As 2023 draws to a close, pharmacies must prepare for new developments quickly as the new year approaches. The May 9, 2022 Final Rule issued by the Centers for Medicare and Medicaid Services (CMS) goes into effect on January 1, 2024, impacting DIR programs. As Frier Levitt has previously discussed, the Final Rule deletes the existing definition of the term “negotiated prices” at 42 CFR § 423.100 and adds a definition of the term “negotiated price” at 42 CFR § 423.100 to mean “the lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D sponsor or the sponsor’s.” The impact of this rule change is if Plans continue to use DIR Programs, they must report the entire possible amount of DIR fees they might collect in the future as the “negotiated price.” This will effectively end DIR Fees’ profitability and end pharmacy DIR Fees foreseeable future. However, this does not end issues that pharmacies have with Medicare Part D reimbursements.
Independent pharmacies need to be aware of their Medicare Part D reimbursement terms for 2024, especially in the first few months of the new year. As Frier Levitt predicted, overall reimbursement is going down in many Part D networks, even though DIR Fees are going away in Part D. At the same time, for the first several months of 2024, pharmacies will be hit with the last DIR fee assessments for 2023, which will result in a “double whammy” of lower 2024 reimbursement combined with the final 2023 DIR collection. Pharmacies need to be prepared to experience cash flow issues during this period. Frier Levitt has advice for pharmacies to help prepare.
In many networks, DIR rates are determined months after the point of sale. This means that pharmacies receive high up-front reimbursement, but only later learn the total DIR fee to be collected. Therefore, pharmacies should be aware of how each PBM’s DIR network (typically referred to as a “performance” network or similar) operates, and how high their fees will likely be, to predict the amount that will likely be clawed back for the final 2023 DIR fee collection. However, pharmacies must also account for lower reimbursement in Part D networks, especially now that up-front reimbursement will be lower from most PBMs than it has been since 2016.
Pharmacies should review their Part D contracts for 2023 and 2024 so they can understand what their DIR liability will be for 2023 and what their new reimbursement will be for 2024, so they can account for the overlap. Pharmacies are encouraged to reach out to Frier Levitt for advice and guidance regarding the specifics of their Part D networks.
Frier Levitt attorneys have extensive experience analyzing Part D networks, and are familiar with both the past Part D DIR Networks, and the new networks coming into effect in 2024. Pharmacies unsure of how their Part D reimbursement will be impacted in 2024 should call Frier Levitt today.
