Removing DIR Fees Could Save Billions

Removing retroactive direct and indirect reimbursement (DIR) fees in Medicare Part D would save the federal government $3.4 billion over 10 years, according to a new study.

Commissioned by the NCPA, the Wakely Consulting Group study evaluates the possible impact of enacting the “Improving Transparency and Accuracy in Medicare Part D Drug Spending Act” (H.R. 1038/S. 413), which prohibits retroactive pharmacy payment reductions on “clean claims” (those without any defect, impropriety or fraud) in Medicare Part D. 

Eliminating the retroactive pharmacy payment reductions and shifting them to equivalent point-of-sale price concessions would save the federal government $3.4 billion in Part D payments made to plan sponsors between 2018 and 2027, Wakely found.

In addition, the decrease in total drug cost at point-of-sale would also lower the amount of claim dollars in the catastrophic phase of the Part D benefit, because claims and amounts accumulating toward the true out-of-pocket catastrophic threshold would be lower.

“Paying pharmacists what they are promised is only fair. Ending retroactive payment reductions would let pharmacists, especially in rural areas, focus on serving their customers, and, according to the study, it would save the federal government billions,” said Congressman Morgan Griffith (R-VA), who sponsored H.R. 1038.

Related article: Pharmacists Pushing for DIR Relief

“This new Wakely study is vitally important in showing that DIR legislation will actually save taxpayers $3.4 billion over 10 years without subtracting any benefits seniors currently receive,” said NCPA CEO B. Douglas Hoey, RPh. “For pharmacies, banning these after-the-fact fees is the fair way to achieve predictability in the reimbursement for the medications they buy and dispense.”

However, Charles Cote, Vice President of Strategic Communications for the Pharmaceutical Care Management Association, told Drug Topics that “the independent drugstore lobby agenda on DIR would increase costs and reduce access to affordable medicines for Medicare enrollees.”

DIR is a form of performance-based payment used by PBMs to promote value and quality and helps keep premiums down for Medicare beneficiaries, Cote said. “The price concessions that pharmacy benefit managers negotiate with drug manufacturers and drugstores and report to CMS as DIR are generating significant savings for the federal government and are projected to save enrollees in standalone Part D plans $48.7 billion on their premiums over the next 10 years.”

Meanwhile, the DIR bills continue to gain co-sponsors in both the Senate and House. S. 413 is supported by 13 senators and H.R. has the support of 52 House representatives, John Norton said.

“We urge Congress to move quickly to schedule hearings and advance this important legislation,” Hoey said.

NCPA is also asking pharmacists and others to email legislators, urging them to support the two bills. Sample emails are available here.