Pharmacy Benefit Manager & DIR Fee Changes, Explained

Pharmacy benefit managers (PBMs) are the malevolent puppeteers in the complex ecosystem of the pharmacy world. These entities, known for their opaque pricing models and damaging reimbursement policies, have mercilessly crushed pharmacies with their practices, leading to such abysmal reimbursement rates that many pharmacies have either had to close their doors or seek revenue outside of dispensing revenue tied to PBMs.

The recent move by the Centers for Medicare & Medicaid Services (CMS) to eliminate retroactive DIR fees might feel like a glimmer of hope, but there are many nuances to this change. Specifically during the first quarter of transition, including the months of January through March, 2024, pharmacies will be left grappling with two crushing bills. The first bill will be the last of the remaining retroactive DIR fees assessed by pharmacy benefit managers. The second and new version of this bill are DIR fees assessed at the point of sale for prescription medications.

Amidst this apocalyptic scenario, a glimmer of light emerges in the form of non-PBM revenue for work already being performed by pharmacies. Medical billing, empowered by DocStation, allows pharmacies to inject much-needed cash into their coffers to survive this tumultuous period. 

What does all of this mean for your pharmacy? Can your pharmacy take action even if not in an advanced pharmacist provider-status state? (Yes!) Before we delve into the specifics of this change, let’s cover some basics. 

What is a Pharmacy Benefit Manager (PBM)?

Pharmacy benefit managers (PBMs) pervasively operate within the intricate pharmacy landscape. If a pharmacy accepts prescription insurance, they likely deal with a PBM. These entities have become notorious for their lack of transparency in pricing and reimbursement policies, leaving pharmacies vulnerable to whatever reimbursement the PBM sends them for prescriptions dispensed. At times pharmacies even lose money, being forced to accept less money than the product costs itself. These third-party PBMs, sometimes rebranded as “pharmacy benefit administrators” have adversely affected pharmacies through their practices for many years, leading to low reimbursement rates and challenging financial situations for community pharmacies.

Given the challenging landscape perpetuated by pharmacy benefit managers, what is a pharmacy benefit manager’s role in day-to-day operations? Essentially, a PBM or pharmacy benefits manager is an intermediary between health insurance plans, pharmacies, and patients. Their role includes a variety of activities related to coordinating prescription drug benefits, negotiating with pharmaceutical manufacturers on pricing, and processing claims on health plans’ behalf. However, their influence extends far beyond these seemingly innocent administrative functions, infiltrating the day-to-day operations of the entire pharmacy ecosystem.

While PBMs claim to streamline the prescription process and control costs, their practices have raised eyebrows and provoked outrage within the industry. Independent pharmacies in particular have significantly suffered under the weight of PBM practices. With a lack of transparency surrounding their operations, PBMs impose unfairly low reimbursement rates and hidden fees, affecting pharmacy’s ability to support staffing models and pushing pharmacies to the brink of financial ruin.

Pharmaceutical benefit managers have become the driving force behind a crisis that has left countless pharmacies struggling to survive. Their profit-driven strategies have not only crippled community pharmacies but have also resulted in massive wealth accumulation for their business and shareholders. It’s clear that the role of PBMs extends well beyond the coordination of benefits; it’s a far-reaching grasp that holds pharmacies captive.

The Role of Pharmacy Benefit Managers (PBMs) in the Crisis

With the upcoming DIR fee change, the pharmacy world has a storm to weather, at a minimum. At its worst, there are many owners in utter turmoil, with industry outlets dubbing it the “DIR Fee Apocalypse.” DIR fees have become a source of immense pain and frustration, leading to lower reimbursements and an impending hangover effect in the first part of 2024. The transition and new timing of these fees will drastically reduce cash on hand at pharmacies, exacerbating the already grim situation. In this context, the concept of “double dipping” can only be described as a full-blown apocalypse.

The Opaque Practices of Pharmacy Benefit Managers (PBMs)

Pharmacy benefit managers or prescription benefit managers are the force behind this crisis. Their practices, designed to maximize their own profits, have crippled community pharmacies while amassing billions of dollars for themselves. The truth is the role of PBMs extends far beyond coordinating benefits between health insurance plans and pharmacies. Their grasp reaches into the day-to-day operations of the entire pharmacy ecosystem.

Breaking Free from the Clutches of Pharmacy Benefit Managers (PBMs)

Pharmacies, motivated by the pursuit of business success, often find themselves caught up with PBMs, despite the significant costs involved. Moreover, the lack of transparency surrounding PBM operations leaves pharmacies vulnerable to their influence. The appetite to sever ties with PBM networks has led to a number of new pharmacy business models (e.g. cost-plus pharmacy model) and attempts to seek direct negotiations with health insurance companies as alternatives.

The Impact of Regulatory Changes and the Persistence of DIR Fees

The recent elimination of retroactive DIR fees by CMS may appear to be a beacon of hope, promising greater transparency. However, the truth remains that DIR fees will still persist. Only now, they will be applied at the point of sale. While this change might equip pharmacies with more timely knowledge of the financial burden, it does little to alleviate the crushing weight of these fees. The reality is that DIR fees, initially intended to incentivize superior patient care, have morphed into a revenue-generating scheme for PBMs. Astonishingly, these fees have grown a staggering 107,400% from 2010 to 2020, leaving pharmacies in their wake of devastation.

The Cons of Regulatory Changes and Challenges Faced by Pharmacies

Establishing the pros and cons of this regulatory decision proves almost as difficult as the implementation complexities for the various stakeholders. During the first quarter of 2024, the cons appear to outweigh the benefits for pharmacy owners. The path ahead  will be met with challenges as PBMs, pharmacies, insurance companies, and drug manufacturers grapple with executing the new regulations. Smaller pharmacies, already reeling from the burden of current regulations, 340b access reduction, and loan rate elevation face an impending storm that will be tough to weather without significant savings or alternate revenue plan.

Preparing for the Storm: Saving Money and Diversifying Revenue Sources

To prepare for the times ahead, pharmacies must prepare themselves and seek ways to increase cash on hand for 2024 and beyond. The first quarter of the year will deliver a double whammy as pharmacies face double the payout in DIR fees. Setting aside funds to combat this onslaught becomes imperative for survival. Additionally, diversifying revenue sources beyond prescription dispensing becomes crucial. Billing eligible services to the medical benefit for immunizations and point-of-care in-pharmacy testing offer potential avenues to bolster income and mitigate cash flow problems. Additional opportunities exist for most pharmacies, and DocStation can become the partner that guides a pharmacy through these opportunities.

Optimizing Workflow and Embracing the Future with DocStation

Optimizing workflow for clinical services is a necessary avenue for pharmacies who expand their offerings in order to maximize revenue within the constraints of this crisis. Pharmacy analytics & practice software like DocStation enables data-driven decision making, medical billing, and streamlined operations, serving as a lifeline amidst the chaos. DocStation is an all-in-one pharmacy management software that is easy and cost effective to implement. In bypassing PBMs, pharmacies can eliminate clawbacks, enhance workflow efficiency, and get paid for care already provided by pharmacists such as comprehensive counseling activities.

Embracing the Future with DocStation: A Lifeline for Pharmacies

Embracing the future with DocStation is more than just a lifeline for pharmacies; it’s a game-changer that can revolutionize their operations and business model. Developed by pharmacists who understand the unique challenges faced by their peers, DocStation is a comprehensive pharmacy management system that empowers pharmacies to deliver superior care to their patients while maximizing opportunities to receive payment for their services.

Say Goodbye to Manual Claims Processing

One of the standout features of DocStation is its automatic billing capability. Gone are the days of manually processing claims and dealing with tedious administrative tasks. With DocStation, pharmacies can automate their billing processes, saving valuable time and reducing the risk of errors. The software seamlessly integrates with insurance providers, allowing for efficient claims submission and processing. On top of this is transparency in billing activity and claims feedback and payment. This means that pharmacies can focus on what matters most – patient care – while the software takes care of the complex billing procedures in the background.

Efficiency and Productivity Through Streamlined Workflows

Streamlined workflows are another hallmark of DocStation. The platform is designed to optimize efficiency and enhance productivity within the pharmacy setting. With intuitive tools and interfaces, pharmacists and other team members can navigate through their daily tasks with ease. From managing prescriptions to conducting patient consultations and documenting interventions, DocStation provides a user-friendly environment that promotes seamless workflow management. By eliminating redundant steps and automating routine processes, pharmacies can save valuable time and allocate resources more effectively.

Unlocking Opportunities for Growth and Success

DocStation opens doors for pharmacies to new opportunities for growth and success. By leveraging the sophisticated technology paired with the team’s subject matter expertise in pharmacy operations, medical billing, payer relations, and revenue cycle, the synergy can give pharmacies a competitive edge in the market. From identifying trends in medication adherence to a transparent claims dashboard to track medical billing activity, DocStation equips pharmacies with the tools they need to thrive in an ever-evolving healthcare landscape.

Seizing Control of Pharmacy Operations

The future of pharmacy lies in embracing innovative solutions like DocStation. By harnessing the power of technology, pharmacies can transcend the challenges imposed by PBMs and regulatory changes. With DocStation, pharmacies can reclaim control over their operations, deliver exceptional patient care, and ensure financial stability.

Experience the DocStation Difference

DocStation’s pharmacy management system was created for pharmacists by pharmacists. We help you deliver superior care to your patients — and get paid while doing it. 

We are continually innovating, and we’re proud to be introducing our pharmacy billing software offering automatic billing; the no-brainer solution for managing and streamlining your billing process. Say goodbye to manual claims processing and tedious workflows. 

With our robust and intuitive platform, you can automate your billing system, save time, and focus on what truly matters: caring for your patients. Don’t miss out on this opportunity to transform your pharmacy. Request a free DocStation demo today!