The DIR Hangover: The What, When, and How to Avoid
DIR (Direct and Indirect Remuneration) fees is a comprehensive term which covers charges made to pharmacies by Medicare Part D plans or PBMs outside of normal administration fees. The charges may be classified as service fees, network access fees, or they may even be tied to pharmacy performance quality measures.
Two of the major problems with these fees include transparency and timing. First, many times the quality measures pharmacies are being measured against are arbitrary. While the PBM might be tying the quality to a portion of the Medicare star system, the quality measures do not always apply to the pharmacy or the patients of the pharmacy.
Second, timing is a major issue with DIR fees. The fees are assessed at some point after the claim has been adjudicated and the medication is sent home with the patient. The timeline can be as long as six months or even a year. This results in the pharmacy losing the reimbursement for the medication (which they had to purchase and dispense) and any dispensing fees. This is detrimental to the pharmacy’s bottom line.
While there has been some relief through legislation on both the state and federal level, the change could prove difficult for unprepared pharmacies. The Medicare Part D Final Rule goes into effect starting January 1, 2024. The initial major impacts have been referred to in the industry as the DIR Hangover. Essentially the hangover is higher up-front DIR fees coupled with lower patient copays thus leading to cash flow issues and financial pain in the first two quarters of the year. Proper preparation for this hit can help mitigate some of the financial distress.
Dealing with DIR fees can be overwhelming and at times confusing. Here are some suggestions you may want to add to your strategic planning in the next few months:
1. Collect and analyze claims data to assess how the fees and claw backs are affecting your bottom line. This analysis will highlight drugs you are dispensing which might be a particular problem in your operation and negatively affecting your bottom line.
2. Find an estimator of DIR fees. Many wholesalers have them and they could help in regards to preparing for these fees.
3. Improve operational efficiency by utilizing MedSync programs, repricing supplies, reassessing your inventory and buying plan, and exploring technology that might help decrease dispensing costs.
4. Expand or acquire non-dispensing revenue.
NCPA (National Community Pharmacy Association) has great resources in the form of podcasts, articles, and training sessions. They also have a section of “Revenue Generators” you may be able to utilize within your business to help minimize the financial strain. Visit www.ncpa.org/dir-hangover for many more resources.
To learn more about other pharmacy issues and what you can do to protect yourself and your business, visit the Risk Management Center (RMC). The RMC is available at no cost to Pharmacists Mutual’s commercial insurance customers at www.phmic.com. Click “My Accounts” in the upper right corner to access or enroll.