Frier Levitt is at the forefront of challenging unreasonable and unlawful Direct and Indirect Remuneration (DIR) Fees imposed on pharmacies by Pharmacy Benefit Managers (PBMs). Our attorneys have extensive knowledge disputing these fees, through negotiation, arbitration, and litigation, as well as protecting the rights of pharmacies participating in Medicare Part D programs.
What are DIR Fees?
“DIR” stands for Direct and Indirect Remuneration, a term introduced by the Centers for Medicare and Medicaid Services (CMS) in the drug price reporting context to ensure that Medicare Part D sponsors and Pharmacy Benefit Managers (PBMs) accurately report rebates and other “price concessions” from manufacturers, pharmacies, or other third parties which could not be reasonably determined at the point-of-sale. While DIR was originally intended to ensure accurate reporting of drug costs, PBMs have expanded its use to impose post-sale fees on pharmacies.
How are DIR Fees Collected?
PBMs typically utilize DIR fees in networks which they represent as measuring a pharmacy’s performance. Often, these networks are called “performance networks,” and the term “DIR” may not be used. Instead, they may be termed “performance fees,” “contingent performance fees,” “performance adjustments,” “network rebates,” or similar names. Some of these programs are purported to be based upon CMS’ “Star Ratings” program, which CMS uses to measure plan performance in Parts C and D; it may be the case, however, that this rating system does not apply to certain pharmacies, or that the categories measured are not measured in the Star Ratings program.
Metrics used by PBMs may include:
- Generic Dispense Rate (“GDR”) of a pharmacy
- Adherence to common maintenance medications, like RAS antagonists, statins and diabetes drugs
- Net Promoter Score (“NPS”) gathered from the pharmacy’s patient surveys
- Adherence to certain specialty medications
A pharmacy’s DIR fee depends upon its score in these metrics, regardless of whether the metrics are appropriate or even applicable to the pharmacy’s business model.
How Do DIR Fees Harm Pharmacies?
Since DIR Fees are retroactively assessed, pharmacies may later discover that reimbursements fall below the drug acquisition cost, violating laws requiring payments to be “reasonable” and “relevant.” This system is particularly harmful to pharmacies operating on slim margins, resulting in severe financial strain or business instability.
DIR Fees May Be Particularly Unreasonable for Specialty Pharmacies and Dispensing Physicians
PBMs frequently apply irrelevant performance measures like generic dispensing rates to providers who do not dispense generics, which unfairly penalizes them for metrics that do not reflect their practice model. Even when metrics appear relevant, they may be applied inaccurately, penalizing providers for physician-directed changes to therapy or formulary compliance issues beyond their control. Due to their unique business model, specialty pharmacies and dispensing physicians often do not dispense generic drugs or common “maintenance medications” measured by PBMs. Regardless, PBMs often measure specialty pharmacies and dispensing physicians’ performance in these areas and penalize them for failing to meet these metrics.
As a result of pre-existing slim margins in the marketplace and ever-increasing costs to service patients (especially those with complicated treatment protocols such as cancer patients), DIR Fees often result in reimbursement that is below the cost of drug acquisition by providers or otherwise leave the provider without a reasonable profit margin necessary to maintain operations.
How Do DIR Fees Harm Patients?
DIR fees inflate out-of-pocket costs for Medicare beneficiaries, in which then the patient must bear the greatest out-of-pocket costs for medication. The cost of DIR Fees also shifts the burden of drug costs to the federal government by creating a circumstance where more patients are prematurely pushed into the catastrophic case portion of Medicare services. Ultimately, DIR Fees weaken the overall value of the Medicare insurance benefit intended to provide health care coverage for our nation’s oldest and most vulnerable citizens.
Frier Levitt Understands Your Rights Under the Law
PBMs cannot impose unreasonable or irrelevant fees under Medicare Part D and many states have made it illegal for any PBM to impose any fees against a pharmacy after the point of sale. Frier Levitt’s extensive knowledge of these and other laws and regulations governing pharmacies in both the state and federal governments, places us in a strong position to protect your rights and, where necessary, to bring these PBMs before a court or arbitrator to halt these harmful fees.
Frier Levitt Can Help Your Pharmacy Understand and Fight Unreasonable DIR Fees
Our firm provides comprehensive legal support to help pharmacies understand, dispute and eliminate unreasonable DIR fees. We assist clients with:
- Negotiating PBM and plan sponsor contracts
- Analyzing DIR fee provisions and their impact
- Initiating and managing disputes
- Representing clients in arbitration or litigation
- Filing Freedom of Information Act (FOIA) and state “right-to-know” requests
- Working with CMS and state regulators to enforce laws
Drafting legislation and regulations to strengthen pharmacy protections When disputes escalate, our litigation team stands ready to act. We also explore alternative fee arrangements to help pharmacies pursue justice without undue financial risk.
Who We Represent
Frier Levitt represents clients nationwide in every aspect of pharmacy law and litigation related to DIR Fees, including:
- Independent and Specialty Pharmacies
- Hospital-owned and Health System Pharmacies
- In-Office Dispensing Practices
- Oncology Practices
- Pharmacy and Oncology Associations
How Frier Levitt Can Help
If your pharmacy is being assessed unreasonable or unlawful DIR fees or if you need help understanding your PBM contracts and reimbursement exposure, contact us. Our attorneys are admitted to multiple state and federal bars. We also collaborate with professional organizations to draft legislation, advocacy letters, and amicus briefs, including submissions to the U.S. Supreme Court, supporting fair treatment for pharmacies.
Frier Levitt provides strategic, industry-focused legal counsel tailored to your needs. Contact our team today to learn how we can help you.