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Acute Medications
Drugs used to treat short-term medical conditions or illnesses, such as strep throat or respiratory infection.
Adjudication
The steps through which a claim is processed by a third-party payer to verify coverage of eligibility, determine appropriateness of care and services rendered, and establish the amount of reimbursement.
Adjustment
The change in the payment amount after a claim has been paid incorrectly.
Allowed Cost
The lower of the pharmacy’s requested price for a claim and the amount Serve You has approved for claim payment.
Average Wholesale Price (AWP)
The average cost of each drug charged to a pharmacy by a wholesaler or distribution facility.
Bank Identification Number (BIN)
Each prescription claims processor is assigned a unique 6-digit BIN number. This number is used within the pharmacy's claim submission to identify Serve You.
Brand Drug
When a drug manufacturer develops a new drug, they are granted a patent for 17 years. After approval by the Food & Drug Administration (FDA), a unique NDC number is assigned and the manufacturer may distribute this drug under the brand name they designate. At that time, they are the single source of this drug. After the patent expires, other manufacturers may develop equivalent drugs, called generics.
Carrier
Entity which underwrites or administers a variety of health and benefit programs. A carrier could be an insurer or a managed care plan.
Chain Pharmacy
One of a group of pharmacies under the same management or ownership. Examples are Walgreens, Kmart, etc.
Claim
Information submitted by a pharmacist or member to establish that prescription services were provided, from which processing for payment to the pharmacy or member is determined.
Compliance
Adherence to a drug regimen as in taking medications correctly, regularly and on-time.
Controlled Substance
The Controlled Substances Act of 1970 places certain restriction on substances that have potential for abuse. These substances have been placed in categories according to their potential for abuse.
Schedule 1 – These substances have the highest potential for abuse and no accepted medical use in the United States. Examples: heroin, marijuana, and LSD.
Schedule 2 – High potential for abuse. Use may lead to severe physical or psychological dependence. No renewals (refills) are permitted. Prescriptions must be written in ink, or typewritten and signed by the practitioner. Examples: narcotics, amphetamines, and barbiturates.
Schedule 3 – Some potential for abuse. Use may lead to low to moderate physical dependence or high psychological dependence. Prescriptions may be oral or written. Up to 5 renewals (refills) are permitted within six months of the date written. Examples: non-barbiturate sedatives, non-amphetamine stimulants, steroids and certain narcotics.
Schedule 4 – Low Potential for abuse. Use may lead to limited dependence either physically or psychologically. Prescriptions may be oral or written. Up to 5 renewals (refills) are permitted within six months of the date written. Examples: some sedatives, and anti-anxiety agents.
Schedule 5 – Subject to state and local regulation. Abuse potential is low, a prescription may not be required. Federally most are classified as over the counter medications. Examples: Cough and Cold preparations with small amounts of narcotics (codeine).
Copayment
The portion of the costs of prescription services paid by the member. The copayment is usually a dollar amount, but can also be a dollar amount or percentage of the cost of the prescription, whichever is greater, whichever is less, or dollar amount plus percentage. Copayment is similar to coinsurance.
DEA
Drug Enforcement Administration (DEA) enforces the controlled substances laws and regulations of the United States and brings to the criminal and civil justice system of the United States.
DEA Number
The number that is assigned to every licensed Doctor. This number contains 2 letters in the beginning and 7 digits following.
Deductible
A fixed amount of health care dollars of which a person must pay in full before his or her normal prescription benefits begin.
Direct Member Reimbursement (DMR)
Information submitted by a member to establish that prescription services were provided, from which the claim is processed for payment determination. Payment for member submitted claims goes directly to the cardholder.
DirectRx
Serve you’s mail order facility for members who’s plan allows them to receive a 3 month supply limiting the cost to the plan and the member.
Dispense as Written (DAW)
Indicates how a product was selected for dispensing. This code may also be referred to as the Product Selection Code (PSC). See Product Selection Code for more information.
Dispensing fee
A professional fee paid to the pharmacy and added to the price of a drug for the cost involved in dispensing the prescription.
Drug Utilization Review (DUR)
The process of evaluating prescription drug use, physician prescribing habits, or utilization of prescriptions by patients to determine the appropriateness of drug therapy. A drug being dispensed may be evaluated for interaction with another drug or duplication with another drug the member is currently taking. The claim is also checked for meeting or exceeding the number of tablets the manufacturer has recommended, or dispensing for more or less days than the manufacturer has recommended. Drugs are also evaluated for their appropriateness for the age or gender.
Eligibility
The determination of whether an employer or health plan will cover a person’s prescription claim. Eligibility refers to the member effective period of coverage.
Enrollment
Information confirming that an individual is enrolled in a health insurance plan. The term also applies to the total number of individuals covered by an employer group or health care plan.
Explanation of Benefits (EOB)
The statement that comes back either electronically or on paper, telling the pharmacist or beneficiary what action a payer took in response to a claim and how or why the claim was paid or denied. Members may request an EOB to send to their secondary coverage health plan (see Coordination of Benefits) or for tax purposes.
Food & Drug Administration (FDA)
The federal agency which oversees the testing, approval and release of all drugs. The FDA assigns the NDC number for each drug as well as an equivalency rating to all generic drugs.
Formulary
A list of prescription medications covered by a prescription insurance plan. The purpose of a formulary is to help a member and the member’s physician choose safe and effective drug treatments that are the most cost-effective. Using drugs on the formulary often results in lower out-of-pocket costs for many patients.
Generic Drug
A chemically equivalent copy of a brand name drug whose patent has expired. Typically a generic is less expensive and sold under the chemical name for the drug rather than a brand name. See Brand Drug for additional information.
Generic Product Indicator (GPI)
A 14-digit code assigned by Medispan, identifying a group of similar drugs. Each successive two digits of the code represents a more specific relationship of the drugs. Example, the first 2 digits indicate a general drug group. As 2-digit blocks are added to the selection, the group of drugs becomes more specific. The full 14-digits indicate a group of NDC numbers which are a specific drug, specific dose form and specific strength.
Generic Substitution
A generic drug that is believed to be therapeutically equivalent (i.e. will achieve the same outcome based on the Chemical Equivalency rating by the FDA) to the brand name drug prescribed by the physician. The drug is substituted by the dispensing pharmacist without the need to obtain permission from the physician. Substituting lower cost generic drugs for higher cost brand drugs is generally recommended for lower overall costs for the health plan.
HIPAA
Health Insurance Portability & Accountability Act. A law that ensures that each member’s privacy is protected in regards to his/hers health related issues.
Independent Pharmacy
A pharmacy where the management or ownership is independent of any other pharmacy. Occasionally a number of pharmacies share an affiliation for purchasing drugs, yet they continue to be independent in management or ownership.
Legend Drug
A drug that, by law, can be obtained only by prescription and bears the label, “Caution: Federal law prohibits dispensing without a prescription.”
Mail Service Facility
A method of dispensing maintenance drugs directly to the patient through the mail for convenient home delivery. Mail order pharmacies provide dispensing efficiencies and reduced overhead, therefore, clients often benefit from the reduced cost of a mail order program. There are no shipping charges for standard mail service.
Maintenance Medications
A limited group of prescription drugs commonly prescribed for long-term patient use. For example, clients may cover all regular drugs for up to 30 days, but allow maintenance drugs for up to 90 days.
Maximum Allowable Cost (MAC)
Once a drug is available from multiple sources, a ceiling price (maximum allowable cost) can be established. This maximum cost per unit would apply to all generic sources of the drug as well as the brand.
Medicaid
A federally funded program which provides medical assistance to the poor, disabled, or elderly. The program is administered either through a state program or through an HMO.
Member
Participant (or employee) in a health program consisting of medical and prescription benefits. The member is associated with other members by virtue of some common factor, such as common employer, membership in a union, association, or other organization. Member defines the contract holder, such as employee.
Multi-source Products
Prescription products where the patent has expired and multiple companies now offer the same product. One of these products (commonly the original brand-name product) is referred to as a multi-source brand-name product and the rest are referred to as generic drugs. The generic versions usually are available at a reduced price compared to the multi-source brand-name product.
NABP Number
A unique 7-digit identification number assigned to each pharmacy located in the United States and Puerto Rico. The first two digits of the number identify the state where the pharmacy is located. The number is issued by the National Association of Boards of Pharmacy.
National Council of Prescription Drug Programs (NCPDP)
NCPDP is a national organization with representatives from HMOs, PPOs, PBMs, prescription claims processors, drug manufacturers, and other industry related businesses. With input from their representatives, NCPDP establishes standard formats for electronic claims transmissions, eligibility, manufacturer rebates, clinical evaluations, and product identification.
National Drug Code (NDC)
A unique 11-digit number assigned by the FDA to every drug available, including the majority of Over-the-counter drugs. The first five digits identify the manufacturer of the drug. The next four identify a unique formulation of drug by that manufacturer. The last two identify different package sizes of that drug (100 tablets, 30 tablets, etc.) There are well over 100,000 drugs within the drug database.
National Provider Identifier (NPI)
A federally mandated method of identifying all healthcare providers in the United States, including, but not limited to, pharmacies, prescribers, nurses and pharmacists. The NPI replaces the NCPDP ID for pharmacies and DEA for prescribers. NPI identifies any and all healthcare providers through one central database.
On-Line Adjudication
An electronic assessment of claims at the point of service (pharmacy). The pharmacy sends data to Serve You electronically. Serve You compares the pharmacy submitted information to the plan guidelines. If the prescription claim meets the guidelines, the claim is approved for payment. A message is sent to the pharmacy indicating how much the pharmacy will be paid and the amount for which the member is responsible. If the claim does not meet the guidelines, a detailed rejection message is sent to the pharmacy. Using this information, the pharmacy may correct the data and resubmit the claim, or explain to the member why a particular drug is not covered by the plan.
Over-the-counter (OTC) drug
A drug product that does not require a prescription under federal or state law.
Pharmacy Benefit Management Company (PBM)
An organization which manages the prescription benefits of members by providing:
-customer support that enhances the quality of care to patients.
-clients with cost effective benefit management strategies.
-utilization of pharmacy provider network.
-administration, information, clinical, and process solutions that support and empower benefit managers to manage health care risk.
Pharmacy Reimbursement
The amount a pharmacy receives for dispensing a prescription to a health plan member, comprised of the cost of the drug (average wholesale price of the drug less a negotiated discount) and a professional fee for the pharmacy’s services (dispensing fee). Of this total, the member may pay a portion (copayment), with the remainder paid by the health plan.
Point of Service (POS)
At the time of dispensing a drug at the pharmacy. See On-Line Adjudication.
Pre-Existing Condition
A condition of a member which existed prior to joining the current health plan. Plans may exclude coverage for various drugs during an initial period of membership.
Prior Authorization (PA)
When a drug or dispensing limitation does not meet the guidelines of the health plan but the plan wishes to override those guidelines for a specific member, a PA is issued. This authorization is effective for a specific period of time and will override the rejection of the claim.
Processor Control Number (PCN)
This number is used within the pharmacy's claim submission to Serve You. In addition to the BIN number, which identifies the claim processor, the pharmacy submits a PCN to identify the appropriate area within the processor's database.
Product Selection Code (PSC)
The PSC code indicates how a product was selected for dispensing. Pharmacies may refer to this as the DAW (dispense as written) Code. A prescription may be written for a brand drug which has equivalent generics, but the substitution was not made. Plans may allow the PSC override or penalize the member the difference between the brand cost and generic cost. Several PSC codes are available for the pharmacist to communicate why the brand was dispensed. These include:
•PSC 1 = Physician mandated the brand drug
•PSC 2 = Patient selected the brand over the generic
•PSC 3 = Pharmacist selected the brand
•PSC 4 = Generic product out of stock
•PSC 5 = Brand product used as the pharmacy's generic
•PSC 6 = Processor defined override
•PSC 7 = Substitution not allowed by state law
•PSC 8= Generic product not available due to manufacturer supply
Remittance Advice
A statement sent to the pharmacy that outlines how a claim was paid. The remittance advice accompanies the pharmacy’s check, summarizing all of the payments for a particular period of time.
Retail Pharmacy Network
A contracted group of retail pharmacies that offers discounts on medication dispensing in exchange for a contracted dispensing fee and recognitions as an organizations network pharmacy provider.
Reversal
A pharmacy submits a claim, which is approved for payment, but then wishes to change a portion of the claim data. Using a second submission (reversal), a negative record is created for the claim. The pharmacy may then resubmit the claim with the corrected information.
Self-Funding
A method of financing health coverage in which employers fund benefit plans from their own resources without purchasing insurance. Such plans may be self-administered or the employer may contract with a TPA or insurance company for administrative services only.
Single-Source Drug
Pharmaceuticals that are only available under one brand label and there is no generic equivalent available.
Step-Therapy
The practice of utilizing therapeutically comparable, less costly medication options before “stepping up” to more costly alternative therapies.
Third Party Administrator (TPA)
An organization, outside of the health plan or employer group, that handles administrative duties. TPAs are used by organizations that fund health benefits but do not find it cost-effective to administer the health plan benefits themselves or have staff experienced in prescription benefit management. TPAs sometimes perform utilization review and may recommend benefit changes to the health plan for cost containment purposes.
Universal Claim Form (UCF)
While on-line adjudication of prescription claims is recommended, a pharmacy may wish to submit a non-electronic claim. A claim form was developed by NCPDP for this purpose. The data required on the form is the same as the data required for on-line submissions. When a UCF is received at Serve You, Serve You manually enters the data to process the claim. The pharmacy receives information along with their check indicating if the claim was approved and the payment information.
Usual & Customary (U&C)
A submitted total cost the pharmacy has calculated for dispensing a prescription to a health plan member. The cost of the drug is based on what the pharmacy paid the wholesaler for the drug. A professional fee for the pharmacy’s services is included in the calculation. When the U&C price is submitted, the claims processor (Serve You) compares the pharmacy’s U&C price to the pharmacy reimbursement allowed by the plan, and pays the pharmacy the lower of the two.
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