Drug Price Variability Among Medicare PDP Plans – Part 4: What to Do Now?

Written by Dr. Thomas Barus

July 14, 2020

So far, this series included a lot of information for a various stakeholders that can use this data in many different ways.  Let’s explore just some of the possibilities that can add value for different organization types.

Wholesalers

Do wholesalers know the price drugs are being reimbursed at across different pharmacies and plans? With this type of information and ongoing routine review, wholesalers would be able to ensure pricing reflects market competitiveness while keeping margins tight and understand better the final markup on drugs.

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Group Purchasing Organizations (GPOs)

While GPO’s are providing member pharmacies with discounts, does the fluctuating final net price reflect enough margin for the pharmacy? If GPO’s continually monitored pricing across different retail pharmacies they could ensure the buyers have transparency to potential margins and that buying price is in line with reimbursements.

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Health Plans / Payers

Consumerism and price comparisons are driving patient decisions in many aspects of healthcare. As a health plan, your member’s satisfaction is important to retention and new member acquisition (or employee attraction).  In addition, your pharmacy network is reviewing your rates as well.  It is important for health plan to know what their competitors are reimbursing across different pharmacies. This insight can help develop innovative pricing strategies to attract consumers and to monitor outlier pricing.

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Pharmacy Benefit Managers (PBMs)

PBMs are typically setting reimbursements for pharmacies, but how does the PBM know if they are making their clients competitive or not? And is the PBM in line with other PBM reimbursement? Especially in generics, MAC pricing can vary greatly depend on multiple factors, including supply, GER, and the insurers objectives. We believe it is important for PBMs to monitor the marketplace for outliers and receive feedback from pharmacies on reimbursements.

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Pharmacy services Administrative Organizations (PSAO)

PSAOs are helping independent pharmacies contract as a group with PBMs or health plans to alleviate a large administrative burden on any single pharmacy. While complex, pharmacies want to ensure they are competitive in pricing and not an outlier which could negatively impact reimbursement or customer traffic. With a strategic pricing analysis, PSAOs will have additional data to support negotiations on various drugs to keep member pharmacies competitive.

In addition when contracting for future year contracts, how many pharmacies will be impacted negatively by the contract pricing? What are the leverage points that can be utilized to ensure the majority of pharmacies are receiving adequate reimbursements? By reviewing previous pricing metrics and trends, analyzing current networks and acquisition costs, the proper analysis can provide insights to negotiable items.

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Pharmacies

In the end, the retail pharmacy is subject to the consequences of many decisions made by other stakeholders. Health Plans, PBM’s and PSAO’s are setting reimbursements. Therefore, as a pharmacy, you can start by having the knowledge of drug reimbursements across your competition, understanding the impacts of reimbursements and formulary on your current customers, and buying drugs at prices that help ensure you are not losing money. By being knowledgeable about industry pricing, retailers can ask the right questions to their PSAO or Health Plan and proactively engage in meaningful discussions with GPO’s or Wholesalers.

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Summary

While we have only covered a few high level opportunities using competitive pricing data analysis, each organization has its own needs and has its own perspective to accommodate. This vastly complex and hyper-competitive marketplace requires specific understanding of the client’s needs and/or overall strategy to develop value-add strategies. These opportunities have the potential to substantially improve profitability for clients but requires the proper expertise to uncover.

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