From a payer’s perspective, which includes insurers, PBMs, and government bodies, managing pharmacy benefits is a critical balance between providing patient access to effective medications and controlling rising healthcare costs. For PharmD students, understanding formulary design, cost-containment strategies, quality metrics, and the economics of drug pricing is vital. This knowledge is essential for navigating the complexities of managed care and contributing effectively to population health management in any practice setting.
1. What is the primary function of a Pharmacy & Therapeutics (P&T) Committee within a managed care organization?
- To negotiate drug prices directly with pharmaceutical manufacturers.
- To market new drugs to physicians and patients.
- To evaluate the scientific evidence of new and existing medications for formulary placement and policy development.
- To process prescription drug claims from pharmacies.
Answer: To evaluate the scientific evidence of new and existing medications for formulary placement and policy development.
2. In a tiered formulary, which tier typically has the lowest patient cost-sharing?
- Tier 1 (Preferred Generic)
- Tier 2 (Preferred Brand)
- Tier 3 (Non-Preferred Brand)
- Tier 4 (Specialty)
Answer: Tier 1 (Preferred Generic)
3. A “closed formulary” is a type of prescription drug benefit design where:
- All FDA-approved drugs are covered without exception.
- Only a specific list of drugs (the formulary) is covered, and non-formulary drugs are not reimbursed.
- Patients can get any drug, but brands cost more than generics.
- The pharmacy is closed on weekends.
Answer: Only a specific list of drugs (the formulary) is covered, and non-formulary drugs are not reimbursed.
4. What is the main purpose of a Prior Authorization (PA) requirement from a payer’s perspective?
- To ensure a medication is being used for a medically appropriate indication and to control costs for high-cost agents.
- To delay patient access to all new medications.
- To create additional administrative work for physicians.
- To verify the patient’s insurance coverage is active.
Answer: To ensure a medication is being used for a medically appropriate indication and to control costs for high-cost agents.
5. Step therapy is a utilization management tool that requires a patient to:
- Attend physical therapy before starting a medication.
- Try a preferred, lower-cost medication first before a more expensive alternative is approved for coverage.
- Use a mail-order pharmacy for all their prescriptions.
- Take their medication at specific steps throughout the day.
Answer: Try a preferred, lower-cost medication first before a more expensive alternative is approved for coverage.
6. What is a primary role of a Pharmacy Benefit Manager (PBM)?
- To manufacture generic medications.
- To operate retail pharmacy chains exclusively.
- To process prescription claims and negotiate rebates with drug manufacturers on behalf of health plans.
- To regulate the FDA’s drug approval process.
Answer: To process prescription claims and negotiate rebates with drug manufacturers on behalf of health plans.
7. A drug rebate in managed care pharmacy refers to:
- A discount given to the patient at the pharmacy counter.
- A payment made by the pharmacy to the health plan.
- A payment from a pharmaceutical manufacturer to a PBM or health plan in exchange for favorable formulary placement.
- A government subsidy to cover the cost of research and development.
Answer: A payment from a pharmaceutical manufacturer to a PBM or health plan in exchange for favorable formulary placement.
8. What does “drug trend” refer to in the context of managed care?
- The popularity of a drug on social media.
- The measure of the growth in prescription spending per member per month.
- The process of a drug moving from brand to generic.
- The side effect profile of a new medication.
Answer: The measure of the growth in prescription spending per member per month.
9. The term “net cost” of a medication for a payer is best described as:
- The price the patient pays at the pharmacy.
- The wholesale acquisition cost (WAC) of the drug.
- The drug’s list price minus all rebates and discounts negotiated by the PBM.
- The total cost of manufacturing the drug.
Answer: The drug’s list price minus all rebates and discounts negotiated by the PBM.
10. A prospective Drug Utilization Review (DUR) is performed:
- Annually to review prescribing patterns.
- After a medication has been dispensed to the patient.
- At the point of sale, before a medication is dispensed, to check for potential safety or therapeutic issues.
- By the FDA before a drug is approved.
Answer: At the point of sale, before a medication is dispensed, to check for potential safety or therapeutic issues.
11. The CMS Medicare 5-Star Quality Rating program is designed to:
- Rank pharmacies based on their size and sales volume.
- Help beneficiaries compare the performance and quality of Medicare Advantage and Part D plans.
- Provide a rating for individual pharmaceutical drugs.
- Certify pharmacists to work in managed care settings.
Answer: Help beneficiaries compare the performance and quality of Medicare Advantage and Part D plans.
12. Which of the following is a common quality measure used in the CMS Star Ratings for Part D plans?
- The number of prescriptions dispensed per day.
- Medication adherence rates for diabetes, hypertension, and cholesterol.
- The pharmacy’s hours of operation.
- The number of pharmacists employed by the plan.
Answer: Medication adherence rates for diabetes, hypertension, and cholesterol.
13. HEDIS (Healthcare Effectiveness Data and Information Set) is a tool used by health plans to:
- Measure performance on important dimensions of care and service.
- Advertise new insurance products.
- Calculate patient copayments.
- Track pharmacist work schedules.
Answer: Measure performance on important dimensions of care and service.
14. From a payer’s perspective, what is the primary goal of Medication Therapy Management (MTM) programs?
- To exclusively promote the use of brand-name drugs.
- To improve safe and effective drug use and patient outcomes, which can lead to lower overall healthcare costs.
- To increase the number of prescriptions a patient is taking.
- To replace the role of the primary care physician.
Answer: To improve safe and effective drug use and patient outcomes, which can lead to lower overall healthcare costs.
15. Specialty pharmaceuticals are typically characterized by:
- Being available over-the-counter and being low in cost.
- High cost, complex treatment regimens, and often requiring special handling or administration.
- Being used for common, acute conditions like a cold or headache.
- Having no side effects.
Answer: High cost, complex treatment regimens, and often requiring special handling or administration.
16. “White bagging” refers to the practice of:
- A patient picking up a specialty drug at any retail pharmacy.
- A specialty pharmacy dispensing a drug and shipping it directly to the physician’s office or clinic for administration.
- A patient bringing their own medication from home to the hospital.
- The use of plain white bags for all dispensed medications to ensure privacy.
Answer: A specialty pharmacy dispensing a drug and shipping it directly to the physician’s office or clinic for administration.
17. Payers may use a limited pharmacy network for specialty drugs primarily to:
- Make it more difficult for patients to access their medications.
- Control costs and ensure proper handling and patient management by experienced pharmacies.
- Increase competition among retail pharmacies.
- Allow any pharmacy to dispense any specialty drug.
Answer: Control costs and ensure proper handling and patient management by experienced pharmacies.
18. What is a key feature of a value-based or risk-sharing contract between a payer and a pharmaceutical manufacturer?
- The payer agrees to pay for the drug regardless of its effectiveness.
- The manufacturer is paid a flat fee for all patients using the drug.
- Payment for the drug is linked to its performance and patient outcomes, rather than just the volume of pills sold.
- The patient pays the full cost of the drug out-of-pocket.
Answer: Payment for the drug is linked to its performance and patient outcomes, rather than just the volume of pills sold.
19. In pharmacoeconomics, what does an Incremental Cost-Effectiveness Ratio (ICER) represent?
- The total cost of a new drug therapy.
- The additional cost for each additional unit of health benefit (e.g., per QALY gained) of a new therapy compared to the standard.
- The total benefit a therapy provides, regardless of cost.
- The ratio of generic drugs to brand drugs on a formulary.
Answer: The additional cost for each additional unit of health benefit (e.g., per QALY gained) of a new therapy compared to the standard.
20. A Health Technology Assessment (HTA) is a process used by payers to:
- Evaluate the clinical and economic evidence of a new health technology or drug to inform coverage and reimbursement decisions.
- Install new computer systems in a hospital.
- Train pharmacists on new dispensing technology.
- Assess the technology skills of healthcare providers.
Answer: Evaluate the clinical and economic evidence of a new health technology or drug to inform coverage and reimbursement decisions.
21. The concept of “least costly alternative” is often applied by payers in which scenario?
- When choosing between two drugs with different mechanisms of action.
- When choosing between a surgical procedure and a medication.
- When multiple clinically equivalent drugs are available, the one with the lowest net cost is preferred.
- When a patient requests a brand-name drug over an available generic.
Answer: When multiple clinically equivalent drugs are available, the one with the lowest net cost is preferred.
22. Which part of Medicare provides prescription drug coverage?
- Part A
- Part B
- Part C
- Part D
Answer: Part D
23. Medicaid prescription drug programs are funded by:
- The federal government only.
- State governments only.
- A partnership between federal and state governments.
- Private donations.
Answer: A partnership between federal and state governments.
24. What is the role of a formulary in a managed care setting?
- To be a complete list of every drug ever manufactured.
- To be a list of covered drugs, designed to promote the use of safe, effective, and affordable medications.
- To act as a price list for patients without insurance.
- To provide detailed prescribing information for physicians.
Answer: To be a list of covered drugs, designed to promote the use of safe, effective, and affordable medications.
25. A retrospective DUR is a review of prescribing patterns that is designed to:
- Stop a potentially harmful prescription before it is dispensed.
- Identify patterns of fraud, abuse, or inappropriate prescribing after the fact to educate providers.
- Help a patient remember to take their medication.
- Set the price for a new drug entering the market.
Answer: Identify patterns of fraud, abuse, or inappropriate prescribing after the fact to educate providers.
26. Why would a payer be interested in a medication’s “real-world evidence” (RWE)?
- RWE is always more reliable than data from randomized controlled trials.
- RWE can provide insight into how a drug performs in a diverse patient population outside of a controlled clinical trial setting.
- RWE is less expensive to generate than clinical trial data.
- RWE is primarily used for marketing purposes.
Answer: RWE can provide insight into how a drug performs in a diverse patient population outside of a controlled clinical trial setting.
27. From a payer’s point of view, promoting the use of generic drugs is a primary strategy for:
- Increasing the profitability of brand-name drug manufacturers.
- Improving the quality of care for all patients.
- Controlling pharmacy benefit costs.
- Complicating the dispensing process for pharmacists.
Answer: Controlling pharmacy benefit costs.
28. A bundled reimbursement mechanism for a specialty drug might involve:
- Paying the pharmacy for each pill it dispenses.
- A single payment that covers the drug as well as all associated services like administration and monitoring.
- The patient paying for the drug and the insurance paying for the administration.
- The manufacturer providing the drug for free.
Answer: A single payment that covers the drug as well as all associated services like administration and monitoring.
29. The main goal of designing a population-based prescription drug benefit is to:
- Provide unrestricted access to every medication for every person.
- Focus on individual patient preferences over all other factors.
- Achieve the best possible health outcomes for a group of people while managing costs.
- Maximize the profits of the insurance company.
Answer: Achieve the best possible health outcomes for a group of people while managing costs.
30. What does the term “adherence” mean to a payer?
- The degree to which a patient takes their medication as prescribed, which can impact health outcomes and total healthcare costs.
- A patient’s agreement to pay their insurance premium on time.
- The pharmacy’s ability to follow the PBM’s contract terms.
- A physician’s willingness to prescribe formulary drugs.
Answer: The degree to which a patient takes their medication as prescribed, which can impact health outcomes and total healthcare costs.
31. The term “medical loss ratio” (MLR) refers to:
- The percentage of claims that are denied by a health plan.
- The proportion of premium revenues a health plan spends on clinical services and quality improvement.
- The rate at which patients are lost to follow-up in a clinical trial.
- The percentage of medications that are wasted due to expiration.
Answer: The proportion of premium revenues a health plan spends on clinical services and quality improvement.
32. Why are biosimilars of interest to payers?
- They are exact copies of the original biologic and have no differences.
- They are typically more effective than the original biologic drug.
- They have the potential to create competition and lower the cost of expensive biologic medications.
- They are easier to manufacture than small-molecule drugs.
Answer: They have the potential to create competition and lower the cost of expensive biologic medications.
33. In the pharmacy supply chain, the Wholesale Acquisition Cost (WAC) is the:
- Price the patient pays.
- Price the PBM pays.
- Manufacturer’s list price for a drug to wholesalers.
- Reimbursed price to the pharmacy.
Answer: Manufacturer’s list price for a drug to wholesalers.
34. The Inflation Reduction Act includes provisions that allow Medicare to:
- Set the price for all prescription drugs.
- Negotiate the price of certain high-cost prescription drugs.
- Prohibit the use of all generic medications.
- Force manufacturers to stop making certain drugs.
Answer: Negotiate the price of certain high-cost prescription drugs.
35. A “carve-out” in benefits management refers to:
- Excluding all prescription drugs from a health plan.
- Separating a specific benefit, like the pharmacy benefit, and contracting with a specialty vendor (like a PBM) to manage it.
- Removing a drug from the formulary.
- A type of surgical procedure.
Answer: Separating a specific benefit, like the pharmacy benefit, and contracting with a specialty vendor (like a PBM) to manage it.
36. A key performance indicator (KPI) for a managed care pharmacist might be:
- The number of phone calls made per day.
- The generic dispensing rate (GDR) for the health plan.
- The number of meetings attended per week.
- The time it takes to drive to work.
Answer: The generic dispensing rate (GDR) for the health plan.
37. From a payer’s perspective, what is a potential drawback of a copay accumulator program?
- It increases the patient’s out-of-pocket costs by not counting manufacturer coupons towards their deductible.
- It lowers drug prices for the payer.
- It encourages the use of generic drugs.
- It simplifies the billing process.
Answer: It increases the patient’s out-of-pocket costs by not counting manufacturer coupons towards their deductible.
38. The primary goal of a drug formulary is to manage:
- Quality, safety, and cost of medications.
- Pharmacy staffing levels.
- Physician prescribing habits.
- Patient satisfaction surveys.
Answer: Quality, safety, and cost of medications.
39. In the context of managed care, “medical necessity” is a criterion used to:
- Determine if a treatment or service is appropriate for a patient’s condition according to accepted standards of medical practice.
- Decide if a patient likes their medication.
- Justify the use of the most expensive drug in all cases.
- Allow patients to receive any treatment they request.
Answer: Determine if a treatment or service is appropriate for a patient’s condition according to accepted standards of medical practice.
40. A formulary exclusion means that a drug is:
- Simply placed on a higher tier with a larger copay.
- Not covered by the health plan at all.
- Only available through a special program.
- The preferred drug in its class.
Answer: Not covered by the health plan at all.
41. The 340B Drug Pricing Program allows certain hospitals and clinics to:
- Purchase outpatient drugs at a significant discount.
- Get all their medications for free.
- Sell drugs at a higher price to increase profits.
- Avoid all FDA regulations.
Answer: Purchase outpatient drugs at a significant discount.
42. Payers use clinical guidelines developed by professional organizations to:
- Establish a standard of care to guide coverage decisions for certain medical conditions.
- Create more work for doctors.
- Limit access to all new and innovative treatments.
- Replace the need for individualized patient assessment.
Answer: Establish a standard of care to guide coverage decisions for certain medical conditions.
43. A medication reconciliation performed upon hospital discharge is important to payers because:
- It can increase the length of a hospital stay.
- It helps prevent medication errors, adverse drug events, and costly hospital readmissions.
- It is a task that can only be performed by nurses.
- It ensures the patient receives all brand-name drugs.
Answer: It helps prevent medication errors, adverse drug events, and costly hospital readmissions.
44. What is a “pharmacy network” in managed care?
- A social media group for pharmacists.
- A group of pharmacies that have a contract with a health plan or PBM to provide services to its members.
- All the pharmacies located within a single hospital.
- A government agency that regulates pharmacies.
Answer: A group of pharmacies that have a contract with a health plan or PBM to provide services to its members.
45. What does MAC stand for in the context of pharmacy reimbursement?
- Mandatory All-inclusive Copay
- Manufacturer’s Actual Cost
- Maximum Allowable Cost
- Medical Adherence Calculation
Answer: Maximum Allowable Cost
46. Payers often favor mail-order pharmacies for maintenance medications because:
- They are typically less efficient than retail pharmacies.
- They can lead to lower dispensing fees and greater cost savings for 90-day supplies.
- They provide more face-to-face counseling opportunities.
- They are more convenient for acute medications like antibiotics.
Answer: They can lead to lower dispensing fees and greater cost savings for 90-day supplies.
47. The “pharmacy supply chain” describes the flow of:
- Information from the patient to the doctor.
- Prescription drugs from the manufacturer to the wholesaler to the pharmacy to the patient.
- Money from the health plan directly to the manufacturer.
- New drug applications through the FDA approval process.
Answer: Prescription drugs from the manufacturer to the wholesaler to the pharmacy to the patient.
48. Why would a payer be concerned with off-label prescribing?
- Off-label use is illegal in all situations.
- There may be a lack of evidence for the drug’s safety and effectiveness for that indication, posing a risk to the patient and a potential waste of resources.
- It always leads to better patient outcomes.
- It reduces the cost of care.
Answer: There may be a lack of evidence for the drug’s safety and effectiveness for that indication, posing a risk to the patient and a potential waste of resources.
49. The concept of “moral hazard” in health insurance refers to the idea that:
- People with insurance may use more healthcare services than they would if they had to pay the full price.
- Doctors are morally obligated to provide free care.
- Insurance companies are inherently unethical.
- Patients always choose the least expensive treatment option.
Answer: People with insurance may use more healthcare services than they would if they had to pay the full price.
50. Ultimately, the goal of managed care pharmacy from a payer’s perspective is to provide a prescription drug benefit that is:
- Sustainable, affordable, and promotes high-quality care.
- Unrestricted and covers all drugs at no cost to the member.
- Profitable above all other considerations.
- Identical to the benefits offered by all competitors.
Answer: Sustainable, affordable, and promotes high-quality care.
I am a Registered Pharmacist under the Pharmacy Act, 1948, and the founder of PharmacyFreak.com. I hold a Bachelor of Pharmacy degree from Rungta College of Pharmaceutical Science and Research. With a strong academic foundation and practical knowledge, I am committed to providing accurate, easy-to-understand content to support pharmacy students and professionals. My aim is to make complex pharmaceutical concepts accessible and useful for real-world application.
Mail- Sachin@pharmacyfreak.com