Compounding Pharmacies Are Seeing Reduced Reimbursements

Margins in compounding pharmacies have seen sharp decreases by some carriers and unfortunately the trend still prevails.

In May 2015 Tricare started the ball rolling. They instructed their PBM ExpressScripts to stop payments and require submission of supporting documents for a re-verification process. Evidence of doctor’s visit, scripts, proof of delivery, and components of the compounded final product are being examined. To add insult to injury, ExpressScripts is reverting to its contract with its pharmacies calling for payment within 18 months. These protracted payments as a quasi punishment for just being in that industry seems cruel to say the least.

What does all of this mean? Carriers are now fully aware that reimbursements have to be examined and the geometrically large margins previously enjoyed by pharmacists will be going away. It also means that the large margins which supported slow payments will also be going away. Cash flow is definitely going to be an issue in very short time.

Wise pharmacists are now engaging in factoring relationships to prepare for or actually mitigate the disruption in the compounding pharmacy sector. Previously these businesses have been using factoring to pay for referral sources that bring compounding transactions to them. Commissions for these sources are due and payable the week following the referral. With the new reimbursement schedules around the corner, both of these issues can be solved with a factoring facility. Xynergy Healthcare Capital has seen an increase in applications coming from compounding pharmacies and has been able to provide the “peace of mind capital” for them. The process of billing every Friday through Thursday and getting paid on the next day makes cash flow predictable and overhead not an issue.

The handwriting is on the wall, prepare for the coming changes. Failing to plan is planning to fail.