| Term | Definition |
|---|---|
| adjudication | Prescription claims adjudication refers to the determination of the insurer's payment after the member's insurance benifits are applied to a medical claim. |
| average manufacturer price (AMP) | The average price paid to manufacturers by wholesalers for drugs distributed through retail pharmacies. This includes discounts and other price concessions that are provided by manufacturers. |
| average sales price (ASP) | Price based on manufactuurer-reported selling price data and includes volune discounts and price concessions that are offered to all classes of trade. |
| average wholesale price (AWP) | A commonly used benchmark for billing drugs that are reimbursed in the community pharmacy setting. The AWP for a drug is set by the manufacturer of the drug. |
| coinsurance | A percentage change for a service, such as a prescription or doctor visit. |
| copayment | An amount that insured individuals must pay for a service such as a prescription or docter visit, each time the use the insurance benefit. |
| cost sharing | The amount of insurance costs shared by the employee or beneficiary. |
| coverage gap (donut hole) | A period of no coverage that typically occers once the total prescription drug spending for the year reaches the initial coverage limit. The beneficiary must pay all costs for prescription spending for the year reaches the catastrophic coverage threshold. |
| deductible | A fixed amount that must be paid each year by the individual before the insurance starts to pay |
| diagnosis-related group (DRG) | A set rate paid for an impatient procedure based on cost and intensity. Drugs provided during an inpatient stay are not separately reimbursed; thay are included in the DRG payment. |
| dispensing fee | The amount paid for dispensing the prescription. |
| federal upper limit (FUL) | The maximum of federal matching funds that the federal government will pay to state Medicades programs for eligible generic and multisource drugs. |
| fee for service | A method of payment in whitch providers bill separately for each patient encounter or service they provide. |
| formulary | A specific list of drugs that are included with a given prescription drug name. |
| health care common procedure coding system (HCPCS) | A set of medical codes that identifies procedures, equipment, and supplies for claim submission purposes. |
| indemnity | A system of health insurance in witch the insurer pays for the cost of covered services after care has been given on a fee-for-service basis. It usually defines the maximum amounts covered. |
| institutional patient assistance programs (IPAPs) | Bulk medication replacemaent is provided to the institution (e.g., pharmacy or clinic) insted of to an individual patient. The institution has the obligation of verifing that each patient who receives medications meets the established criteria. |
| maximum allowable cost (MAC) | Used for generic or muntisource drug reimbursement; usually based on the cost of the lowest available generic equivalent. |
| network | A group of pharmacies, physicians, hospitals, or other providers who participate in a certain managed care plan. |
| patient assistance programs (PAPs) | Programs offering certain free drugs to low-income patients who lack prescription drug coverage and meet certain criteria. |
| pharmacy benefit manager (PMB) | An organization that manages pharmacy benefits for managed care organizations, self-insured employers, insurance companies, labor unions, Medicaid/Medicare drug plans, the Federal Employees Health Benefits Program, and other government entities. |
| premium | The amount the idividual pays to belong to a health plan. Premiums are often paid monthly. |
| priot authorization | Requires the prescriber to receive pre-approval from the PBM in order for the drug to be covered by the benefit. |
| prospective payment | The amount to be paid for drugs is predetermined based on the condition that is being treated. It typically includes all cost associated with treating a particular condition including medications. |
| quantity limits | Set upper limits of an amount of a drug that is covered by the benefit, or the total days of therapy. |
| retrospective payment | drugs are dispensed and reimbursed later, according to a predetermined formula that is specified in a contract between the pharmacy and the third-party payer, such as the insurance company or pharmacy benefit manager. |
| revenue | Represents the inflow of funds. |
| step therapy | Requiring the use of a recognized first-line drug before a more complex or expensive second-line drug is used. Beneficiaries must try and fail with the first-line drug before a second-line drug can becovered by the benefit. |
| third-party payer | An organization (either private or public) that reimburses a pharmacy or patient for products and/or services. |
| wholesale acquisition cost (WAC) | Represents the "list price" at which the manufacturer sells the drug to the whole saler. |
