Pharmacy Contracting & Reimbursement

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PBMs contract with pharmacies on behalf of health plans and employers to serve patients by building networks of preferred pharmacies. As part of the negotiations to become a preferred network provider, pharmacies and PBMs negotiate contract types, payment rates for medications, and the responsibilities of both parties. Pharmacies accept these terms in order to participate in high-quality networks, engage in value-based initiatives, and achieve an increased market share.

Payments for generic drugs are generally based on Maximum Allowable Costs (MAC) which specifies the most that will be reimbursed for equivalent generic drugs based on the average acquisition cost of a well-run pharmacy. A MAC list is a common cost management tool that is developed from a proprietary survey of wholesale prices existing in the marketplace, taking into account market share, existing inventory, expected inventories, reasonable profits margins, and other factors. The federal government and many state Medicaid programs use MAC lists for reimbursement purposes.

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