Financial Terms:

PMPM: Per member per month. This is used to show how a drugs price will realistically affect each member of a pharmacy plan financially.

BIM: Budget impact model. A comparison of price among drugs that will show their overall affect on the cost of the plan (usually PMPM). This analysis may include many variables such as total members, eligible members, drug cost.

QALY: Quality adjusted life year. This is a means of actualizing the impact of a drug in relation to a patient’s condition. This can be used to compare against cost to get an idea if a drug is worth its price. If a drug has many QALYs per dollar spent, it is considered cost effective.

WAC: Wholesale acquisition cost. This is the wholesale, or original price, of a drug when sold by the manufacturer themselves. This is not usually the price paid for the drug.

Rebate: a deal a PBM receives from a drug manufacturer for giving priority of their drug in one way or another. This priority may include placement of a drug in a higher tier on their formulary. Ex: Drug A will be placed in tier ‘Brand Preferred’ in return for a 20% rebate.

ICER: Incremental cost effectiveness ratio. The comparison of QALY to drug cost. Ex: (Cost A- Cost B)/ (QALY A- QALY B) = Cost/QALY.