Student Pharmacist

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Online Exclusive: Some fees have “DIRe” consequences
Jamila Negatu
/ Categories: Student Magazine

Online Exclusive: Some fees have “DIRe” consequences

By David Bunch

In the 15-year timespan from 2003 to 2018, one in six rural independent pharmacies had closed their doors for the last time.1 Speculation may point to many potential reasons, but there is one practice that undeniably hinders small pharmacy operations: direct and indirect remuneration (DIR) fees. 

Imagine you are selling candy bars at a local food stand, and you are dealing with Company X, which helps certain groups of people buy chocolate bars. You are given $2 by Company X through selling a candy bar to a man named Billy. A few months later, Company X comes to your shop and takes 75 cents in fees for that sale because of administrative costs and changing chocolate prices. Your shop ends up making only $1.25 for that chocolate bar you sold to Billy. Imagine even further that your price for chocolate bars from the wholesaler is $1.30 a bar. Because these fees are recouped by Company X, you end up losing 5 cents on that sale to Billy. This is a simplified explanation of what PBMs are doing to pharmacies across the nation in the form of DIR fees.

In March 2018, the APhA–ASP House of Delegates passed resolution 2018.2—Direct and Indirect Remuneration Fee Practices. This policy states: “APhA–ASP supports legislation that opposes retroactive fees imposed by pharmacy benefit managers on pharmacy claims.” It is important to understand what DIR fees are and how they affect pharmacy practice, what is being done about it, and how we can all make a difference in this arena.

Financial headaches for pharmacies
These fees are what pharmacies are charged by PBMs outside of normal administration fees and are collected after the point of sale. While DIR fees were originally intended to be a way to offer incentives, PBMs have morphed them into a different practice that includes what many refer to as “clawbacks.” Clawbacks occur when a PBM charges a DIR fee after the point of sale that is a percentage of the total cost and that may even create a negative reimbursement for the drug dispensed. 

There is little transparency in the way DIR fees are calculated. This causes financial issues for pharmacies, especially when they are assessed months after dispensing.2 This practice makes it increasingly difficult for independent pharmacies to turn a profit and has been implicated in their closure. A report from CMS in 2017 warned that the rise in DIR fees has increased the costs of Medicare to taxpayers and has forced a larger number of patients into the coverage gap.3 During the coverage gap, also known as the donut hole, the patient incurs much higher out-of-pocket costs for their medication. In 2018, the coverage gap would only transition into the catastrophic phase, in which the patient would have minimal co-payments, after the patient had spent a total of $5,000 out of pocket for medications.4

Federal legislation
The proposed legislation to the federal legislature for the 2017–18 session was S. 413/H.R. 1038—Improving Transparency and Accuracy in Medicare Part D Spending Act. This bill had bipartisan support and was introduced in the Senate by Sens. Shelley Moore Capito (R–WV) and Jon Tester (D–MT), and by Reps. Morgan Griffith (R–VA) and Peter Welch (D–VT) in the House. This bill has recently been reintroduced in the House and has been assigned bill number H.R. 803. A senate bill number has yet to be assigned for this session as of writing. 

This bill would prohibit Part D plan sponsors and PBMs from retroactively assessing DIR fees. The goals of this ban are to increase the transparency of drug pricing, force fewer seniors into the coverage gap, prevent the closure of independent pharmacies, and decrease overall costs for CMS. According to the Wakely Consulting Group, a ban on retroactive DIR fees would save tax payers $3.4 billion dollars over a 10-year span.5

You can play a pivotal role
Drug pricing has been a hot topic in the political arena for years, and the upcoming legislative session may prove to be an opportune time to eliminate retroactive DIR fees completely. States such as Georgia, North Dakota, Texas, and others have already passed legislation limiting retroactive DIR fees.5 It is important for student pharmacists to stay involved in the legislative process by keeping up on current legislation and by staying in contact with both their state and federal legislators. 

This year has substantial potential to bring reform to retroactive DIR fees, and student pharmacists can play a pivotal role in bringing about change. Ensuring that pharmacy practice remains financially sustainable by advocating against this detrimental practice will benefit pharmacies, patients, and Billy.

1.    “Here's Why Rural Independent Pharmacies Are Closing Their Doors.” Home,….
2.    “Study Finds Legislation to End DIR Fees Could Save Billions.” AJPBLive, 29 Sept. 2017,….
3.    “Fact Sheet Medicare Part D – Direct and Indirect Remuneration (DIR).” Centers for Medicare & Medicaid Services, 19 Jan. 2017,….
4.    “The Medicare Part D Coverage Gap (‘Donut Hole’).” Medicare Information, Help, and Plan Enrollment -, 15 Sept. 2018,
5.    “White Paper: DIR Fees Simply Explained.” Specialty Pharmacy Times, 25 Oct. 2017,….


David Bunch is a final-year PharmD candidate at the Washington State University College of Pharmacy and was a member of the 2018–19 APhA–ASP Policy Standing Committee.

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