Independent pharmacies play a central role in the U.S. prescription drug market, distributing almost one in five drugs sold in the country. But small pharmacies often do not have the resources to handle the administrative burden of filing claims with health plans or purchasing stock from prescription drug wholesalers. Instead, they contract with a Pharmacy Services Administrative Organization (PSAO) to manage those functions. In 2012, the U.S. had a total of 22 PSAOs serving up to 28,343 pharmacies.

A Look at PSAO Operations:

The Government Accountability Office (GAO) recently published a thorough overview of PSAOs, how they work, and the role they play in the U.S. pharma market. A few of the main findings from the report:

  • Pharmacy Services Administrative Organizations contracted with as few as 24 and as many as 5,000 pharmacies, mostly independent pharmacies.
  • Most PSAOs represented or provided other services to fewer than 1,000 pharmacies, clustered in a geographic area.
  • The most common services PSAOs provided were negotiation with health insurance plans or pharmacy benefit managers (PBM), communications, and help-desk services.
  • Almost all of the fees paid for PSAO services are paid by member pharmacies, with PSAOs receiving no administrative fees from other entities such as third-party payers with prescription drug coverage and reimbursement.
  • Most PSAOs were owned by drug wholesalers or pharmacy cooperatives.
  • PSAOs the GAO interviewed earned little profit on those services. Instead, the organizations served to help promote the PSAO owner’s other services, such as drug distribution.
Prescription Drug Market Trends:

Spending on prescription drugs is expected to decrease in coming years, mostly because expiring drug patents will allow consumers to choose cheaper generic drugs. A report from the IMS Institute for Healthcare Informatics recently projected that expiring U.S. drug patents would cut drug spending by $106 billion over the next four years.

The Express Scripts 2012 Drug Trend Report is another good resource for those interested in the U.S. pharmaceutical market. It found that, for the first time in two decades, spending among those with prescription drug benefits fell 1.5 percent for traditional prescription drugs, which includes medicines for high cholesterol and high blood pressure. However, spending on specialty drugs – for conditions such as rheumatoid arthiritis and hepatitis C – increased more than 18 percent in 2012.