Today we have a few more details of the contract discussed in yesterday’s blog. If you have not read the blog post yesterday here, please take a moment to do so now.
- It is being assumed (I do not have official confirmation) that any existing rural contracts would not be included in this contract. Theoretically, they would continue to see the same reimbursement the have as this contract is explicit for retail stores. Always confirm this with the payer before making any decisions.
- The contract does appear to have language in it that would prevent a pharmacy from leaving the plan during the year once it has “elected” to participate (recall that this is an Opt-Out contract, doing nothing means you are in). This means that once you are in, you are in for the whole plan year.
- Sources indicate that the very aggressive terms for this contract are a “worse case scenario” and that the enforced contract will be “significantly shallower”, whatever THAT means. We believe that one has to assume that the contract will be enforced as written. A non-contractural promise that the contract won’t be as bad as it is written is not something you can count on. As always, your level of trust may vary.
- This plan is going to be used heavily by the PBM next year. In fact, the anticipated plan sponsor crosswalk from the payer shows that only a few plans will be using a different contract next year. The PBM is going all-in with this very aggressive (and bad for pharmacy) contract.
Before we discuss how to proceed, let’s make a few more observations:
As mentioned above, PBM seems to be all-in on this plan. It is counting on having enough pharmacies involved to make this feasible. Payers, including Medicare, require network adequacy, and even if the PBM owns a lot of stores, they are required to have alternative options. This is likely one reason that this contract is using the Opt-Out language. They may hope to meet their needs thru subterfuge.
In many ways, it is imperative that pharmacies, including independent stores, regional chains, and even some national chains critically evaluate this contract to understand its egregious terms and effect on the financial viability of their practice. By not doing anything, the pharmacy opts in, automatically accepting the terms and conditions of the contract. If enough pharmacies opt-in (by not opting out), the plan may reach network adequacy, and community-based pharmacy becomes far less relevant to the healthcare landscape. On the other hand, if pharmacies opt-out, and network adequacy is at risk, this may require the PBM to revisit the contract terms.
From a Pharmacy Services Administrative Organization (PSAO) aspect, I suspect that unless serious concessions are made, most PSAOs will not sign the contract on behalf of their stores. In some ways, this is becoming a referendum on PSAOs. The PBM industry has been at odds with PSAOs for a long time now. Failure of the PSAOs to achieve a fair contract for their pharmacies could spell the beginning of the end for this type of service organization.
So what do you do? Here are the four possible scenarios. If you don’t belong to a PSAO, your options are effectively binary.
Scenario A) You accept the contract (do nothing) and your PSAO elects to decline the contract. You are in the contract, for good or for bad, for the original terms of the contract for the duration of next year.
Scenario B) You accept the contract (do nothing) and your PSAO Accepts and negotiates better terms than the base contract. You are now going to receive the better terms, as your affiliation’s contract supersedes your own contract.
Scenario C) You opt-out and your PSAO opts-out. You are not in the plan next year, and you will need to work to ensure that your patients know this and can make an informed choice come open enrollment in October thru December of this year. You may lose some patients that either miss their opportunity to change plans or elect to use the plan despite your non-participation.
Scenario D) You opt-out of the contract and your PSAO opts IN to the contact. You are now back in, even if the PSAO negotiated rates are not enough to keep you happy.
If you end up in scenario D, and you still don’t want to participate, you do have one more option. You can elect to contract direct with the payer. Doing this would invalidate your inclusion in the PSAO contract, and you then can choose which plans you do wish to participate in yourself. Keep in mind that you still would not be able to service any of your customers that elect to participate in that plan.
From an independent pharmacy perspective, there are a lot of reasons to opt-out. If you have a PSAO, your store opting-out gives the PSAO more leverage to negotiate a better contract for you and your peers. If you don’t have a PSAO, there is little reason to take a contract that would cause a long-term hemorrhage of cash for your store(s).
Ultimately, each pharmacy owner needs to decide about this contract by either doing nothing (opting-in) and waiting for the inevitable negative consequences, or taking action, standing up for your professional convictions, and controlling your destiny.