DIRECT AND INDIRECT REMUNERATION FEES

To advocate that payers and pharmacy benefit managers be prohibited from recovering direct and indirect remuneration fees from pharmacies on adjudicated dispensing claims; further,

To oppose the application of plan-level quality measures on specific providers, such as participating pharmacies.

Rationale

Direct and indirect remuneration (DIR) fees are a growing concern among pharmacies that dispense medications in a retail pharmacy or outpatient clinic setting. Created under the Medicare Part D Program, DIR fees were originally intended as a way for the Centers for Medicare & Medicaid Services (CMS) to account for the true cost of the drug dispensed, including manufacturer rebates and pharmacy concessions. Often these rebates and concessions were unknown until the drug was dispensed and the claim adjudicated. Recently, a concerning trend has emerged in which pharmacy benefit managers (PBMs) charge DIR fees to pharmacy providers, applying their own plan performance measures as a way to assess fees on pharmacies dispensing covered Part D drugs. These fees are problematic for the following reasons:

• The fees are arbitrary and appear to result from an unintended application of measures meant for total plan performance as opposed to pharmacy-level metrics.
• The quality measures applied tend to be based on maintenance medications such as blood pressure or medications used to treat diabetes. These measures were never intended to be applied to specialty medications, or other specialized disease states such as oncology, yet PBMs assess DIR fees against the gross reimbursement for all prescriptions received by pharmacy providers, not just maintenance medications.
• PBMs are not required to define, justify, or explain to providers or to CMS the rationale or process for imposing their DIR fees.

Pharmacies providing specialty medications have been especially hard hit by DIR fees, due to the fee structure. DIR fees can be a flat rate (a fixed amount per dollar per claim) or a percentage (typically 3-9%) of the total reimbursement per claim. When the percentage-based structure is applied, the fees increase markedly for specialty drugs, which are typically much more expensive than maintenance medications.

Even more disturbing is that the fees are assessed retroactively, sometimes months after the claim has been adjudicated, providing no recourse for the pharmacy impacted by the assessment. Questions also remain as to whether Part D plan sponsors have the authority to assess DIR fees on pharmacies. There are no references to DIR fees collected on pharmacies in either the Medicare Modernization Act or corresponding CMS regulations.

DIR fees have led to higher cost-sharing responsibilities for Medicare beneficiaries, causing more of them to enter the Part D “donut hole” in which they are solely responsible for the cost of a drug. Because of higher costs, adherence rates tend to be lower among beneficiaries in the donut hole. These higher costs are a perverse result contrary to the very reason DIR fees were created – passing savings onto beneficiaries.

Pharmacies are not alone in their concern. In January 2017, CMS published a fact sheet expressing concern over DIR fees and cited them as contributing to increased drug costs, beneficiary out-of-pocket spending, and Medicare spending overall. ASHP supports legislation that would address the problem of DIR fees. For example, H.R. 1038/S. 413, the Improving Transparency and Accuracy in Medicare Part D Drug Spending Act, would prohibit Medicare Part D plan sponsors from retroactively reducing payment on clean claims submitted by pharmacies under Medicare Part D.