Pharmaceutical Terms Defined

PBIRx®

Intelligent Solutions in Pharmacy Benefits

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In order to understand topics covered in the pharmaceutical industry, it is first important to understand the terms and acronyms that are used to detail them. Since the terms used by industry experts can be quite complex and highly specific, it is often difficult to decipher their meaning at first glance. However, not understanding such terms makes it much more difficult to fully grasp industry news as well as information pertaining to your healthcare and pharmacy benefit plans.

To help you better understand our industry, we've put together a list of five terms commonly used by our team along with their definitions; check them out below!

Average Wholesale Price (AWP): Average wholesale price for a drug that is determined by the manufacturer and applied to each NDC code. The AWP does not necessarily reflect what pharmacies pay for a drug, but it is generally accepted as a pricing measure.

Generic Effective Rate (GER): The rate calculated by looking at the AWP of a generic drug as well as all generic drug claims submitted for a specific plan.

Maximum Allowable Cost Price (MAC): When brand drugs have more than one generic equivalent, prices will differ among each depending on manufacturer and package size. The MAC for such drugs is determined and implemented by your Pharmacy Benefit Manager. Some brands also have a MAC applied i.e brand with two distributors.

National Drug Code (NDC): The code every FDA approved drug is assigned, which could be 10 to 11 digits. The first 4-5 digits represent the Labeler Code (manufacturer, repacker or distributor), the next 3-4 digits represent the Product Code (strength, dosage form and formulation), and the last 1-2 indicate the Package Code (package forms and sizes).

Patient Protection and Affordable Care Act (PPACA): Also known as Obamacare and the Affordable Care Act, PPACA is a federal regulation that was signed into law by President Obama on March 23, 2010, with several amendments to date.

Though these are just a few of the most popular pharmaceutical terms, they are a great place to start to increase your knowledge and understanding of this industry. Stay tuned for our next blog which will contain an additional five!

At PBIRx, it is our goal to make sure our clients are fully educated on their pharmacy benefit plans, which is why we take the time to explain what it all means, every step of the way. With us, there is no confusion or uncertainty when it comes to your healthcare costs. To learn more about how we can help, please visit us on our website or contact us at (888) 797-2479.