Compliant vs. Non-Compliant Does It Pay to be Compliant?

Primary Vendor Compliance, why should you care? Are you leaving profit on the table with Non Compliant Purchasing? 

Compliance with your primary vendor agreement has been a hot topic across the pharmacy community. The industry has mixed opinions about whether or not it pays to be loyal to your full line wholesaler or shop around for the best price up-front. In this blog we will take a look at several factors to consider when you are making decisions on how and where to source your RX inventory.

1. Do you have time to shop outside your primary wholesaler?  How much opportunity costs are associated with workflow allocation to the search?  

When you put employees on the hunt for deals, you have to factor in the time and opportunity costs of paying them.  Does it make sense for them to be taken off other tasks, such as taking calls or looking online for items?  Also, do you trust them to understand the full picture of inventory & purchasing management, including leakage and compliance ratios?

2. To meet minimum shipping from secondaries, do you have  to buy unnecessary items?

How often is there the perfect scenario where you can buy one item and make the shipping requirements for an order?  Do you typically have to  order multiple items to meet shipping minimums and/or avoid freight costs?  Is the second and third item worth the savings on the first if you take into account all the mitigating factors around the cost of goods game?

3. Have you reviewed your Primary Vendor Agreement (PVA) to identify and avoid potential generic rebate cliffs? 

In many cases, missing one PVA metric can cause your rebates to plummet. This sudden cliff will drastically throw off the net cost of your generic program. We have spoken to many independent pharmacy owners in our career and most have a general idea but are not confident in the true net cost. We have found in most instances, it's more profitable to avoid this rebate cliff. While still shopping the secondary market for discounts with the remaining leakage allowed in your PVA.Do you understand what your net price is on items after rebates? Do you look at your purchasing line by line or as an overall number?

4. Can you wait for rebates or do you need savings up front?

Cash flow versus net savings is something all pharmacy owners have to weigh.  Can you wait on the savings of the rebate for 30 or 60 days, or do you want to get a lower price up front?  We have found that most stores are better off from a gross margin perspective if they can wait for the rebates to funnel through.

5. Do you understand how non-compliance affects your brand cost of goods that you typically have to source from Primary?

Brand item availability is typically why you have a primary wholesaler.  They protect their financial interest by adjusting the pricing and concessions on these items based on your loyalty.  Have you run the numbers to understand what non-compliance does to your branded items?

6. Do you understand how non-compliance affects your control substance ordering capabilities from your Primary?

Another common drug classification you typically have to purchase through your primary is your controlled substance drugs.  Their system is set up where they allocate your purchasing based on store volume.  If you are only purchasing a small percentage of your overall drug spend from them, their system adjusts these thresholds down because it thinks you have less prescription volume then you actually have.  Don't expect them to only sell you branded and controlled substance items.  

At Pharmacy Marketplace, we have developed our proprietary reactive AI module, Athena so you can have your cake and eat it too.  We use an advanced algorithm to look at your purchasing history and load your full line price catalog along with some of the top secondary wholesalers into our platform and let her do the work.  With built in purchasing parameters she gives you recommendations on what items you can source at the right time from the secondary market without going overboard and hurting your purchasing incentives.  If you are frustrated with the cost of goods game, call us today and set up a demo.  Also ask us about our Compliance Counseling program.

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