Drug costs are paid through self-payment, third-party payers like insurance companies or government plans, or employee benefit plans. Patients pay a deductible amount and then a copayment percentage with insurance paying the rest. Insurance companies prefer generics unless a brand is preauthorized. Pharmacies determine drug prices through cost plus markup pricing, where cost is marked up a percentage plus a dispensing fee, or using Average Wholesale Price plus or minus a percentage and adding a dispensing fee, which insurance companies use as they may get bulk discounts from pharmacies through contracts.

1. drug cost
•self payments--full price unless senior discount,
ect
•3rd party payer----ins company, gov plan,
employee benefit plan, unions.
•deductible---pt pays x amount then ins starts to
pay
•copay---pt pays x% and ins co pays the rest
•ins co want to pay for generic unless dr gets
preauth for brand name.

2. find selling price
• pharmacies choose one of these
• cost plus markup method--
• cost+(cost*markup)+dispensing fee=shelf price
• expenses per month /# rx per month=dispense fee
• other way---AWP+/-percentage+dispensing fee
• ins co wants this since pharmacy maybe got a bulk
discount. pharmacy has contract with ins co.
• AWP=average wholesale price
• AWP+/-(AWP x %)+dispensing fee=ins pays