(See Medicare)

A pass-through payment model passes through to the plan sponsor the rate paid by the PBM to the pharmacy, which will vary among pharmacies. The PBM typically receives an administrative fee for its services, and the plan experiences fluctuations in its costs among pharmacies. Pass-through models can result in higher and less predictable costs for plan sponsors than other payment models .

 

(See Drug Patent and Drug Patent Thicket)

An approach to reduce health care costs and improve quality of life for individuals with chronic conditions by preventing or minimizing the effects of the disease through integrated care. Disease management programs are a form of patient support program often used for specialty medications.

Typically, these arrangements, which are also known as “reverse payment” settlements, are the result of patent infringement litigation settlements. Brand manufacturers strike deals with potential generic drug competitors (e.g., generic drug manufacturers), paying them to keep their products off the market for a specified period.

A group of independent clinicians assembled by or on behalf of PBMs or health plan sponsors to evaluate the available scientific evidence on pharmaceutical treatment options. The basic objectives of a P&T committee are to review drugs for potential inclusion on the PBM’s or plan’s formulary for the full range of disease states, based on safety, efficacy, and other clinical attributes. In most cases clinical reviews occur first and are firewalled from other internal discussions on costs and rebates.

Health plan sponsors typically delegate authorization to the PBM that manages their drug benefits, to audit pharmacies by reviewing prescription claims made for payment through the PBM under the benefit plan. Pharmacy audits, which may be required by state or federal rules or by plan sponsors, allow PBMs to facilitate the ability of patients to receive high-quality, proficient services from network pharmacies. Audit protocols also encourage pharmacies to comply with rules set by state Boards of Pharmacy and help identify evidence of fraud, waste, and abuse (FWA) .

 

Contractually specifies the level of coverage and types of pharmacy services available to health plan sponsor enrollees. A sound pharmacy benefit design balances patient care outcomes, costs, quality, risk management, and provision of services expected by enrollees. The pharmacy benefit options can be integrated, carved out, or purchased by the sponsor on a service-by-service basis.

PBMs are companies that are contracted by health plans, employers, unions, and other plan sponsors to administer prescription drug benefits and negotiate with pharmacies and drug manufacturers to lower costs and improve quality.

PBMs, working on behalf of health plan sponsors, use selective contracting to create pharmacy networks (which are called preferred pharmacy networks under Medicare Part D). The use of pharmacy networks increases PBMs’ bargaining leverage with pharmacies, which helps lower the overall costs of enrollees’ prescriptions.

• Closed Network – An arrangement made by a plan sponsor that restricts prescription coverage to an exclusive list of pharmacies. This arrangement denies coverage and/or payment of prescriptions provided by a pharmacy not included in the exclusive list, with certain limited exceptions. These types of networks help control costs for a plan sponsor.


• In-Network – A licensed pharmacy that is under contract with a plan sponsor to provide negotiated prices and services to patients.


• Limited Distribution Network – A pharmaceutical company establishes a select network of specialty pharmacies authorized to distribute a particular specialty medication. When that medication is limited to certain specialty pharmacies by the manufacturer, it becomes a limited distribution drug (LDD).


• Open Network – Plan sponsors create a broad network open to virtually all pharmacies. Enrollees can use their prescription drug benefits at all network pharmacies for the same copay or cost share. These network offerings typically result in higher costs to the plan sponsor than a preferred network. Any Willing Pharmacy (AWP) policies protect pharmacies and allow a pharmacy to participate in any network if they agree to the participation terms and
  conditions. (see Any Willing Pharmacy)


• Out- of- Network – A licensed pharmacy that is not under contract with a plan sponsor to provide negotiated prices or services to patients


• Preferred Network – Medicare Part D establishes a framework for preferred networks. Plan sponsors create a select group of preferred pharmacies within a broader network of participating drugstores. Preferred pharmacies participate in plan sponsor offerings with better discounts in exchange for higher volume; however, the cost differential for a preferred network pharmacy cannot be so great that it disadvantages pharmacies not participating in a preferred network. Enrollees typically pay lower copays or cost shares at a preferred pharmacy. The use of preferred networks is growing and can lower prescription costs by an estimated 5% compared to open networks while meeting Medicare’s pharmacy access standards nationally. Many Medicare Advantage and Medicare Part D Prescription Drug Plans (PDPs) include preferred network pharmacies. These networks incentivize pharmacies to provide a high quality of care and promote improved health outcomes.

Reimbursement to the pharmacy of the total amount to fill a prescription, which is composed of the drug ingredient cost and professional dispensing fee.

An organization that represents independent pharmacies and provides access to pooled purchasing power for these pharmacies. PSAOs negotiate contracts with third-party payers, negotiate reimbursement rates with PBMs, including payment and audit terms, and provide inventory and administrative functions to assist pharmacy business. The largest PSAOs are owned by drug wholesalers. Physician-Administered Drugs (also see brown bagging and white bagging) – Prescription drugs that are administered by a health care provider to a patient through injection or infusion. These drugs, which are typically administered in a hospital outpatient setting or a provider’s office, often have high list prices.

Prescription drugs that are administered by a health care provider to a patient through injection or infusion. These drugs, which can be administered in a hospital outpatient setting, a provider’s office, an infusion suite, or in a patient’s home, often have high list prices. (also see Brown Bagging and White Bagging)

 

The entity that establishes and subsidizes health coverage and stand-alone drug benefits (if such benefits are carved out of the regular medical benefit), including public and private employers, unions, retiree plans, health insurers, state employees, and government programs such as Medicare and Medicaid and the qualified health plans on the ACA exchanges. Health plan sponsors make active choices about how they design their drug benefits and participant cost sharing.

A POS rebate is when the value of a rebate goes directly to offset an individual patient’s cost sharing for that drug at the pharmacy counter (i.e., “at the point of sale”) instead of being used by the plan sponsor to offset the cost of health care benefits, increase benefit offerings, or to lower premiums for all health plan sponsor enrollees.

 

A drug that is designated as a valuable, cost-effective treatment option under a drug benefit formulary adopted as part of the pharmacy benefit design. Typically, preferred drugs are more affordable to patients and plan sponsors than non-preferred drugs.

 

Most state Medicaid programs maintain a PDL of outpatient prescription drugs, which is a list of drugs that the state encourages to be prescribed over other drugs. States use PDLs as a mechanism to negotiate higher supplemental rebates. A drug not on a PDL may require prior authorization or have a higher copayment.

The fees paid each month by or on behalf of an enrollee to maintain health insurance coverage from a plan sponsor.

The pharmaceutical supply chain is the means through which prescription medicines are delivered to patients. Drugs originate in manufacturing sites; are transferred to wholesale distributors; stocked at retail, mail order, and other types of pharmacies; subject to price negotiations and processed through protocols by plan sponsors, insurers, or PBMs; dispensed by pharmacies; and ultimately delivered to and taken by patients.

Prior authorization is a process where the pharmacy benefit design requires documentation from a prescriber for the prescribed drug before the plan sponsor will agree to cover the drug for a given patient. Plan sponsors use PA to improve clinical safety, decrease inappropriate utilization and waste, and help ensure appropriate use of high-risk and/or high-cost drugs. In the pharmacy benefit, a PA helps ensure the appropriateness of medication prescribed for patients and promotes the most cost-effective therapies. It is also often used to evaluate prescriptions for (i) drugs that are intended for certain age groups or conditions only; (ii) drugs used for both cosmetic or therapeutic reasons, to ensure the drug is being prescribed for therapeutic treatment; (iii) drugs that have potentially harmful side effects, dangerous interactions, or risks for abuse or misuse; (iv) drugs that are not covered under the formulary but are deemed medically necessary by the prescriber; or (v) brand-name drugs that have a more affordable generic or biosimilar equivalent.

 

 

 

 

Product hopping occurs when drug manufacturers make incremental changes to a previously approved product (like changing a pill from a capsule to a tablet). They then switch patients onto the new product, which has its own patent and/or exclusivity protections, by discontinuing or discouraging use of the old product. This approach is used to extend a drug’s duration of time without competition from generics or biosimilars.

A publication by the FDA that contains licensed biological products regulated by FDA’s Center for Drug Evaluation and Research (CDER) and Center for Biologics Evaluation and Research (CBER). The purple book includes reference products, biosimilar, and interchangeable biologic products licensed and approved by the FDA.