Issue Background

Direct and Indirect Renumeration (DIR) Fees

H.R. 5951 was introduced in the House on 9/08/2016- Referred to House Ways and Means

S. 3308 was introduced in the Senate on 9/12/2016- Read twice and referred to the Committee on Finance 

New bipartisan legislation has been introduced in both the United States Senate and House of Representatives to address "DIR fees."  S. 3308 introduced by Senators Shelley Capito (R-WV) and Jon Tester (D-MT) and H.R. 5951 introduced by Representatives Morgan Griffith (R-VA) and Peter Welch (D-VT).  This legislation will prohibit Medicare Part D plan sponsors (PBMs) from retroactively reducing payment on clean claims submitted by pharmacies under Medicare Part D, therefore eliminating retroactive pharmacy fees.


The Issue


Front-line pharmacists have been involved with the success of the Medicare Part D program from inception. Along the way there have been situations that called for Part D changes, such as in 2008 when Congress required that pharmacies be paid promptly (within 14 days) for clean claims in order to remain viable and pay their suppliers. It is difficult to run a business and care for patients when pharmacies are unaware what or when it will be paid. Recently pharmacists have been put in the untenable position of not knowing what their true reimbursement will be until months after they have dispensed Part D drugs, due to direct and indirect remuneration or “DIR” fees.


The Solution


S. 3308 / H.R. 5951 will provide greater transparency in drug pricing. Retroactive fees inflate costs on Plan Finder so prohibiting these fees will make Medicare Plan Finder more accurate and reliable. CMS is concerned that consumers cannot currently minimize both cost sharing and costs to taxpayers by seeking and finding the lowest-cost drug/pharmacy combination.


S. 3308 / H.R. 5951 will lower cost-sharing for many beneficiaries at the pharmacy counter. This is because retroactive fees lead to inflated drug costs and therefore the cost sharing that beneficiaries are responsible for is based on inflated costs. This is particularly important as the average percentage of covered drugs facing coinsurance has risen sharply from 35 percent in 2014 to 58 percent in 2016 among PDPs per an Avalere analysis published March 10, 2016.


S. 3308 / H.R. 5951 will improve Medicare Part D program integrity. CMS recognizes that Part D sponsors are reporting DIR fees in different ways. The reporting differential impacts beneficiary cost sharing, CMS payments to plans, federal reinsurance and low income cost-sharing subsidies, and manufacturer coverage gap discount payments. By eliminating retroactive DIR fees, S. 3308 / H.R. 5951 will ensure program costs are reported correctly and consistently.


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