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Chapter 7
The Business of
Community Pharmacy
Learning Objectives
• Explain the parts of a computer system.
• Explain the alternatives for third-party administration.
• Define and explain the terms prescription benefits manager
and tiered copay.
• Discuss drug coverage for Medicaid and Medicare
patients.
• Identify procedures for inventory management, including
the purchasing, receiving, and storage of prescription and
over-the-counter drugs.
Learning Objectives
• Identify procedures for the purchasing, receiving,
storage, and inventory control of controlled-drug
substances.
• Calculate inventory turnover, markup, and markup rate.
• Apply average wholesale price to profit calculations.
• Compute discounts.
MANAGING COMPUTER SYSTEMS
• Parts of a Computer System: Some of the more
important parts of a typical computer system
include: input devices, central processing unit,
storage devices, random-access memory, readonly memory, monitor, printer, scanner, modem,
operating system, and applications.
• How Pharmacy Computer Systems Work:
Pharmacy computer systems differ dramatically
from one another. Most systems often allow the
operator to call up patient profiles onscreen and to
enter new prescription information.
Community Pharmacy
Business Issues
Safety Note!
• Many pharmacy computer systems contain
features that will warn, automatically, of
possible allergic reactions or adverse food
or drug interactions based on information in
the patient profile and on a database of
known contraindications for given
medications.
Figure 7.1
Terms to Remember
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applications
central processing unit (CPU)
scanner
storage devices
computer
database management system (DBMS)
input devices
modem
monitor
Terms to Remember
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operating system
random-access memory (RAM)
read-only memory (ROM)
printer
BILLING AND THIRD-PARTY
ADMINISTRATION
• Processing Prescription Drug Claims: When a
new prescription is received, the pharmacy technician must
obtain all necessary insurance information from the
customer, including deductibles plus any copay or
coinsurance percent amount.
• Medicaid Prescription Billing: Medicaid subsidizes
the cost of healthcare, including drugs, for indigent and
disabled citizens of its state who meet age and income
eligibility requirements. Most community pharmacies sign
a contract to agree to provide prescription benefits to this
disadvantaged population according to the terms of that
state.
BILLING AND THIRD-PARTY
ADMINISTRATION
• Medicare Prescription Drug, Improvement,
and Modernization Act of 2003: This act offers
eligible patients the option to add drug insurance
to their health coverage. Starting in January 2006,
patients who qualified for Medicare coverage were
eligible to add drug benefit coverage for an
additional monthly charge to their current
premium.
Terms to Remember
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deductible
copayment
Coinsurance
third-party administration (TPA)
prescription benefits manager (PBM)
universal claim form (UCF)
Medicare Prescription Drug, Improvement, and
Modernization Act (MMA) of 2003
INVENTORY MANAGEMENT
• Purchasing: Purchasing is usually carried out by
either an independent or group process. The
Controlled Substances Act (CSA) defines
procedures for purchasing.
• Receiving: The pharmaceutical products received
must be carefully checked against the purchase
order or requisition. The shipment should be
compared for name of product, quantity, product
strength, and product package size.
INVENTORY MANAGEMENT
• Inventory Management Processes: Inventory
management includes knowledge of the
importance of turnover ratios. Several important
issues include how much inventory should be
maintained, when inventory levels should be
adjusted, and where inventory should be stored.
Factors that bear on decisions regarding these
issues include floor space allocation, design and
arrangement of shelves, and demands on available
refrigerator or freezer space.
INVENTORY MANAGEMENT
• Inventory Management Requirements for
Controlled Substances: The DEA requires that a
complete inventory of all controlled substances
must be taken every 2 years. Some states have
more stringent requirements such as a yearly
inventory. The complete inventory must include
an inventory record and an extemporaneous
compounding record.
Community Pharmacy
Business Issues
Safety Note!
• Prescription vials returned by the patient
cannot be returned to stock, even if they are
unopened.
Figure 7.3
Terms to Remember
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purchasing
receiving
direct purchasing
prime vendor purchasing
inventory
turnover rate
inventory value
wholesaler purchasing
average inventory
BUSINESS MATH USED IN PHARMACY
PRACTICE
• Markup: Prescription pricing is subject to
governmental laws and regulations, as well as
competition within the marketplace. Markup
plays an important part in the pricing system.
• Discount: A pharmacy may offer a consumer a
discount, or a deduction from what is normally
charged, as an incentive to purchase an item.
BUSINESS MATH USED IN PHARMACY
PRACTICE
• Average Wholesale Price Applications: Usually
a third parties reimburse a pharmacy based on the
AWP less an agreed on discount. Therefore the
pharmacy has an incentive to purchase a drug as
far below its AWP as possible.
• Capitation Fee: This reimbursement plan is
infrequently used because it places all risk on the
pharmacy without adequate controls in place to
control prescribing.
Terms to Remember
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profit
gross profit
average wholesale price (AWP)
capitation fee
markup
discount
Discussion
Create a diagram of a typical computer
system. Label the following parts: keyboard,
mouse, central processing unit (CPU), floppy
disk drive, monitor, printer, and modem.
Discussion
A pharmacy technician working in a retail environment should be
familiar with various terms related to heath insurance. Patients
often have a difficult time understanding how their insurance
works, and the technician can often act as an intermediary and
advocate for the patient with regards to prescription drug benefits.
Research the following insurance terms and define them in words
that would be easily understood by a customer of the pharmacy.
a.
b.
c.
d.
e.
f.
major medical insurance
Medicare, Parts A, B, and D
Medicaid
deductible
copay
coinsurance
g. preferred formulary
h. prescription benefits
manager (PBM)
i. usual and customary
j. dual and tiered copays