As a pharmacist, you may think that your most difficult tasks will include helping patients and keeping track of possible contraindications between medicines. Many pharmacists say those tasks are easy compared to getting correct reimbursements. Pharmacy billing is no simple matter, although technology removes most of the headaches.
Basics of Pharmacy Billing
From Pharmacy to the patients hand, a prescription has numerous stages of reimbursement for not only the pharmacy but also the patient. Understanding the life cycle of a prescription from entry to adjudication can be complicated, but is the key to understanding how pharmacy billing works.
- Tracking of the prescription (point of origin) through code- POC codes entered through the pharmacy management software. Codes range from 0-4 indicating written, verbal, e-prescribe, or fax
- Gathering patient insurance data including which type of coverage (primary, secondary), BIN number, group number, and member ID
- Data entry – entering important billing information such as prescriber info with DEA and NPI number
- DAW codes– entered for medication substitution if applicable
- Drug information including medication name with National Drug Code (NDC)
TIP: A pharmacy needs to sign up with the National Council for Prescription Drug Programs (NCPDP), a database service that allows it to the bill. The NCPDP provides each pharmacy with a unique six-digit number, known as a BIN, that identifies it for billing purposes.
Pharmacy Billing and Reimbursement
When a pharmacy claim is transmitted, it does so through a switch vendor, which is a vendor that ensures the information being transmitted to conform to the National Council for Prescription Drug Programs (NCPDP) standards prior to the claim reaching the Pharmacy Benefit Manager (PBM). Pharmacies enter into an agreement /contract with a PBM and a rate/formula is set for dispensing brands, generics, and specialty medications. Usually, the rate for the brand and specialty dispensing is Average Wholesale Price (AWP) less a set % plus a dispensing fee. Generics rates typically are a fixed amount called MAC (Maximum Allowable Cost) which is the maximum amount that the plan will pay for a generic medication.
Applying for insurance contracts is a crucial stage for pharmacy reimbursement. Sign up with some local pharmacy groups (these groups may have the ability to sign on several insurance plans at a time) then sign up the contracts through that group. It’s essential to sign contracts, allowable and payable charges are important numbers to understand. A pharmacy can’t bill to a PBM unless it has signed a contract. That contract designates how much the PBM pays to the pharmacy, co-pays, etc. Each PBM has different contracts.
TIP: Insurance companies don’t do their own billing. Each has a third party—a Pharmacy Benefit Manager (PBM) such as Express Scripts or Medco. These intermediaries are billed when a prescription is filled, and they audit files to make sure everything is correct and assure the insurance company that they’ve done due diligence.
In case of declined submissions, the pharmacy and or the prescriber will need to contact the PBM or the third-party payer to receive approval. Some of the common reasons for rejected claims are prior authorization; incorrect days supply; refill too soon; invalid quantity; incorrect insurance information. When a script is accepted, the claim is then adjudicated by the payer and cross-references the patient insurance benefits for coverage and indicates what the patient will owe for the prescription. This process is done electronically and immediate.
For Medicare, Part D sponsors (health plans) independently negotiate pharmacy reimbursement and price concessions with manufacturers and pharmacies. For Medicaid, State Medicaid agencies administer Medicaid and reimburse pharmacies for drugs. States also receive federally mandated Medicaid drug rebates and may negotiate with manufacturers for additional funds. For the private payers, usually, base reimbursement formula on AWP. PBM negotiates reimbursement with dispensing fees individually with pharmacies that are usually 40% off the usual dispensing fee charge.
Other ways pharmacies receive payment is through Rebates and Discount programs. Manufacturers/ drug companies negotiate with payers (Medicaid, Medicare, and private health plan PBM’s) to pay rebates after a medication has been dispensed. Rebates from drug manufacture provide reimbursement and profit to the pharmacy. In 2014, Medicaid spent approximately $42 billion on prescription drugs and collected about $20 billion in rebates. Patient discounts or coupons for medications are provided for high dollar or specialty medications- this aids the pharmacy in dispensing and adjudication of these usually very costly medications.
Getting the correct reimbursement is the main challenge of pharmacy billing. It’s vital to ensure that the paid amounts are correct in the final claims adjustment. The amount paid by the insurance company and the co-pay must equal the amount billed. Medical Billers and Coders (MBC) can assist you in filling the correct claim amount first time only. Our experienced pharmacy billing team is really good at reconciliation which ensures the financial integrity of your firm. To know more about pharmacy billing services you contact us at 888-357-3226/ email@example.com