Keenan Blog

The goal of the Keenan Blog is to provide a forum where we can come together to discuss issues and cultivate the solutions that will have a meaningful impact on your organization.

Is there a way to accurately track pharmacy costs throughout the supply chain?

Jeff Hall 12/19/2012
Jeff Hall

The incredible pace of pharmaceutical development in the last 50-60 years has certainly been a boon to individual health and welfare. But a complex web of players and processes has emerged, oftentimes at odds with each other.

Pharmacy benefits managers are tasked with navigating this sea of change, including an outdated and dysfunctional system for standardized drug pricing.

Since the 1970s, the de facto approach has been an average wholesale price (AWP) model. But this model has taken hits for not being a true average and a potential for manipulation, which led to fraud investigations and lawsuits. Not exactly a ringing endorsement!

A number of alternatives (at least nine) have been proposed to increase:

  • Transparency
  • Simplicity
  • Comprehensiveness
  • Timeliness
  • Immunity to manipulation

And, of course, any solution must be acceptable to pharmaceutical companies, wholesalers, retail pharmacies and other PBMs, health plan providers and the end consumer. A tall order, but achievable.

Here’s a potential white knight. The Predictive Acquisition Cost (PAC) model uses multi-dimensional, predictive analytics to accurately track costs in a way that’s applicable to all aspects of the supply chain. And it addresses all the criteria mentioned above.

Inputs to the PAC model include:

  • Industry MAC benchmarks
  • Published price lists
  • Existing pricing benchmarks
  • Behavioral metrics
  • Supply/demand measures
  • Survey-based acquisition costs

If you’re involved at any stage in the pharmacy benefits process, you should learn more about this concept. And get behind it, if you feel it addresses the current issues facing the industry.

To learn more about this approach, you can read this white paper from Elsevier / Gold Standard entitled “Drug Price Types and Options for a Future Standard.”

This website explains the model in detail.

Click here for information on Keenan Pharmacy Management programs and resources.