PBM Optimization: The Third Pharmacy Profit Pillar

The Third Pharmacy Profit Pillar
The Third Pharmacy Profit Pillar

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Our third pharmacy profit pillar, PBM Optimization, will significantly impact your bottom line in the shortest amount of time for most independent retail pharmacies.

While most pharmacy owners hate PBMs, they are a part of our everyday business and the key to success. You can’t ignore them when about 90% of a pharmacy’s revenue is from a PBM.

Let’s look at a few ways to optimize your revenue that flows through a PBM  with our PBM Optimization tips.

PBM Pricing Tables

When was the last time you optimized your pricing table?

If you are anything like me, I hadn’t thought about my pricing tables in approximately… forever! Assuming you haven’t focused on these recently, you must change that ASAP. 

I have learned that your pharmacy management systems (PMS) pricing tables significantly influence how much you get paid. Everything I thought I knew about prescriptions reimbursements went out the door after going through Pricing Concepts’ optimization program. 

What doesn’t work is just setting your pricing equations to AWP plus, plus, plus and then crossing your fingers and hoping for the highest reimbursements. What does work is Pricing Concepts’ proprietary process to help you optimize all of your PBM reimbursements.

I achieved a several dollars per prescription average increase within a few months. I am delighted to renew each of my pharmacies every year. You can reach out to Robbie Stokes with Pricing Concepts HERE.

Know Your PBM Contracts

Over the last 15 years, PBM contracts have become far more confusing.

When you are using a contract with a PBM, there are a few things that you must consider.

  • If using a PSAO, how do they handle “escrow money”?
  • Are you under effective rate contracts?
  • When is the true-up period?
  • Are adjustments taken at the point of sale or in post-adjudication only?
  • What are your DIR fees?

Your reimbursement at adjudication isn’t any actual tangible number unless you know these answers. I highly recommend you program your estimated fees directly into your PMS. If you can’t do this yourself, hire someone like Benjamin Jolley if you need assistance.

When you understand your contracts, you can better decide what inventory to order, what products to dispense more of, and how to best optimize your reimbursements. For example, if you don’t have effective rates, then dispensing items like Clemastine can be a win for you and your patients. 

Go Direct with PBMs (Ditch the PSAO)

PBMs are constantly squeezing pharmacies with no sign of relief. Many pharmacy owners contract with PBMs through a PSAO. PBMs offer varying warranties and different ones directly to pharmacies. Most PBMs can access via a PSAO or directly. 

We get asked about PSAOs frequently. Common questions are:

  • Should you switch your PSAO membership? 
  • Would a direct contract benefit your pharmacy? 

Generally speaking, PSAOs work on being a “preferred pharmacy” that will bring you more volume. This thinking sounds logical. However, if being a preferred pharmacy causes you to lose money on a significant amount of your prescription claims, multiplying a negative number by a more substantial number doesn’t turn it positive. 

More Volume ≠ , More Profit

If you don’t make money on a few preferred claims, filling more of them won’t suddenly bring you profit. There are a lot of pros and cons to consider with ditching your PSAO. Make sure to check out our blog that dives deeper into these concepts.

Manage DIR Fees

DIR fees are indeed awful. I don’t think anything in the pharmacy world is as bad as DIR fees. There is no way to avoid them unless you don’t take Medicare or go cash-only. Since most of us can’t do that, let’s mitigate DIR fees as much as possible. 

I believe in overcoming DIR fees you have to get them as low as possible and then monetize those patients in other ways. This way, you are reducing your costs and increasing your revenues. By doing this, Medicare patients can still be an attractive market. 

Mitigate and Optimize

The best way to reduce your DIR fees is to start working now for next year. Getting patients on plans that fit their medications and dispensing histories is vitally important. I prefer to use FDS Amplicare for this deep dive plan comparison. Their Win-Win report is a must-have. If you get patients’ plans optimized, you can save tens of thousands of dollars in DIR fees next year. 

Next up is to understand which patients are costing you the most. I have seen where just 1 to 2 patients as outliers cost a pharmacy thousands of dollars in extra DIR fees. FDS Amplicare can help with this analysis too. Once you know who and why your DIR fees are increasing, you can spend your time and energy on those patients. Sometimes it might mean not filling for them anymore; other times, it might mean working with them to get synchronized or on optimum therapy. 

Don’t Ignore Your PBM Revenue Because You Hate PBMs

You must optimize your PBM revenue because it is such a large portion of your revenue, and we think you should also be growing your non-PBM revenues. Inside our Pharmacy Badass University, we teach you how to grow many revenue streams and improve your marketing. We tackle all 6 Pharmacy Profit Pillars. 

Ready to create a profit plan for your pharmacy? Join us at the Pharmacy Profit Summit in Dallas in August. 

  • DiversifyRx

    About DiversifyRx

    DiversifyRx is dedicated to helping pharmacy owners kick ass and create profitable, thriving pharmacies. We strongly believe the key to success is diversifying your revenue streams and maximizing each opportunity that is right for you. DiversifyRx was created by a pharmacy owner for pharmacy owners. We offer tons of free information and our Pharmacy Badass University membership. This site contains affiliate links to products or services. We may receive a commission for purchases made through these links.

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