Prescription Drug Plans Flashcards
Describe the common elements of a prescription drug plan.
Among the common elements of today’s prescription plans are:
A. Member eligibility cards
B. Online claims adjudication
C. Tiered co-pays or deductibles and coinsurance
D. Pharmacy networks providing discounts for branded medications
E. Maximum allowable cost (MAC) pricing for generics
F. Mail service
G. Formularies and/or preferred drug lists
H. Prior authorizations for certain high-cost medications
I. Therapeutic interchange or switching
What design and managing options are available to employers for a pharmacy benefit plan?
When designing and managing a pharmacy benefit plan, employers have several options. Employers and other payers can (1) manage the benefit and adjudicate claims internally; (2) outsource the benefit management to a health plan, PBM, or TPA; or (3) contract directly with pharmacies and adjudicate claims internally.
In general, here’s covering fewer than 15,000 members usually do not retain the management of the pharmacy benefit in house, although some large employers do so in the belief that they can negotiate better terms with pharmacies and pharmaceutical manufacturers than can PBMs.
What is AWP in the supply chain of pharmaceutical drugs?
AWP: average wholesale price - is the price assigned by the drug manufacturer and used as a reference price for all discounts paid to pharmacies and PBM’s. The AWP is used as a reference for pricing guarantees in public and private contracts.
Note: the AWP pricing benchmark has been the subject of much criticism and a 2009 court ruling resulted in, among other changes, the two largest publishers of AWP announcing that they were going to discontinue the publication of AWP in 2011. Since then, they have reversed their decision.
What is WAC in the supply chain of pharmaceutical drugs?
WAC: wholesale acquisition cost (or average manufacturer price) is the price at which wholesalers by pharmaceuticals from manufacturers.
WAC pricing contracts were expected to replace AWP-based contracts; however, recent industry actions suggest otherwise, at least in the short term.
What is MAC in the supply chain of pharmaceutical drugs?
MAC: maximum allowable cost of a generic medication places a ceiling on the reimbursement for generic. The genesis of the MAC concept is the federal Medicaid program. The centers for Medicare and Medicaid services (CMS) publishes a federal upper limit price for all generic medications paid by the Medicare and Medicaid programs.
PBM’s in TPAs developed their own MAC lists to cover all generic medications. Since generics are made by many manufacturers, several options are used for pricing the MAC. It may be the average cost of all manufacturers’ AWPs, the lowest AWP, or a formula for arriving at an aggregate AWP discount for the entire MAC list. Most plans offer payers a MAC list that will deliver a 50% or more discount off the AWP.
What happens when an employee presents his or her prescription drug card to a pharmacy that is in network?
A prescription drug card program provides its participants with prescription medications from a participating pharmacy at a pre-negotiated discount rate. That covered employee presents his or her prescription to the participating pharmacy. The pharmacist uses an online computer network to get answers to a number of questions, such as whether the drug is covered by the plan, whether the individual is eligible for the medication and whether any limitations are associated with the medication before filling the prescription. The employee typically pays a fixed copayment, and the payer is billed at a pre-negotiated discount rate.
NOTE: under most prescription drug plans, employees are required to share in the cost of their prescription by paying a copayment or coinsurance, and/or by satisfying a deductible. A copayment (co-pay) is a predetermined amount that’s paid when the prescription is filled. Coinsurance is a percentage of the cover charges that the employee pays for his or her prescriptions.
Today, prescription drugs represent 10 to 25% of employers overall health care costs. What factors have been cited as contributing to the dramatic increases in prescription drug costs?
The overwhelming majority of increase in expenditures on prescription drugs is attributable to the increased volume, mix and availability of products, as well as cost increases passed on by the pharmaceutical industry. According to one report, recently drug price inflation for branded products was the single most important factor driving up cost per unit. Direct to consumer advertising has also increased and the demand for drugs. In addition, demographics are driving up prescription medication costs as the population ages. Another contributing factor is that more and more new drug therapies are targeting the “young old” in an effort to prevent certain diseases from progressing. In some cases, prescription drugs are a substitute for other forms of healthcare.
Of note is that biotechnology drug spending is expected to account for about half of the future growth in drug prices.
What are some examples of medications excluded under prescription drug plan?
Come and plan exclusions are medications used for smoking cessation, hair loss, obesity and has medic conditions. (Drugs for investigational use, drugs covered under workers’ compensation programs and immunizing agents are also excluded).
Contraceptive prescription drugs are a special class of drugs that have often been giving separate consideration. Insured plans may have a rider that allows a plan sponsor to opt for coverage of contraceptives. Multiple court rulings have required plans to cover contraceptives, even in plans for religious organizations, but this trend is starting to be reversed.
Another special class of drugs is so called lifestyle drugs - the term applied to prescription products that do not necessarily cure illness that can be used to improve daily life by boosting psychological attitudes, energy levels, sexual performance and body image. These drugs are typically excluded from employer-sponsored prescription drug plans.
Over-the-counter (OTC) medications also are a common exclusion. Very few plans cover OTC medications. A few plans cover some OTC medications, such as insulin, needles and syringes, prenatal vitamins, and diabetic devices and test strips.
Finally, when biotechnology medications (drugs made from living cells that treat diseases from cancer to anemia to psoriasis) must be administered by a healthcare professional, they are usually covered under the medical benefit. However, some plans are placing these drugs under the pharmacy benefit for the purpose of applying managed-care tools since this placement allows for more discounted pricing, formulary management, edits and position profiling for managing the use of these medications.
NOTE: Prescription drug plan benefits typically include: (1) Federal legend drugs, (2) State restricted drugs (in some states, federal nonlegend drugs can only be dispensed with a physician’s prescription), (3) compound items which contain a federal legend drug or state restricted drug and (4) injectable insulin. Quantity limitations are often the greater of a 30- or 34-day supply or 100 units. The definition of federal legend drugs is any medicinal substance which bears the legend “Caution: Federal law prohibits dispensing without a prescription.”
Need to know-review answer.
In a three-tier prescription drug plan, the lowest tier is for generics, the next higher tier is for preferred brands, and the highest tier is for nonpreferred or nonformulary brands.
Explain the mechanics of a prior authorization program.
A prior authorization (PA) program restricts coverage under the plan for certain drugs based on the patient’s conditions and maximizes the outcome of the medication. Under this program, the physician must call into the entity that is administering the PA program (typically the PBM or health plan). The physician answers questions about the patient’s condition and, based on the information, the drug will either be covered under the plan or not. Many drugs that are subject to PA programs have monthly cost that range from $250 to $2000 a month. Some drugs also have quantity limits in addition to a PA requirement.
Explain the mechanics of a quantity limits provision in a drug plan.
Quantity limits (QL’s) are predefine maximal quantities for specific medications. QLs restrict the number of dosage units (e.g., tablets or capsules that can be dispensed for a 30-, 60-, or 90-day supply of a prescription. Originally established to ensure that certain medications could not be abused or overused, QLs may help in improving compliance with medication therapy. Instead of taking a lower strength of a drug more frequently, QLs prompt patients to obtain and take higher doses less frequently.
Provide a number of reasons for offering carved out prescription drug plans.
A. Under an indemnity plan, there are typically no discounts for prescription drug coverage. Plan sponsors may pay as much as 10% above the AWP rather than 15% below it.
B. Medical claims Processors often do not require detailed receipts for prescription drugs and therefore cannot review the prescriptions for coverage as effectively as is done with the PBM’s online claims processing systems.
C. Because detailed information is not entered into the medical claims processing systems, limited data are available in report format for reviewing drug trends.
D. Rebates and other cost-saving programs, which are available in prescription benefit plans, are not available through medical claims processors.
Need to know-review answer.
Some employers that believe it is more cost-effective to manage the entire medical benefit, may wish to avoid a freestanding drug plan in favor of covering medication under a make major medical or comprehensive health plan. The employers thinking is that carving the pharmacy benefit out of the major medical benefit may lead to micromanagement of the pharmacy portion of The plan, leading to losses for the medical portion. For example excluding certain medications could lead to increased emergency medical visits for physician encounters.
What factors influence the cost of prescription drug benefits?
The cost of the prescription benefit depends on a variety of factors:
First, the demographics (age and gender) of the population determine the disease mix that is being treated.
Second, benefits, co-pays and formulary design influence what is covered in the plan.
Third, drug cost and the mix of branded products covered by the benefit drive the cost of drugs. Drug mix is a factor of the preferred drug list, or the restrictiveness of the formulary. Rebates may migrate some branded drug cost, particularly if 100% of the rebates are being returned to the plan. Preferred drugs may actually cost more on a monthly basis in terms of the cost of the discounted ingredient cost. But, after rebates, the “net” costs of the preferred drugs should always been less than those of the nonpreferred drugs within a therapeutic category unless the agent (a particular drug) is clinically superior.
Fourth, the utilization (number) of prescriptions used by the members is the multiplier of drug cost.
Fifth, the cost charged by the PBM and the PBM’s ability to gain a profit from retail and mail-order discounts, rebates and other programs should provide offsetting discounts to the cost of the program. PBM’s can increase costs, however, if all earned fees and discounts are not returned to the plan sponsor.
Sixth, other factors influencing the cost of a prescription drug plan are fraud (by pharmacies, patients, or physicians) and prescription misuse.
Seventh, the ability of the plan to manage costs has a definite impact on the cost of the benefit. Tightly managed plans always yield lower costs on a patient-by-patient basis than nonmanaged plans do.
What are the advantages of a mail service program (MSP) which typically allows a more generous quantity amount to be filled, say a 90-day supply, compared with a 30-to-34-day supply in a retail sale?
A mail service component in a prescription drug plan allows patients to obtain prescription drugs by mail. Mail service prescriptions typically are used for chronic conditions that require maintenance medications for long periods of time, such as high blood pressure, asthma, or diabetes.
One advantage of MSP’s is that they save patients time and money and are popular additions to the benefit design. Mail service typically can save as much as 10% of the cost of traditionally delivered prescription drugs. Also, MSP’s offer a lower cost of dispensing and allow quality control through automation that is uncommon in retail pharmacy.
Although MSP’s are typically underused because enrollees are not familiar with a plans mail service benefit or are not sure how to access the service, studies indicate that once enrollees are introduced to the convenience, simplicity and safety of an MSP program, perceptions change. Most enrollees then express a high level of satisfaction with the plan. In addition, one industry association cites numerous studies that conclude that managed-care MSPs reduce overall prescription costs while maintaining and even improving quality.
NOTE: Among the disadvantages of MSP’s are the possibility of waste if individuals obtain excessive dosage sizes prior to a change in their treatment regimens and the possibility of an employee stocking up on prescriptions prior to employment termination.
List come and techniques plan sponsors use to control pharmacy costs.
A. Review the design of the pharmacy benefit and how it fits into the overall medical program. With flat dollar copayments that may not have increased in several years, many plans are subsidizing the cost of the pharmacy benefit by a substantial amount.
B. Analyze experience to identify areas needing better management. Typically, also and depression therapy are the two most frequently dispensed medications. Ensuring that a program is developed to help employees use those drugs properly controls costs.
C. Use the following pharmacy management tools and techniques:
(i) reduce the pharmacy network to the smallest size without compromising access; in addition, offer pharmacy incentive programs aimed at additional reimbursement for increases and generic substitution and formulary compliance to decrease cost trends.
(ii) Offer mail service or 90-day retail point-of-service prescription as a convenient option to members. Rather than making mail service prescription a requirement, make the copayment per day’s supply equal in both retail pharmacies and mail order pharmacies.
(iii) Adopt a plan design that encourages generic drug substitution where patients have to pay the difference between the cost of brand medication and the generic drug if the patient for the position requires a brand.
(iv) use it formulary that is designed to promote cost-effective and clinical therapeutic drugs coupled with a rebate program that passes on 100% of the rebates to the plan sponsor.
(v) . Practice utilization management that targets high cost users and intervenes with physicians and patients to ensure quality outcomes.
(vi) . Offer physician profiling that highlights high-cost physicians with low acuity patients coupled with an incentive program to dispense appropriate medications.
(vii) . Utilize health management programs designed to educate patients about alternatives to high-class therapies.
(viii) . Communicate cost trends to plan members to help them become better consumers.
D. Anticipate the financial impact of new drugs and therapies and set policies and procedures for the new drugs before they are released.
What are the three types of drug utilization review (DUR) programs available?
Concurrent, retrospective and Prospective.
Concurrent DUR occurs at the point of service (the pharmacy) and flags potential overuse based on clinical monitoring criteria or “edits” that have been programmed into the PBM’s systems. These edits (referred to as “hard edits” because the claim will not be adjudicated until they are cleared) are for too-soon refills, duplicate claims, drugs requiring prior authorization, or quantity limits.
In Retrospective DUR programs (pharmacy case management), pharmacists or nurses review patient profiles to determine if patients are complying with their drug therapy or to suggest alternative therapies to their physicians that may be better or more cost-effective. PBM’s have been reluctant to offer these types of programs because PBM’s are paid to fill rather than not fill prescriptions by plan sponsors (and drug manufacturers). Many PBMs refer to their therapeutic switching programs as retrospective DUR. However, therapeutic switching programs are aimed more at substituting one drug for another rather than determining if the therapy is appropriate.
Prospective DUR refers to educating physicians and patients about drugs or drug therapies.
What is a formulary?
A formulary is a list of drugs preferred by a health plan or PBM. A formulary is designed by a process of evaluation and analysis that is usually under the auspices of the pharmacy and therapeutics (P&T) committee. A P&T committee is composed of physicians, pharmacists and nurses who may be complemented by pharmacoeconomists, ethicists, the lay public and plan administration. The P&T Committee has the responsibility for evaluating all available evidence to choose medications to treat the conditions indigenous in the insured population.
If the P&T Committee determines that drugs within a therapeutic class are equally effective, the formulary select struggles within the category that are most cost-effective based on a combination of AWP and rebates that manufacturers are willing to give to the PBM or plan. Although generic drugs may be listed on the formulary as preferred, formulary development typically centers on brand products. Some PBM’s contract with generic manufacturers for rebates, although generally this practice is uncommon. It is critical for plan sponsors to ensure that they receive all earned rebates weather for brand or generic drugs. When plan sponsors purchase formularies developed by health plans, PBM’s, or TPAs, it is important for them to know who the representatives are on a PBM’s formulary.
The use of formularies is growing because formularies, particularly preferred formularies, are very effective at moving patients to lower-cost drugs and maximizing rebate potentials. One of the primary drawbacks to formularies, however, is the constant communication to physicians and patients that is necessary regarding the current list of preferred products. When a PBM changes it’s formulary and does not communicate those changes to members, members may become dissatisfied because their copayment may differ from what they had expected.
What is an open formulary?
Open formularies allow plan enrollees any covered prescription drug prescribed for them. Since most physicians are primarily familiar with only the handful of prescription medications they use most often, open formularies - which typically include hundreds of possible medications and several options per category - give physicians and patients the chance to make a better informed choices.
In an open formulary environment, the list of preferred drugs is distributed to patients and physicians for informational purposes only.
What is a preferred formulary?
Preferred formularies have become quite popular in the last several years. They encourage patients to use the preferred or formulary drugs in return for reduced copayment.
What is a closed formulary?
Closed formularies often meet with resistance from plan enrollees. They simply mean that the plan will not cover the nonformulary drug. Closed formularies are typically found in hospital settings and tightly managed HMO programs - employers normally do not use this type of formulary.
What nonformulary cost management tools are available to contain prescription drug cost?
In addition to formularies, there are other tools available to contain prescription drug cost. Other cost management tools include:
- Network management, better discounts with retail and mail order programs, and monitoring performance to avoid fraud and abuse.
- Designing plans that meet the objectives of the overall benefit program.
- Quantity limits and maximum dollar limits on all prescriptions.
- Step therapy programs to ensure that prescribing complies with national guidelines for treatment of particular diseases.
- Prospective review of new drugs in early policy determination.
- Clinical management through a thorough pharmacy case management program.
- Other DUR programs such as concurrent or propective programs.
- Quality data management that provides early intervention reporting.
Why are disease state management (DSM) programs developed?
Disease state management programs are developed to measure and manage all healthcare outcomes and costs associated with a particular disease across the entire continuum of healthcare delivery.
What are the two main types of DSM programs?
Two types of DSM programs are offered: the medical model in the therapy-directed model.
The medical model consists of call centers staffed by nurses and their assistance to triage patients to appropriate levels of care. These centers follow up on patients with select diseases to ensure that the patients are scheduling physician appointments, receiving appropriate tests and procedures, and understand the importance of taking their medications.
The therapy-directed model is administered by PBM’s, pharmaceutical manufacturers, health plans and disease management companies. These entities foster improved compliance with medication therapy, patient education and testing for outcomes of care.
