A Way to Reduce Out-of-Pocket Drug Costs: What Will You Do?

A simple truth is emerging about the complex topic known as pharmacy direct and indirect remuneration fees: They are as damaging to patients and to pharmacies as advertised.

Adam J. Fein, Ph.D., the chief executive officer of Drug Channels Institute, on Feb. 13 announced his analysis that these fees “have grown faster than most people realize” — and reached a record $9.1 billion in 2019.

Fein wrote powerfully: “Our long time readers know that I’ve been skeptical about pharmacy owners’ claims regarding the impact of DIR fees. But it does now appear that these payments have become a significant economic burden. When the facts change, I change my mind. What do you do?”

Those not familiar with DIR fees may appreciate an explanation. Conveniently, the term “DIR fees” coincides nicely with the word “dire,” which pretty much sums them up.

More specifically, DIR fees result from a Medicare regulatory loophole. Payers “claw back” reimbursement paid to pharmacies for Medicare prescriptions, claiming that they can do so based on pharmacies’ performance on quality measures. However, these metrics can lack transparency, vary widely, impose unattainable requirements and relate to topics out of a pharmacy’s control.

Two important results flow from this dire situation: These DIR fees needlessly inflate patients’ out-of-pocket drug costs at the pharmacy counter, and they also are forcing pharmacies of all sizes to fill many prescriptions below-cost — an unfair and unsustainable situation.

The Centers for Medicare and Medicaid Services has estimated that patients would save $7.1 billion to $9.2 billion over 10 years in cost sharing if DIR fees were reformed. 

Reform also would help to confront the unsustainable situation faced by pharmacies. IQVIA, which specializes in health care data, found that about 2,000 pharmacies have closed in the past two years.

Research demonstrates that higher out-of-pocket costs and pharmacy closures both contribute to medication non-adherence, or the failure to take medications as prescribed. This leads to poorer health, increased reliance on more drastic forms of care and higher health care costs.

A study published in Medical Care found that if one-quarter of hypertension patients who were non-adherent became adherent, Medicare could save nearly $14 billion annually — preventing more than 100,000 emergency room visits and 7 million inpatient hospital days. 

The American Medical Association’s JAMA Network Open published a study that found pharmacy closures led to “an immediate statistically and clinically significant decline in adherence.”  

The recent journey of DIR fee relief has made the most wild roller coaster look tame. Last year at this time, it looked like there could be a chance for relief through a federal regulatory path. That did not happen, and necessity has required pursuit of relief at all levels of government. 

Among the opportunities now before us, all eyes are on the bipartisan Senate Finance Committee drug-pricing legislation by Chairman Chuck Grassley (R-Iowa) and ranking member Ron Wyden (D-Ore.). Currently, that legislation includes important provisions that would address the ability of payers to “claw back” pharmacy reimbursement, as well as establish standardized and relevant pharmacy quality measures. 

In his State of the Union Address, President Donald Trump urged that bipartisan drug-pricing legislation be passed and sent to his desk for signature.

Time will tell if DIR fee relief can finally become a reality, but — as the realities of DIR fees become more and more apparent — time is not on the side of patients, nor on the side of pharmacies.

Fein posed a question that should be considered by those who would stand in the way of DIR fee relief, or who would tolerate inaction: “When the facts change, I change my mind. What do you do?”


Steven C. Anderson, IOM, CAE, is president and CEO of the National Association of Chain Drug Stores.

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