The Hidden Costs of a Bad Wholesale Agreement

Pharmacy wholesaler partnerships can result in considerable reductions, but the terms of the deal itself might dictate the amount of cash a pharmacy has available. Analysis of the true expenditures, payment deadlines, and purchase conditions might be a technique to understand why certain pharmacies experience financial challenges even in cases of steady sales.

The big problem is the time between buying the drug and getting reimbursed from insurance for prescriptions. A pharmacist should pay wholesaler invoices before getting money for prescription medications. The pharmacy has to pay salaries and other operating expenditures besides this. This indicates that there will always be a lack of money despite ongoing sales. Also, it is required to consider reimbursement modifications (including DIR costs).

Pricing is another factor that is vital to consider. Wholesaler Acquisition Cost (WAC) is the price published by a pharmaceutical firm as the selling price to the wholesaler or direct purchaser of the medicine. So, for example, if the contract says “WAC less 6%,” it means the price would be 6% below the benchmark price stated in the contract. However, this is an attractive offer, but it does not automatically mean that the pharmacy will acquire the lowest price available. WAC Pricing For Pharmacies should be assessed by considering a comparison between the actual cost of each medicine and various means of purchasing. That is especially true for pricey medications, such as some of the GLP-1 treatments used to treat diabetes and obesity. And if the reimbursement isn’t enough to cover the purchase price and other expenditures, there may be no profit left.

Rebate incentives could make the wholesaler deal look better than it really is. Some of the agreements provide an incentive based upon the number of sales or the purchase of particular products. Such a refund can be advantageous, but the terms linked with the offer will decide its benefit. Purchasing more items to avail of the rebate offer may imply that the money being utilized has to be locked up in medications that take a long time to sell. Blended pricing might have a similar effect of hiding the actual price of pharmaceuticals, as different drug costs are averaged together.

There are several practical ways to optimize the purchase without compromising the day-to-day running of the pharmacy. A strong Pharmacy Drug Purchasing Strategy starts with an analysis of existing wholesaler agreements and, if relevant, looking at the pricing provided by alternative suppliers. Evaluating stock turnover percentages will assist in avoiding overstocking, while negotiating payment conditions might provide some flexibility in processing payments. By comparing the purchase price with the reimbursement rates, pharmacists will be able to detect medications with poor margins and even losses. Such frequent reviews will be important, especially for pharmacies with restricted working capital.

The wholesaler agreement will only be important in how much it helps to optimize a pharmacy’s finances, not how much of a discount it offers on the agreement. The financial side of things includes payment arrangements, medicine pricing, rebates, and purchases. It is necessary to spend time evaluating this. This will help independent pharmacies save needless expenditures, optimize profit, and manage their cash flows well.