Glossary of Terms  

Actual Acquisition Cost: Net cost the pharmacy pays for a drug, after discounts and rebates.

Acute Medication: Medication needed for short-term or emergency conditions. For example, antibiotics prescribed for strep throat would be acute medication.

Average Wholesale Price (AWP): Manufacturer established price per unit.

Board of Pharmacy: Generic term for the individual state boards that regulate the practice of pharmacy within their own states. Contrary to common belief, the Federal government plays a minimal role in the regulation of the home delivery (mail service) or retail pharmacy industries.

Brand Name (Brand Drug): In pharmaceuticals, medication that is available only from its original manufacturer or licensee under a recognized brand name. A brand-name drug may have a generic equivalent after the original patent expires.

Capitation / Risk Sharing: Fixed yearly or monthly payment paid to a healthcare provider by a benefit sponsor in advance of delivery of goods or services for each member, regardless of the number of services provided to each member. Rates can be adjusted based on demographic and actuarial cost projections.

Carve-Out: A "carve-out" pharmacy benefit occurs when a plan sponsor has the benefit managed separately from the rest of its healthcare services. A separate division may manage benefits or they can be contracted out to a Prescription Benefit Administrator or Pharmacy Benefit Manager.

Case Management: Method designed to accommodate specific health services needed by an individual through a coordinated effort to achieve the desired health outcome in a cost effective manner. Also, the monitoring and coordination of treatment rendered to patients receiving specific diagnosis or requiring high-cost or extensive services.

Co-Insurance: type of cost sharing through which beneficiaries (patients) pay a percentage of the cost for services or goods and insurers or administrators pay the balance.

Compliance: Patient adherence to a prescribed drug regimen.

Co-payment (Co-pay): Type of cost sharing through which beneficiaries (patients) pay a flat fee for services or goods and insurers or administrators pay the balance.

Covered Drugs: Medications for which a health plan, employer, Labor Union or association will reimburse a pharmacy on behalf of a member.

Deductible: The set amount beneficiaries must pay toward covered charges before employer-sponsored coverage takes effect. Deductible requirements are usually renewed annually.

Demand Management (Patient Consumerism): A process designed to educate and empower consumers to make informed decisions about their healthcare. Consumers become active participants in decisions regarding their health, avoiding unnecessary or inappropriate care and achieving better outcomes.

Disease Management: A continuous process of influencing the behavior and health objectives of people involved with chronic diseases. Helps patients achieve specific outcomes such as improving productivity and quality of life in addition to lowering the sponsor's medical costs.

Dispensing Fee: Dollar amount reimbursed to pharmacy for dispensing the medication.

Drug Counseling (Patient Counseling): The process by which a pharmacist provides a patient with relevant medical and pharmacological information on the prescribed drug(s) being dispensed.

Drug Utilization Review (DUR): Review system, based on a set of specific medical criteria and professional judgment, used by pharmacists and pharmacies to check or monitor the frequency, type, appropriateness and use of prescription medications. They may be concurrent (performed before dispensing as a series of checks against a patient's medical history and plan guidelines), retrospective (analysis of a plan's prescribing trends over time) or prospective (face-to-face counseling programs directed to heavy prescribers of specific drugs.).

Federal Legend Drugs: Medication that cannot be obtained over the counter. Valid prescriptions are necessary in order to purchase.

Fee-for-Service: "Traditional" health insurance plan in which patients agree to go to the healthcare provider of their choice and the health plan pays for the full usual and customary cost of the service or medication, less any deductible or co-payment.

First Data Bank: National drug database that provides information such as AWP price of medications, package size and clinical information.

Food and Drug Administration (FDA): Federal agency that ultimately approves pharmaceuticals for market and regulates their marketing. The FDA regulates manufacturers of pharmaceuticals and plays a minimal role in the regulation of the home delivery (mail service) or retail pharmacy industries. Individual state boards of pharmacy are responsible for regulating the practice of pharmaceutical medicine in their own states.

Generic Drug: Equivalent version of a brand-name drug, except in price, introduced to the market when the patent on the brand-name drug has expired.

Generic Substitution: The process of substituting the lower cost generic version of a drug when a brand-name drug has been prescribed but not mandated by the prescriber. Generic substitution is often encouraged by third-party payers and, in some cases, state law to cut prescription drug costs.

HIPAA: Health Insurance Portability and Accountability Act of 1996

Home Delivery Service (Mail Service): Dispensing and delivery of prescription medication directly to patients via mail.

Integrated Pharmacy Benefit: Pharmacy benefit plan that provides subscribers with two options: home delivery (mail) or retail filling of prescriptions. Often, retail filling of prescriptions requires a higher co-payment than home delivery service.

Intervention: Any action on the part of a healthcare organization that is designed to enhance quality of care or control costs. These can range from customer service phone calls to drug utilization reviews.

MAC: Maximum Allowable Cost for a generic drug.

Maintenance Medication: Also referred to as "chronic medications." Medications used over a long term to treat or control chronic conditions, i.e. the medication taken daily by high-blood pressure sufferers or diabetics.

Medispan: National drug database that provides information such as AWP price of medications, package size and clinical information.

Multi-Source Drug: A drug that is available in more than once source; Brand and Generic.

National Association Board of Pharmacy (NABP): This is the only professional association that represents the state boards of pharmacy in all 50 United States, the District of Columbia, Guam, Puerto Rico, the Virgin Islands, New Zealand, eight Canadian Provinces, two Australian states and South Africa.

National Committee for Quality Assurance (NCQA): Private, nonprofit organization dedicated to assessing and reporting on the quality of managed care plans. NCQA's mission is to provide information that enables purchasers and consumers of managed healthcare to distinguish among plans based on quality, thereby allowing them to make more informed healthcare purchasing decisions.

National Council for Prescription Drug Programs (NCPDP): Organization that represents the interests of pharmacy-related organizations concerned with setting national standards for the use of computers in pharmacy practice.

National Drug Code (NDC): An 11 digit number identifying the drug, strength, manufacturer and package size.

NCPDP: National Council of Prescription Drug Programs. Creates and promotes industry standards for the transfer of pharmacy or healthcare related files and data.

Outcomes Management: Evolving view in the healthcare industry that seeks to optimize health outcomes through the continuous development of clinical guidelines and interventions, monitoring and evaluation of patient data and reintegration of program results.

Pharmacy Networks: Groups of chain and independently-owned pharmacies that contract with a claims processor or a plan administrator to provide medication and pharmacy services to plan members at a discounted price.

Point of Sale (POS): Managed prescription drug care term referring to specialized software that links individual pharmacies with a central database and enables pharmacists to perform DUR, check plan guidelines and adjudicate claims at the time of dispensing.

Prescription Benefit Administrator (PBA): An organization responsible to administer a group’s prescription benefit plan based on the groups culture and financial needs. A PBA is responsible for claims processing and management, cost management, plan development and outcomes, eligibility processing and integrity, plan performance, identification card development and production, member communication development and production, clinical management and outcomes, preferred drug management and rebate administration, pharmacy network development and implementation and customer service.

Pre Pack: Packaging of prescription drugs that are dispensed in a certain format i.e.: inhalers, oral contraceptives, liquid cough medicines, eye drops.

Prior Authorization: Service provided to clients to process exceptions to plan designs, pre-certifications and high dollar claim management.

Provider: Person or organization that gives healthcare services to patients, including pharmacists, physician, nurses and hospitals.

Rejection: Prescription claim rejected at point of service (pharmacy level). A rejection can occur for various reasons such as a specific drug is not covered, a pre-certification is required, a refill was requested too soon etc.

Reversal: Pharmacy correcting a claim that was previously submitted.

Single-Source Drug: Medication for which there is one source BRAND Only.

Step Therapy: A process of treating a patient with the least intrusive medication or therapy initially, then graduating to more complex medications or therapies if required.

Therapeutic Class: Drugs grouped by their purpose, the symptom, or disease they are used to treat.

Therapeutic Interchange / Substitution: A decision made by a physician to replace a prescribed drug with a similar drug that is more effective or equally effective, but less expensive for the patient.

Usual and Customary Price: The price a pharmacy charges for a pharmaceutical medication to a person who walks into the pharmacy without a prescription plan. Also known as the advertised posted or cash price.

Wholesale Acquisition Cost (WAC): The price in which pharmacies and mail order facilities purchase their drug at with discounts based on volume.