December 11, 2022
Today, I want to share a little more about a lesser-known actor in your pharmacy claims and transactions (and let’s be honest, there are MANY actors out there now touching pharmacy claims beyond the pharmacist, doctor, patient, and healthcare plan). This actor you’ll never see or touch, but your pharmacy certainly has: it’s called a pharmacy switch.
What are pharmacy switches, what do they do, and who owns them? Let’s break that down!
What is a Pharmacy Switch?
A pharmacy switch, essentially, is software that exists between your pharmacy and your pharmacy benefit manager, or that company that shows up on your employer’s health insurance card for “pharmacy benefits.” The Switch is basically the router or connector/traffic cop that links your pharmacy to your PBM. There are a few numbers on most pharmacy benefits cards that help the switch route the claim — 1. a group number sometimes listed a GRP or group #, 2. a BIN number, or a bank identification number (yes, I believe claims processing for pharmacy claims grew out of bank transfer technology), and a 3. PCN or Processor Control Number.
Your card and these codes help the pharmacy benefit manager find your company’s drug formulary, what your copays are, and whether or not you’re even eligible for your plan in the first place (you and each member on your card has a member ID and person code as well, but that’s not as relevant to the switch discussion). A simple illustration is below (at least to process out to PBMs, more on the route back of claims later). A more complicated one is available here.
Most pharmacy fulfillment software programs (those that pharmacists use to fill prescriptions) partner with a particular switch to process claims near real-time. We love to have our claims real-time, near-instant, and there’s nowhere else in healthcare where we can transmit, and receive back, claims processing in healthcare faster than in the pharmacy. A switch helps makes pharmacy claims software claims processing or adjudication lightning fast and easy. Great, right?
Maybe. It depends.
Who are the Major Pharmacy Switches, and Who Owns Them?
This is a much tougher question to answer, since the switches over the past few years have been acquired, and literally have ‘switched’ owners (pardon the pun.) Here’s to the best my knowledge who the bigger switches are, and who owns them as of December 2022:
- Relay Health — Owned by McKesson, the largest drug wholesaler on the planet, since 2006. Online reports have alleged they own as much as 75% of all switch traffic in pharmacies, as of early 2021. Keep in mind that McKesson also bought CoverMyMeds, an online prior authorization service.
- Change Healthcare — Owned recently by UnitedHealthcare/OPTUM, one of the big 3 largest healthcare insurers, the acquisition was announced in 2020/21 and finalized just recently in October 2022. Same online sources tout that Change controls 25% of all switch traffic in pharmacy as of early 2021.
- Powerline — owned by RedSail Technologies, also owners of a bigger pharmacy fulfillment software program for independent pharmacies, called PioneerRx, and QS/1. I can’t seem to locate online what share of the business this particular switch has at this time. Note as well that pharmacy fulfillment software to switch isn’t necessarily 1:1 either. Most pharmacies have 2 switches — a primary, and a back up just in case the primary goes down for some reason. Furthermore, many software platforms for pharmacy fulfillment also can work with different switch brands or companies as well, meaning that even PioneerRx here could hypothetically integrate with Change or Relay as a switch vs. their own switch, Powerline (and I’m not saying for sure that happens with Pioneer specifically, I’m just citing it as a possible example.)
- RxLinc — owned as of 2022 by Pharmacy Providers of Oklahoma, Inc. (PPOk). Ditto to #3 — can’t find market share data here either.
- DataRx — Appears to be owned by RxSense, which is a claims processor and PBM. No stats found here either.
- eRx Network — appears to go straight to Change Healthcare now — see #2 above.
- FDS — which is now part of Enlivenhealth, which is owned by Omnicell. Omnicell is NOT owned by CVS Health. (I had previously stated that Omnicell was owned by CVS Health. Apparently, that is incorrect — apologies, but it’s good to know someone other than my mom is actually reading these posts. ;)
- OmniSys — which is owned by Xifin, which in turn was acquired by GTCR, a private equity firm.
- Net-Rx — owned by Managed Healthcare Associates, owned by a company called Roper Technologies.
There are probably others. Full disclosure: I don’t know as well if SureScripts (which is the largest traffic cop on the front end of ePrescribing or making sure pharmacy claims reach your pharmacy from your doctor’s electronic health record) also plays in this space…? It’s not super clear to me. (SureScripts BTW is owned by the National Association of Chain Drug Stores (NACDS), National Community Pharmacists Association (NCPA), CVS Health, and Express Scripts, as an aside and interesting conglomerate of players.) But prescription routing could be another entire post on its own…I’ll save explaining that one for another day.
So What? Why Do We Care about Switches?
The bottom line: AKA why we care about switches — for two major reasons: 1. This switch service costs — there’s a charge of anywhere between 5–7 or more cents per claim using this service (not great when you’re trying to keep prescription costs low and that’s per fill, not just every new prescription only, this fee is also on refills) and 2. Whoever controls the switch controls almost the near-final say in a prescription’s cost and coverage and data (technically, I suppose the pharmacy has the final say, but not really if 3rd party insurance is involved). This leads me to closing the loop on the illustration above — or said another way, what happens when the pharmacy’s claim comes back from the PBM and back through the switch? Let’s look below…
What’s Happening on Step 5?
Okay — now we look at steps 4, 5 and 6 — when a claim arrives back at the pharmacy from the PBM. Note that on step 5, whatever the PBM says is final back in step 4 could be altered, potentially. In fact, many switches offer their services to brand manufacturers to override and/or automatically apply eVouchers or coupons to patients, trumping whatever coupon maximizers or coupon accumulators the PBMs have in place before that claim goes back to the pharmacy. This is a service advertised to brand manufacturers. And, note that it’s usually the pharmacy (through the pharmacy fulfillment software) that picks the switch. Sometimes even the pharmacy doesn’t know what’s going on with the switch!
On one hand, this is actually awesome for patients, because brand-manufacturer copay coupon cards are automatically applied, and a lower copay can be enjoyed by a member. It’s also awesome for manufacturers that really want to control the use of copay coupon cards. On the other hand, any plan parameters on copay coupons by PBMs and self-funded employers could be overridden. (Is that good or bad? For whom? Lots of questions here...) Last — and not so awesome here — because I would guess that 99% of the time the actual process is completely opaque to most players in the system — INCLUDING the pharmacist that is even transmitting the claim in the first place.
Not to mention — what’s happening to all of your/our data here...? Obviously, the PBMs like to think they own the data (spoiler alert, technically, that’s the self-funded plan’s data), and are the switches leaking data as well? (See illustration below for possibilities.) If so, to whom? Clearly, they are giving some of the data back to the manufacturers that have purchased their coupon application/eVoucher services, at a minimum — but if nothing else, knowledge is power by data transmitting through the switches, in and out. Check your switch contracts if you’re a pharmacy, BTW — you may be aiding in data leakage and not even be aware of it.
I’ve got more Questions; You Should Too
If you’re a CEO, in HR, a CFO of a self-funded plan, or a pharmacy, a PBM, or even a patient — I’ll bet at this point you’ve got some questions. I certainly have a ton of questions when it comes to this one tiny process of the already big black box of pharmacy claims. Just by being aware of this one tiny step in the pharmacy benefits claims process puts you ahead of most of the population right now. Even putting this article together was hard, because there’s just not that much data out there on the switches — and blink, and one or more of them might be acquired! They like to stay behind the curtain — for obvious reasons.
All I know is that pharmacy used to be one of the most trusted professions in the US. And, we’ve lost ground here, pharmacists, in part because of being completely ignorant of these intermediaries dipping into pharmacy and healthcare claims.
I’m guilty of this too — I’ll be honest — when I was a bench pharmacist, I had NO CLUE who the switches were on claims I was processing as a pharmacist, and what they did or do. But now working in the space for a long time, I wanted to write this post, because we all need to start paying attention to who has our patients’ data, where it goes, and how it may be changed along the process. If we keep ignoring or stop asking questions of actors like these, our profession, and our patients, are potentially doomed.
There’s been a huge push for electronic prescribing and claims processing now for decades in pharmacy. I’m here to ask the hardest question of all: is that a good thing, or is it just driving up costs, leaking data, and making the rich players even richer?
Erin L. Albert is a pharmacist at Mark Cuban Cost Plus Drug Company, PBC. However, opinions here are hers and hers alone.