Independent Pharmacies Must Look Out For Deceptive PBM Practices


A Q&A with Douglas Hoey, CEO of NCPA, on ways to change the pharmacy payment model and deceptive practices being employed by PBMs.

Independent pharmacy profits have declined significantly recently, putting owners and pharmacists in a very difficult position. According to the National Community Pharmacists Association’s (NCPA) 2023 digest, gross profit margins for independent pharmacies that year fell to 21%, the lowest in 10 years.1 This is most likely due to a number of issues, including low or below-cost third-party reimbursements, inflation, and higher dispensing costs.

How to change the pharmacy payment model / Aleksander -

How to change the pharmacy payment model / Aleksander -

Douglas Hoey, CEO of NCPA, sat down with Drug Topics at the 2024 American Associated Pharmacies (AAP) Annual Conference to talk about different ways to change the current pharmacy payment model and deceptive practices being employed by Pharmacy Benefit Managers (PBMs).

Drug Topics: Can you discuss some ways to change the pharmacy payment model?

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Douglas Hoey: NCPA talks about changing the pharmacy payment model, that is our core mission, to facilitate changing the pharmacy payment model. Medicaid and Medicare reform are certainly ways to do that. Another way to do it is to really encourage pharmacies to look at their cash pricing. We see more and more patients who choose cash pricing because it's less expensive than going through their insurance. There are a number of cash pricing programs out there to help pharmacies optimize their cash pricing. Prescryptive Health has one and there are others that are out there.

Another thing that's coming up is cost plus. For example, Mark Cuban and his low cost pharmacy, they talk about cost plus and that's getting more attention. Whether or not their way of providing the solution is the right solution or not, remains to be seen, although we think it could have some potential. But the conversation [is] around what should the plus be? Our understanding is that they're going to be increasing their plus to low double digits in the near future. We think that would be an encouraging sign to the market for others to follow.

On the clinical services side, That is the future of independent pharmacy. We need to be paid fairly for the product. A cost plus provides transparency and stability, but then we also have to be paid for our services. We're seeing more and more pharmacies have the opportunity to do that. We see a lot of people who want to work with independent pharmacies, especially networks of independent pharmacies. That's why we helped create the Community Pharmacy Enhanced Services Network (CPESN), so that pharmacies have the opportunity to get paid for those clinical services. We encourage pharmacies to keep their eyes open [and] to participate in CPESN. One key thing to do that…is to have [their] staff trained to free up the pharmacist [or] the pharmacy owner…to be able to do some of these clinical services and then also use their technicians to help support some of those clinical services. That, hopefully, will bring in some additional revenue…

Drug Topics: Are there any other important topics you wanted to discuss?

Hoey: I think one thing that's going to come up is that one of the key assets that PBMs have are pharmacy networks. That's basically what they're selling, is a pharmacy network. In essence, they're selling independent pharmacies because they need a network. One thing that we're seeing, that we're keeping an eye on I'll say, is that they may be having some difficulties forming those networks because it seems like we're seeing…what we would say are deceptive tactics of creating these pharmacy networks.

For example, a phantom fax. [PBMs] are still faxing, they're still in 1984 and faxing things out. So, the PBM will say “Well we faxed you a contract” and the pharmacy says, “I never got that.” [The PBM says] “Well, you didn't respond. So, you're in the network.” So, they just added [the pharmacy] to their network. [Also], a deadline date. {The PBM says] “Hey, the deadline for you to respond is June 1” [and the pharmacy says] “Well, I got this on June 12.” [The PBM will then say] “Oh, you're in the network.” We're seeing more tactics like that and that's just something for pharmacies to be aware of. They really need you in that network. Be on the lookout if they're trying to use deceptive tactics to get you in the network.

The other thing, as always, is to read your contracts. Read them carefully because we're being told about some interesting terms that are being put in those contracts. It's always important to read your contract carefully.

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1. NCPA Releases 2023 Digest Report. News Release. NCPA. October 15, 2023. Accessed April 24, 2024.
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