It’s High Time We Consider Differential Reimbursement

Pharmacy TimesDecember 2023
Volume 89
Issue 12

All fills are not equal in their complexity and cost.

An Outdated Model That Perpetuates Cost Shifting

Third-party community pharmacy reimbursement for prescription fill dispensing has remained fundamentally the same since the first prescription orders ever submitted on paper forms for payment. Each fill is considered the same as the next, regardless of what the medication is for, whom it is for, whether the patient is new to therapy, or whether it requires special handling and assessment. As such, pharmacies make more margin (or lose less margin) on some prescriptions and make less margin (or lose more margin) on others. This cost shifting has been amplified by automated filling technologies, unfunded regulatory service mandates such as drug use review, increasingly divergent reimbursement for different payer types, and 340B contracts that mask or cover for increasingly low-margin or underwater fills for other payer types and plans.

Pharmacist looking up a prescription

Image credit: Dragana Gordic |

Established and Nonestablished Patients

For nearly every other provider of health care services, there is a differentiation between patients who are new to a practice and patients who are already established. New patients require a more comprehensive evaluation and assessment to provide safe and effective care during the initial encounter, and nearly all rate schedules reflect this difference, paying more for nonestablished patients.

Coding Based on Complexity

Similarly, patients come to practices with a wide range of complexity, from the noncomplex patient with no chronic conditions and no chief complaint who is seeking an annual checkup to the patient with multiple comorbidities, including behavioral health conditions; food insecurity; lack of stable housing; and recent hospitalizations. Timebased codes and rate schedules that match patient and condition complexity are the norm everywhere else in the world except our Pharmacy Island, separated by many miles from Normal Town.

No 2 Patients are the Same and Neither are Any 2 Pharmacies

However, new patients and new prescriptions are more time consuming and costly to service (or at least they should be if the pharmacy is doing a proper job). No 2 patients or their circumstances are the same, so why does the reimbursement reflect the idea that all patients, in all situations, require the same level of effort and care? Refills on hypertension medications are quite different than an initiation of nirmatrelvir/ritonavir (Paxlovid; Pfizer) for a nonestablished patient. In fact, the costs and care considerations of those 2 filling events aren’t even close.

Additionally, no 2 pharmacies are the same. I’ve worked part time in more than a hundred different pharmacy locations in North Carolina for more than 20 years. I can tell you without a doubt that filling 150 prescriptions between Durham and Chapel Hill, with their provider specialties, patients with special conditions, transient-natured population, and diverse forms of insurance, is much more difficult than filling 300 prescriptions in rural North Carolina, where 80% of the fills on weekends are refills for oral generic drugs in prepacked 30 days of supply, without any prior authorizations or large co-pays, and the pharmacy technicians know how to contact the 4 or 5 prescribers responsible for most of the prescription fills.

The Consequences of Pharmacy Cost Shifting are Insidious

Cost shifting in health care is insidious and often unrecognized as problematic by the public. Pharmacy deserts, long lines, misfills and mistakes, unscheduled closings, differential treatment of patients, care team relationships dysfunction, medication nonadherence, and suboptimal medication use result in more expensive delivery of care overall. Of course, an evenly downward pressure on pharmacy reimbursement will stress the system. The breaking points, however, will occur where the system is under the most stress from cost shifting. When that happens, the pharmacy locations with the patient, payer, and prescriber mix that leads to the most difficult and time-consuming prescription fills will break first.

Cost shifting also delays necessary change. If all pharmacies are losing money, you can bet reimbursement will go up. If many pharmacies are losing money and some are making it up on nonpharmacy sales along with others who make money outright (even if they have small margins), the industry will remain in a quagmire of “Well, patients can go to this pharmacy or that pharmacy” under the illusion that the market is working. In fact, those unprofitable prescriptions at the failing location are now just being sent to slightly profitable locations, or loss-lead locations, leading to a downward spiral in care delivery and patient safety.

An Alternative Model Based on Complexity of Safe, Accurate, and Timely Dispensing

We have the technology and coding necessary to provide differential reimbursement. We just choose not to use it. The best example of willful ignorance (or outright greed in the ignorance of patient safety) is specialty pharmacy, which is defined not by complexity of condition, product handling, or length of needed patient assessment and claim administration burden but rather by classifying specialty products by their cost.

There are no rational patient care or policy reasons why differential rates shouldn't exist for new and refill prescriptions, types of prescriptions such as long-acting antipsychotic injectables or buprenorphine, or additional payment for administration of a prior authorization.

It isn’t difficult to assess a patient’s list of medications to determine comorbidities as insurance companies do to determine their own capitated payment rates from Medicare or Medicaid. Pharmacy Island already has the ability to submit codes within pharmacy systems for activities that go beyond the Omnibus Budget Reconciliation Act of 1990 review and counseling requirements, and adding time codes to a telecom D.0 claim should not be a challenge.

Or Maybe a Radical, Completely Different Approach Modeled After 340B and Diagnosis-Related Groups?

Maybe the system should be blown up entirely, and the purchaser or the pharmacy benefit manager should own the inventory in a virtual model as with the 340B program. There would be no more buying and selling prescription medications; instead, there would be payment for services such as optimized, safe, and effective dispensing (which does not exist today); immunization administration; point-of-care testing; chronic condition management; adherence and other types of coaching; and screenings and related services—which have all become more needed and more economically sustainable from a pharmacy perspective. Pay the pharmacy a fixed fee based on the prescription order’s complexity, just as hospitals are paid for diagnosis-related groups and episodes of care over multiple days, weeks, or months.

Sure, it may sound a little crazy. But a system in which pharmacy staff are walking out of stores in protest not because of low wages but because of lack of staff to avoid patient harm is even more crazy—and a canary in a coal mine.

The system is on the verge of blowing up. Somebody needs to step up and step in with a different reimbursement model.

About the Author

Troy Trygstad, PharmD, PhD, MBA, is the executive director of CPESN USA, a clinically integrated network of more than 3,500 participating pharmacies. 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 recently served on the board of directors for the Pharmacy Quality Alliance and the American Pharmacists Association Foundation.

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