Pharmacy Reimbursement - A Common Argument

If you have been involved in the retail pharmacy industry for more than a fees seconds, you've heard the argument that goes something like this...

"Dispensing fees are a joke. They are too low to cover the cost to dispense medications and provide all the wonderful clinical service and interventions pharmacists do every day. The act of dispensing and clinical services should be separated and pharmacists paid for their work."

I admit that I used to subscribe to such a theory. However, over time and through my own professional experiences I've come to a different thought process.

First, the current level of dispensing fees were not designed to cover the cost to dispense. Most who know the going industry level of retail dispensing fees might agree that it may cover the cost of the vial and label, and perhaps a technician's time to count the drug, but little else. The fact is that historically speaking most other costs were accounted for in the "ingredient cost." Let me illustrate with this formula:

Payment = Benchmark Price +/- % + Dispensing Fee

The total payment a pharmacy receives when dispensing a medication is based upon a markup or markdown of a "benchmark" price for the drug being dispensed plus a set fee.  The secret (not well kept actually) in all this is that the benchmark price is actually bogus... And all of the pharmacy's margin is hidden in there. If you want to learn more on the fallacy of AWP (as an example benchmark that is very commonly used) just google it, or perhaps I can write another post to explain more. 

Suffice it to say that the cost to dispense is not covered by the dispensing fee, and never has been. So, no, dispensing fees are not sufficient, but that's because the ingredient cost reimbursement has been inflated. It varies by product, but it can be extremely high on things like recently introduced generics, and is generally pretty steady on higher-cost brands, because there is less variance on those products between their true acquisition cost and their benchmark prices. Sure there has been cost pressure on drug prices, and payers have negotiated deeper discounts on ingredient costs, but that's because there was room to negotiate for the pharmacies - because there was margin being made...

But let's not ignore another little part of the above common argument about pharmacy payments... The cost of clinical services and interventions. Now, I was a retail pharmacist, and I know that pharmacists do some wonderful and sometimes life-saving things... Just not on every prescription. Whether you knew it or not, pharmacists are supposed to do a Drug Utilization Review every time you fill a prescription. Reality is, the computer does it, and pushes "alerts" to the pharmacy staff, which can easily be overridden. These automated systems are often very inflexible in their sensitivity, and often generate so many false positives that it can lead to all warnings sounding like noise - and I'm sure some valid warnings get missed. But, the point is that unless you happen to have a pharmacist who is truly conducting these reviews on a regular basis, and is invoking their clinical knowledge and judgement, there is truly little "costly" investment of time that would dictate a big fee for the service. Realistically, the biggest thing a retail pharmacist does (besides provide the license to allow the pharmacy to be open) is validate the right drug is in the bottle. (which is important, don't get me wrong)

So, why do pharmacists go to school for so long? Why would a pharmacist need all that training and knowledge? Well, it truly CAN be used for betterment of patients. And guess what... Interventions and reviews of medication therapy have been theorized (and even shown in some cases) to improve outcomes and lower costs. And so was born Medication Therapy Management (MTM). MTM is a Medicare service that pharmacists can participate in that allows payment of fees for time spent working with Medicare Part D patients on their medications. Part D payers are required to offer such programs, though not all do it through pharmacists. 

However, those that DO offer these revenue streams to pharmacists have seen disappointing results, given the universal level of interest in such payment for services. Statistics related to actual consults conducted compared to those offered or available are not considered public, but the ones I've been privy to are nowhere near a level that would indicate pharmacists are truly taking advantage of the opportunity. The offer of $ for services has been made, but the $ are largely still on the table untouched.

So, sure, if you're doing work, and someone is benefiting (especially if they benefit financially), the person doing the work should likely be compensated. That extends to pharmacy and pharmacists. But, I say don't complain about low dispensing fees, unless you're willing to get reimbursed true drug acquisition cost. (you pass on true cost without built-in margin, and your costs SHOULD be covered, plus a little profit, through a dispensing fee) Also, I believe in the value of pharmacist activity in the health care space, but don't complain about not being paid for services you're not really doing (most of the time) and when you're being offered $ to do similar (though more in-depth) work, and you're not taking advantage.