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PHRM 510 > Lecture 10 > Flashcards

Lecture 10 Flashcards

1
Q

Pharmacy benefit managers (PBMs)

A

Prescription drugs are a high administrative cost benefit that requires huge volumes to be cost-effective;

middleman between insurance companies and manufacturers which lowers the cost of drugs for insurares and companies

-causes the rise of pharmacy benefit management companies (PBMs).

  • For the above reason, health plans & MCOs usually “carve out”
    prescription drug benefit to be administered by a separate PBM
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2
Q

PBMs contract with

A

a payer and provide service to a network of
pharmacies

  • have many characteristics of managed care, including a provider network
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3
Q

How many retail prescriptions are processed by a PBM

A

approximately 70%

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4
Q

Participating pharmacy agreement

A

Participating (or network) pharmacies contract to provide specific services for a specified reimbursement

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5
Q

Preferred pharmacies (or providers)

A

A select number of pharmacies are allowed to contract

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6
Q

PBMs may be

A
  • Stand-alone companies

- subsidiaries of insurers or of retail drug stores

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7
Q

PBM clients may be

A 
insurance co
employers
unions
discount card programs
Medicare
Medicaid
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8
Q

The Big Three:

A
  • CVS/Caremark (32% of the market)
  • Cigna Express Scripts (24%)
  • UnitedHealth Optum Rx (21%)
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9
Q

Rx reimbursement (Pharmacy PMT)

A

(Dispensing fee + Ingredient costs) ‒ Patient cost sharing

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10
Q

Dispensing fee

A

A fixed amount paid for every prescription dispensed.
( ~$9-11/Rx commercial insurance but declining….negotiated per contract)
Medicaid = $4.50, Medicare = $2.27)

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11
Q

Ingredient costs

A

Based on an estimate of the Rx cost*

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12
Q

AWP ( Average wholesale price)

A

similar to MSRP on other big ticket items

  • readily available and published everywhere
  • usually a higher price than “real”
  • Nobody really pays this price
  • Lawsuit in 2009- AWP is inflated improperly

AWP refers to the average value at which wholesalers sell drugs to physicians, pharmacies, and other customers. AWP is the generally accepted standard measure for calculating the cost of a particular medication

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13
Q

Wholesale Acquisition Cost (WAC)

A

The most common cost for pharmacy purchasing brand name drugs
• Published by wholesalers
• Not available for all drugs (only if sold to wholesalers)
• Similar to “dealer invoice price” a car dealer pays the manufacturer

an estimate of the manufacturer’s list price for a drug to wholesalers or direct purchasers

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14
Q

Estimated acquisition cost (EAC)

A

Usually based on a percent of the manufacturer’s average wholesale price (AWP), which hopefully is higher than the actual acquisition cost (AAC) paid by the pharmacy

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15
Q

Maximum allowable cost

A

Brands with generics may only be reimbursed at the cost of the generic
Applies to multi-source, generic drugs
• Levels the playing field when there’s a lot of generics available
• Determined by the Payer or the PBM
• Proprietary and not public information
• Represents a limit for multi-source drugs

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16
Q

Earned discount

A

The difference between the AWP and AAC which is the sum of three other discounts:

  1. Volume (how much is bought)
  2. Cash (early payment)
  3. Trade (special deals and promotions)
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17
Q

AAC

A

Actual acquisition cost

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18
Q

Federal Upper Limit (FUL) price

A

Used as the maximum drug cost price to be paid by any Medicaid and/or medicaid program
(plus the small dispensing fee is extra)
• Published by CMS (federal)
• Represents a limit for multi-source drugs
• Calculated retrospectively, not that useful

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19
Q

Gross margin (GM) or gross profit

A

Difference between the Reimbursement and AAC (COGS)

should be sufficient to cover COD plus Net Profit

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20
Q

Your break-even point (BEP)

A

AAC + COD

you dont lose or gain any money

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21
Q

Prescription Payments:

- To stay in business: total reimbursement (plan + patient) should cover:

A
  • AAC (COGS)
  • COD (cost of dispensing / cost of keeping the pharmacy open)
  • Net profit
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22
Q

Rx Payments characteristics

A

Most plans’ total reimbursement for a prescription will not exceed the pharmacy’s usual and customary (U&C) charge – price paid most commonly by private-pay
patients; therefore, most plans reimburse the lower of:

(1) EAC + COD, (2) MAC + COD, or (3) U&C (usual and customary price)

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23
Q

To calculate amount billed to Bearcat PBM

A

(AWP- 15%) + 8
$300 for 100 caps
$3.00 per cap - 15% =2.55

$2.55 *30 caps= $76.50 + $8 = $84.50

24
Q

You’re pharmacy cost for the caps

A

WAC

$240 for 100 caps
$2.40 per cap
$2.40*30 caps= $72.00

Billed to PBM: $84.50
You made $12.50

25
Q

Earned discounts are the sum of which 3 discounts?

A
  1. Volume (how much is bought)
  2. Cash (early payment)
  3. Trade (special deals and promotions)
26
Q

AWP

A

Actual wholesale price

27
Q

Creating Limited (“preferred”) networks

A

• Deeper discounts in return for increased volume.
• Prepare “report cards” for network pharmacies based on performance criteria,
which can be used to compare pharmacies

28
Q

Offering mail-order services

A
  • Run their own or contract out.
  • Take advantage of economies of scale.
  • Incentives for patients to use mail order when possible.
  • Savings: ~27% on brands / ~ 53% on generics
29
Q

Rebates

A

additional revenue from manufacturers to PBMs for placing their drug on formulary or preferred status

30
Q

Claims adjudication

A

Review Rx claims for payment

• Standardized electronic data interchange maintained by National Council for Prescription Drug Programs (NCPDP)

31
Q

Electronic claims submission, eligibility verification, and claims adjudication.
Data include

A
  • Formulary status of drug
  • Quantity or refill limits
  • Copayment requirement
  • Generic substitutions or therapeutic alternatives
  • Information for DUR
32
Q

Formularies

A

list of approved drugs available for plan members

33
Q

3 types of formularies

A
  • Open - all drugs covered
  • Closed - drugs not on formulary are not covered
  • Incented - financial incentives to use preferred drugs
34
Q

Tiered co-payments

A

Lowest co-pay for preferred drugs & generics

Higher co-pays for different levels of nonpreferred drugs

35
Q

Co-payment Tiers

A
  1. Generics
  2. Preferred brands
  3. Non-preferred brands
  4. Specialty or “Lifestyle” drugs
  5. Non-formulary (100% out-of-pocket)*
36
Q
  1. Generics
A

Typically the most affordable and are equal to their brand-name counterparts in quality, performance characteristics, and intended use

37
Q
  1. Preferred brands
A

Proven to be safe, effective, and favorably priced compared to non-preferred brands

38
Q
  1. Non-preferred brands
A

These drugs have either a generic or preferred brand available, therefore, patients cost share will be higher

39
Q
  1. Specialty or “Lifestyle” drugs
A

Proven to be safe, effective, and favorably priced compared to non-preferred specialty drugs

40
Q
  1. Non-formulary (100% out-of-pocket)*
A

These drugs typically have a preferred brand available, therefore, patients cost share will be higher

41
Q

Specialty tier drugs original definition

A

Medications generally prescribed for people with complex or ongoing medical conditions such as MS, hemophilia, hepatitis, and rheumatoid arthritis

These Rxs typically (had) one or more of the following characteristics:
 injected or infused, (but oral specialty medications are becoming more common)
 unique storage or shipment requirements
 additional education and support required from a health care professional including REMS
programs (Risk Evaluation & Mitigation Strategy)
 usually not stocked at retail pharmacies

42
Q

Current CMS definition for specialty drugs

A

Any medication costing more than $670/month

43
Q

Prior authorization (PA) program

A

prescriber must request prior approval from

PBM in order to be covered; usually for non-preferred tier or higher tiers

44
Q

Step-therapy

A

less expensive first-line drugs must be used and shown ineffective before more expensive second-line (third-line, etc.) are covered

45
Q

Therapeutic alternative

A

Pharmacists are authorized to dispense other therapeutically-equivalent drugs
(based on established guidelines) for the one prescribed

46
Q

Therapeutic interchange (or conversion, substitution, or switch) program

A

physician is contacted for approval; patient may be also.

47
Q

DUR

A

Drug Utilization Review

  • Review of physician prescribing, pharmacist dispensing, & patient use of drugs
  • Ensures drugs are used appropriately, safely, and effectively
48
Q

Retrospective DUR

A

is an educational tool to inform providers of how to improve their drug therapy

49
Q

Prospective DUR

A

is done at time of dispensing to determine if the prescription is appropriate.

50
Q

PBM services: Disease Management

A 
Manage patients with chronic illnesses
• Maximize long-term Rx outcomes and cost-effectiveness
• May not always use the least expensive Rx: but saves \$\$$ overall
Example diseases:
• Asthma / COPD
• Diabetes
• CVD
• Depression
51
Q

PBM Controversies

A

 Increase in profits is raising attention
 Paying rebates puts pressure on Pharma to raise their prices
 PBMs may not be sharing their rebates with pharmacies
 Spread pricing
 Lack of transparency
 Two interesting resources available:
 Explainer (commonwealthfund.org)
 PBM Basics (PSSNY.org)

52
Q

Opportunities within PBMs: Students

A

 Internships

 PGY-1 residencies

53
Q

Opportunities within PBMs: Pharmacists- Clinical

A

formulary design(s); P&T committee; manage relations with pharmacies; mailorder Co.; or specialty pharmacies

54
Q

Opportunities within PBMs: Pharmacists- Operations

A

call centers; mail-order processing; DUR

55
Q

Opportunities within PBMs: Pharmacists-Administration/Corporate

A

client relations; account management; rebate management;

network management; specialty contracts; regulatory compliance

PHRM 510 (11 decks)

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