Prescription Drug Pricing Pathfinder
GLOSSARY

The world of health care is fraught with acronyms, abbreviations, and specialized terminology. Following are some common terms you will encounter as you embark on your pharmaceutical research, with links to sites providing more information, where applicable:

• Co-payment: Many health plans that do cover prescription drugs require members to pay some portion of the cost of each prescription. Some health plans set the CO-payment as a fixed dollar amount, such as $5. Other health plans set the CO-payment as a percentage of the price, such as 20%. For the newer, more expensive drugs, the difference is significant.

• DHHS: The federal Department of Health and Human Services. DHHS is the umbrella overarching all federal agencies dealing with health, medicine, and welfare.

• Formulary: A list of approved drugs. Most HMOs use formularies as a means of controlling drug costs. If a particular drug is not on the formulary list, it is either not available to the plan member, or else the plan member must pay more than her usual CO-payment, or share of the drug cost. HMOs use their bargaining power with manufacturers to obtain quantity discounts for drugs in the formulary.

• FDA: The federal Food & Drug Administration. FDA is an agency of DHHS, with primary responsibility for enforcing the federal Food, Drug and Cosmetic Act. New drugs must gain FDA approval before they are allowed to be tested on humans or subsequently marketed.
  
  
• FTC: The Federal Trade Commission. FTC handles claims of deceptive or unfair advertising in the pharmaceutical industry, as well as monitoring drug company mergers for possible antitrust violations. If the New England states are successful in forming a drug-purchasing compact, it could possibly have antitrust ramifications.
  

• HCFA: The federal Health Care Financing Association. Insiders pronounce this "hick-fa." HCFA is an agency of DHHS, with primary responsibility for Medicaid, Medicare, and the State Children's Health Insurance Plan (S-CHIP). If Congress passes legislation adding a prescription drug benefit to Medicare, HCFA will likely handle the negotiations with drug manufacturers.

• HMO: Health Maintenance Organization. HMOs are health insurance plans that agree, on a prepaid basis, to provide or arrange for the provision of a defined set of health care services for its enrolled subscribers. HMOs generally use a network of contracted providers, and limit the use of providers outside the network. The HMO model is also referred to as "managed care."

• Medicaid: A program providing health insurance to certain low-income and needy individuals, including children. Medicaid is jointly funded by the states and the federal government, and covers approximately 36 million people.

• Medicare: A program providing health insurance to senior citizens (over age 65) and certain people with disabilities. All seniors are automatically eligible for Medicare, regardless of their income level. However, Medicare does NOT cover prescription drugs. Medicare is the nation's largest health insurance program, covering approximately 39 million Americans.

• NCSL: National Conference of State Legislatures. NCSL is a bipartisan organization attempting to coordinate and facilitate interaction between lawmakers across state lines. NCSL has been tracking the efforts of many states to implement pharmaceutical price-assistance legislation and price regulation.

• PBMs: Pharmacy Benefit Managers. PBMs are firms hired by large employers, insurance companies, and HMOs to lower drug costs. PBMs represent many customers and can therefore negotiate big discounts with drug manufacturers. Interestingly, the three largest PBMs are owned by drug manufacturers.

• PhRMA: The Pharmaceutical Research and Manufacturers of America, usually pronounced "pharma" (rhymes with Parma). While there are many associations representing drug manufacturers, PhRMA is by far the largest and most influential.