Common Pharmacy Terms, Definitions and Acronyms

Common Pharmacy Terms, Definitions and Acronyms
COMMON PHARMACY TERMS

Brand-name Drug: a drug sold by a drug company under a specific Generic Drug: a drug that has the same active-ingredient formula as a
name or trademark that is protected by a patent and is typically more brand-name drug that usually costs less.
expensive than the generic version.
MTM: medication therapy management; a service rendered by a
Compounding: the creation of a particular pharmaceutical product to fit pharmacist that provides a comprehensive and in-depth examination of
the unique needs of the patient. a patient’s medication regimen that helps to ensure proper medication
utilization.
Formulary: a list of specific medications that are approved to be
prescribed under a particular insurance policy. Reimbursement: compensation for a pharmacy service (example:
medication therapy management).
TYPES OF PHARMACIES
Ambulatory Care Pharmacy: a pharmacy where a pharmacist provides Independent Pharmacy: a community (retail) pharmacy that is not
direct patient care for a specific disease state or group of diseases. directly affiliated with any chain of pharmacies and is not owned by a
publicly-traded company.
Central Fill Pharmacy: one large pharmacy that packages medications
and delivers them to smaller pharmacies for distribution to patients. Mail-order Pharmacy: a type of pharmacy service that will deliver a
patient’s medication to their home.
Chain Drug Stores: a group of pharmacies owned by a corporate entity
all under the same name. Nuclear Pharmacy: a specialty pharmacy dedicated to the compound-
ing and dispensing of radioactive material for use in nuclear medicine
Clinical Pharmacy: term is used to describe any pharmacies that are procedures.
located within a hospital; typically do not offer outpatient services.
Outsourcing Facility: a pharmacy that performs the compounding of
Community Pharmacy: health care facility that provides pharmacy medications for other pharmacies and health care institutions.
services to people in a local area or community. This term is also used to
group independent pharmacies and chain drug stores together. Specialty Pharmacy: focuses on providing services to patients with often
rare conditions, who require high-cost, complex medications, frequently
Compounding Pharmacy: pharmacies that take medications and reformu- only available from a limited panel of specialty pharmacies
late them to meet specific patient needs.
PHARMACY LEGISLATION TERMS

5 Percent Rule: the rule that limits a pharmacy from selling more than education, training or experience to perform the act, task or function
5 percent of either its total annual sales or total dosages in a 12-month (example: a physician delegates the act of administering a flu shot to the
period as “For Office Use.” pharmacist under a collaborative practice agreement).
Any Willing Pharmacy: a set of laws that require managed care organiza- For Office Use Prescription: a noncontrolled medication that is sold by a
tions to grant network participation to all pharmacies willing to join and pharmacy to a practitioner for office use.
meet network quality requirements. Provider Status: the certification of a medical professional group that
Collaborative Practice Agreement: a formal agreement in which a licensed gives them permission to participate in Medicare Part B, which gener-
provider makes a diagnosis, supervises patient care, and refers patients ally allows them to receive compensation for their services from federal,
to a pharmacist under a protocol that allows the pharmacist to perform state and private health care plans.
specific patient care functions (example: flu shots, dose alterations, etc.) Scope of Practice: a term used by all licensing boards that defines the
Delegation: the transfer of
a specific act, task or function, by a licens- procedures, actions and processes that are permitted for the licensed
ee who holds a license other than a health profession subfield license, individual under law.
to a licensed or unlicensed individual who is otherwise qualified by
COMMON INSURANCE TERMS
Audit: a planned and documented activity performed by qualified per- reaches the stop loss number [maximum out-of-pocket costs]; the in-
sonnel to determine by investigation of objective evidence the adequacy surer is then responsible for 100 percent of the costs thereafter).
of procedures and the effectiveness of their implementation. Medical Benefit: generally, a defined package of medical services devel-
Closed Network: an insurance plan that only allows patients to visit spe- oped by an insurance provider that lists what is covered.
cific providers to receive coverage for medications. Open Network: an insurance plan that allows a patient to visit providers
Coinsurance: a percentage that the insurer pays after the policy’s deduct- of their choosing without an increase in copayment.
ible is exceeded up to the policy’s stop loss Pharmacy Benefit: a defined list developed by an insurance provider that
Co-pay: a fixed cost defined in the insurance policy that is paid by the states which medications are covered and how much they are covered.
insured person each time a medical service is rendered. Preferred Network: an insurance drug plan that allows patients to choose
Maximum Out-of-Pocket Costs: the equivalent to the insurance stop loss their pharmacy, but preferred pharmacies offer lower copayments.
number from the patient (example: after the patient pays their deduct- Third Party: the party to a medical benefits contract that may collect
ible, and the insurance company then reaches their stop loss number, premiums, assume financial risk, pay claims and provide other admin-
the excess costs are now paid by the insured person until this amount istrative services.
COMMON REIMBURSEMENT TERMS

AMP: Average Manufacturer Price; a quarterly, calculated average dictat- MAC: Maximum Allowable Cost; the upper limit or maximum amount
ed by the Centers for Medicare and Medicaid Services of what whole- dictated by a payer or pharmacy benefit manager that they will pay for
salers pay drug makers. AMP is also the basis for prescription drug a certain medication.
payments to pharmacies under Medicaid.
NADAC: National Average Drug Acquisition Cost; a pricing list compiled
AWP: Average Wholesale Price; it is used by pharmacy benefit managers by the Centers for Medicare and Medicaid Services that is derived from
and health insurance companies to calculate drug product reimburse- the invoices of 500 volunteer pharmacies.
ment rates.
UCR: Usual, Customary and Reasonable; the amount paid for a medical
AWP Minus: the negotiated price that an insurer will pay for each pre- service or medication in a geographic area based on what providers in
scription (example: AWP minus 8 percent). that area charge for the same service or medication.
FUL: Federal Upper Limit; a calculation performed by the Centers for
Medicare and Medicaid Services that multiplies a products AMP by 175
percent, which is the maximum that a pharmacy is allowed to charge
for a product.
TYPES OF INSURERS AND REIMBURSEMENT ENTITIES

CMS: Centers for Medicare & Medicaid Services; federal agency within Medicare Part A: covers inpatient hospital stays, care in a skilled nursing
the United States Department of Health and Human Services that ad- facility, hospice care and some home health care.
ministers the Medicare program and works in partnership with state
governments to administer Medicaid, the State Children’s Health Insur-
Medicare Part B: covers certain physicians’ services, outpatient care,
medical supplies and preventive services.
ance Program, and health insurance portability standards
Health Savings Account: tax-advantaged savings account for medical ex- Medicare Part C: not a separate benefit, but rather the part of Medicare
policy that allows private health insurance companies to provide Medi-
penses for patients enrolled in health insurance with a high deductible.
care benefits.
Healthy Michigan: Michigan Department of Community Health pro-
Medicare Part D: provided only through private insurance companies
gram that helps to provide health coverage to those who cannot provide
with government contracts; mainly provides outpatient prescription
it for themselves and who are not qualified for or enrolled in federal
drug coverage.
Medicare and Medicaid assistance.
PBM: pharmacy benefit manager; primarily responsible for processing
Medicaid: U.S. government program financed by federal, state and local and paying prescription drug claims, and are most often (but not in
funds, which covers hospitalization and medical insurance for persons
Michigan) a third-party administrator
of all ages within certain income limits.
TPA: third-party administrator; an organization that administers and
processes insurance claims.
408 Kalamazoo Plaza Lansing, MI 48933 | ph (517) 484-1466 | fx (517) 484-4893 | MichiganPharmacists.org

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Common Pharmacy Terms, Definitions and Acronyms

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Common Pharmacy Terms, Definitions and Acronyms

COMMON PHARMACY TERMS

PHARMACY LEGISLATION TERMS

COMMON REIMBURSEMENT TERMS

TYPES OF INSURERS AND REIMBURSEMENT ENTITIES

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