PSAO
The Next Transparency Gap: PSAOs, Wholesalers, and Pharmacy Acquisition Costs
Massachusetts policymakers continue to examine how prescription drug dollars move through the health care system and where additional transparency may be needed.
One part of the pharmacy supply chain, however, remains comparatively difficult for employers, union health plans, regulators, and even independent pharmacies themselves to see clearly: the relationship among pharmacy services administrative organizations (PSAOs) and drug wholesalers.
These entities play an important role in pharmacy contracting and purchasing. Yet their ownership structures, financial relationships, fees, discounts, and incentives receive far less public attention than other parts of the prescription-drug system.
A more complete understanding of pharmacy costs requires looking at that relationship.
What Is a PSAO?
Drug mA pharmacy services administrative organization (PSAO) represents independent pharmacies in their dealings with PBMs, health plans, and other third-party payers.
PSAOs may negotiate contracts, communicate reimbursement requirements, reconcile claims, assist with audits and appeals, analyze dispensing data, and provide administrative support.
These organizations provide value by allowing independent pharmacies to pool administrative resources and contracting expertise.
Why Drug Wholesalers Are Part of the Discussion
The role of PSAOs cannot be fully understood without examining prescription-drug wholesalers.
Wholesalers establish purchasing terms and invoice prices that help determine pharmacy acquisition costs, while affiliated PSAOs may represent those same pharmacies in reimbursement negotiations.
Many of the nation's largest PSAOs are affiliated with major drug wholesalers, creating an important transparency question regarding ownership, incentives, purchasing arrangements, and financial relationships.
What Does Pharmacy Acquisition Cost Really Mean?
IMany policy proposals rely on pharmacy acquisition cost or NADAC reimbursement benchmarks.
Invoice prices may not always reflect every discount, credit, purchasing incentive, or concession associated with a pharmacy's wholesaler relationship.
Any reimbursement policy built on acquisition cost should rely on information that is transparent, verifiable, and consistently calculated.
A Consistent Approach to Transparency
Massachusetts has already established significant reporting and oversight requirements for PBMs, and those reforms are now being implemented.
Rather than repeatedly revisiting one participant in the supply chain, policymakers should apply the same commitment to transparency across other entities that influence pharmacy purchasing and reimbursement.
PSAOs and wholesalers are logical next steps in creating a more complete understanding of prescription-drug costs.
What Balanced Transparency Could Look Like
• Registration or licensure of PSAOs
• Disclosure of ownership affiliations with wholesalers
• Disclosure of PSAO fees and services
• State tracking of NADAC participation
• Review of exclusive wholesaler purchasing arrangements
Conclusion
Independent pharmacies, PSAOs, wholesalers, PBMs, manufacturers, and health plans all play important roles in the prescription-drug supply chain. Consistent transparency across each participant will provide policymakers with a more complete understanding of how prescription-drug dollars move through the system and where meaningful reforms can improve affordability.