In a previous blog, we went over what role pharmacy benefit managers play in the independent pharmacy scene. They are essentially negotiators meant to help pharmacies get the best services within their means.
PBMs aren’t always on your side, however. They can make negotiations more difficult than it needs to be, making the process that they’re supposed to simplify even more convoluted.
Enter pharmacy services administrative organizations (PSAOs).
What Are PSAOs?
The Healthcare Distribution Alliance defines PSAOs as entities that “interact with healthcare insurers and pharmacy benefit managers (PBMs) on behalf of independent community pharmacies.”
PBMs usually work in favor of bigger chains, so independents need all the help they can get, and having a PSAO on your side can definitely work in your favor.
To curb the potential damage done by PBMs, PSAOs give independents clarity and the peace of mind necessary to make sense of the industry’s inner workings. In essence, they do the non-pharmacy heavy lifting so you can focus on running your independent pharmacy to its fullest potential.
Yes, PSAOs are the middlemen that handle the other middlemen (PBMs).
Does that sound confusing? Probably. Is it confusing? Without a doubt.
Making Sense of PSAOs
Writing for Acute Condition, Olivia Webb called PSAOs the “middleman for the middlemen, or an entity that fits between PBMs and pharmacies.”
As mentioned before, PBMs have a stronghold on the industry, influencing things ranging from what out-of-pocket costs pharmacies pay, what pharmacies are covered under a plan, and what contents the formulary itself contains.
Your aim is to offer the best and most beneficial health services that money can buy, and PSAOs are to fulfill that ideal. Independent pharmacies can be a pillar of the community, a one-stop shop for all a customer’s health needs.
PSAOs are extremely prominent in the independent pharmacy sector, with a reported 83% of pharmacies having a contract with them as of 2019, according to the Pharmaceutical Care Management Care Association.
Their primary role is negotiating contract terms with PBMs in various aspects, including:
- Contracting Negotiations with PBMs and Plans
- Contracting Wholesalers
- Billing Support
- General Business Support
- Pharmacy performance analytics
Helping Independents Hold Their Own
PSAOs are on the business side of the pharmaceutical industry, helping independents hold their own against prominent chains.
Independents having increased negotiating power is a direct result of that 83%. They work to deliver your reimbursement rates and potential third-party agreements that are tailored to your specific business needs.
They offer services meant to alleviate independent pharmacies of the less flowery aspects of the job. The fact that they’re basically meant to negotiate with the negotiators is simply an example of the current state of the industry.
PSAOs are ultimately an invaluable part of the industry to help independents cut through the infinite amount of red tape in starting a business.
Knowing what PSAO best fits your business needs will help your pharmacy continue delivering exceptional service while staying financially healthy. What matters is you’re informed of which PSAOs consist of what and how certain alliances (change word) will impact your day-to-day operations.
The largest PSAOs include:
- Health Mart Atlas
- Cardinal Health
- Elevate Provider Network
- Arete Pharmacy Network
Dispelling the Myths
The key to running a successful business is to be as informed as possible.
You want to make sure you’re investing in something that is worth your time and money. As such, knowing fact from fiction, PSAO to PBM, is vital to your pharmacy’s success.
To clear, the air, the NCPA goes over the key differences between PSAOs and PBMs.
Perhaps the most vital difference between the two is the legal necessity of having a PBM:
“U.S. pharmacies must contract with a PBM to provide services to insured patients. PSAO services, on the other hand, are voluntary for independent pharmacies and help these small businesses navigate the administrative complexities and ‘take-it-or-leave-it’ decision-making presented by PBMs.”
PSAOs don’t cancel PBMs out — they are and will remain to be a prominent figure in the industry.
PSAOs instead work to empower their clients when negotiating deals with PBMs, working on behalf of independent pharmacies so they can focus more on their day-to-day operations.
A Life Preserver
PSAOs also help independents from potentially going under.
A study conducted by the National Community Pharmacists Association found that 58% of small business owners feel they may go out of business in the next two years due to PBMs and their unregulated practices.
59% of participants rated their business’s health as somewhat poor or very poor.
PSAOs are a life preserver for independent pharmacies, ensuring that pharmacy owners get a fair shot at running a successful business.
They don’t take any portion of your pharmacy’s reimbursement.
Instead, independents pay a flat, transparent fee for their services. They also do not determine prescription pricing or provider reimbursements in any way. It’s a relatively cost-effective investment to make sure you’re getting the best deal possible.
Like PBMs (with a few exceptions), PSAOs don’t really have to adhere to government regulations or oversight.
Compared to PBMs, where more regulations are being put in place to mitigate their shady practices, PSAOs give pharmacies peace of mind that their business is heading in the right direction.