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.
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.
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.
Across the country, major pharmacies pay major DIR fees. Fairview Pharmacy Services, which has more than 30 locations across the Minneapolis-St. Paul area, shelled out $4.4 million in 2019, or 5.65% of its total reimbursement for claims, said Tim Affeldt, vice president of specialty/infusion operations. About $3.7 million of that total was split almost evenly between PBM CVS Caremark and health insurer Humana.
DIR fees hard for pharmacies to avoid
The pharmacists say that the amount of each bill is always impossible to predict and never arrives until months after seniors' original drug purchase.
They say that no matter how good their services, they will be assessed a DIR fee.
“I’m not even sure if Christ himself" could have avoided a penalty, says former GOP state Sen. Dave Burke of Marysville, who ran a pharmacy until late last year.
"I've never seen a study that this added to the quality or longevity of people’s lives."