As a pharmacist, you deal with plenty of day-to-day challenges. Helping a patient understand a new medication. Managing budgets. Planning your inventory. But one thing you shouldn’t have to deal with? Unpredictable direct and indirect remuneration (DIR) fees that can keep you up at night.
DIR fees can cause financial uncertainties for your pharmacy. And it’s unclear whether these fees are accomplishing what they set out to do: save patients money. Here’s what we believe the biggest challenges are with the current system. And, what we believe needs to change within the complex landscape of DIR fees so both your pharmacy and your patients can thrive.
Three main challenges DIR fees present to pharmacies
DIR fees are supposed to account for rebates that occur after the point of sale. The goal is to pass along savings from the pharmacy benefits manager (PBM) or Plan D sponsor to Medicare, ultimately lowering premiums for patients.
The intent is right. But pharmacists are feeling the burden of a not quite right system. And patients aren’t seeing savings at the pharmacy where they want to.
The way DIR fees work today is problematic for three reasons:
- They’re unpredictable
- They’re often tied to things your pharmacy can’t control
- There’s no way to make sure patients see real savings
Let’s explore each of these challenges in depth so we can address how they should be reformed.
1. They’re unpredictable and lack transparency
DIR fees occur retroactively, meaning they can sometimes hit your pharmacy many months after filling a prescription. That doesn’t make planning very easy for you. There’s also not much transparency about how PBMs and Part D plans calculate these fees. Sometimes they’re percentage-based, and other times it’s a flat fee.
If you can’t estimate how big the fee will be, you might end up with what’s called an “underwater claim.” This is when your pharmacy’s cost to acquire and dispense a drug ends up being higher than your reimbursements after you pay DIR fees.
We believe no pharmacy should have to worry about losing money in order to get patients the medication they need.
2. Performance-based fees are often focused on factors out of your control
In many cases, PBMs and Part D plans calculate DIR fees based on performance metrics your pharmacy might not even be able to control. For example, they may base fees on performance related to non-clinical metrics like formulary compliance, which can be difficult for the pharmacy to have visibility to and often require prescriber intervention.
3. There’s no way to ensure this savings actually gets passed on to the patient
The intended purpose of DIR fees is to account for post-point-of-sale transactions. PBMs and Part D plan sponsors can then more accurately report the net costs of a plan to the CMS. But DIR fees don’t generally reduce the cost of drugs for patients at the point of sale, which is where most people could use the financial relief.
Reforms to reduce the impact of DIR fees on pharmacies
The frustrations you probably feel about DIR fees are valid. But how can we change this system?
We’re actively educating policymakers about these challenges and working to come up with solutions. Here are some policy recommendations we support to reduce the impact of DIR fees on your pharmacy and ensure patients see tangible savings.
- Deliver patient savings at the point of sale. It’s no secret that many patients struggle to pay for their medications. Not being able to afford a medication is a major cause of non-adherence and drug abandonment. Ultimately, it can derail health outcomes for your patients. We believe pharmacy DIR fees should actually help reduce the financial burden of out-of-pocket costs on the patient at the point of sale.
- Increase predictability of DIR fees and limit the timeframe. Because DIR fees are retroactive in nature, it can be hard to know when your pharmacy will receive the next one—or how much it will be. We recommend limiting the timeline for PBMs and plan sponsors to recoup DIR fees from a pharmacy to within six months after a prescription has been filled. Overall, we’d like to see CMS establish more predictability for DIR fees, so you can anticipate the net reimbursement of any given prescription. This would allow your pharmacy to better plan for the future and gain more financial peace of mind.
- Eliminate or revise performance-based fees. As we discussed above, the performance metrics PBMs and plan sponsors use to calculate fees are not transparent and are sometimes unachievable. We think PBMs should disclose how they determine your fees when you sign a contract with them. We also believe CMS should alter the criteria so your pharmacy is judged on things you can actually influence.
Working to end retroactive DIR fees for your pharmacy
We hear you when you say DIR fees are hurting your pharmacy. You are not alone. We have heard from countless pharmacy owners about how hard it is to stay in business due to these unpredictable costs.
We are actively working to educate federal lawmakers on the impact of DIR fees. In partnership with the National Community Pharmacists Association, we support legislation that ends retroactive fees. Last year, more than 40 McKesson employees met with 90 members of Congress and their staff to share stories about the impact of DIR fees on community pharmacists. We urge you to share your opinions on DIR fee reform with your Members of Congress and state elected officials.
We’re also helping our pharmacy customers understand, estimate, and manage DIR fees. We’ve developed two online calculator tools that allow a pharmacy to enter its information and estimate accrual and incentive amounts that may affect DIR payments.
We’ll continue to work with you to advocate for meaningful change.
To learn more, download our white paper on Pharmacy Direct and Indirect Remuneration Fees (PDF, 819 KB)
Related: Learn about McKesson’s reimbursement services for independent pharmacies