The DIR fee, a subject of several posts on this blog, can be calculated in a variety of different ways. In 2016, Medicare/CMS directed plans to calculate the DIR at the point of sale (the time of adjudication) whenever possible. A DIR fee doesn’t have to be complicated to save the plan money. Yet after reviewing the 2016 Medicare Part D Prescription Drug Plans (PDPs) and their associated DIR fees, I became distressed to see even more “retrospectively calculated” DIR fees appearing despite the CMS’s direction to simplify the DIR.
So why are PDPs going out of their way to create these retrospectively calculated Voodoo DIR fees? One possible conclusion is that the PDP is trying to hide something. If we agree that this is a possible conclusion, the next question would be: what are they trying to hide, and from whom are they hiding it?
While it might seem logical to assume that the plan is trying to hide something from the pharmacy, I believe that this is in fact not the case. Instead, I believe that this might be a direct result of PBM consolidation. Over the past several years, there has been significant consolidation in the Pharmacy Benefit Manager arena, with only a handful of larger PBMs remaining in the market. I have dubbed the remaining large processors the PBM Titans. This lack of homogeneity in the processor arena has created an interesting dynamic between the PDPs and the PBMs that process for them.
Impact of PBM consolidation on the PDPs
10 years ago, our pharmacies received dozens of remittance advices and checks weekly from different PBMs and plans. Today, it is a very different story. Each remittance from a PBM Titan represents many different plans, both Medicare and commercial. In today’s world, this means that the processor of all of these claims has access to a virtual cornucopia of data.
Remember that the PBM Titans not only process claims for other PDPs, but also run their own commercial and Medicare plans. The Titan PBMs have direct access to the smaller PDP’s claim data, which includes their Maximum Allowable Cost (MAC) for each drug product and the dispensing fee(s). It is not hard to imagine that the PDPs run by the Titan PBMs could leverage their under-the-hood knowledge of the smaller players to match up their plans favorably by comparison and therefore maximize their own PDP enrollment.
The VooDoo DIR Fee
When a major national PDP started using a retroactively calculated DIR fee last year, pharmacies had a very hard time determining exactly how much they were actually being paid for each prescription. The DIR fees for last month’s claims were attached by the PDP to the current claims. This obfuscation not only created confusion for the pharmacy, but is also hid the DIR fee logic and impact from the PBM doing the processing. It is my belief that this is not a coincidence.
The Consequences
Pharmacy is in the midst of a transition. Historically, pharmacies were paid for product, and the services that accompanied the product were essentially given away. The profitability of the drug product will soon be gone. It may already be gone for some pharmacies. The revenue streams for pharmacy service, however, are still in their infancy. It is going to take some time before a pharmacy and pharmacist can run a successful business charging for their services.
The time is now to focus your pharmacy on services. The transition to a service based revenue stream will have to be taken in small steps, so the process must start now. Both pharmacists and their patients will be outside of their comfort zones during this time, and it is going to be a learning experience for everyone. There is not a better time than now to make every encounter with your patients count!
