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IF YOU’RE AN INDEPENDENT PHARMACIST OR PHARMACY OWNER, you know how challenging the payer landscape has become. You’ve probably made an effort to diversify your business in order to meet healthcare needs in your community while trying to stay financially viable. So when it comes to contracting on your behalf, shouldn’t your pharmacy services administrative organization (PSAO) be doing everything it can to protect your patient access and keep your pharmacy viable?
Your pharmacy’s pharmacy services administrative organization (PSAO) should prioritize your valuable role in the community (and not just consider prescription volume). There are a few key attributes that should be evident if the organization has your best interests at heart. Below we discuss the three priorities of the right contracting partner.
The Three Priorities of the Right Contracting Partner
1. The “A” in PSAO stands for “administrative” and describes the traditional role of the PSAO, which is acting as an intermediary between the PBMs (pharmacy benefit managers) and the pharmacies. This is a passive role that worked in the past to a degree because independent pharmacy was able to operate in the former reimbursement environment. As payers and PBMs continue to consolidate, they now wield tremendous negotiating leverage. They’re rapidly forcing down reimbursement rates, thus negatively impacting the economic model for all pharmacies, especially independents.
The “A” in PSAO must evolve to mean “advocate” — both at the contracting table and on the legislative front.
Most traditional PSAOs continue to believe their primary role is merely an administrative one, working in the background as intermediaries so that PBMs don’t have to contract with each individual pharmacy. Most PSAOs haven’t moved beyond that narrow scope. What they haven’t realized is that the PSAO’s mission must expand to help its member pharmacies operate in the current environment, where their services aren’t properly valued. This is about financially, economically, and professionally striving for a sustainable business model for independent pharmacies. What we are hearing from pharmacies is that they need someone to fight for them, and not just act as a back-office administrator. They need someone to evaluate, contract, and advocate to help reverse some of the abusive and burdensome tactics that these monolithic PBMs are imposing, especially on independent pharmacies. Meeting this need makes it even more incumbent upon PSAOs to engage with payers on your behalf and to promote your value to protect their own viability and future. The “A” in PSAO must evolve to mean “advocate” — both at the contracting table and on the legislative front.
2. When a PSAO casts a wide net and agrees to participate in all payer networks, what it’s really telling you is that it’s conceding that your unique and valuable services are commodities. They are trading margin for volume as the only option. But if the PSAO views its mission more expansively, it will find that being more selective prevents the commoditization of pharmacy services. This sends a very powerful signal to the PBMs. Imagine your PSAO being unwilling to readily sacrifice its member pharmacies’ margins to the PBMs merely to participate under less-than-viable terms. Prescription volume alone shouldn’t be the goal. Preserving patient relationships that also reward you for value should be the prime objective. Key to contracting is keeping in mind that unless pharmacies have the time, resources, assets, and wherewithal to continue to deliver these services, they won’t be able to continue to survive in the future. Patient relationships are the hallmark of independent pharmacies.
3. Industry-leading PSAOs bring experience from various disciplines to the contracting process. They bring to bear expertise from health plans, PBMs, pharmacy, and pharma. After all, it’s crucial to understand “how the sausage is made” if you’re trying to change the menu. The new PSAO will have a fundamental understanding of how PBMs work — what the economic flows are, where their incentives are — and try to apply those when protecting pharmacies. That experience can’t be overstated. It’s the only way to truly understand where the opportunities are to help pharmacies survive and thrive.
The Bottom Line
Independents need a true partner that contracts to help them successfully navigate a challenging payer landscape. The right partner will prioritize your compelling value story — and have the experience, passion, and strategies to make it happen. CT Peter Kounelis, R.Ph., is VP of Elevate Provider Network for AmerisourceBergen, where he leads network strategies and serves as a liaison to the industry. He holds responsibility for developing and leading PBA Services for the organization and oversees the provider network advisory board. He earned his pharmacy degree at the Purdue University School of Pharmacy and his M.B.A. at the Purdue University Krannert Graduate Business School of Management.