A Pharmacy Services Administrative Organization (PSAO) interacts with healthcare insurers and pharmacy benefit managers (PBMs) on behalf of independent community pharmacies. Because community pharmacies comprise an approximately 35 percent share of the overall retail pharmacy market in the U.S., the PSAO serves a critical function to help sustain these businesses.
A majority of the nearly 22,000 independent community pharmacies in the U.S. voluntarily outsource some administrative services to a PSAO, providing these small business owners and healthcare providers support to allow them to spend more time at the pharmacy counter and, ultimately, on patient care.
The core function of a PSAO is to contract with a group of independent pharmacies, generally for an affordable monthly fee (around $200, the sole source of revenue for the PSAO). Doing so amplifies the voices of independent pharmacies with third-party payers and PBMs and creates administrative efficiencies, allowing these small businesses to better use their limited resources.
Empowering and Amplifying the Voice of Independent Pharmacy
PSAOs are one of the many ways distributors support their pharmacy customers. Recognizing independent pharmacies are at a disadvantage when negotiating against pharmacy benefit managers, some wholesale distributors developed PSAO services as part of their value-added services.
When a distributor offers PSAO services, the PSAO is a separate legal entity that operates independently with the necessary safeguards/guardrails in place that keep PSAO services from impacting the distribution side (and vice versa). However, it is important to note that not all PSAOs are connected to wholesale distributors, and not all wholesale distributors offer PSAO services.
What PSAOs Do Not Do
Critical to the understanding of PSAO services, is knowing that contracting with a PSAO is voluntary. PSAO services do not influence drug pricing or impact what a patient pays for their medication. PSAOs also are not responsible for plan and formulary designs or for determining provider reimbursements. Partnering with a PSAO is the choice an independent pharmacy owner makes based on administrative needs and on what will best serve them as a small business owner. Because PSAOs are administratively focused service providers, they should not be held to the same reporting or licensure standards as other healthcare supply chain entities.
Local independent pharmacists are some of the most accessible and trusted healthcare professionals in their communities. Supporting, managing and growing these businesses involves multiple full-time jobs, and PSAOs — just one of the many ways distributors support their customers — provide pharmacists the value-added services to help them make a difference in the health of their customers and neighbors.