(See Home Delivery)

MCO is a general term used to describe entities that manage the cost and utilization of covered services and products to optimize quality patient care through efficient use of limited resources. (also see Medicaid MCO)

Fees paid by manufacturers to PBMs (or their contracted Rebate Aggregators) for administrative services rendered in connection with aggregating, allocating, collecting, and invoicing claims for rebates.

Beginning in 2025, the IRA eliminates the coverage gap benefit phase and replaces it with manufacturer discounts in the initial and catastrophic coverage phases.

Exclusivity provides a fixed period following drug approval during which the originator can market its drug without direct competition from other manufacturers of duplicate or reformulated products. Exclusivity periods can vary and are dependent on a multitude of factors. Exclusivity is designed to promote a balance between new drug innovation and generic drug competition. Below are each kind of drugs exclusivities and their time frame (not including traditional extensions):

• Biologics: 12 years


• Small Molecule: 9 years


• Orphan Drugs: 7 years (drugs developed to treat certain rare medical conditions)


• New Drug Application: 5 years


• New Indication: 3 years


• Pediatrics: 6 months


• First Generics: 6 months

A MAC list specifies the maximum amount that a PBM will reimburse a pharmacy for a particular generic drug or brand drug with marketed generic equivalents. PBMs set and regularly update MAC lists at a level that reflects the average acquisition cost of an efficient pharmacy. MAC lists encourage pharmacies to purchase drugs at the lowest possible cost, driving competition among wholesalers and drug manufacturers.

A shared, state-federal health insurance program of public assistance to eligible persons, regardless of age, whose income resources are insufficient to pay for health care. Most recipients are low-income women and children, but 70% of the funds pay for nursing home and other long-term care services for elderly and disabled people. Funded through both state and federal funds, each state administers its own Medicaid program, with some flexibility in benefits provided and according to federal requirements. While pharmacy coverage is an optional state benefit under federal Medicaid law, all states have opted to provide outpatient prescription drug coverage to virtually all their Medicaid covered recipients. Medicaid coverage may be through fee-for-service or through managed care (see Medicaid MCO).

Medicaid MCO is a non-government health care plan sponsor that contracts with a state Medicaid agency to manage the health care of the Medicaid population. The pharmacy benefit may be provided by the MCO through a PBM, or it may be a stand-alone benefit.

The Affordable Care Act requires health insurance issuers to submit data on the proportion of premium revenues spent on clinical services and quality improvement, also known as the Medical Loss Ratio (MLR). Issuers must incorporate (into this data) information provided by their contracted PBMs regarding the provision of the drug benefits covered under ACA. Incurred claims for drug costs are included in the MLR, net of rebates. It also requires issuers to issue rebates to enrollees if this percentage does not meet minimum standards. The Affordable Care Act requires insurance companies to spend at least 80% or 85% of premium dollars on medical care, with the rate review provisions imposing tighter limits on health insurance rate increases. If an issuer fails to meet the applicable MLR standard in any given year, as of 2012, the issuer must provide a rebate to its customers.nt on clinical services and quality improvement, also known as the Medical Loss Ratio (MLR). Issuers must incorporate (into this data) information provided by their contracted PBMs regarding the provision of the drug benefits covered under ACA. Incurred claims for drug costs are included in the MLR, net of rebates. It also requires issuers to issue rebates to enrollees if this percentage does not meet minimum standards. The Affordable Care Act requires insurance companies to spend at least 80% or 85% of premium dollars on medical care, with the rate review provisions imposing tighter limits on health insurance rate increases. If an issuer fails to meet the applicable MLR standard in any given year, as of 2012, the issuer must provide a rebate to its customers.

A federal program operated by the CMS that provides health insurance benefits primarily to persons over 65 years of age and adults under 65 years of age with permanent disabilities (as well as certain other persons eligible for Social Security benefits). Different “parts” of Medicare cover different health care goods and services:

• Part A: Pays for inpatient hospital, skilled nursing facility (SNF), and home health care.


• Part B: Pays for physicians’ professional services, some outpatient services, preventive services, infusions and durable medical equipment. Part B coverage is optional with no outof- pocket maximum.


• Part C (also known as Medicare Advantage or MA): Pays for Part A and B benefits through private health plan sponsors, certain part D components, and some benefit coverage not provided under traditional Medicare Parts A and B, like vision and dental.


• Part D: Pays for outpatient prescription drugs through private plan sponsors. In effect since 2006, Part D benefits are provided through plan sponsors approved by the federal government. These plans receive premiums from both Part D enrollees, as well as the federal government. States are federally preempted from regulating Part D plans, except in specified, narrow instances (e.g. plan solvency).


• Medicare Advantage with Prescription Drugs (MA-PD): Enrollees receive all Medicare coverage from one entity.


• Prescription Drug Plan (PDP): Medicare FFS beneficiaries may enroll in a stand-alone PDP separately.

See Medicare

See IRA

The original Medicare Part A and Part B program, sometimes called traditional Medicare, in which the federal government pays physicians, hospitals, and other health care entities for each service provided based on established fees, most of which are updated annually through regulations.

See IRA

A system run by CMS that rates the quality of MA-PDs and stand-alone PDPs using a scale of 1 (lowest) to 5 (highest). The quality ratings, which beneficiaries are encouraged to use to compare Part C and Part D options available to them, are based on factors including clinical performance, patient experience, enrollee complaints, and customer services. Star ratings are used by CMS for a range of regulatory and payment incentives and disincentives.

A distinct set of services that a Part D sponsor must establish in a program to ensure optimum therapeutic outcomes for targeted enrollees, typically those with multiple chronic conditions, through improved medication use.

A multi-sourced brand drug is a brand-name drug that is marketed or sold by two or more manufacturers or labelers, is no longer protected under patent exclusivity, and has a therapeutically equivalent generic available.