Focusing On The Business Model
Discussion on DIR Fees:
QUESTION: What are DIR Fees and how do they affect my profitability and business productivity?
ANSWER: The profitability benchmark % DIR$/GM$ (actual $ DIR Fees / Actual GM $) determines the shrinkage of GM$ before coverage of total expenses as a result of DIR Fees.
RX/Day % DIR$/GM$
123 6.60%
147 4.73%
153 3.57%
206 2.70%
National Average 1.4%
The % DIR$/GM$ benchmark suggests that DIR Fees are more burdensome on smaller pharmacies than larger pharmacies. the national average is approximately 1.4%.
DIR FEES reduce pharmacies’ profits, so they are at the forefront of the most concerned issue in 2020 by pharmacy owners.
According to the National Community Pharmacists Association (NCPA), pharmacy owners rank DIR fees as the most important legislative and regulatory priority.
Preferred pharmacies in Part D must offer “covered Part D drugs at negotiated prices to Part D enrollees at lower levels of cost-sharing than apply at a non-preferred pharmacy under its pharmacy network contract. ” (See Code of Federal Regulations, Sec. 423.100.)”
PBM'S use narrow pharmacy networks as a way of reducing pharmacy benefit spending, so PSAO's and direct contracting willingness to accept lower payments to maintain patient access have driven PBM network participation decisions. Medicare Part D plans rely on post-point-of- sale (POS) price concessions paid by pharmacies to the Part D plan sponsor. These price concessions, which are collected from pharmacies after claim adjudication, are considered direct and indirect remuneration (DIR) under federal requirements. Since these are price concessions, Medicare Part D plans provide details about these.
https://www.cms.gov/newsroom/fact-sheets/medicare-part-d-direct-and-indirect-remuneration-dir
DIR is a broad term that relates to the net amounts actually paid by a part D sponsor. It is not limited to amounts
paid by pharmacies to plan sponsors.
“Actually paid means that the costs must be actually incurred by the Part D sponsor and must be net of any direct
or indirect remuneration:
1) Discounts, cash discounts or REBATES
2) Free goods contingent on a purchase agreement
3) Other price concessions or similar benefits offered to some or all purchasers
4) from any source (including manufacturers, pharmacies, enrollees, or any other person) that would serve to decrease the costs incurred under the Part D plan.
DIR CREDITS: They are significant. The Retail Services Group clients have shown as much as 25%-35% of DIR FEES. The significance require PDC Scores as high as 88% to 90%.
WHAT IS PDC? Proportion of Days Covered.
PDC measures adherence as the percentage of Medicare Part D beneficiaries whose prescription claims indicate that patients have sufficient medication on hand to cover 80% or more of the period during which they are supposed to be taking the medication. (CMS does not assign star ratings to pharmacies.)
Pharmacies can influence such metrics as the Proportion of Days Covered, which measures adherence for oral diabetes, statins, and hypertension medications. Patients who receive appropriate prescription refills by the plan’s network pharmacies will have higher adherence, and in turn, the plan For 2020, the DIR fees for many Part D plans are based on such performance.
Consequently, many Part D plans now incorporate quantitative performance.
In addition, all Medicare Part D plans are not based PSAO plan performance. For example, Caremark Medicare Part D plans are direct contract that measure PDC performance on pharmacy. Humana is another direct contract plan based upon pharmacy performance.
DIR MINIMIZATION STRATEGIES BROUGHT TO YOU BY:
Steven C. Anderson, IOM, CAE, is president and CEO of the National Association of Chain Drug Stores.
https://morningconsult.com/opinions/way-reduce-out-pocket-drug-costs-what-will-you-do/
Click the link below to view MENTOR online presentation: "REDUCE DIR FEES THROUGH PATIENT ADHERENCE".
Select "PRESENT" on the right side of menu screen.
https://1drv.ms/p/s!AnusnNQIzk7Epp0-VZ65it6UsitZrA?e=LXpijw
RETAIL SERVICES GROUP
Profit Enhancement Mentor for Independent Pharmacies
