What Pass-Through Pricing Actually Means (With Numbers)

Once a month, a hospice team manager sits down with the pharmacy invoice for their team and reads it line by line. They are looking for the drug that should not have been billed to the hospice, the fill that went to a patient already discharged, and the quantity that looks wrong. When the lines reconcile, they sign off, and payment goes out. It is careful work, and it catches real errors.

But there is a number the review cannot catch, because it never appears on the page.

The number that isn't on the page

Say a medication cost the pharmacy $4 to dispense. On a spread arrangement, the hospice is billed $10, the pharmacy is paid $4, but the invoice shows only the $10. The $6 in between belongs to the middle party, and the hospice has no way to know it is there. The medication should be covered so the manager signs off. The spread rides along, invisible, on every fill.

That gap is the oldest problem in hospice pharmacy pricing, and pass-through is the answer to it. In a pass-through arrangement, the invoice shows what the pharmacy was actually paid. The $4 is the $4, and nothing hides in a difference, because there is no difference to hide. If that were the whole story, pass-through would be the end of the conversation.

A visible line item is still a meter

It is not the whole story, because a vendor can pass the drug cost through honestly and still be paid in a way that works against you. The spread was a hidden charge. What replaces it is often a visible one: a fee for each claim processed, a fee for each prior authorization, and a fee for each clinical call. Every one of those is a clean line item you can see and add up, and none of them is aligned with what your hospice actually wants.

Take the clinical call. Put a price on it, and the cost of asking for help climbs exactly when a case gets hard and the team needs the most support. At the end of a patient's life, no nurse should be weighing whether a phone call is worth the charge. A fee being visible does not make it aligned. It just makes it easy to add up.

The same logic runs through the rest of the invoice. A vendor paid per claim earns more when there are more claims, so a shorter days supply on a stable patient, a fill every two weeks instead of every month, quietly pays better. A vendor paid per covered drug has a reason to prefer a wider formulary. A vendor paid per prior authorization is not the one who loses when more of them are required. The charges are disclosed, and the incentive still points away from you.

The same month, priced three ways

The numbers below are illustrative, chosen to show the mechanic, not a quote for anyone's program.

Take one patient for one month, and say the medications actually cost the pharmacy $400.

On a spread arrangement, the hospice might be billed $520. The pharmacy is paid $400, the vendor keeps $120, and the invoice shows $520. Move the patient to shorter fills or a pricier drug and the spread grows with it.

On a per-claim pass-through arrangement, the hospice is billed the real $400 for the drugs, plus a fee for each claim. Say the fee is $3 and during the month the hospice ran twelve fills, for $36. Now cut the days supply so the same medications fill every two weeks instead of monthly. The drug cost is still passed through honestly, but the month is twenty-four fills and the fee is $72. Nothing about the patient's care changed. The vendor's revenue doubled.

On a per-patient-day arrangement, the hospice is billed the real $400 for the drugs, plus a flat platform fee for each day the patient is on service. Whether the month ran twelve fills or twenty-four, three prior authorizations or none, four clinical calls or zero, that fee is the same. The vendor is paid for the patient being cared for, not for how much got processed along the way.

Transparency is about incentives, not just numbers

This is where "transparent" pricing quietly divides. Showing the drug cost is real progress and worth insisting on. But a transparent charge on a per-use fee still rewards the vendor for doing more to you, and a number you can see is not the same as a number that is on your side.

The real test of a pricing model is not whether you can see the line items. It is whether the person sending the invoice earns more when your hospice spends more, fills more, and calls more. If the answer is yes, the model is working against you no matter how clean the invoice looks.

How MerlinRx prices

MerlinRx passes the pharmacy's contract rate through with no markup. What the pharmacy is paid is what you see, and what you see is what you pay for the medication. There is no spread, because there is nothing for a spread to hide in.

The platform is paid a flat fee for each patient day, tied to your census rather than your claim count. That single choice is the alignment. MerlinRx earns the same whether a patient's month runs ten claims or a hundred, needs three prior authorizations or none, prompts four clinical calls or forty. There is no version of the month where processing more, filling sooner, or covering wider pays the platform better. The arrangement pays off when the hospice stays, and the hospice stays when the platform is genuinely useful.

This is also why MerlinRx is not a PBM. The hospice runs its own pharmacy benefit and keeps the decisions a PBM would otherwise make on its behalf. MerlinRx is the platform underneath, priced so its interest and the hospice's point the same direction.

What to ask any vendor, including us

The manager signing off on the invoice can catch the drug that should not have been billed. Only the pricing model decides whether the vendor is on the same side of the table while they do it.