Pharmacy Benefits Manager Exam 3 Lecture From 10/23/20

Question 1

Per claim fees paid by clients to PBMs for services like claims processing. Also used
to denote the fees paid by manufacturers to PBMs for administering formulary rebate contracts

Answer 1

Administrative Fees

Question 2

A published suggested wholesale price for a drug, based on the
average cost of the drug to the pharmacy. AWP is often used by pharmacies to price prescription drugs

Answer 2

Average Wholesale Price (AWP)

Question 3

The administration of drug benefit designs. It includes setting up and
maintaining the drug coverage and exclusions, setting limits on drug coverages, and defining member
cost sharing requirements

Answer 3

Benefit Administration

Question 4

A very rare contract among PBMs. It is used when a PBM agrees to assume
financial risk for a client’s drug spending. Capitation is a set dollar amount, established by analysis of
pharmacy claims data, used to cover the prescription costs for a member, usually set at a per member
per month rate (PMPM)

Answer 4

Capitated Contract

Question 5

The online processing of a prescription drug claim. Most claims are submitted
electronically at the point of service (the retail or mail pharmacy)

Answer 5

Claims Adjudication

Question 6

A MCO, employer, or insurer that contracts with a PBM to administer their drug benefits and
cost control programs.

Answer 6

Client

Question 7

A fixed dollar amount paid for every prescription

Answer 7

Co-pay

Question 8

The fixed percentage members pay of the cost of each prescription

Answer 8

Co-insurance

Question 9

A specific annual dollar amount that a member must pay out-of-pocket for prescription
drugs before the drug benefit program begins

Answer 9

Deductible

Question 10

Programs developed by PBMs to identify and categorize patients
(especially those with chronic conditions) and to direct these patients towards a specific treatment
protocol

Answer 10

Disease Management Programs

Question 11

The most common pricing arrangement PBMs have with their clients. Under
the contract, PBMs are paid for the administrative services they provide, and they do not assume the
risk for the cost of the drugs dispensed

Answer 11

Fee-for-Services Contract

Question 12

An approved list of branded (and generic) drugs developed by the PBM, or the client

Answer 12

Formulary

Question 13

A list of recommended drugs. Under this structure all drugs are reimbursed
irrespective of formulary status. However, a client’s plan design may exclude certain drugs (OTC,
cosmetic, and lifestyle drugs)

Answer 13

Open Formulary

Question 14

An incented formulary applies differential co-pays or other financial
incentives to influence patients to use, pharmacists to dispense, and physicians to write
formulary products

Answer 14

Incented Formulary

Question 15

A closed formulary limits reimbursement to those drugs listed on the
formulary. Non-formulary drugs are reimbursed if the drugs are determined to be medically
necessary, and the member has received prior authorization

Answer 15

Closed Formulary

Question 16

The cost to the pharmacy for dispensed drugs (AWP – discount %)

Answer 16

Ingredient Cost

Question 17

Mail pharmacies dispense a 90-day supply of drugs through the mail; typically used for
chronic conditions. Most pharmacy benefit plans offer a mail pharmacy service as a way to promote cost
savings and improve access

Answer 17

Mail Pharmacy

Question 18

A broad term encompassing a variety of healthcare delivery
systems utilizing group practice and providing an alternative to fee-for-service health plans. The primary
goal of a MCO is to create incentives to use a prepaid and organized healthcare system that serves a
defined population

Answer 18

Managed Care Organization (MCOs)

Question 19

A company that manufacturers branded and/or generic pharmaceuticals

Answer 19

Manufacturer

Question 20

The price basis for generic drugs which is typically 50–60% below
AWP. PBMs can either set the MAC prices themselves, or use the MAC prices set by HCFA for Medicaid
beneficiaries

Answer 20

Maximum Allowable Cost (MAC)

Question 21

Per member per month; in an employer plan includes employees and their covered
dependents

Answer 21

PMPM

Question 22

A company providing administrative and clinical
services through a complex system that includes retail pharmacies, manufacturers, clients, physicians,
and members. These companies administer drug benefits and drug cost control programs for their
clients, and secure substantial discounts from retail pharmacies and drug manufacturers. PBMs establish
and maintain large pharmacy networks with chain and independent pharmacies. Also, PBMs contract
with manufacturers of branded products to receive rebates and administrative fees

Answer 22

Pharmacy Benefit Manager/Management (PBM)

Question 23

Specifies which pharmacies are approved for members, and includes retail, mail,
and in some cases specialty pharmacies

Answer 23

Pharmacy Network

Question 24

A prior approval process that allows prescription drugs to be dispensed to
members only when specific conditions have been met

Answer 24

Prior Authorization

Question 25

A contract between a PBM and a client that provides incentives for both sides
to collaborate and run the pharmacy benefit effectively and to share in the overall cost savings

Answer 25

Shared Savings Contract

Question 26

Typically operated in mail pharmacies to encourage physicians and
patients to switch from the drug prescribed to lower cost, comparable drugs. Substitution requires
physician and typically member permission

Answer 26

Therapeutic Substitution Programs

Question 27

Paid by manufacturers to PBMs for the sale of branded drugs to PBM members

Answer 27

Rebates

Question 28

The price pharmacies charge to cash paying customers for prescription
drugs.

Answer 28

Usual and Customary (U&C)

Question 29

Programs designed to lower drug costs and utilization and to
encourage the use of generics or preferred products. These programs include services such as prior
authorization, drug utilization review (concurrent and retrospective), academic detailing programs, and
patient education

Answer 29

Utilization Management Programs