Year: 2015

Cost vs. Care

It is becoming increasingly evident that the current Medicare pharmacy benefit (Medicare Part D) is broken. Recently, several Medicare Prescription Drug Plans (PDPs) were given the opportunity to hear about pharmacists’ activities to support clinical outcomes and patient care. The information presented included a description of significant savings a commercial plan realized due to the positive effects of pharmacists’ interventions. At the end of the presentation, the representatives from the PDPs remained  silent. There was no outward enthusiasm for the patient care described and the results achieved from that care. In sort, the PDP representatives did not appear to understand how care fits into their cost-centric model.

The Focus on Drug Cost

The laser-like focus the PDPs have for trimming cost is nothing short of amazing. Examples of downward pressure on costs include extensive use of Maximum Allowable Cost (MAC) pricing and, more recently, Direct and Indirect Renumeration (DIR) fees. The dispensing fee paid by the PDP to the pharmacy has also been mostly eliminated. Once, dispensing fees (the fee paid to the pharmacy for the service of filling the prescription) measured in dollars. Today they are measured in cents, and it is not uncommon for a PDP to pay a $0 dispensing fee to the pharmacy for dispensing a 90 day supply of a medication. The end result is no appreciable profit for pharmacy for the drug product.

Consequences

When a company sees lower profits, it has to react in order to stay profitable. Pharmacy is no different. Over the last several years, pharmacies have been trimming their expenses and working on efficiencies to counter the constant downward pressure on drug product reimbursement. Eventually, each pharmacy comes to a point where further cuts to remain profitable are more onerous than closing their doors. The equation for profitability is especially vulnerable in regions with limited populations to service. Rural pharmacies are very susceptible to the PDPs cost-centric model.  The rash of closings of rural pharmacies in states like Iowa has created areas without access to a pharmacy. Rural patients requiring pharmacy services are then relegated to either mail order, or a long drive to a neighboring community.

Technology has a solution creating pharmacy access in remote areas: Tele-Pharmacy. Tele-pharmacy leverages a technician driven pharmacy and a remote pharmacist capable of performing final verification. The remote pharmacist is able to communicate “face-to-face” with the patient in a live video conference to complete counseling and answer patient questions. A single pharmacist might be able to staff multiple remote pharmacy sites, reducing the overhead of each pharmacy by a portion of the pharmacst’s salary. This resulting economy might be enough to make a rural pharmacy business plan feasible.

History Repeats

Tele-pharmacy is yet another way pharmacy has tried to adapt to the model set by the cost-cutting PDPs. In the case of tele-pharmacy, however, the cost being cut is the person actually providing the care. This should be a concern to all pharmacists. Given past developments, consider a likely progression of events for tele-pharmacy:

  • The number of remote pharmacies a pharmacist “manages” will undoubtedly climb with time, resulting in less and less time for the pharmacist to focus on patient care.
  • Tele-pharmacy concept will be brought from rural areas into more populated centers in an attempt to further save money on pharmacist salaries.
  • Seeing the costs of filling a prescription further fall, the PDPs will again reduce reimbursement, erasing any positive gains on pharmacy profit gained by the use of tele-pharmacy.

Drug Cost and Paying for Care

I understand the fixation the PDPs have on drug cost, but drug product is only a part of the pharmacy equation. Pharmacists provide much more than drug product to their patients. Pharmacists all over the country work closely with their patients. They listen to their drug and disease issue. They decipher verbal and non-verbal clues to discover drug therapy problems. These face-to-face encounter are a large part of what pharmacists do every day. While the teleconference type interaction used in tele-pharmacvyc is not ideal for patient care, it is a suitable substitute in cases where an onsite pharmacist is not feasible. But pharmacy has reached a tipping point: the current emphasis on drug cost is now significantly impacting the ability of pharmacists to care for their patients.

A New Model

This brings us full circle to the current, broken model. A new model is needed for pharmacy. A model that pays pharmacists for their positive impacts on patient care and the savings they provide in the total health spend. We are slowly moving in this direction, as Congress works to make pharmacists providers under Medicare. But even this is not enough. Congress needs to overhaul the current PDP system. Make the PDPs accountable morbidity and mortality of the covered beneficiaries. The PDPs should be see incentives for reducing hospitalizations and ER visits that decrease expenses to Medicare. Congress needs mandate the PDPs to compensate the providers for their care and contributions in helping them achieve these goals.

This new model should pay pharmacists to perform CMM (Continuing Medication Management). Pharmacists and pharmacies should also have a shared risk in these endeavors, with rewards reaped for reducing health care costs. This may sound like science fiction to some, but commercial plans and managed care organizations are already moving this way. Starting in 2016, there will be a network of high performing pharmacies in place in my state. These pharmacies will work with a payor to reduce total health spend. This network boasts a new model for pharmacy reimbursement, with shared risk and reward.

It is time for Congress and Medicare to recognize not only pharmacists as providers, but also as an important and untapped potential to improve the system. It is time to for pharmacists across the country to stand up and be heard by their representatives. Recently, the senate held hearings on the PBM industry. This means that there is no better time than now to contact your representatives. Let them know what you do every day as a pharmacist. Be sure they understand that the current model is broken and needs to be fixed. It needs attention now, now later. Make your voice heard. Make this encounter count!

Why Generic Dispensing Rates are not “Clinical” Measures

Some time back I wrote about “The Rewards of Performance“. In that piece, I discussed the existence of Generic Dispensing Rates (GPR) as one of the measures used by a plan to “reward” a pharmacy for clinical performance. Since that time, several additional plans have announced their 2016 Prescription Drug Plans, and several have a form of reward or penalty based on the pharmacy’s GPR.

Economics 101

In every pharmacy I have ever worked, a generic drug was always offered to the patient if it was or is available. Generic drugs have always benefitted the health system by reducing overall drug spending by health plans. Back several years ago, pharmacies even made a better margin on generic drugs, so the pharmacy was rewarded for the helping increase the adoption of genetic drug options.

Today, pharmacy is facing a plague of Maximum Allowable Cost (MAC) prices for generics that are essentially pricing most generic drugs at or just above the pharmacy’s acquisition cost. Given this drastic reduction in pharmacy reimbursement over the last 5 years, one would expect that overall drug costs would actually be way down, just like pharmacy profits. In fact, this does not appear to be the case. See “Examining Medicare Part D Transparency” for a quick analysis.

Clinical Measures

Clinically, we are interested in many different types of outcomes. These might be specific to the disease being treated, or they could be global, like total health spend for the patient. Consider the cholesterol lowering “statin” drugs as an example. Typical outcomes might include:

  1. Degree of lowered LDL (Bad Cholesterol)
  2. Possible increased HDL (Good Cholesterol)
  3. The existence of Adverse Drug Effects (ADRs), especially muscle weakness / rhabodomyolosis.
  4. Overall cost the the health system.

From a clinical standpoint, atorvastatin is a great product to lower cholesterol compared to some of the older products like simvastatin. It is also now generically available and very inexpensive.  At lower doses, it has a low incidence of ADRs. If a patient does not achieve their LDL / HDL goals, the dose can be increased, but with an increased likelihood of ADRs. If ADRs do appear, a choice has to be made to balance the overall reduction in LDL with the existence of ADRs. This can be handled two different ways. First, choose a different generic drug like pravastatin, which has a lower incidence of ADRs, but also is not as effective at reducing LDL. Second, choose to use a lower dose of the brand name drug like Crestor, which may lower LDL more than atorvastatin at a lower dose and without any ADRs.

Based solely on drug cost, Crestor is much more expensive to the patient and the plan. What is unknown, however, is the long term cost associated with the choice of this medication. Any decrease in morbidity that results in fewer doctor visits, fewer hospitalizations, or fewer emergency room visits could easily outweigh the marginally higher cost of the brand name drug. Other examples of brand name medications that can save the health system money include the new anticoagulants. Overall reductions in required monitoring, unplanned ER visits and other costs may actually save the system money over time. A one-size-fits all approach to generic drugs like a GDR incentive does not address patient care.

The existence of GDR is therefore entirely an economic measure. If PBMs want to encourage generic drug use, this is one way. The goal GDR needs to be accessible in order to actually encourage pharmacies to buy in to the concept, and not all PDMs are realistic in their expectations. Consider one 2016 Medicare Part D plan that includes a Direct and Indirect Renumeration (DIR) fee with a GDR based incentive to reduce a pharmacy’s DIR fee. The required GDR for this incentive to apply is 95%. For a point of reference, our pharmacy typically has a GDR at or slightly above 90%. All of the stores in our franchise (thousands of stores) average closer to 80%. A 95% GDR is virtually impossible to achieve unless the pharmacy works tirelessly to switch all brand-only drugs to generic drugs without respect to clinical outcomes.

Treat the Patient, Not the Numbers

Back in pharmacy school, I was told to treat the patient, not the numbers. Unfortunately, the current attempt to quantify quality in pharmacy benefit portion of Medicare (Medicare Part ) is currently limited to numbers. EQuIPP scores curtently measure the compliance, measured as the Percentage of Days Covered (PDC) for several categories of drugs along with the prevalence of high risk drugs and the pharmacy’s ability to perform assigned comprehensive medication reviews. These numbers are arguably more closely related to clinical outcomes than GDR, but they still fall short of actually measuring the impact a pharmacy can have on patient care and total health spend.

I have faith that the measures used by Medicare and others will expand to include more direct measures of care. Until then, however, I believe that if GDR is going to be used as a basis for “reward” on any plan, it should be reasonable, and not lumped into “clinical” performance. The GDR “goal” for the incentive outlined in “The Rewards of Performance” was 86%. Based on the thousands of pharmacies represent by my PSAO, this level encourages those on the lower end to improve, and offers them a reachable goal.

Do not forget, though, that the focus of pharmacy is the patient and their outcomes. Pharmacists can impact these outcomes in many ways, including not dispensing medications. Be sure you answer three questions with each patient you care for:

  1. What can you do to ensure the patient achieves their therapeutics outcome(s).
  2. Is the patient’s therapy is safe, without unnecessary ADRs
  3. How can you help the patient maximize the effectiveness of their therapy

In other words, make every encounter count.

Why yes, we ARE are messing with your workflow

During a recent discussion with a pharmacy management systems (PMS) vendor, my business partner was describing our workflow and how we leverage the pharmacist. The goal was to help the vendor understand what we would like to see their software enable: a patient centered workflow. Their immediate comment was “you are messing with our workflow!”

That was the point. The PMS workflow has evolved over the years into a single focused entity: to fill a prescription. The patient, as a focus, is largely gone from every system currently marketed. PMS feature lists are generally focused on increasing efficiency of the dispensing process, tracking the prescription from beginning to end. Every PMS offers an some “clinical” screening for therapeutic duplication, drug and disease interactions, allergies, and compliance, but these are limited in scope to the prescription being filled at the time.

Standard Workflow
Figure 1

Figure 1 above represents a typical prescription focused workflow. The steps typically involving the pharmacist are shown in a brown box, with steps traditionally handled by technicians colored green. This is a traditional assembly-line type workflow, but notice that the pharmacist has to jump-in at several locations. Modern pharmacy management systems minimize work to reduce the impact of this to the pharmacist

The Workflow of the Future Pharmacist

In order to modernize the pharmacist’s workflow, patient-wore clinical information needs to be infused into the final verification step. This includes a summary of addressed and unaddressed clinical issues like drug-drug interactions, drug-disease interactions, therapeutic duplications, compliance issues, clinical outcomes, and monitoring currently being monitored. This information should not be limited to just the drug being checked: modern pharmacists emphasize patient care instead of just checking the prescription.

This workflow might be represented by Figure 2 below.

Modern Workflow
Figure 2

The difference in this workflow is the injection of all clinical data at the final verification step. Unaddressed issues with other medications are presented to the pharmacist to be addressed as necessary. Additionally the pharmacist is given the opportunity to document the intervention(s) at this point. These interventions become a part of the clinical record and are available for the next time the patient is reviewed.

The data injection and the documentation steps–the basis of the commercial product PharmClin (Patent Pending)–are as simple as they are innovative. This expansion of the final verification step creates a patient-focused process that we call MTM-on-the-run. While this workflow might seem daunting to some, with some basic training and a well engineered software package, the process is quite satisfying.

Taking it to the Next Level: An Ultra-Modern Workflow

The truth be told, there is really no reason that technicians could not be used for the entire Intake to Will-Call workflow. In some states, including Iowa, some pharmacies are studying technicians checking another technician’s work (performing the final verification step). The purpose of this type of workflow is to free up the pharmacist to focus more on the clinical aspects of the practice. In this case, the workflow might look more like Figure 3 below.

UltraModern
Figure 3.

Notice above that the pharmacist is still tasked with the data-entry check for new prescriptions. This is currently still required in Iowa under the special rules covering this type of workflow. As a pharmacist, this workflow is very liberating. Instead of being mired in the details of checking between one and twenty prescriptions, the pharmacist can focus on the clinical profile information for each patient represented in the order. They can review previous intervention notes and create new notes. When the patient or their representative arrives at the pharmacy to pick up medications, the register clerk can summon the pharmacist to counsel on any new medications and/or follow-up with interventions flagged by the pharmacist that performed the clinical review.

Change is Coming. Don’t Look Back, We Aren’t Going There…

Giving up participation in the dispensing workflow is a scary proposition for some pharmacists that have spent entire careers performing little more than this function. When we talk to pharmacists at meetings, it is obvious that there are two types of pharmacists: those that look forward to moving to a model like this,and those that don’t know what or how they would perform in a new, modern workflow.

But this much is certain: reimbursement for product (dispensing) is not going to magically return. Maximizing efficiency through a technician driven workflow with added efficiency through robotics or other technologies will free the pharmacist to be a pharmacist. Pharmacists need to apply their clinical knowledge to care for patients. The days of paying a pharmacist to perform final verification of a prescription (a dispensing function) are rapidly coming to an end.

While I will not claim to know what pharmacy will look like in a few years, I am certain of two things. Firstly, it will be very different than the current dispensing-driven model. Secondly, pharmacists will be increasingly paid for their contribution to patient care or they will be be missing entirely from the flow chart. Make every encounter count today, so you can continue to do so tomorrow.

The Origin of the Voodoo DIR?

 

The DIR fee, a subject of several posts on this blog, can be calculated in a variety of different ways. In 2016, Medicare/CMS directed plans to calculate the DIR at the point of sale (the time of adjudication) whenever possible. A DIR fee doesn’t have to be complicated to save the plan money. Yet after reviewing the 2016 Medicare Part D Prescription Drug Plans (PDPs) and their associated DIR fees, I became distressed to see even more “retrospectively calculated” DIR fees appearing despite the CMS’s direction to simplify the DIR.

So why are PDPs going out of their way to create these retrospectively calculated Voodoo DIR fees? One possible conclusion is that the PDP is trying to hide something. If we agree that this is a possible conclusion, the next question would be: what are they trying to hide, and from whom are they hiding it?

While it might seem logical to assume that the plan is trying to hide something from the pharmacy, I believe that this is in fact not the case. Instead, I believe that this might be a direct result of PBM consolidation. Over the past several years, there has been significant consolidation in the Pharmacy Benefit Manager arena, with only a handful of larger PBMs remaining in the market. I have dubbed the remaining large processors the PBM Titans. This lack of homogeneity in the processor arena has created an interesting dynamic between the PDPs and the PBMs that process for them.

Impact of PBM consolidation on the PDPs

10 years ago, our pharmacies received dozens of remittance advices and checks weekly from different PBMs and plans. Today, it is a very different story. Each remittance from a PBM Titan represents many different plans, both Medicare and commercial. In today’s world, this means that the processor of all of these claims has access to a virtual cornucopia of data.

Remember that the PBM Titans not only process claims for other PDPs, but also run their own commercial and Medicare plans. The Titan PBMs have direct access to the smaller PDP’s claim data, which includes their Maximum Allowable Cost (MAC) for each drug product and the dispensing fee(s). It is not hard to imagine that the PDPs run by the Titan PBMs could leverage their under-the-hood knowledge of the smaller players to match up their plans favorably by comparison and therefore maximize their own PDP enrollment.

The VooDoo DIR Fee

When a major national PDP started using a retroactively calculated DIR fee last year, pharmacies had a very hard time determining exactly how much they were actually being paid for each prescription. The DIR fees for last month’s claims were attached by the PDP to the current claims. This obfuscation not only created confusion for the pharmacy, but is also hid the DIR fee logic and impact from the PBM doing the processing. It is my belief that this is not a coincidence.

The Consequences

Pharmacy is in the midst of a transition. Historically, pharmacies were paid for product, and the services that accompanied the product were essentially given away. The profitability of the drug product will soon be gone. It may already be gone for some pharmacies. The revenue streams for pharmacy service, however, are still in their infancy. It is going to take some time before a pharmacy and pharmacist can run a successful business charging for their services.

The time is now to focus your pharmacy on services. The transition to a service based revenue stream will have to be taken in small steps, so the process must start now. Both pharmacists and their patients will be outside of their comfort zones during this time, and it is going to be a learning experience for everyone. There is not a better time than now to make every encounter with your patients count!

When Therapeutic Duplication Isn’t…

Modern pharmacy management systems screen therapeutic duplication using third party databases, and these systems are not capable of exercising the necessary professional judgement to separate an actual duplication from a rational duplication. Duplication alerts, because they are so frequent, become almost a nuisance, and alert fatigue is a real concern.

Normally, therapeutic duplication alerts in our pharmacy are documented as:

Duplication Appropriate: Different mechanisms of action required to achieve therapeutic outcome(s)

The above is typically added to intervention notes in cases like the use of metoprolol (a beta blocker) with losartan (an ARB). When we create this note, we typically will flag the problem for re-evaluation in 6 months or 1 year.

Duplication Appropriate: Different courses of acute therapy.

This designation is often used for antibiotics or other acute therapies (prednisone, NSAIDs etc) that have been completed before the next course is started. These are typically flagged for re-evaluation with the next fill of the medication.

Case Study (An Exception)

Today’s Tales from the Counter story starts with a therapeutic duplication; sotalol 120 mg in the AM / 80 mg PM with metoprolol ER 25 mg QD in the AM. One prescription was ordered by the patient’s primary care provider and the other a cardiologist. Both of these drugs are in the same therapeutic class of beta blockers. In this case, the duplication alert is not necessarily a nuisance; it represents a potential problem.

In the case of this patient, the refill history made the problem more difficult to evaluate. Metoprolol was filled in April for 90 days, sotalol in June, and both filled in August. At first glance, it appeared that the medication was changed from sotalol to metoprolol and then back again. To be sure, the patient was approached and asked if they were taking both. The unexpected response was that they were taking both medications (they had just accumulated an excess of sotalol and did not need to refill it until that supply had been depleted).

At this point, we let the patient know that we were going to contact the prescriber to clarify the therapy. A SOAP note was created and faxed that day to the primary care provider. The note simply stated:

Subjective / Objective: KB came into the pharmacy today to pick-up her meds. Pharmacist noted patient is taking both metoprolol ER 25mg QD (Dr. One) and sotalol 80mg 1.5 tabs QAM and 1 tab QPM (Dr. Two).

Assessment / Plan: 

Should KB be taking both metoprolol and sotalol? ___Yes ___No

If not, should metoprolol be D/C’d? ___Yes ___No ___N/A

Less than 24 hours later a reply was received. The response was unexpected by this pharmacist: KB should be on both medications — confirmed with cardiology.

Therapeutics Revisited

I was not expecting this response, and took some time to investigate the possible rationale for this decision. Sotalol is somewhat unique in the class of non-selective beta blockers as it also exhibits cardiac action potential duration prolongation (Vaughan Williams Class III) anti-arrhythmic properties. It is well documented that beta blockade can significantly decrease mortality and improve outcomes in several types of cardiac disease. In the case of a patient with an implantable cardioverter-defibrillator (ICD) and or a biventricular pacemaker, the combination of anti-arrhythmic and betalocking properties of sotalol can be beneficial, making it an excelent choice. Sotalol, being non-selective, may not offer enough beta blockade by itself, and the addition of a low dose selective beta blocker like Metoprolol Succinate 25 mg is therefore rational therapy.  For a good review, see Chaki AL, Caines AE, Miller AB. Sotalol as adjunctive therapy to implantable cardioverter-defibrillators in heart failure patients. Congest Heart Fail. 2009 May-Jun;15(3):144-7.

This is a great time to re-emhasize the importance of documentation. This intervention was addressed as Duplication Appropriate – an exception to the normal “like mechanisms” duplication that would normally be a problem. The intervention and SOAP note, including the physician’s response, was documented and linked to the problem. The next time this problem is assessed in 3 months, the pharmacist will already know the story.

Monitoring

Just because the duplication problem has been addressed does not mean that the pharmacist’s responsibility is complete. In this case, the patient is at risk of the effects of too much beta blockade. This would manifest as a low resting pulse rate. The pharmacy should now regularly ensure that the patient’s pulse is being monitored and/or monitor the patient’s pulse periodically. Both activities should be documented in the patient’s record.

Every day I worry about the future of pharmacy as a profession. The current reimbursement climate continues to resemble a walk through Death Valley, California, without any water in sight. Despite some of the grim realities pharmacists face daily, finding problems (and even non-problems like the one above), and managing the care of patients still excites me. It makes my days enjoyable. And the added benefit of the patient’s gratitude for taking the time to look into the potential problem doesn’t hurt, either. It reenforces the fact that every encounter really does count.

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!