1. Third Party Payers Direct Payment is when the patient pays for pharmacy services and drug directly out of pocket; very common before 1970’s Today most pharmacy reimbursement comes from Third Party Payers Patients hold insurance for medical expenses As a part of the insured’s coverage the third party payer contracts with a PBM (Pharmacy Benefits Manager) to provide pharmacy coverage Express Scripts is an example

2. Medicare Government insurance for those over 65 Patients young that 65 with certain disabilities Any age patient with end stage renal disease Part A=hospital (Hospital, ER, skilled nursing care, hospice, home health care) Part B= MD office and physical therapy (also covers DMEPOS durable medical equipment, prosthetics, orthotics and supplies). For this patient pay a premium deducted from the social security check Part C= Medicare advantage Offered by private companies who work with the government Part A and Part B is required Offers extra coverage like dental, vision Larger Premiums but more coverage Part D= Rx drug coverage

3. Part D was signed into law in 2003 Provide Rx coverage to seniors Premium depends on plan Most drug classes are covered except, most notably, the BDZ’s All plans have coverage up to about $2,700/year after which the patient covers all the cost of the drug After the patients reaches about $4,500 out of pocket, Plan D kicks in as catastrophic Rx coverage where it pays 100% of the cost This gap in coverage is called the “donuthole” Open enrollment for any given year is October 15-December 7

4. Medicaid Government health insurance for needy people, pregnant women, teenagers, individuals who are legally blind State splits the cost with the federal government Often patients are enrolled in a private managed care plan that government uses to contract with. Common managed care plans are Fidelis care, Metroplus. Managed care pays for legend drugs and Medicaid picks up OTC and generic drugs

5. Other government programs State children’s Health Insurance program (SCHIP) Federal government provides matching funds to state States operate the program and determine eligibility Intent is to provide families with children and income that is low but not low enough for medicaid medical coverage TRICARE is the health insurance plan that services uniformed armed services men and women CHAMPVA (civilian health and medical program of the veteran administration) is insurance for permanently disabled veterans and their family members

6. Health Savings Accounts Individuals and Families can make tax deductible contributions to an account that is similar in structure to a traditional IRA Limitations: $3,250 (self) per year and $6,450 per year for family Funds can be withdrawn only for medical related expenses

7. Private Third Party Payers Health Maintenance Organization (HMO) Insurance provider that contracts with and other institutions to provide services under an agreed upon fee called a capitation fee. Doctors, dentist, etc work directly for the HMO this is called the “staff model” HMO The insured person is to select a PCP (primary care provider) who controls access to specialist via referrals; specialist must also be in network Coverage is not provided for out of network providers Lowest premiums and no deductables Blue Cross/Blue Shield is an example of an HMO

8. Point of Services Plans (POS) contracts are made with individual providers An in network doctor called a Primary Care Provider (PCP) acts as a “point of service” PCP can make a referral for specialists out of the network Out of network providers can be seen Slightly higher premium and deductibles (not with HMO) but more freedom United Healthcare is an example

9. Preferred Provider Organization (PPO) Similar to a POS Main advantage is that referral are not needed to see specialists Provides most freedom but costs more Cigna and Humana are examples

10. Adjudication formulas and Reimbursement Pharmacy Pricing Benchmarks AWP- Average Wholesale Price is published by the wholesalers across the country for the drug. The data is compiled by First Databank, a data collection company U&C – usual and customary often your pharmacy software creates it own U&C based on your actual acquisition cost. This is often the cash price a customer with no insurance pays MAC – maximum allowable cost : used in calculating the reimbursement for older generic drugs by PBM’s Estimated Acquisition cost (EAC)= what medicaid pays the pharmacy for drugs A PBM will pay either MAC (for generics) AWP – a certain percentage U&C Which ever is smaller Actual Acquisition cost=AAC (what you actually pay for the drug) Profit, or the spread= what pharmacy is reimbursed- AAC + dispensing fee Capitation Fee Insurance company agrees to pay a flat fee per every covered patient that is client of the pharmacy. Patient only goes to that pharmacy

11. Prescription Drug Card When patients receive medical coverage cards they usually receive two cards One card provide office visit information Second card provide pharmacy coverage information Information on the Rx card Managed care plan (insurance company) Affinity Health Fidelis Care HIP MetroPlus Pharmacy Benefits Manager Express Scripts CVS Caremark (CVS health) Medco (acquired by Express Scripts) Prime Therapeutics (BCBS) United Health/OptumRx RX BIN (bank Identification number) identifies the PBM and the payor

12. RX BIN for express scripts 003858 for example Group Code: identifies the group that contracted with the managed care plan, may be a large group of employers i.e. RX1199 identify 1199 union members Cardholder: name of person card belongs to Person code: relationship to primary beneficiary primary beneficiary is 01 Spouse is 02 Sequential dependents are 03,04, etc

13. Rejection Codes National Council for Prescription Drug Program (NCPDP) rejection codes Claims that are rejected have at least one or more rejection codes Rejection codes are standardized across the country Code 1= missing or invalid BIN Code 53= non match person code (the primary holder has a code of 2 by mistake) Code 19 = invalid day supply Code 71= Prescriber not covered Code 79= refill too soon Code 69= filled after coverage terminated (Patient may have a new card but your pharmacy has old one on file) Code 76= Plan Limitation exceeded Code 75= Prior Authorization Require

14. Common Rejections Invalid DOB, or person code Enter corrected information and resubmit claim Filled after coverage terminated Ask for new insurance card; patient may have changed insurance or insurance may have new PBM or patient may have new ID# Invalid Day supply Try to enter prescription with a reduced quantity with more refills and resubmit. i.e. 90 tablets with 2 refills = 30 tablets with 8 refills Refill too soon Patient must come back for refill 75 % time allotment on regular RX If vacation supply is needed, may obtain override code from PBM and resubmit Prescriber is not covered Prescriber is out of the network for the plan; patient must pay full price

15. Drug Formulary A drug formulary is a list of medications that insurance will reimburse for Type of formularies Closed Formulary: a formulary with medications and their class are set and closed. No exception process Open Formulary: a formulary that has medications and their class tiered. You may have a preferred brand and a non preferred brand and patient pays a different copay for each Restricted Formulary: similar to a closed formulary but has a exception process with involves the prescriber justifying why a particular medication is necessary over a similar one. This is what is called Prior Authorization