By Misty Royse, Account Manager, Net-Rx
Have you ever wondered why payers
will reject some claims, adjudicate others with profits, or respond on some with
losses? The answer may lay with whether the medications’ NDC (National Drug
Code) is on the payer’s formulary list.
If it is on the list, what tier is it on and is it a preferred
medication? The answer may affect the reimbursement amount and patient copay
assignments.
A formulary is a list of prescription
drugs covered by a prescription drug plan or another insurance plan offering
prescription drug benefits1. Within a formulary, there is typically
a preferred list and a non-preferred list. NDC’s are categorized into these
tiers based on how much the payer will cover for that medication.
Let’s take a closer look at
what a formulary is and what variables may cause a claim to reject, adjudicate
with profits, or adjudicate with losses.
Formulary/Preferred
Tier 1: Most generic NDCs are considered preferred. Claims will adjudicate when
a formulary NDC has been used, barring other factors which may cause the claim
to reject. Patient copays are the lowest in Tier 1.2
Tier 2: Preferred brand NDCs fall within this category. Preferred brand
reimbursements will reflect contract rates barring any other factors which
could reduce reimbursements. Patient copays in this tier will be higher than in
Tier 1.3
If a claim adjudicated, but the
reimbursement rate is higher than expected, and your profits are lower than expected,
it may be because the NDC is on the payer’s formulary but it is on
non-preferred tier.
Net-Rx™ is a provider of pharmacy
reimbursement solutions exclusively for pharmacies. Our advanced business
analytics platform, Metric-Rx®, combines
multiple data sources to reveal key performance indicators such as
reimbursement, profitability, utilization, and trends. The Metric-Rx Claims
Data Extract tool helps identify claims which have been reimbursed below the contracted
rate due to formulary tier level concerns.
Formulary/Non-preferred:
Tier 2: Many non-preferred generic NDCs will end up in this tier and could
result in low profits or losses. Patient copays will be higher than Formulary
Preferred Tier 13.
Tier 3: Some non-preferred generic, most non-preferred brands, and some
preferred brand NDCs land in Tier 3. Newer NDCs, and NDCs with alternate NDCs
in a lower tier will fall into this category also. Claim reimbursements for non-preferred NDCs will
likely adjudicate with losses. Preferred brand claim reimbursements could
result in low profits. Patient copays will be higher than Tier 1 and Tier 2.3
Tier 4: Some specialty non-preferred brands, preferred brands, and non-preferred
generic NDCs will be in Tier 4. NDCs used for treating rare medical conditions
fall within this tier and usually cost the pharmacy more than other NDCs. Patient
copays will be the highest within this tier with variable claim profits.3
In addition to Metric-Rx,
Net-Rx has an enhanced claims editing service, EditRx, that uses propriety
analytics along with the support of a pharmacy reimbursement trained analyst to
detect under-reimbursed claims.
The EditRx DAW/Generic Utilization report
helps to identify when a claim was incorrectly paid at the generic rate instead
of at the brand rate, which may indicate a non-preferred NDC has been utilized.
The EditRx Low Margin report identifies
claims in which a non-preferred or a lower-tier covered NDC was used, resulting
in reduced reimbursement.
Non-formulary: Whenever you use an NDC that
is not on the payer’s formulary list, the NDC is considered non-formulary and
the claim may be rejected. Payers will often refer the pharmacy to the
formulary/preferred NDCs list.
Having a good understanding of
formulary preferred NDCs vs. formulary non-preferred NDCs is integral to
maximizing your claim reimbursements. Armed with this knowledge you’ll be able
to keep a closer eye on your bottom line by quickly catching claims
submitted with non-preferred (higher tier) NDCs.
Next Article: Identifying Payer Messaging to Comply with Transition Supply Requirements Efficiently
References:
1. https://www.healthcare.gov/glossary/formulary/
2. https://www.medicare.gov/Pubs/pdf/11136-Pharmacies-Formularies-Coverage-Rules.pdf
3. https://www.goodrx.com/blog/guide-to-medication-formulary/
4. https://www.net-rx.com/
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