Study: Ending DIR Fees Could Save Medicare Billions


The Improving Transparency and Accuracy in Medicare Part D Spending Act would end direct and indirect remuneration fees.

Pharmacists from around the country have raised concerns over the effect of direct and indirect remuneration (DIR) fees. Pharmacy advocacy organizations, such as the National Association of Specialty Pharmacy (NASP) and the National Community Pharmacy Association (NCPA), have made it their job to educate legislators and the general public about the harms of DIR fees for both patients and pharmacies.

DIR fees are used by pharmacy benefit managers (PBMs) to shift financial risk to patients, but they also harm community pharmacies, according to the NCPA.

A new study conducted by the Wakely Consulting Group and commissioned by the NCPA found that eliminating retroactive DIR fees in Medicare Part D alone would save more than $3.4 billion over 10 years, according to a press release.

“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, Pharmacist, MBA. “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.”

In the study, the investigators explored the potential effect of the Improving Transparency and Accuracy in Medicare Part D Spending Act (HR 1038/S 413). This bill, introduced by House Reps Morgan Griffith (R-VA) and Peter Welch (D-VT), would put a stop to DIR fees on Part D claims without any defect, impropriety, or fraud.

Eliminating retroactive DIR fees and shifting those funds to point-of-sale (POS) price concessions would save the government $3.4 billion in Part D payments to plan sponsors between 2018 and 2027, according to the study.

The authors also found that the Centers for Medicare & Medicaid Services would spend less on federal reinsurance and subsides under the proposed rule. The additional discounts at the POS would lower drug costs and reduce cost-sharing for the government, while keeping down costs for patients, according to the study.

POS discounts could also lower the number of patients entering into catastrophic drug coverage due to lower claims and the amount paid by the patient would be lower. Under catastrophic coverage, the government is required to pay for a majority of the drug, placing a high burden on taxpayers.

PBMs and their advocacy organizations have previously reported that DIR fees actually keep premiums low for patients and eliminating DIR would increase costs for the government and beneficiaries.

However, the study authors tested those PBM claims and suggest that getting rid of DIR fees would reduce drug costs for patients and the government.

Although DIR fees may help lower premiums, it drives up patient costs at the pharmacy, according to the study.

The authors also report that eliminating DIR fees would result in improved outcomes-based arrangements, in which pharmacies are reimbursed based on patient outcomes and lowering costs. Many current quality arrangements are flawed and inaccurately measure the performance of specialty pharmacies, according to an interview with NASP.

The findings also suggest that ending DIR fees would not stop efforts to address fraud, as the proposed legislation would only prohibit retroactive charges for clean claims, according to the study.

“This new Wakely study is robust in its scope and thoroughness and points clearly to significant cost savings to the federal government if HR 1038/S 413 were passed into law,” Hoey said in the release. “We urge Congress to move quickly to schedule hearings and advance this important legislation.”

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