Pharmacy DIR Fees: The Need for Reform

Direct and Indirect Remuneration fees, or DIR fees, were created with Medicare Part D, a prescription drug benefit program for elderly and disabled beneficiaries, to serve as a way for pharmacy benefit managers (PBMs) to report manufacturer rebates, so the federal government would be able to account for actual drug costs. Think of PBMs as the middlemen between health insurance companies and pharmacies. They serve as third-party administrators of prescription drug programs for commercial, self-insured, Medicare Part D and state/federal employee health plans.

DIR Fees Are Unfair, Arbitrary and Opaque


  • The original purpose of DIR fees has been hijacked. Now, PBMs use these fees to extract funds from pharmacies for every prescription filled, and this happens retroactively – weeks or months after the transactions.
  • Pharmacies dispense medications and are reimbursed, only to have a portion of that reimbursement “clawed back” by PBMs weeks or months after the transaction. There’s no way for pharmacies to anticipate the fees, and PBMs rarely (if ever) provide justification for the claw back.
  • A medication on which the pharmacy looks to break even or even turn a modest, fair profit at the time it’s dispensed can become a loss weeks after the retroactive fee is taken. This makes it extremely difficult for pharmacies to operate.
  • Pharmacy DIR fees also hurt patients. They increase out-of-pocket costs for needed medications and in doing so push seniors more quickly into the “donut hole” – the point at which they are responsible for 100% of their prescription drug costs until they reach the catastrophic coverage threshold when taxpayers begin paying 80% of the cost. Bottom line: If there were no DIR fees, then beneficiaries who take prescription drugs would have lower cost sharing.

Watch Our Video on Retroactive DIR Fees

According to the federal government, DIR fees have increased by 45,000% in less than ten years. Therefore, patients are facing higher out-of-pocket costs while pharmacies are struggling to stay in business.

Urge Congress to Pass the Phair Pricing Act

The bipartisan Phair Pricing Act of 2019 (H.R. 1034 / S. 640) would make all of the criteria for reimbursement determined at the point of sale, assuring that Medicare patients are properly charged and defending pharmacies from the financial uncertainties they currently face.

Tell Congress to Pass the Phair Pricing Act

Doug Baker
For questions or more information, please contact FMI's Director, Food & Health Policy, Peter Matz

Contact Peter
FMI's Pharmacy Report is a monthly communication to educate FMI members on the latest pharmacy-related actions that could impact food retailers and wholesalers. Read up on new federal and state pharmacy issues in the latest edition.

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