December 17, 2019
Inside: High DIR fees and low PBM reimbursements don’t have to mean the end of your pharmacy’s profitability.
The average independent pharmacy makes 92 percent of its profit from prescription sales. But with unpredictable DIR fees and decreasing PBM reimbursements, those prescription sales aren’t as reliably profitable as they used to be.
As an owner, you have to look beyond the pharmacy counter to ensure revenue keeps coming in. By offering products and services that don’t involve third parties or mostly result in out-of-pocket payments, you can offset the DIR fees and PBM reimbursements that are squeezing your pharmacy budget.
Start any of these programs to avoid the third parties altogether and take home a larger share of the money.
Pets need medicine, too, and your patients’ furry friends don’t have PBMs issuing DIR fees and copay clawbacks on their prescriptions.
Around 68 percent of American households have a pet, according to a survey by the American Pet Products Association. By tapping into this animal demographic, independent pharmacies can potentially make a significant profit, since the vast majority of pet medications are purchased through cash transactions with no third-party involvement.
Dispensing medicine to animals isn’t exactly like dispensing to humans, so consider taking a continuing education class or participating in a certificate program to break into this niche.
Major drug manufacturers can’t tailor medications to individual patients, but you can at your independent pharmacy. By adding compounding, you can accommodate patients who need their prescription as a liquid instead of a pill, are allergic to a certain ingredient, or need to take a non-standard dosage.
In addition to allowing you to tap into a market that is underserved by the larger pharmaceutical industry, compounding services can boost your profits. An NCPA survey says that half of compounded drugs are paid for with cash, saving you from third-party pains.
More than half of Americans are overweight or obese. By promoting nutrition and weight loss in your pharmacy, you can improve patients’ health and your bottom line.
Weight loss programs don’t have to be that different from what you normally do—consulting with patients about their medications and analyzing their lifestyle—but by packaging a program specifically for weight loss, it becomes a flashier option. Since these programs are paid for out-of-pocket, you don’t have to consider the impact of third-party reimbursements.
This white paper includes 30+ formulas to calculate the most important metrics for independent pharmacies. You’ll learn to think like a retailer, discover the methods to track and measure meaningful pharmacy metrics, and learn ways to use pharmacy metrics to get insight into business performance.
The market for lab tests is 58 times bigger than the market for flu shots—and you can offer them in your pharmacy. Lab tests can draw new patients into your pharmacy, and by working with a third party like Ulta Lab Test, the cost to start providing this service remains relatively low.
Pharmacy lab testing is another service that patients pay out-of-pocket for. Some patients might apply for reimbursement from their insurance company, but that doesn’t affect the pharmacy’s bottom line.
Since pharmacies see patients more often than their doctors do, pharmacists have a unique opportunity to monitor patient health by offering health screenings.
These screenings can range from annual wellness exams that measure height, weight, body fat percentage, and more, to checking for specific health conditions like:
Health screenings are a great way to engage more with your current patients as well as attract new ones into your pharmacy.
Your patients can get CBD anywhere—farmers’ markets, grocery stores, dispensaries—but since it’s predicted to become a $22 billion industry by 2022, you should make sure they’re buying it from you.
As a pharmacist, you have an advantage over all these other vendors, because you’re already a trusted healthcare professional. Unlike the guy at the farmers’ market, you’ll be able to explain how to take CBD, how much to take, and any potential side effects. CBD products are both high-dollar and high-margin, meaning they can bring in big profits to your pharmacy.
There are several ways you can cater to your diabetes patients while also bringing in additional revenue for your pharmacy. Education classes (for a fee) can help your patients learn to manage their conditions, while carrying supplementary supplies like fiber supplements, skincare products, diabetic socks, and more can increase your front end sales.
Because they take multiple prescriptions, diabetic patients can also benefit from medication reviews.
Your front-end merchandise should be making 50 to 80 percent profit. If you can convince patients to come in the door for those products, your pharmacy will see cash returns.
To do this, you have to merchandize effectively. Stock items that no one else has, like items from local artisans. Or, be the first to jump on a new trend. If you were the first place in town to sell Silly Bandz or fidget spinners, you had a stampede of new customers. You can also carve out a niche for yourself and make the pharmacy a destination for shoppers.
Since front end sales are untouched by third parties, doing whatever you can to bump up those sales will help to counteract DIR fees and low PBM reimbursements.
More articles on PBMs
By joining a clinically integrated network of pharmacies like CPESN, independent pharmacies gain access to a completely new payment model. CPESN pharmacies provide enhanced services to patients and get paid directly by payers.
Participating pharmacies must offer specific services demonstrate improved outcomes. Healthcare costs decrease overall, but pharmacies receive a share of the money they’ve saved the payers.
For a truly radical solution to cut out DIR fees and pathetic reimbursement rates, you can cut out third parties entirely. That’s what Mark Wright of GenScripts Pharmacy in Tulsa, Oklahoma did.
All patients pay cash for their prescriptions, and no money goes back to a PBM. While this model was initially most popular with uninsured patients who were paying out-of-pocket no matter what, Wright found that it quickly gained popularity with insured patients, too.
Patients like the model because they don’t have to deal with long wait times or prior authorizations. It’s great for the pharmacy because employees don’t waste time on the phone arguing with insurance companies or have to deal with the unpredictability of fees and low reimbursements.
These strategies all focus on the sell side of your business. Although each of these can bolster your bottom line, you’re still subject to the whims of the market. Because of this, the area you have the most control over is the buy side. Because of the tremendous expense of your inventory, saving even a small percentage on your cost of goods can help offset the losses from low reimbursements.
ProfitGuard®, PBA Health’s group purchasing organization, increases its members’ margins up to six percent on average–that’s $166,096 a year in pure profit for the average pharmacy. In addition to group purchasing services, ProfitGuard provides an unprecedented proprietary tool to help pharmacies optimize wholesaler rebates and savings on their inventory every day. Using a sophisticated modeling system, it automatically analyzes every purchase and every contract incentive to ensure every drug you buy from your primary or secondary wholesaler results in maximal rebates and savings–giving you the lowest net cost of goods for your pharmacy.
ProfitGuard is also one of the only GPOs who isn’t tied to a single wholesaler. That means your pharmacy gets bids from multiple wholesalers who compete to win your business, getting you a deal that can’t be matched by a GPO with one wholesaler.
Valuing the true uniqueness of independents, ProfitGuard gives members an entirely customized approach best suited to each pharmacy’s individualized needs. Whether you want a contract negotiated specially for you or you want to join a group that has already negotiated a lucrative deal, the choice is yours. ProfitGuard assists you in getting exactly what you want for your business. (It also guarantees a better contract than you have now. Period.)
Lastly, ProfitGuard members also have the perk of access to PBA Health’s VAWD-certified warehouse. As a secondary supplier, it carries a wide selection of brands, generics, OTCs and more. Schedule IIs can even be ordered straight from the warehouse through a completely electronic, time-saving system.
PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy side of their business. The company is a member-owned organization that serves independent pharmacies with group purchasing services, expert contract negotiations, proprietary purchasing tools, distribution services, and more.
PBA Health, an HDA member, operates its own VAWD-certified warehouse with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products.
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