Snail Mail

I don’t know about you, but the amount of actual postal mail I receive today is significantly diminished from a decade ago. But unlike land lines (phones that were attached to your house, for those that grew up in the cellular phone era), the mailbox isn’t going anywhere soon. Electronic mail may be good for a lot of things (I must get back to that Nigerian Prince one of these days…), but official correspondence, while uncommon, needs a landing strip.

When you receive certified mail, you know something important just arrived. Postal mail has a certain gravitas: even if you refuse delivery of certified mail, the contents are considered “served” from a legal perspective. If something appears in your mailbox from your insurance company, it is probably significant.

As a pharmacy owner, I am regularly approached by patients, some not even my own customers, asking about mail they received from their insurance company or PBM. They correctly assume that the document may contain important information, and the message is not always clear or easily comprehended. A great example are letters from PBMs informing their customer that their pharmacy won’t be in network starting at some point in the future. 

From a consumer standpoint, this is confusing. Many consumers consider their choice of a pharmacy as a given freedom. Being told you must change providers creates confusion, anger, and even fear. This is why I see so many of these letters every year. They are disruptive to the patient.

From a pharmacy owner’s perspective, these letters are often unfair. The letters, while factually accurate, do not convey all the ramifications and alternatives available to the patient. For example, around the end of the year, when open enrollment is approaching, a lot of these letters go out when a pharmacy opts out of a bad contract for the next year. The letter tells patients that they must change pharmacies. What it doesn’t tell them is that they could also elect to change plans. That is an important part of the equation, but because it isn’t in the plan’s best interest, they omit this information!

These letters are a fact of life. Sometimes a patient will have alternatives like switching plans. Other times, when an employer elects a plan change that excludes local pharmacies, there isn’t an obvious way for the patient to maintain their pharmacy choice. The important part, for both patients and pharmacy owners, is to be proactive. 

As a pharmacy owner, you need to have your finger on the pulse of your community. This usually means inculcating loyalty with a few dozen community members. Let them know you want to hear about anything they encounter that might impact pharmacy and healthcare. When one of their friends mentions a letter they received from their insurance impacting their pharmacy choice, YOU want to know about it because you cannot plan if you are not aware that change is afoot. 

As a member of the community, and a consumer of local healthcare, it is important to share plan changes with your local providers. If your local providers are excluded from any plan, their long-term viability as a local provider becomes questionable. Healthcare is a local service. Proximity to care, be it physicians, clinics, or pharmacies, is important, and often it is only after a clinic or pharmacy closes you recognize the impact of the loss. 

Changes being made by healthcare plans impact accessibility. It doesn’t take long in today’s economic environment to be left with one or no options in your area. Healthcare plans might tell you that fewer providers creates efficiency. While this is true to a degree, it also eliminates competition and choice. What happens when the remaining options are also squeezed out, and the next closest option is in the next town, city or state?

On the consumer side, it is about maintaining access to your local providers. On the provider side, it is about maintaining access to your patients. Health plans and PBMs are not necessarily concerned with the patient or the provider. They are concerned with their own bottom lines. To them, it boils down to dollars in their pocket. To the local community, it is far more important. 

For consumers, if you receive mail regarding changes to your care plans that might impact your providers, share it with them! Take time to ask questions. There may be options available to you to continue to use your providers of choice.

What to do When Faced with a Bad Contract

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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. 

Hard Math and Tricky Terms

It is only April, but we are having to make decisions on upcoming Medicare Part D plans for 2025. Anymore, pharmacies just expect poor reimbursement. Unfortunately, the menu this year includes not only unsavory contracts, but also some tricky maneuvering by some plans.

First, let’s revisit: most pharmacies can purchase brand name drugs at Wholesale Acquisition Cost (WAC) minus 4-6% if they do a decent book of business with a wholesaler. I know very few that do even marginally better than 6%. Purchasing brand name medications from the few secondary wholesalers that carry them generally does not result in a discount of better than WAC – 3%. In other words, there is a hard floor for the purchase price of brand name products for ANY pharmacy. Going below that floor means you need to make up the difference (loss) somewhere else.

Today I was looking at a national contract featuring reimbursement of brands at AWP – 22.7%, which is equivalent to WAC – 7.24%* plus a negligible ($0.10) dispensing fee. The extended day supply arm, something that the contract deliberately emphasizes because it makes THEM more money, was listed as AWP – 24.7% (WAC – 9.64%)* plus no dispensing fee.

Reported conversations with the plan note that the rates above are the maximum discount that can be applied to a prescription. It is reported that they have stated that the actual discount will be “significantly shallower”. Yet the maximum rates are so egregiously low that even if they are “shallower” they would still likely to at best be a break even proposition. Any time the maximum was used, it would be a severe loss. These terms are not something that any rational business person would ever accept. But that isn’t the limit to the devious tactics being set forth in this contract. It gets worse.

I would not sign this contract. It is a poison pill that would kill my pharmacies. Any patients enrolled on this plan and filling insulin, inhalers, or other brand medication, would gradually bleed the life from the pharmacy. But I don’t get the opportunity to sign this contract. No. This contract will automatically become effective for 2025 if I don’t EXPRESSLY OPT-OUT before April 29th.

There are a few possible reasons that the plan might be doing this, but the most likely one is that they know that the contract is, at best, non-profitable for the pharmacy. If pharmacies were given the option to join in, they would not do so on their own. There is no incentive to opt-in. By making this an opt-out only contract, they stand a chance to keep enough pharmacies in the network come January 2025 simply because they missed their opportunity to opt-out. Having pharmacies participate in the contract is important to the plan because they have promised Medicare a certain level of network accessibility. If pharmacies didn’t enroll, the plan could be in trouble.

But this isn’t the end of the funny business. You see, we have not actually seen this contract. We have only been shown the reimbursement rate schedule. While the schedule is very important, there are other aspects to the contract that are important to understand. For example, the contract will outline how a pharmacy can exit the contract, normally by giving, say, 90 days notice of termination. But this contract, which we have not seen, had an interesting blurb in the information they did provide: “You will be enrolled as a provider in the [redacted plan name] for the ENTIRE (emphasis added) plan year under the terms detailed in the attached Network Enrollment Form.”

Once again, I have not seen that actual contract, therefore I cannot say what is in the termination section. It is possible that if you fail to opt-out and find you are losing money next January, you actually may still be able to exit. We have exercised this type of termination clause in the past for poor plans. But for some reason, the document sent with the notice for this plan explicitly states “for the ENTIRE plan year (emphasis added). In other words, there is a real possibility that a pharmacy would be stuck in the plan for the year if they don’t opt-out!

It stands to reason that the plan is probably concerned with maintaining network adequacy. If I were trying to sell this plan, I would also be worried. Why in the world would any pharmacy take a contract which will lose them money on any brand dispensed? There is no upside. No Carrot. Only a stick.

This article is, of course, targeted to pharmacy owners. But it is important that patients that use independent pharmacies understand that their access to their pharmacies is under attack. If you use an independent pharmacy, and they end up in bad contracts like this, they will may not be your independent pharmacy much longer.

The decision to opt-out of contracts like this has to be made by each individual store owner. If they are not aware of events like this contract opt-out deadline, then they cannot make an informed decision. The result of this inaction could be the end of that store. Make your Encounter with this article today Count. Be sure to alert your local independent pharmacy or pharmacies. Make sure they know that there is an opt-out contract coming due imminently, and it is a contract they may not want come the 2025 plan year.

Likewise, as pharmacy consumers, it is important to understand that the open enrollment period beginning this fall (October) is becoming a mandatory engagement event. Like this opt-out only contract, not managing your plan for 2025 when you have the window of opportunity can result in your choices in pharmacies being very limited!

Make this viral so access to independent pharmacies isn’t further eroded!

* When converting from WAC to AWP, WAC = AWP – 16.67%, This applies when there are no additional discounts. If discounting off AWP and then converting to WAC, the WAC has to be adjusted based on the discount. This means that AWP – 22.7% = WAC – 7.24% and AWP – 24.7% = WAC – 9.64%

Patient Access IS Pharmacy Viability

Last week while I was in Washington DC, I had the privilege to meet with several US Senators, US Representatives, and the lawmakers’ staff charged with healthcare issues. I was with a group of independent pharmacy owners, and we were asking for support for three pieces of bipartisan legislation that had implications related to patient access to healthcare. Our job while meeting was to convey real stories and the ramifications of the legislation to these lawmakers. 

One of the things we were asked to do when speaking with our legislators and their staff was to speak in terms of how the legislation impacts our patients. The patients are constituents of the lawmakers. We were cautioned to limit speaking in terms of the benefits or ramifications of how these bills would impact the businesses (both chain and independent pharmacies).

While I understand the need to approach the lawmakers from the perspective of access of patients to healthcare, I view enabling the success of the local pharmacy as the other side of the same coin. Legislation that helps maintain the viability of a pharmacy by making the playing field more fair results in the pharmacy staying open. Pharmacies that are open can care for and serve the patient. A pharmacy that closed its doors due to poor or non-existent reimbursement for services cannot serve the patient. 

If a pharmacy has to close and there is another pharmacy nearby, care will generally gravitate to that pharmacy. There is a real risk when this happens that the addition of these new patients with prescription plans that poorly reimburse the pharmacy will further erode the financial viability of the remaining pharmacy. Once all pharmacies are closed in an area, then access to care becomes a crisis.

The number of small towns in Iowa now without a pharmacy that have approached us to open stores in them is, frankly, staggering. But given the current state of pharmacy reimbursement, it is unlikely we could ever manage such a feat without risking the overall viability of our existing stores. Something has to be done on a federal level to protect access to pharmacies.

So, while we voiced our concerns to legislators in terms of the impacts of the legislation on the patients we serve, the real concern is and will continue to be pharmacies being paid fairly for the care they provide. This is Legislative Season. Many groups are contacting or even heading to Washington DC to engage with their legislators. Make the effort. Make Every Encounter with your lawmakers Count this spring!

Sticky

Do you have a store or shop you regularly patronize? Have you ever stopped to consider why? There are numerous reasons, of course, but it boils down to one concept. Given a choice between two alternatives, the store you prefer offers sometime that the other doesn’t. That something might be an employee, or customer service. It might be convenience of location or hours. We call patients with an allegiance to a business sticky customers.

If you are operating a pharmacy, your goal is to attract and maintain long-term, loyal, sticky patients. But what differentiates one pharmacy from the next? It likely isn’t the medications: most every pharmacy has access to the same product. Patients perceive that all community (retail) pharmacies to the same thing. Jerry Seinfeld’s observation on pharmacy sums up what many believe pharmacists do

“I’m workin with pills up here. I’m taking pills from this big bottle and then I’m gonna put them in a little bottle!”

Jerry Seinfeld

Many customers really don’t understand what pharmacists and pharmacies actually do. As a result, a lot of patients are sticky to chain or box store pharmacies simply because they don’t know that not all pharmacies follow that model.

Of course there is always churn in pharmacy. The most common reason a patient switches pharmacies is customer service. Even just one bad customer service experience can result in a patient transferring to a new pharmacy. While customer service can help with achieving a sticky customer base, and poor service can certainly result in the loss of customers, customer service alone doesn’t really differentiate a pharmacy.

If you start to compare chain and independent pharmacies, you start to recognize that there are a lot similarities beyond just prescriptions. Things like a drive-thru window, over-the-counter medications, greeting cards, and sundries are all common features in pharmacies. Things like delivery and durable medical equipment might be less common, but again, there are multiple options typically available to the pharmacy customer. This begs the question: what can one do to truly differentiate a pharmacy?

Differentiation

When trying to define something that truly differentiates a pharmacy, it essentially boils down to the same question. “Where else can I go to get this?” In a small market, if the answer is more than zero, it isn’t a differentiator. In a larger market, it can be more than zero, but it still has to be fairly small.

It isn’t enough to offer something uncommon, it also has to be in demand and the quality has to be high. This applies to services as well as product. Ultimately, a well differentiated pharmacy is the only place you can go in the area to get something that is in demand. Of course, this isn’t an easy thing to achieve. It requires thinking outside of the box. Once you determine your niche, it requires marketing and effort to grow it.

Perhaps the easiest path to differentiation is to know what your competition does and compare it to what your pharmacy offers. These things are not differentiating your store. The trick is to identify what you might add as a service or product that they don’t do. Ideally, it would also be something that your competition cannot offer because if you do hit a home-run, the competition will want in on the action.

We obvioulsy cannot offer individualized suggestions to every independent pharmacy here in this article. Today, we will discuss one example that many independent pharmacies could implement.

Professional Supplements.

One way to differentiate an independent pharmacy from the chain pharmacy competition is supplements. Every pharmacy can order national brands of vitamins and supplements. You can go to almost ANY pharmacy and pick up a bottle of Nature Made Stress B-Complex. If the pharmacy doesn’t stock it and there is demand, they can add it. But what if you could order a supplement line that was unavailable to the chain pharmacies?

Professional Supplements refer products that are not sold by the traditional wholesale channels in pharmacy. Companies Ortho Molecular only sell their products to independent pharmacies. These are high quality products that one cannot purchase from your local big-box pharmacy.

Just putting in a quality product that is unavailable elsewhere isn’t generally enough. While there may be existing demand for the products in your area, the public needs to know that you have the product and learn why they need it. In other words, adding a professional supplement line is just step one. Marketing and education follow, to raise awareness and create demand.

In order to create the demand for professional supplements, it is necessary to reach out to practitioners and prescribers that understand the importance of quality supplements and are receptive to general aspects of functional medicine. It also will require the pharmacists and staff to become familiar with nutrition, nutrient depletion and supplementation, and to become comfortable with the basics of functional medicine. This requires ongoing, significant professional commitment and work in marketing and education. Is it worth it to go down a path like this? It absolutely can be a big win for the pharmacy. Margins on supplements are very good, and the patient interactions can be very rewarding.

In a given market, it is possible that two pharmacies might both sell one or more professional supplement brands. While this may or may not be an issue depending on the market saturation, it does diminish the differentiation factor. If you achieve respectable sales of a profesisional product, you might then consider private labeling some of the products. This means that the professional product X becomes YOUR own product, under its own brand, with a different name. Now, even your local competitor cannot offer your product (unless you sell it to them).

Obviously, there are lots of different ways a pharmacy can create truly sticky customers. Differentiation is necessarily an individual process, and there may be a variety of ways to achieve this goal. The important lesson: you have to make the effort. If you don’t make Every Encounter Count in your pharmacy practice, you will miss opportunities!

Do We Need Pharmacists?

If the title of this article makes you uncomfortable, it should. This is the exact question my business partner, Randy McDonough posed to our pharmacists at a recent clinical meeting. The profession of pharmacy is literally at a precipice. The future of pharmacy depends on how every pharmacist answer this question.

The issue facing the profession is one of initiative, or the lack thereof. For years, thought leaders in pharmacy have been pushing pharmacists to perform at the top of their licenses. We have been asking our staff to do more than simply count, pour, and label drug product. We need our pharmacists to leverage their relationship with the patient to help them active their drug therapy goals. We need pharmacists to monitor outcomes. We must have pharmacists that take the initiative to act as health care providers, not simply drug dispensers.

Yes, there are pharmacists that are doing some or even all of this. The problem for the profession is that these outstanding individuals are in the minority. Today, many pharmacies are struggling to keep their doors open. I am not just talking about independent pharmacies. Even the larger players are having difficulty maintaining enough profitability to continue to provider pharmacy services.

The key to the next generation of pharmacy is getting paid for clinical services that pharmacists can, and in some places, are already providing. The problem is one of timing. Pharmacy owners and pharmacists desperately went to be paid for their services. But many, even most, are not providing the services, nor are they even ready to start. This is a classic chicken / egg problem. Pharmacies have to prove themselves in order to be paid for the services, but many pharmacy owners won’t make changes until they are already getting paid.

Additionally, even if a pharmacy owner is committed to making these changes in order to be ready for future of clinical revenue, finding pharmacists that are willing to put forth the effort required is unbelievably difficult. Far too many pharmacists have become complacent. They are being paid very well to do very little outside of dispensing functions and they are far too comfortable with their limited responsibility. The thought of putting their clinical skills to work is both scary and daunting.

The answer to the question posed at the beginning is actually easy. Yes! Hell yes! Pharmacists are definitely needed. But the pharmacists that are needed are not those that are simply dispensing. Dispensing will eventually become extinct. Healthcare is evolving, and these skills don’t require highly paid professionals. Where we are headed, like it or not, is going to make a lot of pharmacists and pharmacy owners uncomfortable. Change is hard. Change is inevitable.

So if you are a pharmacist, ask yourself this tough question: Am I ready to take on the new challenges of healthcare? Am I going to evolve to become a clinical interventionist? If the answer is yes, and I hope that it is, then you need to start now. Be ready to prove your importance in healthcare. Learn new skills. Advance your practice site. And above all else, Make Every Encounter Count.

Bait-and-Switch?!?

Pharmacy is a difficult business for a lot of reasons. The PBM industry, years ago, turned the profession upside down by transitioning from selling a service to pharmacy (processing claims) to selling access to their pharmacy networks, and later also selling patients of those networks as a commodity. This pivot made pharmacies essentially dependent on the PBM industry for access to their own patients.

When a PBM is involved, pharmacies do not have any real control over what they are paid for product or work. If a PBM wants to pay a pharmacy less than the product costs, a pharmacy has few alternatives. The only way to take back control is to cancel contracts with a PBM network. Of course, this also carries the risk that patients using that insurance will go to a different pharmacy to use their insurance. A serious Catch-22.

There are examples, however, when pharmacies do cancel contracts. I have seen pharmacies drop major payers due to poor reimbursement. The question becomes, if I am being reimbursed so poorly that I will go out of business if I continue to take the insurance, then the loss of that bad business might be enough to keep the doors open. This is akin to amputating a leg with gangrene. Tough choices need to be made in order to survive.

Some contracts that are bad for a pharmacy have less draconian implications. A good example is a discount card with high transaction fees leaving little or no margin for the pharmacy. These cards may advertise themselves to patients as a good option, but they are bad business for pharmacies. As there are many options for discount cards, cancelling an egregious contract for a discount card is not as risky to the pharmacy as cancelling a network based insurance contract.

Pharmacy is also a very dynamic industry. One cannot become complacent as things are always changing. The PBM industry has a new trick up its sleeve: piggyback discounts. The PBMs claim that they need to offer their clients (businesses and insurance providers) better copays. Never mind that the PBM completely controls the copay structure. They want to reduce copays but not impact their own pocketbook or cost their customers more money. And they have found a way to achieve this.

Today, when some PBMs receive a claim electronically from the pharmacy, they then submit the claim to one or more discount cards. If the discount card offers a better price than the PBM’s logic, it uses that instead. This all happens outside of the normal claim response loop. In other words, the claim is sent to and returned from the insurance, but it also took a stop elsewhere. Essentially, a bait-and-switch tactic on the pharmacy.

This extra (and secret) hop can create problems. For example, some of the discount card partners being used by the PBMs are the same one that many independent pharmacies went out of their way to cancel. The PBM, with this new program, has essentially overridden the pharmacies preference to not do business with what they perceived as a bad player by piggybacking the discount plan’s contract onto the PBM’s contract with the pharmacy. The PBM contract has vastly more significance to the pharmacy if it wanted to opt-out.

The biggest challenge with the new tactics is that it is essentially transparent to the pharmacy. Unless you are looking closely at the claims, you will be unlikely to notice that it happened. We have also been told that patients and payers are also unaware that this switch is taking place. So how can a pharmacy ascertain if this is happening? There are a few things you can do to flag these claims in your pharmacy system.

  1. Ask your switch to capture any of these types of claims and then return a soft-reject, essentially giving you an alert that something has happened. At this time, our switch is working on an implementation, and expects that it will be ready to deploy in April of 2024. If this is not soon enough for you (and it isn’t for us), then continue below.
  2. Create a filter or restriction on claims based on an ingredient cost paid field returned by the insurance. Look for when the returned value is less than $0. This is NCPDP D.0 field 506-F6. Discount cards in general return a negative value here (this is the claw-back or fee the card takes). This is a very GENERAL test for claw-backs and discount cards.
  3. Finally, and most specific, create filters or restrictions on claims based on the Network Reimbursement ID field. This is NCPCP D.0 field 545-2F. What you look for here depends on the payer. The values and their affiliated plans to capture in the field are:
######GDRX for GoodRx where the ###### are numbers (often a BIN number) *  
######SSRX for SureScripts with the ###### like above again *
CNTRCT5001 for the Caremark internal discount card
CASH for Cigna patient not covered anymore discount card
NET=9185 for the Humana OTC discount / not covered item
OPTPRP is the Optum Patient Relief (no longer covered)

*Because the ###### component may change, you will need to look for the static part by using logic like "Contains GDRX" Alternatively, you may find PBM published payer sheets that outline the actual numbers. In my state, for example, the insurance using GoodRx returns 999999GDRX in 545-2F.

Most of the above programs have very high fees. These fees fall on the pharmacy, and not the PBM or the patient! The list above is not guaranteed to be complete, and values can change.

Personally, I consider this tactic unethical. As the tactic is just now appearing in our area of the country and we don’t have enough data at this time to fully comprehend the implications nor the significance of the change. One expert on pharmacy contracting indicated that the strategy was used in other areas of the country in the fall of last year. That plan phased the strategy out, apparently using what it learned from the discount card partnership to lower their own Maximum Allowable Cost (MAC) pricing.

Assuming that this practice is here to stay, what can a pharmacy do? A pharmacy refusing to run these claims has to understand the contractural implications. Refusing to run claims might put your pharmacy in violation of a network contract and run the risk of being terminated from the network.

At this point, our pharmacies are collecting data: we have implemented filters to flag these claims as they occur. Our staff has been instructed to document the information and forward for analysis. Until we understand how this strategy is being used in our area, we cannot formulate our response. With more information, we can decide what our response might be going forward. Your assignment this week: put these types of flags into place in your pharmacy and prepare to make Every Encounter with your claims Count!

Footnote: If you are not sure how to implement a restriction or alert on your pharmacy system based on returned claim information, contact your pharmacy management software vendor. I am familiar with two common systems being used by independent pharmacies, Pioneer and Liberty. Both allow this type of implementation. Others undoubtedly have similar features.

Comparison: Strip Packaging workflows

Recently, our pharmacy revisited our strip packaging robotics: our current packager was getting long on the tooth, and we were interested in either upgrading or investigating other options. Ultimately, we added a new product to our arsenal.

Target Market

There are a few different strip packaging options available in the market today, and while they all create a similar end-product, their design and operation might influence the type of practice they best compliment. For simplicity, I divide the market into two groups — Long Term Care (LTC) focused pharmacies, and Community / Retail focused practices. The difference between these two groups, for my purposes, are primarily centered on the duration of packaging provided. A LTC pharmacy supplying medications for facilities will provide strip packaging frequently: the day supply provided to facilities generally ranges from 1 to 14 days at time. In contrast, community pharmacies doing compliance packaging would package no more frequently than every 14 days with most patients receiving 28 to 30 days’ worth of medication at a time.

The packaging machines that are required to support these two examples are designed very differently. Machines designed for the LTC style of practice ideally can house hundreds of medications at time. An example is the Parata Pass family of devices. The RxSafe RapidPakRx was designed with community pharmacy compliance packaging in mind. Both machines could technically be used in either environment, but their operation outside their focus space would less than optimal.

Canisters

The volume driven Parata machines house a large number of small containers (208 to 576 drugs) that contain a carousel optimized for a specific size and shape of medication. There are thousands of possible cassette wheels available. For a given canister, even small changes in tablet or capsule size mean that the canister will either work poorly or not at all. Without a canister, the efficiency of the packaging operation drops precipitously. 

The RxSafe RapidPakRx, on the other hand, takes a very different approach. Instead of hundreds of canisters, the RxSafe product has only 20, 30 or 40 canisters. The mechanism in the canister is also much more elegant–it is capable of dispensing a wider range of different sizes and shapes, including half-tablets. The dispensing wheel used in the RxSafe product comes in just 5 variants that optimize efficiency for very small to very large dosage forms.

The RapidPak canisters are large, accommodating larger quantities of medications needed the longer day supply used in the community setting. They are also easier to clean, which is important, as the canister is not typically dedicated to one medication. While you can assign a few canisters in the RapidPak to be fixed — staying on the machine between batches like a Parata canister, most of your stock remains in the manufacturer’s stock bottle, optimizing product shelf life and limiting overall inventory. Infrequently used Parata canisters can go weeks to months between refills, meaning the drugs spend extended times outside of the sealed, desiccated bottle. Inventory management is more difficult when product stays in the machine.

Smarter

The difference in canister design also ties in another important feature. A machine like the Parata uses an optical sensor to register the drop of the medication. If the cassette was loaded incorrectly but the dosage form fits the canister, it will drop the wrong medication into the pouch. I have had this happen more than a few times, and it is as scary as it sounds. The RapidPakRx uses a very different, and much smarter and safer mechanism.

The RapidPakRx canister wheel picks up the tablet or capsule and it rides up the wheel until it is deposited onto a platform. Here, a camera inspects what was presented by the canister. It first checks that only one item was dropped, emptying the platform, and trying again if it did not receive a single unit. With one unit present, it inspects the size, shape, color, and markings to ensure that the correct medication is on the platform. If it doesn’t match with a very high level of certainty, it rejects the unit and tries again. If it fails multiple times in a row, it will alert the operator so the drug can be corrected, or the canister size changed (wrong canister size results in poor drug capture — too many or two few reach the platform). Once the product is correctly identified, it is then dropped into the awaiting package pouch.

In practice, this mechanism is nothing short of amazing. If one accidentally put the wrong medication in a canister, or even a different generic manufacturer version of the right medication, it will almost always know (and flag an error). If one or two tablets of a different medication are introduced into the canister accidentally, it will reject them. Only in a case where the medications that are virtually identical to each other might the machine logic fail to notice the change. Using this mechanism, you have a very high degree of certainty that the right medications made it into the medication packs, despite any introduced human error.

Workflow and Speed

The RapidPakRx was designed with a retail / community pharmacy workflow in mind. With only 20 to 40 canisters, you load each canister every time you package. At first glance, this might appear to be a large inefficiency compared to a Parata style machine with hundreds of medications loaded, but the difference is not as significant as you might think. Working with the Parata, you typically replenish multiple cassettes before a given run, and if the inventory number is off, you may end up having to replenish them during the run as well. For volume runs (large numbers of patients for short time frames), the Parata still has an edge, but the RapidPakRx is respectably efficient if the drug storage shelves are located close to the robot.

The RapidPakRx also comes with an optical tablet counter: we opted for the GSE EyeCon device (spoiler alert, the parent company of the EyeCon also purchased RxSafe). In a community / retail setting, the pharmacy management system integrates tightly with the EyeCon, documenting the initial product verification. The EycCon saves the images of the count (including NDC and a check on the size and shape of the product) back to your pharmacy system: there is a robust electronic paper-trail. After the initial verification, the RxSafe software collects additional information on the product (like Beyond Use Date), the product is dropped directly into the cassette and placed on the robot. The workflow on a Parata is similar but counting is done by weight (less accurate) and the audit trail is not quite as robust.

Packaging Materials and Cost

On the subjective side, my patients are almost completely in agreement: they prefer the RapidPak pouches. This is due to their stiffer paper backing and the exceptional quality of the printing. The Parata strip packs are all cellophane. Parata offers a white / clear cellophane that offers similar readability, but it in my judgment, it is less legible than that RxSafe. The Parata cellophane is also more prone to wrinkling, making them harder to read after they have been rolled up and boxed. Here the edge goes to the RxSafe product.

Cost of materials for the RxSafe is also better. When we did a cost analysis of the packaging materials used versus standard prescription vials, the Parata packaging was roughly the same. The RxSafe packaging supplies are less expensive, creating a net savings versus rx bottles with time.

Integrated Checking

When we first started with our Parata packager, we did all checking by hand. This was a tedious process and was prone to fatigue. Eventually we purchased a Parata Perl imaging workstation. This allowed us to image each envelope and use the images to do the final verification more quickly. This was a significant added cost as the device is not included with the robotic packager.

The accuracy of the Perl’s integrated verification (where it flags things it doesn’t recognize as correct) drops significantly as the number of doses in each pouch goes up. We found that if we had more than 4 or 5 tablets in a pouch, the accuracy dropped quickly. While the pharmacist had to look at every pouch, the pre-check (when it worked) would dramatically decrease the time required to check the product.

The RxSafe has integrated product imaging and verification included in the cost of the robot. As mentioned earlier, the verification taking place when the product is dropped dramatically decreases the chance that a wrong product is dropped. It also decreases the chance of extra doses falling, something that was common with the Parata device. After the pouches are sealed, a photo is created of the commingled product. Like the Parata Perl, the RxSafe verifies what is in the pouch and flags issues.

Both units have decent software interfaces for checking. The Perl relies on many camera tweaks and once set properly it does a decent job. The RxSafe’s software is newer, and suffers a few minor annoyances, mostly because I have seen both and like some things and miss others. The checking experience on the RxSafe is marginally better than the Perl, but the Perl’s software is probably a little more refined. 

If your pharmacy is doing packaging and looking for a strip packaging solution, both devices deserve your consideration. Depending on your workflow and your market niche, one product may serve you better than the other. For community pharmacies doing compliance packaging, the RxSafe product is probably the winner. If you are servicing many different facilities with frequent med exchanges, the Parata would win hands-down. When you are considering purchasing a robot that costs as much or more than a nice house, it is important to understand the niches the machine services best. 

Counter-Productivity and the CancelRx Message

Today’s topic will not be new to the pharmacists that read this forum. The purpose today is to give pharmacists a chance to share this information with providers and patients with the hope of increasing the awareness of some of the more challenging aspects medication therapy management: how to reconcile medications when the pharmacy doesn’t know a change has occurred.

Let’s look at a scenario that came up today. We received a call from the hospital looking for a current medication list for a patient who was being admitted. This is fairly routine: medication reconciliation is a staple of the admit and discharge process from hospitals. During the call, the pharmacist doing the reconciliation questioned one medication we were providing: they recalled reading a clinic note that referenced the medication being discontinued. Our records did not show this change.

Often, the patient’s own pharmacy is the last to know when a change is made, and sometimes, we are never informed of changes. How can this be? Many hospitals and doctors give the patient a post-visit summary. This might include changes in how they are to take a medication, new medications to start, and old medications to stop taking. Sometimes the patient will share this with their pharmacy. This is ideal, and we train and encourage our patients to provide us with a copy when they receive one so we can reconcile their medications on our side as well.

If the patient doesn’t share this, some of the changes will still become apparent. For example, a new medication will result in a new prescription being sent to the pharmacy. In the other scenarios, though, there isn’t any communication of the changes made back to the pharmacy. The change may eventually come to light when the patient requests a refill early or doesn’t need a refill when we expect. Both of these scenarios depend on the pharmacy being very proactive.

Independent pharmacies like ours are proactive. We leverage Medication Synchronization (MedSync) and make calls to patients a week or so before they are due to get refills to ask about changes and confirm what needs to be filled. Changes may become apparent at this point. Pharmacies that do not have these types of program may completely miss these changes.

When a pharmacy packages patient medications, the lack of communication could result in changes not being made promptly. There really should be a better way to communicate. As it turns out, there is. SureScripts has supported the CancelRx transaction for quite some time now.

The CancelRx message is a message to the pharmacy to discontinue one or more prescriptions that the prescriber previously sent. This message, when used, alerts the pharmacy of changes that they otherwise might not be alerted to in a timely manner. Unfortunately, some providers don’t use this message, or their electronic health record (EHR) doesn’t support the message.

This message is not without its own caveats. We routinely receive CancelRx messages from providers to cancel the old Rx at the same time we receive a new Rx for the same item. If the doctor, however, forgets to send the new Rx, the medication might be instead be just discontinued. Today we received a host of CancelRx messages for seizure medications without new prescriptions following. This resulted in a call to the provider to ascertain their intent.

It should be apparent by this point that communication between the patient, prescriber and the pharmacy is exceedingly important. With our without the CancelRx message, the pharmacy needs to be in the loop on any changes being made. The patient can help by providing their after-visit or discharge summaries to the pharmacies promptly. The prescribers can make judicious use of the CancelRx messages, as well as other communication avenues.

The pharmacy has a job in this as well. The pharmacy should be documenting and providing regular feedback to the prescriber, including the current list of medications. Every message, SOAP note, and request that our pharmacy sends to a provider includes a current medication list as we have it documented. This includes supplements and medications that may come for other providers. This helps close the loop of communication between the provider(s), patient, and pharmacist.

The take-home lesson today: Patients — provide your pharmacy with a copy of the information you receive from your visit or hospital discharge. Prescribers — be sure to communicate changes not only to the patient and their caregivers, but also to their pharmacy. Finally, pharmacies need to provide feedback to the providers, both with respect to current medications and supplements the patient is taking as well as any issues, side effects, or concerns the patient voices to the pharmacy staff. In short: Make Every Encounter Count!

2024, a First Look at GM

As I previously explained, a couple of significant changes happened at the start of the new year. DIR fees became effective at the point of sale, and many contracts have reverted to MAC language. The positive aspect of these changes is that we know immediately what we are making on any given prescription. But there are still some nagging questions: we have lost some transparency into both the product pricing (MAC pricing is proprietary) and DIR fees are variable.

The first thing I looked at when we started adjudicating claims in 2024 was the returned claim details. I was curious if we would see the DIR fee applied to the claim broken out. Unfortunately, and as expected, there is no such information in the claims being returned. We are, once again, expected to trust that the DIR portion being deducted is correct. Hopefully, we will still see a DIR report from the PBMs on a regular basis to ensure that they are not taking advantage of pharmacies.

Our best estimate of DIR fees last year, across all of our pharmacies, was 3% of gross sales. Each store had a different blend of commercial and Medicare Part D, with the latter having DIR fees collected. We expect to see, therefore, a 3% decrease in our gross margin for the new year. The question, therefore, is how are our gross margins holding up for the first 2 weeks of 2024? Let’s jump in and take a look.

December 2023 (Baseline)

StoreRevenueUGMGM
Small Town + Rural Contract + 340B$515,919.6014.3%21.0%
Small Town + limited 340B$174,683.2410.0%12.6%
Small Town + limited 340B$401,338,539.6%12.5%
Small Town$263,063.518.2%10.0%
Medium Town$317,114.0119.4%25.5%
Large Town$455,542.5517.0%21.0%
Grand Total$2,127,661.5413.6%18.0%
Baseline

The column entitled UGM represents the unadjusted Gross Margin: the gross margin before accounting for any purchase rebates. Rebates are not a given, and are being estimated as 15% of the cost on generic items purchased based on historic data for the stores.

The first thing to notice is that the average GM across all 6 stores is below 20% in December of 2023 before any DIR fees. Previously, I reported that for our stores, we have historically seen DIR fees represent 3% of gross sales. We would therefore expect to see a 3% decrease of the GM column in 2024.

The other thing to note is that many of the small town stores that do not qualify for rural contracts are significantly below 20%. The only explanation for the discrepancy is the mix of insurance plans these stores see compared to other stores. This is disturbing because if (when) these stores can no longer remain profitable, the next closest store is in another town or city many miles away. This creates pharmacy deserts in states like Iowa, where all of these stores are located,

January 2024 — the first two weeks

StoreRevenueUGMGMChange
Small Town + Rural Contract + 340B$171,080.7314.0%16.8%-4.2%
Small Town + limited 340B$62,620.037.8%9.8%-2.8%
Small Town + limited 340B$124,456.408.2%11.5%-1%
Small Town$73,308.645.2%7.2%-2.8%
Medium Town$109,542.6921.3%23.5%-2%
Large Town$133,343.7012.4%14.7%-6.3%
Grand Total$674,352.1912.3%14.8%3.2%
First Look 2024

First, a note: the 2024 data represents almost 11,000 adjudicated claims. It is a small but representative sample. The decrease in GM is almost exactly what we anticipated: -3%. So the good news: we know what we are making on the claims. The bad news: gross margins are no better today than last year. The bad news can be even worse for smaller, more rural pharmacies where diversification of their business is more challenging.

Both December and the initial numbers for January are highly problematic with gross margins (after DIR) well below 20%. I have said it before and will say it again: this is simply not sustainable. Suffice it to say that we have already optimized our cost of goods where possible. Most of the pressure on the gross margin is from Brand name drugs where there is only a little room for improvement. Our Brand purchases are at Wholesale Acquisition Cost (WAC) minus nearly 6%, which is nearly as low a COGS for brand as I can possibly get.

That brings us to the point that we should start digging into the 2024 data more deeply. If I look only at brand name medications we see a grim story.

StoreRevenueGM
Small Town + Rural Contract + 340B$126,258.897.7%
Small Town + limited 340B$46,918.370.0%
Small Town + limited 340B$93,516.450.6%
Small Town$58,494.971.9%
Medium Town$76,123.277.4%
Large Town$91,901.893.5%
Grand Total$493,213.844.1%
Brand Only 2024

The PBMs are paying us a gross margin of just over 4% across all store (low 0% and high 7.7%). This gross margin represents over 73% of total gross sales. The margin on generics is much better at 43.8% (low of 29.1% and a high of 60.2%). Because the dollars for the brand side are so much larger, the low GM on the brand tanks the overall GM. Simply put, this is completely inexcusable behavior by the PBMs. Consider the January brand numbers to date: We have almost a half-million dollars in inventory sold, waiting 15-30 days for payment ,and our profit to cover our overhead is an anemic $20,000. Even the largest chain pharmacy would struggle to make these economics work. Hence my lack of surprise when chain pharmacies are closing at a rate not that dissimilar to independents right now.

The PBMs have created this problem, and if they don’t make an accommodation soon, they will not only drive most pharmacies out of business, but they also jeopardize their own existence. I have been seeing more and more requests by PBMs for non-participating pharmacies to add certain networks because the PBS doesn’t have the coverage required by the payer: the PBM is in dereliction of its own contract by not maintaining network adequacy. Yet there is a real reason that pharmacies have worked to drop these contracts in the first place. They simply are not profitable enough to maintain. The number of contracts we will have drop in 2024 to stay in business will be significant. It is unsustainable.

This blog post was designed to create awareness of the current situation. Every pharmacy needs to perform a similar self-study. From there, they need to determine which contracts are hurting them the most and make moves to drop them. Not taking action today means not having a pharmacy tomorrow. It’s your turn to make Every Encounter with your own data Count.