Beyond Benefits

November 2020

Pharmacare 101

It’s now November and the days are becoming shorter. There’s a chill in the air…Winter’s coming. With winter, comes the start of flu season and trips to the pharmacy. 

Did you know that prescription drug costs continue to be the largest expense in a group benefits plan? Learning pharmacare basics can help you better understand your prescription drug coverage and hopefully reduce costs.

What makes up the cost of drugs? 

Three parts make a drug’s total cost:

  1. Ingredient cost = what the pharmacy pays to purchase the drug
  2. Pharmacy mark-up = what that specific pharmacy decides to charge for the drug (usually used to help with business costs)
  3. Dispensing fee = a fee determined by the pharmacy to fill and dispense prescriptions

What’s the difference between brand name drugs vs. generic drugs?

When a company holds the sole patent for a particular drug, it’s known as a brand name drug and can only be produced and sold by that company under its trademarked name. This usually means that brand name drugs are more expensive. Once that patent expires, other companies can come into the game and start producing and selling therapeutic equivalents, also known as generic drugs. 

Now, you may hear the word “generic” and think of things like “knock-off”, “sub-par quality” and “home-brand”. In actuality, these generic drugs all have the same active medicinal ingredients as the brand name drugs, and when it comes to quality, dosage, strength and route of administration, they’re all exactly the same. The areas in which generic drugs differ from brand name drugs are inactive ingredients or substances, colour, shape, packaging and flavouring. 

How does having a mandatory generic drug plan help?

Sometimes referred to as generic substitution, mandatory generic plans will only cover brand name drugs at the cost of the lowest-priced generic equivalent, granted that one exists in the market. Most group benefit plans nowadays are set up with mandatory generic coverage as it aids in keeping the plan sustainable for the long term. 

What is Prior Authorization?

Some drugs must be pre-approved based on certain medical criteria in order to be eligible for coverage under a group benefits plan. To do this, the claimant and the prescribing physician will have to complete a prior authorization form and submit it to the carrier for approval. For example, when a brand name drug is being claimed when a generic drug exists, prior authorization will have to be completed to show why the claimant cannot be on the generic. Or for drugs typically used in cosmetic procedures like Botox, a prior authorization form will have to be completed to show that this drug is being used for medical purposes, not cosmetic.

When we’re given a prescription, most of us just simply run to the nearest or known pharmacy without thinking twice of the additional costs we can incur by not understanding our drug coverage. Now with the understanding of the costs behind your drugs and the options you have, you can be confident and prepared for what this cold & flu season may bring.

Want to speak with someone directly? 

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Beyond Benefits
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