Pharmacy Billing Fundamentals and Payer Types
Who pays, and at what price
Start with payer categories. Commercial (private) plans are administered by a PBM and reimburse under a contracted network rate. Medicare Part D covers outpatient drugs through stand-alone prescription drug plans or Medicare Advantage prescription drug plans; Medicare Part B covers a narrow set of drugs (certain injectables and DME-supplied drugs) under the medical benefit, not a pharmacy claim. Medicaid is state-run, TRICARE and the VA are federal, and workers' compensation and auto liability pay only for injury-related therapy. Cash patients pay out of pocket and set the ceiling for everyone else.
Identify the plan from the card: BIN routes the claim through the switch, PCN identifies the specific benefit package, and the group and member numbers identify the enrollee. Same BIN with a different PCN is a standard trap; never infer the plan from the BIN alone.
Four prices drive every calculation. AWP and WAC are published benchmarks; contracts pay AWP minus a percentage, or WAC plus a percentage, plus a dispensing fee. MAC is the plan's ceiling for a generic ingredient. U&C is the cash price your pharmacy charges a walk-in customer. U&C is not a number you may inflate: it must reflect your lowest cash price, and plans require the lesser of the contracted rate or U&C.
Rule of thumb: reimbursement equals ingredient cost plus dispensing fee, and the patient copay is carved out of that total rather than added on top.
Traps to expect
Questions like to swap Part B and Part D, to present a plan that requires a specific PCN, and to test whether you know U&C is a reporting obligation, not a billing choice.