 months of 2024 and possibly even longer. During early 2024, pharmacists will have to pay their 2023 DIR payments that were not previously collected; at the same time, CMS will pay pharmacists less money for drugs as the inflated costs will not be paid at the point of sale. Pharmacists—especially independent pharmacists—are being clobbered by the DIR fees from 2023, along with the reduced reimbursements from the PBMs.

The reason for this low point-of-sale reimbursement is that, starting 2024, DIR fees will no longer inflate the cost of drugs at the point of sale. Although this appears to be good news in the long term, pharmacists may make less money while paying more in retroactive fees for 2023. I see nothing to celebrate about this DIR fee transparency.

PBMs continue to steal from independent pharmacies, thanks to the lobbyists in Washington, DC. Whether they are stealing while our eyes are closed or open, stealing is still stealing. How much longer can we survive with this method of reimbursement?

Peter A. Kreckel, RPh, practices in Lemont Furnace, Pennsylvania.

1. Medicare program; contract year 2023 policy and technical changes to the Medicare Advantage and Medicare prescription drug benefit programs; policy and regulatory revisions in response to the COVID-19 public health emergency; additional policy and regulatory revisions in response to the COVID-19 public health emergency. Department of Health and Human Services. April 27, 2022. Accessed January 24, 2024. https://
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