Glossary
of Pharmacy-Related Terms
340B
Ceiling Price: The maximum price
that manufacturers can charge covered
entities participating in the Public
Health Service's 340B Drug Pricing
Program. The 340B discount
is calculated using the Medicaid
rebate formula and is deducted from
the manufacturer's selling price
rather than paid as a rebate. Compared
to a drug's Average Manufacturer
Price (AMP), covered entities receive
a minimum discount of 15.1% for brand
name drugs and 11% for generic and
over-the-counter drugs and are entitled
to an additional discount if the
price of the drug has increased faster
than the rate of inflation. Note
that covered entities are free to
negotiate discounts that are lower
than the maximum allowable statutory
price, i.e., sub-ceiling prices.
340B
Prime Vendor Program: The 340B
law requires HHS to create a "prime
vendor" program for the entities
in the 340B drug discount program. The
prime vendor handles price negotiation
and drug distribution responsibilities
for those entities that choose to join
the prime vendor. A covered entity does
not have to join the prime vendor program
in order to participate in the 340B program
although covered entities are encouraged
to join. Apexus
Inc. (not a U.S. Government Web site)
(formerly HPPI) is the current prime vendor.
Since the prime vendor has the potential
to control a large volume of pharmaceuticals,
it can negotiate favorable prices and
develop a national distribution system
that would not be possible for covered
entities to obtain individually.
340B
Program: The 340B Drug Pricing
Program resulted from enactment of
Public Law 102-585, the Veterans
Health Care Act of 1992, which
is codified as Section 340B of the
Public Health Service Act. Section
340B limits the cost of drugs to
Federal purchasers and to certain
grantees of Federal agencies.
Actual
Acquisition Cost (AAC):
The net cost of a drug paid by a pharmacy.
It varies with the size of container purchased
(e.g., ten bottles of 100 tablets typically
costs more than one bottle of 1,000 tablets)
and the source of purchase (manufacturer
or wholesaler). A drug's ACC includes
discounts, rebates, chargebacks and other
adjustments to the price of the drug,
but excludes dispensing fees.
Apexus:
(not a U.S. Government Web site) The organization
currently awarded the contract by the
Office of Pharmacy Affairs to serve as
the prime vendor for the Public Health
Service 340B program. Apexus (formerly
HPPI), which was awarded the contract
in September 2004, hopes to negotiate
discounts for 340B covered entities below
the 340B ceiling price on a wide range
of brand name and generic drug products.
Apexus, which is based in Irving TX, is
a nonprofit subsidiary of Provista, one
of the country’s leading group purchasing
organizations (GPO).
Average
Manufacturer Price (AMP): The
average price paid to a manufacturer
by wholesalers for drugs distributed
to retail pharmacies. AMP was a benchmark
created by Congress in 1990 in calculating
Medicaid rebates and is not publicly
available. FSS and 340B prices, as
well as prices associated with direct
sales to HMOs and hospitals, are
excluded from AMP under the rebate
program. The Congressional Budget
Office estimates AMP to be about
20 percent less than AWP for more
than 200 drug products frequently
purchased by Medicaid recipients.
Average
Sales Price (ASP): A
new system created by Federal and
State government prosecutors in settlements
with pharmaceutical manufacturers
TAP and Bayer to ensure more accurate
price reporting. ASP is the weighted
average of all non-Federal sales
to wholesalers and is net of chargebacks,
discounts, rebates, and other benefits
tied to the purchase of the drug
product, whether it is paid to the
wholesaler or the retailer.
Average
Wholesale Price (AWP): A
national average of list prices charged
by wholesalers to pharmacies. AWP
is sometimes referred to as a "sticker
price" because it is not the actual
price that larger purchasers normally
pay. For example, in a study of prices
paid by retail pharmacies in eleven
States, the average acquisition price
was 18.3 percent below AWP. Discounts
for HMOs and other large purchasers
can be even greater. AWP information
is publicly available.
Best
Price (BP): The lowest price
available to any wholesaler, retailer,
provider, health maintenance organization
(HMO), nonprofit entity, or the government. BP excludes prices
to the Indian Health Service (IHS),
Department of Veterans Affairs (DVA),
Department of Defense (DoD), the
Public Health Service (PHS), 340B
covered entities, Federal Supply
Schedule (FSS) and State pharmaceutical
assistance programs, depot prices,
and nominal pricing. BP includes cash
discounts, free goods that are contingent
upon purchase, volume discounts,
and rebates.
Big
4: The four largest purchasers
of pharmaceuticals within the Federal
government: Department of Veterans
Affairs (VA), Department of Defense
(DoD), Public Health Service (PHS),
and Coast Guard. These four Federal
agencies have the right to purchase
their pharmaceuticals from the Federal
Supply Schedule (FSS) like every
other Federal agency. However, the
Big 4 often get pricing below FSS
on brand name drugs because these
drugs are subject to a maximum statutory
price called the Federal Ceiling
Price.
Bundled
Sales: The packaging of drugs
of different types, where the total
price for the package is less than
the purchase price of the drugs if
purchased separately.
Centers
for Medicare & Medicaid Services
(CMS): Formerly known
as the Health Care Financing Administration
(HCFA), the Centers for Medicare & Medicaid
Services are organized around three
centers to clearly reflect the
agency's major lines of business. The
Center for Medicare Management
focuses on management of the traditional
fee-for-service Medicare program.
This includes development of payment
policy and management of the Medicare
fee-for-service contractors. The
Center for Beneficiary Choices
focuses on providing beneficiaries
with information on Medicare, Medicare
Select, Medicare+Choice and Medigap
options. It also includes management
of the Medicare+Choice plans, consumer
research and demonstrations, and
grievance and appeals functions. The
Center for Medicaid and State Operations
focuses on programs administered
by states. This includes Medicaid,
the State Children's Health Insurance
Program (CHIP), insurance regulation
functions, survey and certification,
and the Clinical Laboratory Improvements
Act (CLIA).
Coinsurance: The
percent of the Medicare-approved amount
that a Medicare beneficiary has to
pay in addition to the deductible for
Part A and/or Part B. In the Original
Medicare Plan, the coinsurance payment
is a percentage of the cost of the
service (for example, 20%). In
this example, coinsurance for a $100
x-ray would be $20.
Comprehensive
Pharmacy Services: Refers
to services that improve the health
status of the patient population
through access to affordable medications,
efficient pharmacy management, and
pharmaceutical care to improve patient
outcomes.
Contracted
Pharmacy: An arrangement
through which a covered entity
may contract with an outside pharmacy
to provide comprehensive pharmacy
services utilizing medications
purchased under 340B.
Consumer
Price Index-Urban (CPI-U): CPI-U
means the index of consumer prices
developed and updated by the U.S.
Department of Commerce. As
referenced in section 1927(c) of
the Social Security Act, it is
the CPI for all urban consumers
(U.S. average) and, except for
the base CPI-U, it shall be the
index for the month before the
beginning of the calendar quarter
for which the rebate is made. CPI-U
is used in calculating the 340B
ceiling price for single source
and innovator multiple source drugs.
Copayment: In
some Medicare health plans, this is
the amount a Medicare beneficiary must
pay for each medical service s/he gets,
like a doctor visit. In the Medicare
program, a copayment is usually a set
amount a beneficiary pays for a service,
for example, $5 or $10 for a doctor
visit.
Corporate
Integrity Agreement (CIA): An
agreement between the Office of the
Inspector General of the Department
of Health and Human Services and
a health care provider or other entity
as part of a settlement for alleged
civil wrongdoing relating to federal
health laws. The government
may enter into a CIA with an entity
instead of seeking to exclude the
entity from Medicare, Medicaid, and
other Federal health care programs. Each
CIA is unique to the entity, but
a typical CIA will last for five
years and will require the entity
to implement procedures to comply
with Federal health care laws, often
including developing a compliance
plan and hiring a compliance officer. Several
pharmaceutical manufacturers have
recently entered into CIAs in connection
with, among other issues, their determination
of AWP and Medicaid best price.
Covered
Drug: An FDA-approved prescription
drug, an over-the-counter (OTC) drug
that is written on a prescription,
a biological product that can be
dispensed only by a prescription
(other than a vaccine) or FDA-approved
insulin.
Covered
Entities: The statutory name
for facilities and programs eligible
to purchase discounted drugs through
the Public Health Service's 340B
drug pricing program. Covered entities
include federally qualified health
center lookalike programs; certain
disproportionate share hospitals
owned by, or under contract with,
State or local governments; and several
categories of facilities or programs
funded by Federal grant dollars,
including federally qualified health
centers, AIDS drug assistance programs,
hemophilia treatment centers, STD
and TB grant recipients, and family
planning clinics.
CRITICAL
ACCESS HOSPITAL (CAH):(Acrobat/pdf) Is
a designated limited-service hospital
located in a rural area. CAHs are
not legislatively defined as covered
entities under the 340B Program.
Medicare pays CAHs for inpatient
and outpatient services on the basis
of their current Medicare-allowable
costs or “cost-based reimbursement”.
Deductible: The
amount a Medicare beneficiary must
pay before Medicare begins to pay.
There is a deductible for each benefit
period for Part A, and each year for
Part B. These amounts can change
every year.
Depot
Price: The price available
to any depot of the Federal government
for purchase of drugs from the manufacturer
through the depot system of procurement.
Dispensing
Fee: The dispensing fee
represents the charge for the professional
services provided by the pharmacist
when dispensing a prescription (including
overhead expenses and profit). Medicaid
and most direct pay insured prescription
programs use dispensing fees to establish
pharmacy payment for prescriptions. Dispensing
fees do not include any payment for
the drugs being dispensed. Under
the new Medicare Law, pharmacy dispensing
fees paid by Medicare under Part
B are expected to grow depending
on the complexity of the drug administration
services involved.
Disproportionate
Share Adjustment: The
Medicare disproportionate share
adjustment is an additional Medicare
payment to hospitals which treat
a high percentage of low-income
patients. The factors used to calculate
this adjustment are the sum of
the ratios of Medicare Part A Supplemental
Security Income (SSI) patient days
to total Medicare patient days,
and Medicaid patient days to total
patient days in the hospital. In
order to qualify for the 340B Program,
a hospital must have a disproportionate
share adjustment greater than 11.75%.
Disproportionate
Share Hospital (DSH): A
hospital with a disproportionately
large share of low-income patients. Under
Medicaid, States augment payment
to these hospitals. Medicare
inpatient hospital payments are
also adjusted for this added burden.
DSH
Payment: Additional
payments in the Medicaid and Medicare
programs that, along with local
tax appropriations, help hospitals
finance care to low income and
uninsured patients.
Dual
Eligibles:
(Acrobat/pdf)
Persons who are entitled
to Medicare (Part A and/or Part B) and who
are also eligible for some form of Medicaid
benefit.
Federal
Ceiling Price (FCP): The maximum
price manufacturers can charge for
FSS-listed brand name drugs to the
Big 4 -- VA, DoD, PHS, and the Coast
Guard -- even if the FSS price is
higher. FCP must be at least
24 percent below the non-Federal
average manufacturer price. FCP
prices are not publicly available.
Federal
Supply Schedule (FSS):
The collection of multiple award contracts
used by Federal agencies, U.S. territories,
Indian tribes and other specified entities
to purchase supplies and services from
outside vendors. FSS prices for the pharmaceutical
schedule are negotiated by the VA and
are based on the prices that manufacturers
charge their "most-favored" non-Federal
customers under comparable terms and conditions.
Because terms and conditions can vary
by drug and vendor, the most-favored customer
price may not be the lowest price in the
market. FSS prices are publicly available.
Formulary:
A preferred list of drug products that
typically limits the number of drugs available
within a therapeutic class for purposes
of drug purchasing, dispensing and/or
reimbursement. A government body, third-party
insurer or health plan, or an institution
may compile a formulary. Some institutions
or health plans develop closed (i.e. restricted)
formularies where only those drug products
listed can be dispensed in that institution
or reimbursed by the health plan. Other
formularies may have no restrictions (open
formulary) or may have certain restrictions
such as higher patient cost-sharing requirements
for off-formulary drugs.
Health
Resources and Services Administration
(HRSA): HRSA is an agency
within the Department of Health
and Human Services. Its mission
is to improve and expand access
to quality health care for all. HRSA
assures the availability of quality
health care to low income, uninsured,
isolated, vulnerable and special
needs populations and meets their
unique health care needs. HRSA
is organized into several Offices
and five Bureaus (the Healthcare
Systems Bureau, the Bureau of Primary
Health Care, the Bureau of Health
Professions, the HIV/AIDS Bureau,
and the Maternal and Child Health
Bureau).
In-House
Pharmacy Services: Pharmacy
services which are housed within
a covered entity’s facility. The
pharmacy must be part of the legal
organization of the covered entity.
Innovator
Multiple Source Drug: As
set forth in Section 1927(k)(7)(A)(ii)
of the Social Security Act, includes
all covered outpatient drugs approved
under a New Drug Application (NDA),
Product License Approval (PLA), Establishment
License Approval (ELA), or Antibiotic
Drug Approval (ADA). A covered
outpatient drug marketed by a cross-licensed
producer or distributor under the
approved new drug application shall
be included as an innovator multiple
source drug when the drug product
meets this definition.
Manufacturer: For
purposes of the 340B Program, manufacturer
includes all entities engaged in (1)
the production, preparation, propagation,
compounding, conversion, or processing
of prescription drug products, either
directly or indirectly by extraction
from substances of natural origin,
or independently by means of chemical
synthesis, or by a combination of extraction
and chemical synthesis, or (2) the
packaging, repackaging, labeling, relabeling,
or distribution of prescription drug
products. A manufacturer must
hold legal title to or possession of
the NDC number for the covered outpatient
drug. Such term does not include a
wholesale distributor of drugs or a
retail pharmacy licensed under State
law. "Manufacturer" also includes
an entity, described in (1) or (2)
above, that sells outpatient drugs
to covered entities, whether or not
the manufacturer participates in the
Medicaid rebate program.
Medicaid: A
joint Federal and State program that
helps with medical costs for some people
with low incomes and limited resources.
Medicaid programs vary from State to
State but most health care costs are
covered if a beneficiary qualifies.
The name of the program varies by State
but is commonly referred to as the
medical assistance program.
Medicaid
Best Price: The lowest price
paid to a manufacturer for a brand
name drug, taking into account rebates,
chargebacks, discounts or other pricing
adjustments, excluding nominal prices.
Best price is a variable used in
the Medicaid rebate statute to calculate
manufacturer rebates owed to State
Medicaid agencies. Prices charged
to certain governmental purchasers
are statutorily excluded from best
price including prices charged to
the VA, DoD, Indian tribes, FSS,
State pharmacy assistance programs,
Medicaid, and 340B covered entities.
Best price data is not publicly available.
Medicaid
Rebate Net Price: The effective
price paid for covered outpatient
drugs by State Medicaid programs
taking into account the manufacturer
rebates received by States. The basic
rebate for brand name drugs is the
greater of 15.1 percent of the AMP,
or the difference between AMP and
Medicaid best price. Rebates for
generic drugs are 11 percent of the
AMP. Manufacturers must pay
a supplemental rebate on brand name
drugs for which the AMP increases
faster than the rate of inflation
based on the consumer price index.
Information on rebate amounts is
publicly available; AMP and best
price are not.
Medicare:
The Federal health insurance program for
people 65 years of age and older; certain
younger people with disabilities; and
people with End-Stage Renal Disease (those
with permanent kidney failure who need
dialysis or a transplant), sometimes called
ESRD.
Medicare
Part A: The part of Medicare
that covers hospice care, home health
care, skilled nursing facilities,
and inpatient hospital stays.
Medicare
Part B: The part of Medicare
that covers doctors' services, outpatient
hospital care, and other medical services
that Part A doesn't cover such as physical
and occupational therapy. Other examples
include X-rays, medical equipment or limited
ambulance service.
Medicare
Prescription Drug, Improvement and Modernization
Act of 2003 (MMA): The most
sweeping amendments to the Medicare program
made by Congress since the start of the
program, featuring the creation of a new
outpatient drug benefit, revitalization
of the Medicare managed care program,
payment methodology changes for virtually
every Medicare provider, contracting and
appeals reform, and establishment of health
savings accounts.
National
Drug Code (NDC): The
NDC is the identifying drug number
maintained by the Food and Drug
Administration. Manufacturers
that have executed Pharmaceutical
Pricing Agreements (PPA) report
quarterly information to the Office
of Pharmacy Affairs by NDC number
including labeler code, product
code, and package size code.
Network
Central Fill: A pharmacy
distribution system in which a network
member’s in-house pharmacy
fills prescriptions for the patients
of the other network members. Please
note that if drugs purchased under
340B are used, approval as a 340B
Alternative Method Demonstration
project might be required.
Nominal
Price: For purposes of
excluding prices from the Best Price
calculation, this means any price
less than 10 percent of the AMP in
the same quarter for which the AMP
is computed.
Non-Federal
Average Manufacturer Price (Non-FAMP):
The average price paid to a manufacturer
by wholesalers for drugs distributed
to non-Federal purchasers. The Big
4 are entitled under Federal law
to discounts on brand name drugs
of at least 24 percent off of Non-FAMP.
Non-FAMP is not publicly available.
Noninnovator
Multiple Source Drug: This
category is defined in Section 1927(k)(7)(A)(iii)
of the Social Security Act as a multiple
source drug that is not an innovator
multiple source drug. It also
includes covered outpatient drugs
approved under ANDA or AADA.
Patient: An
individual is considered a patient
of a covered entity (with the exception
of State operated or funded AIDS drug
assistance programs) only if: (1)
the covered entity has established
a relationship with the individual,
which includes maintaining records
of the individual’s health care;
(2) the individual receives health
care services from a health care professional
who is either employed by the covered
entity or provides health care under
contractual or other arrangements (e.g.,
referral for consultation) such that
responsibility for the individual’s
care remains with the covered entity;
(3) the individual receives a health
care service or range of services for
which grant funding or federally-qualified
health center look-alike status has
been provided. (Disproportionate share
hospitals are exempt from this requirement.)
Pharmaceutical
Pricing Agreement (PPA): This
agreement is required for manufacturers
who have executed a Medicaid Rebate
Agreement with CMS and voluntary
for those who do not have a current
Medicaid Rebate Agreement. The
PPA must be signed by a corporate
officer of the company (e.g., President,
Chief Executive Officer, or General
Counsel –signatures by VP
or Director of Sales or Marketing
will not be accepted). A
PPA remains in effect until terminated
by either the manufacturer or the
Secretary of HHS. It is not
automatically terminated if a manufacturer
terminates its Medicaid Rebate
Agreement.
Pharmacy
Affairs Branch: The previous
name of the Office of Pharmacy Affairs.
The Office of Pharmacy Affairs (OPA)
is the component within the Health
Resources and Services Administration
(HRSA) that administers the 340B
Drug Pricing Program. OPA is
located within HRSA’s Healthcare
Systems Bureau.
Pharmacy
Assistance Programs (PAPs): Programs
through which many pharmaceutical
manufacturers provide free or greatly
subsidized medications to indigent
patients.
Pharmacy
Benefit Manager (PBM): An
organization that provides administrative
services in processing and analyzing
prescription claims for pharmacy
benefit and coverage programs. PBM
services can include contracting
with a network of pharmacies; establishing
payment levels for provider pharmacies;
negotiating rebate arrangements;
developing and managing formularies,
preferred drug lists, and prior authorization
programs; maintaining patient compliance
programs; performing drug utilization
review; and operating disease management
programs. Many PBMs also operate
mail order pharmacies or have arrangements
to include prescription availability
through mail order pharmacies. PBMs
are expected to play a key role in
managing pharmacy benefit plans in
the Medicare drug program.
Pharmacy
Services Support Center (PSSC): PSSC
has a contract with the Office
of Pharmacy Affairs to provide
guidance and technical assistance
to 340B covered entities. The
organization’s primary mission
is to bring comprehensive pharmacy
services to patients who receive
care at HRSA grantee and 340B-eligible
health care delivery sites. The
non-profit organization, which
is based at the American Pharmacists
Association (APhA), provides information
and assistance to make the best
use of government resources and
create new programs that promote
access to affordable drugs and
bring the value of pharmacy services
to traditionally underserved populations.
Premium: The
monthly payment for health care coverage
to Medicare, an insurance company or
a health care plan.
Section
1927 of the Social Security Act: The
legislation that requires a manufacturer
to enter into and have in effect
a rebate agreement with Medicaid
in order to receive payment for
certain covered outpatient drugs.
Section
602 of the Veterans Health Care
Act of 1992: Section
340B of the Public Health Service
Act was established under Section
602 of the Veterans Health Care
Act of 1992. As a result,
340B and 602 are often used interchangeably.
Single
Source Drug: As defined
in Section 1927(k)(7)(A)(iv) of the
Social Security Act, a covered outpatient
drug which is produced or distributed
under an original new drug application
approved by the Food and Drug Administration,
including a drug product marketed
by any cross-licensed producers or
distributors operating under the
New Drug Application (NDA). It
also includes a covered outpatient
drug approved under a Product License
Approval (PLA), Establishment License
Approval (ELA), or Antibiotic Drug
Approval (ADA).
Telepharmacy: The
use of electronic information and communication
technology to provide and support comprehensive
pharmacy services when distance separates
the participants.
Unit
Rebate Amount (URA): This
is the unit amount computed by
the Centers for Medicare & Medicaid
Services to which the Medicaid
utilization information may be
applied by States in invoicing
the Manufacturer for the rebate
payment due. The link shows
examples of how URA is calculated.
VA
National Contract Price: The
price VA has obtained though competitive
bids from manufacturers for select
drugs in exchange for their inclusion
on the VA formulary. Because the
VA is entitled to FCP prices under
Federal statute, VA national contract
prices are even lower than FCP
prices and are often the lowest
prices in the nation. These prices
are publicly available at the link
shown.
Wholesale
Acquisition Cost (WAC): The price
paid by a wholesaler for drugs purchased
from the wholesaler's supplier, typically
the manufacturer of the drug. On
financial statements, the total of
these amounts equals the wholesaler's
cost of goods sold. Publicly disclosed
or listed WAC amounts may not reflect
all available discounts.
Wholesaler: A
wholesaler is a company that serves
as a bridge between a drug manufacturer
and a covered entity. This means
any entity (including a pharmacy or
chain of pharmacies) to which the labeler
sells the covered outpatient drug,
but that does not relabel or repackage
the covered outpatient drug.
(This
glossary is based, in part, on Drug
Pricing Glossary and Other Key Terms, prepared
by Powers, Pyles, Sutter & Verville
PC, and is used with their permission. Parts
of this glossary also include definitions
obtained from the Centers for Medicare & Medicaid
Services.) |