Pharmacy owners will soon face significant changes in how they collect direct and indirect remuneration (DIR) fees. It will be a bumpy road ahead, and pharmacies need to be prepared to navigate it successfully.
The Centers for Medicare and Medicaid Services (CMS) has issued a final ruling titled Medicare Advantage and Part D Final Rule for Contract Year 2024. The ruling removes the retroactive application of DIR fees beginning on Jan. 1, 2024. The goal is to bring more transparency to drug costs for patients and pharmacies, but the journey will take work.
Just like navigating on an unfamiliar road, pharmacy owners need to be extra cautious while driving through the changes in the DIR rules. The new ruling is a step in the right direction but doesn't eliminate DIR fees altogether. Pharmacy benefits managers (PBMs) can still apply DIR fees at the "negotiated price" at the point of sale. The problem with DIR fees is that they are retroactive, like a speed trap that tickets drivers weeks or months after they've passed it. Fees are not applied at the time of sale, making it difficult for pharmacies to recoup their costs. However, with this new rule, pharmacists will be able to see immediately what they will be paid for the drug they just dispensed. This will make the process more transparent and predictable.
The ruling is encouraging news for both patients and independent pharmacies. Patients will benefit from reduced out-of-pocket costs, and pharmacies will have more predictability. Pharmacy groups such as the American Pharmacists Association (APhA), National Community Pharmacists Association (NCPA), and National Association of Chain Drug Stores (NACDS) have lauded the ruling as a step toward increased transparency. It's like seeing a green light on a traffic signal that tells drivers to proceed with confidence. The CMS ruling, however, acknowledges that changes in cash flow may cause some already struggling pharmacies to decrease services or medication availability and/or be unable to remain in business, which may impact pharmacy networks. Pharmacy owners must be prepared for this and anticipate potential issues, just like drivers plan their routes to avoid construction zones.
PBMs can still collect retroactive DIR fees from 2023 until the first day of 2024. Pharmacy owners will be hit twice during this transition period. The fees paid immediately at the point of sale in the new year and the fees still uncollected and unpaid from prescriptions from 2023 may cause cash flow problems.
To navigate this roadblock, pharmacy owners need to be proactive and plan ahead, like drivers who check the traffic report before departing on their trip. Transaction Data Systems (TDS) has the solutions and tools needed to be ready for DIR changes. Here are some tips for road trip pros and the savviest of business owners:
- Plan Early- Utilize a GPS to guide you on your route.
- Estimate the timing and amounts of plans that have DIR fees in 2023 and how long into 2024 you will still owe 2023 DIR fees is crucial.
- Earmark Cash- Keep a reserve tank of gas in case of an emergency.
- Put aside cash as a contingency to compensate for the overlap between 2023 and 2024, so you are not caught flat-footed when cash flow becomes tight.
- Scale Your Cash / Non-Dispensing Revenue- Take a detour to avoid traffic and save time.
- Adjust your budget and plan your operations to generate more cash or non-dispensing revenue to offset the impact of DIR fees. This can include expanding your product lines or services, negotiating better reimbursement rates, or increasing efficiency in your operations.
- Minimize Waste- Avoid unnecessary stops to reach your destination faster.
- Review your operations and identify areas where you can reduce waste or inefficiencies. This can include optimizing inventory management, streamlining workflows, or negotiating better prices for supplies.
- Stay Alert- Pay attention to traffic signals to avoid accidents and stay on course.
- Keep an eye on industry trends, regulatory changes, and competitive developments that could affect your business. This can help you anticipate challenges and opportunities and adjust your plans accordingly.
As you prepare to begin your long road trip into the new rules and regulations of DIR, remember that pulling over to ask for directions when you are lost is always the best option. That is why TDS is standing by, ready to offer direction by implementing these solutions before you head too far down the wrong path.
- TDS will expand partnerships with Part D Payors and other organizations that will work with your pharmacy to manage DIR reform-related changes.
- We will continue recommending ways your pharmacy can diversify its revenue, ensuring that any cash flow issues won’t drastically impact your business.
- We promise to inform you and other clients of any updates to the proposed DIR reforms.
As you embark on this new route to DIR, Outcomes® will be there, ready to help you overcome and anticipate any obstacles you may encounter. With the right partner to guide you, your pharmacy can confidently navigate these changes and emerge successful when we reach the final destination.
Subscribe to the pharmacy blog
Using Virtual Verification for Pharmacy Load Balancing
Do your pharmacy locations suffer from an inefficient distribution of the workload? Learn about load balancing with Virtual Verification today!
6 Fun Facts for National Pharmacy Week
Every year, the third full week in October is National Pharmacy Week. Take a look at these fun facts we've compiled about the industry, famous professionals, and more!