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Elevate Provider Network fights to prohibit GER, BER, and DIR Recoupments

By Peter Kounelis, Beth Lea, Shaun Henry, Tracy Armstrong

Contractual terms mandating direct and indirect remuneration (DIR) fees, as well as generic effective rate (GER) and brand effective rate (BER) recoupments, can turn profitable prescriptions into financial losses for an independent pharmacy.As a matter of survival, community pharmacies should look for ways to diminish the impact of these and other post-adjudication recoupments.

DIR (Direct and indirect remuneration) fees, instituted by pharmacy benefit managers (PBMs) that represent payers, are another form of post-adjudication recoupments that deduct money from reimbursement for Medicare Part D prescriptions — sometimes months after initial point-of-sale transactions. The Centers for Medicare and Medicaid Services (CMS) reports that DIR fees skyrocketed by 107,400 percent between 2010 and 2020.1

With similar effect, PBMs set contracted effective rates for generic and brand-name drugs as a percentage discount from average wholesale price (AWP), measured across network pharmacies, but often not reflective of reimbursement at individual stores. Depending on the PBM’s performance and the PSAO pharmacies’ results, PBMs may claim a GER or BER “clawback" at the end of a measurement period (usually annual) when aggregate reimbursement to pharmacies falls below the contracted effective rate (PSAO’s pharmacies were paid more in the aggregate than the contracted effective rates).

When a PBM assesses DIR fees or GER/BER clawbacks, drug products with high AWPs (e.g., specialty and dermatological medications) may drive large recoupments from individual pharmacy payments.

What can you do? The call to action is three-fold: Recognize the problem, advocate for change, and align with a pharmacy services administrative organization (PSAO) that represents your interests at the state and federal level.

The problem: One size does not fit all

PBMs agreed to contracted effective rates with chain drugstores more than 20 years ago as a way of managing the reimbursement. Contracted effective rate arrangements works for chain pharmacies with variability in reimbursement among dispersed pharmacies under common ownership. However, the widely applied variable-rate reimbursement model does not fit dispersed independently owned pharmacies’ cost structures, for which reimbursement and cost structures can differ greatly from one store to another.

Advocacy: Inform your legislators

The best way to explain and demonstrate the challenges presented by PBM post-adjudication recoupments is to invite local, state, and federal officials for an onsite visit to your pharmacy. The National Community Pharmacists Association has designated August as the Month of Action, a perfect time to host legislators in your store as many will be working in-district/state during congressional recess. Plan to discuss the financial pain points you face under current reimbursement contracts and emphasize what changes must be made for your pharmacy to stay in business and continue serving patients in your community.

Also urge support for the Pharmacy Benefit Manager Transparency Act of 2022 (S. 4293), sponsored by Senators Maria Cantwell (D-WA) and Chuck Grassley (R- IA). The act empowers the Federal Trade Commission to increase drug pricing transparency and hold PBMs accountable for practices that drive up the costs of prescription drugs at the expense of patients.

Additionally, ask legislators to back the Equitable Community Access to Pharmacy Services Act (H.R. 7213), sponsored by Representatives Ron Kind (D- WI), Earl Carter (R-GA), Nanette Barragan (D-CA) and David McKinley (R-WV). The act recognizes pharmacists' critical role in keeping communities safe and healthy by providing essential services.

Our Independent Voice, an advocacy website for independent pharmacy, put together a resource with links that make it easy to contact your legislators on these issues.

PSAO partnership: Look for common ground

Despite the top seven PBMs managing over 90 percent of prescription volume with a payment component coming from Medicare, Medicaid or commercial insurance,2 independent pharmacies have opportunities to gain ground against unwanted reimbursement provisions. Successful pushback has come in a variety of forms:

  • Elevate Provider Network, the PSAO for over 5,000 community pharmacies, has advocated at the local, state, and national level to prohibit GER and BER “clawbacks” and establish more equitable and transparent contracts. Further, Elevate extensively validates claims data used by PBMs to calculate the financial liability owed under the agreement and actively challenges PBMs where appropriate.
  • The 2020 Supreme Court ruling in Rutledge v. PCMA allows states to extend the scope of their regulations of PBMs.3 Following the decision, state laws in Louisiana, Maryland, Michigan, New Jersey, and Texas have led the way in moderating the impact of GER/BER recoupments.
  • DIR reforms are included in a policy rule finalized by CMS in April 2022, with provisions affecting DIR fees set to take effect in January 2024. The new rule prohibits pharmacy DIR fees from being applied after point-of-sale transactions and estimates that out-of-pocket expenses for beneficiaries will be reduced by $21.3 billion over 10 years.4
Moving forward, Elevate Provider Network will continue to advocate for elimination of contractual recoupments in their many forms. In tandem, Elevate's contracting strategy will deal with current clawback attempts by scrutinizing, validating, contesting, and mitigating them to minimize their impact on Elevate pharmacies.

Elevate saves the average independent pharmacy member tens of thousands of dollars per year.*

*Based on Elevate claims data for an average pharmacy filling 5,000 claims per month.


  1. National Association of Chain Drug Stores. DIR Fees.
  2. National Association of Chain Drug Stores. DIR Performance and the Impact on Pharmacies Serving Medicare Part D Beneficiaries.
  3. U.S. Supreme Court. Rutledge v. Pharmaceutical Care Management Association.
  4. Centers for Medicare and Medicaid Services. Medicare Program, Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Benefit Programs. 09375.pdf

About The Authors

Peter Kounelis
Vice President, Managed Care Contracting
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Beth Lea
National Director, Managed Care
Elevate Provider Network
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