Just the Facts: Pharmacy Direct and Indirect Remuneration Increases Value and Improves Quality

During the Energy and Commerce Health Subcommittee hearing on “The Fiscal Year 2021 HHS Budget and Oversight of the Coronavirus Outbreak” several inaccurate remarks were made on pharmacy direct and indirect remuneration (DIR).

What is Pharmacy DIR?

Pharmacy benefit managers (PBMs) and Part D plan sponsors use pharmacy DIR to create high-quality, value-based pharmacy networks, improve patient health outcomes through increased adherence, and reduce out-of-pocket costs through lower premiums.

How Pharmacy DIR Works

PBMs, working on behalf of Medicare Part D plan sponsors, may enter into value-based network agreements with pharmacies that include performance standards designed to improve patients’ health and lower out-of-pocket costs. Often, the agreements assume pharmacies will meet or exceed performance standards, thus resulting in either no change in reimbursement or bonuses paid to the pharmacy. When pharmacies do not meet performance standards, pharmacies must return overpayments.

Importantly, pharmacies have access to online tools to view and manage their status on DIR measures, which may help them track their performance on these agreed-upon quality metrics.

Pharmacy DIR’s Impact on Pharmacies

Pharmacy DIR was a nominal portion — 2.6% — of total Part D plan payments to pharmacies in 2017, which is well within a reasonable at-risk amount for pay-for-performance strategies.

The presence of pharmacy DIR in Medicare Part D is not restricting the growth of independent pharmacies. Between 2010 and 2019, the number of independent pharmacies nationwide increased by more than 2,600 (a nearly 13% increase).

Pharmacy DIR’s Impact on Medicare Beneficiaries

CMS announced that over the past three years, average Part D basic premiums have decreased by 13.5 percent, from $34.70 in 2017 to a projected $30 in 2020, saving beneficiaries about $1.9 billion in premium costs over that time. Decreases in premiums are in part due to the continuance of pharmacy DIR, which helps improve benefits for beneficiaries.

Barring pharmacy DIR in Medicare Part D would increase premiums for seniors and raise costs for taxpayers, while decreasing the quality of pharmacy care for beneficiaries. According to a CMS analysis, eliminating pharmacy DIR will increase Part D premiums by $5.7 billion and taxpayer costs by $16.6 billion over 10 years.

For plan year 2020, 92% of Part D enrollees chose Prescription Drug Plans (PDPs) with preferred pharmacy networks — an increase from 88% in 2019.

*For information on the XIL Consulting report, please see  PCMA’s response

In addition, two new analyses by Visante confirm that pharmacy benefit managers’ (PBMs’) proven cost savings and patient care management tools reduce prescription drug costs for health plan sponsors and consumers, including the Medicare program and beneficiaries.