PHP Midterm 2 Questions with 100%
CorrecT Answers Rated A
Maximum Allowable Cost (MAC) - ANSWER Refers to a payer or PBM-generated list of
products that includes the upper limit or maximum amount that a plan will pay for
generic drugs and brand name drugs that have generic versions available ("multi-source
brands")
-no two MAC lists are alike and each PBM has free reign to pick and choose products
for their MAC lists
-There is no standardization in the industry as to the criteria for the inclusion of
drugs on MAC lists or for the methodology as to how the PBM will determine the
maximum price or how it's changed or updated
-These are typically not e-list and can cover a few NDCs, drug classes or the entire Red
Book
-A pharmacy may lose money if acquisition cost > MAC price
DIR Fees (stands for, why it was originally created, plans have used the term DIR fee
to describe...) - ANSWER Direct and Indirect Renumeration
-CMS originally created DIR as way to account for all costs associated with prescription
medications, which included price concessions that would ultimately impact the gross
prescription drug costs of Medicare Part D plans that were not captured at the point of
sale.
,-According to the National Community Pharmacists Association, plans/PBMs have used
the term "DIR Fee" to describe a "true-up" between a target reimbursement rate in a
participating pharmacy agreement and the aggregated effective rate actually realized
by a pharmacy
DIR Fees and Penalties - ANSWER -Penalties that can be assessed by insurer/PBM if
insured lives don't meet performance goals which are often tied to Medicare star ratings
Ex) if adherence measurement is not 0.80 or above over the past 6-months
then Pharmacy will face financial penalties over the next 6-months
-Can lose network status if consistent poor performance
Table: Top US Pharmacies Ranked by Prescription Drugs Market Share in 2017 - ANSWER
~Walmart < UnitedHealth Group < Express Scripts < Walgreens < CVSHealth (23.8%) →
CVS generating almost 24% of the total Rx drugs pharmacy revenues in the US
Walmart as a Retailer - ANSWER ~Came into the pharmacy space very late; had $4
generics and only covered certain classes (hypertensives, anti-cholesterol,
diabetes medications)
~Co-pay is usually $5, so wanted people to come into the market
~Criticisms of the PBMs or health plans that don't know whether there is a drug
interaction because won't see that drug prescription is filled at Walmart; no way to
put this into the record
Net margins table for each sector in pharmaceutical industry - ANSWER ~Most
margin made by brand manufacturers (gross: 76.3%)
~Behind that is the generic manufacturers (gross: 49.8%), then pharmacy (brand only
gross: 3.5%; generic only gross: 42.7%)
~PBMs are a low-margin business (brand only gross: 2%; generic only gross: 8%)
~For all drugs gross: manufacturer (71.7%), insurer (22.2%), pharmacy (20.1%),
PBM (6.3%), and wholesaler (3.7%)
, Figure 2: Distribution of Health Plan Enrollment for Covered Workers, by Plan Type,
1988-2019 - ANSWER ~In 2019, less than 1% conventional, 19% HMO (health
maintenance organization), 44% PPO (preferred provider organization), 7% POS
(point of service), 30% HDHP/SO (high deductible health plan)
~Most used is a preferred provider organization (PPO) plan in 2019
~Growing trend towards HDHP/SO plans
~HMO and PPO plans remained relatively steady in use overtime, while POS and
conventional methods declined, HDHP/SO significantly grew
path from payer to patients 1 - ANSWER $ (individual patients, employers, federal and
state taxes-medicare, medicaid, veterans administration, tricare) → insurance functions →
delivery of health care services → recipient of health care services (patients)
path from payer to patients 2 - ANSWER Payers (insurance companies, medicare,
medicaid) with responsibility for both quality and costs → prepaid group practice
(PGP) with all services under 1 roof, independent practice association (IPA), or
preferred provider organization (PPO) → health care services
Figure 5: Among Firms Offering Health Benefits, How Broad the Firm Considers their
Largest Plan's Provider Network, by firm size, 2019 - ANSWER ~All large firms: 74%
very broad, 21% somewhat broad, 4% somewhat narrow
~All small firms: 54% very broad, 38% somewhat broad, 7% somewhat narrow
~All firms: 55% very broad, 37% somewhat broad, 7% somewhat narrow
Interventions to Control Health Care Costs - ANSWER -Prior authorization
-Disease management (Improves outcomes, May or may not reduce costs)
-Cost-sharing
CorrecT Answers Rated A
Maximum Allowable Cost (MAC) - ANSWER Refers to a payer or PBM-generated list of
products that includes the upper limit or maximum amount that a plan will pay for
generic drugs and brand name drugs that have generic versions available ("multi-source
brands")
-no two MAC lists are alike and each PBM has free reign to pick and choose products
for their MAC lists
-There is no standardization in the industry as to the criteria for the inclusion of
drugs on MAC lists or for the methodology as to how the PBM will determine the
maximum price or how it's changed or updated
-These are typically not e-list and can cover a few NDCs, drug classes or the entire Red
Book
-A pharmacy may lose money if acquisition cost > MAC price
DIR Fees (stands for, why it was originally created, plans have used the term DIR fee
to describe...) - ANSWER Direct and Indirect Renumeration
-CMS originally created DIR as way to account for all costs associated with prescription
medications, which included price concessions that would ultimately impact the gross
prescription drug costs of Medicare Part D plans that were not captured at the point of
sale.
,-According to the National Community Pharmacists Association, plans/PBMs have used
the term "DIR Fee" to describe a "true-up" between a target reimbursement rate in a
participating pharmacy agreement and the aggregated effective rate actually realized
by a pharmacy
DIR Fees and Penalties - ANSWER -Penalties that can be assessed by insurer/PBM if
insured lives don't meet performance goals which are often tied to Medicare star ratings
Ex) if adherence measurement is not 0.80 or above over the past 6-months
then Pharmacy will face financial penalties over the next 6-months
-Can lose network status if consistent poor performance
Table: Top US Pharmacies Ranked by Prescription Drugs Market Share in 2017 - ANSWER
~Walmart < UnitedHealth Group < Express Scripts < Walgreens < CVSHealth (23.8%) →
CVS generating almost 24% of the total Rx drugs pharmacy revenues in the US
Walmart as a Retailer - ANSWER ~Came into the pharmacy space very late; had $4
generics and only covered certain classes (hypertensives, anti-cholesterol,
diabetes medications)
~Co-pay is usually $5, so wanted people to come into the market
~Criticisms of the PBMs or health plans that don't know whether there is a drug
interaction because won't see that drug prescription is filled at Walmart; no way to
put this into the record
Net margins table for each sector in pharmaceutical industry - ANSWER ~Most
margin made by brand manufacturers (gross: 76.3%)
~Behind that is the generic manufacturers (gross: 49.8%), then pharmacy (brand only
gross: 3.5%; generic only gross: 42.7%)
~PBMs are a low-margin business (brand only gross: 2%; generic only gross: 8%)
~For all drugs gross: manufacturer (71.7%), insurer (22.2%), pharmacy (20.1%),
PBM (6.3%), and wholesaler (3.7%)
, Figure 2: Distribution of Health Plan Enrollment for Covered Workers, by Plan Type,
1988-2019 - ANSWER ~In 2019, less than 1% conventional, 19% HMO (health
maintenance organization), 44% PPO (preferred provider organization), 7% POS
(point of service), 30% HDHP/SO (high deductible health plan)
~Most used is a preferred provider organization (PPO) plan in 2019
~Growing trend towards HDHP/SO plans
~HMO and PPO plans remained relatively steady in use overtime, while POS and
conventional methods declined, HDHP/SO significantly grew
path from payer to patients 1 - ANSWER $ (individual patients, employers, federal and
state taxes-medicare, medicaid, veterans administration, tricare) → insurance functions →
delivery of health care services → recipient of health care services (patients)
path from payer to patients 2 - ANSWER Payers (insurance companies, medicare,
medicaid) with responsibility for both quality and costs → prepaid group practice
(PGP) with all services under 1 roof, independent practice association (IPA), or
preferred provider organization (PPO) → health care services
Figure 5: Among Firms Offering Health Benefits, How Broad the Firm Considers their
Largest Plan's Provider Network, by firm size, 2019 - ANSWER ~All large firms: 74%
very broad, 21% somewhat broad, 4% somewhat narrow
~All small firms: 54% very broad, 38% somewhat broad, 7% somewhat narrow
~All firms: 55% very broad, 37% somewhat broad, 7% somewhat narrow
Interventions to Control Health Care Costs - ANSWER -Prior authorization
-Disease management (Improves outcomes, May or may not reduce costs)
-Cost-sharing
