How the right PSAO protects patient access and pharmacy viability

By Peter Kounelis, R.Ph.

The three priorities of the right contracting partner

If you're an independent pharmacist or pharmacy owner, you know how challenging the payer landscape has become. You've probably made an effort to diversify your business in order to meet healthcare needs in your community while trying to stay financially viable. You're doing everything you can, so when it comes to contracting on your behalf, shouldn't your pharmacy administrative services organization (PSAO) be doing everything it can to protect your patient access and keep your pharmacy viable?

Does your PSAO prioritize your valuable role in your community (and not just consider prescription volume)? How can you tell? A few key attributes should be evident if the organization has your best interest at heart. Look for a PSAO that:

1. Doesn't stop at access; evolves to meet your needs

The "A" in PSAO stands for "administrative" and describes the traditional role of the PSAO, which is acting as an intermediary between the PBMs and the pharmacies. This is a passive role that worked in the past to a degree because independent pharmacy was able to operate in the former reimbursement environment. As payers and PBMs continue to consolidate, they now wield tremendous negotiating leverage. They're rapidly and dramatically forcing down reimbursement rates, thus negatively impacting the economic model for all pharmacies, especially independents.

Most traditional PSAOs continue to believe their primary role is merely an administrative one, acting as an administrative organization working in the background as intermediaries so that PBMs don't have to contract with each individual pharmacy. Simultaneously, they offer their member pharmacies services, so they don't have to contract with each of the payers and PBMs on their own. Most PSAOs haven't moved beyond that narrow scope. What they haven't realized is that the PSAO's mission must expand and evolve to help their pharmacies operate in the current environment where their services aren't properly valued and are, instead, viewed as commodities. It's not just about allowing their patients to continue to come to their pharmacies. It is also about financially, economically, and professionally striving for a sustainable business model for independent pharmacies.

As pressure on pharmacies increases due to this PBM consolidation, more and more pharmacies are telling us and advocacy organizations like NCPA that they need and even demand more from their contracting partners. What we are hearing from pharmacies is that they also need someone to fight for them, and not just act as a back-office administrator. They need someone to evaluate, contract, and advocate to help reverse some of the abusive and burdensome tactics that these monolithic PBMs are imposing, especially on independent pharmacies. Meeting this need comprehensively makes it even more incumbent upon PSAOs to engage with payers on your behalf – not just for the narrow mission of getting access to patients and prescriptions, but to promote your value to protect their viability and future. The “A" in PSAO must evolve to mean “advocate" – both at the contracting table and on the legislative front.

2. Innovates and takes risks; insists on recognizing the enhanced value that you deliver

Protecting your patients' choice and your viability demands a certain amount of risk taking on your PSAO's part – risk that many aren't willing to take. But making sure the business model, the viability of the pharmacy, and the patient relationship are all considered means foregoing the commodity approach when it doesn't work for the pharmacy. The fact is, when you accept all networks, you are sacrificing significant margins and unnecessarily paying higher DIR fees on all your existing patients.

When a PSAO casts a wide net and agrees to participate in all payer networks, what they're really telling you is that they're conceding that your unique and valuable services are the commodities that the PBMs say they are. This approach gives pharmacies the erroneous perception that trading margin for volume is the only option. But if the PSAO views their mission more expansively and more strategically, they'll find that being more selective, and insistent on your value, prevents the commoditization of pharmacy services. It sends a very powerful signal to the PBMs.

Imagine if all organizations valued independent pharmacies that much. Imagine your PSAO being unwilling to readily sacrifice its member pharmacies' margins to the PBMs merely to participate under unviable terms. Prescription volume alone shouldn't be the goal. Preserving patient relationships that also reward you for value should be the prime objective. Key to contracting is keeping in mind that unless the pharmacist has the time, the resources, assets, and the wherewithal to continue to deliver these services, they won't be able to continue to survive in the future. Profound patient relationships are the hallmark of independent pharmacies, and nothing should leave the pharmacy unable to deliver the service they're known for. 

3. Really understands the managed care industry; has the experience to advocate for you

Industry leading PSAOs bring experience from various disciplines to inform the contracting process. They bring to bear expertise from health plans, PBMs, pharmacy, and pharma. After all, it's crucial to understand “how the sausage is made" if you're trying to change the menu. The new PSAO will have a fundamental understanding of how PBMs work with their clients — what the economic flows are, where their incentives are — and try to apply those when protecting pharmacies. That experience can't be overstated. It's the only way to truly understand where the opportunities are to help pharmacies survive and thrive.

The bottom line

Independents need a true partner that contracts to help them successfully navigate a challenging payer landscape and persevere amid increasing pressures. The right partner will prioritize your compelling value story – and have the experience, passion, and strategies to make it happen.

Learn more

Elevate Provider Network's mission is to preserve and promote your patient relationships while also protecting the viability of your community pharmacy. Find out how we're making the successful future of independent pharmacies like yours our mission.

About the Author

Peter Kounelis, R.Ph.

Vice President of Elevate Provider Network
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