Month: September 2015

Pharmacy Games

Recently, I have spent some time trying to lend some understanding of the inner workings of the pharmacy world to a financial reporter interested in DIR fees (among other things). The most recent discussion with this reporter left me thinking about how far the profession of pharmacy has been corrupted by outside interests. Pharmacy today is a lot like a game of Russian Roulette.

Narrow Networks and Choice

This blog has discussed the benefits and difficulties facing pharmacy with respect to access to lives. Consider a pharmacy invited to participate in a narrow network. The pharmacy has to make a decision on their participation. The idea with narrow networks is that not every pharmacy will be invited to participate, creating an illusion of exclusivity and access to the patient group represented by the narrow network. This exclusivity comes at a price: lower reimbursement to the pharmacy for servicing these patients.

If a pharmacy elects to participate in the network, they are forfeiting the current level of reimbursement for the services (medications) they provide and accepting a much more aggressive (lower) reimbursement in its place. The carrot, as it were, is the potential of this exclusivity to drive patients to come to your pharmacy. If a pharmacy rejects the lower reimbursement, the pharmacy risks losing most or even all of the patients (even current customers) in the narrow network. If a pharmacy elects not to participate, the patients then have to make a decision: pay more at their pharmacy, or switch pharmacies to one that is preferred by their plan. Make no mistake, many, or even all, patients will eventually succumb to the lure of a lower copay and leave the non-participating pharmacy. A preferred network is, metaphorically speaking, the Pharmacy Benefit Manager (PBM) placing a gun to the head of the pharmacy. Choose between lower reimbursement, or fewer patients (customers). 

The wild card in this choice is the reimbursement the pharmacy is going to receive. Reductions in the contract are usually specified as the lesser of either Average Wholesale Price (AWP) minus a percentage or Maximum Allowable Cost (MAC). This lower reimbursement may also be accompanied by Direct and Indirect Remuneration (DIR fees) taken from the remittance advice (withheld from the payment at a later date).

While a pharmacy might be able to estimate the impact of AWP – % or a simple DIR fee, without a clear definition of the MAC price (a price that the PBM considers to be a trade secret), there is no real way to know how participation in the narrow network will actually effect the bottom line before signing up.

Access to Lives

An optimistic pharmacy, chain, or PSAO might look at the numbers and decide to participate, hedging that with the published reimbursement rates, the pharmacy will maintain a profitable margin. The pharmacy will have to find other ways to generate revenue using the “access to lives” it has negotiated. Independent pharmacies using Pharmacy Service Administrative  Organizations (PSAOs) heard exactly this logic when preferred network contracts were signed for the 2015 year. Large chains undoubtedly made similar decisions.

A pessimistic pharmacy (or chain or PSAO) might elect to not sign the contract. In the end, they undoubtedly will lose customers. This is revenue that drops from the bottom line. And if the customer doesn’t come into the store, you cannot offer them services or other items to purchase.

The real question for any pharmacy, chain, or PSAO, is which chamber the bullet is in when the pharmacy pulls the trigger on the contract. And each year, the chamber rotates around, so if a pharmacy survived 2015 with a preferred network, it has to pull the trigger again in 2016.

Even a large chain (like WalMart), with some very smart lawyers and accountants, appear to have miscalculated for 2015. WalMart’s recent, lower than forecast financial disclosure blame, in part, pharmacy reimbursement for lower than expected profits. It is not an accident; WalMart participates more narrow network contracts than any other pharmacy chain.

Two Edged Sword Revisited

Earlier this year, I wrote about access to lives (see A Two Edged Sword), and in the end I wrote:

I don’t like the current landscape of pharmacy and healthcare, and it is going to take hard work to change it. Giving up access, to me, is simply wrong.   Micheal Lefoeuf once said “Every company’s greatest assets are its customers, because without customers there is no company.”  Access to our patients is our lifeline!

Even given the stark reality that the past 6 months have revealed (with reimbursement in some networks well below break-even), I am sticking with my previous assertion. The difference today, though, is the realization that one cannot necessarily generate enough new revenue to cover the losses realized by participation in some of these narrow networks. In order for my pharmacy to continue to service our patients, we are going to have to optimize every aspect of our care. This will be difficult to do while maintaining high quality service. The goal now is to survive long enough to see the end game, where pharmacy and pharmacists are reimbursed not for product, but for the value they provide to the system.

That time is coming, of this I am certain. A significant number of pharmacies will close before that time, and pharmacists not performing clinical services and adding value will find themselves in a difficult position. The pharmacy transformation is coming, and I am certain that we are ready. Ask yourself what you need to be doing to be ready in your practice, and work to make every encounter count.

Access to Lives and the Biggest Big Box Store

Walmart has long been a polarizing force in pharmacy. It is best known to pharmacists as the innovator of the prescription loss-leader. The goal of the loss-leader prescription (the $4 program) was to draw customers into Walmart store in order to drive non-Rx sales. Recently, Walmart’s financials were revealed, and the results were poorer than expected. Pharmacist frustrated with these tactics may have cracked a secret smile upon hearing these financial results. Analysis of these financial results implicated poorer than expected pharmacy reimbursement, at least in part, was responsible.

For an excellent analysis of the impact of preferred networks (and how Walmart may have miscalculated the benefits of these closed networks), follow this link to “Walmart Wrestles with the Reality of Preferred Networks” at AccessRx America

The DIR and the Pharmacy Rebate

Recently, I was discussing DIR fees with a journalist writing a story about DIR fees for a national financial publication. Among the things we discussed was one PBM’s description of the reason DIR fees exist today: to pass a part of the rebate savings pharmacies receive back to the payor. This is not a quote, of course, but the implication is clear: pharmacies are making money on rebates and some of that should be shared with the payor.

While I disagree with the sentiment above, I understand the payor’s desire to lower its costs. With that said, I figured it was time to go back to some actual numbers and see how our DIR fees compare to our rebates.

Methodology

The rebates are available to pharmacy are product specific. For a given generic drug, there may or may not be a rebatable product available to the pharmacy. Sometimes, the rebatable product is actually more expensive (after rebates are accounted for) than another product. Rebates for the purposes of this analysis were calculated based on the actual rebate available for the product submitted to the PBM. If a cheaper, non-rebatable product was submitted, no rebate was calculated. Pharmacies do not generally receive rebates on brand name drugs.

There are two flavors of DIR fees currently being used by PBMs: Flat Fee DIRs and what I refer to as voodoo DIR fees. The former is specified as either a percent of a claim or is a flat fee known to both parties before the transaction takes place. The latter is calculated by the PBM using a variety of variables and the pharmacy generally has no way to know what the DIR fee being assessed for a prescription is until much later.

A two week period of claims assessed a Flat Fee DIR fees for our pharmacy was analyzed to compare the total DIR fees returned to the payor. For each claim, the estimated rebate (assuming the rebate requirements were fully met) was calculated using on the after-rebate NET price per unit (tablet / capsule etc).  The sum of both the DIR fees and the per-claim matched rebates received by the pharmacy was calculated.

For the voodoo DIR fees, it was necessary to wait for a quarterly report compiled by our PSAO in order to match a DIR fee to each claim. This report represented DIR fees for 3 months. The sum of these DIR fees was then calculated along with the corresponding claim-matched rebates estimate.

Results: Flat Fee DIRs

There were 201 claims processed with Flat Fee DIR Fees in the most current remittance for our pharmacy. The total DIR fees withheld by the PBM to pass along to the payor was $546.51. After applying rebates to the products eligible for rebates, the total rebate the pharmacy will eventually see for these prescriptions was $545.39.

Where things get interesting is when one looks at brand name drugs. The pharmacy receives no rebates for these (though the PBM may actually receive a rebate from the manufacturer for having the medication on formulary). The pharmacy was still assessed a DIR fee on many brand name drugs. Of the 201 claims, 26 were brand name drugs without pharmacy rebates. 415.74 in DIR fees were assessed to the pharmacy on these non-rebatable claims.

I will let that sink in for a moment. For the period analyzed, all of the rebates that would eventually be received by the pharmacy for the drugs dispensed was wiped out by the DIR fees. Remember, the rebate won’t actually hit the pharmacy’s bank account for several months, so this is a real hit to the pharmacy’s cash flow.

As a point of reference, these 201 claims generated only $611.59 in profit for the pharmacy after DIR fees were subtracted and the rebate check was received. That is an anemic $3.04 per prescription.

Results: voodoo DIRs

Because this report represented a larger time span, there were 805 claims compiled. The total of the DIR fees withheld (which includes any negative DIR fees that are returned to the pharmacy because the MAC price was even more aggressive than the contract allows) was $12,512.23. The rebates that these sales will reap the pharmacy came in at $3985.88, It does not take a rocket scientist to figure out that the DIR fees not only have eliminated the rebates the pharmacy would eventually receive, but also have dragged the pharmacy’s bottom line significantly into the red. For reference, the 805 claims LOST the pharmacy $5741.55 (an average loss of $7.13 per prescription). Like the last DIR analysis done here, most of this was due to several drugs significantly underwater. Note that the PBM has not addressed these underwater claims despite 6 months worth of regular reporting done by our PSAO. 

Like the Flat Fee DIR fees above, the voodoo DIR fees also assessed DIR fees on brand name drugs. Brand Name drug claims were limited to only 60 claims and represented only $450.99.

Conclusions

In order to be included in the preferred networks, pharmacies have had to agree to very aggressive terms. The MAC Pricing being used today leaves very little profit to be made by the pharmacy on the product. In recent years, the primary driver for profit for pharmacies has been rebates. With the advent of DIR fees, rebates are effectively being completely absorbed in DIR fees as “provider savings,” leaving pharmacies with little profit to cover overhead, salaries, and a reasonable profit on their investment.

I have no problem with rationalizing DIR fees existence on the existence of pharmacy rebates. Unfortunately, just like MAC price schedules, the PBM’s grasp on reality appears to be questionable. The PBMs severely underestimate real-world acquisition prices, and their MAC prices are too often below actual the pharmacy’s acquisition price. Likewise, the PBMs appear to be severely overestimating the rebates pharmacies generate.

Post Script

At the end of my conversation with the reporter, he asked me if there was anything that I would ask the PBM (that he was scheduled to talk to next) about DIR fees. That answer was simple: Pharmacy sacrificing their own profits to generate savings to the payor through the acceptance of contracts with DIR fees. What is the PBM industry (as one of the more profitable industries in all of health care) sacrificing to provide savings to the payor? I doubt that question will get a serious answer, though.

“If it’s right for the patient, then its right for pharmacy”

“If it’s rights for the patient, then its right for pharmacy”.  I first heard this statement, or something very similar to this from an esteemed colleague, Bob Osterhaus.  Over the years, I have cited this statement in many venues convincing pharmacists to always put the patient first and do the “right thing” to ensure that they are achieving therapeutic outcomes through safe and effective medications.  This phrase was paramount to my business partner (Mike Deninger) and I as we re-engineered our practice to provide continuous medication monitoring (CMM) for all of our patients.   To put it simply, CMM was a process that we developed and implemented so that we became accountable to our patients.  Filling a prescription becomes more than just a dispensing process, but rather a meaningful encounter with the patient whereby pharmacists are reviewing the patients medications, identifying and resolving drug therapy problems, communicating with patients and prescribers, and documenting their activities in real time.  We firmly believed that this was the RIGHT thing to do for patients.

Since implementing CMM, our pharmacists have improved their efficiencies in their patient care processes so much so that we are documenting approximately 3000 interventions every month.  But how did we get there?  This did require an investment of time, money, and resources.  Early one Mike and I realized that CMM can only be done if there is an effective and efficient documentation system.  Initially we developed a documentation system that allowed pharmacist to do final verification along with patient SOAP notes and we called it our “Quick Clinical” system.  Eventually, it became a comprehensive documentation tool that allows our pharmacist to provide final verification, create on-the-run interventions, identify potential drug therapy problems, and write SOAP notes.  This clinical documentation system is now called PharmClin and we have filed for a patent to the United States Patent and Trademark Office (USPTO).  This system has allowed our pharmacists to better manage our patients drug therapy.  It was the RIGHT thing to do for our patients.

We also hired more pharmacists to ensure that we could provide other clinical services in addition to CMM.  These services include immunizations, medication therapy management (MTM), consulting services for hospice and long term care, medication adherence program (MAP), durable medical equipment (DME) consults, medication synchronization, and health screening/promotion.  We invested in technology (e.g. Parata Pass and Parata Max), participated in the new practice model (tech-check-tech program) initiated in our state, and fully engaged in medication synchronization with the sole purpose to make sure pharmacists were freed up to provide patient clinical services.  Although a sizable investment, it is the RIGHT thing to do for our patients.

Mike and I fully understand that we have a sizable financial investment in our pharmacies, but we firmly believe that we have put our pharmacy on the right path for a bright future.  It is not without concerns, fear, or doubts.  But then I am reminded of the statement by Bob Osterhaus “If it’s right for the patient, it’s right for pharmacy”.  Then I know that we have done the RIGHT thing because our patients are benefitting.

It is time for all of us to critically evaluate our practices to determine if we are doing the “RIGHT” things for our patients.  It begins by creating efficiencies in the practice so that pharmacists are freed up to provide clinical services.  Dispensing should be technician driven.  Medication synchronization services should be the standard of community pharmacy practice as it improves dispensing efficiencies, inventory management, and the provision of clinical services.  Pharmacists need to become “interventionist” by identifying drug therapy problems, providing clinical recommendations to patients and/or prescribers, and documenting their clinical activities.  Pharmacists need to make sure they are practicing to the level of their degree.  If they are uncomfortable and incapable of doing this, then they need remedial education/clinical training.  Obviously this is not easy, nor can it be done without some type of investment (time, money, or resources).  But, ultimately, it is not about what is best for us, but rather what is RIGHT for the patient!

Being Proactive

Previously, I discussed complacency as it relates to pharmacy practice. But this is not the only challenge a dedicated pharmacist faces. Even a great interventionist struggles with being reactive from time to time.

Reactive |rēˈaktiv|
adjective: acting in response to a situation rather than creating or controlling it: 

To be fair, there is no way that anyone can avoid being reactive all of the time. Pharmacy is littered with opportunities for situations to arise that the pharmacist cannot reasonably predict and properly prepare. A common example might be receiving prescription electronically for a patient you have never seen before moments before (or even as) the patient walks through your door.

Strive for Proactive

Our pharmacy regularly struggles with this exact type of situation. In one regard, it is nice to be the place many providers refer patients. But a poorly handled referral  (because you were not prepared) does nothing to help you grow your business. You only get one chance to make a first impression with a new patient. But a proactive approach will do wonders for your business image and your first impression.

A large part of being proactive is simple common sense, and most of it distills down to one thing: excellent patient and provider communication. The trick is to create a workflow that allows any unexpected order or issue to be initially addressed in an efficient manner. Note that I wrote addressed, not completed. Being proactive really means letting the patient know where you are with the issue, what is needed, and what to expect will happen next.

A Reactive Case Study

Recently, we received an unsolicited order for wound supplies from a local prescriber’s office for a patient we had never seen. The order was received by fax at 4:30 pm, and the office regularly closes at that point and no patient information (phone number, address etc) was included on the faxed order.

Because nothing was known about the patient or the order, and because the office was already closed, the pharmacist or technician places this order on the counter for the next day’s staff to address. The pharmacist’s shift ends at 5:00 pm and the pharmacist fails to let the others working know about the new order.

About 45 minutes after receiving the order, the patient presented to the pharmacy for the wound supplies that they are expecting to be ready.

When the patient arrives, the staff are confused and do not know about the order. They search around, and eventually find the order. At this point, the pharmacy staff is completely out of control of the situation and is entirely reactive to the problem. To make matters worse, the items that the patient needs are not ones stocked by the pharmacy, and the patient needs them now. The situation spirals from bad to worse, and the image of the pharmacy and pharmacist is tarnished in the eyes of the patient, who fully expected this to be done and ready.

Proactive Case (Version).

Being proactive in the case above is going to be difficult. Our first order of business would be to contact either the prescriber or the patient to assess the urgency of the order and to gain insight in to what their expectations were for our pharmacy. With the prescriber’s office being closed, the pharmacist could have the prescriber paged to gather additional information. The only other option would be to use a local phone directory to try to establish contact with the patient to determine their needs and expectations. Note that SOMETHING needs to be done shortly after the order is received, and whatever is done needs to be documented in a manner that the next person to deal with the situation will be able pick-up and immediately know what the situation is.

The pharmacist asked the technician to call the office and finds the office closed (as expected). Rather than page the prescriber, the technician attempts to look-up and contact the patient using the phone directory. They call what they believe to be the patient’s home number and get no answer, so they leave a general message for the patient indicating that they wish to speak with the patient about a new order received. Both of these calls are documented and placed into a pending queue for the pharmacy, and an action item is created and added to initiate a call to the office in the morning.

The pharmacy has done very little at this point, but they have been reasonably proactive. While do not have any additional information needed to proceed with the order, it is officially “pended” awaiting a call back from the patient and a call is scheduled for the morning to call the prescriber. The pharmacy now has documentation that they can share with the patient that will demonstrate a proactive approach.

This patient arriving shortly after the unexpected order is received is possibly the worst possible scenario, and the fact that the patient has an expectation that things will be ready aggravates the situation considerably. Two things, however, make this situation more manageable:

  1. The readily retrievable pended issue that can be matched to the new patient’s requests and
  2. The documentation of what was already done by the technician.

The above items demonstrate to the patient that the pharmacy is vested in solutions. Little time needed to be spent by the pharmacist or technician to get up to speed on the situation. Despite now being in a reactive position with this patient, the pharmacy handled the situation in the best possible way.

Being proactive applies to anything that could reasonably be anticipated. An common example might be counseling the patient on potential adverse drug reactions (ADRs) when they first receive the medication. Recently, a patient came into the pharmacy and received a shingles vaccination. The pharmacist that gave the immunization failed to proactively mention the possibility of a local rash (ADR) at the injection site that takes several days to appear and then disappear. The patient did have this local reaction and came into the pharmacy concerned. Proactively counseling would not have prevented the patient from coming to the pharmacy (when I counsel Zostavax, I ask them to come in if they have a reaction so I can assess the rash and further counsel on signs and symptoms of cellulitis for them to watch for), but it does prevent the patient from a moment of panic.

Conclusion

In business, image is everything. Being proactive can make a huge difference in all aspects of a pharmacy practice, and it is not limited to simple transactions. A proactive pharmacist will look for possible issues that are not currently issues. Things like the price of a medication might not be a problem for a 64 year old patient with excellent commercial insurance now, but thinking proactively, addressing the possibility of a less expensive medication now, before cost becomes an issue, is something that will make your pharmacy stand out. Think Proactive. Be Proactive. It can help you make every encounter count!

Complacency

Over the last 8 months, I have worked hard to lose 50 pounds and become much more physically fit. This did not happen by itself. It took a lot of hard work and dedication. There was a point where I had to dedicate myself to fitness and set goal. Once I achieved these goals, another dedication (to maintain my level of fitness) was necessary. Unless this dedication becomes life-long, I risk a return to my much heavier, and less healthy self.

Dedication is an amazing thing. Over the course of the month of August, I ran more than 100 miles, a feat I did not think possible. I also managed to run a half-marathon (twice). Again, not something I reasonably thought I would be able to do. I even plan on attempting a marathon distance this fall. Dedication takes will power and perseverance.

The other morning, a day after I logged 12 miles of running, my alarm went off (as usual) at 5:20 AM. The little voice in my head rationalized that because I ran 5 of the last 6 days, I should sleep in and rest today. It was tempting to get a little rest, to let my sore muscles heal. I deserve some rest because I put all of that hard work in last month and achieved so much! All of a sudden, my mind was beginning to be complacent.

Complacent
adjective: showing smug or uncritical satisfaction with oneself or one’s achievements ORIGIN mid 17th cent. (in the sense ‘pleasant’): from Latin complacent- ‘pleasing,’ from the verb complacere

Needless to say, dedication prevailed, and I got up and put in my miles. After the run, I felt much better. But such is the battle with complacency. You know what you should do, but you still feel you don’t need to do it again because you have proven yourself.

The Thriving Pharmacist vs. the Complacent Pharmacist.

This little store above was not meant to publicly brag about my accomplishment in a national forum (though it does feel good!). It is, instead, a way to talk frankly about pharmacy and pharmacists becoming complacent. One of the first things my business partner tells our residents every year is to “not become complacent.”

It takes a lot of energy and commitment to be an active, patient-care-centered pharmacist. I know a lot of pharmacists that started out committed to patient care, only to slowly become complacent. Little financial benefit is seen by both the pharmacist and the pharmacy for quality pharmacy care. Complacency comes easy in this situation, and a pharmacist may gradually become a simple dispensing pharmacist, doing only the bare minimum required by the state board of pharmacy.

Dedicate Yourself

For me, complacency in my overall fitness came gradually over the last several years. My wake-up call to get fit came from my loving wife in the form of a gift certificate to a local gym. It sometimes takes a push to recognize that complacency has set in.

Fortunately, my dedication to my pharmacy career has been fairly constant over the years. While I regularly am challenged with complacency, I work in an environment that helps me stay dedicated to patient care. Occasional “wake up calls” come from my business partner and my employee pharmacists. We all work hard to challenge each other to stay dedicated to patient care. It is certainly not easy, and often reimbursement for quality care is non-existent.

The Thriving Pharmacist openly challenges every pharmacist to reaffirm their dedication to patient care. Strive to create a supportive work environment that helps everyone maintain a level of dedication to patient care. Become a dedicated interventionist, or re-affirm your dedication quality care. Be proactive, and not simply reactive in clinical recommendations for your patients. Pharmacists have ready access to their patients, seeing them far more often than most physicians see them. Use your access to make every encounter with your patients count!