Better Insight and Management of Effective Rate Contracts Helps Independent Pharmacies Improve Performance

February 9, 2021 4:50 PM EST

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OVERLAND PARK, Kan.--(BUSINESS WIRE)-- For independent pharmacies already facing the challenges brought by a global pandemic, reimbursement models like Effective Rate Contracts can further threaten their stability when their services are needed most.

“Pharmacies are playing a more important role than ever in their communities. In the world of COVID-19, the need for fair and equitable reimbursement has grown critical,” said Robert Dickey, MBA, CEO for Pharmacy First, a pharmacy services administrative organization (PSAO) serving thousands of independent pharmacies across the United States.

Pharmacy First recently published a white paper that explores the management of Effective Rate Contracts to help independent pharmacies improve overall performance.

Pharmacy Benefit Managers (PBMs) designed effective rate models to ensure clarity and predictability around reimbursements. The effective rate language allows reimbursement adjustments over time to average out to a guaranteed amount. However, the adjudication and payment of claims close to the effective rate are managed inconsistently, so pharmacies see numerous over- and under-reimbursements that lead to financial confusion and risk.

To ensure appropriate adjustments across the board, Pharmacy First created a selective escrow process to capture overpayments. Escrowing pharmacy overpayment provides the ability to offset future true-ups to the net effective rate at a pharmacy level. The PSAO has also created tools enabling member pharmacies to monitor the Effective Rate Balance during the contract term and gain visibility to problem drugs.

“Escrowing is the right thing to do for our member pharmacies that need that safety net,” Dickey said. “We are committed to supporting pharmacies to stay financially and operationally successful as they work through the special challenges of Effective Rate Contracts.”

About Pharmacy First

Serving over 2,300 independent pharmacies in the U.S. and Puerto Rico, Pharmacy First provides services and support to keep its members competitive in an evolving market. Pharmacy First eases the administrative overhead of independent pharmacy operations by assisting with credentialing, third-party contract management and reconciliation, quality assurance, medication adherence services and more. For more information, call 800-460-1575 or visit

Adam Lee

Source: Pharmacy First

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