What is the Truth Behind Direct and Indirect Remuneration Fees?

With the Centers for Medicare and Medicaid Services and the Community Oncology Alliance (COA) recently issuing reports about direct and indirect remuneration (DIR) fees, pharmacy benefit managers (PBMs) have come under fire.

These fees are retroactively charged to pharmacies who receive a bill weeks to months after a transaction. Pharmacies say that these fees harm their businesses, and affect their ability to stay in business and serve patients.

On the other hand, CVS Health has taken the position that these pay-for-performance fees do not impact their own profitability, since they are not recouping that much income from pharmacies. By making these statements, this particular PBM has made the case that DIR fees help drive down Medicare premiums and ensure that patients receive high quality care.

In an alleged leaked document from Mark Merritt, president and CEO of the Pharmaceutical Care Management Association (PCMA), the organization outlines strategies to combat potential reforms that will be placed on PBMs.

In response to this leaked document, the National Community Pharmacists Association (NCPA) issued a statement.

"More and more scrutiny is being directed towards PBMs, and so, as this purported leaked memo makes clear, they're having to scramble to preserve the status quo, and, as the memo suggests, they've got deep pockets to do it,” B. Douglas Hoey, RPh, MBA, CEO of NCPA. “That's because they've extracted untold profits from patients, drug manufacturers and health plans, and they do it with very little oversight and almost no transparency. PBMs' business model is contributing to the problem of rising drug costs—as well as the resulting medication access and affordability challenges those costs create for patients.”

PCMA has long supported PBMs and their cost-saving tools, and has voiced opposition to the recent reports of DIR fees and how they can harm patients. In fact, PCMA said in a previously issued press release that the COA report shows an attempt to conserve oncologists’ profits.

“DIR reduces premiums for Medicare Part D beneficiaries, which leads to lower costs for the federal government. Stable and affordable premiums contribute to a 90% satisfaction rate among Part D enrollees for their drug plan,” PCMA said in a press release. “Furthermore, the paper’s dubious claim that DIR in Part D contribute to higher drug prices raises an obvious question: why are drug prices so high in Medicare Part B? In reality, Part D plans reduce costs not only by negotiating price concessions on brand and generic drugs, but also by lowering premiums, which reduces costs for all Medicare beneficiaries as well as US taxpayers.”

However, not all stakeholders agree with this point of view, and believe that the recently published papers shed a light on the truth of the matter.

"As evidence, consider their manipulation of pharmacy DIR fees in the Medicare Part D space. NCPA wholeheartedly agrees with Medicare officials that PBM manipulation of pharmacy DIR fees increases costs to the government and raises beneficiary out-of-pocket costs for medications,” Hoey said in the NCPA press release. “Those retroactive fees also threaten the viability of some independent pharmacies. The growing PBM share of rebates from drug manufacturers is another example of how PBMs profit right along with higher prices. We need PBM reform in order to help patients and health plan sponsors."