Originally published on Aug 28, 2018.
Attacking the Last Line of Defense for Independent Pharmacy
Recent industry events and further consolidation of the PSAO industry has led to increased pressure on independent pharmacy and drug distributors.
What is a PSAO?
A PSAO negotiates for pharmacy against PBMs and other payors to protect reimbursements and profitability. Although hotly contested, it is generally accepted that PSAO has a “Fiduciary Duty”–in other words, that a PSAO must act solely in the interest of a pharmacy.
Past Coverage & Insight
In November 2017, we first reported on Amerisource Bergen’s acquisition of H.D. Smith and how it affected the Arete Pharmacy Network. Here are the highlights (read the full article here
With direct control over H.D. Smith voting shares and a rock-solid relationship with Smart-Fill (and likely their voting shares), AmerisourceBergen might have achieved control over Arete Pharmacy Network for a merger with their Good Neighbor Pharmacy.
18 months ago, H.D. Smith announced a partnership with American Associated Pharmacies (AAP) to combine their respective Pharmacy Service Administration Organizations (PSAO) under Arete Pharmacy Network, LLC.
12 months ago, Arete Pharmacy Network acquired RxPride, another PSAO, from Smart-Fill Management Group.”
And so, it seems that those predictions came true as three of six Board members are direct employees of Amerisource Bergen.
Pharmacy First Litigation: Express Scripts Limit PSAO Vendors to Four
‘Like a lamb led to slaughter,’ Pharmacy First alleges that Express Scripts has essentially forced independent pharmacies to use one of the four PSAOs that Express Scripts has contracted with – actions they deem are unlawful and anti-competitive.
Per Pharmacy First’s press release and statement: unless an independent chooses a PSAO “handpicked” by Express Scripts, pharmacies will face “punitively-low and non-negotiable reimbursement rates, network restrictions, and additional administrative burdens.” Further, “by capturing those four PSAOs and using them to further Express Scripts’ interests, Express Scripts transformed what was once a much-needed advocate and bargaining agent for independent pharmacies into an agent of Express Scripts.”
With this claim, PSAOs might be acting in violation of their fiduciary duty to pharmacy.
April 2018 Consolidation, McKesson & APCI
McKesson’s Access Health business and American Pharmacy Network Solutions (APNS) joined together to gain a larger lead as the biggest PSAO in the industry. Read McKesson’s Press Release here.
Ventura County Litigation
“They’ve breached their fiduciary duty in putting these pharmacies into bed with OptumRx on a very lousy deal and then not standing up to Optum,” said attorney Marc McCulloch, of Westlake Village. He said the pharmacy benefit manager colluded with the administration organizations to send a grim message to mom-and-pop businesses. “You’ll sell at a loss and you’ll like it or you’ll be out of the network,” McCulloch said.
Per Tom Kisken, “The litigation also targets three pharmacy services administration organizations — operated by Cardinal Health, Arete Pharmacy Network and AmerisourceBergen — that worked as middlemen between the pharmacies and OptumRx.”
Read the full article on Ventura County PBM Litigation by Tom Kisken of VC Star here
AreteRx & Health Mart Atlas – Anecdotal Evidence
“AreteRx cut me first, and now Health Mart Atlas. I keep getting cut for stupid reasoning. AreteRx said CVS/Caremark billings were too high, and because of that, we were a liability. We weren’t even under a CVS audit at the time. We came out of all CVS audits that came later just fine in any case.”
“Arete asked a pharmacy for a full list of their suppliers and when we didn’t comply, they terminated them.”
Next Steps for Independent Pharmacy
With bargaining power against PBMs dwindling and a number of wholesalers being cut out of the industry with Optum Rx’s VAWD requirement – what is independent pharmacy to do?
One option is to sign up for Marketplace Portals such as EzriRx
to garner better pricing.
More soon, as it breaks.
Based just outside of Philadelphia, Five Rivers RX provides actionable guidance and excellent administrative services with a focus on client care across Compliance, Commercial, and Quality solutions. Our mission is to improve the health and welfare of the American public by providing solutions and implementing best practices for companies in the pharmaceutical supply chain.