What the Medicare Changes Mean for Your Pharmacy
Posted on Mar 22, 2023
Although DIR fees are nothing new for pharmacies, they have increased at a rapid rate over the last ten years. In fact, DIR fees have risen so much that they significantly impact the profitability for many pharmacies. Not only are pharmacies hit with surprise fees months after claims have been processed, but in some cases, the pharmacy ends up providing the medication below cost. To address this and work towards better medication price transparency, legislative reform efforts are in the works. This includes the May 2022 Centers for Medicare & Medicaid Services (CMS) final rule. Beginning January 2024, the new rule will revise several areas of the Medicare Advantage (Part C) and Medicare Prescription Drug Benefit (Part D) programs, including Star Ratings and DIR fees. The changes will affect patients, payors and pharmacies, so it’s important to be aware of what’s coming.
Here’s what pharmacies should know about the upcoming Medicare changes, and what they mean for your pharmacy:
Despite what you may be hearing, not all the changes will be bad.
In fact, many of the revisions favor of pharmacies and their patients. The new rule includes reform that begins working towards better reimbursement transparency across our health system.
Revisions have been made that address areas of concern for pharmacies.
Thanks to nationwide advocacy efforts, the 2023 Medicare Part D Final Rule has been revised to:
- Close the coverage gap loophole.
- Help address pharmacy cash flow issues by encouraging Part D sponsors to consider alternate payment arrangements to help minimize the impact of DIR fees.
- Enforce plan compliance with network access to be eligible for a new or expanded Medicare Advantage contract. Moving forward, plan sponsors will need to have a sufficient network of providers, including pharmacies.
- Redefine negotiated price as, “the baseline, or lowest possible payment to the pharmacy”. This will close the loophole caused by the previous definition that resulted in a 107,400% rise in pharmacy DIR fees since 2010. The definition also aims to:
- Reduce out-of-pocket costs for beneficiaries.
- Improve price transparency around pharmacy reimbursements.
- Make claim revenue more predictable.
- Address network administrative fees, by defining them as price concessions that must be reflected in the price of the payer’s Part D bid. CMS further defines a price concession as:
- Any discount, direct or indirect subsidy, or rebate received by the Part D sponsor, or its intermediary, that is designed to decrease the costs incurred under the Part D plan by the sponsor.
- This includes chargebacks, manufacturer rebates, cash discounts, free goods contingent on a purchase agreement, coupons, free or reduced-price services, and goods in-kind.
- Include safeguards to ensure reasonable reimbursement for pharmacies. Moving forward, a drug’s negotiated price must:
- Include all price concessions from network pharmacies or providers.
- Include dispensing fees.
- Exclude additional contingent amounts, such as incentive fees, if they increase the drug price.
- Be reduced by non-pharmacy price concessions and DIR fees that the sponsor passes on to beneficiaries at the time of sale.
The 2023 Medicare Part D Final Rule does not address all pharmacy concerns, so it’s important to be aware of what hasn’t changed as well.
The following areas will continue to impact profitability for pharmacies:
- There is still no mandate about the amount being paid, or the timing of adjustments and/or payments being made to pharmacies. While plan sponsors must comply with the payment requirements that have been set, the new rule does not eliminate post-sale price concessions. Ultimately, plan sponsors will still have discretion over the timeframe for their payment incentives and penalties.
- No pharmacy-specific performance metrics have been established. This means the pharmacy “quality” scores that are tied to reimbursements and DIR fees are still inconsistent and unclear.
- No restrictions have been placed on performance-based payment arrangements.
- Nothing has been established to address how plan sponsors contract with, incentivize or pay pharmacies in their network.
- No amendments were made that take into consideration the impact of the rule on smaller, community-based pharmacies versus larger, national chains.
There ARE things you can do now, to ensure your pharmacy is prepared.
While there are plenty of things you can’t control when it comes to your reimbursement and DIR fees, you can protect your pharmacy by:
- Establishing a mitigation plan. There are multiple ways you can ensure your pharmacy receives the maximum reimbursement and add new, DIR-free sources of revenue. Plus, you can use your BestRx software to ensure your mitigation plan is successful.
- Stay informed. Keeping up with all legislative changes that impact pharmacies, enables you to adjust your business operations when needed.
- Get involved. You can join the reform efforts already underway and advocate for your store and peers by:
- Contacting local, state, and federal officials.
- Signing petitions.
- Educating your patients about harmful PBM practices.
- Joining independent pharmacy organizations.
Plus, BestRx offers a variety of tools that can help your pharmacy continue to operate efficiently and profitability in the road ahead. Contact us for more information on how we can help you navigate the upcoming Medicare changes.