Epic RX

Differentiating Between PSAOs and PBMs

By Bretta Grinsteinner

The world of community pharmacy has many players. Understanding their roles in an ever-changing, complicated healthcare system can be daunting, but EPIC Rx can help differentiate between two participants: Pharmacy Services Administrative Organizations (PSAOs) and Pharmacy Benefit Managers (PBMs).

PSAOs and PBMs serve vastly different roles, and it’s important not to confuse them. PSAOs help independent pharmacies by offering administrative support, while PBMs typically negotiate discounts and rebates with drug manufacturers, contract with pharmacies, and develop and maintain the drug formulary.

What are PSAOs?

PSAOs are organizations that provide “behind the scenes” administrative services for community pharmacies. A local pharmacy voluntarily hires a PSAO to help with administrative tasks for a monthly fee. PSAOs offer several services to empower independent pharmacies, amplify their voice, and help them compete in the marketplace.

Contracting, credentialing, reconciling claims, and protecting from reimbursements below cost (RBC) are a few services PSAOs offer. They also assist pharmacies with audits, offer clinical support and legislative representation, and provide tools to improve patient care.

PSAOs don’t influence drug costs or patient benefit designs, determine pharmacy reimbursements, or set maximum allowable cost (MAC) rates. PSAOs do not keep any part of the pharmacy reimbursement for profit. Their sole source of income is the monthly fee community pharmacies pay, unlike PBMs.

EPIC Pharmacy Network (EPN) was formed in 1993 to support community retail independent pharmacies. EPN offers claims payment reconciliation through a proprietary software tool, RxRegulator; pharmacy compliance and credentialing through an alert program, PharmCAP; escrow accounts for reconciliations; customer service with one-on-one relationships; and more.

What are PBMs?

PBMs are intermediaries between insurance companies, pharmacies, and drug manufacturers. They develop formularies and retain rebates, which influence drug costs. PBMs also determine benefit designs and create pharmacy network configurations. Three PBMs control nearly 80% of the marketplace, making them highly influential companies. A critical service of PSAOs is managing relationships and negotiating contracts with PBMs on behalf of their pharmacy members.

PBMs earn money through different revenue streams due to their vertical integration with health insurers. One avenue is spread pricing, where health plans are billed at a higher rate than they reimburse pharmacies; the difference in pricing goes to the PBM. Other sources of revenue are money earned through insurer administrative fees and per member per month (PMPM) fees, as well as rebates that the PBMs negotiate. These practices can harm local, independent pharmacies that may need help negotiating better contract terms and conditions or afford rising drug costs.  That is where PSAOs come in.

PSAOs vs. PBMs

There are many key differences between PSAOs and PBMs.

PSAOs associate with PBMs through contracting negotiations, attempting to protect independent pharmacies from reimbursement below costs, effective rate management, and more. Are you trying to negotiate contracts and manage relationships with PBMs yourself? Do you struggle to increase reimbursement rates and compete in the marketplace? If you’re a community pharmacist dealing with any of these issues, it may be time to consider working with a PSAO.

PSAOs are critical to the survival of independent pharmacies and, thus, patient care. The expertise and efficiency of PSAOs help independent pharmacies stay in business and protect reimbursements. At EPIC Pharmacy Network (EPN), our members can survive and thrive in today’s marketplace. With the help of a PSAO, you’ll be able to get back to focusing on what’s most important: your patients.

For more information, please visit:

www.hda.org/psaos/

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Bretta Grinsteinner

Bretta Grinsteinner leads EPIC Pharmacy Network (EPN), the nationwide Pharmacy Services Administration Organization (PSAO), where she successfully leverages her experience in the payer space to benefit independent pharmacies as they navigate the changing landscape of pharmacy.

In her current role, Bretta provides strategic leadership to EPN’s contracting, reconciliation, government affairs, audit, and clinical services teams. Bretta also oversees EPN’s ongoing efforts to deliver enhanced products and services to independent pharmacies and expand membership in new markets.