Prescription drug pricing and reimbursement are complicated and confusing as it is. DIRs have only made them more so. And much more painful for community pharmacies.
What are DIRs?
DIR stands for Direct and Indirect Remuneration. The term was initially used by the Centers for Medicare and Medicaid Services (CMS) to refer to all price concessions which PBMs and plan sponsors (insurance companies, HMOs, chains and PBMs offering Medicare Part D plans) receive for Part D prescription drugs that were not included in the point of sale transaction (i.e., when the drug was dispensed to the patient and the charge sent to the plan sponsor or PBM). CMS reconciles payments to plan sponsors at the end of each year and one of the reconciliation involves reducing plan reimbursements by the amount of the DIRs received by plan sponsors.
In an earlier post, I argued that a retail pharmacy was not a good setting for providing many of the new services – such as dispensing birth control pills and naloxone without a prescription or providing expanded services under collaborative practice agreements – that new legislation allows pharmacists to provide. An article recently published by my colleagues Dave Dixon and Evan Sisson demonstrates that in the proper setting, pharmacists can successfully provide such services. (Disclaimer: I am one of the authors of the article. I feel comfortable saying great things about the results of the study because my role was limited to evaluation. I was not one of the pharmacists who provided the services described in the article.)
Dave and Evan describe their work at the Center for High Blood Pressure (CHBP), an inner-city free clinic for uninsured patients in Richmond, VA. They report results from 172 patients who received continuous care at the clinic over a 4-year period. These patients were primarily African-American and uninsured. At the beginning of the study period, a majority were obese and nearly 40% were smokers. Their mean blood pressure at the start of the study was 156/98 and only 17% were at or lower than the goal BP of 140/90.
For most of my career, it’s been pretty simple to find good estimates of the average price of a prescription. But for the last several years it has not been. You would think that simply Googling “average prescription price” would provide links to several sites that would provide this information. You would be wrong. The closest estimate I could find online was a study commissioned by Prime Therapeutics that found the average net ingredient costs from Prime compared with its competitors.
Using “mean prescription price” doesn’t work either. This is all the more surprising given that many PBMs – Express Scripts, CVS/Caremark, Catamaran, and Prime Therapeutics – publish annual drug trend reports.
I’m frequently asked about the average prescription price, so I did what a good PhD advisor should do and asked my graduate students to find it. Specifically, I asked three graduate students – Anisha Patel, Batul Electricwala, and Della Varghese – to calculate the average prescription price for all prescriptions and for selected therapeutic categories from the latest data available from the Medical Expenditure Panel Survey (MEPS).
Recent legislation and new products have resulted in a number of new clinical service opportunities for pharmacists in community settings. These include providing naloxone to patients who may be at risk for opioid overdose and their family members; providing counseling, education and monitoring for patients taking specialty drugs (biologics); collaborative drug therapy management with physicians; and providing oral contraceptives without a prescription.
A big reason for these opportunities is the wide spread availability of community pharmacies. Community pharmacists are available in geographic areas and at times that physicians and other prescribers are not. And, consumers visit community pharmacies a lot more frequently than they visit other health care providers or sites. Continue reading →
Retail pharmacies, despite the fact that they face high competition, low reimbursement rates, and limited-to-no control over their pricing, continue to be profitable. Census data quoted in the Drug Channels blog indicate that gross margins in retail pharmacies have actually increased over the last few years. Data from the NCPA Digest indicates that most independent pharmacies continue to be profitable. But how do they do it? My calculations, using publicly available sources, indicate that pharmacies are probably taking a loss on most prescriptions that they dispense.