Let's talk about some aspects of obtaining and paying for prescription drugs, particularly as they come up from a patient's perspective. We'll tell the story mainly about the US system. And we'll take as our main case, a situation where a patient is getting a drug that they're going to use outside of a hospital or a physician office. Things can be different sometimes when a patient uses a drug as an inpatient in a hospital or when the drug is administered in a physician office or a clinic. When a patient is going to use a prescription drug, they need a prescription from a physician or other suitably authorized provider. Maybe kind of obviously the general rule is, you can't get a prescription drug without a prescription. The prescription indicates the drug to be taken, the form, liquid or pills for example, the dosage and other instructions. To get the drug or sometimes we say to get the prescription filled, the patient needs to take the prescription to a pharmacy. Classically, the prescription would be on paper and hand carried to the pharmacy. Nowadays, it's more and more likely to be transmitted electronically from the physician to the pharmacy. Pharmacies are important here because prescription drugs can only be dispensed through appropriately authorized pharmacies. Very commonly, pharmacies are businesses set up to sell prescription drugs. And of course pharmacies often sell other things too. They buy prescription drugs from wholesalers or others and keep them in stock. And then resell them at retail to patients with prescriptions trying to make a profit. Sometimes we call these retail pharmacies. Sometimes patients also get medicines through other channels, other types of pharmacies. You might hear about mail order pharmacies for example, that sell medicines delivered through the mail. And of course the internet has enabled some new ways of doing business in this space. Sometimes hospitals or other facilities have pharmacies as well, though these would most commonly serve patients being treated at the facility. Pharmacies, by the way, are staffed by pharmacists, people with advanced training who are experts in different drugs and their uses and how to handle them. When patients by prescription drugs at a pharmacy, we can normally think about it like a retail transaction. Patients go and buy the drug and pay the pharmacy for it. Most patients have insurance coverage that helps them cover the cost of buying prescription drugs and that's what we focus on here. Sometimes this coverage is part of the main health insurance plan that they have, which is common in private insurance in the US. Sometimes prescription drugs though, are covered by add on plans like in Medicare where there's Part D. The ideas about coverage are similar. The patient buying the drug will often have some cost sharing, but be able to get some or all of the costs covered by the insurer as long as they comply with the terms of their policy. It's common for insurance plans to have some provisions that affect the drugs patients can use and the ways the insurer will cover them. A key concept here is the formulary. This is most generally the list of drugs that the insurance company will allow the patient to use and get reimbursed for. Formularies can vary from one insurance company to another. For some diseases for example, there are different drugs that could be used. So some formularies might have many different choices and others fewer, depending on the preferences of insurers, the characteristics of the drugs and other factors. Formularies can have a variety of features. A really important one is tiering, we say tiered formulary. Drugs can be placed in different more and less favored tiers, depending on a variety of factors like their cost, the importance of the drug for medical care and patients, the availability of cheaper or more expensive substitutes, things like that. Whether the drug is a brand or a generic, on or off patent can be an important factor associated with price and can be associated with the placement of drugs in more and less preferred tiers of the formulary. The insurer can then create incentives for patients to use drugs in preferred tiers. The most common way to do this is with cost sharing. The insurer can set lower more favorable cost sharing for patients when they use drugs in more preferred tears. There may be a smaller co-pay for preferred tier drugs for example, and a larger one for drugs in less preferred tiers. Like for other forms of medical care, in addition to or instead of co-payments, there can be different forms of cost sharing like deductibles or coinsurance that apply to prescription drugs and plans can have other rules too. They may use utilization review like pre-authorization, where a patient needs to seek pre-approval from the plan before getting the medicine. Or plans may use something called step therapy, where the plan might impose a requirement that a patient try a more preferred drug first, before they'll cover a less preferred one. There may be a network of pharmacies that the patients are encouraged or required to go to if the plan is to cover. So there are some basics about buying prescription drugs for people with insurance. People get a prescription from their doctor. They go to the pharmacy to buy the drug. They may pay some cost sharing, may be varying with tiering. And the pharmacy will get reimbursed the rest ultimately by the insurer.
