Using Data to Put a Stop to Your Pharmacy's Profit Leakage


Technology will help you identify potential reimbursement problems before they trigger reduced payments or claims audits.


You can't fix what you don't track. Technology will help you identify potential reimbursement problems before they trigger reduced payments or claims audits.

Understanding pharmacy reimbursement is a tall order, even for owners who've been in business for decades. Pharmacy benefit managers (PBMs) structure their contracts with broad rights to initiate claims audits, which can lead to recoupment of entire reimbursement amounts plus potential audit fees. What's worse, an audit uncovering systemic errors could void profits on hundreds of claims.

So, any approach to maximizing community pharmacy reimbursement should include an active triage component, supplemented by ongoing use of pre-and post-edit and pharmacy claims reconciliation software.

Pharmacy Claims Processing

Let's say, in the normal course of business, your pharmacy receives a prescription for an existing patient. Your counter technician enters the script into the pharmacy system based on patient name and other identifiers. The script goes into a queue, then makes its way to the filling tech. Once filled, the pharmacist verifies that everything on the written prescription matches up with what's in the medication bottle.

Any discrepancies would need to be resolved by either the prescribing physician or the patient's insurance company. Here are some common problems that typically occur.

  • Prescription lacks legally required information, such as prescriber's signature, drug quantity, date, or proper patient identifiers
  • Incorrect calculation of days' supply
  • Refill submitted sooner than allowed
  • Wrong quantity
  • Invalid DEA/NPI/prescriber identification number

When your pharmacy deems the script ready to submit for adjudication, you transmit it over a digital bridge to the PBM. In turn, the PBM examines the patient's insurance coverage, the specific drug dispensed and the contract payment rate compared to the actual claim amount submitted. If everything lines up correctly, the PBM processes the claim for payment, which can take anywhere from a week to 90 days (depending on whether insurance is government-sponsored or commercial). At the same time, claims submitted at prices less than contracted amounts would be reimbursed at the lower level.

As you can see, the process involves a lot of variables. Realistically, you can't expect to handle pharmacy claims data analysis for all your transactions manually. Many independent pharmacies use pre-and post-edit software from a third-party company to follow claims through adjudication. A pre-and post-edit platform automatically tracks, for example, prescription fill dates, drugs dispensed, and prices charged. Primarily, this type of software ensures claims are submitted correctly. In addition, many pharmacies run a reconciliation platform in tandem to make sure claims are also paid correctly. Reconciliation allows you to concisely see which claims have been paid and if the amount the store submitted for payment was the amount actually paid. Reconciliation software also provides a breakdown of claims aged up to 30 days, 60 days, 90 days, or 90 days plus.

Your action item here: Appoint a trusted team member to take charge of reviewing the reconciliation reports. Your claims “captain" should run the reports at regular intervals, ideally weekly. Any claims that haven't been paid as anticipated should prompt a call from your captain to the corresponding insurance company asking why proper reimbursement hasn't been issued.

Additional Challenges

Independent pharmacy revenue leakage can also happen outside the parameters of reconciliation.

For instance, a pharmacy's computer system typically uses an algorithm to set prices for dispensed drugs. The algorithm generates a measure of cost multiplied by a markup plus a dispensing fee. When you fill a prescription, it's tied to the pricing formula—or it's overridden to establish a discretionary price. Overrides cause inconsistency in pricing, which can raise audit flags with PBMs. Be sure your store has protocols and clear guidance to technicians and pharmacists regarding when an override may be used.

Another area to watch is the National Drug Code (NDC) number—the universal product identifier tied to every prescription. The NDC submitted on a claim must be an exact match to the NDC on the product dispensed to the patient. In the case of generic drugs with multiple manufacturers, NDCs differ for each strength and bottle count. It's not uncommon to have old inventory on the shelf, along with bottles of the same drug in new sizes or strengths. To avoid NDC mix-ups, consider software that monitors NDCs and will issue a “hard stop" at the pickup window when attempting to adjudicate an outdated NDC.

Similarly, “dispense as written" (DAW) codes can cause problems if not properly triaged. This comes into play when a brand-name drug isn't covered by the PBM, but the prescriber specifies a branded product. The DAW code on the claim must match the instructions on the prescription. If the script doesn't include a DAW tag for a particular brand and you sell the branded product while having the generic equivalent on your shelf, an insurance audit would dictate that you only receive payment at the generic rate. Again, claims editing software would catch such an instance before it becomes a financial liability.

Finally, it's essential to have a current average wholesale price (AWP) file incorporated into your claims processing system. Drug manufacturers publish AWPs, which establish the basis for wholesale drug prices and PBM reimbursements. Be sure your AWPs are updated at least weekly; even better, run those updates daily, if available. An outdated AWP file could fail to translate drug price increases, which would result in a loss of income. When investigating claims editing software, ask if it automatically corrects for the latest AWP information.

The overarching theme in maximizing community pharmacy reimbursement is that you can't remedy what you don't measure. In other words, if you don't have the optics to understand potential problems, you won't be able to solve them. Appoint a trusted staffer to oversee pharmacy claims data analysis and continually monitor the claims process. When your pharmacy gets to the root of any problems, metrics will verify over time whether they've been permanently fixed.

Fully understanding pharmacy reimbursement is hard enough as it is, but, for even the most seasoned independent pharmacy, revenue leakage is an ever-present threat that requires constant attention. A Good Neighbor Pharmacybusiness coach can serve as a second set of eyes on your business, performing pharmacy claims data analysis and identifying anything that results in reimbursement that’s less than it should be. Your coach will help you optimize the way you reconcile claims and plug leaks along the way to make sure you’re maximizing your reimbursement at every turn.

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