Third-Party Payer Considerations & Audits Flashcards
What are the functions of PBMs?
- Contracted by third party payes to provide prescription claims and processing
- Create pharmacy netwqorks that participate in their claims management service
Purpose of PSAOs?
Used by independent community pharmacies to negotiate third-party contracts to improve bargaining power
What are the functions of a PSAO?
- Contraction negotiations with PBMs and Health Plans
- COntracting wholesales
- Billing support
- General business support
- Pharmacy performance analytics
Price that pharmacies pay the drug wholesaler/manufacturer to obtain the drug product
Actual acquisition cost (AAC)
Average of prices paid by different pharmacies for drug products, which is determined by surveying pharmacies
Average actual acquisition cost (AvAC)
Average price received by a manufacturer from wholesalers for drugs distributed to the retail pharmacies
Average manufacturer price (AMP)
List price for what drug wholesalers charge pharmacies
Overestimation of the price that wholesalers charge the pharmacy
Average wholesaler price (AWP)
Third-party payer’s estimate of the price that a pharmacy pays the drug wholesaler/manufacturer to obtain the drug product
Estimated acquisition cost (EAC)
Maximum cost that a third-party will pay for a multisource drug, represented by an average of generic drug prices from several manufacturers
Maximum allowable cost (MAC)
List price for what drug manufacturers charge drug wholesalers
Overestimation of the price that manufacturers charge wholesalers
Wholesaler acquisition cost (WAC)
What are the three different methods third parties use to reimburse for prescriptions?
Reimbursement ($) = AWP – 18% + $1.00 dispensing fee
Reimbursement ($) = WAC + 1% + $1.00 dispensing fee
Reimbursement ($) = NADAC + $10.00 dispensing fee
What are DIR fees?
direct and indirection remuneration fees
-fees that come in after reimbursement which tend to cut profits
What are the methods of DIR fees?
Method 1: Percent of ingredient cost
= (AWP - 18%) x contracted DIR %
Method 2: flar dir fee
= contracted flat $ amount
What are the steps involved in evaluating the financial impact of 3rd party plan reimbursements?
- Calculating the cost of dispensing a prescription
- Examining the average net profit per prescription
- DIfferential analysis
- Pro froma analysis
What is the average cost of dispensing?
$10.79
What are the types of cost?
Fixed: doesn’t change, as prescription volume changes (eqipment, license)
Variabl: costs that change directly, as prescription volume changes (vials)
Direct: costs that are completely attributable to the prescription department (labels, vials, labor)
Indirect: costs that are shared between the prescription department & rest of the store (rent, utilities)
Average COD =
Total expenses / total prescription per year
Average net profit =
average gross margin = Price - COGS
What is differential analysis?
COmpares marginal revenue with the marginal cost of dispensing a script for a specific third-party plan
Contribution margin = differential revenue – differential cost
Accept all third-party plans that generate a contribution margin greater than zero (> 0), join it
What are the steps to a differential analysis?
- Calculate the differnetial revenue
- Calculate the differntial cost: vials, label, labor
- Calculate the contribution margin
How do you interpret a contribution marign?
greater than zero it would be beneficial to join the network
Whart are the scenaros of pro forma analysis?
- Dont join
- Join (low preforming)
- Join (high performing)
When is pro forma used?
uses information from the average net profit comparison and the differential analysis to provide a comprehensive review of the financial implications of joining a preferred pharmacy network
What are some other considerations for third-party contracts?
- Effect on pharmacy customers
- Effect on pharmacy staffing
- Effect on pharamcy image
- Effect on ther 3rd parties
- Effect on ther sources of revenue at pharmacy
