Boosting the benchmarks: How to track profit potential in the era of preferred pharmacy networks

Preferred pharmacy networks make pharmacists nervous as they face an uncertain future, and independent pharmacists may be the most worried of all. If they join a preferred network, they may face lower reimbursements. If they stay out, their customer base may dwindle.

Besides accepting the trend, is there an alternative? Officials with McKesson’s AccessHealth arm don’t see one. They recommend making the best of it.

“The other choice is a constantly declining base of customers,” said Kevin Connor, McKesson’s vice president of managed care and general manager of AccessHealth.

See also: The new pharmacy: Revenue streams, Part 1

The trend

The current picture is not unremittingly bleak. AccessHealth’s pharmacy gurus say there is plenty of reason for optimism. In interviews with Drug Topics and in front of a sometimes skeptical audience, they urged independent pharmacists at the McKesson ideaShare conference in San Diego to join them in embracing opportunities for profit in the new era.

See also: Community pharmacy's secret weapon

“We saw the trend coming, and we made sure to develop a strategy,” said Eyad Farah, AccessHealth’s vice president of business development and strategy. “We understand that this is a difficult shift. We want to take you through that process.”

AccessHealth provides support to thousands of independent, chain, and hospital outpatient pharmacies and powers the managed care network of Health Mart, a network of 3,000 independent pharmacies. It has been monitoring the rapid move toward preferred networks, which typically offer lower reimbursement.

One startling statistic tells the story: The percentage of Medicare Part D plans with a preferred benefit structure has skyrocketed from just 7% in 2011 to 87% today.

Under preferred networks, Connor said, “the market basket of drugs being sold has a positive gross margin. But it is significantly lower, close to a third lower, than would have been in the broad network.”

Other opportunities

So where does opportunity lie for the 68,000 pharmacies - including 20,000 independents - in the United States? One strategy is to boost sales across the store. Preferred networks aren’t technically a loss leader, Connor said, but they act in a similar fashion: They can bring in more customers who may add to profits by buying OTC products and getting special services, such as immunizations.

“It’s a very standard retail practice: Lower prices to get more consumers in the door,” he said. “We’ve had a lot of tough conversations with pharmacies to say that they need to make less money on reimbursements, but expand the number of patients as a whole and look into other revenue opportunities.”

Value to payers

Survival into the future is about more than sales of nonprescription products to customers. As do many stakeholders in the pharmacy business, AccessHealth wants payers to understand that pharmacies are crucial to health savings, because pharmacists can help patients take better care of themselves.

To do that, AccessHealth is touting the benefits of independent pharmacies to pharmacy benefit managers. “Then they can say to their clients, ‘we have AccessHealth in our network. They’re a group of independents, and this is the group you want,’” Connor said.

It all comes down to providing value to payers by helping them lower the costs they must pay for each patient.

The indie advantage

While they may lack the visibility and influence of their chain counterparts, independent pharmacists have built-in advantages because they provide a personal touch.

“Patients are more comfortable talking to their independent pharmacist. They’ve known them for generations upon generations, and they trust them more,” said Amie Bland, AccessHealth’s director of pharmacy performance strategy and business development. “We do better at engaging the patient and driving clinical performance by getting the patient to do something. You can have a positive impact on the patient.”

If pharmacies improve clinical performance, they can take advantage of performance incentives, Connor said. That means higher payments.

Benchmarking tools

Through significant investments, AccessHealth is helping independent pharmacies use benchmarking tools to track how they’re performing, Bland said. According to Bland, one priority for AccessHealth is to partner with the makers of appropriate tools, provide them to pharmacies, and show pharmacists how to use them to improve their overall performance.

Armed with the tools and new attitudes, the thinking goes, pharmacies can turn an uncertain future into the start of new accomplishments.

Randy Dotingais a medical writer in San Diego, Calif.