Jeff Baird Discusses Pharmacies and Their Future

Monday, February 26th, 2018

Jeff Baird, with Brown & Fortunato, discusses some of the current challenges that independent pharmacies are facing. Jeff talks about how independent pharmacies can set themselves apart from chains by offering niche products and services. He also discusses the need for pharmacies to seek accreditation and learning how to work with PBMs or Pharmacy Benefit Managers.


At the end of the day, it’s difficult for, particularly your independent pharmacists, to make money selling commercially available drugs. In other words, a pill counter. When you think of a typical pharmacy, you think of a person that goes back and takes a big bottle of pills and takes out a 120 pills, puts them in a smaller bottle and, or container, and hands that container to the patient. Those are commercially available drugs. Those are drugs that have been produced by a manufacturer, that’s gone through the FDA process. It’s difficult for the pharmacy to make money doing that. And so increasingly pharmacies, particularly the independents, are having to develop their own niches. They’re having to set themselves apart from their competitors. And they can do that from several ways.

Number one, they can compound drugs where they’ll work with physicians to come up with something that’s unique to a patient that will really fit the patient’s particular needs. That can set the independent pharmacy apart from a, from a chain. In addition to that, the pharmacy can cater to particular patient groups such as women, such as geriatric patients, such as COPD patients where the pharmacy can not only provide drugs, including compound drugs, but also particular services for a particular pharmacy group. And then thirdly, the pharmacy can develop a niche just by thinking outside the box and not just dispensing drugs but also dispensing healthcare services. This is a way that, again, your boomer, your baby boomer who’s born between 1946 and 1964 who wants to be healthy and active until the day he or she dies, is willing to pay cash, extra, for those types of healthcare services.

Accreditation has been an open question among pharmacies over the last decade or so. Is accreditation important? Accreditation is normally not required, at least up to this point in order for a pharmacy to be paid by a third party payor. Having said that, increasingly, whether it’s government programs, medicare part D, Medicaid, Medicaid managed care and others, they are imposing more and more quality requirements on pharmacies, and so we are beginning to see now more of a requirement for pharmacies to become accredited in certain areas in particular as pharmacies are trying to, particularly as independent pharmacies trying to distinguish itself from its competitors a way to do that is to be able to show consumers to show their referring doctors and show other referral sources that they are accredited in certain areas. In addition to that, just to get paid by some third party payors, pharmacies do need to become accredited. So I guess the short answer is it’s a wave of the future and I think is important for pharmacies to go the accreditation route. Its kinda like me as an attorney. I’m board certified in health law Now, I can practice health law without being board certified. I don’t need it, but it sets me apart from my competitors. So it’s the same concept with pharmacies and accreditation.

The relationship between pharmacies and PBMs(Pharmacy Benefit Managers) is a complicated one. PBMs pretty much have the power of God. They pretty much do what they want to. And there’s not a whole lot of accountability. And, as a general rule, the PBM wants to, wants to let pharmacy into its network, it will, if it is not want to let a pharmacy network, it will not. Now, even though there is some ongoing litigation against PBMs, to force them to open up their networks and to treat pharmacies in a more of an even handed way, at least as alleged in the lawsuit. Nevertheless, at this point in time, PBMs do have a lot of leeway, a lot of authority. And so, the key for the pharmacy is to be at the get go, to be honest, to be open, to be transparent. Where pharmacies get themselves in trouble is, for example, when they fill out a questionnaire to, where they’re asking to be accepted to a network, the pharmacy may lie or might just give an incorrect answer on the questionnaire. For example, PBMs do not want to accept pharmacies in network that are heavily into mail order. I’m not going to pass judgment right now as to whether or not that’s fair or unfair, but the bottom line is if a pharmacy is involved in mail order then it needs to answer the question honestly, and that might result in the pharmacy being excluded from the network. And so, if the pharmacy wants to be included in a, PBM network then it needs to understand what the PBMs requirements are and that the pharmacy needs to adjust his business model so as to meet those requirements, such as, for example, doing less mail order then it needs to do so.