Pharmacists have been attempting to educate other about pharmacy benefit manager (PBM) tactics, but few outside the profession understand the complexity and implications. Recently, however, congress and other have started paying attention to the associated costs of the PBM middleman. Benefit Design Specialists recently wrote about the implications in their blog, and it is an excellent summary of the problems. Click here to read their post entitled Your Health Plan Has a Serious Drug Problem.
Category: Business
Re-Blog: Apple, FBI, and the Burden of Forensic Methodology
What does the current court order requiring Apple Computer to assist the FBI by “hacking” into a criminal’s phone have to do with pharmacy? One word: privacy. More and more, our patients are using their “smart phones” to keep and store their health records. Apple even includes Health Kit in their core operating system on their phones, which allows the user to store and display many different types of protected health information (PHI) in what is essentially a mini electronic health record (EHR).
It appears that many are siding with the FBI in this case without fully understanding the legal ramifications of the case. If you are interested in why the FBI’s request is far more intrusive to your patients’ privacy, skip over to Zdziarski’s Blog of Things and read Apple, FBI, and the Burden of Forensic Methodology, an excellent summary description of the implications of this case. After reading it, consider how save any PHI stored on a phone would be if Apple loses this case.
The Benefits of MedSync
My business partner, Randy McDonough has spent a lot of time traveling and speaking about MedSync at town hall meetings hosted by our affiliation (HealthMart). He continues to be surprised by how many pharmacies have not heard about, or have little interesting Medication Synchronization. We believe that there is a lot of value in this MedSync; our pharmacy has seen a significant impact since our program was implemented.
Just about a year ago, our pharmacy started really pushing a medication synchronization program. We went from a paper file based program to an electronic system. When we started our push, we had about 50 patients enrolled, and the program was labor intensive. One year later, the process is much more streamlined, and we how have over 400 patients enrolled. Our overall goal is to have about 30% of our active patients enrolled in the synchronization program. In one year, we are about half of the way to that goal. A secondary goal of our program is to enroll up to a third of our synchronization patients in our SuperSync program.
While we do charge for the enhanced packaging option included with SuperSync, there is no cost to our patients for our basic sync program. This is unusual for us; we make it a rule to charge for services our pharmacy offers. Our basic synchronization program is an exception to this rule. The reason is simple: while synchronization benefits the patient, by decreasing the complexity of managing their prescriptions and the number of trips they make to the pharmacy, it also has significant benefits for our pharmacy. The 15% of our patients enrolled to date were approached specifically because they represented more than 15% percent of our retail prescription volume. Our average sync-enrolled patient has more than 5 medications; many have significantly more.
The benefit for our pharmacy is primarily centered around our ability to anticipate our synced prescription workload. With our synchronization program, we can leverage our knowledge of the patients sync date to:
- postpone stocking expensive medications until just before they are needed, decreasing store inventory and improving cash flow,
- plan and distribute workload throughout the week, improving wait times for our non-sync patients.
- review patient medication utilization, and prepare targeted clinical interventions before the patient appears in the pharmacy.
The last benefit requires some explanation. Our clinical staff, while managing our synchronization schedule, also have used the opportunity to review the patients’ medications and utilization. Beyond reviewing maintenance mediations, our pharmacists are now also looking at other aspects of each patient, like immunization history, to identify patients that may need additional services. Specific interventions are printed and added to the will-call bag containing their medications to be picked up. This allows our pharmacists to talk to the patient when they come it, fill in these gaps in our clinical records, and offer additional services, like immunization, if indicated.
The benefits of our MedSync program and the associated changes in workflow efficiency is most visible on Saturday. Our pharmacy is only open for a few hours on Saturday mornings, with limited staff working this day. Historically, Saturday was a very difficult day for our pharmacists. The volume of prescriptions filled per hour was often equal to many week day mornings, but was being managed by a much smaller staff. Since implementing our synchronization program, this has changed significantly. The volume of prescriptions filled on a Saturday is how less than half of what it was before. This reduction is largely due to the redistribution of these prescriptions throughout the week.
One year into our program, we are seeing other benefits as well. Patients that have enrolled appreciate the convenience it provides. This helps cement our relationship with our patients, creating additional loyalty. While the number of visits our sync patients make to the pharmacy may actually decrease as a result of synchronization, the actual level of engagement with them has increased as a result. This additional engagement has helped us promote other paid services to our patients and thereby expand our revenue opportunities. The impact and opportunites afforded by our synchronization program are certainly broader than we first anticipated.
Sharing the EHR
Back in December, Drug Topics published Kroger pharmacy’s shared EHR pilot project a success, which described a study completed by an Ohio chain and a local family practice provider. The essence of this study was to observe the benefit of giving a select pharmacy access to the medical provider’s Electronic Health Record (EHR).
This study was certainly not unique, though. Many pharmacies have created similar collaborations. Our pharmacy, for example, has access to our shared patients with a local hospice and a nursing home. The advantages described in Drug Topics are certainly real. Access to a this additional information enables the pharmacist to better ensure that patient is receiving the most effective and safe therapy, and that the desired outcomes are met.
But not all is rosy in these scenarios. The current lack of integration between pharmacy management systems and EHR of the office or organization creates an extra step in the clinical workflow for the pharmacist. Any documentation the pharmacist has to make must be made both in the EHR and the pharmacy management system.
The problem is not limited to the exchange of information between the pharmacy and the office. Collaboration between general practitioners and specialists is hampered by the lack of communication between different vendor’s EHR implementations. This single fact represents one of the biggest reasons that the facsimile (fax) still remains a predominant tool in healthcare. Paper is a common denominator as the document can be scanned into the EHR.
Our Experience with the EHR
In our pharmacies, or employees regularly have multiple systems running on their workstations. This includes our pharmacy management system, our clinical management system (PharmClin), MTM management systems like Mirixa and Outcomes, and multiple EHR windows for the offices with which we routinely collaborate. This requires significant attention to detail and a bit of computer savvy.
Any given problem found by our pharmacists is entered into at least two different systems. Fortunately, many of these systems are free-text based, and our pharmacists can simply copy and paste information between applications to minimize the extra work required to complete documentation on all platforms.
A bigger problem, however, is the reciprocal communication channel. The doctors and nurses at the remote offices do not have a way to easily pull information from the pharmacy’s prescription system. The most common information prescribers are interested in is an accurate medication profile. In lieu of a two way exchange, a copy of the patient’s medication profile with all of our notes by our clinical documentation system (PharmClin).
Despite the challenges of working with multiple EHR products, the benefits still far exceed the associated cost. The improved communication allows our pharmacists to better identify problems in the patient’s drug therapy, monitoring plans and therapeutic goals.
As we continue to navigate the currently evolving transition in pharmacy toward a care centered model, we are continuing to look for new ways to improve communication with the providers. This means that we are constantly connecting with the providers in an attempt to improve our communication.
Luck and the Narrow Network Contract
Narrow network, or preferred network pharmacy contracts are generally offer the pharmacy lower reimbursement in exchange for access to the network’s patient base. Previously we discussed how participation in narrow networks may not actually drive patients in your direction (The Flip Side of Access to Lives). Today I wanted to talk about the math behind these contracts.
Preferred Reimbursement.
In general, a narrow network contract is not very lucrative. Several contracts that I have seen describe in terms of a Generic Effective Rate or GER. This GER defines the average discount on Average Wholesale Price (AWP) the benefit manager will take when it sets its Maximum Allowable Cost (MAC) prices for generic drugs. Historically, an non-preferred network contract might define a GER in the range of AWP – 78%. The narrow network contracts I have seen often have a GER that exceeds AWP-90%.
Doing the Math (or Why Sign a Preferred Contract?)
Before signing a contract, a pharmacy or their contracting organization will evaluate the reimbursement offered to be sure that the agreement is in the best interest of the pharmacy or pharmacies involved. Doing this involves some assumptions on what the pharmacy or pharmacies will dispense to patients in the contract. It is the assumptions that can make or break the analysis once the contract is signed and in force.
The primary assumption is mix of drugs that will be dispensed. The contract promises that the benefit manager will pay out, over all drugs and pharmacies covered by the contract, a GER that averages the discount on AWP defined in the contract. An analysis of the profitability of a contract might take historical dispensing records and calculate an estimate of MAC price from the AWP and GER. This then can be compared to an estimate of the net acuisistion cost for each drug.
Why You can Still Lose When the Average is Profitable
My contracting organization signed a narrow network contract because their analysis showed that while the reimbursement was aggressive, it was still profitable. How then, could I loose money on the plan? The answer buried in the statistics. Remember that all MAC prices are going to average AWP – GER. Profit, however is determined by the difference between the actual MAC and the actual Net Cost.
Consider the top 10 drugs in my pharmacy listed in the table below. Using the AWP / Unit, one can calculate an estimated MAC price for each drug (Est. MAC based on GER). Once a claim is processed, one can capture the Actual MAC price being returned, and calculate the Effective GER. The last two columns calculate the estimated and actual profit or loss per unit for these top 10 drugs.
Based on these calculations, my top 10 drugs should be profitable at the contracted GER (the Estimate Profit/Loss per unit averages $0.215), with only one product underwater. The reality is very different, however. The Effective GER for the top 10 drugs in my pharmacy is much higher than the contract specifies (averaging over 96%). Instead of 1 drug being underwater, 6 of 10 are underwater. The average reimbursement over all 10 drugs actually just below zero.
The next table below shows the top 10 drugs dispensed so far this year in the example narrow network:
Note that while several of the top 10 drugs match the previous table, there are several drugs on this list that appear in at a spot greater than 20 on the overall list. The sample size here is smaller (none more than 6 prescriptions), but after one month, the drug mix already appears fairly stable. Of interest in the table is one drug that does not appear in the top 200 (Quetiapine 50 mg). This becomes important in the discussion below.
Like the previous table, the estimated profit and loss using the contracted GER are positive: none of the top 10 drugs here are estimated to be losers. Looking at the actual adjudicated MAC rates reveals that the average effective GER for these 10 drugs is, like the overall list above, higher than the contractual rate. In this table, the net profit is positive. The reason that the average profit for the top 10 drugs is above zero is the presence of the single outlier drug: Quetiapine 50 mg. This drug, which is otherwise not it the top 200 drugs our pharmacy dispenses, has a high AWP with a MAC price discounted near the contracted GER. It is a stark contrast to the others: a winner. Removing this one drug from the list drops the actual profit down to zero.
This illustrates the danger of using an average GER in a contract. The plan can, and apparently does, discount common best selling drugs at rates far in excess of the contractual GER. Other, less common, drugs will be discounted at lower, more profitable rates to generate an average over all pharmacies that meets the contractual requirements. But if a given pharmacy doesn’t dispense a mix of products containing a sufficient sample of winners, they will quickly trend to either zero or negative profit.
For a given pharmacy, therefore, a preferred network contract becomes a gamble. Will I at least break even? Will I average a few dollars for each prescription over the year? Or will I actually pay the benefit manager, in the form of a net loss, for the privilege of filling prescriptions for my patients? This gamble is compounded by continuing patient migration to narrow network plans in order to save money. Over 75% of patients are now enrolled in a preferred network plan, and that number will only increase with time.
What Do I Do?
In all likelihood, the implications of the current batch of narrow network contracts is just now becoming apparent to those pharmacies participating. After a single month, for example, our pharmacy has managed a profitable mix for one of the more aggressive networks. This, of course, will need to be watched carefully as our mix changes with time. Other networks we are enrolled in use Voodoo DIR fees, which makes assessing our position virtually impossible in the near term.
But pharmacies do have options. Many states have adopted laws that regulate the MAC prices of drugs. It is very important that pharmacies exercise their voices, submitting underwater MACs for review, and reporting problems to the appropriate agencies when the benefit manager fails to implement a meaningful change. While our contract for reimbursement is tied to the GER, we are still entitled to be paid the cost of the drug product. We are still entitled to the protections offered by our laws. Despite the severity of contracted GERs, most common drugs are profitable if the benefit manager actually uses that rate. An average GER can be either fair or unfair to a pharmacy, depending on how the benefit manager manipulates individual MAC prices. It is in our interest fight and ensure we are paid fairly under the contract’s terms.
Narrow Network Growth in 2016 (link)
Adam Fein, Ph.D. publishes a blog called Drug Channels. Last week he published an excellent summary of how the 2016 Prescription Drug Plan landscape is evolving in the new plan year. Skip over to Medicare Part D 2016: 75% of Seniors in a Preferred Pharmacy Network (PLUS: Which Plans Won and Lost) to read more.
Changing Tides
The paradigm change occurring in the practice of pharmacy has been a regular topic of this blog. But the Thriving Pharmacist is not the only one talking about the importance of pharmacists participating in a new care centered model. Randy Dotinga, with Drug Topics echoes many of the same themes in his recent article : Care delivery key to nex-gen pharmacy success.
Independent pharmacies are not the only ones looking to differentiate themselves to prepare for this new model. A recent article in Chain Drug Review: 2016 Retail Outlook: Pharmacy’s reach to expand, reports the thoughts of several leaders in a variety of chain drugstores on the same topic.
Change is coming. Be ready. Start now, and make every encounter count.
The Flip Side of Access to Lives
Previously, we have written that access to lives is important to any pharmacy, and the narrow, preferred networks that have become vogue in Medicare Part D are an example of an outside influence that can impact this access. The theory, of course, is that being in a narrow network will drive patients to a participating pharmacy, thereby increasing its business. The decrease in reimbursement that accompanies preferred status is theoretically offset by the pharmacy’s ability to generate the revenue from these new patients. But does this theory withstand scrutiny? Continue reading The Flip Side of Access to Lives
Pharmacy Street Blues
It may not be at the top of the list of things people consider when they think about what a pharmacist does all day, but one important, and over-looked aspect of the profession is a form of law enforcement. Specifically, pharmacists are constantly on the look-out for drug seekers and forged controlled substance prescriptions. Criminals are becoming more and more sophisticated in their attempts to secure controlled substances without a valid prescription, and today’s blog is going to describe some of the challenges pharmacists need to be ready to embrace.
Drug Seekers
One of the more common problems encountered is the drug seeker. Most of the time, these present as a patient with an otherwise valid prescription for a controlled substance. The problem is that the person is using many different doctors and many different pharmacies. Spotting a drug seeker is generally not very difficult as long as the pharmacy has proper training and policies in place. These often present as new patients to a pharmacy who request a cash price for the controlled substance.
When presented with a potential seeker, pharmacists and pharmacies should check the state registry for a controlled substance dispensing history (sometimes called a PMP for Prescription Monitoring Program). These lists, while often a week or so behind, quickly reveal multiple pharmacies, physicians and insurance / cash histories.
Once a problem is identified, however, pharmacists are confronted with an even more difficult task: what do you do? The answer is far from trivial, because there is likely a real medical issue being treated alongside physical dependence to the controlled substance(s). A pharmacy may elect to refuse to fill a prescription in this cases, but that does not address the underlying problem. It just moves the patient to a different pharmacy or pharmacist. A better approach is to speak with the patient about their issue and then send a short clinical note to each of the recent prescribers alerting them to issue, directing them to the PMP for details. The goal is to get all of the prescribers on the same page and have one prescriber and pharmacy manage the patient. Addressing the root of the problem takes effort and fortitude.
Criminals
Less common, and far more difficult, are forged prescriptions. Criminals are becoming amazingly sophisticated with their tactics, making the job of the pharmacist recognizing an invalid controlled substance prescription increasingly difficult every day. The criminals plan carefully, usually targeting a pharmacy at a busy time or just before closing, trying to catch the staff in a hurry. Spotting a forged prescription is an art. The pharmacist relies on many different pieces of information to spot a fake, but don’t look for me to publish a list. The last thing we want to do is make it easier for criminals to fool the pharmacist. Instead, I will detail several common tactics:
- A out of town or out of state doctor.
- Trying to fill the prescription after the physician’s office is closed, making contacting the prescriber inconvenient or impossible
- Coupled prescriptions: presenting one controlled and one non-controlled prescription together to make them both appear more legitimate.
- Someone other than the patient on the prescription presents the prescription and wants to pick it up.
If a prescription is not passing the sniff test, the pharmacist has to make a choice of what to do next. My first advice is to trust your gut. When it doubt, consider the prescription suspect and do not fill it.
The law does not necessarily cover what a pharmacist can, and cannot do in these circumstances: we are generally left to figure this out on our own. The advice of the thriving pharmacist is this:
- Request the identification (photo ID) of the person requesting the prescription to be filled. Make a photocopy of this information in case the prescription is determined to be fake.
- Stall. Tell the person the pharmacist needs to verify the prescription and it will not be released until that has been complete. This may not be possible until the next business day when the prescriber’s office opens.
- Do not risk your safety. Starting with the items below, the situation could become risky. It is in your best interest to call the police now and alert them to a possible situation. It cannot hurt to have the local law enforcement nearby or even at the store.
- Do not relinquish the suspect prescription to the patient until it is verified as valid by the prescriber. If the patient demands the prescription back before this, suggest the local law enforcement stop by to discuss the problem. (They may even be outside by this time if you followed step 3)
- If the person actually waits for the police to arrive and discuss, the prescription may actually be real, and you should follow the advice of the officer(s), returning the prescription if directed to do so.
- Provide all information to the police, including information obtained from a verification check and any video surveillance if available.
- Report the incident to your local PMP or state board. Many states maintain a mailing list alerting pharmacies to current threats.
The Rubber and the Road
Neither of the above scenarios are easy to handle, and either can become dangerous. Physical dependence and criminal intent can be a tricky combination. Each issue presents its own set of challenges, and successfully foiling a scam may mean the pharmacist has to testify in court. This is an important part of the profession: a part that does not involve any reimbursement–but should.
In the words of Sergeant Esterhaus (Hill Street Blues): Let’s Be Careful Out There. Make every encounter count.
Economics vs. Care
The other day I wrote about PBMs and their role as Middleman (See The King is Naked). But every story has two sides. Today’s installment is a little more depressing: it relates to the economics of the current health care system.
From a Wall Street perspective, retail pharmacy is at the bottom of the pharmacy food chain. Consider the following quote from a financial analyst looking at the economic differences between PBMs and Retail pharmacies:
Whereas the PBM business is an oligopoly, the retail pharmacy business is extremely competitive with inferior economics (See seekingalpha.com)
One significant deduction made by the financial analysis is that PBMs are indispensable to retail pharmacy networks. This indispensability is due in large part to the current state of oligopoly the PBMs have over the market. Where once there were dozens of small PBMs, today there are only a few, controlling most of the market (See Does Size Matter). The marginalization of retail pharmacy is due, in part, to their relative ubiquitous nature: pharmacies, in the eyes of the investor, are essentially interchangeable. This creates a perceived weakness in the economics of retail pharmacies.
Marginalization
Consider another quote from the same analyst:
A PBM’s customers are exclusive to it. But a retail pharmacy network does not have exclusive customers. This enables a PBM to squeeze retail pharmacy networks by playing them off against each other.
A PBMs customer is the payor, and the exclusive nature of this relationship is basic contract law. A retail pharmacy network’s customers are patients. Non-exclusive access to a patient implies that the patient is not actually going to a pharmacy for any other reason than drug product. It implies that PBMs are able direct where the patient goes without respect to the level of care or service provided. This is where an investor’s perspective starts to diverge from the reality of care.
Patients want a choice with respect to their pharmacy provider. While some may consider price to be of paramount importance, others consider service and care as driving forces. If asked to characterize themselves, it is my assertion that most patients would consider themselves exclusive to a pharmacy provider. When the PBMs play pharmacy off against each other, patients are marginalized. The payor is interested not only in drug cost, but also in total health spend. With the PBM focusing primarily on price, and ignoring the impact of care on the payor’s bottom line, the PBM is marginalizing the payor.
An Upside-Down Market
The current market is upside down. Traditional competition of pharmacies for patients has been removed by the PBMs. Patients are now being manipulated by the system, and the manipulation is based entirely on drug cost. The market is no longer a free one.
In the current market, there is really only one winner: the PBM industry. Both the patient and the payor become losers. Without an effectively competitive market that values not only cost, but also care and customer service, pharmacy will regress toward the least common denominator: drug product.
Part of the reason this situation exists is the complexity of the current system. Most patients do not understand how the system works, or how they are being manipulated by the PBMs. Pharmacists need to be ready to explain the system to their patients in simple, understandable terms. It is going to take a groundswell of patients voicing their discontent with the current system to bring real competition back to the market. And this groundswell is going to have to start at the prescription counter. Take time to work with your patients. Educate them. Be sure they understand both their medications and the system that provides them. Make every encounter count!