Medicare Part D Direct and Indirect Remuneration — Where Is It Headed?

Over the past decade we’ve seen several changes in Medicare Part D: clinical and quality efforts such as Star Ratings, and reduction of costs to the members in the coverage gap. But something that has been less apparent to the general public is the growing complexity of Direct and Indirect Remuneration (DIR). In short, the definition of DIR is the total dollars in which the Part D sponsor received, or an entity in which they are affiliated with (e.g., Pharmacy Benefits Manager) received, that ultimately would reduce the incurred drug cost experienced by the plan after the transaction at point-of-sale. Historically this was generalized as “rebates” from the pharmaceutical manufacturer.

However, since 2010 we have seen DIR amounts increase and a progression of strategies implemented in the marketplace. The Centers for Medicare & Medicaid Services (CMS) published a Fact Sheet on January 20, 2017, entitled, “Medicare Part D-Direct and Indirect Remuneration (DIR)." The Fact Sheet speaks to industry trends and the increased number of members who qualify for reinsurance, thereby shifting greater financial responsibility on to CMS. We collaborated with the talented staff at Strategic Health Law to provide a summary of the current state of DIR related to CMS, Plan Sponsors, Pharmacies, and PBMs.

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