Community-Based Pharmacy at a Crossroads: Dispenser, Service Provider, or Dodo Bird?

Pharmacy TimesMay 2017 Skin & Eye Health
Volume 83
Issue 5

I’ve written a number of articles over the past few months and years about the unstoppable, unwavering, and now accelerating march toward value-driven care and payment reform.

The Opportunity: A Value-Driven Health Care System Relies on the Optimized Use of Medications

I’ve written a number of articles over the past few months and years about the unstoppable, unwavering, and now accelerating march toward value-driven care and payment reform. Part of this reform effort is to figure out how pharmacy—which is segregated from the rest of the health care solar system in its own world of financing, information technology, and special interests—fits into the medical benefit’s new holistic system of care and financing that emphasizes patient outcomes, panel (population) management, and risk sharing. Medications treat chronic disease, and chronic disease is where most of our health care system’s efforts and dollars go. Therefore, the optimal use of medications—which is a combination of an optimal regimen and optimal consumption—will undoubtedly play a leading role in transformation and value recognition among payers.

Yet only recently have I pondered what an evolved system of care looks like without community-based pharmacies. The continued explosive growth in mail order or closed-door shared services pharmacies, remote medication therapy management (MTM) services, and direct and indirect remuneration fees are strong indicators that community-based pharmacies, as settings of care delivery for pharmacists, may go the way of the Dodo bird in a few short years.

The Problem: A Product-Driven Pharmacy Benefit Relies Almost Entirely on the Reimbursement of Products (and not services or outcomes).

Community-based pharmacies are indeed retailers, always have been, and may continue to be as long as they exist. They buy and sell (hopefully selling for more than they buy), while ensuring the safe and effective provision of medications. Pharmacy benefit managers manage the pharmacy benefit by choosing which drugs receive easy passes upon adjudication and negotiate reimbursement rates with pharmacies. Seems like a reasonable match, right? Well, not any more. Problem is, this outdated alignment leads to a myopic relationship construct based solely on the distribution of medication and drug—cost minimization, with little or no focus on the optimal use of the medications on which we spend $300 billion a year as employees and taxpayers.

Employers and Taxpayers Continue to Look for a Better Way

The Health Transformation Alliance is a coalition of large name-brand employers, including Coca Cola and Caterpillar, which have come together to use their $30 billion-plus in yearly health care spend to look for a better way to pay for and incentivize better and more value-driven care delivery.3 The group recently announced a transparency initiative with CVS/Caremark and OptumRx that also endeavors to align the pharmacy benefit with the medical benefit by using evidence to drive decision making and program development.

Taxpayers and their representatives are now paying attention, as well. I recently had an eyebrow-raising discussion with a former state Medicaid pharmacy director who now does consulting work in many states. She expressed that most states are looking for innovative ways to administer the Medicaid pharmacy benefit, not only from a transparency perspective, but also to solicit and receive ideas about how to pay pharmacies differently.

CMS Continues to Solicit Input

In yet another sign that the rest of the health care system is looking to the pharmacy industry for solutions to help solve its low-value problem, CMS last month released its 2018 Part D rates and request for information1 with continued (and welcomed) solicitations for input. It identified 4 key aspirations for continued improvement of the program: transparency, flexibility, program simplification, and innovation. CMS stated the following:

Ideas could include recommendations regarding benefit design, operational or network composition flexibility, supporting the doctor—patient relationship in care delivery, and facilitating individual preferences. They could also include recommendations regarding changes to the way plans are paid, monitored, and measured.

There is a lot of room for innovation in that statement. Nearly all aspects of the program—from what is covered, to which pharmacies are eligible, to additional payments and supports for coordination of care efforts, to the fundamental nuts and bolts of how plans are awarded bids and remunerated—seem to be on the table. Given the size and influence of the Part D program and its sister program of drug benefits in the Medicare Advantage programs, community-based pharmacies would do well to get in the game by submitting comments and supporting CMS in their transformation journey.

From a Cost Center to an Investment

CMS’s Enhanced MTM demonstration, now 5 months into its 5 years of planned operation, represents an important example of innovation in 11 states.2 In an effort to align incentives between the Part D plan and the purchaser of Part A and B services (this purchaser is you via your paycheck, by the way), the program was designed to expose the pharmacy benefit to upside risk on the medical benefit if the plan can administer an Enhanced MTM program that can produce Part A and B savings. Additionally, rather than requiring the plan to pay for the MTM program out of its capitated payment, CMS pays for the Enhanced MTM program directly out of its coffers, thereby removing the incentive to Part D plans to minimize the traditional MTM program to nothing (as a cost center), as long as regulatory requirements are met. In this way, the funding (and the intended outcomes) are outside the normal capitation-based incentive to focus solely on the most profitable way to administer and reimburse for products.

Will the Redwood Forest be Poisoned or Starved or Thrive after a Wildfire?

All of this makes me wonder about the fate of community-based pharmacies and if they are missing the lifeline they are being offered. Once gone, these redwoods may never come back. Will they be poisoned by direct and indirect remuneration fees? Will they starve by elimination from narrow networks industrially engineered for a singular purpose—dispensing? Or will they thrive after a rare forest fire that isn’t comfortable but is essential to regeneration and rebirth?

The Next 5 Years Will Tell

Community-based pharmacies represent a unique and advantageous touchpoint for millions of patients in tens of thousands of locations every day. They (collectively) are a population health management juggernaut waiting to happen if they can be properly financed and incentivized to deliver better outcomes (not just more fills). The opportunity exists for community-based pharmacies to provide medication optimization and support services that are a durable and economically viable means to sustain, protect, and justify a profitable product reimbursement. But can these services generate sufficient demand from an insurance system that doesn’t know how or where to position them—are they a pharmacy benefit, a medical benefit, or a care management service in a post-payment reform era? The next 5 years will tell.

Troy Trygstad, PharmD, PhD, MBA, is vice president of Pharmacy Programs for Community Care of North Carolina, which works collaboratively with more than 1800 medical practices to serve more than 1.6 million Medicaid, Medicare, commercially insured, and uninsured patients. He received his PharmD and MBA degrees from Drake University and a PhD in pharmaceutical outcomes and policy from the University of North Carolina. He also serves on the board of directors for the American Pharmacists Association Foundation and the Pharmacy Quality Alliance.


  • 2018 Medicare Advantage and Part D Rate Announcement and Call Letter, and Request for Information. website. Accessed April 18, 2017.
  • Part D Enhanced Medication Therapy Management Model. website. Accessed April 18, 2017.
  • Alpert B. Pharmacy-Benefit Managers Under Pressure. website. Accessed April 18, 2017.

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