Pharmacy 101

The definitions contained herein are common in the pharmaceutical industry and may help you better understand your pharmacy benefits and general understanding of the pharmaceutical industry.

The terms “Average Wholesale Price” or “AWP” or any reference thereto, shall mean the average value at which wholesalers sell drugs to physicians, pharmacies, and other customers. AWP is the generally accepted standard measure for calculating the cost of a particular medication.

The term “Brand Drug” or any reference thereto, shall mean a prescription drug that is marketed with a specific brand name by the company that manufactures it and is protected by a patent, usually held by the company that manufactures it.  Brand Drugs are typically much more expensive than their Generic Drug counterparts.

The term “Generic Drug” or any reference thereto, shall mean a medication created to be the same as an already marketed brand drug in dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use.  Generic Drugs are typically much less expensive than their brand drug counterparts.

The term “Legend Drugs” or any reference thereto, shall mean those drugs that, by law, cannot be dispensed by a pharmacy without a prescription from a physician or dentist.  These may include, but are not limited to insulin, diabetes management supplies, chemotherapy drugs, and other drugs used to treat chronic conditions.

A Letter of Medical Necessity, more commonly referred to as a “LMN,” is a written request made by your doctor and submitted to Proscript, explaining why it is medically necessary for you to be on a particular type or brand of medication.  A LMN is required for all specialty drugs, injections, ADHD medications, certain brand medications, and contraceptives.  One of the reasons this letter is required is to ensure it is covered by your plan.  There are also some medications that require the patient’s most recent medical records, lab work, and/or treatment plan, in addition to a LMN, in order for that prescription to be filled.

The term “Maintenance Medication” or any reference thereto, shall mean any prescription medication that is used for the treatment of chronic conditions, which require ongoing or continuous treatment, including, but not limited to high blood pressure, high cholesterol, diabetes, coronary disease, or arthritis.

The terms “Maximum Allowable Cost” or “MAC” refers to a list of pharmaceutical products, generated by a PBM, that includes the upper limit or maximum amount that a plan will pay for generic drugs and brand drugs that have generic versions available.

The term “Participating Pharmacy” or any reference thereto, shall mean a licensed retail facility in which prescription drugs are dispensed by a licensed pharmacist that has agreed to participate in the pharmacy network with which the fund has contracted.

The terms “Pharmacy Benefit Manager” or “PBM” or any reference thereto, shall mean a third-party administrator of prescription drug programs for group health plans, self-insured employer plans, Medicare Part D plans, and any other healthcare-based benefit plan offering prescription drug coverage.

The term “Specialty Drugs” or any reference thereto, shall mean medications that are high-cost oral or injectable medications used to treat complex chronic conditions. Specialty Drugs are highly complex medications, typically biology-based, that structurally mimic compounds found within the body.  High-touch patient care management is usually required to control side effects and ensure compliance.  Specialized handling and distribution are also necessary to ensure appropriate medication administration.