Pharmacies focus a lot of attention on what they get paid for dispensing a medication, but it can be very important to the bottom line to spend some time addressing your costs. PharmSaver President Michael Sosnowik suggests taking a good look at your prime vendor agreement (PVA) to ensure that it’s structured to be mutually beneficial for your pharmacy and your primary wholesaler. Here are Sosnowik’s three keys to improving your PV:
1. Don’t get wrapped up in cost minus on brands.
Often pharmacies will look at the discount off brands in isolation, without taking a look at the generic side of the equation, too. For example, if you negotiate minus 5% on brands, that’s great. But you also need to take a close look at the PVA terms for your generic buy to make sure the terms there aren’t eliminating the savings on brands.
2. Pay attention to your tiered rebates based on generic compliance.
Ask yourself, are the percentage tiers that trigger rebates actually achievable given your pharmacy’s buying patterns? Here you have to keep in mind that not all generics count toward your compliance. For example, most OTC (over the counter) items are probably not going to count toward your rebate tiers, and in fact will be counting against you, since they’re adding to your total dollar spend without correspondingly adding to your generic purchases. That’s because with most tiered rebate structures the only generics that count are “source” generics, and there may be many other generics that you are purchasing — on GPO (group purchasing organization) contracts, for example — that add to your total spend without adding to your generic spend.
3. Don’t overcommit to your primary wholesaler.
Don’t forget that, overall, your prime vendor may well be your highest-cost option on many products. If you contract for too high of a top-line dollar amount in your PVA, you don’t leave yourself any wiggle room to purchase outside of that contract when you find better pricing. Keep your total PVA commitment as low as you possibly can. Aim for no more than 80% of your total volume. CT