The Truveris Pharmacy Benefits Glossary of Terms is intended to help educate and inform professionals navigating the pharmacy benefits and PBM (pharmacy benefits manager) ecosystem.
If you have questions or would like to connect with a pharmacy expert about your current benefits program, please contact Truveris.
Accumulator Adjustment Programs: A benefit design program typically offered by PBMs that systematically excludes the value of certain pharmaceutical manufacturer copay cards from applying to a member’s deductible or maximum out-of-pocket costs under the benefit plan. The goal of these programs is to mitigate the perceived incentive created by copay cards to use higher cost medications and to promote member cost-share as intended by the plan sponsor’s benefit design.
Alternative Funding: Funding strategy solutions that limit plan sponsors’ cost exposure to expensive medications via advocacy-based programs. Typically focused on a set list of specialty drugs, although can include other high-cost medications, that are excluded from coverage.
Alternative funding programs source medication from a variety of pharmaceutical charities, private charities, and other foundations. Plan members must apply and meet enrollment criteria, particularly financial requirement thresholds. The alternative funding program facilitates the shipment of the medication, typically provided at no cost to the member. Learn more about alternative funding use cases here.
Administrative Services Only (ASO): Type of pricing arrangement where the plan sponsor takes risk for the cost of care and pays the PBM or health insurer for administrative services only. This is the same as a self-funded pricing arrangement.
Award: The act of selecting a winning vendor for pharmacy benefits. The winning vendor is awarded the PBM contract.
Broker of Record (BOR): The BOR is the designation given to the broker an employer or plan sponsor has hired to assist with their pharmacy benefit procurement and guidance.
Carrier: The insurance company that provides medical benefits to an employer may be referred to as the carrier.
Channel: Type or location of healthcare provider that may dispense medications to a member. Common channels include retail pharmacy, mail pharmacy, specialty pharmacy, infusion pharmacy, long term care, and medical providers (i.e. physicians and hospitals).
Coalition: A coalition is a group purchasing organization focused on a particular service or good such as prescription drug benefits. Coalitions typically offer employers set pricing for prescription drug benefits, leveraging its combined membership for competitive rates. There are different types of coalitions, including stand-alone coalitions and consultant-owned coalitions. Coalitions may also be called “collectives.”
Copay Maximizers: Programs that reduce a plan sponsor’s costs by leveraging available copay cards from pharmaceutical manufacturers and adjusting a patient’s monthly out-of-pocket claim costs to equal the maximum annual value of the manufacturer’s copay program over the course of the benefit year.
For example, if a copay card allows an annual value of $3,000, the member’s monthly out-of-pocket prescription cost would be adjusted to $250, ensuring the full available value of the pharma copay card is used, resulting in reduced cost to the plan sponsor. Learn more about copay maximizers and their use cases here.
Countermeasures: Cost-saving techniques and strategies employed by various stakeholders in the pharmacy ecosystem to maximize revenue while adhering to existing contractual obligations.
Covered Lives: The total number of eligible members covered under a benefit plan including subscribers and their dependents. Also referred to as “eligible lives.”
Deal improvement (DI): The estimated savings for a bidder plan compared to the current plan. Deal improvement can be expressed as either a dollar amount or percentage. If a bidder has negative deal improvement, then the amount or percent is less than the current amount.
Discount Card: A coupon for a specific brand or generic medication negotiated with a pharmacy by a PBM or other organization (e.g., oneRx) that can be downloaded by a consumer to a mobile device or printed and presented to the pharmacy to receive the discounted price. Discount cards are used in place of insurance. (See “Pharma Copay Card” for pharma discounts intended for use with insurance.)
Disruption: The number of members negatively impacted from a change from a current pharmacy benefit plan to a prospective bidder’s plan due to placement of member’s current medication on prospective bidder’s formulary. E.g., member’s medication is currently on drug formulary tier 2 but would be excluded from benefit coverage on prospective bidder’s formulary.
Drug Type: Categorization of a medication as either a generic drug, branded drug, or specialty drug. The drug type is defined in the PBM contract, using a combination of either First Databank (FDB) or MediSpan indicators and PBM contractual terms.
Essential Health Benefit: A set of 10 categories of services health insurance plans must cover under the Affordable Care Act. These include doctors’ services, inpatient and outpatient hospital care, prescription drug coverage, pregnancy and childbirth, mental health services, and more. Some plans cover more services. See what else is covered at healthcare.gov.
Generic Dispensing Rate (GDR): The percent of total prescription claims in a certain time period that are classified as generics (e.g., the GDR is 92% and the brand dispensing rate is 8%).
Incumbent: The current/in-place pharmacy benefits manager for a plan sponsor.
KPI (Key Performance Indicators): The metrics deemed most important in an analysis or report to understand how a prescription drug benefit is performing.
LDD (Limited Distribution Drug): A drug, typically a specialty drug, that is only available from a limited number of pharmacies due to certain factors, for example, unique administration, patient care requirements, and/or availability. The definition and pricing for LDDs should be known as part of a pharmacy benefits contract.
Market Check: An analysis PBMs may be contractually required to conduct that checks current marketplace pricing to ensure a plan sponsor’s existing pricing is market competitive. Market checks may be negotiated into a plan sponsor’s pharmacy benefits contract to be conducted annually or once per contract term, for example. A market check may result in enhanced pricing for a plan sponsor mid contract.
Member Paid: The amount paid by the member for a prescription claim based on the plan sponsor’s member cost-share benefit design.
Offsetting: A reconciliation calculation that allows a surplus in one guarantee to offset a deficiency in another guarantee.
Patient Assistance Programs (PAP): Pharmaceutical manufacturers may sponsor patient assistance programs (PAPs) that provide financial assistance or drug free product (through in-kind product donations) to low-income individuals to augment any existing prescription drug coverage. Learn more about PAP at cms.gov.
Payer: Any entity or organization responsible for paying for the cost of prescription medications.
PBA (Pharmacy Benefits Administrator): An organization that focuses on pharmacy benefit administration; not a full-service pharmacy benefits manager.
PBM Audit: A formal audit of a PBM’s performance and contractual compliance, the scope of which, including approved auditors, timing, frequency, and criteria, may be defined within the PBM and plan sponsor contract.
Pharma Copay Card: A pharmaceutical manufacturer coupon that provides a discount to members on their out-of-pocket costs (e.g., copay, coinsurance) under their insurance benefit. Learn more about copay cards here.
Plan Paid: The amount paid by the plan for a claim after discounts, fees, and member cost sharing is applied.
Portability: The ability for a plan sponsor to change pharmacy benefits without changing components of its benefit is due to “portability.” For example, if a plan sponsor uses a carve-out formulary provider, they can change PBMs and keep their existing drug formulary.
Pricing Guarantee Underperformance: The PBM has not met (and thus underperformed) its contractual pricing guarantee for AWP. Truveris’ truGuard analyses identify whether the pharmacy benefit provider is meeting promised discounts across a category of medications. For example, if the pharmacy benefits contract said that generic medications, as a category, would get at least an 80% discount off of AWP, but truGuard finds the discount was only 75%, the pharmacy benefits provider would have underperformed on their guaranteed AWP drug discounts.
Pricing Variance: An error in the claim adjudication process that results in an inaccurate claim price.
Reconciliation: The process to reconcile any pricing guarantee shortfalls or surpluses between the PBM and the plan sponsor. Truveris conducts a reconciliation when the last report for a client’s guarantee period has been received.
Reverse Auction Procurement: A marketplace procurement process that has vendors bidding against each other as opposed to a typical auction format where buyers are bidding.
RFP (Request for Proposal): The solicitation of proposals from vendors for the procurement of pharmacy benefit management services.
Therapeutic Drug Class/Category: A set of medications indicated to treat the same/similar condition or disease.
Truveris Marketplace: Truveris’ patented solution to pharmacy benefit procurement that secures the best pricing and terms by including a unique marketplace of bidders and driving price transparency and competition. Learn more about the Truveris Marketplace here.
Variance: An error in the claim adjudication process that results in an inaccurate claim cost.
340B Claims: Claims for drugs dispensed at “safety net” hospitals and clinics designated by Section 340B of the Public Health Service Act. These safety net organizations include community health centers, children’s hospitals, hemophilia treatment centers, critical access hospitals (CAHs), sole community hospitals (SCHs), rural referral centers (RRCs), and public and nonprofit disproportionate share hospitals (DSH) that serve low-income and indigent populations. Learn more about 340B here.