8.5 Insurance and Patient Responsibilities

Unlike most medical and dental offices, a pharmacy processes a claim prior to the patient receiving the service to check the claim’s viability with the insurer’s pharmacy benefit manager. Most commercial insurance, Medicare D plans, state Medicaid, and workers’ comp programs outsource the administrative processing of prescription drug claims to a pharmacy benefit manager. Commonly known PBMs include Merck, Express Scripts International (ESI), CVS Caremark, and Medco.

Each PBM develops with the insurer its own preferred drug list, or formulary of medications that are fully covered or covered at a lower cost. Using the formulary and the insurance policy, the PBM processes insurance drug claims and pharmacy reimbursements.

Pharmacy Benefit Manager–Contracts and Reimbursements

In community pharmacy, the very same drug may be billed at different rates to patients, different insurance companies, and government programs. That is because each community pharmacy must have a drug-provider contract negotiated with each PBM it works with. Typically, pharmacies have annually renewable contracts with PBMs to provide prescription benefits at specified reimbursement rates to the insurance enrollees managed by that PBM. Larger PBMs that can promise more business can negotiate lower rates of reimbursement. The rates are generally based on usual and customary (U&C) charges for drugs plus a pharmacy dispensing fee. Technicians need to learn the different rate schedules. The U&Cs are based on the AWP for each drug. By law, the pharmacy cannot charge or negotiate a higher cost to the government programs than to a commercial user or PBM for the same prescription.

Community pharmacies usually have contracts with all the major PBMs, thus being able to provide drugs to the widest clientele possible. However, some independent or chain pharmacies will not enter into certain PBM contracts because those PBM reimbursements do not sufficiently cover direct and indirect pharmacy expenses. The very survival of a pharmacy depends on its ability to contain personnel and drug acquisition costs. To continue as a business, community pharmacies must avoid agreeing to unprofitable contracts with any PBM, whether representing a government or a private insurance program.

Pharmacy Benefit Manager-Based Patient Charges

In most cases, insurance companies and their pharmacy benefit managers pay only a portion of the prescription cost, so patients need to pay up front some portion through a coinsurance percentage or copay. The most common drug insurance plans use a tiered-level copay for less expensive to more expensive drugs. In this scenario, the patient pays a lower copay for the generic than the preferred brand drug and an even higher copay for a nonpreferred brand or specialty drug. A non-formulary drug is most likely not covered at all. Some PBMs have high-cost innovator or specialty drugs as a fourth-tier formulary option: the patient usually pays a percentage (coinsurance) of the drug cost rather than a fixed copay amount.

For example, a PBM may elect to cover the generic drug simvastatin for the treatment of high cholesterol, which incurs a $5 copay. However, simvastatin (the nonpreferred generic drug) may have a $10 copay, and Livalo (the nonpreferred brand name drug), a $60 copay.

Technicians can help patients understand these options. Patients also need to know that most insurance plans cover only a 30-day supply of a brand name medication in a community pharmacy. Sometimes a 90-day supply will be covered at a cost-saving copay if the PBM’s mail-order pharmacy is used.

Even with drug insurance coverage, a patient who has high blood pressure, diabetes, and high cholesterol commonly pays five or six copays at the time of their medication refills if they all come due at the same time. The patient may need to pay $100 to $250 or more per month in out-of-pocket expenses—in addition to the monthly insurance premium expenses. That is where drug coupons can come in handy for patients on commercial insurance.