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» 340B Discounts

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» Dispensing Options

» California's Discount Programs

» Glossary


1. AWP: The Average Wholesale Price is the drug manufacturer’s list price.

2. Brand name: The trademark name of the drug that appears on the package label.

3. Buying group: A group of like entities that purchase together to increase market share of a particular product thereby receiving a price discount on the product.

4. Charge back: The amount that a wholesaler discounts from its invoices to make up the difference between the wholesale acquisition cost (WAC) and the actual prices charged.

5. Covered entity: Covered entity refers to the types of clinics, health departments and hospitals receiving federal funding that are eligible to participate in the 340B purchasing program. These are defined in Section 340B of Public Law 102-585, the Veterans Health Care Act of 1992.

6. Dispensing fee: This is usually a flat amount of a percentage of the drug cost that is paid to the pharmacist for labor and administrative and administrative costs.

7. Drug diversion: Providing a 340 B drug to a clinic or patient that is not eligible to receive it.

8. Formulary: A provider or health plan that pays for its patients' medications may wish to limit or influence usage of the drugs it pays for. To accomplish this, they usually construct a list of drugs or groups of drugs designated by therapeutic class as preferred choices for patients of that provider or plan. This list is called a "formulary" and it is distributed to prescribers and sometimes to patients to encourage choices that will moderate the increases in drug expenditures.

9. Generic drug: Generic drugs are chemically equivalent to their brand name counterpart and have been approved by the FDA. The drugs are less expensive but have the same therapeutic value as the brand-name product.

10. Maximum Allowable Cost (MAC) also known as Maximum Allowable Ingredient Cost (MAIC): A number of benefit sponsors, like government institutions, negotiate provider contracts with over-riding fixed prices in lieu of the AWP basis. These MAC prices are set lower than the AWP price for the specific drug. The Medicaid program is an example of a large "MAC" drug database.

11. PBM: Pharmacy Benefit Management companies are relatively recent actors in today's managed health care environment. The four core functions of a PBM are: (1) drug claims processing and adjudication (b) pharmacy network management (c) formulary development and management, and (d) negotiation of rebates from pharmaceutical manufacturers. In addition to the nation's top three PBMs--AdvancePCS, Merck-Medco and Express Scripts --there are also smaller PBMs that can work with safety net organizations to develop the information and administration services requested by that organization and an appropriate fee structure (typically a per-claim charge) to pay for these services.

12. Repackager: A company licensed to take bulk quantities of branded medications and re-package them into smaller sizes.

13. Sub-ceiling price: A price below the Medicaid net price negotiated by 340B purchasers.

14. Upcharge: The amount added to the price of a drug by a wholesaler. The amount is determined by the terms negotiated by the purchaser. It is expressed as a percentage, (e.g., + 0.25%) of the net price of the drug. In some instances, for the most credit worthy purchasers or for certain buying groups, the upcharge can be a negative, (e.g., -1%).

15. WAC (Wholesale Acquisition Cost): This is the net cost of a drug not including any special deals to the wholesaler.

16. Wholesaler: A business that acts as a “middleman” between purchasers and manufacturers. The wholesaler purchases drugs from the manufacturer in large quantities and ships the drugs to pharmacies in smaller quantities.

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