For pharmacies, “purchasing” means much more than buying products. It means understanding the ins and outs of compliance: procurement that accounts for their contracts with a primary vendor, group purchasing organization (GPO) and/or buying group. It’s never as simple as finding the lowest price.
The most successful pharmacies do more than just comply. Calvin Hunsicker, founder and chief product officer at SureCost, explains that “understanding what’s included and excluded in your agreements is vital for optimizing purchasing behavior within your market. Maximizing vendor relationships relies on aligning your needs with the right agreements, ensuring you surpass their potential impact.”
In this blog post, we’ll show you three ways to harness smarter purchasing to maximize contract adherence. First, let’s discuss some of the familiar and less-than-obvious impacts of compliance.
What’s at Stake With Contracts
Contractual agreements outline pricing structures, product sourcing, terms of engagement and other purchasing requirements. These may include:
• Minimum purchase volume for tiered pricing (such as total spend or minimum spend)
• Compliance rate for source items (like total generics purchased or as a percentage of your pharmacy’s total spend)
• Products included or excluded from cost plus or generic compliance ratio (GCR)
• Source products versus pharmacy benefits manager (PBM) items
• Purchase volume needed to unlock additional discounts
• Timeline for pharmacies to report discrepancies in pricing or product availability
• Penalties for non-compliance
Failure to comply with the contract terms affects your pharmacy’s margins. You may miss out on financial incentives (that you may have negotiated in the first place). You may also see reduced margins on PBM reimbursements. If you’re not purchasing enough, that means reduced purchasing power and higher procurement costs. In some cases, contracts tie generic compliance to the cost of goods sold (COGS) for brands, which means additional financial impact. Read more >
