Pharmacy Benefit Glossary
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Contents
A
Accumulator Adjustment Programs
Programs used by pharmacy benefit managers to exclude drug manufacturer copay assistance from counting towards patients’ deductible or out-of-pocket maximums.
Actual Rebate Amount Per Script
The rebate dollar amount for each prescription examined.
Acute Medication
A drug typically taken for less than 30 days and not subject to refill.
Adherence
The extent to which a patient conforms with the healthcare provider’s treatment regimen.
Adherence – Medication Possession Ratio (MPR)
The ratio of actual days’ supply dispensed to the potential days of use from an initial fill date until the end of the reporting period.
Affordable Care Act (ACA)
Healthcare reform legislation enacted in March 2010 with the aim to make affordable health insurance available to more people.
Age-Adjusted Trend
Applies the client’s prior-period age distribution to the client’s current period spend, then uses the age-adjusted current cost per member per year to calculate the trend.
Alternative Funding Programs
Funding from an outside vendor for costly medications. Programs may be subject to income restrictions, discrimination rules, IRS rules, etc.
AM
Account Manager.
Appeals
A process that can be initiated by a patient and/or provider to review a previous benefit determination. There are three levels to appeals:
- First Level (Coverage Determination): Ensures the claim adjudicated according to plan setup.
- Second Level: For an approval previously deemed not covered. Coordinated by a PBM when an external provider and the participant’s current provider determine coverage together. This level can only be initiated by a provider.
- Third Level: Review of claim of approval that was previously denied by plan setup and through second level appeals. This appeal is coordinated by a PBM and occurs between a different external provider and the patient’s current provider. This level can only be initiated by a provider.
Assignment of Benefits
An arrangement when a patient requests that their medical benefit payments be made directly to a designated provider or facility, such as a physician or hospital.
Audit
The process of examining pharmacy benefit claims, records, and procedures to verify accuracy, completeness, legality, and adherence to the terms outlined in plan descriptions and contractual agreements.
Authorized Voting Representative
The person delegated by a plan sponsor group to vote on National CooperativeRx issues, such as electing board members.
Average Eligible Members
Average number of eligible members participating during the time period.
Average Manufacturer Price
Average price paid by wholesalers to manufacturers for drugs distributed to pharmacies.
Average Wholesale Price (AWP)
A surrogate marker of drug price, which does not include rebates or discounts.
B
business associate agreement (BAA)
States an entity cannot share the protected health information of another entity.
Best-in-Class
The top percentage of ranked clients.
BIOLOGIC
Products derived from living organisms and can be composed of sugars, proteins, cells and tissues, and/or nucleic acids. These products are used to treat various conditions and are typically higher priced due to their complexity and production processes.
Biosimilar
A biological medical product that is typically less expensive and a highly similar replica of a reference biologic product.
Book of Business (BOB)
A group of members specifically assigned to one person or entity.
Brand Name
A drug sold under a trademark product name.
Bridge Supply
A short-term supply of a medication provided to a patient to cover the period until they can receive their full medication fill.
BROWNBAGGING
Scenario in which patients receive their specialty medications from a pharmacy and bring them to a healthcare provider’s office or facility for administration or usage.
C
CA
Confidentiality Agreement.
CareTeam
A team of clinical experts led by a pharmacist or nurse specifically trained in the patient’s condition and available 24/7.
Carrier Number
A four-digit number assigned to each member group by CVS Caremark.
CARVE-IN PHARMACY benefit
Pharmacy benefits that are integrated within an employer’s medical benefits offered by a health plan. In this arrangement, the same insurance provider or health plan manages both medical and pharmacy benefits.
Carve-Out Pharmacy Benefit
A benefit that occurs when employers choose to separate their prescription drug benefit from their medical insurance plan to better control costs.
CELL AND GENE THERAPY
Cell Therapy: The transfusion or transplant of viable cells into a patient.
Gene Therapy: The altering of genetic makeup within patients’ cells.
Channel
An avenue in which a prescription medication is dispensed to a patient. This includes retail, mail, maintenance choice, specialty or direct (paper claim).
Chronic
A persistent or constantly recurring illness.
CLAIM ADJUDICATION
The process of reviewing and determining eligibility, coverage, and reimbursement of prescription drug claims submitted by pharmacies to pharmacy benefit payers.
CLOSED FORMULARY
Does not cover a medication that is not on the list of preferred medications.
Cooperative member agreement (CMA)
It officially declares a member joined National CooperativeRx and defines the level of membership.
COPAY CARD PROGRAMS
Drug companies may offer copay cards that reduce or cover patients’ out-of-pocket costs to steer them towards purchasing their particular products. Such programs can usually be used in combination with insurance but may work against health plans by promoting more expensive drugs. May also be referred to as copay assistance cards, copay offset cards, savings cards, or manufacturer’s coupons.
Centers for Medicare and Medicaid services (CMS)
A government group that oversees and issues regulations.
Coinsurance
A cost share structure where the member pays a percentage of the total cost and the plan sponsor pays the rest.
Compliance
The degree to which a plan member follows his or her health care provider’s medication instructions.
Compound Drug
Created when a pharmacist combines or mixes one or more ingredients to fill a prescription when the combination is not commercially available.
Cooperative
Refers to National CooperativeRx.
Coordination of Benefits (COB)
The way a plan member’s claims are processed when the member is covered under more than one health plan. This helps determine which health plan pays the claims in which order to prevent the total benefits costing more than the total expenses.
Copay
A cost share structure in which the member pays a fixed amount and the plan sponsor pays the rest.
Cost Share
The amount that members contribute to the cost of prescriptions covered by their plan. May be a set dollar amount or a percentage of total cost.
Coverage Gap
Part of Medicare Part D. Occurs when a participant has reached a certain out-of-pocket threshold. During this time, the participant is responsible for a higher portion of their drug costs. This amount changes annually.
Client Requirements document (CRD)
The master implementation document is specific to CVS Caremark and is used to set up a member’s benefit plan.
D
DAYS’ SUPPLY
The number of days a prescribed quantity of medication is intended to last.
Deductible
The amount the participant must pay before there is coverage by the plan sponsor.
DISCOUNT CARD PROGRAMS
Organizations may offer discount cards for use at pharmacies. Such programs, typically funded by third parties, raise concerns about actual savings, privacy rights, and potential risks related to drug interactions.
Disease Management
A system that manages the condition of a population of patients with a chronic illness.
Dispense as Written (DAW)
A prescription notation that states the brand name drug should be dispensed despite the availability of a generic equivalent.
- DAW 1: A prescription order from a prescriber that states the brand name drug is medically necessary and no substitution is allowed.
- DAW 2: A prescription order from a prescriber that allows for a generic substitution, but the patient requests the brand name drug to be dispensed.
Dispensing Fee
A fee paid to the pharmacy to cover the cost of services provided by the pharmacist when dispensing a prescription.
Drug Benefit Design
Plan setup that determines medication coverage and utilization management requirements.
Drug Class
A group of medications that may possess similar chemical structures, work the same way, or are designed to treat the same condition.
DRUG MIX
Variety and types of medications used by patients, such as brand name vs. generic drugs.
DRUG PATENT
Exclusive rights to manufacture and sell a new drug or novel use for an existing drug. This is granted to drug manufacturers by the U.S. Patent and Trademark Office and prevents other companies from producing or selling a similar product for a specified period.
DRUG PIPELINE
A collection of potential drugs under development in the pharmaceutical industry at a given point. It can also refer to the drug approval process.
E
ERISA
Employee Retirement Income Security Act.
EXCLUSIONS
Medications or services not covered by a specific pharmacy benefit plan.
Extended Days’ Supply Network (EDS)
A special network that offers better pricing and no dispensing fees for prescriptions.
F
FDA
US Food and Drug Administration.
Federal Reinsurance
A payment received to offset costs and spread risk associated with supporting Medicare programs to minimize danger of monetary loss.
Formulary
A list of preferred medications that are covered under a drug benefit plan, based on specific plan setup.
FRAUD, WASTE, AND ABUSE (FWA)
Improper or illegal activities that lead to unnecessary costs or overuse of pharmacy benefits.
FSA
Flexible Spending Account.
FSA-Eligible Items
Items that may be purchased using FSA funds.
G
Generic
A pharmaceutical drug that is comparable to a brand name drug in quality and performance, but is typically less expensive than its brand name counterpart.
Generic Dispensing Rate (GDR)
The percent of payable prescriptions dispensed as generic drugs.
GENERIC EQUIVALENT
A generic medication that offers the same quality as brand-name medications in dosage, strength, performance, and use.
Generic Substitution Rate (GSR)
The rate of generic dispensing that occurs whenever generics are available.
GLUCAGON-LIKE PEPTIDE -1 AGONISTS (GLP-1s)
A class of medications primarily used to manage blood sugar levels in patients with type 2 diabetes. This class of medications are commonly known for their potential to induce weight loss, contributing to high demand and off-label use.
Gross Cost
Total member cost plus total participant cost.
Gross Cost PMPM
Gross cost divided by average eligible participants per month.
Gross Cost Trend
Gross Cost PMPM for current time period divided by Gross Cost PMPM for prior time period.
Guaranteed Rebate per Mail Script
Dollar amount of guaranteed rebates for a prescription delivered by mail service.
Guaranteed Rebate per Retail Script
Dollar amount of guaranteed rebates for retail prescription.
H
HDHP
High Deductible Health Plan.
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996 (HIPAA)
A U.S. federal law aimed at protecting the privacy and security of individuals’ medical records and other personal health information.
HSA
Health Savings Account.
I
IMPLEMENTATION
Process of onboarding a new PBM and activating its benefits plan.
INGREDIENT COST
The negotiated amount a pharmacy benefit manager agrees to pay a pharmacy provider for a prescription drug. This excludes additional fees such as dispensing fees or cost-sharing amounts.
INTERNATIONAL SOURCING
Importing prescription drugs from one country into another.
L
Lifestyle Drug
An optional drug used to improve one’s quality of life rather than treat or manage a medical condition.
LIMITED DISTRIBUTION DRUG (LDD)
Medications that are not widely available due to special handling, safety concerns, and/or regulations, etc. Typically available at specific pharmacies or from healthcare providers directly.
Long-Term Medication
Medication taken for longer than three months. Does not apply to new maintenance medications.
M
Mail Service
Part of a drug benefit plan that allows for delivery of maintenance medications to a patient’s home. It is common for medications to be supplied in larger quantities and at a lower cost than at a retail pharmacy.
Mail Service Cost Share
Cost share amount for a set days’ supply of a prescription normally delivered by mail service. May be a dollar amount or a percentage of the total prescription cost.
Maintenance Choice
The option for a member to fill a 90-day supply of maintenance medications at a CVS retail location at the mail service discount. The member pays the mail order cost share.
Maintenance Medication
A prescription typically taken on a regular basis to treat a chronic condition.
MARKET CHECK
The process of ensuring negotiated drug pricing terms with pharmacy benefit managers are competitive against industry benchmarks and market conditions. Occurs during the term of an existing contract.
Maximum Allowable Cost (MAC)
The maximum amount a plan will pay for generic drugs with three or more manufacturers.
Maximum Out-of-Pocket (MOOP)
The maximum dollar amount that a member will pay for medical and/or pharmacy services under their plan.
Member or Member-Group
A self-insured employer group that has chosen National CooperativeRx for their pharmacy benefit needs.
MEMBER OUT-OF-POCKET (OOP)
The dollar amount a member will pay for medical and/or pharmacy services under their plan.
Multi-Source Brand (MSB)
A brand name drug that is available from multiple manufacturers and usually has a generic equivalent.
Multi-Tier Copay
A structure in a drug benefit plan that has more than one copay tier.
N
NATIONAL COOPERATIVERX (NCRx)
A member-owned and governed, not-for-profit cooperative that provides pharmacy benefits to organizations that self-fund their health plans.
NATIONAL DRUG CODE (NDC)
A unique identifier assigned to every medication approved by the FDA, identifying the labeler, product, and package size.
Net Cost
Plan sponsor total amount paid.
Net Cost PMPM
Net cost divided by average eligible participants per month.
NET PROMOTER SCORE (NPS)
Metric to gauge customer loyalty and satisfaction by asking how likely they are to recommend a company’s product or service to others, typically on a 0 to 10 scale.
Net Trend
Net Cost PMPM for current time period divided by Net Cost PMPM for prior time period.
Network
A group of pharmacies that will accept a person’s prescription benefit ID card.
Non-Disclosure Agreement (NDA)
States that information cannot be shared.
Nonformulary Drugs
These drugs will not always appear on the formulary list but may still be a covered product.
Nonpreferred Brands
Brand name drugs that are not included on a plan’s preferred drug list.
O
OFF-LABEL DRUG USE
Using a FDA approved drug for a disease or medical condition that it was not approved to treat.
OPEN FORMULARY
Most, if not all, medications on a list of preferred medications have coverage.
Over-the-Counter (OTC) Medications
Medicines that can be purchased at retail stores without a prescription.
P
Participant
A person who is covered under a plan sponsor’s pharmacy benefits plan. CVS Caremark often refers to a participant as “member.”
participating group addendum (PGA)
The National CooperativeRx PGA often accompanies the Master Contract with our PBM vendor and requires a signature for a new member to join.
PATENT THICKETING
When a pharmaceutical company holds multiple patents for various aspects of a drug or its manufacturing process, making it difficult for competitors to enter the market.
PATIENT ASSISTANCE PROGRAMS
Typically offered by pharmaceutical companies, providing financial assistance to eligible patients for their medications. Programs may be subject to limits and restrictions on eligibility and available funds.
Patronage
Net earnings distributed to members in dividends.
PEPM/PEPY
Per employee per month/per employee per year.
Pharmacy Benefit Manager (PBM)
A third-party administrator of prescription drug programs for employers, health plans and other plan sponsors. Their main responsibilities are to develop the formulary, negotiate rebates with drug manufacturers and pay prescription drug claims. CVS Caremark is a PBM.
PMPM/PMPY
Per member per month/per member per year.
Preferred Brands
Brand name drugs that often appear on the formulary list and are a covered benefit.
PREVENTIVE CARE
Vaccinations, screenings, medications aimed at reducing the risk of developing health complications. Preventive care is often encouraged to promote proactive healthcare and prevent long-term health complications.
Prescriber
The health care provider who legally writes a prescription for a patient.
Prior Authorization (PA)
A review to ensure a medication or procedure is used for the right patient at the right time.
PUMPM/PUMPY
Per utilizing member per month/per utilizing member per year.
Q
QUANTITY LIMIT
Limits on how much medication can be dispensed to a patient within a specific timeframe, determined by clinical and safety guidelines.
R
Rebate
A credit returned to members based on utilization. National CooperativeRx distributes 100% of rebates back to members.
REBATE CREDIT LANGUAGE
Terms and conditions in a PBM agreement allowing a PBM to reduce the rebate guarantee payment when market conditions allow for a lower list price product with lower rebates to become preferred.
Rebate True-Up
Rebate dollar amount that is above the minimum guarantee.
RECONCILIATION
The process of reviewing and verifying pharmacy benefits claims, payments, and associated data for accuracy and consistency between what is billed by pharmacies, what is paid by the PBM, and recorded in their systems.
REQUEST FOR PROPOSAL (RFP)
A request issued by organizations to pharmacy benefit managers, inviting them to submit proposals that outline their strategy for managing the organizations’ pharmacy benefits.
Retail Cost Share
Cost share amount for up to a one-month supply of prescriptions from a retail pharmacy. May be a set dollar amount or a percentage of the total prescription cost.
RETAIL PHARMACY
Dispenses, stores, and sells medications to the public, including both prescribed and over-the-counter drugs.
S
SAE
Strategic Account Executive.
Short-Term Medication
Medication that is typically used for 30 days or less.
Single-Source Brand (SSB)
A brand name drug that is available from a sole manufacturer.
SINGLE-SOURCE GENERIC (SSG)
A generic drug that is available from a sole manufacturer.
SPD
Summary Plan Description.
Specialty Gross PMPM
Specialty total gross cost divided by average eligible participants per month.
Specialty Medications
Prescriptions used to treat specific chronic and/or genetic conditions. Each PBM sets their own specialty drug list as there is no industry standard.
Specialty Percentage of Total Gross Cost
Specialty total gross cost divided by total gross cost.
STEP THERAPY
Treatment protocol based on clinical outcome criteria and cost-effectiveness. Patients begin with preferred medications, and if initial treatment does not meet needs or is ineffective, they may progress to other alternatives.
STOP LOSS
A type of insurance designed to manage the financial risk of unexpectedly high healthcare costs for a self-funded health plan.
T
Third-Party Administrator (TPA)
A claims processor who may be owned by a large insurance carrier and specializes specifically in pharmacy or other areas.
340B
A U.S. federal initiative requiring drug manufacturers to provide eligible healthcare organizations with outpatient drugs at discounted prices.
Tier
A structure that determines cost levels for prescription drugs, with Tier 1 typically consisting of generic drugs (least expensive) and brand name drugs in higher tiers.
Transparency
An open and honest form of communication between an organization and its members, where all revenue is fully disclosed including rebate amounts, formulary management fees, pricing, etc.
Trend Components
Trend is the long-term pattern of a time series. Pharmacy trend components provide a breakdown of price inflation, utilization and drug mix.
U
UTILIZATION
The way patients use prescription drugs within a health plan. PBMs track quantity, frequency, costs, etc. through utilization data.
W
WHITEBAGGING
Scenario in which patients’ specialty medications are sent directly from a pharmacy to a healthcare provider’s office or facility for administration or usage.
WHOLESALE ACQUISITION COST (WAC)
The list price for a medication that a drug manufacturer sets when selling it to wholesalers or direct purchasers, such as pharmacy benefit managers.
WisconsinRx
National CooperativeRx’s former legal name.
Note: These definitions are provided for general educational purposes and may not reflect the specific terms or definitions outlined in your contract. If you are a current member or partner of National CooperativeRx, please refer to our master contract for specific terms and definitions related to your plan.