Category: Business

I know that it has been awhile since I have published anything new. For that I am sorry. COVID-19 has been a challenging time for most industries, and pharmacy has not been an exception. I have broken out my keyboard, however, because the pandemic has created an alarming sentinel event everyone in pharmacy should be aware of immediately. This is an event of significance; an event that could lead to another lost opportunity for the pharmacy industry. I am talking about point of care (POC) testing. Specifically testing related to COVID-19, but really all POC testing.

Testing in and of itself is generally regarded as an opportunity for pharmacies. We have the expertise and the resources to quickly spin up a process and be valuable assets when needed. The pandemic has been a great opportunity as many pharmacies are participating in testing for COVID-19 and the demand keeps growing.

So where is the danger you might ask. Consider this–yesterday I received a fax from a national PBM. They are a significant player, perhaps even approaching monopoly status as they are very “vertically” integrated. The PBM industry has already crippled pharmacies across the nation with significant underwater claims and overall anemic reimbursement. They do not pay pharmacies a real professional fee; $0.15 or less for most prescriptions is a joke as far as a professional fee goes.

This fax was an invitation to join their Point of Care (POC) testing network. And here is the problem. This is yet another area the company is excerpting its vertical integration and control. Does pharmacy really need to give a monopolistic juggernaut yet more control over their existence?

Now the rates being offered for the POC testing are quite reasonable. So you may ask “what is the problem with this”? To answer that, consider the infancy of the PBM industry. The PBMs priced generic and brand name items reasonably at first. With time, however, they took steeper and steeper discounts. Their own profitability, however, never sagged. The PBMs turned us from a participating provider into their virtual asset to be sold as a part of their network.

Today pharmacies have little to no negotiation power in this arrangement. If you don’t like it, you can leave it. But your patients won’t be able to use you if you leave. Leaving the “network” is suicide for most pharmacies. To make matters worse, the PBMs are already pushing pharmacies out of business gradually through manipulating their network contracts. Don’t forget, the PBMs either own or operate their own pharmacies, and they only need so many to maintain their measures of network adequacy required by some states.

Which brings me back to POC testing. If you are doing POC testing, you likely are either charging cash or you are set up to do billing to the medical insurance. Testing is really a medical service, and the PBM is not needed here. The medical third party administrators (TPAs) already oversee pricing. Bringing a PBM into this is a disservice to the testing and a disservice to the profession of pharmacy.

So I am asking you a favor. Share this article. Be sure all pharmacy owners understand that they don’t need a PBM involved in POC testing. Get registered as an independent laboratory and credential on the MEDICAL side of the field. This is so important to the future professional status of pharmacy and pharmacists. Let’s not let our industry fall prey to another PBM hostile takeover. I mean it. Make this encounter count!

The SarS-CoV-2 Pandemic is undoubtedly far from over, but the push to “reopen” in most states is high. Even though the reopening of the country will undoubtedly have an impact on new cases and Covid-19 related deaths, some well placed procedures may help minimize this potential impact.

While pharmacies were deemed essential, and not forced to close doors, we decided to close our lobby back in March and exclusively service our customers using curbside service and delivery to protect both our patients and our staff. Now, with non-essential businesses being allowed to reopen, we also opened our doors last week. For the first time in over 2 months we are willingly allowing patients back into our practice. Restaurants and other businesses in my area have occupancy restrictions placed on them in order to reopen. We are not constrained in this manner, but the concept certainly has merit.

Unlike a restaurant, we don’t have a host or hostess acting as a gate keeper. We did not desire to post store staff at our door in a similar fashion so we looked for another mechanism to control our occupancy. We ultimately decided to put a traffic light at our door (see the Featured Image at the top). We coupled the signal with signage outside our store to explain the procedures.

Our desire was to be able to limit the potential spread of the virus. We hope to accomplish this by limiting the number of patients allowed in any given area of our practice at any time. We have chosen to allow one person to enter the store each time the light is green. Our staff can control the light from the prescription department. If we bring a patient into our clinical offices for a prolonged encounter, the light can used to admit another person to the lobby for general pickup.

This method works well for a small independent store with a limited front end. In fact, our front end is not accessible to our patients, with fixtures moved to create a single aisle to the register. Patients cannot shop our store. The stoplight concept would not work well in a store with a large front end or other departments without further modifications to procedures being made. 

The concept has worked well for us, though there was a learning curve. It took our staff several days to get into the habit of changing the light when someone entered or left. I have also had to return to the store after locking at the end of the day up to turn the light From GREEN back to RED.

Not everyone coming to our practice took time to fully read the signs, and we have had a few traffic violations. We have not made it a practice to issue tickets, though. Most of our violations have only received verbal warnings from the store police. Also, as we expected, we are still doing a brisk curbside business, and our delivery volume has not subsided.

Overall, we feel that this method has worked well for us, and our patients have not presented us with negative feedback to date. Having patients back inside the store, albeit in controlled doses, has been refreshing. It gives us a taste of normalcy, though the face masks and plexiglass partitions still hint that things are far from returning to normal. But we are back to making every encounter, count again. For now, though, just one person at a time!

If you have successfully interested with an employer to self-insure and consider a direct pharmacy services contract, the next step is to understand the landscape, devise a benefit, and put the logistical parts together. In many ways, this is the hardest part, especially if you try to make it more complicated than it needs to be.

The first step is to demonstrate the potential savings. This is not as easy as you might expect. The goal is to compare the employer’s current medication cost with the the estimated costs under a direct contract with your pharmacy. The problem is that if the employer was previously using a traditional medical insurance package, the drug benefit was likely bundled with medical expenses and is not easily teased out.

On the other hand, if the employer has a history of using a PBM to manage their benefit, they should have access to reports that detail exactly what was purchased and what it cost both the employee (their coinsurance / copay) and the employer. We are going to assume that the employer has some access to to an itemized listing of medication costs. If they don’t have this, the process becomes one of trust and experimentation.

There are two scenarios possible if the employer has access to this information: 1) they share a de-identified list of medications (ideally NDC) and quantities, but not what they were invoiced for them, or 2) they share a de-identified invoice complete with what they were charged. The difference is a matter of trust. With all information the pharmacy can completely prepare the analysis for the employer, but they can also potentially manipulate the contract terms to maximize their own profit. By excluding invoice price, the employer will have to do this work, making the comparison of the PBM expenditures and pharmacy estimates.

In order to prepare for the analysis, the pharmacy has to come up with a proposed contract. As mentioned last time, I often use an Invoice Price + Dispensing fee schedule for these contracts. They are one of the simplest to implement. I suggest a fee based in part on a published cost of dispensing survey. In Iowa, for example, Medicaid has a dispensing fee of $10.07 based on actual pharmacy financials submitted to a third party for analysis.

The disadvantage of this simplistic fee schedule is that some inexpensive drugs will cost the employer more than they were paying under a PBM contract. The savings on the rest of the items, however, is usually more than enough to offset this plus save the employer significant dollars. If you don’t have the employer’s actual invoice cost and they are doing their own analysis, be sure to let them know in advance this to avoid surprises.

The employer’s actual expenditure is the amount remaining after any deductible and coinsurance are collected by the pharmacy. When doing an analysis for the employer, or providing an estimate for them, you need to build in the traditional mechanics of deductibles, coinsurance / copays, and tiers. Once again, keeping it simple is recommended because whatever you suggest will have to be tracked if you secure the contract.

For this reason, I recommend completely eliminating deductibles in your proposal. The employer might initially balk at this, but if bottom line saves them money even without a deductible, the employer gains an additional benefit: happier employees! Another piece of pre-work that you should do is to create a list of the medications they have used over the last several months or years and place them into appropriate tiers of Brand / Generic / Specialty. How you define these may differ from their previous contracts and it helps to have this written out before completing the proposal.

While developing a proposal, I recommend using a spreadsheet that allows you to adjust Tier, Copay and Coinsurance for all prescriptions at once. This takes a little technical know-how but will allow you to tweak the proposal quickly as negotiations move forward.

Example: Simple Contract Structure

Employer Cost on Medications:

Specialty: Cost + $50
Brand: Cost + $15
Generic: Cost + 10

Employee Cost Sharing 30 day supply

No Deductible
Specialty: 25% Coinsurance
Brand: $35.00
Generic: $4.00
Birth Control: $0.00

Employee Cost Sharing 90 day Supply

No Deductible
Specialty: 25% Coinsurance
Brand: $70.00
Generic: $8.00
Birth Control: $0.00

As simple as this schedule is, it is actually fairly complicated to model in a spreadsheet. More importantly, you will need to be able to apply this (or whatever you eventually agree upon) to the actual prescriptions going forward. While you may be able to handle this manually for a small employer, you will want to automate this if at all possible to ensure consistency going forward. For a larger employer, automating the fee schedule is imperative.

Many pharmacy management systems have the ability to put together price schedules that will accomplish the simple contract demonstrated above. Contact your vendor’s support line if you need help. The last piece of the puzzle is putting together the monthly invoice for the payer. The key is developing an invoice that represents the price schedule minus the copay / coinsurance collected at the point of sale. Again, your pharmacy management software may be able to do some or all of this for you.

All of this is just looking at the drug product. The contract can and should also include value-added services. Take the time to discuss clinical programs, immunizations and other areas that can help the employer’s staff stay healthy, have fewer sick days, and lower overall health costs. This is more than just beating the PBM at the drug price game; it is about pharmacy as a service that can impact total health spend.

With these guidelines in mind, you can put together a compelling argument for a direct to pharmacy contract with an employer. The net savings for the employer can be very significant, as is the the benefit to the pharmacy. Besides gaining a revenue stream with a sustainable profit margin, the pharmacy can expand business as well, bringing in new customers. This is one encounter that can count on many different levels. Get out there and make every encounter with local employers count!

PBMs came into being as a convenience service that originated when third party prescription benefits began to emerge. Pharmacies were required to send paper claims to insurance for reimbursement. This was a time-consuming process, both in the preparation of the submissions and the time to receive payment. The fledgeling PBM industry enabled pharmacies to submit claims electronically, get instant approval and get paid faster. A win-win-win.

That was then, and now things are a lot different. Today, pharmacy has been flipped upside-down. Literally. Instead of servicing pharmacies for convenience, PBMs sell pharmacies in aggregate as a network and extract money for the pharmacies work. PBMs, as an industry, are far more profitable than the pharmacies they depend on and pharmacies are at the mercy of the PBM for their customers and future. So how can a pharmacy remove the PBM from having this undue influence on pharmacy? The answer is simple: turn back the clock to the days before middlemen. To do this, we need to influence a change in perspective at the employer (the payer) level with respect to healthcare benefits.

For the employer, health insurance creates an illusion of risk mitigation. If an employee ends up with a very costly medical condition, the insurance is at risk, and not the employee or the employer. But this thought process if flawed. Insurance premiums will always adjust to ensure that the insurance company is not at significant risk. Insurance companies are not altruistic; They strive to turn a profit. The amount of money paid in premiums, both the employer and employee contributions, closely follows the actual health expenditures. This is key, because even though an insurance company is involved, you are self-funding, or pre-funding the benefit.

If an employer is essentially self-funding the health insurance by pre-funding the insurance, you may be able to save significant money by opting to self-fund. This sounds scary but it is not all that different from using an insurance company, though having a more than a few dozen employees makes this easier. Self-funded companies hire a third party administrator to manage the medical benefit. The hospital and physician network is attached to that administrator just like with insurance.

The difference is that premiums for insurance, both the employee and employer contributions, are banked by the employer to pay medical bills as they come are received from the administrator. These bills would be paid from the money collected from the employer and employee contributions to the health insurance premium. The premiums can be adjusted yearly to match the actual spend just like the insurance company did before.

Note that with fewer employees, it is possible to re-insure the company to prevent a catastrophic event from putting undue strain on the employer. This additional security measure has a cost and will decrease the potential savings an employer can see.

The prescription benefit is similarly streamlined and self-funded. This is where the direct contracting with the pharmacy comes into play. An employer would first contract with a transparent PBM to manage the national prescription benefit. Just like with the medical administrator, he employer would receive a bill from the PBM for the cost of the medications plus an administrative fee minus the amount collected as a copay. The employer would pay these from the banked premiums.

The PBM is necessary here: it creates national prescription benefit coverage for cases where employees are traveling. But the PBM would not be the preferred mechanism for the drug benefit. Instead, the employer partners with a with a local pharmacy. A direct contract that benefits both the pharmacy and the employer. Doing this, the pharmacy makes significantly more than they would if using even a transparent PBM and the employer will pay significantly less. The employer can set up the copay and deductible system to incentivize employees to use the local direct contract by reducing employee copays to incentivize savings for the employer.

This whole process is both simple and complicated. And it is not necessarily an easy sell to an employer because it takes them out of their comfort zone. But once successfully implemented it can both decrease costs to both the employer and its employees.

For the pharmacy doing the direct contract, however, things are just getting started. Next week we will talk about what it takes to manage a direct contract on the pharmacy side. Until, then, make your next encounter with local business owners count: talk to them about their insurance.

This week, there have been numerous states that have began the process of re-opening non-essential businesses. There are valid arguments both for and against these decisions, but ultimately the decisions are being made for political and financial reasons.

State and local government tax revenues during the shut-down are essentially non-existent in many jurisdictions. Unlike the federal government, which can essentially create money from thin air, the states need tax revenue to operate, and without an active economy their budgets are in intensive care on ventilators. The pressure on governors to open up the economy is undoubtedly intense.

The implications of any official re-opening, however, are significant. If a jurisdiction allows restaurants, for example, to re-open, restaurant owners are put in a difficult position. All employees currently on unemployment are no longer eligible for the federal emergency unemployment benefit. If the business owner does not want to risk re-opening, or opens at lower capacity and only needs some of the employees back, any remaining unemployment burden will likely shift back to the employer. This creates a significant pressure for the owner to re-open even if they don’t feel comfortable doing so at the time.

Pharmacies, for the most part, have not closed. Sure, many have gone to curbside service and delivery in place of having an open store, but they have continued to serve the public. A “re-opening” will not directly create the economic ramifications described above. That being said, there are still ramifications.

It is important to recognize that any re-opening does not mean turning the clock back to December 2019 and doing things the same way as before. When my area begins to re-open non-essential businesses, things will still be very different. In our pharmacy, I anticipate changes happening when our doors re-open. Perhaps a plexiglass screen, or a limit to how many people we let in the door at a time. We might take patient temperatures or measure blood oxygen levels with a pulse oximeter before letting a patient inside. I also expect that some of the procedure we put in place during the crisis will continue to be popular. Many patients appear to like the curbside service and delivery, for example.

My father-in-law has a great expression. He may not have originated it but I always attribute it to him: “Don’t look back, we aren’t going there.” For any re-opened economy this quote pretty much sums it up. So instead, look forward. Acknowledge that everyone, including community pharmacies, will be making changes to work in a post Covid-19 pandemic world. Look at these changes not as burdens, but opportunities. It is time to make this encounter with re-opening count.

I own and operate an independent community pharmacy. Since the middle of March, we have made numerous changes to our operating procedures to accommodate the safety of my patients and my staff. One significant change that we had to make was to close our doors to the public and instead rely on delivery and curbside service. This has been very well received by our customers and I anticipate that even after the global pandemic is over, we will have customers that will continue to want these conveniences.

Many of the things we have done have cost the business. These costs has spanned across all areas including a large uptick in our expenditures for personal protective equipment to an increase in staff required for the additional services. But not all costs are so easy to quantify or realize.

Recently I was on a conference with some outstanding pharmacy owners and a hidden cost and risk was brought to the forefront. This increased cost of doing business is subtile but significant, and I suspect that many pharmacy owners and managers have given it very little thought. The culprit? Credit card transaction fees.

Since we closed our doors and have relied exclusively on curbside and delivery for our prescriptions, we have also necessarily increased our use of “card-not-present” transactions on or register. This may seem obvious, but the ramifications are not: credit card companies stratify their fee schedules based on the types of transactions.

Swiped or “dipped” (chip) card transactions have lower transaction fees, with these fees increasing depending on the card type, the presence of reward incentives like cash back, and ultimately the transaction type. Card-not-present transactions have some of the highest fees per transaction because they also have the highest risk to the card issuer. Fraudulent transactions are almost exclusively this way.

All of the pharmacists I was talking to had noted a significant increase in transaction fees due to the abrupt decrease in in-person transactions inside the store. To date, I am unaware of any announcements from card issuers to waive the differential fees during the pandemic. And while this is not deliberate, the card issuers are profiting because of this.

To make matters more worrisome are the possible ramifications this change in business model has from your credit card processor. Processors are a lot like PBMs: they sit between the card issuer and the merchant. These companies look at a businesses card history when drawing up contracts. The client’s rate of “card-not-present” category, which poses additional risk, is looked at carefully when they draw up contracts and agree to process for you. A drastic change could put you in jeopardy of being dropped by your processor!

There are some things you can do to ammilorate some of the damage, though these changes do come with additional overhead of their own. First, you could create in house charge accounts for regular customers and get their permission to put their card on file and bill them at the end of the month. This can decrease the number of fees you see. This means the pharmacy will be carrying additional accounts receivable burden. A second option is to move card transactions out of the pharmacy with a mobile payment terminal: the patient could to insert their card and complete the transaction at curbside or at their door. Of course this creates yet another surface that needs to be disinfected each time a customer touches the device. In a perfect world, all customers would have a contactless payment method they could use with that terminal. Finally, you could carry the card into the pharmacy and complete a swipe transaction. This defeats some of the advantages of curbside service or delivery offer.

Incorporating measures like these may help decrease the pain, but the added expense is still there. And pharmacy is not the only industry being hit in this manner. Many restaurants in my area are now limited delivery and curbside as well. The financial windfall to the credit card companies is undoubtedly large. I spent some time this week talking to my State Attorney General’s office about this problem, and they informed me that they are not able to take action. Any action must happen at the Federal level.

So today’s “Encounter” is an assignment: contact your US Representative and Senators. Talk to them about this issue, and ask them if there is something that they could do to address the unintentional profiteering taking place in the credit card industry. Spend a few minutes of your time today to make this encounter count.

A few days ago, Will Maddox wrote a column for D Magazine entitled Amazon Teams Up With Local Pharmacy Benefits Manager. This news article, discussing the partnership between CerPassRx (a PBM) and Amazon’s PillPak, demonstrates the huge discrepancy in how the profession of pharmacy is perceived today.

Maddox’s article describes the hot-button issues of medication adherence and cost in the pharmacy world. The PBM industry has a long history of touting its success in reducing costs to payers, but cost is generally not an issue anymore. Pharmacies routinely receive reimbursement that does not even cover the cost of the medication on a large percent of the prescriptions they dispense. So PBMs are looking for something else to keep themselves relevant.

Adherence has become a big part of the PBM marketing focus. This started several years ago with the emergence of EQuIPP’s metrics for Percentage of Days Covered (PDC) as applied to specific medications being taken by Medicare Patients. The general premise: medications do not help if you don’t take them regularly. Adherence is often touted as a main driver in keeping overall healthcare costs down, but as we will see below, it is not the complete picture.

Near the end of the article, you will find the following statement:

Buscetto sees this move as one more step on the way to eliminating retail pharmacies, which he doesn’t see as part of the future of medication delivery.

Now this is not a direct quote from Mr. Buscetto, so I cannot take him to task. But clearly Will Maddox was left with this impression after interviewing the CerPassRx executive. This is where the descrepancy I alluded to above becomes apparent.

If you read the 409 words penned by Mr. Maddux, you will find the word care just once: when describing his company as a value-based care PBM. The word cost and the word patient appear 3 times each. What is entirely missing in the article, and what is missing in most discussions of medications coming from PBMs, is the combination of the two words to make patient care.

You see, while adherence is important, it is not the end-game. Patient outcomes are what matter. Is the patient achieving their blood pressure goal? Are they experiencing any adverse effects? Adherence means nothing if the medication is not achieving the desired goal, or the patient is not reaching the appropriate outcome. The wrong medication taken 100% of the time is still the wrong medication. Adherence alone does not ensure that the patient won’t end up in the ER or the hospital.

Outcomes are what matter in drug therapy management. And these are the things that are not strengths of mail order pharmacy. It is the personal relationship with the patient and the repetitive nature of monthly refills that allow the pharmacist to do far more than just dispense medication.

The PBM industry has focused entirely on drug spend for decades, but they completely ignore the bigger picture: patient care by the pharmacist has a large impact on the effective utilization and optimization of medications. Other subtleties, like the fact that sometimes a more expensive medication will actually save the payer significantly more in overall health spend than the differential drug cost, or that making formulary choices based on rebates does not improve patient care, are largely ignored by PBMs.

So ignoring the inherent limitations of mail-order packaged medications* and the challenges that mail order would face should we end up living in a world without “retail” pharmacies**, we still have to come to grips with the fact that drug product by itself is not a panacea. Pharmacists are essential health care workers, and the personal relationship between the pharmacist and the patient is an important part of patient care.

There will always be someone pushing an agenda that runs counter to patient care. The PBM industry has been doing this for years under the guise of saving money. But there is something more important: pharmacists pushing the patient care agenda. And it is imperative that every community pharmacist works their hardest to ensure that they are actually taking care of their patients. If you don’t make THIS encounter count, perhaps Amazon truly is going to replace the community pharmacy.

Footnotes

* PillPack, like many of the similar options used for commingled drug packaging, works well until a medication change is made. Adding a medication is fairly easy: one just sends a second strip pack with the new medication This is not ideal, but it is a generally accepted work-around. Discontinued medications, however, create real problems. The patient has to manually remove the medication from the pack each time they take medications until the pack ends, and that completely erases the advantage of the med packaging. The problem is aggravated by the use of extended day-supply (90 day) orders. If PillPack were to send a new pack out the the patient, they would necessarily have to waste the medications, and no insurance will pay the pharmacy, even if they are Amazon, for dispensing the same medication twice.

** There are many cases where patients require same-day fills of medications. While these are mostly acute medications, mail order really cannot do this. If Amazon were to create the capacity to do same-day delivery of medications around the country, they would essentially have “retail” pharmacies in or near every community and their supposed “competitive advantage” would be completely eliminated.

I have been hearing complaints about Allowable Drug Prices (ADPs) in the pharmacy community for years. Most recently, I have listened as pharmacists have described significant prices drops on medications during the current Covid-19 pandemic.

The trouble with these prices, and by extension, any complaints about them, is that most ADPs are MAC (Maximum Allowable Cost) applied to generic medications, and these are considered proprietary information by the Pharmacy Benefit Managers (PBMs). For this reason, one cannot just download the data and analyze what is happening. Furthermore, because every pharmacy has a slightly different profile of medications it dispenses each month, each pharmacy is impacted by these prices and their changes differently.

Like online reviews, people are much more likely to take time to complain about a bad experience than they are to take the time to provide positive feedback. It is possible that I am only hearing the unsatisfied pharmacies complaining while many, perhaps even a majority, might be satisfied.

I am skeptical of my last statement, of course. ADPs, and especially MAC prices, serve only the PBM. Which brings me back to the question: How are these prices changing, and do they make sense?

There is not a good way to answer this. It would take data from an aggregator like a switch to do a proper analysis across all regions, PBMs and drugs, and I don’t have that type of access. But I do have access to my own pharmacy’s data, and I thought it might be timely to look at where my own ADPs have gone in the last 6 months.

To do this, I calculated the an ADP per unit (tablet, capsule etc) for each month the past 6+ months. This represented 3715 different medications from claims processed between October 2019 and early April 2020. ADP was calculated by subtracting the dispensing fee allowed from Adjudicated Amount and dividing it by the units dispensed. These results aggregate the allowable price over one or more different insurance plans during any given month.

Because I wanted meaningful trends, I further segregated the data to look only at medications where I had dispensing data in every one of the 7 discreet months sampled. The net result was 855 medications with data in all 7 month. Below is a histogram of items dispensed at my pharmacy during one month, March, grouped by their Allowable Drug Price per Unit.

The shape of this histogram is definitely not a normal distribution. It shows that a majority of medications dispensed–nearly 70%–are adjudicated at less than $0.50 per unit. These low cost medications also represent a majority of all claims (53%) during the month. To put this into perspective, if a PBM pays the pharmacy a high (by PBM standards) $1 dispensing fee, a medication with an allowable cost of $0.50/unit equates to a $16 transaction for a 1 month supply. That is not profit, that is the total paid to the pharmacy.

Because the raw Allowable Cost data represented multiple carriers, many medications showed a some variability in price from month to month. For this reason, regression lines were run on all 855 medications over the 6+ month period. Allowable Price increases were defined as a slope of at least $0.01 per month and Allowable Price decreases were similarly defined by a slope of -$0.01 per month.

Change in Price (slope) over 6+ months	# of Medications	Ave ∂ /unit/month
Increased by > $0.01/unit/mo	245	$0.15
Decreased by >$0.01 /unit/mo	202	$0.10
Unchanged (slope between -$0.01 and 0.01	408	$0.00

The average change up or down in the price of a medication was actually much higher than the $0.01/month used to define changing prices, with price increases averaging $0.15 per unit per month and decreases averaging $0.10 per unit per month.

Looking at this table, one see that price increases appear to outpace price decreases. This runs contrary to what I regularly hear. A closer look is probably in order. Perhaps we should look at how prices change with respect to the allowable cost of the medications. Below is a graph showing the price changes broken down by the overall allowable cost per unit.

This begins to paint a picture that agrees more closely with what I have long observed. In short, price decreases outpace price increases for all inexpensive medications. Only after about $0.70/unit do price increases outpace decreases. Remember, left third of the graph represents almost 70% of products in the sample, and well over half of all claims.

The nature of these decreases at the low end of the price scale are actually amplified by the low dollar nature of the claims: a change of only a few cents per unit can create a 10-30% decrease in reimbursement for a medication with a cost of less that $0.30 per unit. Remember that these items are the most commonly dispensed items.

The increases in ADPs are predominantly on the higher priced medication. The problem with this type of “balancing” is that every pharmacy sees a significant number of price decreases because they are happening mostly to inexpensive maintenance medications that represent a majority of prescriptions filled. Price increases, which are skewed toward the more expensive medications, happen less often and are a smaller percentage of total sales. A pharmacy must fill a significant mix of prescriptions that pick up enough winners on this end just to keep level on the low end. There is no skill involved. It is random, and this is the reason so many pharmacy complain.

Which brings be back to the original question: are prices continuing to be pushed lower during the COVID-19 pandemic. The answer for me appears to be yes. This is disappointing, as both independent and pharmacies are being asked to man the front lines to ensure continued access of medications for everyone. While operating expenses are going up due to changes we have to make to work around the current crisis, the PBMs are doing business as usual and continuing to drive prices to the floor.

But it is not all doom and gloom. The prize here is the opportunity for pharmacies to show that they are more than just a provider of drug product. We are seeing many new opportunities during these trying times. These opportunities further our goal of being paid not for product, but for the value and service we provide. So be sure to watch your bottom line, but don’t forget to Make Every Encounter Count. Especially now.