NCPA Executive Update

NCPA Executive Update delivers insights on legislative, regulatory, policy, and industry developments from NCPA CEO B. Douglas Hoey, Pharmacist, MBA, to NCPA members and pharmacy leaders every Friday.

DIR Fake News Repellant | NCPA Executive Update | March 24, 2017

by NCPA | Mar 31, 2017

Dear Colleague,

Doug Hoey

There's been an awful lot of talk about "fake news" in the political world over the last year. A September Gallup Poll reported that only 32% of Americans trusted the media, the lowest in the organization's polling history. With so much information available online, it's sometimes hard to know what's real and what's not.

The demand for hard evidence is one of the reasons NCPA recently engaged one of the most recognized independent actuarial consulting firms in health care to look at the impact of pharmacy direct and indirect remuneration (DIR) fees on seniors, the government, plan sponsors/PBMs, and pharmacies. The report is in, and here's some of what it found:

  • Beneficiaries are impacted by pharmacy DIRs. A Part D plan/PBM that favors DIR may produce a slight reduction in premiums, but beneficiaries with Part D claims will also pay more out-of-pocket. Also as DIR amounts increase, cost-sharing for beneficiaries with Part D claims will be higher in all benefit phases (i.e., initial coverage limit, gap, etc.).

  • The Centers for Medicare & Medicaid Services incurs higher costs because of pharmacy DIRs. CMS incurs these higher costs (reinsurance and low-income cost sharing subsidies) because of the increased use of retroactive or post claim adjudication pharmacy DIR fees.

  • Plan sponsors/PBMs benefit from pharmacy DIRs. This is because they have significant financial incentives to use increased DIR in Part D bids and are in more favorable financial position as DIR amounts increase.

  • Pharmacies are at a distinct disadvantage when DIR is taken or collected from pharmacies after the point of sale. There is a lack of transparency in the detail provided to pharmacies and the retroactive nature of these fees creates operational and cash flow challenges for pharmacies.

So, in short, most seniors, the federal government, and taxpayers all pay more with the current use of pharmacy DIR fees, while plan sponsors and PBMs reduce their risk and do better. What a deal.

This report is groundbreaking information.

You might be tempted to say that these findings are not a surprise to you. Certainly, not the part about pharmacies being at a distinct disadvantage because of pharmacy DIR fees. We couldn't agree more. Since 2011, NCPA has been in contact with CMS repeatedly about the problems with retroactive pharmacy DIR fees and has doggedly taken our members' concerns to Congress.

We knew what was happening to pharmacies. We suspected seniors and taxpayers were being hurt too, but we couldn't quantify. That's one reason we engaged the actuarial firm last year to show us exactly what was happening.

Coincidentally, CMS released findings in January that are consistent with those of the actuarial firm. Now there are two well-respected entities—including the federal agency negatively impacted by DIR fees—that have weighed in on the problems with the way pharmacy DIR fees are being used.

In addition, in January 2017 a commissioner with MedPAC, the independent agency that advises Congress on Medicare issues (the commissioner is also a principal in another well-known actuarial firm), concluded that DIR fees may provide incentives for Part D plans to put higher priced drugs with large rebates on their formularies rather than lower priced drugs. This seems counterintuitive for entities that purport that DIR fees reduce drug costs.

The NCPA-endorsed DIR legislation introduced in Congress last month is one step in the right direction to fix the problem. The Improving Transparency and Accuracy in Medicare Part D Spending Act (H.R.1038/S. 413) would prevent retroactive DIR fees charged to pharmacies in Medicare Part D. Moreover, it would be another step in creating full transparency in a highly opaque prescription drug payment system that allows PBMs to contribute to the rising costs of prescription drugs.

A brief summary of the analysis by the actuarial firm is available behind the member login wall on our website. For more information on the analysis or to join NCPA's pharmacy DIR advocacy efforts contact Susan Pilch, NCPA VP Regulatory Affairs, at

NCPA will continue to be dogged in focusing attention on the tyranny PBMs exercise over your profession and your patients. Stay tuned for more news about our efforts in the days ahead.

Doug Hoey

P.S. - The NCPA Congressional Pharmacy Fly-In is a perfect opportunity to share with members of Congress the impact pharmacy DIR fees are having on your family and the families of voters in their district and state. Go to to register.