1. Pharmacy Stock and Billing
Chapter 13

2. How Major Private and Government Insurance Companies Manage Drugs
Lesson 13.1
How Major Private and Government Insurance Companies Manage Drugs
Explain the function of a drug formulary.
Describe the differences between generic and trade drugs, and explain how these differences affect cost to the patient and pharmacy.
Explain the process of third-party billing.
List the primary types of insurance companies and describe how they manage drug coverage.
4a. Differentiate between HMO and PPO health care programs.

3. Lesson 13.1
How Major Private and Government Insurance Companies Manage Drugs (cont’d)
Differentiate between Medicaid and Medicare programs, including eligibility.
5a. List the five individual coverage plans offered by Medicare.
5b. Explain the use of Medigap plans and their limitations.
Explain the purpose of workers’ compensation.

4. Billing the Insurance Company
Lesson 13.2
Billing the Insurance Company
Summarize why and how prior authorization occurs, and describe the pharmacy’s responsibilities in attaining authorization.
7a. Indicate how to read a prescription drug card.

5. Pharmacy Ordering Systems and How to Handle Returns
Lesson 13.3
Pharmacy Ordering Systems and How to Handle Returns
Describe three main ordering systems available in a pharmacy to keep stock levels constant.
8a. List the types of automated dispensing systems used in pharmacy.
Define the steps taken to handle recalled, returned, or expired medications.

6. Introduction Everyone working in pharmacy maintains inventory stock.
Stock depleted: replacement inventories ordered.
Task is delegated to specific person in pharmacy.

7. Introduction (cont’d)
Technicians also in charge of billing process.
Each pharmacy accepts different insurance claims.
Technician acquainted with normal billing procedures.
Formulary: firm knowledge is necessary.
Why do you think that a technician’s duties might include billing? Wouldn’t it be more efficient to have a pharmacy clerk do all the paperwork? (Technicians are expected to have the competencies needed for pharmacy billing: strong telephone and written communication skills and a good memory for the range of billing practices used by different insurance providers and government agencies. Some pharmacies might have billing clerks, but smaller pharmacies often rely on technicians for billing and filling prescriptions.)

8. Formulary and Drug Utilization
A list that describes all the medications covered under a specific insurance plan
Offers alternative medications if first choice not covered
Medications meet certain requirements (effectiveness and cost)
Formularies help control costs when there are many similar drugs in each therapeutic class.
For example, there are 10 FDA-approved oral ACE inhibitors, but because they are considered largely interchangeable for most patients, it is likely that only a few would be included on a formulary.
Each insurer has its own unique formulary, and pharmacies associated with HMOs will stock according to the HMO’s formulary.

9. Formulary and Drug Utilization (cont’d)
Most formulary drugs generic when available
Generics—effective as brand names—less expensive
Review committee: pharmacists, physicians, administrators
The review committee evaluates drugs that have been approved by the FDA and determines whether they are cost effective.

10. Formulary and Drug Utilization (cont’d)
Drug companies give rebates when their drug is chosen.
Most insurance companies cover most of cost of generic drug.
Some allow brand-name drug; patient pays difference in cost between trade and generic.
A decrease in price to the pharmacy ultimately saves money for the insurance company and the patient.

11. Formulary and Drug Utilization (cont’d)
Formularies not permanent—new generics and cost factors reviewed
Drugs not on formulary: new drugs, uncommon drugs, expensive drugs
Nonformulary drug: approved if justified as medically necessary by physician

12. Generic Versus Trade Drugs
Trade, brand, proprietary (interchangeable): name of drug when first patented and marketed by owner or manufacturer.
Patent runs out after time.
Other drug companies produce same drug “generic.”
What do you think the average difference in cost is between trade and generic drugs? (Generic drugs average $17 per 30-day supply, and brand-name drugs average $72, a difference of $55.)
A drug formula is the property of the original manufacturer until the patent expires—20 years from the date of filing.
Why are generic drugs cheaper? (Generic drugs cost less because several manufacturers might be competing and because there is often less money spent on advertising or research and development.)

13. Third-Party Billing
Refers to the third party of three parties: patient, hospital, and insurance company.
Insurance company involved in overall payment process.
Patient pays his or her portion, pharmacy bills insurance company for remainder.

14. Point of Sale Billing
Electronic billing is performed via a secure data and transactional network to ensure patient confidentiality.
Within seconds, insurance company:
Verifies eligibility
Identifies covered drugs
Prices a claim
Returns a response

15. Types of Insurance Three types of plans in use today:
Health Maintenance Organization (HMO)
Preferred Provider Organization (PPO)
Government programs: Medicaid, Medicare, Worker’s Compensation
Insurance card: determines if the patient has prescription coverage, who should be billed, and transmit the claim correctly.
Each pharmacy accepts a different set of insurance carriers.

16. Health Maintenance Organization
Effective method of controling healthcare costs
Examples: Aetna, Blue Cross, United Healthcare, PacifiCare, Champus Tricare, Kaiser

17. Special Features of HMOs
Primary care physician (PCP)
Independent physician association (IPA)
Copay
The patient can choose a primary care physician rather than having to be seen by the physician on duty.
The HMO gives the patient a discounted rate for having to see contracted providers (including certain hospitals, clinics, and medical groups) through the contract made with the insurance company.
What is a copay? (A copay is a predetermined amount to be paid by the patient for office visits, emergency room visits, and prescription drugs. The patient is billed the copay per medication filled and the insurance company is billed for the remaining balance of the medication.)

18. What if Your Patient Has HMO Insurance?
Technician obtains information from patient.
Technicians charges patient copay and bills insurance for rest.
HMO may require prior authorization.

19. Preferred Provider Organization
Patient pays more out-of-pocket expenses.
Chooses physician from list of contracted providers or any wanted.
No requirements for PPO.
Examples are: Aetna, Blue Cross Blue Shield, State Farm, United Healthcare.
Copay higher, deductible.
A deductible is the amount that the patient must pay before the insurance company pays.
The insurance will pay a certain percentage of the medication bills if the charges were incurred by a contracted provider.

20. What if Your Patient Has PPO Insurance?
Do they have medication coverage?
Has copay or pay up front?
Determine if there is a deductible to be met.
Information: insurance health care card.
Approval code sent to pharmacy after information transmitted.
Rejected claim: call help desk.
The patient must call the provider to rectify any major problems causing rejected claims.

21. Drug Discount Cards or Drug Coupon Cards
These cards are not insurance.
Discount cards allow the patient to obtain medications at the contracted provider rate.

22. Drug Discount Cards or Drug Coupon Cards (cont’d)
Drug manufacturers provide drug coupon cards.
It’s an incentive to get the patient to try the drug, and
An aid to patients who meet certain income requirements.
Both types of cards are billed as a third-party claim.

23. Government-Run Insurance Programs
Medicare: each worker paying portion of salary to this plan
Medicaid: percentage of each state’s budget
State and federal insurance plans

24. History of Medicare and Medicaid
Both programs established in 1965.
Medicare Modernization Act: created prescription drug discount cards
Medicare Part D: federal government provides subsidies to participants whose income is less than 150% of the federal poverty limit.

25. Medicare
Federally run program for seniors, disabled, dialysis patients.
It works like an HMO and PPO.
Provider accepts Medicare.
Patient pays yearly deductible, share of cost.
Medicare did not offer prescription drug coverage in the past, but the Medicare Modernization Act of 2003 mandated that it begin to do so in 2006.
What have you heard, either in the news or in pharmacies, about Medicare’s prescription drug coverage?

26. Medicare Levels
Medicare Part A: hospital stays, skilled nursing facilities, hospices, various therapies
Medicare Part B: doctor visits, lab diagnostics, outpatient mental health, physical therapy, medical equipment
Medicare Part D: coverage of medicine; diabetic insulin and syringes

27. Medicare Part D
Intended to help certain persons with prescription costs.
Each plan may vary considerably in coverage.
Two types of plans: basic, enhanced.
Guidelines found on

28. What if Your Patient has Medicare Insurance?
Pharmacies must apply for a National Provider Identifier (NPI).
Patient is encouraged to receive generic drugs.
Keep updated on any new changes in the system in order to help their patients.

29. Medicaid
For low-income residents, uninsured pregnant women, persons with disabilities
Can be used in conjunction with Medicare.
Three major levels of coverage:
Patient not responsible for any cost
Share of cost
Geographical managed care program
In the share of cost level, the patient must pay a deductible. (A geographical managed care program allows the patients to belong to a medical group, including HMOs, with which Medicaid has a contract agreement.)

30. What if Your Patient Has Medicaid?
Copy of insurance card
Identifies which program patient is under

31. Worker’s Compensation
Paid by employers to cover injuries of employee on the job.
Eligible coverage if work-related injury.
Patient does not pay for anything.
Claims filed electronically or hard copy to insurance companies.
Get billing information before dispensing medication.
The government requires employers with a certain number of employees to offer worker’s compensation.

32. Billing the Insurance Company
Information insurance companies need to process claim: same as pharmacy label plus date of birth, insurance group, and identification number.
Information verified before medication is dispensed.
Patient information is in pharmacy’s computer system.

33. Billing the Insurance Company (cont’d)
Information kept updated
Minimum information required by insurance company:
Patient’s name
Date medication is filled
Pharmacy name and address
Medication prescribed
Dosage
Date of birth identification number
The insurance company verifies whether the drug is on the formulary.
The dosage determines the cost of the medication.

34. Billing the Insurance Company (cont’d)
Each plan: own formulary, limitations, exclusions
Each pharmacy: accepts certain insurance
If the pharmacy accepts the copayment as payment in full, it will bill the insurance company for the cost of the medication.

35. Prior Authorization
Prior authorization needed because drug of choice may not be formulary, or the insurance company may have determined less costly methods of treatment are available that need to be tried first.
Doctor’s office responsible for requesting prior authorization.

36. Patient Profiles
Pharmacy computer system details each patient’s profile.
Profile kept updated for proper billing.
When mistake in information: claim is rejected.
No insurance: pay full price.
What can pharmacy technicians do to reduce the likelihood that a claim will be rejected? (Technicians can ask the patient whether his or her name, address, phone number, and DOB on the prescription are the same as what is on file with the insurance company. Another element that is sometimes important is whether the prescribing physician is the patient’s PCP. If anything in the patient’s profile is different than what is on file with the insurer, the patient, not the technician, must inform the insurance company. Technicians can help patients with these steps.)

37. Basic Information for Patient Profiles
Patient’s name
DOB
Address
Phone number
Gender
Allergies
Insurance provider’s information
Why are Social Security numbers no longer an essential part of patient profiles? (To maintain privacy, HIPAA states that patients must primarily be identified using other information, such as clinic number or prescription number.)

38. Patient Profiles (cont’d)
Pharmacies offer coupons.
Generics reduce price of medication.
Adjudication: process whereby all claims are processed.
Insurance criteria: examples include average wholesale price and copay.
Adjudication refers to the claims approval process in which the insurance company determines the amount of coverage for each prescription.
What is one standard reference for average wholesale price (AWP)? (Insurers might use the AWP listed in Drug Topics Red Book to determine coverage levels for each drug and dosage.)

39. Processing Claims
Pharmacy responsible for relaying necessary information about each patient.
Technician knows each insurance company’s specific needs.
The insurance company is responsible for the approval of drug coverage, collecting and processing claims, and payment.

40. Information Required for Processing Claims
Processor, typically insurance company
Member’s ID number
Group number
Plan code
Insurance carrier

41. Claim Problems Common reasons for rejected claims: Coverage expired
Coverage limits exceeded
Patient refilling too soon
Cardholder information doesn’t match processor’s
Invalid days’ supply
Claims also are rejected sometimes if the prescribing doctor is not the PCP.

42. Coverage Expiration Policy for Drugs
Patient: lost coverage, so claim rejected.
HIPAA: pharmacy can be told only that insurance is terminated and date it was terminated.
Patient: unaware and no knowledge.
Pharmacy: not allowed to call insurer.
Patient confidentiality breached—legal action could result.
Patients themselves must call the insurance company to resolve noncoverage issues.
When a claim is rejected, to receive the prescription immediately, the patient must pay full price and then be reimbursed after the insurance company corrects the problem.

43. Limitation of Plan Exceeded
Problems:
Drug is not covered in formulary.
Prescription calls for greater amount of drug than allowed.
Exempted patients: those with diabetes, HIV, or AIDS.
The physician can fill out a special authorization form explaining why a patient must have a specific nonformulary medication.

44. Handling Nonformulary Drugs or Noncovered NDC Numbers
Formularies: specific
Decision which manufacturer’s product included in plan
NDC: code assigned to every drug in United States
Code not in formulary: claim rejected
A pharmacist can request for the doctor to change a prescription to a drug that is covered under the patient’s insurance plan.

45. Filling a Prescription Too Soon
Refill okay: last week of drug supply, not first week after receiving prescription.
Prescriptions filled: 30-, 60-, 90-day supply.
Mail order pharmacies usually fill up to a 90-day supply.
Many insurance plans allow additional savings if refills are ordered via certain mail-order pharmacies.
Who can decide whether to dispense a prescription early? (Pharmacists have the authority to decide whether to fill some types of medication early, but sometimes insurance companies reject claims that are submitted sooner than expected.)

46. Filling a Prescription Too Soon (cont’d)
Amount related to safety issues.
Many medications extremely dangerous (CII).
Patient may be leaving the country and wants to ensure sufficient supply.
Increase in dosage forces early refill.
When a prescriber changes a patient’s dosage, the prescriber must submit a new prescription or authorize it to a pharmacist.
A technician can contact the insurance company to request a vacation override if the patient is leaving town for longer than 30 days.

47. Non-ID Match
Cardholder’s information does not match processor’s information
Result: claim rejection
Double-check card number, ID number, insurance number, etc.
Patient’s name, DOB, relationship to insured person

48. Pharmacy Stock Pharmacy orders formulary and nonformulary drugs.
Periodic automatic replenishment level: established level of medication stock kept on hand at any given time.
Many different systems are available that keep a running inventory of medications as well as order them.

49. Pharmacy Stock (cont’d)
Running inventory kept: point of sale (POS), order cards, handheld inventory computers
Technician in charge of all aspects of ordering, restocking, returning stock
Sometimes a pharmacy might contract out the job of writing up returns and sending them back to the manufacturer.

50. Ordering Systems
Periodic automatic replacement level maintained: manufacturer does not fill on weekend or holidays.
Patients in community pharmacy: go elsewhere to fill prescription.
Hospital patient relies on pharmacy to stock medications.

51. Ordering Systems (cont’d)
Late arriving stock: borrow from another pharmacy
Express delivery: emergencies only, very expensive, unnecessary
Pharmacy personnel: teamwork
Computerized systems best way to maintain stock
All pharmacy employees should keep an eye on stock levels.

52. Bar Coding Identified by manufacturer and can be scanned
Input of information faster
One pass of barcode: ID drug, strength, dosage form, quantity, cost, package size

53. Bar Coding (cont’d)
Medication scanned at register (POS): electronically taken off computerized inventory list.
In-stock quantity drops: automatically reordered.
Handheld components: used to scan drugs.
When using a handheld device, a technician needs to enter only the quantity to be ordered, and the information then is transferred to the main computer ordering system.
Some handheld devices must be reconnected to a base or charger before the information is transmitted, so it’s important to ask exactly how the system works.

54. Automated Dispensing Systems
Community pharmacies: computerized dispensing units keep track of inventory.
Baker Cell System keeps track.
Hospital: pharmacy supplies various clinics and nursing units with stock.
Dispensing systems: provide links.
A Baker Cell System keeps track of inventory as tablets and capsules are dispensed into a drug vial by removing them from the inventory as they pass a beam of light.
How do automatic dispensers located on nursing floors work? (Nurses and other authorized users can log into the system to access prescriptions that have already been entered in the pharmacy computer. They can then dispense the authorized amount of medication from the station.)

55. Automated Dispensing Systems (cont’d)
Stock levels viewed at any time.
Centralized unit: monitors narcotic usage.
All persons adding to or taking drugs from unit are identified and a log is kept of all users.
PYXIS, OMNICELL
Many systems are switching to fingerprint ID, rather than using personal codes, to make it more difficult to misuse the system.

56. Manual Ordering Slowly being eliminated as main ordering technique
Pharmacies—visually note stock levels—keep ordering cards inside medication box
Cards list drug information, ordering number, PAR levels

57. Manual Ordering (cont’d)
Following categories noted:
Formulary
Fast mover
Slow mover
Special orders
Time of year
Certain drugs can have a higher periodic automatic replenishment level at a certain time of year, such as allergy medications in the spring.
What other types of drugs might have seasonal trends? (Examples: otic preparations in the summer for swimmer’s ear, cold and flu season antivirals and decongestants; New Year’s resolution smoking cessation products.)
One seasonal trend that researchers don’t yet understand is the 50-percent higher rate of heart attacks (and the thrombolytics and beta blockers used to treat them) in the winter.

58. New Stock Stock arrives daily to pharmacy.
For billing purposes, check stock completely against invoice.
See Box 13-5 for procedure.

59. New Stock (cont’d) Mark stock shelves clearly to reduce drug errors.
Similar-sounding drug names: take note.
Rotating stock so that new stock with later expiration dates is placed behind the existing stock is important: this avoids the accumulation of expired drugs.
Sometimes this system is called FIFO: first in, first out.

60. Proper Storage Follow manufacturer’s requirements for storage.
Frozen, refrigerated, light-protected, room temperature requirements met.
Chemicals, toxic matter are kept in cabinet low to ground.
Everyone in pharmacy responsible.

61. Returns Four main reasons drugs are returned: Drug recalls
Damaged stock
Expired stock
Stock about to expire
Most medications can be returned to the manufacturer by the technician without a pharmacist’s signature.
Some states (Louisiana, Ohio, and Oklahoma) allow hospitals, pharmacies, and nursing homes to redistribute unused prescription drugs to low-income patients. Other states (California, Maine, Texas, and Washington) are considering similar legislation.
Nebraska even allows consumers to return unused prescriptions that are in tamper-resistant packaging.

62. Drug Recalls
Manufacturers required by law to recall any product found to violate following guidelines:
Wrong labeling
Product not packaged or produced properly
Drug batch contaminated
FDA has required removal
Changes that fall out of guidelines

63. Drug Recalls (cont’d)
Recall notices: arrive by mail or fax, ID information about drug or device, how to handle, and recall procedure.
Immediately inspect and remove all stock from shelves, refrigerators and freezers.
Important—drug’s lot number—key to ID recalled medication.
Recall notices explain why a drug is being recalled.
Technicians are responsible for checking all of the drug stock throughout the facility to make sure the recalled drug is not in stock; if it is in stock, the pharmacist must be notified.

64. Drug Recalls (cont’d)
Contact patient receiving recalled medication—by phone—check lot number.
All recalled items sent back to manufacturer.
Reorder stock if needed.

65. Damaged Stock
Drugs damaged en route to pharmacy—return to manufacturer.
Call first to get approval code.
Damaged drugs can be returned to the manufacturer even if the damage was not noticed at the time of delivery.

66. Expired Stock
Pharmacies pull medication within 3 months or less of expiration.
Example: if cimetidine expires within 3 months, then return all full boxes of 100 tablets for full or partial credit.
Can also pull slow-moving stock with 9 to 12 months left and return for credit.
Pulling these medications ensures that expired drugs will not be used accidentally.

67. Automated Return Companies
Companies have sole job of processing returned drugs for hospitals, wholesalers, pharmacy chain stores, independent retailers.
Are responsible for all records, recalled items, disposal of hazardous waste.

68. Nonreturnable Drugs and Their Disposal
Examples:
Reconstituted or compounded drugs
Partially used bottles of medication
Repackaged drugs
Cytotoxic agents
Nontoxic IV agents
Narcotics
Most drugs are sent to a central location for destruction or returned to the manufacturer for credit.
Cytotoxic agents must be disposed of in a container labeled “Hazardous Waste.”
Nontoxic IV agents should be disposed of in a regular sharps container.
Narcotics must be counted and cosigned by a pharmacist before they are destroyed, and the pharmacist must cosign their disposal and return information required by the DEA; a receipt from the DEA must be kept for 5 years.

69. Suppliers
Technician orders from centralized warehouse that pharmacy owns, wholesaler, manufacturer
Pros and cons
Difference in cost

70. Difference in Ordering from Manufacturers, Wholesalers, and Warehouse Repackaging Plant
Factors to Manufacturer Wholesaler/Vendor Consider Warehouse Repackaging Plant Warehouse
Supplier cost No shipping fees Lower per contract Lowest cost
Supplier has No Yes Yes electronic inventory control mechanism
Supplier able Yes No No to stock large supplies when ordering
Figure 13-4
Repackaging provides easier handling, increased productivity, and lower cost.
Prepackaging common dosages can speed up the labeling process.

71. Difference in Ordering from Manufacturers, Wholesalers, and Warehouse Repackaging Plant (cont’d)
Factors to Manufacturer Wholesaler/Vendor Consider Warehouse Repackaging Plant Warehouse
Supplier Varies by Yes Yes provides manufacturer special delivery service
Supplier Yes Some special orders Some special handles special must be done through orders must orders through the be done through manufacturer the manufacturer
Figure 13-4

72. Special Ordering Considerations
Given to:
Controlled substances
Investigational drugs
Cytotoxic drugs
Hazardous substances
Dealing with these drugs takes more time.
For example, with investigational drugs—even if the drug is commercially available and being investigated for a new use—the pharmacy must carefully document FDA approval of the investigation and its participation in it, including receipt, storage, preparation, and dispensing records for each drug in the trial.

73. Special Ordering Considerations (cont’d)
All require special ordering, inventory, handling, and return paperwork.
FDA requires special forms for C-II controlled substances.
Normally, the ordering technician does not have the task of doing the daily controlled substance inventory.

74. Special Ordering Considerations (cont’d)
Investigational drugs: paperwork must be completed and returned to manufacturer each time medication given.
Cytotoxic drugs: handled with great care and placed in safety cabinet.
MSDSs: know where they are.
What is an MSDS? (A Material Safety Data Sheet contains detailed product information about ingredients, hazards, storage, first aid, cleanup, and disposal for any chemical or agent that is potentially hazardous.)
The pharmacy should have an MSDS on file, either paper or electronic, for every hazardous chemical in stock, even ones that seem quite safe, such as alcohol prep pads (because they are flammable, they are an eye irritant, and their vapors can cause dizziness) and antibacterial hand soap (because it is an eye and skin irritant).