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DIR Fees – Do you know what they are and why transparency matters?

 By: Wendy Morrow, Team Lead, Net-Rx 

 What are DIR fees?

Direct and indirect remuneration (DIR) fees assessed on Medicare Part D scripts are now being extended to commercial networks. DIR is a “catch-all” term that covers a variety of “fees” including “pay to play” fees for network participation. It is also used to refer to pharmacy fulfillment of various quality measures or alternately a fee assessed to pharmacies for non-compliance with quality measures. These fees lower the profit received on each script because they are taken out after the point of sale and are not visible within the transaction.

The steady increase in DIR fees is an ongoing issue for pharmacies. They have increased by nearly 225 percent per year on average between 2012 and 2017. Amid the COVID-19 pandemic, several members of Congress have proposed DIR fees reform. But until reform comes, and perhaps even after, pharmacies struggle with quantifying these fees. The fees are generally collected on your remittances as a check adjustment and can be assessed months after the date of fill. In 2019, pharmacies paid over $9 billion in DIR fees. Do you need help identifying DIR fees on remittances from the PBM?

What is pharmacy reconciliation?

Why is the transparency of DIR fees important?

DIR fees can have a significant impact on pharmacy claims reimbursements. To accurately calculate your profit margins, you need to include any fees charged by payers. This includes DIR fees. Once you have identified your fees, you can deduct the charges from the payments on the expense line to calculate your true net income. If you do not account for DIR fees as part of your gross profit, your gross margin will not be accurate and could affect your profit and loss statement.

At Net-Rx™, we recognized the need for reporting and transparency. Net-Rx is a provider of pharmacy reimbursement solutions exclusively for pharmacies.  One of our many solutions, RecRx, includes a Fee/Adjustment report.  This report provides a detailed list of third-party claim and check-level adjustments listed on your remittances. This includes any claim level and check level DIR coding the remittances have.

Net-Rx has been an advocate of pharmacies for over 15 years. We participated in the NCPDP WG45 task group to help create and enact a standardized way of reporting DIR fees on payment remittance advices to provide transparency and visibility to the pharmacies.  With the evolving landscape of pharmacy operations, we continue to develop new, innovative software while remaining steadfast in our core values of commitment and dependability.

 © 2021 Managed Health Care Associates, Inc.

Read more articles that cover topics such as submission clarification codes and how formulary status affects claim responses and reimbursement.

http://www.ncpa.co/pdf/dir-faq.pdf

https://www.govinfo.gov/content/pkg/FR-2018-11-30/pdf/2018-25945.pdf

https://ncpa.org/sites/default/files/2020-04/dir-letter-phase-IV-covid-pandemic.pdf

http://www.nacds.org/pdfs/government/2020/AdvocateLeaveBehinds.pdf

https://www.sykes-cpa.com/dir-fees-accounting-tax-treatment/