the business of community pharmacy chapter 7 created by jennifer majeske, mineral area college

Created by Jennifer Majeske, Mineral Area College

The Business of Community

PharmacyChapter 7


Learning Objectives• Understanding the roles, responsibilities, and limitations

of the technician in the sale of over-the-counter (OTC) drugs, dietary supplements, and medical supplies, especially in the case of a patient who is diabetic.

• Accurately process special OTC sales, such as Schedule V cough syrups, decongestants containing pseudoephedrine, and the Plan B contraceptive.

• Understand the importance of necessary cash register management functions.

• Identify procedures for inventory management, including purchasing, receiving, and storage of prescription drugs, including controlled substances.

• Define and explain the terms pharmacy benefits manager, deductible, co-payment, coinsurance, tiered co-pay, and prior authorization.


Learning Objectives• Discuss drug insurance coverage for private,

Medicaid, Tricare, and Medicare plans.• Know how to process a workers’ compensation

insurance claim.• Define the term coordination of benefits.• List options for lower prescription costs for uninsured

patients.• Identify the necessary insurance information needed

to process online claims for prescription drugs.• Calculate days’ supply of medication for online billing.• Resolve problems with online claims processing,

audits, and charge-backs.


Introduction• Pharmacy technicians are responsible for performing business

tasks vital to the daily operation of a community pharmacy.• Business functions can include: operation of a cash register,

computer system (including bar-code scanner), and automated dispensing and counting devices; assisting customers in the purchase of over-the-counter (OTC) drugs and various products; online billing; and inventory management.

• Technicians need a basic understanding of math principles as well as business math such as markups, discount, and average wholesale price (AWP).

• Learning these skills gives technicians a view into the business operations of community pharmacy and a vested interest in the profitability of their workplace.


Nonprescription Sales• Rx area: stores medications requiring a

prescription and related items as well as nonprescription drugs.

• Front area: stores medications that can be purchased without a prescription, medical supplies, and other merchandise available for sale.

• Pharmacy techs have a major role in assisting customers in locating necessary OTC drugs, diet supplements, and medical supplies.


Over-the-Counter Drugs

• Over-the-counter (OTC) drug: is approved for sale without a prescription.

• Many OTC drugs of today once required a prescription.• Fast-acting regular insulin's such as Novolin and

Humulin can be sold to a patient with or without a prescription.

• Benefits of OTC Drugs: Customers purchase OTC products for self-administration at an ever-increasing rate. Why?

• Labeling of OTC Products: Manufacturer’s must include on their labels all information necessary for the safe and effective use of the products by consumers.



• Consumer Precautions: Products should be used for a restricted period (less than 7 days) for self-limiting indications, unless directed by a physician.

• No drug, even OTC products, are completely safe and without side effects or adverse reactions.

• OTC Products and Pharmacy Personnel: Consumers will often seek the advise of pharmacy personnel when selecting an OTC product.

• Role of the Pharmacist: Only pharmacists can address questions about drug product selection, indications, dosage….

• Role of the Pharmacy Technician: Technicians sell and stock OTC drugs; questions about OTC should be directed to the pharmacist.



• Sale of Certain OTC Products: certain OTC products have restrictions; Schedule V, pseudoephedrine drugs, and emergency contraceptives.

• Schedule V Drugs: Schedule V drug – a medication with a low potential for abuse and limited potential for creating physical and psychological dependence.

• Drugs that Contain Pseudoephedrine and Ephedrine: restricted sales; information required prior to the sale of these products; smurfing – when a patient is paid cash by an individual to illegally purchase pseudoephedrine from one or more pharmacies.

• Emergency Contraceptives: 10% of women of child-bearing age may need emergency contraceptives.


Dietary Supplements• Dietary supplement - can be a vitamin, mineral, or

herbal product.• Diet supplements are not regulated by the FDA in the

same stringent manner as OTC drugs; scientific studies of the efficacy of these products can be quite limited.

• Diet supplements are primarily regulated by the DSHEA.

• Diet supplements must be safe and accurately labeled.• The FDA can remove a diet supplement from the

market if it is deemed dangerous or if the marketing claims or labels include disease indications.

• Dosage of a dietary supplement is usually indicated as a serving size rather than dose.


Medical Supplies• Durable medical equipment (DME)• DME includes:

o Hospital beds, Wheelchairs, Canes, Walkerso Crutches, prosthetics, orthotics, blood glucose meters, etc.

• Non durable medical equipment – consumable, disposable items that can only be used by one patient for a specific purpose.• Diabetic supplies – test strips, lancets


Supplies to Manage Diabetes

• Customers with diabetes require specific medical supplies to monitor and manage blood sugar levels.

• Pharmacy techs can become certified in patient education for diabetic patients as well as help a customer locate diabetic supplies.

• Glucometer: a DME device that measures blood glucose levels in diabetic patients.

• Insulin syringes: allow for the self-administration of insulin; insulin syringes are available in 0.3 mL, 0.5 mL, and 1 mL sizes.


Supplies to Manage Diabetes

• Pen Needles: needles for insulin pens.• Test Strips, Lancets, and Alcohol Wipes: test strips are

machine-specific and must match the type of glucometer a patient is using; lancets are used to pierce the skin; alcohol wipes are used to clean the patient’s finger prior to using the lancet.

• Insurance Coverage for Diabetic Supplies: insulin syringes and other diabetic supplies are sometimes covered by insurance or Medicare Part D if a prescription is written by a physician.

• Certificate of medical necessity – a form to be completed and signed by the prescriber. (see Figure 7.2)


Test Kits• Patients come to the pharmacy to purchase test

kits to help monitor health conditions.• What sort of test kits can be purchased at the

pharmacy?


General Medical Supplies

• Customers purchase general medical supplies from a community pharmacy.

• Pharmacy techs help with these transactions.• What sorts of general medical supplies can you

purchase from a community pharmacy?


Automation in the Pharmacy

• Computer - an electronic device used for inputting, storing, processing, and/or outputting information. A computer is a critical tool needed for the safe and efficient dispensing of prescriptions and online billing in the pharmacy.

• Basic keyboarding (typing) with a minimum of 30 words per minute proficiency is essential.

• Computer Hardware:o Smart terminal: contains its own storage and processing capabilities.o Dumb terminal: a computer that contains a keyboard and monitor but

does not contain its own storage and processing capabilities.o Remote computer: a mini-computer or mainframe at company

headquarters (or home office) that stores and processes data.


Automation in the Pharmacy

• Computer Software: designed to help the technician process the prescription with both speed and accuracy.

• Capabilities of DBMS: database management system (DBMS) – contains the patient profile, physician database, etc.

• Specially designed computer systems are capable of controlling automatic or robotic dispensing, tracking expenses and inventory reports, generating reports concerning controlled substances or patient insurance, performing dosing calculations, or retrieving medical and pharmacy literature.

• Operation of DBMS: insurance plans are accessed via telecommunications; backups of all data should be made at regular intervals.


Cash Register Management

• Pharmacy techs are often responsible for collecting money that the patient owes to cover the cost of prescriptions, OTC drugs, vitamins, herbs, diet supplements, medical supplies and other store merchandise.

• Larger pharmacies often employ a bar-code scanning technology in concert with the cash register.

• Cash• Personal Check• Card Transactions

o Credit card: doesn’t deduct the money directly but is a type of loano Debit card: form of online cash payment; debit cards instantly deducts the

cost of the purchase from the customer’s bank accounto Flex card: medical credit card for prescription co-pays and select OTC

items


Cash Register Functions

• Other Payment Options• Voided sales; verify prices; refunds• Reconciliation of the Cash Register: reconcile the

cash, credit cards receipts, etc.• Other Automation Tools: bar coding, automated

counting machines, weighing scales, and robotics.o Machines are not 100% accurate and should not be used to count

controlled drugs.o “Pharmacy management systems” – software programs that manage a

pharmacy’s data.

• How can automation improve efficiency in the pharmacy?


Inventory Management

• Inventory: the entire stock of pharmaceutical products on hand for sale at any given time.

• If inventory is too tight, pharmacies may frequently run out of needed medication, causing loss of a sale or inconvenience to the patient.

• Inventory value: the total value of the drugs and merchandise in stock on a given day.

• Why is inventory management so important? What role do you as a technician play in inventory management?


Purchasing• Purchasing: the ordering of products for use or

sale by the pharmacy.• Wholesaler purchasing – enables the community

pharmacy to use a single source to purchase and receive numerous products from multiple manufacturers of brand and generic name pharmaceuticals.

• Just-in-time (JIT) purchasing – frequent purchasing in quantities that just meet supply needs until the next ordering time.

• Prime vendor purchasing – an exclusive agreement made by a pharmacy for a specified percentage or dollar amount of purchases.


Purchasing• Pharmacy techs play a crucial role in purchasing;

techs have a good sense of what drugs are moving of the shelf and may need to be reordered.

• Automated drug ordering process allows for the purchasing of orders that are automatically generated; when inventory drops to the minimum level, the item is purchased to restock the supply

• Example 1• Special orders may require additional delivery

time if not in the wholesaler’s inventory.


Purchasing• A pharmaceutical product can be temporarily or

permanently unavailable from a supplier.• Drug shortages can be due to manufacturing

quality control issues, FDA or voluntary recalls, expirations, or discontinuations.

• Pharmacy personnel should determine why the drug is unavailable; the pharmacist can then identify and obtain a change.

• Pharmacies will check with a competing pharmacy to see if they have the medication, and then transfer the prescription.


Receiving and Posting• Receiving: the physical delivery of an order from a

wholesaler, warehouse, or other pharmacy.• Pharmaceutical products must be carefully checked

against the purchase order or requisition.• Posting: the process of reconciling the invoice and

updating inventory in the pharmacy database.• The pharmacist or technician signs an invoice from a

delivery representative, verifying the receipt of the number of totes or boxes delivered.

• A separate invoice is required for controlled substances.• Contents of a shipment should be verified for name of

product, manufacturer, quantity received vs. ordered, product strength, and package size.


Receiving and Posting• A drug ordered but not received should be

brought to the attention of the pharmacist.• Part of the posting process includes placing

stickers on received stock.• When stocking pharmaceuticals the products with

the shortest expiration date should be first for selection and use.

• Once the wholesaler order is received and posted all partial-fill and out-of-stock (OOS) prescriptions should be filled and the patient should be notified that the prescription is ready.


Handling Out-of-Stock and Partially Filled Medications• Pharmacies maintain a limited drug inventory to

remain profitable.• Out-of-Stock Medications: medications can go out

of stock (OOS) for a variety of reasons.• What potential solutions are there for the

temporary unavailability of a medication from a supplier?

• Partial-Fill Medications: inventory is insufficient to completely fill the prescription.

• Partial fill – may provide a 5-day supply of medication, which should be sufficient until the new drug inventory is received.


Drug Returns and Credits

• Drugs may be returned to the pharmacy stock or to a wholesaler for credit.

• Stringent laws regulate the return of pharmaceuticals to manufacturers, especially controlled substances.

• Drug Return Process: technicians are often responsible for handling drug returns to the wholesaler for credit.

• Patient Decline of Medication: if a patient fails to pick up a prescription medication the drug can be returned to the wholesaler for credit.


Drug Returns and Credits

• Expired Medications: drug inventory must be maintained, keeping a close eye on expiring medications; prescription medication vials returned to the pharmacy by the patient – even if unused and unopened – cannot, be federal law, be returned to stock once they have left the pharmacy.

• Filled Prescriptions: any medication or dispensing error made by the pharmacy results in returning of the incorrect drug, correct dispensing, an apology, and reimbursement/credit made to the patient.

• Drugs that have left the pharmacy, where no error occurred, may or may not result in reimbursement to the patient.

• Drug Recalls: the patient can return the drug for credit or refund provided by the manufacturer.


Inventory Requirements for Controlled Substances

• Purchasing, receipt and inventory of controlled substances requires special procedures and record keeping.

• Each pharmacy must register with the Drug Enforcement Administration (DEA) to purchase controlled substances.

• The symbol C and/or the Roman numeral must be at least twice the size of the largest letters printed on the label; if a bottle is to small, the box and package insert must contain the symbol or numerals.

• Symbols and/or numerals are not required on the containers of dispensed medications.


Schedule III, IV, V Drugs

• In most pharmacies, techs can order C-III through V medications.

• Receipt of these drugs must be verified by the pharmacist, this includes comparing the invoice with the drug name, dosage and quantity of physical inventory.

• All C-III, IV, and V prescriptions and records, are commonly kept separate from other records and must also be kept in a readily retrievable form.

• Records for nonscheduled drug prescriptions are often filed separately.


Schedule II Drugs• Purchasing: purchasing Schedule II drugs must be

authorized by the pharmacist and executed on a DEA 222 form.

• This form provides a record of any Schedule II sold or delivered to another DEA-registered dispenser.

• Ordering of such drugs, from a wholesaler, can take 48-72 hrs.

• The pharmacist – not the technician – is legally responsible for the ordering of all Schedule II drugs, whether by completing a 222 form or by ordering online.


Schedule II Drugs• Receiving: schedule II drugs should be received in

a special tote with an unbroken seal.• The pharmacist must break the seal and verify

the contents of the tote.• Inventory: perpetual inventory record: a

method of maintaining ongoing accountability for Schedule II medications on a tablet-by-tablet basis.

• Any discrepancies should be reported to the pharmacist; if a discrepancy cannot be resolved the pharmacist should contact the state drug inspector and DEA.


Schedule II Drugs• Documentation: complete and accurate records of

all controlled substances must be maintained.• Tracking mechanisms exit by state and federal

authorities to monitor the distribution of Schedule II drugs.

• Disposal: any disposal of a controlled substance must be witnessed, recorded and signed by another pharmacist.

• Schedule II drugs are often saved for destruction on the next visit of the state drug inspector or returned to an authorized destruction depot.

• National Take-Back Initiative: Saturday, Sept. 27th


Disposal of Syringes and Medications

• Pharmacy Disposal Guidelines: the proper disposal of “sharps” is critical to the safety of individuals but also to prevent communicable diseases.

• Home disposal Guidelines: flushing medications down the toilet is not recommended; mix the medications in kitty litter or coffee grounds.

• 7.8 billion needles and syringes are improperly disposed of each year; patients should be encouraged to purchase a rigid, puncture-resistant, hard plastic sharps container.

• http://www.safeneedledisposal.org/index.cfm?load=page&page=114

http://www.safeneedledisposal.org/index.cfm?load=page&page=114

http://www.safeneedledisposal.org/index.cfm?load=page&page=114


Estimating Drug Inventory

• Pharmacies today often have $150,000 to $300,000 or more in inventory on there shelves.

• Inventory levels must be accurate, but not excessive.

• What are some of the costs associated with keeping excess inventory in stock?

• An inventory value is used to determine average inventory and inventory turnover rate – the turnover rate of the drug inventory.

• Open bottles should have an “X” or an “Open Bottle” sticker indicating that the bottle has been opened.


Business Math Used in Pharmacy Practice

• Profit - to have more receipts than expenses to continue to provide customer service.

• Technicians need to help ensure that inventory turns over and that all insurance reimbursements and receipts are greater than the expenses.

• Techs take care of pricing in the pharmacy by billing online insurance, marking products up by a certain percentage, and marking products down.

• A pharmacy technician needs to master basic mathematic skills; understanding the terminology and mathematics used can directly affect the profitability of the business.


Markup• Markup or gross profit - the difference

between what pharmacies purchase products at, and what they are sold for.

• Markup is computed as follows:o Selling price – purchase price = markupo Markup cost 100 = markup rate

• Example 2• http://www.rd.com/advice/10-outrageous-markups

/

http://www.rd.com/advice/10-outrageous-markups/

http://www.rd.com/advice/10-outrageous-markups/


Discount• Discount: an item offered to a pharmacy at a

lower price.• Discount and discounted prices are calculated

with the following formula:o Total purchase price discount rate = discounto Total purchase price – discount = discounted

purchase price

• Example 3


Average Wholesale Price Applications

• Average wholesale price (AWP) is an average price that wholesalers charge the pharmacy.

• Third parties typically reimburse a pharmacy based on AWP less a discount that has been agreed on in a contract.

• AWP is used to calculate a prescription reimbursement with the following formula:o Prescription reimbursement = AWP +

percentage + dispensing fee

• Example 4


Health Insurance• Health insurance is coverage of incurred

medical costs such as physician visits, lab fees, and hospitalization.

• The cost of health care and health insurance is far outpacing the rate of inflation.

• Medicaid and Medicare offer medical and drug coverage, with limitations and restrictions on age, income and disability.

• The passage of the Affordable Care Act of 2010 became a first step in providing comprehensive health insurance coverage to individuals.


Prescription Insurance Plans

• Private insurance• Medicaid (state government)• Tricare, Medicare (federal government)• Prescriptions and the costs associated with

prescriptions has risen dramatically over the past 30 years.

• 1990 – 1.47 billion prescriptions dispensed - $6.62• Today – 4 billion + prescriptions dispensed - $80• Pharmacy benefits manager (PBM) – a company

that provides such service by administering the prescription drug benefits and pharmacy reimbursements for many insurance companies.o Express Scripts, Caremark, PAID



• Deductible: amount that must be paid by the insured before the insurance company will consider paying its portion; annual deductible is $100 to $3000.

• Co-pay: the flat amount the patient is to pay for each prescription; co-pays vary by drug and insurance company.

• Coinsurance: a percentage based plan, the patient must pay a certain percentage of the prescription price; not as common as a deductible or co-pay.

• Most individuals pay a monthly premium for prescription drug coverage that may or may not be subsidized by their employer.



• Private Insurance – coverage for medical or prescription costs provided by an employer or purchased by an individual; a wide range of plans are available and their costs reflect the coverage provided.

• Co-payments: dual co-pay – one co-pay for brand name drugs and a lower co-pay for generic drugs; tiered co-pay – escalating cost for a generic, preferred brand, and a nonpreferred brand.

• Preferred Drug List (PDL) – an list of medications provided by a patient’s insurance company.


Medicaid• Subsidized cost of health care, including drugs, for

indigent and disabled citizens of its state who meet age and income requirements.

• Pharmacies sign a contract to provide prescription benefits to this disadvantaged population according to state terms.

• OTC drugs, with very few exceptions, are NOT covered by Medicaid.

• Usual and customary - pharmacies cannot charge the state more for the same prescription dispensed to a patient with private insurance.

• Some pharmacies elect not to accept Medicaid because of low reimbursement, delays or errors in receipt of payment, and challenges on legitimate drug claims.


Tricare• Tricare is a federal health and prescription plan

that is available to active and inactive members of the military and their families.

• Prescription insurance coverage has relatively low co-pays for generic and brand name drugs.

• A 90-day supply is usually covered from any community pharmacy.


Medicare• Individuals over the age of 65 are eligible; covers

some percentage of costs for hospitalization and ER visits; does not cover prescription drugs.

• Medicare Advantage: Medicare Part C, combination of both health and prescription insurance.

• Medicare Part D – The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003; patients can add drug insurance to their existing health coverage at an additional monthly charge to their current Medicare (Part B).

• Donut hole – gap in coverage; from $3000 to $7700; the Affordable Care Act of 2010 has provisions to eliminate the donut hole by 2019.


Prescription Insurance Patient Needs

• To best serve the older adult patient population, technicians should be knowledgeable of drug insurance coverage.

• Education and guidance should be provided, from pharmacy staff, as needed helping patients choose, based on their individual drug regimens, the most appropriate plan.

• Patients should research their options and seek guidance from family members, to help them make their selection.


Workers’ Compensation

• Workers’ comp provides insurance to cover medical care and compensation for employees who are injured in the course of employment or from an accident.

• Drug coverage is usually limited.• Pharmacies must have a contract with the third-

party PBM that is providing reimbursement to the pharmacy for the claim.

• Technicians should be familiar with the policy and procedure for handling workers’ comp claims.


Coordination of Benefits

• Coordination of benefits (COB) - the process of billing a primary and secondary insurance.

• Primary and secondary insurance, “dual eligibility.”

• Coupons for prescriptions generally cover all or part of the co-pay from the primary insurance.

• Uninsured: more than 50 million adults and children, 16% of the population, do not have any type of health or drug insurance.

• Drug Discount Cards and Coupons: prescription savings club card; drug discount card; coupons.


Receiving and Entering Insurance Information

• Learning the ins and outs of various insurance plans is a most challenging skill for a pharmacy technician, second only to learning all the generic and brand (trade) names.

• Procedures for billing online PBMs are similar – but not identical – whether the billing is to private insurance, government, or state plans.


Processing Prescription Claims

• Being able to properly process and identify insurance claims are very important steps and key to a pharmacies profitability.

• Online adjudication – using wireless communications to process prescription claims for private insurance, Medicaid and Medicare Part D.

• When the prescription is billed to the PBM, the pharmacy is immediately aware as to what amount the pharmacy will be reimbursed.

• Customers co-pays are determined by the insurance plan, not by the pharmacy.

• With insurance a patient can go to any pharmacy to get their prescription filled; the differences are in location, hours and quality of service.


Potential Processing Errors

• Discrepancies between the name on the patient’s insurance card and the name in the insurance database.

• Incorrect date of birth, either at the pharmacy or insurance company.

• Look at the ID number; some insurance companies require the letters proceeding the ID number, some do not.

• Person code to follow the ID number; some insurance companies require the person code, some do not.

• “Refill to soon”; most insurance companies will allow refills to be processed if the request is made within 5-7 days of the patient’s depletion of the medication.

• “Days supply”; there exists limits on the amount of medication the insurance will pay for.


Processing Prescription Drug

Claims• Calculating days supply of creams, ointments,

and gels is difficult, but it can be estimated - depending on the size of the tube and the application site

• Days’ supply – the time that a given amount of prescribed medication lasts.

• See Table 7.3 Medication Volume Equivalences• Examples 5 - 12


Resolving Prescription Drug Claims, Audits, and Charge-backs• The technician is an advocate for the patient when

dealing with insurance claims; this fosters patient trust and pharmacy loyalty.

• Prior Authorization: authorization to cover a prescription when a medication is not covered, or when the prescriber determines a patient requires a medication not only the patients insurance formulary.

• Medications without Insurance Coverage: some medications selected by a physician, no matter what, are not covered by an insurance company.

• Insurance Fraud: filling a false claim; subject to criminal and civil penalties'.


Resolving Prescription Drug Claims, Audits, and Charge-backs• Medication Audits: pharmacies are subject to

medication audits by an insurance company.• Audit – a challenge on a reimbursement from a

PBM or insurance provider on a prescription claim that has been previously processed.

• What are some examples of potential audit challenges?

• Charge-backs: a rejection of a prescription claim by a PBM or insurance provider that must be investigated and, if possible, resolved by the pharmacy technician.

• What are some reasons a charge-back could occur?


This workforce solution was funded by a grant awarded by the U.S. Department of Labor’s Employment and Training Administration. The solution was created by the grantee and does not necessarily reflect the official position of the U.S. Department of Labor. The Department of Labor makes not guarantees, warranties, or assurances of any kind, express or implied, with respect to such information, including any information on linked sites and including, but not limited to, accuracy of the information or tis completeness, timeliness, usefulness, adequacy, continued availability, or ownership.

This work by Mineral Area College is licensed under the Creative Commons Attribution 4.0 International License.

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Resources• Picture on slide 10

o Crutch by Pearson Scott Foresman licensed under CC BY

• Picture on slide 10o Whizzer’s Place by Mick Rogers licensed under CC BY

• Picture on slide 10o Patient room with hospital bed by National Cancer Institute licensed under

CC BY

• Picture on slide 14o Thermometer by Svdmolen licensed under CC BY

• Picture on slide 14o Dropper by laobc licensed under CC BY

• Picture on slide 14• Adhesive bandage by Nevit Dilmen licensed under

CC BY

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the business of community pharmacy chapter 7 created by jennifer majeske, mineral area college

Documents

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benefits of otc drugs

otc products

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business functions