third party payers

Community Pharmacy and Third Party Payers

• Presentation by: Peter A. Kreckel, R.Ph

• Location: Nickman's Drug, Lemont Furnace, PA

Learning Objectives

• Compare and contrast different types of insurance available.

• Describe necessary numbers to process prescriptions on a patient’s insurance.

• Define key terms such as:

  • AWP (Average Wholesale Price)

  • WAC (Wholesale Acquisition Cost)

  • Prior Authorization

  • Formularies

  • DIR Fees (Direct/Indirect Remuneration Fees)

• List tiers of medications and examples in each tier.

Medicare Overview

Introduction

• Founded: 1966, single-payer national social insurance program.

• Administration: Contracted with approximately 30-50 private insurance companies.

• Funding Sources:

  • Payroll tax

  • Premiums and surtaxes from beneficiaries

  • General revenue

• Eligibility:

  • Primarily for Americans aged 65+.

  • Coverage for certain younger individuals with disabilities.

Financial Projections

• National Health Expenditure (NHE) in 2020 was $4.1 trillion, accounting for 19.7% of GDP, with significant increases projected.

• Enrollment projected to exceed 80 million by 2030 with a decline in workers per enrollee from 3.7 to 2.4.

Medicare Coverage

Parts of Medicare

• Part A: Hospital Insurance (covers inpatient care)

• Part B: Medical Insurance (outpatient care and physician services)

• Part C: Medicare Advantage (private plans providing Medicare benefits)

• Part D: Drug Coverage (prescription medications)

Costs for Medicare Beneficiaries

• Part B Premium: Standard rate of $174.70 in 2024, increasing based on income.

• Cost Sharing:

  • Part A deductible: $1,632 per benefit period (2024).

  • Part B deductible: $224 annually (2024).

Coverage Limitations

• Medicare typically covers 80% of health care costs; patients often need supplemental insurance to cover the remaining 20% (Medigap policies).

• Enrollment in Medigap at age 65 is advisable to avoid health underwriting.

Medicare Advantage Plans

• Differences: Must provide at least the same coverage as Original Medicare (Parts A & B), often with additional benefits.

• Premiums can be as low as $0 but may include additional out-of-pocket costs.

• Important to consider deductibles and out-of-network charges.

• Enrollment periods allow switching between plans.

Medicaid

• Description: A program for low-income individuals and those with disabilities, providing assistance that can overlap with Medicare for 'dual-eligible' individuals.

• Eligibility in West Virginia: Covers SSI beneficiaries, pregnant women, children under 19, low-income families, and individuals with specific health conditions.

Commercial Insurance Plans

Historical Context

• Originated in the 1870s with hospital associations; expanded significantly by the 1930s.

Insurance Functionality

• Insurance companies collect premiums to cover enrollees' healthcare costs while ensuring a balance of healthy individuals to maintain affordability.

Pharmacy Benefit Managers (PBMs)

• Major PBMs like CVS-Caremark manage formularies, negotiate pricing, and adjudicate claims.

  • Aim to maintain or reduce pharmacy costs while improving health outcomes.

Prescription Processing Details

Information Needed

• BIN Number: For routing electronic pharmacy claims.

• PCN Number: Secondary identifier for differentiating plans.

• Group Number: Identifies specific health plan groups.

• ID Number: Specific to the individual patient, previously based on SSN.

Prescription Costs and Pricing Mechanisms

Average Wholesale Price (AWP)

• Refers to average selling price of pharmaceuticals, currently noted as WAC + 20%.

  • Examples provided demonstrate significant variability in discounts offered for generics vs brand names.

Key Price Metrics

• WAC: Manufacturer's list price to wholesalers, exclusive of discounts/rebates.

• NADAC and ACA-WAMP provide averages relevant for retail pharmacies.

Drug Utilization Review (DUR)

• Purpose: Assess medication therapy before dispensing, ensuring safety and efficacy.

  • Types of DUR include prospective evaluations and concurrent reviews for safe medication use.

Formulary Management

Definitions

• Open Formulary: No medication access limitations.

• Closed Formulary: Limited access based on cost and other criteria.

  • Example: Specific preferred meds for certain health conditions.

Medication Tier Structure

Tiers Defined

• Tier 1: Generic medications (most affordable).

• Tier 2: Preferred brand-name drugs.

• Tier 3: Non-preferred brand-name medications.

• Tier 4: Specialty drugs with higher costs.

Examples by Tier

• Tier 1: Lisinopril, Metformin.

• Tier 2: Janumet, Invokana.

• Tier 3: Farxiga, Symbicort.

• Tier 4: Specialty drugs for chronic conditions.

Coverage and Prior Authorization

• Some medications, particularly for opioids and psychiatry, require prior authorization based on usage guidelines.

• Processes for overrides and monitoring handled within pharmacy operations.

Economic Impact of DIR Fees

• Overview of how DIR fees impact pharmacy revenue and operations. Significant increases noted over the past decade, with current trends indicating a move towards greater expense burdens on pharmacies.

Conclusion

• The evolving landscape of healthcare reimbursement affects community pharmacies significantly, emphasizing the importance of understanding these structures for effective patient care.