Independent Pharmacy | Network of Affiliated Pharmacies Embracing Reform

Whew...It's Not The End! But What Does 2013 Hold For Independent Pharmacies?

Posted by James Thompson

Dec 27, 2012 12:00:00 PM

Friendly reminder: any opinions I express in this blog are mine and are not those of PDS or any other entity that I am now or have been affiliated with at any time or in any way.

Pharmacy MayanWe have made it through the end of the Mayan Calendar! Your customers probably came into your store over the past months, unsure of what the end of the year would hold for them. Whether it be the end of the world, the "financial cliff" descisions, or even potential pharmaceutical provisions of the Affordable Health Care Plan.

As for the 2013 New Year, we can definitely expect some interesting news and changes ahead.

This leads to the basic issues of human behavior as driven by uncertainty and the current overdose of media coverage. I also find it interesting that Express Scripts has deemed it necessary to run television ads assuring MEDCO participants that, not only will nothing change, but also that Walgreens is back in the network for Express Scripts.

This reminds me of the shifting consumer-driven paradigm that happened when the FTC started allowing pharma companies to advertise on television. It begs the question…will customers start to push benefit plan administrators to make changes in their PBMs? Or at least plan designs if they better understand the relationship between their drug benefit, their employers and the PBMs?

This entrance of PBMs into national advertising also appears to be pressuring chains other than Walgreens to increase their media marketing campaigns. The Wal-Mart $4 generic co-pay advertising campaign triggered this a couple of years ago. But for most consumers there still is a disconnect as to the role the PBM plays (or who they are). If so, this leaves an opening for independent pharmacies to step in the formula.

Other predictions I would contemplate for 2013 include, continued consolidation of PBMs and Specialty Pharmacy driving down pricing for self-administered injectibles and compounded drugs. Medicare savings will have to be garnered from more intensive audits of all products and services, because it is unlikely that savings will be garnered through cutting benefits. In addition, with generic medications topping out at over 80% of all drugs dispensed there will be increased scrutiny of supply chains for generics. Hopefully this will help tighten imported pharmaceuticals and some of the shenanigans that have been going on regarding outsourcing.

As with other times of uncertainty 2013 will also be a time for the agile and insightful entrepreneurs to find new and profitable opportunities. I wish you a very happy and prosperous New Year!


This article was written by James R. Thompson, Consultant, PBM and RX Strategies

Topics: community pharmacy, napher update, independent pharmacy community

'Tis the Season! A Childhood Memory of My Community Pharmacy

Posted by James Thompson

Dec 20, 2012 7:00:00 AM

Friendly reminder: any opinions I express in this blog are mine and are not those of PDS or any other entity that I am now or have been affiliated with at any time or in any way.

NAPHER tis the seasonI was raised in a community of less than one thousand people, two thousand dairy cows, about fifty thousand chickens, numerous horses, pigs, turkeys, mink…even chinchilla ranches. In the center of town was my elementary school, right across the street from the community drug store, Draper Drug.

At the expense of divulging my age, our drug store was also the malt shop, soda shop and hangout for us elementary kids, as well as those farmers who stopped by daily, sat on the bar stools and talked about the town.

Draper Drug was always the first to decorate its windows with Christmas lights each year, with beautiful painted Christmas scenes of Santa on one side and the nativity on the other. During the holidays, this is where we bought our ribbons, bows and Christmas paper, and of course boxed candy and candy canes. The pharmacist did most of the work, but during the holidays he would hire a helper, usually one of the women in town whose husband had been hurt on the farm or who otherwise needed some extra income. He always added one or two on the payroll at Christmas time, not because he needed the extra help, but because they needed the extra money.

I moved away from my hometown 45 years ago. Times have changed. The community now has over one hundred thousand people, no dairies, only a few chickens and a few horses. The pigs, mink and chinchilla are now illegal to own.

Draper Drug is gone. There are currently four chain pharmacies, plus a Wal-Mart and an Albertson’s. My hometown is no longer the community I lived in and that my ancestors settled in over 150 years ago. But one of the best parts of each holiday season for me is my memories of Christmas through the eyes of a young boy standing in front of a drug store, looking with wonder at such a beautiful site.

Happy holidays to all of you who still have the opportunity to bring holiday joy to your small towns, neighborhoods and most of all the children who will remember you!


This article was written by James R. Thompson, Consultant, PBM and RX Strategies

Topics: community pharmacy, napher update, independent pharmacy community

It's Déjà Vu! Pennsylvania Mandates Parity in Mail-Order and Retail Copays

Posted by James Thompson

Dec 6, 2012 7:00:00 AM

Friendly reminder: any opinions I express in this blog are mine and are not those of PDS or any other entity that I am now or have been affiliated with at any time or in any way.NAPHER mail order

I recently read an interesting article in Pharmacy Benefit News that addressed prohibiting mail order copays from being lower than retail in Pennsylvania. This topic particularly brings back memories from three decades ago.

I started in the PBM Industry as Regional Sales Director for Health Care Services, Inc. based in Pennsylvania. At the time, there were only three mail order pharmacies: Health Care Services, NationalRx (the predecessor of MEDCO) and Employee Pharmaceutical, Inc. These three firms had grown out of a demand by the International Ladies Garment Workers Union in New York City, who had tried and failed to start their own mail service pharmacy. There was no integration between mail and retail, and PCS dominated the retail landscape.

With only three competitors, the marketplace was a salesmen’s dream. I worked the “rust-belt” from Minnesota to Ohio, then south to St. Louis. At the time, most of the Fortune 500 companies were located in this market and through referrals I bounced around to many companies, TPAs, government entities and unions, including Eaton, Volkswagen of America, Beatrice, Borden, Lubrizol, Borg Warner and Nationwide Insurance. With the help of a well connected broker, I found myself in Puerto Rico selling the Blue Shield Plan (Tripe S). After a year of spending a week of every month in San Juan, we finally closed and installed the sale. Only to have the retail pharmacists of Puerto Rico resurrect an archaic commerce law. It prohibited commerce from entering the island that could effectively be provided on the island. Our opportunity for mail in Puerto Rico ended, but my fond memories have never faded. Sometimes work is so intertwined with play that the outcome is irrelevant.

News of this began to be leveraged by several state retail pharmacy associations. More states found ways to limit or preclude mail order, and here we are 30 decades later with the same issues. Now working on the audit and creative side of the business, I recognize that most PBM’s have found ways to imbed unfair trade practices into their mail order operations. Admittedly these are not illegal, nor unethical (for the most part), but nevertheless have garnered the scrutiny of many state attorney generals. The following is the article from Drug Benefit News, that I have included in its entirety. I think you will find this article insightful and recommend you read through it.

As a side note: this amendment was first passed in 1921, that defined mail order dispensing of prescription drugs. Almost a century of competitive confusion on this issue - Wow!

As Pennsylvania recently joined New York in passing legislation aimed at restricting the use of mail-order pharmacies, PBMs that rely on mail-order pharmacy to boost earnings, drive claims volume and/or improve adherence may be faced with a new threat to an already shrinking business.
Senate Bill 201, signed into law by Gov. Tom Corbett (R) on Nov. 1, amends an existing law to ensure that customers may purchase their drugs from a mail-order or retail pharmacy with no price differential by barring an insurer from imposing a copay that members wouldn’t have using a mail pharmacy. Nearly a year ago, New York Gov. Andrew Cuomo (D) signed a similar law that requires retail pharmacies to accept “the same reimbursement rate and applicable terms and conditions established for mail order pharmacies” (DBN 12/16/11, p. 8).

In Pennsylvania, the retail pharmacy also must be willing to accept “the same pricing, terms, conditions or requirements” as a mail pharmacy, which will likely force pharmacy owners to reduce their margins, suggested Pembroke Consulting, Inc. President Adam Fein, Ph.D., in a Nov. 6 Drug Channels blog post. The law is also likely to impact PBMs like Express Scripts Holding Co. and CVS Caremark Corp., which make a significant chunk of per-prescription profits through their mail-order pharmacies. In 2013, the big two PBMs will account for more than 80% of U.S. mail-order prescriptions, estimated Fein.

“It’s potentially concerning,” observes Morningstar Inc. securities analyst Matthew Coffina. “I think that the copay is a strong incentive for patients to choose mail order over retail although it’s certainly not the only incentive. I think some patients also just find it more convenient to get their drugs through the mail.”

Mail Order Is Already Slowing

As to whether the legislation could divert enough mail-order volumes away from Express Scripts to make a dent in profits, Coffina suggests, “It could be a bit of a headwind to margins. But on the other hand I think the focus has been shifting away from mail order anyway over the last couple of years, and Express can still potentially have value by managing the retail pharmacy network.”

“It’s unfortunate a bill has been passed that raises the cost of the pharmacy benefit for plan sponsors,” laments Express Scripts spokesperson Brian Henry of the “anti-consumer” legislation. “Plans can no longer discount copayments for patients who choose the lowest-cost channel — home delivery — for their medications. Home delivery continues to be the most cost-effective way to deliver chronic medications for serious illnesses and is an important option for employers, unions and state governments who are trying to keep the cost of healthcare down, while improving outcomes for members. With this bill, it’s the patients across Pennsylvania who lose.”

In recent third-quarter earnings reports (see story, p. 1), Express Scripts said organic mail growth — not factoring in the addition of the Medco Health Solutions, Inc. book of business — would have been 3% year-over-year. But if Express Scripts were to include Medco, which lost a major mail-order client in the Blue Cross and Blue Shield Federal Employee Program last year, that number would be negative, points out ISI Group LLC Senior Managing Director Ross Muken. “Mail trend has obviously been flat to negative for some time,” he tells DBN. “And that was historically a very big driver in these companies’ business, probably 40% to 50% of legacy Medco’s earnings, so not an insignificant fact if we see mail continuing to stagnate.”

CVS Caremark, meanwhile, did not break out claims specifically processed by a mail-order pharmacy, but reported that its “mail choice” claims — which include claims filled at one of the PBM’s 18 mail or specialty home delivery facilities and 90-day claims filled at retail under the Maintenance Choice program — were up 16.3% to 20.4 million from 17.5 million in the prior-year period. The company attributed the increase to both new client starts and the continued adoption of its Maintenance Choice program, which allows members to obtain 90-day fills of medications at either retail or mail for the same copay.

“We believe this type of legislation can ultimately drive up costs for payers and patients,” remarks CVS Caremark spokesperson Christine Cramer. “In general, we make multiple plan design options available to our clients and they select the option that best meets their member satisfaction and cost containment goals, as well as applicable legal requirements.”

“CVS is obviously more in favor of retail than mail anyway and they’re trying to divert their patients to retail regardless of the regulatory environment, so it would have less of an impact on them,” says Coffina of this and other similar legislation. “That said, we have to remember that this is only a couple of states and Express Scripts is diversified geographically. It does set a little bit of a precedent, but I don’t know that many other states are going to be interested in this considering that it could in the long run increase their health care costs.”


This article was written by James R. Thompson, Consultant, PBM and RX Strategies


Topics: community pharmacy, napher update, independent pharmacy community

An Alternative Proposition for AWP Pricing for Generics

Posted by James Thompson

Nov 23, 2012 8:00:00 AM

Friendly reminder: any opinions I express in this blog are mine and are not those of PDS or any other entity that I am now or have been affiliated with at any time or in any way.

Last week, I raised the rhetorical question about generic pricing particularly in the Medicare Part D space. This also begs the question about base-line pricing for all drugs. At the NCPDP conference I attended late last spring the consensus was that “AWP” was here to stay. However, I found the recent article interesting.

CMS last month released its first batch of pharmacy acquisition costs and revenue data, based on findings from its two-pronged Survey of Retail Prices, renewing the buzz about average acquisition cost (AAC) as a reimbursement benchmark. Several pharmacy benefit contracting experts participating in a recent AIS webinar agreed that AAC may well emerge as the new pricing standard as payers shy away from the flawed average wholesale price (AWP) methodology. Elsevier/Gold Standard, which offers clinical decision support to pharmacists, physicians and other health care professionals, is one firm that has already gotten a jump on marketing acquisition cost data to pharmacies with the proprietary pricing tool Predictive Acquisition Cost (PAC).
Developed by Glass Box Analytics, PAC is a new drug price type that uses predictive analytics techniques to estimate acquisition cost based on published price lists, existing price benchmarks, drug-dispensing analytics, survey-based acquisition costs and other factors. In a white paper released earlier this year, Elsevier contends that PAC has the potential to serve as a long-term drug pricing reimbursement benchmark by meeting the industry’s demands for data that are transparent, accessible, comprehensive, timely and immune to manipulation.
Meanwhile, CMS has just released the August 2012 draft federal upper limit file featuring reported average manufacturer price (AMP) data, which offers payers a possible benchmark alternative for generic drug pricing. As mandated by the health reform law, AMP will eventually be used to set the federal upper limit, or the maximum amount Medicaid will pay for generic drugs. Pembroke Consulting, Inc.’s Adam Fein, Ph.D., provides a few observations of the past 14 months of AMP data on his Drug Channels blog today.

I admit, that I have not waded through the Affordable Healthcare Act to validate the claim the AMP will eventually be used to set the federal upper limit, or the maximum amount Medicaid will pay for generic drugs, but it reminds me of thirty years ago when HCFA-MAC set the standard for MAC pricing.

By the end of the day, as independent pharmacists you are subject to the MAC pricing determined by each PBM and many who use multiple MAC tables depending on their clients. Fortunately, automation through NCPDP gives you this data at the stroke of a key. BUT your recourse for what may be seen as unfair pricing…or dare I say…price collusion by PBMs dilutes your power for recourse. Except you jointly take action to push back.


This article was written by James R. Thompson, Consultant, PBM and RX Strategies

Topics: community pharmacy, napher update, independent pharmacy community

Dollars to Doughnuts… The Hole Does Not Cost Taxpayers Anything!

Posted by James Thompson

Nov 15, 2012 7:00:00 AM

Friendly reminder: any opinions I express in this blog are mine and are not those of PDS or any other entity that I am now or have been affiliated with at any time or in any way.


That being said… The following is a clip from an article in AIS's Health Reform Week's e-News Alert, that I recently read about the doughnut hole and drug cost increases:

“Prices for brand-name prescription drugs used by Medicare Part D beneficiaries in the coverage gap known as the 'doughnut hole' and by those who did not reach the gap last year increased at the same rate, according to a Government Accountability Office (GAO) report released on October 26th. As part of the health reform law’s Part D Coverage Gap Discount Program, beginning in January 2011, pharmaceutical companies were required to discount their drugs by 50% for those Part D beneficiaries who had reached the 'doughnut hole,' raising fears that the companies might increase prices to offset the discounts.
GAO found that the prices of 77 brand-name drugs increased 36% for those within the gap from January 2007 to December 2010 and 35% for those outside of it. And from December 2010 to December 2011 — after the discounts took effect — prices increased just 13% in both groups. In addition, the report found that 'most [Part D plan] sponsors and [pharmacy benefit managers] told GAO that the Discount Program did not affect Part D plan formularies, plan benefit designs, or utilization management practices.' Separately, HHS Sec. Kathleen Sebelius said that 2.3 million Part D beneficiaries in the 'doughnut hole' this year have saved an average of $657."

The salient content of this article: “pharmaceutical companies were required to discount
their drugs by 50% for those Part D beneficiaries who had reached the doughnut hole,” is somewhat misleading.

My interpretation: I seem to remember that as early as President Clinton’s regime many PBMs and pharmaceutical companies were invited to the Whitehouse to consider and propose strategies to help retirees with their rising prescription costs. I was working for Express Scripts at the time and our CEO, as well as others who attended the meeting, rapidly decided that this was a “third-rail” (like the rest of Medicare) that they didn’t want to touch. However, pharmaceutical companies recognized that unless they proffered a solution, they may be subject to some sort of legislative oversight regarding the pricing of medications.

As we remember, Medicare Part D was passed during the Bush administration with the doughnut hole, with data that assumed that most beneficiaries would neither enter this “gap” nor pass through it. Turns out this was not the case. So once again, under President Bush, industry leaders were asked for solutions, with an underlying assumption that if costs for the elderly were not curtailed the pharma companies would be blamed. These companies were wise enough to recognize that taking a proactive move of offering 50% discounts on drugs in the doughnut hole in lieu of regulation was a small price to pay. (They were not “required to do so” it was a survival strategy.)

The election smoke has cleared, (or at least has been seen coming out of the chimney), and the accusations on both sides have subsided regarding the cost of “social” programs. Regarding Medicare Part D it is interesting to note that pharma companies have been wise enough to have held their costs uniformly whether claims are in or out of the doughnut hole.

In my opinion, this has set an interesting precedent and raises this rhetorical question: what could generic manufacturers proffer for reducing the ingredient costs under Medicare Part D given the fact that generic substitution is topping out at 80% of all prescriptions?

Source: AIS’s Health Reform Week's e-News Alert


This article was written by James R. Thompson, Consultant, PBM and RX Strategies

Topics: independent pharmacy community, Medicare Part D

An Update on the $7.1 Billion MasterCard and Visa Credit Card Suit

Posted by James Thompson

Nov 8, 2012 10:00:00 AM

Friendly reminder: any opinions I express in this blog are mine and are not those of PDS or any other entity that I am now or have been affiliated with at any time or in any way.

A few weeks ago, I published a blog about 3 important recent events that every independent pharmacist should know. I promised to post updates as they come about on those 3 topics and recently I have became aware of one regarding the Mastercard and Visa settlement.


As a refresher, the three events included:

1. Express Scripts bought Medco.

To view the details on this event please click here.

2. United Healthcare wins Tri-Care Western Region Administration.

To view the details on this event please click here.

3. Mastercard and Visa settle out of court for $7 billion.

Litigants for MasterCard and Visa have just reached a settlement for close to $7 Billion for unfair trade practices in how they have conspired to charge merchants for both the “click-through” fees and the percent of the sale they charge for each transaction. Within the next 60 days the judge will decide whether he accepts this agreement. It has a precedent by the same judge and for the same legal issues for which he ruled against MasterCard and Visa.

Basically, this means that every merchant who processed sales through these cards back through 2004 can be claimants for their share of the pot. While the settlement will be pennies on the dollars, for those of you who have had significant credit card purchases there could be substantial recoveries. I am very involved in working this case and will provide more information as the ruling is ratified and the rules of claimants are defined by the judge and trustees. Wal-mart has already received special treatment and received over half a billion. Stay posted for the next 60 days. This is almost done but just needs to abide by the ordinary public hearings and public notifications.

NEWEST UPDATE: On October 19th the Federal District Court accepted the anti-trust suit settlement between the litigants, but by statute ruled that it has to allow 30 days for members of the class (ie: retailers), to file any objections. Some of the largest retail merchants associations have filed objections already, and counsel to many large retailers have indicated they will do the same. For more information you can google “MasterCard/Visa Class Action.”

Legally a court that has accepted a settlement cannot reject it unless 25% of the class opposes. The objectors are hopeful they can move this settlement from the court to a legislative action. Since there are millions of retailers, in spite of a number of large ones that oppose, it is my opinion that the settlement as filed will stand, but that the judge may redact some double-jeopardy language. I will keep you posted as the case continues and how I can facilitate your claims.

As I've mentioned before, all 3 of these important subjects will be part of my presentation at the 2013 Annual PDS Conference, and in the meantime, I will continue to keep you informed as these important news bulletins are updated.

Click on the button below to register for the 2013 Independent Pharmacy Business Growth Conference coming this February 21-23, 2013 at The Gaylord Palms Resort in Orlando, FL. This opportunity will allow you to network with 800 of the most successful pharmacies in the industry. Don't miss out!

If you have any questions or are affiliated with large retailers, please contact me directly at or Gary Jahner at


This article was written by James R. Thompson, Consultant, PBM and RX Strategies

Topics: community pharmacy, napher update, independent pharmacy community

How PBMs Design the Plan That Effects YOU!

Posted by James Thompson

Oct 15, 2012 10:00:00 AM

And the rest of the story… usually it’s all hat and no cowboy!

Almost two decades ago I was invited to be a guest speaker at the University of Pennsylvania Wharton School of Business. I spoke specifically to 300 graduate students who were working on their MBAs specializing in Healthcare Administration. The lecture was for an hour, but they kept me there for another hour of questions and answers.

2013 Pharmacy Business Growth Conference, PDS

Recently I ran across my old power-point for that presentation and was surprised that I still receive requests to speak on exactly the same topics. They are listed below, but for you, the independent pharmacist, the answers to these questions often-times directly reduce your bottom line. At the 2013 Annual PDS Pharmacy Business Growth Conference I plan to elaborate on these, but you may be interested in some cryptic answers that are not much different than they were 20 years ago:

What are the different types of PBM contracts available (e.g., traditional, 100% pass-through, fully transparent)? Which are most appropriate under what circumstances?

Almost none of these contracts fully disclose how PBMs make money.

How do plan sponsors and PBMs define the term “transparency?" How can they reach an agreement that reflects both interpretations?

“Transparency” is the most elusive term in the industry. Clients think they are “seeing” how their plans are financially organized when in reality this is strictly a marketing ploy. Even when terms are included most plans do not understand the cost components.

What fees do PBMs typically charge, and what is included in those payments? What additional fees may be charged and for what kinds of enhanced services?

Of all the questions, this is the most difficult for PBMs to honestly answer without divulging their profit centers. Currently margins hidden in MAC pricing are incredibly difficult for clients to determine. AND IN MANY CASES THE PBM MAKES MORE PER GENERIC THAN DO THE PHARMACIES WHO DISPENSE THEM!

What pricing schemes or changes in the market could prompt payers to update their contracts?

Every contract should allow for a review and update every year.

How do plan sponsors know they’re getting 100% of rebate revenue resulting from their groups’ drug utilization?

The do not! Even as we audit PBM contracts, the roadblocks to manufacturer contracting for
rebates are very difficult to determine.

What are the commonly used pricing methodologies to determine ingredient costs? How are they evolving? For example, what is a maximum allowable cost list, and should MAC lists be negotiated into the contract?

At the most recent NCPDP conference it was confirmed that AWP is here to stay for both brand and generic drugs. MAC price lists SHOULD NOT be included in the contract. Rather a calculated algorithm should be presented in order to divulge a fair compensation and margin to independent pharmacies.

What performance guarantees are found in an effective PBM contract?

These range from timeliness of reporting to average wait time for customer service calls and generic substitution rates. The reality is that most large PBMs budget for non-compliance penalties. We can talk more about this in February.

How can plan sponsors negotiate the right to audit in their contracts? What can the PBM provide to the plan sponsor on an ongoing basis to avoid a full audit?

That is an extraordinary aspect of most contracts and many have insisted that (incredibly)
they…the PBM…must approve the auditor. I have successfully been able to negotiate this out.

What contracting strategies can be used to reduce costs and improve transparency?

A true transparent plan would have an admin fee of $3.00 or more per Rx. But this answer to too long to describe in this blog.

How can plan sponsors ensure that the contract reflects what the PBM proposed?

All Requests for Proposal should include a request for a copy of the proposed contract and where each part of the contract is reflected in the proposal.


While the questions (and many of the answers) have not changed over the past 20 years. The PBMs have become far more astute at burying their profits and skimming margins from point-of-sell. Every month I work on PBM audits that help to “true-up” the fairness that should be in this industry.

As I mentioned above, I will be discussing these topics in further detail at the 2013 Pharmacy Business Growth Conference on Feburary 21-23, 2013. Attending this event is your opportunity to network and learn from 800 of the best pharmacy owners in the business! I hope you see you there.


This article was written by James R. Thompson, Consultant, PBM and RX Strategies

Topics: pharmacy business success, independent pharmacy community, pharmacy owner networking, PBM, Pharmacy Owner Community

A Survival Strategy for Independent Pharmacy Businesses

Posted by Dan Benamoz, R.Ph

Jan 17, 2012 7:08:00 PM

Many independent pharmacy owners will be forced to close, sell or see profits dramatically reduced unnecessarily in 2012. The problem really isn’t PBMs, mandatory mail order or closed door networks. The real problem is that independent pharmacy as an industry is so splintered, it can’t seem to get itself organized to take advantage of many lucrative opportunities available.

Can't see the video? Click here to watch the video

I recently recorded a 18 minute video that discusses strategies versus tactics for independent pharmacies to rally around in order to reclaim their own profession and improve their fortunes.
One strategy is presented but a single obstacle remains, how to get pharmacy owners off the sidelines and engaged in the process.

Join the Movement

Please watch this important video and share your thoughts on how to overcome the obstacles before us. You can either share you comments in the section below, or for a completely private conversation, please join us on the conversation on the Independent Pharmacy Message Board and reply on our thread about this video.

If you've yet to join the Industry Message Board, you can do so by going to As stated in the video, survival requires us banding together. I challenge you to invite three pharmacy owners to join the the message board and join the NAPHER movement. 

Click me

Topics: napher update, independent pharmacy community, dan benamoz