Chapter 7 The Business of Community Pharmacy

Learning Objectives Explain the parts of a computer system. Explain the alternatives for third-party administration. Define and explain the terms prescription benefits manager and tiered copay. Discuss drug coverage for Medicaid and Medicare patients. Identify procedures for inventory management, including the purchasing, receiving, and storage of prescription and over-the-counter drugs.

Learning Objectives Identify procedures for the purchasing, receiving, storage, and inventory control of controlled-drug substances. Calculate inventory turnover, markup, and markup rate. Apply average wholesale price to profit calculations. Compute discounts.

MANAGING COMPUTER SYSTEMS Parts of a Computer System: Some of the more important parts of a typical computer system include: input devices, central processing unit, storage devices, random-access memory, read-only memory, monitor, printer, scanner, modem, operating system, and applications. How Pharmacy Computer Systems Work: Pharmacy computer systems differ dramatically from one another. Most systems often allow the operator to call up patient profiles onscreen and to enter new prescription information.

Community Pharmacy Business Issues Safety Note! Many pharmacy computer systems contain features that will warn, automatically, of possible allergic reactions or adverse food or drug interactions based on information in the patient profile and on a database of known contraindications for given medications.

Figure 7.1

Terms to Remember applications central processing unit (CPU) scanner storage devices computer database management system (DBMS) input devices modem monitor

Terms to Remember operating system random-access memory (RAM) read-only memory (ROM) printer

BILLING AND THIRD-PARTY ADMINISTRATION Processing Prescription Drug Claims: When a new prescription is received, the pharmacy technician must obtain all necessary insurance information from the customer, including deductibles plus any copay or coinsurance percent amount. Medicaid Prescription Billing: Medicaid subsidizes the cost of healthcare, including drugs, for indigent and disabled citizens of its state who meet age and income eligibility requirements. Most community pharmacies sign a contract to agree to provide prescription benefits to this disadvantaged population according to the terms of that state.

BILLING AND THIRD-PARTY ADMINISTRATION Medicare Prescription Drug, Improvement, and Modernization Act of 2003: This act offers eligible patients the option to add drug insurance to their health coverage. Starting in January 2006, patients who qualified for Medicare coverage were eligible to add drug benefit coverage for an additional monthly charge to their current premium.

Terms to Remember deductible copayment Coinsurance third-party administration (TPA) prescription benefits manager (PBM) universal claim form (UCF) Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003

INVENTORY MANAGEMENT Purchasing: Purchasing is usually carried out by either an independent or group process. The Controlled Substances Act (CSA) defines procedures for purchasing. Receiving: The pharmaceutical products received must be carefully checked against the purchase order or requisition. The shipment should be compared for name of product, quantity, product strength, and product package size.

INVENTORY MANAGEMENT Inventory Management Processes: Inventory management includes knowledge of the importance of turnover ratios. Several important issues include how much inventory should be maintained, when inventory levels should be adjusted, and where inventory should be stored. Factors that bear on decisions regarding these issues include floor space allocation, design and arrangement of shelves, and demands on available refrigerator or freezer space.

INVENTORY MANAGEMENT Inventory Management Requirements for Controlled Substances: The DEA requires that a complete inventory of all controlled substances must be taken every 2 years. Some states have more stringent requirements such as a yearly inventory. The complete inventory must include an inventory record and an extemporaneous compounding record.

Community Pharmacy Business Issues Safety Note! Prescription vials returned by the patient cannot be returned to stock, even if they are unopened.

Figure 7.3

Terms to Remember purchasing receiving direct purchasing prime vendor purchasing inventory turnover rate inventory value wholesaler purchasing average inventory

BUSINESS MATH USED IN PHARMACY PRACTICE Markup: Prescription pricing is subject to governmental laws and regulations, as well as competition within the marketplace. Markup plays an important part in the pricing system. Discount: A pharmacy may offer a consumer a discount, or a deduction from what is normally charged, as an incentive to purchase an item.

BUSINESS MATH USED IN PHARMACY PRACTICE Average Wholesale Price Applications: Usually a third parties reimburse a pharmacy based on the AWP less an agreed on discount. Therefore the pharmacy has an incentive to purchase a drug as far below its AWP as possible. Capitation Fee: This reimbursement plan is infrequently used because it places all risk on the pharmacy without adequate controls in place to control prescribing.

Terms to Remember profit gross profit average wholesale price (AWP) capitation fee markup discount

Discussion Create a diagram of a typical computer system. Label the following parts: keyboard, mouse, central processing unit (CPU), floppy disk drive, monitor, printer, and modem.

Discussion A pharmacy technician working in a retail environment should be familiar with various terms related to heath insurance. Patients often have a difficult time understanding how their insurance works, and the technician can often act as an intermediary and advocate for the patient with regards to prescription drug benefits. Research the following insurance terms and define them in words that would be easily understood by a customer of the pharmacy. major medical insurance g. preferred formulary b. Medicare, Parts A, B, and D h. prescription benefits c. Medicaid manager (PBM) d. deductible i. usual and customary e. copay j. dual and tiered copays f. coinsurance