Third-party payer

As for-profit enterprises, pharmaceutical companies must consider whether they will be able to recoup their substantial investments in drug discovery. Thus it is reasonable to assume that pharmaceutical companies would consider not only the number of individuals for whom a particular drug would be efficacious but also whether the individuals would be able to purchase the medication, either personally or through their insurer or other third-party payer. Pharmacogenomics adds another dimension. Once... 

Excessive total costs for prescription drugs. Insurers and other third party payers see drugs as the fastest-rising component in total health... 

Economists have long emphasized that in health care, identification of the consumer is ambiguous. Is it the patient, the physician acting as a professional agent on behalf of the patient, or is it the third-party payer In most but not all countries, pharmaceutical manufacturer sales representatives, called detailers, are permitted to visit physicians in their offices and provide them with promotional material. Representatives from pharmaceutical manufacturers also interact with public-sector payers such as ministries of health, as well as with private-sector payers, such as insurers and self-insured employers in the United States. 

Payment by third-party payers, especially by the national health insurance programs or social security funds, has expanded dramatically during the last several years and the program to promote rational use of drugs is soon expected to make significant contributions. A good example is a program such as... 

Mandatory drug product selection on the basis of price is common practice in the USA because third-party payers (insurance companies, health maintenance organizations, etc) enforce money-saving regulations. If outside a managed care organization, the prescriber can sometimes override these controls by writing "dispense as written" on a prescription... 

The pharmaceutical industry has an important social contract with the public to discover and develop medicines that have value in extending and enhancing life. Simultaneously, the industry must maintain its profitability both to ensure the future stream of innovations and to provide investors with a return. Balancing the responsibilities to the public and to shareholders is further complicated by the inefficiencies of the global patent system, the disease burden of poor developing countries, national price control systems, and third-party payers. 

Third-party payers and coverage issues Complexity/differences among payers policies Formularies Limited networks Limited access for some patients Lack of knowledge by patients Competitive markets Diminished margins... 

A management perspective is indispensable when it comes to issues dealing with third-party payers (e.g.,... 

Although community pharmacists pay close attention to the types of third-party payer contracts to ensure that they understand the reimbursement timetables, in many instances they are not able to influence the... 

Almost all prescriptions filled in a community pharmacy are paid for through a third-party payer, and nearly all of them are adjudicated online. Table 15-7 shows a section of WHP s Daily Plan Payment report. As depicted in this report, the manager is able to monitor the daily number of prescriptions filled for each plan, the total amount paid by each third-party payer, the total copayments made by patients, and total cost of drug products used to dispense these prescriptions. From this information, the gross margin for each payer can be calculated (as shown in the last column). Daily inspection of this report identifies plans with low reim-... 

The revenues on the monthly income statement have to be revised once reimbursements have been received from third-party payers. The reason for making adjustments is that most payers make adjustments to each claim and charge the pharmacy administrative fees. Therefore, the actual amount paid to the pharmacy for prescriptions dispensed is almost always lower than the amount indicated on the Daily Plan Payment report. If the manager fails to revise the revenues, the income statement will show artificially inflated revenue. This can have a number of adverse consequences for a pharmacy including inaccurate financial reports and higher income taxes. In other words, if the revenues are recorded from online adjudications, the pharmacy... 

A significant concern in pharmacy is the level of reimbursement specified in these contracts. In 2000, the average third-party reimbursement for a prescription was 15 percent lower than what a patient would pay for the prescription without third-party reimbursement (USDHHS, 2000). This difference may have increased in recent years because third-party payers have continued to decrease their reimbursement rates. There also are substantial differences in reimbursement rates across third-party payers. For example, many state Medicaid programs reimburse at far better rates than private third-party payers. 

The reimbursement rate, or price, for a third-party prescription is based on a reimbursement-rate formula that is specified in the contract between the pharmacy and the third-party payer. The reimbursement-rate formula almost universally consists of two parts the product cost portion and the dispensing fee. The product cost portion is intended to pay the pharmacy for the cost... 

A third-party payer issue that will continue to be important is declining reimbursement rates. Private third-party reimbursement rates are likely to continue to decrease. Medicare prescription drugs plans now are... 

It is crucial that pharmacy managers understand the impact of third-party payers on pharmacies as well as understand and use the decision-analysis tools described in this chapter to evaluate carefully third-party contracts. It also is important that pharmacy managers and owners manage expenses carefully and think creatively about developing new sources of revenue. Third-party payment for prescriptions will continue to be an important issue in pharmacy in the future, and pharmacy managers need to be aware continually of changing reimbursement levels and other third-party issues. 

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