DIR Fees (Direct and Indirect Remuneration)

DIR fees are payments a pharmacy has to send back to a PBM after a prescription has already been filled and paid. The name comes from Medicare Part D rules, where "direct and indirect remuneration" was meant to capture manufacturer rebates. Over time PBMs began using the same bucket to charge pharmacies fees tied to "performance" measures, such as how many of the pharmacy's patients refilled their blood pressure pills on time, and to claw back a percentage of every claim.

The pharmacy's problem was timing and predictability. A pharmacy would fill a prescription in March, get paid, and then in September receive a bill reversing part of that payment, with no way to know at the counter whether the fill was profitable. Part D DIR fees grew from about $200 million in 2010 to more than $12 billion by 2021 according to CMS, and a good share of that came out of independent pharmacies. Beginning January 2024, CMS required that these fees be applied at the point of sale instead of months later, which made the price visible but also lowered the reimbursement pharmacies see up front. Commercial plans are not bound by the Part D rule, so similar retroactive fees still appear in some employer PBM contracts under other names.

The takeaway: if you sponsor a plan, ask whether any pharmacy payment is reduced after the fact and where that money goes. Fees taken back from the pharmacy do not automatically come back to you.