Early next year, the Centers for Medicare and Medicaid Services (CMS) will remove the application of retroactive DIR fees and move DIR fees to the point of sale instead. The major issues with the DIR fees, which are paid by pharmacies to pharmacy benefit managers, are the fact that they drive up the costs of prescriptions for patients and delay reimbursement of care to the pharmacies.
Now, a brand new issue will arise in early 2024 – namely, pharmacies will be facing a DIR “cliff” where they will be required to pay double DIR fees: one large chunk retroactively at the end of 2023 and point-of-sale DIR fees beginning January 1, 2024.
The rapid evolution and advancement of artificial intelligence (AI) have recently positioned it as a groundbreaking tool for transforming healthcare. With its problem-solving capabilities, enhanced processes, and extensive knowledge base, AI possesses tremendous potential to revolutionize the industry. It even has the potential to be an advantage to pharmacies once the change in DIR fees is put into effect.
We recently spoke with pharmacy market expert and CEO at DocStation, Samm Anderegg, to learn more about how pharmacies can use AI to their advantage after the new rules surrounding DIR fees are implemented next year.
Why is AI adoption so critical for pharmacies once the DIR fee changes take effect?
Samm Anderegg, CEO at DocStation: I would argue that pharmacies, more than any other healthcare professionals, are being asked to do more with less. The forthcoming DIR cliff, happening January 1st will be yet another regulatory change demanding pharmacies to delve deeper and find ways to adapt. In this context, the adoption of new technology and automation is more critical than ever for pharmacies. We have to find ways to make our administrative processes more efficient to free up time to focus on revenue-generating activities.
Pharmacies can leverage AI to both automate workflows and unlock new revenue streams. Within our own organization, we are actively using AI to streamline our software development processes. We have implemented AI within our platform to help pharmacies generate claims automatically based on services rendered. For example, DocStations’ AI-powered Auto-Billing empowers pharmacies to efficiently bill to the medical benefit with maximum payout confidence, increasing revenue potential as well as reducing administrative burden by 80%.
What are some AI best practices to improve the costs of prescriptions and increase pharmacy profits?
Samm Anderegg: I would challenge you on this question. My opinion, and that of others in the industry, is that the ship has sailed on the prescription side of the pharmacy business. Dispensing medications is basically a “loss leader” at this point, but a great way to drive clinical services revenue for pharmacies.
Think about it. Pharmacies possess a loyal clientele, constantly seeking their guidance and relying on their expertise to maximize the benefits of their medications. That includes helping them find the most effective therapies at the lowest costs.
What’s truly intriguing is the potential of harnessing AI for formulary optimization. Let’s say a patient is currently prescribed a non-preferred drug as per their pharmacy benefit. By utilizing formulary data provided by the plan, we can identify a therapeutic equivalent that offers the lowest co-pay or cost-share for the patient. This approach aligns everyone’s interests seamlessly. In this scenario, the pharmacy would be paid by the payer to make the formulary switch, the payer saves money on pharmacy spend, and the patient spends less out-of-pocket. That’s a slam dunk right there.
What are some of the barriers/challenges pharmacies will face when adopting AI solutions?
Samm Anderegg: I think healthcare as a whole faces challenges in adopting AI. The potential of this technology is limitless, with boundless use cases and applications waiting to be explored in the realms of healthcare and pharmacy. The biggest challenge, in my opinion, is implementing solutions in a way that actually makes things faster, easier, and better for providers and, ultimately, for patients. This comes down to workflow.
For example, pharmacies may operate a prescription business using one core pharmacy management system. That’s an opportunity. Now, I can work with my vendor to implement automation and experience the benefit of AI-powered features that make my job easier.
The challenge here for many technology companies in our industry is that the technology itself is dated. A lot of software runs locally on a server installed at the pharmacy. It’s harder to push updates than if it were, say, running on the cloud. It’s tough to find engineers and product people with knowledge of machine learning and artificial intelligence. And the ones that do understand AI and machine learning are being scooped up like crazy by OpenAI, Google, Microsoft, and Apple.
It’s going to be tough for pharmacies to keep track of all the technology advancements and navigate the jargon of companies’ marketing features that use AI. What it comes down to is this: Does this solution make my life easier? Does it grow my revenue? Do my staff enjoy using it?
Finding trusted peers and partners to help you navigate through all this will be critical.
What opportunities will AI offer the pharmaceutical industry to make further progress concerning PBMs and their DIR fees?
Samm Anderegg: There’s only so much we can do to combat shady PBM practices and DIR fees. But I can say this: We’ve been playing defense for far too long. We need to start playing offense and look to alternative revenue streams that unshackle pharmacies from PBMs and put us, the healthcare providers, back in the driver’s seat.
I think that shift to offense starts with understanding what our differentiators are as providers. And particularly, as providers who are ubiquitous in rural and underserved communities across the country. Using AI, we can be in a position to work directly with payers and support pharmaceutical manufacturers on quality and cost initiatives that drive ROI for the entire healthcare system writ large.
About Samm Anderegg
Samm Anderegg, PharmD, MS is Chief Executive Officer at DocStation. A pharmacist by training, Dr. Anderegg started his tech career in consulting. He has served as an advisor for leading national pharmacy associations and trade groups, building data standards for interoperability and quality measure reporting now used by the Centers for Medicare & Medicaid Services. With more than a decade of business and leadership inside and outside of healthcare, Samm leads a team of talented executives to guide strategy to achieve the overall vision of our company.