Prescription drug program & Managed care

What are provider Network?

A provider network is a group of doctors, hospitals, and other health care providers that have agreements with an insurance plan to care for its members.

They offer services such as:

Primary care: Routine checkups and care for common health problems.

Acute care: Treatment for sudden illnesses or injuries.

what is Health Maintenance Organization (HMO'S) ?

Individuals must stay in network (no out-of-

network coverage except in certain emergencies)

• Requires a primary care provider (PCP) who acts

as a "gatekeeper"

- Referrals are needed for specialists

- More coordinated care

• Less flexible, but lower premiums and out-of-

pocket costs

Preferred Provider Organizations (PPOs)

• Individuals can use in- or out-of-network

providers

• Out-of-network care costs more

• No PCP requirement (no "gatekeeper")

- No referrals required for specialist care

- Less coordinated care; patient self-navigates

• More flexible, but higher premiums and out-of-

pocket costs

What are Reimbursement?

• The agreement specifies the amount and frequency of payment to the pharmacy

What does prescription reimbursement consist of ?

1. PBM's cost for the drug's ingredients

2. The dispensing fee

3. The amount paid by the patient in the form of

copayments

• Rx payment = ingredient cost + dispensing fee -

patient cost sharing

• Rx payment is what the PBM is paying the

pharmacy

-Ingredient cost = what the drug itself is worth, based on the PBM's pricing formula

Dispensing fee = payment for the pharmacy's work (pharmacist's time, counting, labeling, counseling, overhead)

Patient cost sharing = the copay (or coinsurance/deductible) the patient pays at the counter

What is patient Cost Sharing ?

To encourage the use of generic prescriptions, many prescription plans require patients to pay a tiered copayment

How is copayment organized in the patient Cost Sharing ?

- Relatively low copayment for generic drugs

- A higher copayment for preferred brand-

name drugs

- An even higher copayment for non-

preferred brand-name drugs

How does the PMB's benchmark that they set for reimbursements affect pharmacies?

Based on the benchmarks that PBMs set for reimbursement, a

pharmacy may lose money on a prescription

How does pharmacies compestate for the money that they loose from the PMB benchmark?

- Rely on front-end sales: Earn money from products sold outside the prescription department, such as over-the-counter medicines, toiletries, and snacks.

- Leverage volume: Fill many prescriptions. Even if the profit on each prescription is small, those profits can add up.

- Offer higher-profit services and niche services: Provide services that earn more profit or meet specialized needs, such as compounding customized medications. Diversify means having several sources of income.

- Use wholesaler contracts and rebates: Negotiate purchasing agreements and receive discounts or money back from suppliers to reduce the cost of buying medications.

- Cut administrative and personnel costs: Reduce expenses related to paperwork, management, and staffing.

• Pharmacies often face competitive and economic pressure to accept PBM contracts to keep patients (most patients use insurance)

What is a PBM claims adjudication?

PBMs use online electronic claims submission systems to adjudicate (receive, review, and decide) claims for prescriptions dispensed by network pharmacies

-National Council for Prescription Drug Programs

-Transaction can be rejected by a PBM during adjudication if the pharmacy violates a clinical or administrative requirement (for example, limits on quantity or refills)

What is PBM prior authorization?

Allows a patient's physician to request coverage of nonpreferred or noncovered medications

PBM formulaires :

-Can be an open, closed, or incented formulary

-Incented = patients are provided financial incentives to use preferred drugs

What does PBM prior authorization require ?

The PBM may require step

therapy

- The use of a more expensive

agent is reserved for second-line

treatment if treatment with the

less expensive agent (commonly a

generic) proves unsuccessfu

PBM Drug Utilization review ( DUR) ?

-Participating pharmacies must perform prospective DUR with each claim as part of their agreement with the PBM

-PBMs can also use retrospective DURs to identify prescribing patterns, patterns of use for certain therapeutic categories, etc.

What act created the foundational law that launched managed care in the United States?

Health maintenance organization = HMO

What is the main roles of Health maintenance organization?

Three main roles:

-Provided federal grants and loans for the development of HMOs

-Required large employers that offered insurance to also offer an HMO option (forced early uptake)

-Set standards for federally-qualified HMOs

What is managed care and what is the key differentiating feature?

Managed care is essentially the structure or system of most private health insurance in the United States

Key differentiating feature = the use of provider networks

What are the accrediting organizations for MCO's :

-The National Committee for Quality Assurance (NCQA)

-The Utilization Review Accreditation Commission (URAC)

What has The National Committee for Quality Assurance (NCQA) develop?

-Healthcare Effectiveness Data and Information Set (HEDIS)

-HEDIS = a group of measures that gives objective information that can be used to evaluate MCOs

Major categories if HEDIS measures:

-Effectiveness of care

-Access/availability of care

-Experience of care

-Utilization and relative resource use

-Health plan descriptive information

MCO's wants to control cost by making providers reduce : number of admissions, lengths of stay, and intensity service .What is one strategie that is used to do this ?

Capitation = providers receive a fixed amount each month for each enrolled patient, regardless of the amount of healthcare services actually provided

Why is pharmacy benefit managers used and what do they do?

-Insurers separate prescriptions from other benefits. Your medical coverage (doctors, hospitals) is handled one way, and your drug coverage is handled separately.

-They hire a PBM to run the drug part. The insurer contracts with the PBM to manage everything about prescriptions. Big PBMs you'll hear about are CVS Caremark, Express Scripts, and OptumRx.

How are PB, and managed care similar ?

PBM structures have many of the characteristics of managed care, including having a provider network of pharmacies

PBMS : In selecting a network of pharmacies, considerations include:

-Location

-Cost

-Quality (A PBM doesn't let every pharmacy fill prescriptions for its members. It builds a network, a list of pharmacies it has contracts with. Members get full coverage only at in-network pharmacies.)

What are Participating Pharmacy Agreement?

Participating pharmacy agreements = contracts that stipulate the services to be provided by contracting pharmacies in exchange for a specified reimbursement

-"You, the pharmacy, agree to do these things for our members, and we'll pay you this much for doing them."

Payment to pharmacy?

For a pharmacy, the profit is the portion of the reimbursement (from the PBM and patient) that exceeds the pharmacy's AAC (what they paid for the drug ingredients)

Pharmacy profit becomes: Rx payment + patient cost-sharing - ACC

- THERE ARE TIMES WHERE ACC CAN BE HIGHER THAN PAYMENT : PHARMACY LOOSE MONEY