Pharmacy profit

[ZakMeister]

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Sorry if I have been posting a lot recently.

So I was looking at this blog post where a calculation shows how Pharmacies get reimbursed. So, it's the AWP the pharmacies pays for the drug- a %+ dispensing fee which is a couple dollars. By the looks of it, it seems pharmacies get reimbursed less than they are buying the drug. I can see them making losses, please enlighten me as to how pharmacies making profit with PBMS in the equation

 

[PharmacistReb]

They reimburse AWP + a dispensing fee. The dispensing fee is typically meaningless. The AWP, however, is not what the pharmacy actually pays. Very typically, the AWP is some over-inflated number that is not a true AWP. Pharmacies certainly aren't making much on stuff like lisinopril. But on some things, particularly newly generic drugs, the AWP and what the PBM pays will be astronomical in comparison to our cost. In some instances, the AWP will be less than pharmacy cost and we'll get screwed.

I don't truly understand how some PBM's are paying what they're paying on some medications. I had a Caremark-based Medicare D plan paying me 75 dollars for 30 days of clopidogrel and I think my cost was about $2.50 or something absurdly low.

 

[ZakMeister]

They reimburse AWP + a dispensing fee. The dispensing fee is typically meaningless. The AWP, however, is not what the pharmacy actually pays. Very typically, the AWP is some over-inflated number that is not a true AWP. Pharmacies certainly aren't making much on stuff like lisinopril. But on some things, particularly newly generic drugs, the AWP and what the PBM pays will be astroonomical in comparison to our cost. In some instances, the AWP will be less than pharmacy cost and we'll get screwed.

I don't truly understand how some PBM's are paying what they're paying on some medications. I had a Caremark-based Medicare D plan paying me 75 dollars for 30 days of clopidogrel and I think my cost was about $2.50 or something absurdly low.

So does the PBM decide themselves the "reimbursement" fee on the various generics/brands? I heard on some drugs the pharmacies lose money but they make up on others? Thank you so much for your previous reply though 🙂

 

[Aznfarmerboi]

So does the PBM decide themselves the "reimbursement" fee on the various generics/brands? I heard on some drugs the pharmacies lose money but they make up on others? Thank you so much for your previous reply though 🙂

Yes, we do lose money on a lot of drugs when you factor in the cost of dispensing, and also lose money on a few drugs where the drug reimbursement is less than what you pay for the drug.

 

[MountainPharmD]

Sorry if I have been posting a lot recently.

So I was looking at this blog post where a calculation shows how Pharmacies get reimbursed. So, it's the AWP the pharmacies pays for the drug- a %+ dispensing fee which is a couple dollars. By the looks of it, it seems pharmacies get reimbursed less than they are buying the drug. I can see them making losses, please enlighten me as to how pharmacies making profit with PBMS in the equation

AWP is a meaningless number. There are a few PBMs who use AWP -% +dispensing fee. Most are going by WAC, which is wholesale acquisition cost. WAC is an accurate reflection of what the wholesaler is paying for the drug. On brand drugs PBMs are starting to pay WAC +% +dispensing fee.

The majority of generics are payed based on the PBMs secret MAC list. The maximum allowable cost (MAC) list is a secret list of generic drugs and the max amount the PBM will reimburse for that drug. It doesn't matter what you paid for the drug. The PBMs are notorious for taking months to update their MAC list after a price increase. Last year in October when all hydrocodone products went C-II the price on Norco doubled overnight and within a month quadrupled in price. It wasn't until January of this year, 2 months after the price increase, that I saw the reimbursement raise. For 2 months I lost money on nearly every single hydrocodone script I dispensed. If you know anything about retail pharmacy you will know hydrocodone is usually in the top 5 of most frequently dispensed drugs.

To answer your question it is very difficult to make a profit with PBMs in the equation.

 

[ZakMeister]

AWP is a meaningless number. There are a few PBMs who use AWP -% +dispensing fee. Most are going by WAC, which is wholesale acquisition cost. WAC is an accurate reflection of what the wholesaler is paying for the drug. On brand drugs PBMs are starting to pay WAC +% +dispensing fee.

The majority of generics are payed based on the PBMs secret MAC list. The maximum allowable cost (MAC) list is a secret list of generic drugs and the max amount the PBM will reimburse for that drug. It doesn't matter what you paid for the drug. The PBMs are notorious for taking months to update their MAC list after a price increase. Last year in October when all hydrocodone products went C-II the price on Norco doubled overnight and within a month quadrupled in price. It wasn't until January of this year, 2 months after the price increase, that I saw the reimbursement raise. For 2 months I lost money on nearly every single hydrocodone script I dispensed. If you know anything about retail pharmacy you will know hydrocodone is usually in the top 5 of most frequently dispensed drugs.

To answer your question it is very difficult to make a profit with PBMs in the equation.

Did you mean to say WAC-% for brands? Thanks for your reply!

 

[MountainPharmD]

Did you mean to say WAC-% for brands? Thanks for your reply!

No. WAC is wholesale acquisition cost. Most pharmacies, depending on their volume, will get a discount from the wholesaler off WAC. Some PBMs pay WAC +% + dispensing fee.

For example one of the well know PBMs just sent out contract amendments nationwide adjusting their reimbursement on brand drugs to WAC +0.2% +$1.00 dispensing fee. In case anyone is wondering that is crappy reimbursement. Under this PBM for a 90 day supply of Crestor you will have to invest close to $600 in buying the product to make a profit of $14 to $21. You will have to wait anywhere from 4 to 6 weeks to get this $14 to $20 and in the mean time you've had to pay your wholesaler for the drug.

 

[ZakMeister]

No. WAC is wholesale acquisition cost. Most pharmacies, depending on their volume, will get a discount from the wholesaler off WAC. Some PBMs pay WAC +% + dispensing fee.

For example one of the well know PBMs just sent out contract amendments nationwide adjusting their reimbursement on brand drugs to WAC +0.2% +$1.00 dispensing fee. In case anyone is wondering that is crappy reimbursement. Under this PBM for a 90 day supply of Crestor you will have to invest close to $600 in buying the product to make a profit of $14 to $21. You will have to wait anywhere from 4 to 6 weeks to get this $14 to $20 and in the mean time you've had to pay your wholesaler for the drug.

Thanks for the elaboration. Do the PBMs give added percentage discounts for using their preferred drugs or that percentage refers to something other than bulk discount from the wholesaler?

 

[Ackj]

Thanks for the elaboration. Do the PBMs give added percentage discounts for using their preferred drugs or that percentage refers to something other than bulk discount from the wholesaler?

PBM "preferred" drug isn't going to directly affect reimbursement, it's going to affect whether they cover it or not, and how much the copay will be. Your reimbursement is still a fixed total, it's just which portion comes from 3rd party, and which comes from the patient.

 

[Chuk15]

Example:
Company A pays $ per month per employee to a Health Insurance.
Health Insurance contracts with a PBM to provide medication for "cheaper than full cost".

Meanwhile

Employee of Company A goes into Pharmacy and buys their Rx DrugX.
Pharmacy sends claim to PBM saying that Employee from Company A was given their DrugX.
PBM sees this claim from Pharmacy and pays Pharmacy a little bit over what the pharmacy bought the drug at + dispensing fee.

PBM meanwhile tells Health Insurance that Employee of Company A bought DrugX and that it costs $$$$ but the PBM says they negotiated with Manufacturer to bring the cost down to $$$. Health Insurance thinks they are getting a good deal.

Health Insurance gives PBM $$$ but PBM only gives Pharmacy $. PBM pockets the other $$ without telling anyone.

Pharmacy or Company A can't fight because of Confidentiality Clauses. PBM will never let Pharmacy and Company A see how much PBM is pocketing in the middle.

 

[PharFromNormal]

Example:
Company A pays $ per month per employee to a Health Insurance.
Health Insurance contracts with a PBM to provide medication for "cheaper than full cost".

Meanwhile

Employee of Company A goes into Pharmacy and buys their Rx DrugX.
Pharmacy sends claim to PBM saying that Employee from Company A was given their DrugX.
PBM sees this claim from Pharmacy and pays Pharmacy a little bit over what the pharmacy bought the drug at + dispensing fee.

PBM meanwhile tells Health Insurance that Employee of Company A bought DrugX and that it costs $$$$ but the PBM says they negotiated with Manufacturer to bring the cost down to $$$. Health Insurance thinks they are getting a good deal.

Health Insurance gives PBM $$$ but PBM only gives Pharmacy $. PBM pockets the other $$ without telling anyone.

Pharmacy or Company A can't fight because of Confidentiality Clauses. PBM will never let Pharmacy and Company A see how much PBM is pocketing in the middle.

This is pretty accurate except there is another truth to this...

Pharmacy will never let PBM or patient see how much pharmacy is pocketing in the middle. No pharmacy is willingly giving up their ACTUAL contracted negotiated purchase rates to PBMs (with purchasing rebates) if they are purchasing at a price significantly lower than they are reimbursing. They will understandably be quick to complain about reimbursements below true acquisition cost.

The total cost on the system includes cost of drug supply chain (Cost to fully procure and get drug product to point of dispensing -may include wholesalers or distributors, who also take a cut), cost of the dispensary (pharmacies make a profit, what is paid to them via the PBM and copays is generally more than what they paid for the drug, allocated labor, allocated overhead etc.), cost of "drug cost control" (easiest to think about small healthplans who don't have the scale nor the resources to manage extensive price changes or managing massive amounts of claims real time from pharmacies) and more.

Everyone is taking a cut, saying they are doing something to lower the overall costs and not getting enough therefore they think they deserve more and everyone involved continues to perpuate the cycle.