Differences Between Traditional Pharmacy, Cost-Plus Pharmacy

Kyle McCormick, PharmD, owner of Blueberry Pharmacy, discusses the differences between a traditional pharmacy model and a cost-plus pharmacy model.

Q: To start, what are some of the differences between a traditional pharmacy model and a cost-plus pharmacy?

Kyle McCormick: At its core, the biggest difference is how we price medications, and we don't take insurance. Mainly because, we'll probably get into this a little bit, but these medications that we dispense, generic medications, are very inexpensive. When we think about what we buy insurance for, we buy insurance for high costs, unknown events, generic cholesterol medication that cost less than $3 a month is not high-cost or unpredictable. Since they're not insurable products, we don't take insurance. We like to do things cost plus because we believe the service that we provide is the same regardless of whether or not we're filling metformin, or lisinopril, or tecfidera, or imatinib. It doesn't matter the medication; we're using our same cognitive skills and services to provide to that patient. We should make the same amount on each prescription that we fill.

Q: What patient populations benefit the most from a cost-plus model? How can pharmacists identify these populations?

Kyle McCormick: In the long run, in theory, everybody benefits from the cost-plus model. Most of health care dollars is spent on administrative burden and middlemen. The whole cost-plus model removes the middlemen from that transaction. Everybody benefits in the end, payers, employers, taxpayers, until we get to that world where everything's cost plus, and everybody's benefiting.

We serve everybody. Our patient demographic is everybody except for patients with Medicaid. Honestly, we want to help patients with Medicaid because a lot of them need our help the most. The challenge is that copays are just so low that it's hard to convince somebody to do cost plus if they have a $0, $1 $3 copay because we're cost-plus 10, and so that means that nothing's cost less than $10. $0, $1, $2, $3 versus $10. It's an easy decision to make.

Q: How can a cost-plus drug model help to address social determinants of health?

Kyle McCormick: One of the social determinants of health is, and I’ll probably butcher it, but I know it has something to do with costs and access and affordability. In the current model, that's not at all true, there's little accessibility, there's high-cost burdens for patients. Patients are faced with the decision of paying for their medication or paying for their food.

In our model, we charge fair and transparent prices to everybody. We have patients who go from paying $300 a month for their insurance to getting the same exact drug for just $30. That's insurance, so they're paying a premium. That's their copay. In our model, they don't have any of that, and so that's $270 of savings every single month for those patients that can be redirected to better food choices, better health, other decisions around health, paying off debt, going to school, different things like that.

The model itself by lowering costs and increasing accessibility for medications, impacts many social determinants of health.

Q: How has the staffing crisis affected cost-plus pharmacies? Has the impact been different from traditional pharmacy models?

Kyle McCormick: Because we don't have the burden of interacting with insurance companies, one the staffing requirements a lot lower, so we don't spend 30% of our time troubleshooting insurance issues, we don't spend, how many hours a month, doing audits, we don't spend how many hours a month, shopping around to maximize our savings.

The cost of running a business is a lot lower, which means even fewer employees. That being said, because we don't have all those efficiencies, and we're just dealing directly with patients providing direct patient care. People love the model. I have pharmacists and technicians reaching out to me all the time that want to be hired. I just don't have the revenue to hire them quite yet, but there's no shortage of people that want to work for cost plus.

Q: Anything you would like to add?

Kyle McCormick: Much of our health care pharmacies specific problems can be solved by a cost-plus model, right now, we're being reimbursed pennies on the dollar for prescription drugs. We're solely volume driven, we're only making 20 cents on lisinopril, in order to pay a pharmacist just by filling lisinopril you'd have to fill, 100,000 no more than that, you’d have to fill a million prescriptions of lisinopril just to basically pay the pharmacist salary, right?

That's not healthy. There's no time. Pharmacists literally cannot fill out a million prescriptions. And so, in that model, there's no time for patient care. There's no time because there's no payment mechanism. In our cost-plus model, we set a floor for pricing, we say we're not going to accept below $10 per prescription because that's the value of our time. That's the value of our counseling a patient. That's the value of checking for drug interactions, making sure it's safe and effective for the patient. We're not going below that. That's our value. Once we recognize our value and charge for that, then patients see us as health care providers, they see us as providers of care. We're best able to work at the top of our license at that time.