The Intersection of DIR Fees and Open Enrollment for Independent Pharmacies

In this episode of Sykes The Bottom Line Pharmacy Podcast, Marvin Guardado, Senior Manager of Customer Enablement at Enliven Health, dives deep into the world of DIR fees and the DIR fee hangover.

Discover how open enrollment can impact independent pharmacies and how they can maximize profitability while ensuring the best care for their patients.

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If you prefer to read this content, the video transcript is below.

Kendell: So welcome to another episode of Sykes The Bottom Line. We are happy to have Marvin Guardado come in from Enliven Health and talk to us. We’re really excited about the DIR fee hangover, open enrollment, Medicare plans, and the whole shebang bang. Marvin he is a senior manager of customer enablement at Enliven Health. So, Marvin, if you don’t mind, just tell us a little bit about yourself and kind of what you do on a day-to-day basis at Enliven Health and then we can just jump into some of the topics for today.

Marvin: Yeah, sure. You’re the first person I’ve heard say you’re excited for a hangover, so that’s a way to start.

Bonnie: Wait, I was going to ask, did you say D-I-R hangover?

Kendell: DIR fee.

Bonnie: DIR fees. What’s a DIR fee?

Kendell: Director fee.

Bonnie: I haven’t heard anything about that. Director fees. We had somebody ask us if they were director fees. So funny. Very pertinent topic, we hear a lot.

Marvin: No, absolutely. It’s a daily topic over here and of course with our customers, but a bit about myself. So again, my name is Marvin Guardado. So as Kendell said, Senior Manager of Customer Enablement for Medicare match actually started with iMedicare way back in 2015. So that was originally the company that had launched this product and then we had rebranded to Amplicare, I think it was like 2018. Then in 2020, we were acquired by FDS. Subsequently the following year we were both acquired by Omnicell under the Enliven Health umbrella. So previous to my experience here, I worked for a wholesaler. So, I had a territory of about 160 pharmacies in New York City and they were all in a radius of like 5 miles.

Bonnie: What? Man.

Marvin: Right next to each other. I remember being in Chinatown, I would park the car, put 2 hours in the meter and I would just go visit eight stores within those 2 hours.

Kendell: Are you serious? In two hours?

Bonnie: That’s amazing!

Marvin: I lived in Florida for some time where I would in the part that I was at, I wouldn’t really see many independents and then going to the city and there’s really just overwhelming number of independents, maybe as many as chains I would say, especially in certain parts of the city, but really enjoyed my time there. I mean, I learned a lot from some veterans, some people that just have so much experience, so much knowledge. But I wanted to work in technology, so I had applied to some jobs in SoHo, in Manhattan, and I don’t know if they still call it this, but they used to call it Silicon Alley back in the day. So, I applied to these jobs and they were in the shared space area. And one job I applied to, I went to interview and it was for something pertaining to EHR and doctor messaging and again it was shared space. So, I was like walking on my way out. This was in summer of 2015 and I heard someone say like PSAO, someone that was like they looked like they were 21 years old. And I was like, what? So, I stopped and what do you guys do? And they’re like, yeah, we offer this software that mostly independent pharmacies use to help their patients find Medicare plans. And I was like, this is perfect. I wanted to work in technology and software, and I never thought that my experience would be relevant in this space. So that’s how I ended up working there in 2015 and then subsequently that history, that timeline that it went through brought me here today where we’re talking about the elimination, at least about the retroactiveness elimination of DIR fees, where back then they were kind of new to the industry.

Kendell: Oh, wow.

Marvin: A full view almost beginning to now, again, not totally the end, but at least the retroactive nature of them.

Bonnie: Right. And as you know, we all know and would agree that patient care is the most important thing, above all, above the profitability and all of these things. So, we’ll just say that right out of the gate. But pharmacists, independent pharmacy is definitely doing everything they can to increase profitability, to maximize cash flow, all of these things. So, tell us about open enrollment and how independent pharmacies can maximize profitability with this program.

Marvin: Yeah, absolutely. And you make a great point, obviously you know, our customers are mutual customers, community independent pharmacies. Paramount is patient care. And I’ve read a McKinsey report where the majority of patients that are taking upwards of five, six, seven medications, they mostly fill at independents, not so at chains.

Bonnie: That’s good to know.

Marvin: Yeah, the folks that are sicker that need the most help, they’re going to independents and part of that is going to independents for open enrollment, right? For help with their Medicare plan options, which are confusing, confusing to me. Even at any job I’ve had, they’ve been confusing and I’ve had maybe three options. But we’re looking at some locations in the country have 30 to 40 plan options and it just becomes very difficult to navigate that landscape. So, with open enrollment, pharmacies are able to use our software, the government website, whatever tools they have available to them to find something that’s suitable for the patient’s specific drug profiles. So, pharmacy owners should set aside during open enrollment October 15th to December 7th, about like a one to two hour window each day for plan comparisons, again during open enrollment. And if that’s not possible, we recommend at the very least distribute some educational material to all your Medicare patients during RX pickups, vaccination appointments, or really any pharmacy visit this fall. Because again, patients talked about this is the Paramount is their health and their benefit in finding something that’s suitable for them. And they’re mostly not on the best plan for their current drug profile. They could have selected something when they turned 65, which maybe at that time was good for them. And their current situation. But things have changed, right? Their drug regimen is changing. Drug formularies, drug pricing, pharmacy networks, so they could be on something that maybe was ideal a few years ago, but that’s no longer the case. And pharmacies being able to manage that for patients, that’s looking at the patient holistically, looking at them beyond that prescription, but also that’s an opportunity to see where are there other gaps in coverage? Where is something that if I’m able to talk to patients about their drug coverage, what can I find out about the patient that’s important for them and driving home a positive patient experience.

Bonnie: So, I have a question about that. Is it normal for an independent pharmacy staff to jump into something like that during this open enrollment time on their own? Or is it something you normally sit back and wait to see if that patient asks you? You know what I mean when you say you take that hour a day or whatever, is that just kind of diving into reports and looking to see people that you can help or is it just helping those that kind of put their hand up and ask for help?

Marvin: Yeah, a combination of both. My opinion, you shouldn’t really wait for patients to come to you because they don’t really know. They don’t know that there is an opportunity for them to find something that’s better for them, something that’s cheaper, that’s going to cover all their medications. So, providing that education starts with the pharmacy, right? So, whether it’s having something on their website, an IVR message, an outbound call campaign, or text message campaign, it’s important for the pharmacy to initiate that awareness that then there is more patients who end up raising their hand come October 15.

Kendell: Obviously, pharmacy owners they’re some of the most busy people in the world. And next to people who work for wholesalers. If they can visit 18 pharmacies in 2 hours, I just found that out today. But anyway, is it worth their time? So, the impact on the patient we’ve spoken about that a little bit. The impact on the patient side, which is they can fill in coverage gaps and do what’s the best plan for them? In the current situation? Maybe not what was the best plan for them five years ago, but let’s say if a pharmacy who was on top of it with their client population and really spent that time that they needed, compared to one who just didn’t look at it at all, would there be a difference? How would it impact the pharmacist and their pharmacy?

Marvin: Yeah, absolutely. So, a major determinant of profitability for the following year is the actions that pharmacies take or don’t take during open enrollment. And that’s going to depend right on the demographics of the community. And when I was visiting certain stores in Manhattan, there’s some areas in the Upper East Side, upper West Side or areas of Brooklyn like Williamsburg, where this was less of an issue. But for the most part, especially because independents are serving those communities that need it the most. Some folks we had someone on a webinar last week, she had been doing plan comparisons for over ten years with us, and she has 65% Medicare. So, 65% you want to have some say in how those plans are going to reimburse you, right? Because or else you’re kind of leaving up the chance for someone else. Whether it’s a local broker that doesn’t know the pharmacy aspect of how these patients affect the pharmacy, doesn’t obviously know the drug interaction aspect of it, or the health plans themselves, who not that any of these stakeholders have bad intentions. Right. But they don’t understand the pharmacy and are certainly not looking out for the pharmacy. And a lot of what our experienced customers do is that they’re identifying plans that are suitable for the patient, of course, first and foremost, but also for the pharmacy. Because in examining patient costs that fluctuate across different plans, it’s important to recognize how pharmacy reimbursements operate in a similar fashion. And when we talk to pharmacies who are just starting to offer plan comparisons for the first time, or kind of thinking about it, they’ll often ask, what’s the best or worst plan for my pharmacy? And it’s not that straightforward. Unfortunately, there’s no magic bullet in selecting plans. There kind of was a few years ago, I guess, if you consider Indie Health, but that was pretty short-lived. Instead, pharmacies have to look at each specific patient’s profile and see how reimbursements vary and how they can find something that’s suitable for both, because they could be Plan A that’s reimbursing the pharmacy a lot less for the same medications in another pharmacy in another plan, and the patient would actually benefit from the plan that’s helping the pharmacy the most.

Bonnie: It’s a win-win.

Marvin: Right.

Bonnie: Can be.

Marvin: In my mind, that’s something, that’s how healthcare should work, right? Is that patients and providers are encouraged through incentives to act collaboratively. And that’s what we want to help facilitate and want to bring to the attention of pharmacies is that by not taking part in this conversation, someone else will do that and fill the gap and speak to the patients on their behalf.

Bonnie: And look at what a difference that is. Imagine walking into a big box where nobody’s going to have that conversation with you, especially on their own, versus walking into an independent where someone is taking you to the side, spending some time with you, comparing plans, saving you some money, possibly. Obviously, that is amazing for the growth of the pharmacy and retaining your patients. At least it would be for me.

Kendell: Yeah. It’s a huge value add. Huge value add.

Bonnie: Absolutely. And I would imagine that you could also I’m just thinking, if I was a pharmacy owner and I know in some areas this might not would work. But I would think even some community events, seminars, different things you could do, maybe to just have that conversation with the public, the community about this open enrollment period and things to think about and look about and tell them to come in, to schedule a time to speak, something of that nature could also be beneficial.

Marvin: Yeah, no, absolutely. And being more visible within the community as a resource for patients. Because you’ll often see, right, for instance, there’s a major plan that’s switching PBMs this year and they’re being very proactive in their communication and they’re sending letters and postcard and new ID cards to patients. And at times some of this communication may direct patients somewhere else. Right? So, if the pharmacy is known as a resource to helping patients with Medicare plan consultations, that patient is going to see a letter and going to be like, let me talk to my pharmacist. Right? They always help. They’re going to provide some clarity, whereas if they’re not seen as a resource for that, they may get a letter and just take it at face value and feel that they need to go elsewhere. And your point about retention, right? It’s going to be key no matter what. You want to keep that dispensing revenue and find where it’s more profitable. But as pharmacies are getting more and more into clinical services, we have to understand what that patient, especially that Medicare patient, is worth beyond their prescription revenue, right? If you look at who’s billing for clinical services, at Enliven Health we have a medical billing product and I work with that team on a regular basis, and I’ll ask them over the past twelve months, give me a snapshot, where are these claims coming from? What type of patient? And over three quarters of them of successful medical billing claims at the pharmacy are for Medicare-aged patients. So, if pharmacies are looking to pivot, and diversify their revenues, these patients are foundational. So, it’s important to make sure you keep them at your pharmacy because there’s more that you can do for them. And as pharmacies are getting deeper into clinical services, diabetic counseling, point of care testing, COVID vaccinations, flu vaccinations, RSV, these are really driven by Medicare-aged patients.

Bonnie: Nice.

Kendell: So, I know you all at Enliven Health. Y’all have been doing a great job of giving a lot of information about the DIR Fee Hangover 2024 and the impacts. Are you like us? We get questions about the DIR fees and what we expect almost on a daily basis. Are you hearing that a lot? And if so, what is your key message around how the Medicare, what they’re doing now, can help them with the 2024 hangover?

Marvin: Yeah, no, definitely. Even before Enliven Health, we were Amplicare. We used to always hold these webinars and like, hey, these are the changes that are coming next year. Let’s talk about how they’re going to affect different plans and potentially your patients that are on these plans. So, even more so this year, right? Because there’s an unknown on what these reimbursements will look like and how plans will adjust to the new environment. From what we’ve seen and heard from some customers, the reimbursements aren’t as bad as expected. Because I guess what was expected is that if the range of DIR is 9% to 13%, let’s say worst case scenario 13%, that they were going to take that worst case scenario and say, subtract that from your reimbursement rate and that is now your new reimbursement rate. But we’ve seen that with some plans they’re actually not going to that race to the bottom, this open enrollment. But transparency is key, or at least the pharmacy having some clarity on how will this affect them moving forward into next year. And something that is largely remained under the radar is how the DIR hangover is going to be a catalyst for a surge in PDP premiums. And this is likely going to lead to significant disruption during this open enrollment. The new DIR rule, of course, it’s intended to lower patient out-of-pocket cost for seniors by looking at the lowest possible drug cost when determining that copay. However, plans, and even CMS itself has said that, previously stated that a concern that removing these post point of sale concessions could result in higher premiums for patients. And if you consider that and also the change with the Inflation Reduction Act and what that’s going to create next year, with the issue of this being further exasperated? Because if you look at what’s coming next year with the IRA in 2024, is that the cost for patients in a catastrophic period will change in a catastrophic phase. So, previously patients had to pay 5%. Those patients are taking expensive medications would have to pay 5% of the cost of their drug. And that’s going to be eliminated for patients on Medicare plans. Previously the plans themselves had to pay 15%. Medicare paid the remaining 80. But now that 5% that patients were previously paying is getting moved to the health clients. So again, these changes along with the DIR rule change, they’re reasons that we’re expecting a pretty big increase. And we think that it’s likely that plans are going to seize this opportunity to get more patients into Medicare Advantage because those plans have more latitude to offer lower premiums and quite frankly, they are more profitable for the carriers.

Kendell: So, for a CPA, could you break down? So, someone I’m not helping anyone sign up for these programs. The big difference between the Medicare Advantage and the regular offerings that are out are what are the main differences and how would that impact the pharmacy if more are enrolled in the Medicare Advantage plan?

Marvin: Yeah, so PDP original Medicare, and when we’re looking at the Part D aspect of it, it’s just going to affect the patient’s drug coverage. So just the part D coverage. But when we look at Medicare Advantage, it takes into consideration hospital doctors and really bundles it all together.

Kendell: Got it.

Marvin: With original Medicare, a patient can go to any doctor that accepts Medicare. With Medicare Advantage, they do have additional benefits, like I said, zero dollar premiums. They’ve already had out-of-pocket limits previously, and some of them will offer dental coverage, hearing coverage, vision coverage, uber rides, gym memberships. They get really creative and flexible. What they can offer, so that’s attractive to people, but the downside is that they could have more latitude to deny coverage. And they have limited doctor networks, kind of like our private insurance does. We can’t just go to anyone. We have to make sure that they’re in networks. So that’s where a pharmacy wants to make sure that if they’re helping patients with finding a plan that is very well going to be good for them on the Medicare Advantage side, that the patient or they’re making sure that the health coverage right, the doctor coverage is still going to be in-network. And how it’s going to affect Pharmacies is that more and more patients will ask about these plans. Currently, we’re finally at 51% of Medicare beneficiaries are enrolled in Medicare Advantage. If we looked like three or four years ago, that was at about 20%. So that’s shifted significantly over the past few years.

Kendell: So, it seems like they have to have a holistic approach so they can’t even just look at, okay, how’s this going to affect their copay? They got to look at, okay, well, who’s your doctor too, and are they going to be in the network and really be strategic, which could add a lot of value. I can see if like you’re saying, Bonnie, if you are going to your local independent pharmacy and they’re helping you and they’re asking about your whole plan, I can see that that will help with the retention of the clients. So, this has been busy for you, webinar. I’ve seen your name on a lot of webinars. Are you doing any traveling this year? Are you just mostly doing the webinars from home? How’s things looking for you to just continue to work and spread the word and get the word out about what pharmacists can do from now to the end of the year?

Marvin: Yeah, it’s mostly been on webinars. The industry webinars we’ve had. And every Tuesday I have a training webinar for our new customers. And at this time of year, we’re getting people that want refreshers or they have new staff that are new to offering plan comparisons. So, yeah, every Tuesday at two Eastern, we have a training webinar for customers. But over the past few weeks, we’ve had a lot of those webinars that you’ve probably seen. Not much travel for me this year. So, I’m going to lose my status with Delta.

Kendell: Oh, no, see, you don’t get that private room. The door just opens up just enough for you to see people.

Marvin: Well, they changed the rules anyways and I probably wasn’t going to even qualify for next year. But a lot of this year has been looking at the roadmap, working with the product team, and just agreeing on a path forward for the product itself and how it’s going to develop. Because we have a side of it that is patient-facing, right? So, as folks become more comfortable with doing that self-serve and pharmacies have less time because they’re doing so much, we stand up a portal for patients that they can use their prescription number to log in, and they’ll see their full drug list already loaded and all their in-network plans at that particular pharmacy. But I’m looking forward to next year doing a lot more. But this year has been really just like, head down, what do we want this product to look like? How is it going to develop, especially with all these changes this year, right? We had to really buckle down and really determine where the market is going and how our customers want the products to develop.

Kendell: No, I can see that’d be big because if the more and more pharmacists are getting ahead of the open enrollment portion and staying on top of it and helping their patients, you need something to navigate that’s user-friendly and that’s easy. So, I can definitely see how important that is. Well, no, we covered quite a bit today. We appreciate you, Marvin, for jumping on and helping us. Bottom line. Key takeaways, Bonnie.

Bonnie: Alright, I got it. This has been very interesting, but definitely, again, kind of mentioned it earlier. Pharmacies, independent pharmacies especially, always looking for a way to set themselves apart, to do what they can to improve patient care. And this is just another way, another offering, in my opinion, of something that they can do to help their patients. And again, like I said, a win-win for the patient and for the pharmacy to improve on both sides of that. So, excited to see.

Kendell: And I have one pharmacy that I work with every year around this time of year. They’re like, I’m not going to be answering any emails or anything because it’s open enrollment. And there’s two that work there. They’re sisters, and one is a pharmacist and one is not. But the one who’s not a pharmacist, she handles all she’s doing open enrollment this time of year.

Bonnie: Which is so smart.

Kendell: So smart. And it’s funny because I’m like, I work with a lot of pharmacies, and you’re the only one that’s completely unavailable that time of the year. But I could see that this being a wave of the future. So, my bottom line is that start to work on the processes now because it might be more and more important next year or the year after. You don’t know what’s going to happen. So, I think you got to start getting your client base ready for it and start working on it now because it’s going to impact for pharmacies. We don’t know how, but I can imagine having a big impact in the future. And last but not least, Marvin bottom line, what’s your takeaway, key takeaway for this podcast?

Marvin: Yeah, look, absolutely, patients need help. They need help figuring this out. These plans, this Medicare system is confusing, and someone that they’re able to see on at least a monthly basis is, in my opinion, best equipped to guide them through that process. On the pharmacy side of things, aside from dropping Medicare altogether or just switching to LTC contracts, this is a way pharmacies could have some say and take proactive measures in what their profitability, what their revenues and reimbursements are going to look like next year. And again, as pharmacies are getting more into clinical services, you have to make sure you’re keeping these patients because they’re the ones that are going to, Medicare patients are the ones that are bringing you these other sources of revenue on the clinical side.

Kendell: Nice. Nice. Well, thank you again. We appreciate it. And that’s the bottom line. Thank you, everyone, for listening. Please subscribe.

Bonnie: Thank you. Have a great day.

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