A Better Pricing Model

Let pharmacies keep their margin

A popular pricing model utilizes a flat fee for every dispense in exchange for the contract pharmacy’s collected third-party and patient payments.  That means that for some fills, the pharmacy gets a payment that’s more than the profit they would have made on that dispense, and on some dispenses, they’re losing money.  A pharmacy manager must calculate a dispense fee that they hope will be enough to provide them at least as much gross margin as they would have made without 340B.

Pricing-Model-compressedOur recommended pricing model allows each pharmacy to keep their normal profit, and always receive an additional dispense fee on top of that.  Every dispense necessarily earns the pharmacy more total revenue with 340B than without.  This simple model makes it easy to show not only that participating in 340B is beneficial to the pharmacy, but provide very good insight into their compensation for helping the covered entity.

Use a percentage fee to maximize 340B Savings

Pharmacy contracts created with a dispense fee based on a percentage of revenue can make more dispenses beneficial to both pharmacy and covered entity, increasing the total 340B discount available with which to help patients.  Less expensive drugs such as generics typically have a lower gross margin for the pharmacy, but most pharmacists are happy to include generics in their 340B formularies if they’re compensated.  For inexpensive drugs, a flat fee may be too large for covered entities to get a net savings on a drug.  For expensive drugs, a flat fee may be insignificant compared to the normal profit earned by a pharmacy.

Utilizing a percentage fee solves both problems: a pharmacy’s dispense fee is larger for more profitable drugs and smaller for less profitable drugs. This means that more eligible drugs are ordered under 340B, increasing the total 340B discount.  A larger total 340B discount means more savings to share with the pharmacy.  Both the pharmacy and covered entity come out ahead.

Next Steps for Pharmacies