Pharmacy and DIR Fees for Medicare Part-D Plans

Pharmacy & DIR Fees for Medicare Part-D Plans:

Pharmacy and DIR fees are raising questions that most Pharmacy owners cannot answer. HCC has been receiving numerous questions regarding DIR fees and we have been intensely studying the issues regarding these fees on behalf of our clients. DIR fees stand for “Direct and Indirect Remuneration (DIR)” fees collected by a Pharmacy for Medicare Part D plans. The reason that DIR fees are such a hot topic of current discussions is how they relate to the recent “crash” of Diplomat Pharmacy stock prices. A little over two weeks ago, Diplomat Pharmacy’s stock dropped by almost 50%. The major reason for the specialty pharmacy’s stock actually dropping below its IPO offering price was attributed by the company’s management to DIR reimbursements. Diplomat’s Chairman & CEO (Phil Hagerman) cited that the way the DIR contracts now work is basically an example of PBMs versus Pharmacies with the PBMs having an unfair advantage.

Without time to go into the entire regulations (see Code of Federal Regulations Section 423.100 if you are interested in the legal specifics), Pharmacies involved in Medicare Part D must offer “covered Part D drugs at negotiated prices to Part D enrollees at lower levels of cost-sharing than apply at a non-preferred pharmacy under its pharmacy network contract”. The complexity associated with the fees is staggering!! Some plans have flat per-prescription DIR fees that range from $2.00 to $7.00 per prescription claim. Other plans require DIR fees that are a percentage of a prescription’s ingredient cost. To really complicate matters, DIR fees for many Part D plans are based on such performance criteria as generic dispensing rates and adherence metrics related to star ratings. Now pharmacy performance is becoming a key criterion for inclusion as a preferred pharmacy in a plan’s network. Many Part D plans now incorporate quantitative performance metrics into the computation of the DIR fee. For example, a pharmacy’s DIR fee could be reduced if the pharmacy: achieved better performance on the three adherence metrics used in the plan’s star rating, had better compliance with the plan’s formulary, dispensed a greater share of generic prescriptions, and/or dispensed more 90-day prescriptions. The specific criteria and thresholds are different for every plan and not publicly available. Note that these metrics are typically not relevant to a specialty pharmacy, which does not dispense the traditional drug classes with Part D adherence measures and dispenses few generic prescriptions.

It is becoming so complicated that some Pharmacy chains such as Walgreens have already opted out of participating. Is it worth participating for your Pharmacy business? As a Pharmacy owner it is crucial that you understand how this works. Most owners need help regarding DIR fee computations and estimating their financial impact.

In today’s environment of a constantly changing landscape in the pharmacy business, let an experienced, proven Pharmacy Consulting company provide you with the assistance you may need. We have a professional full-time staff of pharmacists with a proven track record in every area of pharmacy operations. Just a few of the services that we offer include:

– Pharmacy Performance and Efficiency Enhancements
– Pharmacy Business Management Consulting
– Pharmacy Business Planning
– Pharmacy Start-up Consulting and Implementation
– Interim Pharmacy Management
– Policy and Procedure Development and Review
– Compliance Review
– Pharmacy Exit Strategies

If you have questions regarding virtually any area of your pharmacy business or practice, we urge you to contact us today to see how our Pharmacy Consulting services can help. With a full-time staff of in-house Pharmacy Consultant specialists, HCC can answer any questions that you may have in all areas of your business. Call us today at 800-642-1652 for a free consultation.


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