Celebrating the end of DIR Fees? Not so fast…

In May it was announced that CMS had issued a final rule that put an end to PBM’s retroactive DIR fees. The rule requires that the lowest effective negotiated price be reflected at the point-of-sale – so it does not eliminate DIR fees, it instead moves them to the point of sale.

While, I applaud CMS for eliminating retroactive DIR fees, which have damaged the profession of pharmacy, there is still much work that community pharmacies need to prepare for in anticipation of implementation of the CMS final rule.

It is CRITICAL that the entire profession of pharmacy – including community pharmacy owners, management, and staff understand the impact this will have on practices and patients. In 2024 (especially in the first 3 to 6 months) community-based pharmacies will experience a “double whammy”. The lowest effective price at the counter’s point of sale will be in place and at the same time, the residual retroactive fees from 2023 will still be pulled from the pharmacies. In other words, pharmacies cash flow and the pharmacy’s ability to sustain itself until revenue stabilizes to the new normal will be greatly impacted.

In the next newsletter, I will share four strategies you can take at your community-based pharmacy to ensure cash balance is healthy and sustainable during implementation of the CMS final rule. 

Do you want insight into how to keep your pharmacy alive and thriving? Subscribe here to get this in your inbox.

P.S. In  February, I was asked by APhA to provide comments to CMS regarding PBM practices and retroactive DIR fees. The following are my comments that I gave to CMS. Please share your stories and experiences in the comments so collectively we can continue to push for change.

“My personal journey with the practices of PBM’s and the impact on my practice has been long, difficult, and stressful.  It started with the practice of “underwater MAC’s” which meant I was being reimbursed less than I what could actually purchase the medication from the wholesaler—and many times it was an extremely large loss.  “Clawbacks” started to appear so that the not only was the pharmacy impacted with retroactive DIR fees, but the patient was also impacted by paying more at the point of sale. 

The impact on the bottom line from DIR fees is substantial and for many pharmacy practices unsustainable.  In 2021, the amount of retroactive DIR fees being taken from my two community pharmacy practices is reaching $300,000.00-literally taking any profit that we might have realized.  We employ over 30 individuals who rely on us to keep our doors open so that they can make a “fair wage” and support their families.  We care for over 4000 patients between our two practices.  We provide services beyond just medication dispensing to ensure that our patients are achieving their health outcomes with safe and effective medications. 

When COVID 19 hit we made several large investments in equipment to ensure that we could be a solution for our community including the purchase of an ultra-cold freezer, a trailer unit, and equipment to ensure the safety of our patients and employees.  We have provided approximately 20,000 COVID 19 vaccinations in the past 2 years and work closely with our county public health department, social services, and the emergency management agency to ensure we are providing vaccinations and other services to our most vulnerable populations.  We are stressed, burned out, and challenged—but we never stop, we never close, and we continued to be a solution for our community.  Then we get our financials for the past year and there is nothing to show for our efforts.  It is defeating, it is depressing, and IT IS JUST WRONG!!

Much like other community pharmacy practices, our cash flows are being hit hard.  Now we also have to worry about the retroactive DIR fees that will hit us in the first quarter of 2022—further negatively impacting our financial viability.  I have seen a large number of  community pharmacies close in Iowa, a rural state, leaving communities without a pharmacy or health care provider.  At one time our state could boast that we had a community pharmacy in each of our 99 counties—sadly we are far from that statement today.  I have communities approach me regularly begging for us to open a pharmacy and my response to them is the financial model is just too unsustainable.  This is not just happening in Iowa—this is happening nationally.

I applaud CMS for considering the elimination of retroactive DIR fees. The negative impact on pharmacies and patients cannot be emphasized enough. I went into pharmacy because I wanted to help others.  I became an owner of a pharmacy practice because I wanted to be part of the health care team for my community.  Now I wonder how long we can sustain our practice due to negative financial impact of retroactive DIR fees.  Our patients and our community count on us to be there for them—I hope that I can!”