June 15, 2017
Independent community pharmacies want to offset reimbursement pressures and maximize profitability. This starts with the primary wholesaler contract.
“Pharmacies have to generate margin through their supplier relationship,” said Clark Balcom, Senior Vice President and COO of PBA Health. “It’s one of the few things they can still influence today.”
But most pharmacy owners don’t have the time or experience to ensure they receive the best deal on their contract.
PBA Health offers a primary wholesaler contract negotiation service, called ProfitGuard, to secure independent pharmacies with the best overall margins and operations possible. The service also includes dynamic data analytics tools to help pharmacies monitor and improve their purchasing.
Balcom said ProfitGuard complements the pharmacy’s wholesaler relationship.
“Everything we do in our negotiations is designed to get the maximum volume to the primary wholesaler at the best possible overall price for the pharmacy,” he said.
ProfitGuard forms regional groups of pharmacies to create buying power and enables up to five national wholesalers to competitively bid on the group’s business. “We amass volume, which is healthy for our wholesalers and better for our pharmacies,” Balcom said.
The service presents a balanced economic benefit to both ProfitGuard members and wholesalers. It helps pharmacies negotiate to get a better cost of inventory, and it provides a reliable book of business to wholesalers—one they know will be delivered.
But the benefits go beyond economics.
Pharmacy owners get the security of experts negotiating on their behalf. “You’re substantially dependent on your wholesale supplier in your business,” Balcom said. “You want to know that every particular element has been evaluated, is carefully contracted and is going to be monitored and managed on the backside.”
Business owners often let pride get in the way of getting a good contract. “They sometimes fail to recognize that they need help and that others are equipped and available to help them make better decisions. And, that others have much-needed expertise and experience that they don’t,” Balcom said.
He compares the importance of primary wholesaler contract negotiations to surgery. “If you needed surgery, wouldn’t you want to make sure you have a professional expert? Wouldn’t you want to know that it will be successful and not lead to any bad side effects?” he said. “If you’re willing to have a bad negotiation, experience negative side effects and lose money, then do it yourself. But if you want to have a good surgery—or contract—ask an expert.”
Balcom said ProfitGuard’s goal isn’t to cut pharmacies out of the process; it’s to help them make an informed decision. “We elevate their understanding and visibility into all of the various pieces that have to be managed to drive the economic benefit,” he said.
ProfitGuard is not like a regular buying group.
“Most buying groups won’t help pharmacies negotiate with multiple wholesalers the way they normally would in a competitive market. They won’t bring their members to the negotiating table, give guidance, offer advice on where to go next, or resourcefully use the experience of prior negotiations,” Balcom said. “We do all of this for ProfitGuard members.”
And, other organizations don’t offer pharmacies dynamic tools to manage their purchasing after they sign a contract. “We give them the tools they need to get the best price on every item they order,” Balcom said. “That’s how we drive gross margin improvement. I’m not aware of any other organization that can do that.”
Learn more about how to buy better with Profitguard.
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