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What are DIR Fees? (A Student-to-Student Blog)

APPE Pharmacy Student

As an MCPHS University 6th year pharmacy student on my APPE rotation at RXinsider, part of my days consists of learning about pertinent topics in the world of pharmacy. Recently the RXinsider team returned from the Cardinal Health RBC in Nashville with questions regarding the topic of DIR fees. The subject of “DIR” and the associated fees has a significant impact on pharmacy reimbursement, so I took it upon myself to further research this topic with hopes of developing a more clear picture to my fellow APPE pharmacy students.

The term “DIR” stands for “Direct and Indirect Remuneration” and applies to the fees collected from pharmacies by Pharmacy Benefit Managers (PBM’s). Initially, this was intended to be a way for PBM’s to lower the cost of medication for patients while working with pharmacies to offer financial incentives. This fee has since been extrapolated to include any and all fees in which PBMs charge a pharmacy for dispensing a prescription within their plan/network. PBMs claim that most of the DIR funds that they receive are manufacturer rebates which are necessary to lower drug prices. I find this to be very misleading as “DIR” was initially a term applied to just Medicare Part D plans, but has since expanded into commercial networks as well. 

The most significant issue surrounding DIR fees is the lack of transparency between the PBMs and the pharmacy. The majority of these fees are adjudicated after the point of sale, making it nearly impossible for the pharmacy to know how much they will be charged for dispensing a specific prescription. To add to the confusion, these PBM’s can charge either a flat rate fee (as high as $12) or a percentage fee (as high as 5%) per each prescription dispensed. These fees often consume most, if not all, of the profit a pharmacy would make on a particular prescription. This can lead to negative profit margins for pharmacies which they were never allowed to plan for due to the retroactive nature of these fees. This retroactive fee collection is often referred to as a “clawback”. 

These fees affect both retail and specialty pharmacies as well as the patients within the health care plan. Essentially, DIR fees can create a situation in which pharmacies are losing money when they process a claim through Medicare Part D. Patients are likely to pay more out of pocket costs, as many PBMs will charge a co-pay that is higher than the drug’s price without insurance. Later, the PBM will “clawback” the difference from the pharmacy. To make this topic even more complicated, there is no evidence that the “clawback” money obtained from the pharmacy is ever credited back to the patient.

As you can see there is mounting confusion surrounding the topic of DIR fees and their role in drug pricing. As the future of pharmacy, I believe it is the responsibility of our generation to clarify the DIR system and instill transparency between the PBMs and affiliated pharmacies. The subject of DIR fees has become more prevalent in the past 10 years and now sits at the forefront of our governments' healthcare reform. This burden of DIR fees rests with our generation of pharmacists and I believe it is our duty to change the rules and promote transparency within this area of pharmacy. 

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Worker's Comp, Claims, PA Management, Adjudication Consulting (Retail/Community & Specialty)