EP241: Putting the Squeeze on Community Pharmacies, With Vinay Patel, Founder, Self Insured Pharmacy Networks

There are 65,000 community pharmacies in the United States today, and the total cost to locate, staff, and operate these pharmacies is about 9% of our total national drug spending. That’s less than 1% of our national health expenditure—and falling. This is despite the fact that about 85% of our nation’s something like 6 billion prescription fills are unbranded generics, and unbranded generics are a staple of community pharmacy business. These stats are courtesy of Troy Trygstad, by the way.

Bottom line, and pharmacy benefit managers pushing mail order may beg to differ, but many patients rely on walk-in pharmacies to get their meds filled timely (same day). They rely on the pharmacist for advice. They rely on the pharmacist to be an extension of the care team. This is even more stark in rural settings where there may be a pharmacist nearby but potentially not a doctor.

It would kind of stink for a lot of patients if these pharmacies were pushed out of business by the elephants of the supply chain or, more accurately, on the demand chain. I’m referring to traditional PBMs (pharmacy benefit managers) and the pressures that they are increasingly putting on pharmacies, resulting in what’s beginning to amount to an existential threat for these community pharmacies.

In this health care podcast I speak with Vinay Patel, who is the founder of Self Insured Pharmacy Networks. He’s also a pharmacist, and he’s also an expert in these matters.

To clarify a couple things before we dive in, PBM stands for pharmacy benefit manager. There are three main pharmacy benefit managers that process the vast majority of prescriptions in this country today. These three traditional PBMs are ESI (Express Scripts), CVS Caremark, and OptumRx. Who hires and pays these PBMs? Employers, for one. And also some insurance carriers and sometimes the government, as in Medicare Part D. These PBMs, by the way … these three are vast, and they’re powerful.

Vinay Patel, PharmD, is a pharmacist executive with a 12-year career focused on population health and community pharmacy operations. His background includes integrating pharmacy programs within multifaceted health care teams, engineering effective clinical operations to meet HEDIS program measures, and initiating a pharmacist-led hospital discharge medication reconciliation program.

In his current role as founder of Self Insured Pharmacy Networks (SIPN), Vinay is revolutionizing how plan sponsors pay for pharmacy benefit administration. SIPN’s simple, clear cost-plus model allows plan sponsors to generate significant savings over traditional PBM spread pricing through true invoice cost of drugs and a per member per month fee that is never tied to prescription claims volume or billed charges.  

02:49 Do clients get discounts based on PBM buying power?
03:08 “PBMs don’t actually buy drugs.”
03:42 What are PBMs really doing?
04:13 “PBMs are supposed to control the cost of drugs.”
05:49 What processing a claim really means.
08:32 Why pharmacy and health care in general don’t abide by any free market rules.
09:47 The frequency of cost fluctuations and how this puts pressure on pharmacies.
12:32 Spread pricing.
15:40 How much money the state of Ohio was paying to PBMs that never made it to the pharmacy.
16:19 “It’s not how much PBMs are making … what we have a problem with is that it’s impossible for the purchaser of PBM services to know exactly how much they’re paying in spread when they’re signing that contract.”
17:07 What’s the value of a PBM’s service?
18:41 Branded drugs and PBMs.
19:46 Misaligned incentives in PBMs and Pharma.
20:29 How drug lists and formularies are driving patients to branded drugs when there might be a generic drug available.
21:12 Direct and indirect remuneration—DIR fees.
24:14 Pharmacy performance metrics.
26:51 What’s the repercussion of PBMs owning all pharmacies?
28:28 A new “breed” of PBMs improving the value of care delivered.
28:59 “What does transparent mean in this industry?”
33:02 What Self Insured Pharmacy Networks does.