Pharmacy Price Concessions After 2024: What Changed and What DIR Still Measures

The 2024 pharmacy concessions rule requires Medicare Part D plans to include pharmacy DIR fees in the negotiated price at the counter, including those collected through a pharmacy benefit manager. That price must reflect the pharmacy’s lowest possible reimbursement under its contract. The later payment and reporting trail still matters. If you work in a pharmacy, PBM or plan sponsor and see a concession in one calculation but missing from another, the connection between those records is where we start.

What Changed in DIR Fees in 2024?

Starting January 1, 2024, Part D plans had to include all pharmacy price concessions, including PBM-collected DIR fees, in a negotiated price reflecting the pharmacy’s lowest possible reimbursement. The Centers for Medicare & Medicaid Services adopted that change in its May 2022 final rule, replacing an exception that had allowed certain contingent adjustments to stay outside the price shown at the counter.

Before the change, a sponsor could exclude a pharmacy payment adjustment that could not reasonably be determined at the point of sale. A performance assessment covering a later period could therefore reduce the pharmacy’s payment after dispensing. The agency said the exception had spread beyond what it originally intended as plans and pharmacy benefit managers shifted toward performance-based arrangements. Its data showed pharmacy price concessions, net of incentive payments, grew more than 107,400 percent between 2010 and 2020.

The new calculation starts with the lowest reimbursement the pharmacy could receive for the drug under its contract, including dispensing fees and all pharmacy concessions. In a performance arrangement, that means assuming the pharmacy receives the lowest possible performance score. Additional contingent incentives that increase reimbursement stay outside that initial price. In comments on the rule, supporters of performance arrangements cited generic dispensing rates and medication adherence as targets.

This changes the price used to calculate beneficiary cost sharing. Under the earlier arrangement, the patient could pay a share of a higher price while a later pharmacy concession reduced the plan’s cost. The Centers for Medicare & Medicaid Services required the pharmacy discount to enter the calculation while the patient was still at the counter.

What Does DIR Still Measure After 2024?

DIR means direct and indirect remuneration, a broader category than pharmacy fees. It includes manufacturer rebates and other amounts that reduce a Part D plan’s drug costs. The agency uses DIR in calculating final Medicare payments to plans. Moving pharmacy concessions into the negotiated price changed where the first calculation happens. Annual reporting still accounts for the eventual pharmacy payment.

The mechanics are easiest to see in the agency’s own illustration. A hypothetical contract starts with a $100 pharmacy payment, reduces it to $95 for poor performance, or increases it to $101 for high performance. Under the new definition, the lowest of those amounts supplies the reported negotiated price in every scenario. If the pharmacy ultimately receives more, the difference enters annual reporting as negative DIR.

The agency’s instructions for service year 2024, issued in April 2025, make that reconciliation explicit. DIR #8 records the maximum concession reported in the Prescription Drug Event’s Estimated Remuneration at POS Amount field. DIR #9 records the difference between negotiated price and final pharmacy reimbursement as a negative amount. Together, the entries account for actual pharmacy remuneration.

That is why a lower national DIR total can be easy to misread. MedPAC’s July 2026 Data Book reports about $92 billion in DIR for 2023 and about $79 billion for 2024. It attributes the break to pharmacy concessions moving into point-of-sale prices. Reading that decline as an equal drop in manufacturer rebates, or a rise in pharmacy profits, confuses the reporting change with a change in who kept the money.

Pharmacy Concessions and Manufacturer Rebates Follow Different Paths

A pharmacy concession reduces what the pharmacy receives. A manufacturer rebate comes from the drug manufacturer. A positive pharmacy incentive increases what the pharmacy ultimately receives.

The Centers for Medicare & Medicaid Services expressly said the new negotiated-price definition requires pharmacy concessions but does not require inclusion of manufacturer rebates. A plan can pass non-pharmacy concessions through at the point of sale. The pharmacy-concession rule itself leaves that choice separate.

A contract’s pass-through promise answers another question: which receipts the PBM owes its customer. In Minnesota’s Caremark agreement, the promise covers 100% of defined rebates received by the PBM or an affiliate. The definition excludes specified mail and specialty purchasing discounts and specialty service revenue. The percentage only makes sense beside those exclusions. What the sponsor reports to Medicare can include money the pharmacy benefit manager kept.

Service fees need the same attention to what actually moved. The final rule says that administrative charges deducted from pharmacy payments for Part D drugs are price concessions, even when the deductions are not calculated claim by claim. For concessions calculated across multiple claims, the sponsor must use a method to attribute them to individual claims.

Manufacturer service fees have their own reporting treatment. The annual DIR instructions for 2022 and 2023 distinguish qualifying fees for actual services at fair market value from amounts above that value reported as DIR. The agreement, service and payment matter together. Renaming a deduction does not explain what it bought.

Why Could the Change Squeeze Pharmacy Cash Flow?

The transition could bring earlier-period pharmacy adjustments due while new prescriptions already carried lower point-of-sale prices. The Centers for Medicare & Medicaid Services acknowledged that timing problem in the final rule and expected the same concerns to apply when implementation moved to the beginning of 2024.

The remittance date shows when cash moved. The adjustment period connects that money to the prescriptions and performance calculation behind it. We look at both when comparing a pharmacy’s payment with the sponsor’s report.

Knowing the minimum reimbursement earlier can improve predictability. The rule left sponsors free to negotiate payment arrangements with network pharmacies. We would not confuse a clearer minimum with a better margin.

Are Clawbacks and DIR the Same Thing?

No. A clawback describes money recovered from a pharmacy. Its treatment depends on why the money came back. For an insider, the question is whether the sponsor’s records reflect that recovery in the right place.

Under the agency’s post-point-of-sale adjustment guidance, recovery for an undispensed drug or duplicate claim belongs in the Prescription Drug Event correction history. A pharmacy concession follows the price-concession reporting path.

A remittance shows that the pharmacy benefit manager took money back. The claim, correction history and concession reports show how the sponsor accounted for it. We compare those records because the deduction’s label alone does not tell us where the money went.

The Records Behind a Pharmacy DIR Amount

The useful comparison connects the contract, the pharmacy payment and the sponsor’s report for the same transactions. The agency’s PDE data guide explains that a Prescription Drug Event is a summary extract using standard fields. It is distinct from the individual claim transaction.

For a pharmacy or PBM insider, the records answer successive questions:

• The network agreement and fee schedule establish the payment formula and the period it covers.
• The claim response and final remittance show the negotiated price, adjustments and eventual pharmacy reimbursement.
• The adjustment detail and reconciliation workbook explain which prescriptions produced a claim-level deduction or an amount assessed across claims.
• The PDE, correction history and annual DIR entries show how the sponsor represented the transaction to Medicare.
• Manufacturer or aggregator receipts, service agreements and allocations show where separate rebate or fee money went.

Different teams may hold different parts. Pharmacy staff see dispensing and remittances. PBM finance staff may see contract reconciliation calculations and manufacturer receipts. Sponsor reporting staff see the extracts, certifications and reconciliation. We work with the connection between those views: what the contract required, how the payment changed and what the government was told.

When the Fee Label or Another Account Hides the Concession

The Elixir and Caremark cases show why the inquiry has to reach beyond the pharmacy’s paid claim. One concerned manufacturer rebates classified as service fees. The other concerned pharmacy pricing that reduced an obligation on a different book of business.

Elixir’s Retained Manufacturer Rebates

Rite Aid and Elixir Insurance Company agreed to a $101 million fixed payment to resolve allegations of falsely reporting retained manufacturer rebates. The government’s allegations covered conduct from 2014 through 2020. Elixir’s annual DIR reports allegedly classified retained rebates as bona fide service fees, excluding the money from reported concessions.

The whistleblower’s complaint calls the rebate-retaining company EPS and makes the service question concrete:

The settlement agreement describes alleged retention without manufacturers’ knowledge and fees that failed the governing service-fee definition. Service fees without the services. That is the allegation behind the label. The records that matter connect the manufacturer agreement, receipt, retained amount, claimed service and sponsor report.

Caremark’s Offset Across Commercial and Part D Business

An Aetna Medicare actuary brought the whistleblower case against Caremark, and the government declined to join. In June 2025 findings concerning Caremark, the court examined generic effective-rate agreements combining commercial and Part D purchases at Walgreens and Rite Aid. Higher Part D pharmacy payments reduced Caremark’s commercial reconciliation obligation. The court treated those offsets as reportable price concessions even though no separate refund check returned the money.

The court entered a judgment of $289,873,500 against three Caremark operating companies. We see the absurdity in the court’s findings: paying a pharmacy more on the Medicare side meant Caremark owed less on its commercial business. Looking only for a refund check would miss it.

For an insider, the common question is where the value went after the first payment. We examine the fee classification, offset or later adjustment alongside what the sponsor reported. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know Where the Adjustment Went

If you can connect a pharmacy deduction, retained rebate or cross-book offset to what a Part D sponsor reported, speak with our PBM whistleblower experts about what you see. We work beside you to build your strongest PBM whistleblower case around the money, the reporting and the decisions behind both. We bring in PBM whistleblower lawyers who understand Part D payment records and stay alongside you through the process.