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.