Contracting between Contract Pharmacies (Retail and Independents) is somewhat of an art form. Both parties need to understand each others position and contribution, and allow sound business principles to drive the agreement.

Being overly aggressive on either side usually results in an impasse, and therefore, all parties lose including patients.

Having an idea of what the market is paying on agreements, for example, Walmart, Walgreens, CVS, Kroger, but also Specialty Pharmacies and Rural Independents is critical.

This article will not give you this “market intelligence”, although I am happy to speak with you about what I am seeing.

But what I have done for you here, is given you a few examples of how Dispense Fees might be determined in an agreement.

I’ve also thrown in a few contracting options you ought to consider at the bottom.

This list is far from inclusive, but these are the most common scenarios I have seen in the market. Reach out if you have any questions or comments!

DISPENSE FEES
Type AdvantagesDisadvantages
All Scripts Model

20$ for every Rx, Both Brand and Generic
Good to Great Rates on Generics for Retail Pharmacy
Easy to Financially Track and Set Fee
Easy to Administer
Highest Compliance Risk for HRSA Audits
Loses money on Nearly every Generic Rx for Covered Entity
Inventory Issues for Retail Pharamcy
Difficult to accurately track DIR fees
Flat Fee plus % of Reimbursement

10$ Dispense Fee plus 15% of Collections
Low Compliance Risk for HRSA Audit
Less Inventory Headache for Retail Pharmacies
Can Include Brands and Generics
Easy to Administer
Good Returns for All Parties
Retail Pharmacy subject to typical Generic Reimbursement Rates which are not great
Brand-Only Flat Fee

25$ Dispense Fee for every Brand Prescription
Low Compliance Risk for HRSA Audit
Mostly Profitable, but Retail Pharmacy could lose on some, Covered could lose on others
Easy to Administer
Good Returns for All Parties
Not as Flexible as % based Reimbursement
Retail Pharmacy forgoes Revenue Opportunity
Cost-of-goods Delta

Difference in Retail Wholesale Cost – 340B Cost = Spread;
Pharmacy is “Bonused” 15$ extra for every prescription per Rx
Covered Entity receives Remander of Spread.
Low Compliance Risk from HRSA Audit
Stays completely OUT of the Payer Reimbursement game at the Retail Pharmacy
Pay only for what is Profitable in most cases
Easy to Administer, but many loopholes
Decent Returns for All Parties
Not as profitable for the Covered Entity
Forgoes opportunities
Subject to Loopholes for skimming by Administrators and Retail Pharmacies by Deflating the Retail Wholesale Cost
Payer Rate

10$ per Dispense plus 15 to 30% of Collections
Low HRSA Compliance Risks, depending on agreement
Good Returns for Retail Pharmacy
Good Returns for Covered Entity in Most Cases
Allows Precise Payment Agreements between Parties at Reimbursement Tiers or NDC-level
Flexibility to capture the Most 340B Rx
Harder to Administer
Subject to Dispute
Best run by the Retail Pharmacy
Profitability Filters

Setting to ensure all parties make money.
Keeps all parties making money
Lowest risk for disputes/irritation
Not suitable for All Scripts Models that include Generics (can kill the Retail Pharmacy)
Referral Capture Services

Add volume to 340B program (ps..I’ve written about this, here.)
Low HRSA Audit Risk if done properly.
Can increase profitablity by as much as 25%
Winners on all sides Financially (Covered Entity and Pharmacy) if contracted Properly
Challenging in All Scripts Models
Covered Entities not comfortable alone with Compliance Requirements
DIR Fees

DIR and GER Fees are a Real Pain and Should be addressed in Contracting
Typically, these can be “built in” to the agreement.
Saves on headache from Retail Pharmacies
Allows Covered Entity some insight into WHY the Retial Pharmacy may be asking for what they are on Reimbursement
Terribly disruptive to the exchange of money between the parties
In some cases, hard to account for without the right tools and resources.
Cause problems between the Parties

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