Workers Compensation Pharmaceutical Glossary

ABCDEFGHI – J – K – L – MNOP – Q – RSTU – V – W – X – Y – Z


AAC – Average Acquisition Cost – the purpose of the Average Acquisition Cost (AAC) Program is to establish a transparent, timely and accurate pharmacy reimbursement system based on actual acquisition cost (invoice) data and a statistically validated cost of dispensing survey, and do so with all stakeholder involvement and support. (AL Medicaid definition)

ABP – (American Insurance Association)

AIA – alternative benchmark price

acute – plan’s benefit structures are calculated to treat episodically for acute care rather than for chronic care.

adherence – adherence to (or compliance with) a medication regimen is generally defined as the extent to which patients take medications as prescribed by their health care providers. The word “adherence” is preferred by many health care providers, because “compliance” suggests that the patient is passively following the doctor’s orders and that the treatment plan is not based on a therapeutic alliance or contract established between the patient and the physician. Both terms are imperfect and uninformative descriptions of medication-taking behavior.

age of claim – the length of time a claim is open, beginning with the date of injury or illness, continuing until the current date or the date the claim is closed by the payer, whichever is shorter.

any willing provider – In health care, a law requiring an insurer or a managed care organization to allow policyholders to receive treatment from any provider willing to accept the fee the insurer offers, even if he/she is not in the insurer’s network of approved providers. About half of U.S. states have any willing provider statutes.

more detail here:

approval rate – the percentage of requests for prior authorization that are authorized by the payer (or the PBM or other entity acting on behalf of the payer). In most cases there will be a 1:1 relationship between scripts and approvals; if there is not due to more than one script being authorized at one time, this should be noted.

avoided script – prescriptions transmitted to the PBM or payer that were not authorized or dispensed. (This requires reporting organizations to determine if scripts that were initially rejected were subsequently filled. ) If a script was not filled within thirty (30) days of the initial request, it qualifies as an Avoided Script.

AWP – average wholesale price


BBAWP – blue book average wholesale price

branded generic – the introduction of a generic version of a brand-name drug by the brand name drug manufacturer just prior to patent expiration is known as a “branded generic” or an “authorized generic.” The brand name company uses this as part of an overall strategy to protect branded profit. Since the brand-name company already holds the patent on the generic drug, they are guaranteed approval, or actually already have FDA approval. This gives them an advantage over traditional generic manufacturers that must submit an ANDA and await FDA approval or denial. The potential negative to this strategy for consumers is that the branded generic entrant will both hold generic prices higher, and possibly discourage generic entry by other companies.


cash price – the actual cash price for that drug at that pharmacy on that day. Usually provided by the pharmacy in the electronic transmission to the PBM/payer.

chronic – chronic diseases can be defined in different ways. One definition classifies a chronic disease as a condition lasting at least 3 months. Another definition defines chronic disease as a condition that can be controlled but not cured. Either way, a chronic disease requires a commitment to continue therapy for as long as needed, whether three months or for a lifetime.

claim – in group health a medical bill is called a claim; in comp, a claim is an injury event and refers to the whole life of the treatment. For workers’ compensation PBM reporting purposes, a claim is the injury event and not the script.

claimant – the individual person who files a workers’ compensation claim.

clinically significant drug error – any preventable event that may cause or lead to inappropriate medication use or patient harm, while the medication is in the control of the health care professional, patient, or consumer. Such events may be related to professional practice, health care products, procedures and systems including: prescribing; order communication; product labeling, packaging and nomenclature; compounding; dispensing; distribution; administration; education; monitoring; and use.

cost – total drug expenses for a payer. Cost=Price x Utilization

cost per lost time claimant – the total drug spend per reported period (month, year) divided by the midpoint of the number of lost time claims open during that period.

cost per script – the average cost per prescription dispensed and reimbursed, normalized to a thirty (30) day supply.

CWCI – California Workers’ Compensation Institute


DAW – dispense as written (refers to Rx)

days of therapy – duration of treatment covered by a specific dispensed prescription.

day’s supply – equivalent to days of therapy.

denial – refusal to authorize payment for a prescription.

DP – direct price

Drug Utilization Review (DUR) – formal program for assessing drug prescription against some standard. May consider clinical appropriateness, cost effectiveness and, in some cases, outcomes. Review is usually retrospective, but some analysis may be done before drugs are dispensed (as in computer systems which advise physicians when prescriptions are entered.)

DUR – retrospective,concurrent, prospective: retrospective drug utilization review is looking back at an older claim; concurrent is during the life of the claim, and prospective is before the script is filled. Concurrent care exists where more than one physician renders services more extensive than consultative services during a period of time. A retrospective review is a post-treatment assessment of services on a case-by-case or aggregate basis after the services have been performed.

duplicate – script which is identical in NDC code, patient, number of doses, and potency.


EAC – estimated acquisition cost

EBM – evidence-based medicine

EOB – evidence of billing


first fill rate – a calculated percentage wherein the number of initial scripts captured within the network and processed by the PBM is divided by the total number of initial scripts. It can be difficult to determine the denominator, and if the denominator cannot be established with a high degree of confidence, this should be noted.

formulary – schedules of prescription drugs approved for use for specific conditions; used to manage the types of drugs dispensed. A prescription drug plan’s list of drugs that are included in the plan (i.e., “covered”), and the level at which they are covered. Such lists are used to help plans ensure the appropriate medication is dispensed for the patient’s condition, as well as to control prescription drug costs.

FUL – Federal Upper Limit for generic drug cost containment in Medicaid.


GDR (generic dispense rate) – percentage of scripts dispensed that are generic.

GEAP – Generic Equivalent Average Pricing – GEAP is the average of AWPs for multi-source (generic) drugs that have the same packaging or quantity. GEAP is a proprietary price point published by Medispan. Using GEAP is problematic. Not all generics will have a GEAP assigned. Estimates show approximately 88% of active generic NDCs in Medispan tables do not contain a GEAP amount, nor do private labelers or repackagers have a GEAP. Nor will all package sizes have the same GEAP, and some packages will not have any GEAP. (AIA definition in letter to state of MD)

Generally, the GEAP is the average of AWPs for all multi-source drug products with a TEE Code beginning with A (therapeutically equivalent), except for those with TEE Code values of A1 and A2, in a given GPPC, not including originator drug products. When a drug product has no approved equivalent or the quantity of manufacturers supplying a generic is insufficient for calculating an average, a GEAP is not calculated. The GEAP is a generic price applicable for all drug products sharing the same GPPC; however, all drug products with the same GPPC have not been used in the determination of the GEAP. The AAWP and GEAP Determination section discussed later in this chapter includes the criteria for price determination.

Note GEAPs are not calculated for drug products that have TEE Codes of “A1” or “A2”
(definition by Jim Andrews)

generic drug – a drug produced and distributed without patent protection. A drug product that is no longer covered by patent protection and thus may be produced and/or distributed by many firms.
Sources: and

generic efficiency – estimated by calculating the percentage of the total number of scripts that could be filled with generics that was actually filled with generics.

generic fill rate – percentage of the total number of scripts that are filled with generics.

generic substitution – the process wherein a script that was written to be filled with a brand is filled with an equivalent generic.


home delivery – the delivery of a patient’s prescriptions to their home address via mail.


I-STOP – The New York attorney general (Eric T. Schneiderman) is proposing a real-time, online prescription drug-monitoring program that would require both doctors and pharmacists to instantly report the prescription and dispensing of controlled substances. They would be required to check the database before giving patients more drugs. Legislation requested by Schneiderman would create the Internet System for Tracking Over-Prescribing Act, or “I-STOP.”

IAIABC – International Association of Industrial Accident Boards and Commission

IBNR (incurred but not reported) – those claims that have occurred before the valuation date but have not yet been reported to the insurer. Accidents that happened, but the injured worker didn’t report the injury yet (maybe it wasn’t bad enough, but later problems develop and they report)

in network – services or medications provided to claimants by providers and/or suppliers that have agreed to perform certain services, usually at a discounted rate, in return for participation in a network that directs patients to their practice/facility.
Sources: and

Ingredient – a substance that forms part of a mixture. In the pharmaceutical industry, an active ingredient is that part of a formulation that yields the effect required by the customer.


MAC – MAC or “maximum allowable cost” means the unit price established by the PBM for a multisource drug included on PBM’s MAC drug lists developed for PBM’s clients, which may be amended from time to time by PBM, in its sole discretion. MAC, the maximum allowable cost, consists of a list of off-patent drugs subject to maximum-allowable-cost payment schedules developed or selected by PBM. The payment schedules specify the maximum unit ingredient cost payable by client for drugs on the MAC list. The MAC list and payment schedules are frequently updated.

multi-source brand drug – drugs are classified as single or multi source. This refers to the number of manufacturers of the drug. Single source drugs become multi source when new drug patent expires. For example, a new drug released to marketplace is considered single source for the length of the patent. Only one manufacturer can produce it, so there is a “single source.” The day the patent expires and multiple manufacturers are allowed to produce therapeutical equivalent, the drug becomes multi source as it is produced by more than one source. This applies to both brand and generic drugs. When generics are released to marketplace, the first generic is considered to “hold original patent” and therefore is allowed to price as a brand. All other generics thereafter for that drug are called “non-innovators” and price as true generics. An innovator multiple-source drug is a multiple- source drug that was originally marketed under an original new drug application approved by the FDA as a brand name drug.
Sources: and


NACDS – National Association of Chain Drug Stores

narrow therapeutic index drug – also known as NTI drugs, a narrow therapeutic index, or narrow therapeutic ratio, is not a formal designation by the FDA, but rather describes drugs where small changes in dosage may result in toxic effects. Many consider certain generic versions of drugs to fall into this category but this is not recognized by the FDA, which relies on the “Orange Book” for equivalency ratings.

NCCI – National Council on Compensation Insurance

NCPDP – National Council for Prescription Drug Programs

NDC – national drug codes

network penetration – the percentage of billed prescriptions (electronic and paper claims) which were filled without TPB (third-party billing) involvement at participating pharmacies.

normalized – RxNorm provides normalized names for clinical drugs and links its names to many of the drug vocabularies commonly used in pharmacy management and drug interaction software, including those of First Databank, Micromedex, MediSpan, Gold Standard Alchemy, and Multum. By providing links between these vocabularies, RxNorm can mediate messages between systems not using the same software and vocabulary.


ODG – Official Disability Guidelines produced by the Work Loss Data Institute

off label – practice of prescribing pharmaceuticals for an indication not approved by the FDA. The FDA approves the use of drugs for certain specific conditions. Prescribing a drug for any other use is called off-label.

OMFS – Official Medical Fee Schedule

open vs. closed formulary – formularies can be either “closed” in which there is no coverage at all for non-formulary drugs – or “open” in which non-formulary drugs are covered, but (in the non workers’ comp market) plans use incentives to encourage their enrollees to use the preferred drugs on the formulary.

out of network – care received from a provider that is not part of the approved network of providers. Negotiated rates with doctors, dentists and other health care providers are referred to as being “in network.” Some plans pay for services from providers who are not in the network and pay for out-of-network services based on what is called the “reasonable,” “usual and customary” or “prevailing” charge.
Sources: and


pay without prejudice – a regulation or statute that states payment of a medical bill for a specific procedure or procedures does not imply or require the payer to accept responsibility for that diagnosis.

PBM Penetration rate – the percentage of all billed prescriptions [electronic and paper claims] which were filled without third-party billing (TPB) involvement at participating pharmacies.

PBM (pharmacy benefit manager) – a third-party administrator of prescription drug programs; primarily responsible for processing and paying prescription drug claims. Also responsible for clinical pharmacy management, developing and maintaining the formulary, contracting and maintaining relationships with pharmacies and negotiating discounts and rebates with drug manufacturers.

PBM refill rate – the percentage of initial scripts that are followed by additional scripts for the same claimant and condition.

PCMA – Pharmaceutical Care Management Association

per member per month (cost) – the plan’s cost of drugs per claimant per month, or per member in the non-workers’ comp market.

pharmacy spend – drug costs in workers’ comp.

PHI – Personal Health Information

price – the price per script; a contributor to cost. Cost=Price x Utilization. the average cost per prescription as a weighted average of all prescriptions.

price trend – the annual rate of increase in pharmacy spend due specifically to price; factors affecting average price include the impact of average wholesale price (AWP), new brand medications, new generic launches, and Pharmacy Benefit Management contracting.

prior authorization – the process of obtaining prior approval from a private or public third-party prescription insurer as to the appropriateness and coverage of a service or medication.


REMS – Risk Evaluation & Mitigation Strategy. The Food and Drug Administration Amendments Act of 2007 gave FDA the authority to require a Risk Evaluation and Mitigation Strategy (REMS) from manufacturers to ensure that the benefits of a drug or biological product outweigh its risks. Notifying the sponsors of long-acting and extended-release (LA/ER) opioid drugs that they were required to submit a risk evaluation and mitigation strategy (REMS), the FDA has been working with the sponsors that market these products on the required REMS. The central component of the Opioid REMS is an education program for prescribers (e.g., physicians, nurse practitioners, physician assistants) so that LA/ER opioid drugs can be prescribed and used safely. FDA expects the prescriber training to be conducted by accredited, independent continuing education (CE) providers, without cost to the healthcare professionals, under unrestricted grants to accredited CE providers funded by the sponsors.

rejection rate – the percentage of scripts that are denied by the payer or PBM. The rejection rate is calculated by dividing the number of denied scripts by total number of scripts submitted. A timeframe should always be provided and noted to clearly identify the timeframe wherein a submitted script that is eventually filled does not affect the calculation.


savings – the difference between the amount paid below the fee schedule and the fee schedule, calculated either as a dollar amount or a percentage below fee schedule. In those states without a fee schedule, the basis is usual and customary.

script – a health-care program implemented by a physician or other medical practitioner in the form of instructions that govern the plan of care for an individual patient. May include orders to be performed by a patient, caretaker, nurse, pharmacist or other therapist. Commonly, the term prescription is used to mean an order to take certain medications. The scope of meaning of the term “prescription” has broadened to also include clinical assessments, laboratory tests, and imaging studies relevant to optimizing the safety or efficacy.

single-source brand drug – a brand drug that has no generic equivalent. There are two types of non-preferred brand drugs — single-source and multi-source. A single-source brand drug has therapeutic alternatives available — drugs that treat the problem effectively but that don’t contain the same active ingredients as the preferred-brand. A multi-source brand drug has a generic equivalent available with the same active ingredients as the brand drug. Payment works differently for each. A single source drug is a covered outpatient drug which is produced or distributed under an original new drug application approved by the FDA. There are no generic equivalents available for single-source drugs.
Sources: and

single -source generic medication – single -source drugs become multi source when new drug patent expires. For example, a new drug released to marketplace is considered single source for the length of the patent. Only one manufacturer can produce it, so there is a “single source.”

step therapy – an approach to prescription drug management wherein the claimant is prescribed lower potency or alternative medications initially, succeeded by more potent medications or scheduled drugs only after the initial medications have been found to be inadequate to address the claimant’s condition. Intended to control the costs and risks posed by prescription drugs.


therapeutic equivalence (TE) – drug products classified as therapeutically equivalent can be substituted with the full expectation that the substituted product will produce the same clinical effect and safety profile as the prescribed product. Drug products are considered to be therapeutically equivalent only if they meet these criteria: they are pharmaceutical equivalents (contain the same active ingredient(s); dosage form and route of administration; and strength.) They are assigned by FDA the same therapeutic equivalence codes starting with the letter “A .” To receive a letter “A”, the FDA designates a brand name drug or a generic drug to be the Reference Listed Drug (RLD). Assigns therapeutic equivalence codes based on data that a drug sponsor submits in an ANDA to scientifically demonstrate that its product is bio equivalent (i.e., performs in the same manner as the Reference Listed Drug).

therapeutic equivalence (TE) codes – the coding system for therapeutic equivalence evaluations allows users to determine whether FDA has evaluated a particular approved product as therapeutically equivalent to other pharmaceutically equivalent products (first letter) and to provide additional information on the basis of FDA’s evaluations (second letter). Sample TE codes: AA, AB, BC. The FDA assigns therapeutic equivalence codes to pharmaceutically equivalent drug products. A drug product is deemed to be therapeutically equivalent (“A” rated) only if: a drug company’s approved application contains adequate scientific evidence establishing through in vivo and/or in vitro studies the bio equivalence of the product to a selected reference listed drug. Those active ingredients or dosage forms for which no in vivo bio equivalence issue is known or suspected. Some drug products have more than one TE Code.Those products which the FDA does not deem to be therapeutically equivalent are “B” rated. Over-the-counter drugs are not assigned TE codes.

therapeutic substitution – substituting for a generic or similar medication, one that has the same pharmacological effect.

therapy class – The American Hospital Formulary Service (AHFS) provides a therapeutic drug classification system that allows for the grouping of drugs by similar pharmacologic, therapeutic and/or chemical characteristics. There are many classifications available, but the AHFS system has been in existence since 1959 and includes 30 primary classifications, 183 secondary classifications, 252 tertiary classifications, and 88 quaternary classifications.

TIC – (Texas Insurance Council)

TPB – third party biller

transaction – a mechanism for a pharmacy to request approval from a health plan to authorize certain healthcare products and services, as required by the patients health plan contract. The health plan responds to the pharmacy whether the product or service is approved. The exchange of information between two parties to carry out financial or administrative activities related to health care.

trend – the annual inflation percentage rate from the year prior to the immediate past year. The trend rate for 2009 is calculated by dividing the dollar amount of the increase by the total spend in the prior year.
Sources: and

trend basis – the metric on which the reported inflation rate is based. Except where otherwise defined, refers to the year prior to the year being discussed.


UCR, U&C (usual and customary) – usual and customary charge is the prevailing cost of a medical service in a given geographic area.

utilization – the number of scripts and the number and type of drugs dispensed; a contributor to cost, as is price. Cost=Price x Utilization. The average number of prescriptions received by an injured worker per year.

utilization trend – the annual rate of increase in pharmacy spend due specifically to an increase in the number or change in type of medications dispensed. Factors affecting changes in utilization include new brand medications, new generic launches, clinical management, age of claim, number of injured workers using medications, and number of medications per injured worker.


WAC – wholesale acquisition costs

WP – suggested wholesale price