Elements Magazine - Vol.7 Iss.1 March 2018

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ELEMENTS WAYS TO PAY What independent pharmacies need to know about payment processing today

CONTRACTING STRATEGY What every pharmacy needs to know about network aggregate reimbursement guarantees

Pet Profits

How your pharmacy can gain a share of the profitable veterinary medicine market

VOL. 7 ISS. 1 | MARCH 2018 | PBAHEALTH.COM/ELEMENTS

18

CONTENTS ON THE COVER 18

FEATURE | Pet Profits Your independent community pharmacy’s most profitable customers might be furrier than you think. Discover how your pharmacy can gain a share of the profitable veterinary medicine market.

DEPARTMENTS 07

NEWS | Going Gluten-Free A new draft guidance from the U.S. Food and Drug Administration (FDA) recommends labeling for gluten-free drugs.

08

TRENDS | Lab Testing Your independent community pharmacy can’t afford to miss out on offering this lucrative service to patients.

FEATURE | Pet Profits

10

RETAIL | Stop Planning, Start Planogramming Is your pharmacy’s front end producing less profit than you hoped?

Build front-end profits one shelf at a time with planograms.

26

14

SOLUTIONS | Process of Care The ultimate how-to guide to move your pharmacy from focusing on dispensing prescriptions to implementing a team-based, patient-centered approach in coordination with other healthcare professionals.

24

SPOTLIGHT | Big Growth, Small Focus Discover how one independent community pharmacy always stays one step ahead of the curve by looking to the future.

26

MONEY | Ways to Pay As more customers pull credit cards out of their wallets instead of cash, pharmacies need to keep up with how consumers want to pay.

32

OUTLOOK | Contracting Strategy What every pharmacy needs to know about network aggregate reimbursement guarantees in third party contracts.

34

NOTES | Filling the Script Drive customer growth with help from Phil, an online prescription management and delivery service that connects patients with independent pharmacies.

ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

MONEY | Ways to Pay

3

E

ON THE WEB

ELEMENTS

The business magazine for indpendent pharmacy

VOLUME 7, ISSUE 1 MARCH 2018

Find more strategies, tips, and expert advice to improve your business at pbahealth.com/elements

PUBLISHER & EDITORIAL DIRECTOR Matthew Shamet EDITOR Kirsten Hudson ART DIRECTOR Lauren Ruiz CONTRIBUTING WRITER Greyson Honaker COPY EDITOR

This Is Why Using a VAWDCertified Wholesaler Matters More Than You Think If your independent community pharmacy buys pharmaceuticals from a wholesaler or supplier that’s not VAWD-certified, it could put your business at risk. Learn exactly what VAWD-certified means and what you need to know about it. Read more at pbahealth.com/ using-vawd-certified-wholesaler-matters.

Torrie Wright

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Do you use an AOL, Gmail, Hotmail, or Yahoo email address for your pharmacy? Discover why you need a better business email address for your pharmacy and how to get one.

Read more at pbahealth.com/business-emailaddress-pharmacy.

These Are the Most Relatable Pharmacy Podcasts to Download Do you listen to podcasts but never seem to find ones in your field? We’ve rounded up the best pharmacy podcasts for pharmacists by pharmacists. So, you can finally learn about industry updates and trends from your peers. Read more at pbahealth.com/ pharmacy-podcasts.

Follow Elements magazine on Facebook and Twitter for pharmacy business tips and advice, news announcements, Elements magazine is published quarterly by PBA Health.

Copyright© 2018 PBA Health. All rights reserved.

Neither this publication nor any part of it may be reproduced without written permission by PBA Health.

industry information, and exclusive offers.

Business inspiration.

Networking.

Pharmacy education.

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GOING GLUTEN-FREE

NEWS

A new FDA draft guidance recommends labeling for gluten-free drugs A growing number of patients suffer from celiac disease.

used, either as an ingredient or as a starting material,” Kahn

And many of them worry about gluten in their medications.

said, “there would be very little gluten, if any, expected to be

Because ingesting even small amounts of gluten can

present in the ingredient or the drug product.”

cause health problems, people with celiac disease must diligently monitor what goes into their body, even non-

WHAT DOES THIS MEAN FOR PHARMACISTS?

food products. But they have no way of knowing if their

Pharmacists can use the new guidance to reassure

medications contain the ingredient.

apprehensive patients with celiac disease.

“Confronted by uncertainty, some patients may forego

But because the FDA has only given recommendations,

important medication rather than risk an adverse reaction

not rules, manufacturers may not adhere to the guidance

to gluten,” said Jeremy Kahn, a spokesperson for the U.S.

consistently. If some manufacturers label their products as

Food and Drug Administration (FDA). “Thus, even if gluten

“gluten-free” and others don’t, patients may be even more

is not present at levels that would harm a typical individual

wary when they encounter medicine without the label.

with celiac disease, that individual may be harmed through uncertainty and lack of information.”

As a precaution for patients who might avoid

Consider posting the FDA’s statement in the pharmacy to put patients at ease: “We are aware of no oral drug products currently marketed in the United States that

medications without explicit clarification, the FDA recently

contain wheat gluten or wheat flour intentionally added as

issued a draft guidance to manufacturers recommending

an inactive ingredient.”

how to label certain oral drug products regarding gluten.

The FDA recommends that manufacturers indicate

The FDA still needs to finalize the guidance. In the meantime, it encourages drug manufacturers to have

the following message on their labels when a drug is free

helpful information about the composition of their products

of gluten: “Contains no ingredient made from a gluten-

available to consumers and healthcare providers.

containing grain (wheat, barley, or rye).”

WHICH DRUGS CONTAIN GLUTEN? According to the FDA, no oral drugs on the market contain enough gluten to harm patients. “In the very rare cases where gluten may be present,” Kahn said, “we estimate based on drug formulation information that wheat starch and other ingredients derived from wheat would contribute no more than 0.5mg gluten to a unit dose of an oral drug product. This amount is less than may be found in a single

By the Numbers

1 20

Percent of Americans with celiac disease

Parts per million of gluten the FDA allows in a product labeled “gluten-free”

30-gram serving of food labeled ‘gluten-free’ according to FDA’s regulations.”

Although the FDA isn’t aware of any drugs containing

$3,964

Average additional cost of people with undiagnosed celiac disease over healthy individuals in a four-year period

wheat gluten or wheat flour, a few contain wheat starch.

The word “wheat” may concern patients with celiac disease.

Sources: Beyond Celiac, Celiac Disease Foundation

But they don’t need to worry. “Even if wheat starch were

ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

7

TRENDS

Every year, independent community pharmacies offer more health services to patients. But many still don’t offer one of the easiest and most underrated revenue opportunities: lab tests.

LAB TESTING

Traditionally, physicians administer lab tests. But the market is ripe for pharmacies to enter it.

To put the opportunity in perspective, consider flu shots, now one of the most popular services offered by pharmacies.

Healthcare providers administer approximately 120 million flu shots each year, which sounds like a lot. Until you compare it to the 7 billion lab tests conducted annually.

Your pharmacy can’t afford to miss

That’s 58 times larger than the market for flu shots.

out on offering this service

a lucrative opportunity. Pharmacies that offer lab testing

The market size presents independent pharmacies with can both increase their revenue and diversify it.

And this new market isn’t only a chance to capture revenue. “Offering lab testing services enables the pharmacy to differentiate itself from the competition,” said John Beckner, Senior Director of Strategic Initiatives at the National Community Pharmacists Association (NCPA).

“They can bundle lab testing with immunizations and other patient care offerings to enhance their competitive position in the marketplace.”

BIG BENEFITS OF LAB TESTING Beyond earning revenue, lab tests improve the pharmacy’s long-term outlook. This service can help a pharmacy evolve into a healthcare destination, which patients want today.

“It provides an opportunity to expand the pharmacy’s healthcare offering, which helps with customer acquisition, customer retention, and the conversion of front-end customers who may not be using the pharmacy,” Beckner said.

Lab testing can also deepen the relationship between pharmacists and their patients.

Offering these tests enables pharmacists to provide more comprehensive health

8

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consultations. And to potentially improve health outcomes.

“If the patient is willing to share the results with the of referral for other healthcare providers as well as use the results to improve medication adherence and effectiveness and to enhance patient safety.”

And, when pharmacists have access to patients’ lab results, they can identify vitamin and nutrition deficiencies and recommend supplements from their front end, further increasing revenue.

ONE WAY TO OFFER LAB TESTING Pharmacies today use various organizations to offer health screenings, point-of-care testing, and pharmacogenomics

“

[Lab testing] provides an opportunity to expand the pharmacy’s healthcare offering, which helps with customer acquisition, customer retention, and the conversion of

“

pharmacist,” Beckner said, “the pharmacist can be a source

front-end customers who may not be using the pharmacy.

lab testing. NCPA offers one solution.

NCPA has partnered with Ulta Lab Tests, which provides affordable, physician-approved laboratory testing services for more than 100 conditions and life stages. “We felt strongly that this was a valuable service our member pharmacies could take advantage of and offer to their patients and customers,” Beckner said. “By integrating Ulta Lab Tests’ innovative services within community pharmacies, customers can order select low-priced lab

provider’s claim form. If approved, the amount patients

tests without the need to obtain a prescription from a local

paid may apply toward their deductible. Or, they’ll receive

physician. They have easy access to hundreds of lab tests

direct reimbursement based on their benefits plan. Patients

through a co-branded website.”

can’t submit reimbursement claims from any state, federal,

The extra revenue generated by lab tests requires low

or other governmentally funded health plan or program,

investment from the pharmacy. Ulta Lab Tests provides a

including Medicare, Medicaid, or any subsidized

co-branded website, marketing materials, the lab testing,

exchange policy.

and everything else to promote and execute the tests.

“The pharmacy’s primary role is to serve as an

BETTER FOR HEALTH CARE

access point for patients ordering tests,” Beckner said.

Lab testing through independent pharmacies isn’t just

“Pharmacists can also help patients select the most

a lucrative business venture for pharmacies. It’s good for

appropriate tests for them.” And then Ulta Lab Tests pays

health care and patients, too.

the pharmacy an administrative fee for each test.

“In many areas, community pharmacists are the only

When a pharmacy partners with Ulta Lab Tests,

accessible healthcare provider and are a resource for vital

the company creates a website for the pharmacy. The

patient-focused services,” Beckner said. Lab testing “allows

pharmacy’s patients go the website to choose the test they

community pharmacists to continue their commitment to

want, pay for it, and take the receipt to a Quest Diagnostic

driving better health outcomes for patients by giving them

center to have blood drawn. When the results are available,

direct access to information about their own health at

patients view them online.

lower costs.”

Patients pay for the test out-of-pocket. Or, they apply for reimbursement from their insurance company. “The

Learn more about Ulta Lab Tests at ultalabtests.com.

patient’s receipt includes the ‘CPT Codes’ that most insurance companies require for reimbursement,” Beckner said.

Patients submit their receipt and their insurance ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

9

RETAIL

STOP PLANNING, START PLANOGRAMMING Build front-end profits one shelf at a time with planograms

Is your pharmacy’s front end producing less profit than

maximize sales and profits in the front end. “We want

you hoped?

to make sure that the items are turning for our retail

Time to trade in your best-laid plans for proven

partners,” Lentz said.

planograms.

Planograms are guides for arranging retail shelves to

THE PURPOSE OF PLANOGRAMS

maximize front-end sales. These visual diagrams show

With thousands of different front-end products per

pharmacies exactly where to place their front-end products,

category, how does an independent pharmacy owner know

based on research-backed factors indicating products

what to sell?

should be profitable and turn quickly.

“Independent pharmacy margins are shrinking so much

Although manufacturer and distributor representatives visit pharmacies to educate owners and to help them

behind-the-counter that they need to get that penny profit

merchandise products, it doesn’t occur as much as it

wherever they can,” said Kyle Lentz, Category Analyst at

did years ago. “Planograms are a replacement for that

Hamacher Resource Group (HRG), a firm that improves

store visit,” Lentz said. “We consider the information

results across the retail supply chain by addressing dynamic

manufacturers provide as we perform our objective analysis

needs such as assortment planning and placement, retail

of sales and unit movement data to create the best, most

execution strategy, fixture coordination, item database

profitable planogram.”

management, brand marketing, and analytics.

“Retailers that don’t take advantage of that 10 to 15

Planograms can eliminate almost all of the front-end planning for the pharmacy, so the pharmacy owner doesn’t

percent in front-of-the-counter sales are losing a great deal

have to sacrifice as much time and as many resources. With

of money,” he said. “It’s a small piece of the pie, but can be a

a department of category management specialists, HRG

profitable piece if done correctly.”

provides the expertise, market data, and resource capacity

And that’s the ultimate goal of planograms. By combining practical, objective logic, rigorous research, and experience, HRG creates planograms to help pharmacies 10

pbahealth.com/elements

pharmacy owners don’t have.

“Pharmacists don’t have the time to look into all the data and products our teams are reviewing. When they use

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might first grab lip care and throat drops because dry lips and a sore throat are the first signs of a cold. So, patients

“

will find those items next to each other on the shelf, along with other pre-cold products.

HRG also considers other factors for product placement,

Retailers that don’t take advantage of that 10 to 15 percent in front-of-the-counter

“

sales are losing a great deal of money.

It’s a small piece of the pie, but can be a profitable piece if done correctly.

such as current product and industry trends. Product sales and profitability also matter. The most profitable products typically go on the shelves 30 to 54 inches from the floor, the point where people’s vision rests, known as the cone of vision. Products that shoppers seek out no matter where they are, called destination items, can go on shelves outside of the cone of vision.

HRG also takes into account the broader arrangement of the pharmacy. “We’re looking at creating a unified health, beauty, and wellness space in the front end that is professional and inviting for the customers to shop,” Lentz said.

NARROWING IT DOWN While that explains the basic logic of planograms, it doesn’t explain how to get from a category containing 2,500 items— the number of cold and allergy products HRG may have

our planograms, they’re leveraging our team’s expertise but they also can make adjustments to meet the particular needs of their local clientele,” said Megan Moyer, Senior Marketing Communications Specialist at HRG. HOW PLANOGRAMS WORK Planograms showcase how to arrange products based on general categories and subcategories. For example, cold and allergy is a general category, while cough drops, allergy, and cold and flu are subcategories.

Planograms depict how to arrange the products in a category by subcategory, and then individual SKUs (stock keeping units) within the allotted shelf space. “We’re organizing the logical subcategories and products to make available space as profitable as possible for our independent retailers,” Lentz said.

HRG’s category analysts arrange the products in the planograms to mirror how people shop. “We create logical adjacencies to make shopping easier for the patient,” Lentz said. “We first think about how the shopper instinctively approaches the category.”

For pharmacies, that sometimes means arranging subcategories according to the natural progression of an illness. A patient feeling the onset of a cold, for example, 12

pbahealth.com/elements

in its file at once—down to the limited number that can actually fit on a shelf.

The primary filter HRG uses to determine product selection is profitability. “We want to make sure we’ve got that subcategory representation based on the volume of sales and profitability,” Lentz said.

Using its wholesale withdrawal data containing multitudes of product attribute information, as well as a rigorous process of meetings with manufacturers and internal debate with colleagues, HRG narrows the list to the highest-margin and quickest-turning items.

“We’re looking at the best items that go into that category, including unit sales, dollar sales, and profitability,” Lentz said. “So, we’re looking at items that produce strong margins for retailers.”

Retailers that subscribe to HRG’s TEMPS® Category Manager program receive tools and materials for one to two categories each month including signage, shelf labels, endcap ideas, and new item information.

“The planogram is an easy roadmap to follow,” Lentz said. “They can look at the planogram, make sure their shelves are set correctly, and if warranted, incorporate items that do well in their region or with their customer base.”

Planograms provide independent community pharmacies with a plan to arrange products to maximize front-end sales.

MERCHANDISING CONSIDERATIONS An inside look at the factors that make planograms successful and other product assortment considerations for independent pharmacies from Hamacher Resource Group (HRG).

Cone of Vision

New Items

Destination Products

Never Outs® Items

The most profitable shelves are 30 to 54 inches from the floor, in the average shopper’s line of vision. Place the most popular products here.

New items are the lifeblood of any category. HRG does a full review of all the new items released each month considering earning potential, promotional spend, category growth, production orientation, and innovation.

Destination items are those that customers specifically go to a store to get. For example, in the cold and allergy department, destination items include children’s products and popular nasal allergy and flu relief items. Customers search for destination products regardless of where they’re positioned on the shelf, so these items are typically on lower shelves.

HRG Never Outs are items HRG analysts have determined pharmacies never want to run out of. They can represent up to 50 percent of sales within a category. If shoppers don’t find them, they might walk out empty-handed.

Timing HRG analysts consider several factors to determine when categories are sent during the year, such as typical timing of new item introductions in the category. Or, if there’s a seasonal connection. For example, HRG completes a seasonally relevant planogram in March to capture the allergy season that begins in April.

Products That Address Side Effects Pharmacies should stock over-the-counter (OTC) items that resolve the common side effects of their top 50 prescribed medications. For example, high SPF and specialty sun care items can help patients address the photosensitivity some prescriptions may cause.

Niche Items Niche items are those that competitors wouldn’t carry and can only be found at their independent pharmacy, such as specialty supplements or local products.

ManufacturerSupported Products Some manufacturers supply pharmacies direct support through marketing programs that may include advertising, coupons, brochures, signage, circulars, and online initiatives to help them push sales.

ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

13

SOLUTIONS

systematic tool for pharmacies to shift their focus from feefor-service care to value-based care.

The research team developed the guide from a nontraditional model of care called the Pharmacist Patient Care Process, created by the Joint Commission of Pharmacy Practitioners in 2014. This process moves pharmacies from focusing on dispensing prescriptions to a team-based, patient-centered approach in coordination with other healthcare professionals.

“We want community pharmacies to be involved as an essential member of the healthcare team and to work with other healthcare professionals to coordinate care for their patients,” Ferreri said.

The Joint Commission created a common language for the Pharmacist Patient Care Process that could apply to every practice setting, including community pharmacies.

But Ferreri said it didn’t go far enough.

“What was not included was how to implement it into different practice settings,” she said. “We have all these

PROCESS OF CARE

great resources in pharmacies. And we develop all these processes and we develop all these guidelines. But what’s always missing is how to implement them.”

IMPLEMENTING A CARE PROCESS The guide lists every step to take to implement the valuebased process in a community pharmacy setting. It seeks to

The ultimate how-to guide to shift pharmacy services to value-based care

help community pharmacies integrate more fully into the healthcare team and to improve patient outcomes.

“If we can develop a process of care where we are demonstrating our worth on that healthcare team, then that will help the pharmacist’s business in the long run,” Ferreri said. “And every single physician will want to

Does your pharmacy have a set process to provide better

collaborate with community pharmacies to improve their

patient care?

patient outcomes.”

“As health care starts to evolve, we’re going to have

Although many community pharmacies already offer

to keep up with it,” said Stefanie Ferreri, Pharm.D.,

patient care management in some form, most pharmacies

Clinical Professor in the Division of Practice Advancement

still have a long way to go. Ferreri and her team studied

and Clinical Education at the UNC Eshelman School of

273 community pharmacies and interviewed more than 70.

Pharmacy. “Community pharmacies need to be creative in

What they discovered spurred them to create the guide.

keeping their business doors open and looking for ways

“Community pharmacies were struggling with how to

to have different models of reimbursement and different

incorporate the patient care process into their practices,”

models for compensation.”

she said. “They know that it’s something they should do.

Led by Ferreri, a research team created a comprehensive guide for community pharmacies to develop a patient care

It’s just, ‘How do we put that into our daily process?’”

The guide fills that gap by helping pharmacies evaluate

management program. This step-by-step guide explains

their businesses to find their weaknesses. And, it provides

how to implement process changes and serves as a

process changes they can measure and sustain.

14

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First Financial Bank is one of the nation’s leading small business lenders - originating almost $200M in pharmacy loans over the last few years. Our lending team has over 75 years of pharmacy experience and includes current and past pharmacy owners. We have the industryspecific expertise and knowledge to help you finance your pharmacy.

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HOW THE GUIDE WORKS The guide includes five components that make up the pharmacist patient care process: Collect information, assess information, develop the care plan, implement the care

Steps in the Pharmacist Patient Care Process

plan, and follow up with the patient.

The guide discusses each of the components in detail, explaining what they are and walking pharmacies through process changes in four stages. And within each of those stages, the guide helps identify a champion to lead the process change, methods to continuously improve the process, and ways to sustain the process.

1

COLLECT

2

ASSESS

3

DEVELOP

4

IMPLEMENT

5

FOLLOW UP

INFORMATION

Ferreri suggests pharmacies tackle the guide one component at a time.

Every pharmacy should start by taking the selfassessment in the guide. The assessment helps the pharmacy team rate the pharmacy on a scale of low, medium, and high for each component of the patient care process. “I would recommend starting with the lowest-rated one, see how well you do for that one for about three to

INFORMATION

four months, and then make improvements and go from there,” she said.

During the study, Ferreri found that generally, pharmacies excelled at assessing information and developing a plan but struggled to collect information and follow up with patients. Pharmacies don’t have much control over data collection, Ferreri said, because they don’t have access to a common electronic health record.

CARE PLAN

But pharmacies can more easily improve on their follow up. Pharmacists often get task-focused, moving from one job to the next without looking back, she said. “Follow up is something that we can have a huge impact on in community pharmacies. We have so many touchpoints with our patients that many other healthcare professionals do not. And, I think that was really eye-opening for me. That’s a strength we don’t capitalize on.”

CARE PLAN

Such drastic process changes won’t happen overnight.

“I think it’ll probably take months, if not years, to implement the patient care process within community pharmacies,” Ferreri said.

But now’s the time to start. “It’s something that’s not regularly incorporated into practice because it’s not tied to reimbursement,” Ferreri said. “Hopefully that will change in the future.”

The guide is free to download at pharmacy.unc.edu/

WITH PATIENT

research/centers/cmopp/resources.

ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

17

FEATURE

PET PROFITS

How your pharmacy can gain a share of the profitable veterinary medicine market

Your pharmacy’s most profitable customers might be

patients if you already have a solid patient base under

furrier than you think.

your roof.

Pet owners spent an estimated $69 billion on their

“It’s safe to say that 65 to 70 percent of the patients

pets in 2017, according to the American Pet Products

you’re currently filling scripts for probably have a pet at

Association. Of that, they spent nearly $15 billion on

home,” said Chris Cielewich, Vice President of Independent

supplies and over-the-counter (OTC) medication.

Accounts at FLAVORx, a company that allows customers to

That sounds like great news for veterinarians.

personalize the taste of their medication in pharmacies. “If

But what does it mean for independent community

they’re not getting their prescription from you, then that’s

pharmacies?

an opportunity to grow your business.”

The veterinary medicine market is changing. In the

Even better, veterinary medicine brings in more than

past, veterinarians didn’t write prescriptions for their

revenue. It brings in profit. “The margins are really good,”

animal patients. They solely dispensed the medication at

said Donnie Calhoun, CEO of the American College of

their offices and gave the pet owner instructions on how

Apothecaries (ACA) and the American College of Veterinary

to use it. “The animal owner didn’t have a choice,” said

Pharmacists (ACVP). “The reason the margins are really

Irwin Rashkover, CEO of Animal Med Express, a company

good? Because 99.9 percent of all the prescriptions are

that supplies pharmacies with animal prescription, OTC,

cash. You get to set your price. They’re not set by a third

and nutritional products to retail pharmacies nationwide.

party. So, why would you not want to do that?”

“And the veterinarian would do the fulfillment at a 100 to 200 percent margin.”

But major policy changes have opened up the market.

At least 42 states now require veterinarians to issue a prescription to animal owners when they request it. And

SEEING OBSTACLES But independent pharmacies that want to get into the market face challenges.

“Most pharmacists are not trained on veterinary

the American Veterinary Medical Association’s (AVMA)

pharmacy and veterinary practice, or veterinary medicine in

code of ethics requires the veterinarian to issue a script

general,” Calhoun said. “Amoxicillin works the same way in

when requested. “Those two things alone have changed

a baby as it does in an old person, but it may not work the

the historic monopoly,” Rashkover said. “You have the

same way in a dog and a cat. You’re not taught canine and

birth of a very substantial market.”

feline anatomy and physiology in pharmacy school. You’re

Now that animal owners can leave their veterinarian

not taught how drugs work in a horse.”

with the prescription, they have the freedom to get it

Because pharmacists aren’t trained specifically in

dispensed where they want. That means independent

veterinary medicine, most drug distributors won’t hand

pharmacies have an opportunity to take a bite out of the

their product over to any retail pharmacy, although that

veterinary market. “Right there is a substantial amount of

could be changing. “We have limited access,” said Calhoun,

revenue that will offset losses that retail pharmacies are

who also owns Calhoun Compounding Pharmacy in

experiencing in human meds,” Rashkover said.

Anniston, Ala., which offers animal compounding. “Drug

And that revenue doesn’t have to come from new

companies don’t want to release that drug to a pharmacy ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

19

that’s not qualified to have it.”

Farzana Kennedy, R.Ph., FACA, owner of Alexandria

PET MEDICATIONS TO KNOW

Compounding Pharmacy, an independent community

Pets suffer from the same medical conditions as humans and often need medications to treat them. These are the most commonly used pet medications.

requirements from veterinary wholesalers. “They won’t

Antibiotics Used to kill microbes, such as bacteria and yeast, and to treat infections.

Examples in dogs and cats: penicillin, trimethoprim-sulfa, cephalexin, and enrofloxacin.

pharmacy in Alexandria, Va., has seen even stricter provide services to you because they are really committed to vets,” she said. “The only way for you to get anything from that supplier would be to have a veterinarian on staff.

Because they don’t use a pharmacy license. They use a veterinary license to open up an account.”

Veterinarians share the same concerns about pharmacies as drug distributors. “We know that pharmacists are trained professionals who want to do

Non-Steroidal Anti-Inflammatories

what’s best for their clients,” said Michael San Filippo, Senior

Used to reduce swelling, inflammation, pain, and lameness.

Examples: carprofen, deracoxib, firocoxib, and meloxicam.

Media Relations Specialist at the AVMA. “That being said,

Opioid Pain Relievers Used to relieve pain.

Examples: oxycodone, hydromorphone, butorphanol, meperidine and fentanyl.

Steroids Used as anti-inflammatories to reduce allergic and anaphylactic reactions.

Examples: prednisone, prednisolone, and dexamethasone.

Antiparasitics

local pharmacists may not be aware that animal physiology and pharmacology can differ significantly from that of humans, and this can lead to unintentional prescription errors and conflict.”

The other reason pharmacies face resistance from veterinarians has nothing to do with trust.

The Federal Trade Commission (FTC) reported in 2015 that prescription medications make up 20 percent of a typical veterinary’s total income. That’s a large chunk of revenue they risk losing to pharmacies. “Your primary competitor is the vet themselves,” Calhoun said.

The FTC recognizes this conflict. According to the same

Used to prevent, repel, or kill internal or external parasites such as intestinal worms, intestinal protozoans, heartworms, fleas, and ticks.

FTC report, “Some stakeholders argue that if limitations on

Behavior-Modifying Drugs and Sedatives

ways that are more responsive to consumer preferences.

Used to quiet anxious pets or help in reducing anxiety associated with various behavioral issues in pets, prepare pets for anesthesia, and to reduce pet movement during delicate procedures.

Examples: diazepam, xylazine, acepromazine, and midazolam.

Hormones and Other Medications Used to treat specific conditions.

Examples: insulin used for diabetes treatment, methimazole, or levothyroxine for abnormal thyroid hormone levels, and heart medications such as atenolol, digoxin, and pimobendan.

Chemotherapeutics Used to treat tumors and cancer.

Examples: cisplatin, vincristine, doxorubicin, and cyclophosphamide.

Source: American Veterinary Medical Association

prescription portability and restrictive distribution practices were eliminated, the market would continue to develop in They suggest that this might, in turn, enable pet owners to further reduce their pet care costs and provide them with additional purchasing options. Other stakeholders contend, however, that such changes would not reduce prices or increase convenience but would instead undermine pet health and the financial stability of veterinary practices.”

OVERCOMING CHALLENGES Even though independent pharmacies face major obstacles, those challenges shouldn’t keep them from getting involved in veterinary medicine. “There are lots of ways to get into the veterinary space,” Calhoun said.

The most effective way to overcome the distrust of distributors and veterinarians, and to find success in veterinary pharmacy, is to gain the proper knowledge.

“Drug disposition varies greatly in animal patients when

practices, and even watching their surgeries, to see from

compared to humans,” said Gigi Davidson, B.S.Pharm.,

their point-of-view. “Veterinarians are great people. I love

DICVP, Director of Clinical Pharmacy Services at the North

working with them,” she said. “You have to create that trust.

Carolina State University College of Veterinary Medicine,

You have to create that connection.”

who’s been practicing veterinary pharmacy for 35 years.

“So, before hanging a shingle as a ‘veterinary pharmacy,’

COMPLEMENT, DON’T COMPETE

the pharmacist should seek specialized training, acquire

Given veterinarians’ convenience and expertise, patients

appropriate veterinary drug information references,

are more likely to leave their offices with medication than to

and seek the support of veterinary pharmacy experts

take their prescription to a pharmacy, according to the FTC

in the field.”

report. “Veterinarians have an inherent advantage in that

As you gain knowledge in veterinary pharmacy, you’ll get your foot in the door. “If you can prove that you’ve had the

they are the most trusted source of pet health information, with a built-in base of potential pet medications customers,”

training and the expertise,

the report stated.

then they’ll let you have

And independent

access,” Calhoun said. “It’s

pharmacies need to recognize

just a matter of getting

that. “You can’t go in there

that. It’s not something

with the attitude, ‘I’m the

that you can do in a

pharmacist; I’m the one who

month or two months. It

should be dispensing all

might take you a year or

the drugs,’” Calhoun said.

two years.”

“Because all these years the

And when your

veterinarians have been

pharmacy gains access

dispensing the drugs. They’re

to distributors, you

not going to give that up.”

can start competing

One way to get a slice

with veterinarians on

of veterinary business

commercial prescription

without directly competing

products.

with veterinarians is to find

Learning animal

out how to complement

medication will help you

their offerings in ways

start gaining the trust

that ultimately help their

of veterinarians, too.

businesses. For example,

Especially if you offer

if you’ve established

compounding services for animals. “For the vets, that’s what

relationships with veterinarians, you can explain how taking

they want,” Calhoun said. “They want someone that they

some dispensing or compounding responsibilities off

trust won’t make a mistake and hurt the animal.”

their hands will give them time to perform more lucrative

Getting the proper training is essential to develop

services, like surgeries. “You can work with your vets to

trusting relationships with veterinarians, but it’s only the

free them up to do things that are more profitable for

first step. “If you’re a community pharmacy getting involved

them, which in turn is more profitable for your pharmacy,”

in veterinary practice, you need to have one-on-ones with

Calhoun said.

vets so they know you’re qualified and that it’s something

You can also unite over your shared investment in

you’re investing in,” Calhoun said. “You need to go to their

the local community. Many veterinarians are losing

practice and sit and talk to them there about what you can

prescriptions to online pharmacies, which means local

do to help them.”

money leaving the community. “Local veterinarians see the

At Alexandria Compounding Pharmacy, Kennedy grows her relationships with veterinarians by visiting their

writing on the wall that it’s a competitive market for the dispensing portion of their business,” Cielewich said. “They’d ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

21

prefer to partner with a local business like an independent

hiding a pill in food, like cheese or peanut butter,” Cielewich

pharmacy rather than losing that business to a mail

said. “Once the pets get savvy to what’s in that cheese,

order operation.”

they’re going to start eating around it.”

Pharmacies can also carry select products that

But compounding a medication into an oral liquid

veterinarians don’t stock in their inventory. Many

dosage form that tastes like angus beef will convince pets to

veterinarians don’t carry the whole portfolio of pet

lap up their medication. “The pet thinks it’s more of a treat

prescriptions on hand. When you get to know your local

than a treatment,” he said. And companies like FLAVORx

veterinarians, you can find out what they don’t carry

provide pharmacies with everything they need to turn their

and stock those products at your pharmacy.

pet patients’ prescriptions into tasty treats.

COMPOUNDING CONSIDERATIONS Consider using compounding as an entrance into veterinary medicine. Compounding complements what veterinarians offer and sidesteps any need to use an animal medicine distributor.

Although veterinarians can perform compounding, fewer find it worth their money and time to keep up with rising regulations today. Investments in the proper equipment can reach into the tens of thousands of dollars. Which

FIND A NICHE

ADVICE FROM AN EXPERT

Unlike human medicine,

Gigi Davidson, B.S.Pharm., DICVP, has been practicing veterinary medicine for 35 years and recently won the US Pharmacopeial Convention’s highest award. Here’s her quick advice for pharmacists looking to get into veterinary medicine.

dozens of species. That

animal medicine includes variety creates a unique opportunity for pharmacies.

Depending on where you live and the species of animals in

Dedicate time to become educated in veterinary drug law, compounding law, pharmacology, toxicology, and compounding

your community, you could

Invest in information references to support compounding, dispensing, and counseling for non-human patients

“If you make an effort to let

Join the American College of Veterinary Pharmacists (ACVP) or the Society of Veterinary Hospital Pharmacists (SVHP)

in that particular area, it

Shadow a practicing veterinary pharmacist and observe him or her in action

makes a compounding pharmacist an ideal

carve out specialized niches within veterinary medicine. the veterinary community know that you are engaged can pay huge dividends,” Calhoun said. “Some of our members don’t do human prescriptions anymore. All they do is veterinary.”

If you have a zoo in your community, it likely needs

partner for many veterinarians. “When the compounding

a compounding pharmacist because the animals require

regulations got quite extensive, you saw more veterinarians

off-label medication. “The FDA doesn’t approve drugs for

saying, ‘Hey, I’m going to send you prescriptions now for

gorillas or pink flamingos,” Calhoun said. “They have to take

anything that I compound,’” Kennedy said. “It’s become

drugs that are intended for dogs and cats, and for humans,

more reasonable for pharmacies that already compound to

and make them work for an ostrich.”

incorporate veterinary practice.”

Compounding makes life easier for veterinarians and pet

Specialization opportunities are nearly endless. Consider focusing solely on one species prevalent in your community.

owners. For one, getting pets to consume non-injectable

Do you live in horse country? Or, near sheep farms?

medications is a big challenge. “It’s very difficult to give an

Calhoun said he knows one pharmacist who only specializes

oral dosage to a cat,” Calhoun said. “There are special things

in deer because his community has large deer farms.

that compounders do that can really help the vets get the medication in.”

A simple way to begin compounding medications for pets is to flavor them. “Most times, pet owners will resort to 22

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“Some of these farms have deer populations worth millions of dollars. They have a local vet and this one pharmacist,” Calhoun said. “He’s become an expert in pharmacy and drugs in treating deer and the diseases that

affect deer. So, he’s got a thriving community pharmacy just based on that. Veterinarians specialize like that, so pharmacies could as well.”

ONE STEP AT A TIME Start small. Instead of trying to capture all the business at once, try to get a piece of each. “If you can do one prescription from each vet office, you’re doing probably 15 to 20 vet prescriptions a day, which would be huge from

WHERE TO LEARN Most pharmacists didn’t learn about pet pharmacology in school. You can start today with these resources.

think about it. It’s not that you want all the prescriptions;

The American College of Veterinary Pharmacists (ACVP)

you just want one or two every day from every practice.

vetmeds.org

And you would be well on your way to becoming that

The ACVP offers “Veterinary Compounding Essentials,” a 15-hour practice-based course that provides fundamental techniques for effectively growing the veterinary compounding practice, including calculations, proper safety practices, hands-on compounding, and marketing.

a profit standpoint,” Calhoun said. “That’s how you have to

pharmacy expert in your community.”

And, it doesn’t have to happen all at once. Take it at your own pace. “Start out small and grow it into a larger practice.

That’s what most of our members did,” he said.

Calhoun suggests offering only a few major dog medications that patients are likely to seek on shelves rather than online. Or, put up a four-foot pet section of OTC medications. You could also ask local veterinarians if they’d like to host a rabies clinic in front of your pharmacy.

The revenue and the margins in veterinary medicine will attract many savvy pharmacy owners. But getting into veterinary medicine isn’t a decision to take lightly. “It’s not for everybody, not for every setup,” Kennedy said. “You really have to be in it with your heart. As a pharmacist, you can always make a drug. But can you make an impact in your community?”

At Calhoun’s pharmacy, staff members hang up

PowerPak C.E. powerpak.com/vet The Pharmacist Certificate Program in Veterinary Pharmacy is a comprehensive 22-hour veterinary pharmacy certificate program created by a nationally recognized expert on veterinary pharmacotherapy.

Professional Compounding Centers of America (PCCA) pccarx.com PCCA offers a Veterinary Compounding Training Program, a 10-module home study on veterinary pharmacotherapy as related to compounding, and a two-day laboratory experience on non-sterile compounding for different animal species.

pictures of their pet patients on the wall and meet them all personally. “The biggest thing is commitment,” he said. “You

Drug Store News CE

can’t go into it half-hearted.”

drugstorenewsce.com

Kennedy said she’d be glad to do only veterinary medicine if she could. She gets to know all of her pet patients and encourages the owners to bring them in to the pharmacy, so she can meet them. “It brings me great pleasure to see them,” she said. “I would recommend getting involved. It gives you a different kind of pleasure.

I think it’s healthy for all of us to have that sunshine in our lives.”

Drug Stores News offers a two-hour continuing education class on key factors to consider when providing pet medications in community pharmacy called “Companion Animal Medication Dispensing: Pharmacists and their Pet Patients.”

The Society of Veterinary Hospital Pharmacists (SVHP) svhp.org For members, 16-20 hours of live continuing education is available annually in the field of veterinary pharmacy practice.

ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

23

SPOTLIGHT

Curexa Pharmacy knows how to grow with the times.

Its 15-year evolution reveals a successful blueprint for independent community pharmacies living in a landscape that seems only to favor big players.

Licensed in 48 states, Curexa Pharmacy’s three brickand-mortar pharmacies serve local patients at two locations

BIG GROWTH, SMALL FOCUS

in southern New Jersey and one in Chicago. But its reach extends to nearly the entire U.S., providing patients with specialty medications and compounding needs.

Curexa Pharmacy has succeeded by growing while remaining grounded.

“Although our footprint is expansive, we are a 100 percent pharmacist-owned and operated company,” said

How one independent pharmacy always stays one step ahead of the curve

Tom Keyack, Pharm.D., Executive Director of Business Development at Curexa Pharmacy. “We feel passionate about our obligation to take care of our community and our surrounding geographies.”

What began as a small retail pharmacy in 2003 now employs 90 people and focuses on specialty medications and compounding services. Even as Curexa Pharmacy has grown, its motivation has remained the same: caring for patients.

“The greatest success comes from our strong emphasis on always taking the absolute best care of patients,” Keyack said. “By taking care of our patients, everything falls into place.”

FROM GOOD TO GREAT Mark Taylor, MBA, B.S.Pharm, founded Jersey Shore Pharmacy in 2003 as a community retail pharmacy, which later became Curexa Pharmacy. Although he had success running the pharmacy, the industry began to shift as mail order grew.

Sensing the shift and feeling the competitive pressure, in 2007, Taylor decided to change the pharmacy’s focus to a long-time passion of his: compounding.

“Compounding pharmacy is the last stronghold

Curexa Pharmacy started as a small retail pharmacy and now employs 90 people and serves patients across the U.S.

where pharmacists can create innovative and creative prescription and pharmaceutical service offerings in a way that they have autonomy to do so,” Keyack said.

“That’s the perception Mark has always embodied with compounding pharmacy.”

Then in 2013, Taylor once again adapted to the changing tides of pharmacy. “Keeping in touch with what was happening in the broader healthcare landscape and understanding where the patient care need existed, we got into specialty pharmacy,” Keyack said.

24

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pharmacy goes beyond the medications, embodying its mission of prioritizing the patient. “A larger part of our business is specialty, but roped into specialty includes products that have very specific coverage reimbursement

“

“

Curexa Pharmacy’s distinct approach to specialty

Scalability all stems from taking care of the people who get the products we dispense.

support requirements,” Keyack said. “We understand how to offer prior authorization and appeals and denialtype services to bring those prescriptions through that whole continuum to the patient.”

Curexa Pharmacy created a team of patient care experts solely dedicated to navigating patients through the complex specialty prescription process from start to finish.

OVERCOMING GIANTS Keyack said that Curexa Pharmacy’s biggest obstacle today is the growing vertical integration across the industry. “You have consolidation happening in literally every sector of health care at this point, even pharmacies themselves.

Independents are being gobbled up by large players,” he said. “With consolidation comes funneling of business into avenues that make it harder for small players like us to take care of patients and to operate.”

As companies become giants, they gain more power, Keyack said. Manufacturers limit their distribution

In 2007, Curexa Pharmacy started compounding to earn new revenue and stay

networks. Pharmacy benefits managers (PBMs) reimburse

ahead of the curve.

less for the products they dispense. Behemoth specialty pharmacies box out smaller retailers, like Curexa Pharmacy.

coming up with innovative and creative solutions to take

And, patients suffer from reduced access to medicine and

care of patients as best as possible,” Keyack said.

health networks. “That goes against our mantra,” Keyack

“It’s only a matter of time until the community of patients

said. “Which is to secure the best pharmacy care and best

and physicians out there want to go back to the time when

access possible for patients.”

pharmacy care was more accessible.”

Through it all, Curexa Pharmacy continues to grow

One key to the future success of independent

because of its dedication to patients. Everything comes back

pharmacies, Keyack said, is effective lobbying on Capitol

to that. “Scalability all stems from taking care of the people

Hill. “Right now, pharmacists don’t get the recognition they

who get the products we dispense,” he said. “If we think of

deserve. Pharmacists are the most accessible yet least

creative ways to get products to patients and ensure they’re

understood member of the health community,” he said.

being taken care of from a clinical and safety standpoint,

“We’re not considered to be providers just yet. Hopefully,

and make sure they’re getting access at the lowest possible

that’s coming.”

cost, then things fall into place financially and otherwise.”

But even without provider status, as independent pharmacies look to grow, success boils down to one thing.

A BRIGHT FUTURE FOR INDEPENDENT PHARMACY

“Never lose sight of taking exceptional, personalized care

“Even in the crazy times of consolidated health care that

of patients,” Keyack said.

we’re living in now, I think there are still opportunities for ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

25

MONEY

WAYS TO PAY What independent pharmacies need to know about payment processing today

Cash? That’s yesterday’s way to pay.

they will not fall victim to a data breach,” Braatz said.

Forty percent of consumers prefer credit cards as their favorite way to pay, according to a 2016 survey by TSYS , ®

a payment solutions company. Thirty-five percent choose debit cards. Only 11 percent prefer cash.

As more customers pull credit cards out of their wallets

“However, any business that accepts credit card payments can be hit with fraudulent activity.”

On Oct. 1, 2015, new regulations went into effect that shifted counterfeit fraud liability to merchants not accepting EMV cards, also known as chip or smart cards. “Any

instead of cash, businesses like your pharmacy need to

business that is not accepting chip cards and is hacked may

keep up with how consumers want to pay.

be financially responsible for the hefty fees that come along

“Independent pharmacies need to accept credit cards to remain profitable and competitive,” said Christina Braatz,

with the breach,” Braatz said.

Pharmacies need to make sure to upgrade their systems

Association Development Executive at CardConnect, a

to accept EMV cards. “Accepting EMV payments will allow

payment processing solutions provider that uses patented

pharmacies to add an additional layer of security since chip

tokenization and PCI-validated point-to-point encryption

cards create unique transaction codes that cannot be used

(P2PE). “Processing credit cards will make your pharmacy

again,” she said.

more accessible to customers while also improving your

And for pharmacies with sensitive health information in

cash flow.”

their systems, it’s even more important to keep data secure.

STAYING SECURE

know about PCI compliance. PCI-DSS, or Payment Card

Even if your pharmacy already processes credit cards, every

Industry Data Security Standard, is a set of rules passed

business needs to make sure it does so securely.

down from the four major card brands (Visa®, American

Every pharmacy that processes credit cards should

Thirty-two percent of identity fraud claims in 2016 were

Express®, MasterCard® and Discover®). “These rules help

related to credit card fraud, according to the Insurance

protect consumers’ personally identifiable information and

Information Institute.

are even more important for businesses handling medical

“Many businesses assume that because they are small, 26

pbahealth.com/elements

information,” Braatz said. “Being PCI compliant means your

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pharmacy is doing its best to keep information like credit card numbers or medical records safe and secure.” guarantees PCI-compliant payment processing to protect your business and your patients. “Pharmacies should use a processor that offers powerful security solutions like PCI-validated point-to-point encryption (P2PE) and tokenization,” she said. Tokenization creates an irreversible token that gets passed through the payment gateway, instead of the card number. “By securing cardholder data this way, pharmacies can protect their business and customers from a potential data breach,” she said.

“

Being PCI compliant means your pharmacy

“

Braatz recommends choosing a payment processor that

is doing its best to keep information like credit card numbers or medical records safe and secure.

PHARMACY SPECIFICS As healthcare providers, pharmacies need to correctly set up their payment processes to accept payments from Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs).

To do that, they need one of two things. They need an eligible Merchant Category Code (MCC) number that defines the pharmacy as a healthcare provider. Or, they need to qualify for the 90% Rule.

According to SIGIS, the Special Interest Group for IIAS Standards, the 90% Rule applies to pharmacies operating in ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

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hospitals or medical buildings that mostly fill prescriptions

Braatz said. “NFC allows customers to pay by simply waving

and have a limited availability of other merchandise.

their phone over an NFC-compatible device. It provides a

Specialty pharmacies that primarily sell prescriptions, like

quick and easy checkout experience.”

compounding pharmacies, may qualify. But in all cases, the

Braatz suggests pharmacies look for a payment

drug store or pharmacy must attest that 90 percent of its

processor that offers an omnichannel payment solution,

previous year’s gross sales come from prescriptions and

so customers receive an accessible checkout experience at

eligible healthcare products.

their convenience. And one that accepts the method they prefer to pay with.

NEW WAYS TO PAY

“By accepting different types of payments, pharmacies

Consumers today want to make payments their way.

can rest assured knowing they are providing their

That includes in person, online, and with a mobile device

customers with a seamless payment experience,” she said.

or wearable.

“NFC, or near field communication, is also beginning to gain popularity among merchants and their customers,”

TERMS TO KNOW Don’t get overwhelmed by the unfamiliar lingo when it comes to credit card processing. Take a look at these common payment processing terms.

ACH (Automated Clearing House)

EMV (Europay®, MasterCard® and Visa®)

PCI (Payment Card Industry)

ACH is a way to process payments

A joint venture that created the

A council made up of terminal

PCI-DSS (Payment Card Industry Data Security Standard)

electronically. The bank’s routing

original standards used for smart

manufacturers, processors, card

PCI standards for payment card

number and account number are

card (chip) payment transactions.

brands and security experts from

data security.

required and funds are transferred

the payment industry. This group

from the buyer’s to the seller’s

FSA/HSA

account electronically. For

Flexible Spending Accounts (FSAs)

regarding securing payments,

P2PE (Point-to-Point Encryption)

example, an eCheck.

and Health Savings Accounts (HSAs)

applications, and networks.

When customers swipe or

Tokenization Tokenization is a data security process that encrypts

allow consumers a tax-free way to

sets all standards and practices

insert their cards, their account

save money in an account used for

PCI Compliance

medical expenses.

Major issuing banks created

decrypted at either a retailer’s

PCI compliance standards to

switch, a payment gateway,

protect personal information

or by the processor, depending

data gets encrypted and then

as a customer’s payment card

NFC (Near Field Communication)

and to ensure security when

on the scheme. Several schemes

data or personally identifiable

Also known as RFID or Contactless,

processing transactions. Due

are in play using various

information. Tokenization replaces

near field communication uses a

to the rise in data breaches,

encryption methods.

the customer’s data with a

chip embedded in a card, fob, or

hackers, and identity theft, all

mathematically irreversible token.

smartphone, and an antenna that

processors now charge breach

Virtual Terminal

The token has no algorithmic

emits a low-level electrical charge.

insurance or PCI compliance fees

A credit card terminal run from

relationship to the original piece

The charge powers the chip, which

to protect against such a breach,

a computer screen, smartphone,

of data, meaning hackers can’t

then transmits the customer’s

which could result in hundreds of

or handheld device. The virtual

unlock it with a decryption code.

data to the antenna. There are

thousands of dollars in damages

terminal runs in a window via a

two standards in use today for

and fines.

web browser or other software

sensitive information, such

payments. One works for one-way

application, rather than using

communication to transmit credit

dedicated hardware, like a

card data. The other is used for two-

physical credit card terminal.

way communication for EMV and 30

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couponing on mobile wallets.

OUTLOOK

One factor you might not know about could shift the momentum of your pharmacy’s contracts with pharmacy benefits managers (PBMs).

Network aggregate reimbursement guarantees.

CONTRACTING STRATEGY

PBMs use these guarantees as a contracting tactic with pharmacy services administration organizations (PSAOs) and the pharmacies they serve. These tactics influence the network rates your pharmacy receives.

THE NETWORK AGGREGATE REIMBURSEMENT GUARANTEE Network aggregate reimbursement means that the PBM

What every pharmacy needs to know about network aggregate reimbursement guarantees

will combine all prescription claims for the entire group of pharmacies enrolled in a PSAO. At the end of the applicable time period, the PBM reconciles the prescription claims from every pharmacy in the PSAO together and measures the total reimbursement to the network aggregate reimbursement guarantee.

But with these guarantees, the PBM doesn’t have to reimburse individual pharmacies at its stated network rates.

“The PBM can reimburse the pharmacy at any rate it deems appropriate as long as overall reimbursement for all claims billed by all PSAO pharmacies for the entire year combined equal the rates stated in the contract,” said Melanie Maxwell, Senior Vice President, Pharmacy Services at Pharmacy Providers of Oklahoma Inc. (PPOk), an organization that negotiates third party contracts for independent pharmacies. “This means that pharmacies enrolled in the same PSAO can have different reimbursement rates under the same network contract.”

HOW AGGREGATION IS USED IN THE CONTRACT How network aggregate reimbursement guarantees affect your pharmacy business depends on their use.

At best, “PSAOs can use network aggregate guarantees to protect pharmacies against overly aggressive reimbursement,” Maxwell said.

At worst, “Network aggregate reimbursement gives the PBM carte blanche to reimburse pharmacies at whatever rate the PBM deems necessary,” she said. “Pharmacies have no control over how or when a PBM will lower their reimbursement.”

In an ideal scenario, the aggregate rate would apply only to the generic portion of the contract, Maxwell said, to establish a maximum reimbursement discount. “It helps prevent overly aggressive MAC reimbursement and helps

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hold the PBM accountable for achieving a fairer, more reasonable compensation for generic products.”

However, most PBMs won’t agree to that. PBMs prefer a blanket aggregate reimbursement rate. That way they can divvy out reimbursements however they want as long as they reach that rate in the end. “PBMs will balance out the

WHAT TO LOOK FOR

more aggressive reimbursement with other claim payments under the same network to achieve the network aggregate guarantee in pharmacy contracts,” Maxwell said.

At the very least, the contract terms should narrow the aggregate concept in some ways. “You have to make sure the contract language has specific protections and allowances to the aggregate guarantee,” Maxwell said. For example, contracts should exclude certain drug classes from network aggregate rates. Instead, those drugs should be reimbursed at specific reimbursement rates.

DEPENDING ON YOUR LOCATION The benefits of network aggregate reimbursement guarantees also depend on circumstances outside the pharmacy’s control. The PBM’s hands are tied to its clients, insurers, and employers. Those relationships with the PBM affect your pharmacy’s relationship with the PBM and the effectiveness of your contract.

“If a pharmacy happens to be located in an area where the PBM’s utilization is tied to an aggressively priced insurance or employer price guarantee, the pharmacy will have no recourse to avoid the aggressive reimbursement,” Maxwell said. “Nor will they have recourse to address claims that pay below acquisition cost. Conversely, if a pharmacy happens to be located in an area where the PBM reimbursement is not aggressive, the pharmacy will enjoy a higher profitability on the PBM’s business overall.”

THE BOTTOM LINE PSAOs were developed to help independent pharmacies interact with third party payers. Find the right PSAO, one that will negotiate the best contract for your pharmacy, whether that includes aggregate guarantees or not.

“Pharmacies should examine a PSAO’s overall contracting strategy and its track record for holding PBMs

Network aggregate contracts can work in your favor if you and your PSAO know what to look for in the contract language.

Look for these specific protections and allowances.

Balancing Reimbursement Across the PSAO Network Contracts should have specific language that defines how reimbursement adjustments upon reconciliation will affect individual pharmacies.

Drug Class/Drug Claim Type Exclusions Contracts should exclude certain drug classes from network aggregate rates and guarantees and should have specified reimbursement rates. Examples include specialty drugs, workers’ compensation claims, secondary payer claims, and claims paid at the pharmacy’s usual & customary price.

MAC Appeal Allowances Pharmacies should have the right to immediately appeal unfair reimbursement when MAC reimbursement is too aggressive.

Maximum Reimbursement Allowance Contracts should contain maximum average wholesale price (AWP) discounts and minimum dispense fees to establish the maximum reimbursement discount PBMs are allowed to pay on a specific claim. This will ultimately protect the pharmacy against a major loss on a specific claim.

Rural Pharmacy Exclusion Claims billed by pharmacies located in rural communities should be exempt from network aggregate reconciliation.

Shorter Network Aggregate Reconciliation Periods Annual reconciliation is too long of a time frame to evaluate reimbursement against guarantees. Quarterly reconciliation is a more reasonable time period so pharmacies aren’t subjected to overly aggressive reimbursement for an entire year.

accountable,” Maxwell said. “Find out if the PSAO routinely negotiates rates and contract terms or if it just signs what the PBM offers. The right PSAO is an important business advocate to have working on your behalf.”

ELEMENTS | The business magazine for independent pharmacy | MARCH 2018

33

NOTES

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