DIR Rule Changes

For many years, independent pharmacists like you have been duped by PBMs. The good news is things are turning around.

Changes to how your direct and indirect remuneration (DIR) fees are collected will take place next year on January 1, 2024. The Centers for Medicare and Medicaid Services (CMS) announced that significant reforms will be implemented to the DIR program.

These changes are intended to reduce the financial burden on independent pharmacies as well as to increase transparency in the pharmacy benefit management (PBM) industry. However, the process of getting there may have some ups and downs in terms of cash flow.

DIR fees are retroactive, and they aren’t applied at the time of sale because they’re backdated. Because DIR fees are calculated on various factors, you don’t always learn how much you owe in fees until months later, after you’ve dispensed a drug. This is a concern since it can have a consequential impact on cash flow. For instance, some pharmacies may owe more in DIR fees than they earned from dispensing the drug in question. This makes it a struggle to plan and manage your finances. They’re dealt with weeks or months after the prescriptions are filled. This means you may take a loss and not even recoup the dispensing cost.

The good news is the new rule does come with benefits for independent pharmacies, such as:

Fewer Financial Worries: The new DIR changes will reduce your financial stress. Right now, PBMs can charge DIR fees for various reasons (e.g. drug utilization reviews, medication therapy management, and performance metrics), and the fees can be tough for you to budget for. With the new changes, the types of fees that can be charged will be limited and PBMs will be required to provide more clarity around those fees.

Increased Clarity: Providing more detailed information about the fees they charge will be a requirement for PBMs. This includes the amounts they charged and why they charged them.

Decent Reimbursements: Right now, DIR fees can be charged after the fact. This means you may not know the final reimbursement amount for a prescription until months after it’s been filled. With the new changes, however, that will change. PBMs will be required to provide timely and accurate reimbursement rates. This will make it easier for you to manage your cash flow.

Not only will you benefit from the new rule, but so will your patients. Patients will have reduced out-of-pocket costs, thanks to the final rule moving all pharmacy price adjustments to the point of sale so patients will have lower cost sharing.

Now for the not-so-good news with the new rule:

PBMs are not eliminated from the use of DIR fees. PBMs will still be able to use DIR fees to extract arbitrary fees. This, along with extracting other unreasonable compensations from pharmacies.

The impact on pharmacy cash flow is not addressed. The final rule states that changes in cash flow could possibly cause some struggling pharmacies to decrease services or medication availability as well as have to close their doors for good, thus impacting pharmacy networks. What CMS fails to address is the transition period for pharmacies from calendar year 2023 to 2024. It also states that pharmacies will receive the “lowest possible reimbursement” in 2024 while PBMs continue collecting pharmacy DIR fees from 2023. This could create major cash flow issues for pharmacies during the transition.

Other PBM loopholes haven’t been closed. This means PBMs can still continue other harmful business practices, such as negative reimbursements, and refund the pharmacy less than it costs to acquire the drug.

As the new changes are implemented, there may be some uncertainty. Don’t be surprised if there are delays and confusion as the changes are implemented, as PBMs may also struggle to adapt to the new rules and requirements.

Be aware that with changes comes risks. Unfortunately, it can’t be avoided. With the DIR changes, competition may decrease in the PBM industry. This could result in higher prices for consumers and a decrease in access to care.

There may also be a bit of chaos when it comes to cash flow. You’ll double the amount of DIR fees you normally would during the first part of 2024. This is because you’ll have the retroactive DIRs from 2023 and the new DIRs that’ll occur at the point of sale.

If you’d like to further prepare for the new changes, keep up with the latest news and developments on DIR changes and have a solid financial plan ready. Put aside cash as a contingency; increase your profit margins; figure out how to offset fees; and initiate additional revenue streams, such as nutraceutical packs or CBD products. These are among the best cash-based revenue streams.

Understanding and preparing for these changes now will ensure that you’re well-positioned for any and all challenges that come your way.

From the Magazine

This article was published in our quarterly print magazine, which covers relevant topics in greater depth featuring leading experts in the industry. Subscribe to receive the quarterly print issue in your mailbox. All registered independent pharmacies in the U.S. are eligible to receive a free subscription.

More articles from the September 2023 issue:

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