Seniors’ Medicare costs rising due to rocketing fees, pharmacies say

Table of Contents DIR fees hard for pharmacies to avoidBiden administration sued for allowing huge…

It seemed like such a good idea at the time.

U.S. pharmacies collecting millions of Medicare dollars would be offered incentives to do more than simply push pills. If they don’t meet the new standards, such as making sure their patients receive their medications and get flu and pneumonia shots, they’ll have to give up some of thatMedicare funding.

The concept featured Direct and Indirect Remuneration fees, or DIR fees. Such fees “were originally supposed to be a way to offer incentives instead of a way to ‘claw back’ money from pharmacies,” the Pharmacy Times noted.

Despite this intent, the incentives never materialized. Instead, DIRs evolved into a system that today offers pharmacies only penalties through higher and higher fees — even if every performance standard is achieved, pharmacists say. The sole “incentive” is a small reduction in those fees for meeting the standards.

PBMs: Insiders detail how clawbacks drive up drug prices, hurt pharmacies

Health care in Ohio:Patient navigator battles PBMs, insurers to get drugs people need

Andy Becker, vice president of pharmacy administration and Mike Fruth, vice president of the Fruth Pharmacies stand outside their pharmacy in Wellston. The pharmacy, a privately owned chain that extends into West Virginia and Kentucky, has been hit hard by Direct and Indirect Remuneration (DIR) fees.

That reality has brought accusations from a wide range of Medicare advocates and pharmacy supporters that the setup gouges pharmacies while benefiting health insurers and their pharmacy benefit managers that set nebulous performance standards without input from federal health officials.

In response, these insurers and drug supply chain middlemen PBMs — which are often the same company in America’s highly consolidated health care market — say they are only doing what the federal government allows them to do under a key 2014 rule change.

The amount of Direct and Indirect Remuneration (DIR) fees paid retroactively by U.S. pharmacies on Medicaid Part D prescriptions has grown beyond exponentially by $11 billion in just the past seven years.

Implemented when Medicare Part D was enacted in 2006 but significantly modified by the rule change eight years later, pharmacies’ DIR fees skyrocketed 91,500% from 2013 to 2019, the Centers for Medicare and Medicaid Services say. The fees now total $11.2 billion a year, according to drug price guru Adam Fein, who writes Drug Channels newsletter. 

A typical community pharmacy currently pays roughly $81,000 annually, a survey by the National Community Pharmacists Association shows. Some Ohio pharmacists say they pay annual assessments of hundreds of thousands of dollars.