Understanding Medicine Pricing

Disclaimer:

Please note that the information provided below is used in general terms and is aimed at assisting members to  decide how best to spend the healthcare benefit they have purchased from their chosen Medical Scheme. Schemes may have entered into network arrangements that are conceptually the same but differ numerically from details discussed hereunder. Please check your Medical Scheme guidebook for details relevant to your Medical Scheme.

DEFINITIONS:

There are two important concepts in understanding medicine pricing:

1. Single Exit Price (SEP) can be thought of as the price at which a pharmacy buys medicines from the wholesaler. This price is regulated by the government and a medicine may not be sold by a wholesaler at less than the published SEP. Government allows for an annual increase in SEP.
2. Note: Manufacturers usually take an increase once annually (usually between February and April, depending on when the government publishes the new rate) but then may choose to decrease the SEP during the course of the year, once competitive pressures kick in.
3. The Dispensing Fee is added onto the SEP described above and is the Professional Fee that dispensers of medicine (e.g. pharmacists or doctors) may charge for their services. The maximum dispensing fee allowed is also government regulated. However, dispensers of medicine may offer to sell medicines at less than the regulated maximumdispensing fee.
4. Note: Dispensers are divided into TWO categories:  pharmacists and non-pharmacists (doctors, nursing practitioners). The regulated maximum dispensing fee is different for the two types of dispensers noted above.

PHARMACY DISPENSING FEES

On 19 November 2010, the Department of Health published regulations which substantially increased the maximum dispensing fee allowed to be charged by pharmacists. MediKredit approached pharmacies on behalf of our Medical Scheme clients and have succeeded in negotiating preferred Medicine Dispensing Fees, substantially below the maximum fee that a pharmacist is allowed to charge. Pharmacies agreeing to participate in providing these preferred dispensing fees have been contracted as members of the Preferred Pharmacy Network (PPN).

Considerations:

1. The trust relationship between patient and pharmacist must be considered in healthcare delivery and the establishment of a PPN is not an attempt to channel you away from your regular pharmacy. To this end, the PPN has been offered to all pharmacists and we have attempted to include the majority of pharmacists who routinely service members of your Scheme.
2. Your Medical Scheme will pay for the cost of the medicines you require from any of these pharmacy types that belong to the PPN, subject to the benefit limits available from your Medical Scheme. Therefore the choice of which pharmacy to visit is yours.
3. Should you feel that stretching your Medical benefit is of primary importance to you, the PPN allows you to find a pharmacy that provides an optimal balance between service and price.
4. If you attend a pharmacy outside the network, the Scheme will still reimburse at the rates discussed above but any difference between the Scheme’s reimbursement rate and the pharmacy’s charges will be for your, the member’s, pocket.
5. Remember that even if your pharmacy chooses not to be part of the PPN, this does not automatically mean that you will be charged more when attending such a pharmacy. Participation in the network simply establishes a formal relationship between pharmacy and Scheme and thus provides the Scheme with a form of recourse should the pharmacy charge prices above what the Scheme has negotiated.

CO-PAYMENTS:

Despite the fact that a member has purchased a medicine from a network pharmacy, certain co-payments may still apply. Such co-payments are generally driven by the benefit design of the Medical Scheme and are aimed at stretching your healthcare benefits and controlling the Scheme’s overall budget for medicines. This is done to keep the Medical Scheme costs down and limit the annual increases required to fund the Medical Scheme.

The following information is aimed at assisting Medical Scheme members to understand the co-payments that may be applied when claims are processed via the MediKredit claims engines and to make members aware of the possible options open to them when faced with such a co-payment:

1. An ‘overcharge’ occurs where the PPN pharmacy is charging more than the agreed Scheme rate. If the pharmacy is a PPN pharmacy, members should query such an overpayment with the pharmacy or report such an overpayment to their Scheme.  
2. At MediKredit we have developed and maintain a system called Maximum Medical Aid Payment (MMAP®), this surcharge is shown as an MMAP® surcharge and is implemented when the pharmacy dispenses a medicine for which there is a suitable generic medicine alternative. In such a case members should ask the pharmacist to substitute an appropriate generic medicine. By law pharmacists are required to offer a generic medicine, where available.
3. Note: A generic drug is a copy of the original drug that may be sold once a company’s patent on a brand-name drug has expired.  Generic drugs have the same active ingredient(s) as the original drug. Generic drugs are typically cheaper than the original or brand-name drug as they don’t have the research and development costs that are incurred by the originating company. Furthermore Generic pharmaceutical companies compete with each other thus further driving down the costs of medicines.
4. Note: Some generics may be more expensive than what has been deemed to be the optimal generic price in that category. Ask the pharmacist to substitute with a medicine below the MMAP® rate where possible.
5. Reference Price Surcharge is applied where price differences occur amongst the various types of medicines available to treat a condition, irrespective of generics being available. The clinical team has evaluated the most cost-effective medicines to treat a condition and the Reference Price has been set so as to encourage the use of these cost-effective medicines. Remember that the member is always free to choose the prescribed medicine and co-pay, or to ask that the prescription be converted to a medicine below Reference Price. Should a member require a medicine above the Reference Price because of demonstrated clinical reasons, it is possible to discuss this with the Managed Care team at the Scheme and a special authorisation can be created to lift the Reference Price Surcharge.
6. Scheme Benefit Surcharge: some Medical Schemes apply a surcharge to certain benefits e.g. the member may be required to pay 25% of any medicine purchased when it is outside of the network.
7. Benefits Exceeded Surcharge is applied where the benefit has been exhausted and all or some of the cost of the prescription will revert to the member.
8. Early Refill Surcharge is imposed where a member refills a prescription too early and a portion of the cost of the prescription becomes the member’s responsibility. In this case the member has the option to return to the pharmacy at a later date to collect the prescription without incurring this surcharge. This surcharge is aimed at ensuring that the Medical Scheme pays for 12 refills of chronic medication each year, a measure necessary to ensure that all members benefit equally from the available funds.