If you are familiar with the world of pharmacy, you’ve probably heard about PBMs and DIR fees. Pharmacy Benefit Managers (PBMs) act as the middleman between pharmacies, drug manufacturers, wholesalers, and health plans to manage prescription drug benefits and rebates. Through this intermediary management, small community pharmacies are often faced with arbitrary and extensive DIR fees. DIR Fees are money that PBMs collect after the point-of-sale which change the final reimbursement amount that a pharmacy gets for a drug. In essence, these fees typically “clawback” on the profits that pharmacies expect to see and end up leaving these businesses in the dark about how much money they will actually make on a dispensed prescription.
DIR fees have seen exponential growth over the years and have become a major pain point for independent pharmacies. In 2019, pharmacy DIR fees in Medicare Part D hit a record of $9.1 billion. The pharmacy industry has been advocating for increased transparency from PBMs and a greater accountability for how these DIR fees are calculated. While these fees can be financially devastating, there are also ways for pharmacies to proactively manage and mitigate their effect. It is important to be aware of how exactly DIR fees are affecting your business and be able to plan strategically and identify opportunities to minimize the financial impact.
Take advantage of technology available to you, such as tools in your pharmacy software, in order to get ahead of DIR fees and prevent them from wreaking havoc on your small business. When choosing a pharmacy software, find out whether your new software vendor has integrated tools that help with DIR fee management. These tools pay off in the long run by helping you consistently save money and actively catch detrimental fees before they even happen. Below are some ways to proactively manage DIR fees at your pharmacy:
What Steps Can You Take at Your Pharmacy?
Are you doing everything you can to mitigate and manage DIR fees at your community pharmacy? These best practices and pharmacy software features will help you take control of your business and your bottom line.
- Review Your Contracts. Contracts between PBMs and your pharmacy will outline criteria used to determine DIR fees, so it is important to be aware of exactly what is identified in your contract. This gets tricky, however, because these contracts can be lengthy and convoluted. Most independent pharmacies are part of PSAO and can obtain a summary of contract details from their PSAO, making it easier to be aware of the DIR fee terms in all payer contracts.
- Use Targeted Reporting. Clawbacks are fees collected on money that has already been distributed or promised. Pharmacies will often see clawbacks on prescriptions that they dispense, and by using your pharmacy management software, you can keep better track of how exactly these fees affect your bottom line. By using targeted reporting, pharmacy owners can analyze which transactions are costing them the most money and can strategically plan how to mitigate these problematic areas.
- Estimate Future DIR Fees. Your pharmacy software system might also have the capability to analyze expected DIR fees. By having readily available information about your payer contracts and reimbursement history, some software vendors can help you plan accordingly by projecting estimated future DIR fees.
- Alert Before the Point-of-Sale. Another feature that your pharmacy software might have is alerts and reminders within workflow that warn you about drugs that will incur a net loss. These preemptive alerts can help you identify transactions that will cause your business to lose money, and allow you to instead fill a different NDC that might have a better reimbursement.
- Minimize Mistakes. It is a smart idea to minimize any potential mistakes in filling prescriptions and sending reimbursement claims. This will set a strong base to prevent any fees or clawbacks that may be related to clerical errors. Your software system should help you use the proper drug codes, dispense the correct drugs, accurately manage inventory, and document necessary patient interactions in an eCare Plan. Documenting these additional medication management services can also help your pharmacy’s performance ratings and potentially lower DIR fees.
- Pick the Right Plans. Selecting the right plans for your patients during Open Enrollment can help you mitigate DIR fees by improving your pharmacy performance metrics. Certain plans have rebate incentives for DIR fees based on adherence ratings. You can strategically move non-adherent patients to plans that do not use adherence as a metric, or vice versa - move highly adherent patients to plans that award this kind of behavior. Pro Tip: Having a med sync program in place can also help with increasing your patient adherence ratings.
- Educate Your Local and State Policymakers. It is important that the people in charge of writing and passing legislation in your state are aware of your needs as an independent pharmacy. Always participate in advocacy efforts by signing petitions, calling your local senators, and supporting pharmacy-related bills. By strengthening the collective voice of independent pharmacies, we can better advocate for transparency and fairness in pharmacy DIR fees.
- Don’t Depend Solely on Prescriptions. At the end of the day, it is not practical for pharmacies to only depend on prescription dispensing to run their business. While there are ways to manage the financial burden of DIR fees, it is much easier to improve your bottom line by also diversifying your revenue streams. Adding a wider range of products and services can boost your pharmacy's financial health. Your pharmacy software can help you integrate new services into your workflow and build an efficient flow of operations that works best for your team.