Cost Savings

The PHA program generates significant savings for both the community pharmacy and the hospice agency for
several reasons:

  • The contracted rates are between the hospice agency and the pharmacy and they will pass through directly without any interference from a middleman.
  • This direct relationship allows the pharmacy to be reimbursed at a more reasonable level and the hospice to reduce its cost exposure through lower pricing.
  • The clinical involvement of the local pharmacist will achieve savings through improved drug management.
  • The shared program objectives of the pharmacy and the hospice agency will allow for collaboration and improved savings.

The savings associated with this program are both quantitative and qualitative.  The most immediate and measurable is a more deeply discounted pricing structure.  To quantify this value, the hospice agency provides copies of invoices that incorporate the full NDC number, the claim date and the metric quantity.  From this information, AmerisourceBergen and the pharmacy are able to compare the existing cost and create proposed new pricing to reflect a greater savings opportunity.  

Case Example

This is a real scenario shared to illustrate the price savings achieved through the AmerisourceBergen PHA program.  In this example, the hospice agency and the local pharmacy provider shared claims information over a two week period. 

For the 66 claims submitted during this period, a comparison table was developed.   The retained revenue refers to the difference between what the hospice was billed by the third-party drug manager and what the drug manager reimbursed to the pharmacy. 

According to the original contracted terms, these were the amounts being paid to the third-party drug manager by the hospice agency:

  • Brand Name Drugs: AWP less 13% plus $2.75 dispense fee
  • Generic Drugs: AWP less 28% plus $2.75 dispense fee
Total Drug Manager Billed Pharmacy Reimbursed  
Drugs Claims AWP Dollars Total $
(Ing + Disp)
Total $
(Ing + Disp)
Generics 57 $2,667 $2,071 28% $969 66% $1,192
Brand 9 $781 $680 13% $704 15% $16
Total 66 $3,448 $2,751 15.8% $1,673 30.4% $1,208

If table is cut off scroll sideways.

From this information, AmerisourceBergen was able to determine:

  1. The hospice paid the third-party drug manager $2,751, but the pharmacy was only reimbursed $1,673, resulting in over $1,200 (41.6%) of the total billed amount being retained as revenue by the third-party administrator.
  2. Generic claims represented over 86% of the claims mix, and over 98% of the retained revenues by the third party drug manager (over $1,100).
  3. The third party drug manager’s retained revenue of $1,208 was 72% of what the pharmacy was reimbursed for the drug ingredient cost and dispensing fee.
  4. The third-party drug manger retained the “spread” or $1,208.  This amount was the difference between the amount paid by the hospice agency and the amount reimbursed to the pharmacy.  This amount retained by the third-party drug manager was not transparent or disclosed to the hospice agency. 

The above case reflects quantifiable savings based on invoiced claims, but it does not take into account the additional savings potential associated with the local pharmacist participation in formulary management, medication management and related clinical services also available as part of the AmerisourceBergen PHA program.