Pharmacy services administrative organizations (PSAOs) have grown over the years to provide their members with a wide array of critical services and tools. While dealing with pharmacy benefit managers (PBMs) has always been at the core of the PSAO mission, they are doing much more these days.

An Independent State of Mind

We’ll hear from two PSAO members and dig deeper with an industry expert into some of the current headwinds in the market, such as PBM efforts to undermine these organizations in an attempt to maintain what many consider to be an unfair advantage as middlemen between plan sponsors and pharmacies.

Craig Rowland, R.Ph., owner, Pine Hill Hometown Pharmacy
Craig Rowland, R.Ph., owner, Pine Hill Hometown Pharmacy

Craig Rowland, R.Ph., is the owner of Pine Hill Hometown Pharmacy, an independent community pharmacy located within a medical complex in rural Cato, N.Y. Pine Hill Hometown Pharmacy has been a Pharmacy First member since it opened in 2008, and Rowland stayed with the PSAO when he took over ownership in 2014. “I’ve been courted by several other PSAOs,” says Rowland. “Being an independent, one of the things that I weigh heavily when I make decisions is how a company sees independent pharmacies. Some PSAOs are either owned by or very tightly aligned with major wholesalers. Pharmacy First is not, and that’s been important to me and my decision to stay with them throughout the years.”

Ron McDermott, R.Ph., SVP, pharmacy operations, The Hometown Pharmacy
Ron McDermott, R.Ph., SVP, pharmacy operations, The Hometown Pharmacy

Ron McDermott, R.Ph., is senior vice president of pharmacy operations at The Hometown Pharmacy, an independent pharmacy group that operates 16 locations in Western Pennsylvania and Eastern Ohio. The group is an Arete Pharmacy Network member. McDermott has three things that he recommends considering when assessing a PSAO. As with Craig Rowland, McDermott suggests assessing the affiliation with a wholesaler. If you’ve got a long-time relationship with a wholesaler, as The Hometown Pharmacy does, and you’ve worked hard to get into a certain contract with that wholesaler, you may very reasonably not want to undo all that work. “We have built a great relationship with a regional wholesaler,” says McDermott. “It is important to us that we can continue our contract with our wholesaler and still be a part of a PSAO with Arete Pharmacy Network, since it is wholesaler agnostic.”

Next, McDermott also prioritizes a PSAO’s processes for listening to pharmacy members. “You want to find out if a PSAO takes feedback from its member pharmacies,” he says. “I’m on the advisory board with Arete Pharmacy Network, and we meet and we throw ideas around, and they take that feedback very, very seriously. We really impact how decisions are made at the top of Arete Pharmacy Network.” Giving members an advisory role just makes sense, according to McDermott. It’s a matter of listening to people out in the field rather than just trying to make decisions from the corporate office. “You want your PSAO to allow you to be involved in decisions,” he concludes.

McDermott’s third point to consider is the ancillary services a PSAO offers. “You aren’t just looking for pharmacy contracts with the PBMs,” he explains. “You want to find out if a PSAO brings to the table services such as a quality center that can, for example, review how you’re hitting certain guidelines within those contracts. Does the PSAO offer you somebody who gives you individual representation and somebody who checks in on you every once in a while? You want more than a pile of executed contracts once a year. You also want a PSAO with a team that brings to the table special opportunities for members. For example, with Arete Pharmacy Network we have something coming up with a pharmacogenetic testing company, and we’ve been able to get a special rate because we negotiated it as a group.”

Much of this speaks to maintaining that independent mindset, as Craig Rowland emphasizes, while gaining from the expertise that a PSAO provides. “You are looking for the highest level of expertise in a PSAO’s staff,” says Rowland. “Reading the fine print, that should be their forté. We rely on Pharmacy First to analyze each payer contract carefully, certainly, but there are so many other ways you should look for a PSAO to put those skills to work for you.” For example, there’s reconciliation. Rowland relies on Pharmacy First to follow claims and provide reporting that gives insight into any areas of concern. And when Rowland finds that there are issues with payers, he’s able to go to his PSAO for support, rather than having to deal with them himself. “This is where strong relationships with PSAO staff come into play,” Rowland says. “It’s a major benefit of bringing on the support system that a PSAO should offer.”

Gaining Representation Through Your PSAO

Ron McDermott has a quarterly review with his dedicated representative at Arete Pharmacy Network, but this rep is also available on an ongoing basis. “I can pick up the phone or send an email about a claim that doesn’t go correctly,” McDermott offers as an example. “This means I’m not starting from square one with the PBM help desk. Instead I’m talking to my rep, and she’s seen this issue before maybe, and she’s got her own contacts at the PBMs. It’s important to know that you can use your PSAO as that resource, that they’ve got expertise in these situations, and that they understand your business as a pharmacist. So build those relationships with the staff.”

Rowland leverages the relationships he’s built with Pharmacy First staff to share experiences and gain insights, and he reaches out to his rep regularly as well. “Our rep is talking with a lot of other Pharmacy First members,” explains Rowland. “And so she may have just worked through an issue similar to what I’m calling about. She’s got a high-level view of reimbursement issues, or formulary issues, or dealing with a particular third-party payer. And I contribute to her knowledge with my insights, of course. There’s a healthy dialogue. Pharmacy First has a great staff of very well-trained, knowledgeable individuals with strong communication skills, and it’s a very helpful relationship that we have with them.”

Trusting the PSAO Process

Scott Pace, Pharm.D., J.D., Partner, Impact Management Group
Scott Pace, Pharm.D., J.D., Partner, Impact Management Group

One thing that is important is understanding just what a PSAO can really do for its pharmacy members, though, when it comes to contracts. Not happy with contract terms? Even with all the skills, expertise, and size that a PSAO brings to the table in the contract evaluation process, and even with the goal of executing contracts with the most favorable terms for pharmacy members, unfortunately, the playing field is still heavily tilted in favor of the PBMs. This is a sad but clear truth for all independent pharmacies and all those working to support independent pharmacies. As Scott Pace, Pharm.D., J.D., points out, the core activities of a PSAO is evaluating and executing the contracts with PBMs and helping pharmacies manage their payment reconciliations to ensure that the PBMs pay them what they are owed. Pace is a partner at Impact Management Group, the director of the PSAO Coalition, and co-owner of Kavanaugh Pharmacy in Little Rock, Ark. He has a long history working in and on behalf of community pharmacy. He is quick to emphasize that the one thing that a PSAO cannot do is truly negotiate on behalf of pharmacy members as if they were all owned by the same entity. This is an important point, according to Pace. “Federal antitrust law impacts a PSAO‘s ability to effectively negotiate with PBMs because their members do not share common ownership. Only a few industries, such as unions and professional sports, have exemptions to these laws,” he explains. “What the PSAO can do is evaluate contracts on behalf of members and execute the contracts or decline to execute the contracts, which provides administrative efficiencies to individual pharmacies.” This, in Pace’s mind, is an extremely valuable and time-saving administrative service for member pharmacies, akin to other professional services such as accountancy and bookkeeping that a pharmacy may use.

This is truly a critical service, according to Ron McDermott, because in a world without PSAOs, there’s just not going to be a way for individual pharmacy businesses to effectively review all the contracts, manage the flow of amendments PBMs make over the course of a contract term, keep up with the changing contract terms, and hit all the numbers. It’s not unusual for a PBM to discover, over the course of a contract, that it is starting to miss its numbers, notes McDermott. “Whether it’s a generic percentage that they were supposed to hit or some margin that they were supposed to hit,” he says, “it’s not happening, and then it gets sent back to the pharmacy — and reimbursements can change a couple of times a year within each contract.”

PSAOs can provide, for example, electronic remittance advice and claims reconciliation services that make sure pharmacies are getting paid according to contract terms. “Every pharmacy should have these claims-monitoring services in place,” says Craig Rowland. “If a claim is underpaid or if we have submitted some inaccurate information, whether it’s a quantity or a cost amount, you need the tools to catch and rectify these errors.” Sometimes the amounts are just pennies, which certainly matter in today’s low margin environment, notes Rowland. But it’s not unusual to be dealing with errors in the hundreds of dollars too. “We’re going in so many different directions, especially nowadays. It’s not possible for us to keep up with all of this, and so when you can rely on your PSAO for error resolution and claims reconciliation, it has a big positive impact on the financial end of the business,” he says.

The Future of PSAOs

A solid relationship with a PSAO is going to remain a key component in the continuing battle against low and negative reimbursements from pharmacy benefit managers. “There’s an ongoing risk in pharmacy that you will find you are being paid for prescriptions at less than the cost of the medications,” says Ron McDermott. “Never mind the cost of the time and technology we invest in dispensing, medication therapy management, and all the other clinical activities we undertake. PSAOs are battling this. Independent pharmacy owners are going to continue to need to be working alongside PSAOs to stand up to some of these terrible contract numbers and to help bring ancillary services to the table that support our clinical care and business goals.”

But the very presence and role of the PSAOs has drawn the attention of the powerful forces arrayed against community pharmacy. In fact, PBMs have mounted efforts to misdirect toward PSAOs the scrutiny that PBMs are falling under. The PBMs are trying to use this misdirection to create uncertainty among those who don’t really understand the pharmacy market and to pretend that PSAOs are shadowy organizations that aggregate independent pharmacy members into chain-like behemoths, which is strictly not the case. This effort to misrepresent the role and capabilities of PSAOs is meant to fuel opposition to legislation proposed to reign in egregious practices such as aggressive MACs (maximum allowable costs) or effective rates for generics, brands, and dispensing fees. These PBM efforts to weaponize PSAOs against legislation supported by community pharmacy is something to keep an eye out for, notes Scott Pace, and there’s an ongoing need to make sure that legislators are educated about the role of PSAOs.

This will help keep the pressure on PBMs and ensure that PSAOs can continue to provide much-needed services for their pharmacy members. “Everybody’s blaming big pharma and community pharmacy for high drug costs,” says Craig Rowland. “But many people just don’t have a clue that this all comes back to the contracts PBMs work to force on us. The statistics and the studies that are out there show so clearly that, in state after state, there’s a growing understanding of the money being lost by looking into these PBMs. Specifically, we’ve seen that when state Medicaid programs drop some of these contracts, they’re locating millions and millions of dollars that they had been losing. So as an independent pharmacy, we need a strong PSAO in our corner. My hope is that by working with a PSAO we are going to gain a little more leverage in dealing with these large PBMs.” CT