Pharmacy Contract Negotiation

1. Preparation

• Know your pharmacy’s operating costs, including drug acquisition costs, dispensing fees, staffing resources, and overhead. This information helps in setting realistic expectations for contracting.
• Review existing contracts to identify strengths and weaknesses. Learn from past experiences to improve negotiation strategies. Be sure your agreement clearly states the impacts of the WAC minus discount, including but not limited to:
  • Purchase Volumes
  • Generic to Brand ratios (GCR)
  • Wholesaler source generic percentages
  • Dispensing Ratios
• Research industry standards and benchmarks for reimbursement rates. Understand what other pharmacies are receiving and the common terms in the industry.

2. Define Your Goals

• Determine your goals for the negotiation, such as higher profit margins, better terms, or additional services.
• Identify which aspects of the contract are most important to you and where you have flexibility.

3. Know Your Value

• Highlight the unique benefits your pharmacy offers, such as specialized services, customer loyalty, or advanced technology.
• Provide evidence of how your pharmacy improves patient outcomes, reduces costs through better medication management, or brings a significant patient demographic and market share to the business.

4. Negotiate Reimbursement Rates and/or Profit Margins

• Understand the various reimbursement models, such as fee-for-service or per-unit rates. Negotiate based on what works best for your pharmacy.
• Seek flexibility in the contract, including potential adjustments based on volume or performance metrics.

5. Consider Terms and Conditions

• Negotiate payment terms to ensure timely and predictable cash flow. This may include payment schedules and handling of delayed payments.
• Ensure clear terms regarding your rights and processes. Understand how disputes or discrepancies will be resolved.

6. Include Service Provisions

• Discuss and include provisions for additional services such as patient counseling, medication therapy management, third-party billing, delivery, or compliance monitoring.
• Agree on performance metrics that can be used to evaluate the contract’s success and set benchmarks for adjustments.

7. Review Legal and Compliance Aspects

• Ensure that all contract clauses comply with regulatory requirements and protect your pharmacy’s interests.
• Have a legal expert review the contract to identify any potential legal issues or unfavorable terms.

8. Build Relationships

• Approach negotiations as a partnership rather than a confrontation. Building a positive relationship can lead to more favorable terms.
• Maintain clear and open communication throughout the negotiation process to ensure both parties understand and agree on the terms.

9. Document Everything

• Ensure all agreed-upon terms are documented clearly in the contract. Avoid relying on verbal agreements.
• Keep detailed records of all negotiation discussions, correspondence, and contract revisions.

10. Prepare for Negotiation Tactics

• Be prepared to make concessions on less critical terms in exchange for more favorable reimbursement rates or terms.
• Have alternative proposals ready in case initial requests are rejected. This can help in finding a middle ground.

11. Evaluate and Reassess

• Regularly review and reassess the contract to ensure it continues to meet your needs and adjust as necessary.
• Gather feedback on the contract’s performance and use it to inform future negotiations or renegotiations.

By following these tips, you can approach pharmacy contract negotiations more effectively and secure terms that support the sustainability and growth of your pharmacy.