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Pharmacists and owners know about DIR fees and the dangers it means for retail pharmacies. But for most of the world, the term “DIR fees” sounds like another industry buzzword. One of our PDS members, Traci Shell from Corner Drug Store in North Carolina sent us a summary that was so spot-on and well written, we had to share it.

BONUS: Look below for an easy download of this summary and a breakdown of DIR fees per PBM.

You can share this with…

1. The team at your next team meeting (that’s what Traci did!), so they can stay current with the issues your pharmacy faces and understand that the goals you set are around combating these fees. Read below to learn how pharmacies like you are making them irrelevant.
2. Elected officials so they can begin to comprehend the plight of the independent. The more they understand the gravity, the greater the chances to spur legislation that drives real change in the industry.

What are DIR Fees?

DIR stands for Direct and Indirect Remuneration. In a nutshell, these are fees paid back to the PBM (pharmacy benefit manager) after the point of sale transaction or time of adjudication. Fees are typically collected at the time of third-party payment. However, some are taken far past that date. The fees discussed below and detailed on the second page only apply to Medicare Drug Plans.

What Does this Mean for Independent Pharmacies?

What makes DIR fees so “dangerous” is the fact that they are not easily identifiable at the time a claim is processed. This pain point is exaggerated by the fact that these fees vary by not only the PBM, but by the drug, the pharmacy, and by performance.

It’s not expected for EVERYONE to know EVERYTHING about these fees. However, it is crucial that their existence is acknowledged. Each day we encounter low or below-cost reimbursement by PBMs. We are forced to determine how little we are making on that claim or how much we are losing.

The Problem with PBMs

Many times, a prescription is sent through under the assumption that we’re “only losing $2,” or, “at least we’re making $1.” The problem with this thought process is a failure to calculate in the DIR fee the PBM will expect to be paid. Often after assessing the estimated DIR fee, that small “profit,” is now a loss.

Up until this point, most were completely unaware of these fees. While DIR fees have been around since 2006, it wasn’t until 2013 when they began to show up in PBM’s pharmacy contracts. Since that time, DIR fees have gradually grown, evolved, and become the monster we can no longer hide in the closet.

How Independent Pharmacies Can Combat DIR Fees

While this summary may seem dark, there is hope! Pharmacies just like you around the country are discovering ways to undermine the cost of these fees on their business. It’s not luck that makes a pharmacy successful. It’s not even one single strategy, applied well. It is a combination of unique variables that sparks the development and profitability of your pharmacy while providing a system to sustain the growth.

After 20 years, and through a relentless mission to help pharmacies maximize their potential, PDS has identified these 4 “it” factors for pharmacy success.

People

Your business is nothing without a high-performance team to align with your vision as a leader. Too often, owners are mired in the chase for more profits that they forget the bedrock of their business: their people. A successful owner sets forth a plan to hire and train the right people and focuses on culture to engage their team. You will be unstoppable with an empowered staff that is powering on all cylinders. Keep in mind, people work harder when they know they are valued, appreciated, and set up for success.

Profits

Pharmacy owners too often think that the variable to achieve pharmacy profitability is volume. They would be mistaken. Long gone are the days when pharmacies have to settle for every prescription that walks through the door. It is vital for owners to shift their mindset on what will move the needle in their business. For example, ask yourself which prescriptions are making the most money? The least? It’s critical to identify where you are making money – and doing more of that – and where you are losing money – and doing less of that. Your success should not be measured by script volume, but rather, profit per script. Would you rather fill 100 $4 prescriptions or four prescriptions with a $100 profit each? Which requires more effort?

This is only one of the many ways to impact your profitability. PDS has identified many ways to increase your profits. Check out our ​4 Foundations of Pharmacy Business Ownership blog for more ideas.

​Process

Resting on your past successes is a prescription for failure. Doing something because you’ve always done it will cost you valuable time, money and resources. Ask yourself: is every corner of your business operating at peak performance? Auditing how your pharmacy works, from your workflows to your inventory will show you the changes you need to make to maximize efficiencies in your pharmacy. Do your employees adhere to structured systems and processes that set them up for success and smooths operations? Do you have a handle on your inventory so you’re not allowing any stockpiling? Are you managing your will-call bins? Do you have expired or dead products? These are all questions to ask yourself as you look around your pharmacy.

Every corner of your business can benefit from a good audit. The key is to audit consistently and implement process change swiftly before you lose any more valuable resources.

​​Performance

Pearson’s Law: Everything measured improves, and everything measured and reported on improves exponentially.

This factor in pharmacy success is all about numbers. Understanding your numbers will help you identify and set your goals and listen to what the data is saying to make informed decisions. It’s how you measure whether or not your pharmacy is on the right track towards achieving your goals. Are you financially literate? Do you know how to read, understand and interpret your financial statements along with other pharmacy data to help you make better management decisions, course-correct and seize opportunities? If this is an area in your pharmacy you are falling behind on, it’s vital for you to secure the right tools and resources to help you become literate in your business so you can measure profitability and growth in your pharmacy. (Hint: PDS can help!)

​Download the DIR Fee Summary and Estimate Cost per PBM

Fill out the form below to download the summary and don’t forget to share it with your team and your elected officials!

As we near the end of the first quarter, it’s time to pick your head up from the trenches and take a moment to look around your pharmacy. Take inventory of your four walls and everything in it. What do you see? 

Look at your team. Do you see a team that bickers with each other, or do you see a team who works together to accomplish a singular mission? Do they have a purpose in their everyday duties with measurable goals and milestones, or are they running through the motions of daily operation?  

Now look in your store. Take inventory of your endcaps, your checkout counters, carpets, uniforms… Are they clean and orderly?  

What you see right now is what your patients see when they walk through that door. Making small, incremental changes throughout the year to address cosmetic, structural or operational issues will compound to large wins by the end of the year.  

The idea is not to be consistently perfect, but to be consistently better. 

Instead of making unattainable promises to yourself, your business, your employees, and your patients resolve instead to do small, minor adjustments to your everyday routine that will become powerful catalyst for lasting growth.   

That’s why, instead of making grand resolutions this first quarter, make a simple commitment: “I am going to do something every day to make my pharmacy better.” 

Below are four simple habits you can implement to upgrade your 2018:  

Detox Your Workplace Culture 

If you want to make this the best year yet, you can’t do it alone. You need to rely on your team to help your patients, fill prescriptions and rise above the petty bickering that can often bring teams down.  

While complete culture change is often a long, tough road, the process must start at the top with simple first steps.  

Catch your employees doing something right. As owners and managers, we are too often fixated on recognizing everything employees do wrong. Before we realize it, only negativity comes out. To reverse this, aim to create a culture of positivity by recognizing an employee for a positive action every day. Let an employee know in a simple handwritten note that she did a good job with a patient that day or say thank you for covering for her sick coworker. You can spread positivity and encouragement in just two minutes every day. Just one action a day can have a long-lasting effect.

Spring Clean Your Pharmacy 

Every day, countless feet walk around your pharmacy. The look and smell become background white noise that you and your team no longer notice. However, that isn’t the case for your patients! Trust us; they notice the stain on the ceiling or the faded sign on the front door and, yes, your worn-out carpets.  

While a full remodel may not be possible or even needed, you can do some spring cleaning! Some examples of fast, easy improvements can be:

• Moving OTC products around to new locations
• Purchasing new waiting area chairs
• Placing fresh daily hours stickers on the front door

Small and inexpensive changes like these can give a whole new look to your pharmacy and a new appreciation by your patients.  

Be Thankful  

The role of pharmacy owner is stressful and tiring.  It is often too easy to ruminate on only the challenges and roadblocks you experience. Gratitude, as simple as that sounds, can rewire you to become a more positive person. Taking a moment to appreciate something each day can boost your happiness and productivity. You can do this on your own, by thinking of 3 things you are thankful for every night before bed. You can also include your team and share positive stories at the end of the day, instead of just focusing on daily frustrations.  

Set SMART Pharmacy Goals

Most of us familiar with goal-setting realize that broad goal statements don’t translate into accomplishments without some heavy lifting and correcting course at least once. Specificity is critical when it comes to getting goals across the finish line. SMART goals are:

• Specific
• Measurable
• Achievable
• Realistic
• Timely

Instead of saying I want a better year, you should say “I want to make $50,000 more in profit in 2018,“ or “I want to attend all of my son’s football games this season.“  

When you have a clear vision of your goal, you are more likely to achieve it. Encourage your employees to do the same for themselves, both personally, and professionally. If you’re not sure what is achievable in your pharmacy, we invite you to speak with one of our account executives that can share with you what other pharmacy owners have achieved in a single year.  

Applying incremental and impactful changes will add up to major wins by the end of the year. Regardless of the changes you implement; the point is to keep moving, consistently aim to improve and take quarterly reviews of your pharmacy.  

Launch Your Pharmacy to Amazing Heights in 2018

Want to learn more about what you should be focusing on in 2018? Watch the PDS 2018 Super-Conference recap video below for the 5 Key Takeaways from the conference and the strategies you should set your sights on to make this year the best your pharmacy has seen yet.