Direct and Indirect Remuneration (DIR) fees

What are DIR fees?

DIR fees are the result of a loophole in Medicare regulations. Often more than half a year after a pharmacy fills a Medicare prescription, health plans and their middlemen are taking back money paid to pharmacies. Plans and middlemen are gaming the system, claiming they are taking back money due to a pharmacy’s performance on so-called quality measures. However, these quality measures can be unknown, unpredictable, inconsistent, and outside of a pharmacy’s control. The federal Centers for Medicare & Medicaid Services says that the use of DIR fees has exploded by 45,000 percent between 2010 and 2017. Inmar produced a white paper that describes DIR fees.

DIR fees 2020?

DIR fee relief must be part of the effort by Congress and the Trump Administration to reduce drug prices and to bring transparency to the system. In Medicare, DIR fees are inflating the amount that seniors pay for prescription drugs at the pharmacy counter. DIR fees also are putting pharmacies out of business. This is because health plans and their middlemen – pharmacy benefit managers, or PBMs – are hitting pharmacies with extremely high surprise bills that can force pharmacies to provide drugs below cost. Addressing DIR fees also would help to reduce overall healthcare costs.

How Do DIR Fees Increase Patients’ Costs?

The amount that Medicare patients pay for a prescription drug is supposed to be based on the cost of the drug. However, health plans and their middlemen often calculate drug prices without subtracting the dollars that are taken back from pharmacies. This inflates patients’ drug costs, because the calculation is based on a figure that is higher than what the plans really pay.

What is being Done to Provide DIR Fee Relief?

The Trump Administration proposed DIR fee relief in November 2018, but it was not included in a Medicare rule that was finalized in May 2019. Now, a bipartisan effort is underway to include DIR fee relief in a bill focused on drug-pricing issues. The goal is to include the Phair Pricing Act (H.R. 1034 and S. 640) in a larger drug-pricing bill. The Trump Administration has indicated it supports a legislative approach. The most recent version of the Senate Finance Committee‘s bipartisan drug pricing package, unveiled in December 2019, includes a provision establishing standardized and relevant pharmacy quality measures as well as audit and transparency provisions to hold PBMs accountable. It also includes claw-back fee reform – a significant addition from prior versions of the legislation. A quality-measures provision also is included in the Elijah E. Cummings Lower Drug Costs Now Act (H.R. 3), the drug pricing bill that the U.S. House of Representatives passed on December 12, 2019.

In addition, about one-quarter of the U.S. Congress and 80 percent of the Senate Finance Committee are urging the Trump Administration to take action within its power to advance DIR fee relief. Statements thanking these members of Congress demonstrated the united voice pharmacy, including the National Association of Chain Drug Stores, the National Community Pharmacists Association; the National Association of Specialty Pharmacy; the American Pharmacists Association; the Food Marketing Institute; the National Grocers Association; the National Alliance of State Pharmacy Associations; and the American Society of Consultant Pharmacists. Patient and consumer groups – including the National Consumers League, The AIDS Institute, the National Multiple Sclerosis Society, the Lupus and Allied Diseases Association, and many others – also have called for DIR fee relief. A 30-second ad by NACDS makes the case for immediate DIR fee relief.

Public Support for DIR Fee Relief

People trust pharmacies and their solutions for saving money. In a January 2019 survey conducted by Morning Consult and commissioned by NACDS, 69% of voters said they find pharmacists credible for drug-savings solutions. Also, 86% support relying on pharmacists’ expertise for public policy solutions in this area. An impressive 67% want to change rules by which payers reimburse pharmacies below cost and unpredictably.