First Section of Manan's Theory

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Reference Guide for the Foreign Pharmacy

Licensing Exam -Theory Second Edition
Krisman
PHARMACEUTICAL SERVICE MANAGEMENT

&
SOCIALAND BEHAVIORAL SCIENCES
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www.phannacyexam.com
R eferen ce Guide for the Foreign Pharmacy

Krisman
1-Pharmacy Law
A
PURE FOOD AND DRUG ACT OF 1906
Congress passed this law in 1906 to protect people from unsanitary and poorly labeled food.
FOOD, DRUG AND COSMETIC ACT OF 1938
*'
This law suggests that no new drug can be marketed until proven safe by the FDA for public use.
DURHAM HUMPHREY AMENDMENT OF 1951
This law is also known as "Prescription DrugArnendment".
It differentiates between prescription and OTC drugs.
It also authorizes oral prescriptions and prescription refills.
It suggests that each drug should be labeled " Caution: Federal law prohibits dispensing without
a prescription."
D
KEFAUVER HARRIS AMENDMENT OF 1962
It is also known as the "Drug Efficacy Amendment".
This law indicates that new approved drugs must be safe as well as effective.
It also establishes Good Manufacturing Practice requirements.
MEDICALDEVICEAMENDMENT OF 1976
This law passed in 1976, and includes:
I
II
The classification of medical devices

Safety and efficacy of medical devices
ORPHAN DRUG ACT OF 1983
This law was passed for orphan drugs (drugs for diseases that affect very few people). Congress
passed this act to provide tax relief and other incentives for the manufacturers to develop and
market orphan drugs.
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Krisman
DRUG PRICE COMPETITION AND PATENT TERM RESTORATION ACT OF

1984
This law is also known as Waxman Hatch Amendment.
x'
This law was passed to make generic drugs more readily available to the public.
This law also provides more incentive to innovative pharmaceutical companies and encourages
them to develop new drugs.
NATIONAL DRUG CODE NUMBER CNDC)

The NDC generally consists of ten to eleven letters.
ill
The first four characters indicate the name of the manufacturer or distributor.
The middle four characters identify the drug name and strength.
The last two characters identify the package.
OVER THE COUNTER DRUG
The FDA generally classifies dtugs into three categories in final monograph.
Category I :
ll
ill
It includes ingredients generally considered safe, effective and not

misbranded.
Category ll : It includes ingredients that are not considered safe, effective and are
misbranded.
Category ill : It includes ingredients for which data are insufficient to permit the
classification.
PATIENT PACKAGE INSERT
The FDA passed this law in 1970 that states certain dn1gs require a Patient Package Insert (PPI)
indicating the uses, risks and precautions of such drugs. The list of such drugs are :
*
*x
Isot:retinoin
Oral contraceptives
Isoproterenol
Ticlopidine
Progesterone
Estrogen
Intrauterine device
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*
*
*
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OBRAACT OF 1990
It is known as the Omnibus Budget Reconciliation Act of 1990. It requires that pharmacists must
offer a patient counseling.
THE FDA EMPLOYS A TWO LETTER CODING SYSTEM FOR THERAPEUTIC

EQUNALENCEOFDIF'FERENTDRUGS
AA:
Drugs that are available in conventional dosage fonns and have no

bioequivalence problems.
AT :
Topical drugs that meet bioequivalence standards.
AB :
Dtugs meeting the necessary bioequivalence requirement.
BC :
Drugs in extended release dosage fonn with bioequivalence issues.
BT:
Topical dn1gs with bioequivalence issues.
BX: Drugs for which adequate information is not available to determine the
bioequivalency.
POISON PREVENTION ACT
This law was implemented to prevent the death of children from accidental poisoning. This act was
passed in 1973. It indicates that all dispensed drugs must be required to be in a child proof
container. Drugs exempt from this law are :
Sublingual dosage fonn of nitroglycerine

Sublingual and chewable form oflsosorbide dinitrate (less than 10mg)
Cholestyrarnine powder
Methylprednisolone tablets (less than 84 mg)
Mebendazole tablets (less than 600 mg of drug)
Potassium supplements (unit dose form)
Erythromycin ethyl succinate (liquid and granules not more than 8 gm of drug)
Colestipol in powder form
Erythromycin ethyl succinate (tablets no more than 16 gm of drug)
Pancrelipase preparations
Prednisone (tablets no more than 105 mg)
Oral contraceptives
;;l:
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*
*
*
*
*
*
*
*
*
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CONTROLLEDSUBSTANCEACT
*
*
CSA = Controlled Substance Act

DEA = Drug EnforcementAdministration
The attorney general of United States has authority to place a drug into one of the five
categoties of schedule controlled dn1gs.
The controlled drug can be classified into five different classes according to the potential for abuse.
The potency of abuse of controlled drugs should be I > II> III> IV > V. Schedule I should be
considered the highest potential for abuse and schedule V the lowest potential for abuse.
SCHEDULE IT CONTROLLED DRUGS
Cannot be refilled in any circumstances.
The partial filling of this class of drugs should be done within 72 hours of initial filling.
The DEA 222 order form is required to order this class of drug.
Controlled ll drugs:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Ritalin
Dexedrine
Adderall
MsContin
Concerta
Oxycontin
OxyiR
MSIR
Roxanol
Roxicet
Percocet
Demerol
Dilaudid
Dolophine
Duragesic
RMSunisert
Percodan
Tylox
--------
--------
Methylphenidat~
Dextroamphetamine
Amphetamine+ Dextroamphetamine
Morphine sulfate
Methylphenidate
Oxycodone
Oxycodone
Morphine sulfate
Morphine sulfate
Oxycodone + APAP
Oxycodone + APAP
Meperidine
Hydromorphone
Methadone
Fentanyl
Morphine sulfate
Oxycodone +Aspirin
Oxycodone + APAP
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DISPENSING OF CIII CIV and CV, DRUGS
Cannot be refilled more than five times.
Cannot be filled for the prescription older than six months.
...,.
Do not require any DEA 222 form to fill the order.

Controlled ITI drugs:
:::c
*'
*'
Lortab
Tylenol#3
Fioricet I Codeine
Fiorinal I Codeine
Vicodin
-----
Hydrocodone + APAP
Acetaminophen+ Codeine
Butalbital + APAP +Caffeine+ Codeine
Butalbital +Aspirin+ Caffeine+ Codeine
Hydrocodone
--------------
Pentazocine
Pentazocine + Naloxone
Pentazocine +APAP
Pentazocine+ Aspirin
Propoxyphene
Propoxyphene +Aspirin
Propoxyphene + APAP
Meprobamate
Chlordiazepoxide
Diazepam
Oxazepam
Clorazepate
Flurazepam
Clonazepam
Lorazepam
Estazolam
Temazepam
Ttiazolam
Alprazolam
Zolpidem
Pemoline
Controlled IV drugs:
*
~~
'
I
*
'i~
*
*
*
*
*
*
*
*
*
~I<
*
~~
*
*
,.
Talwin
TalwinNX
Talacen
Talwin compound
Darvon
Darvon compound
Darvocet
Equanil
Librimn
ValiLUU
Serax
Tranxene
Dalmane
Klonopin
Ativan
Prosom
Restmil
Halcion
X anax
Ambien
Cylert
Controlled V drugs:
*
*
Buprenex
Lomotil
Buprenorphine
Diphenoxylate
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EMERGENCY DISPENSING OF CII DRUGS REQUIRES CERTAIN CONDITIONS
The dispensing quantity of the drug should be limited to cover emergency situations.
The prescriptions is immediately reduced to a written prescription by the pharmacist with

complete information about the ordering physician's name, address, DEA and telephone number.
The prescriber must send a written prescription within seven days from an authorized emergency
prescription.
FAXING OF CII DRUGS
A pharmacist can fill the Crr prescription by using a fax prescription under the condition that before
dispensing of the drug one must receive the original prescription. The faxing of err prescriptions
should be considered the original err prescription only under the following conditions:
When a prescription is faxed by a prescriber that needs to be compounded and administered to a

patient via LV., S.C., I.M. or intraspinal infusion.
II
When a prescription is faxed by prescriber for a patient living in long-tenn care institution.
ill
When a prescription is faxed by a prescriber for patient residing in a hospice certified by

Medicare.
METHADONE DISPENSING
Methadone can be used for pain as well as for treatment of drug detoxification. A pharmacy not
registered with the DEA narcotic program cannot dispense Methadone for treatment of drug
detoxification.
THE FILING METHOD FOR CONTROLLED SUBSTANCES
One file for err

Second file for CUI, CIV and CV
Third file for non controlled substances
One file for CIT

Second file for Crri, CIV , CV and non-controlled substances
One file for CII, CIII, CIV and CV with the condition that all III, IV and V should be previously
marked "C" with red ink on face of the prescription, so that it can be easily differentiated from CIT.
Second file of non-controlled substance.
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DESTRUCTION OF CONTROLLED DRUGS
The request to destroy controlled substances should be done on a DEA 41 form.
If the institution has a past history of very low drug abuse, the DEA may authorize registrant to
destroy the drug without a DEA representative .

OR
The drug that needs to be destroyed can be forwarded to a state agency.

OR
The drugs that needs to be destroyed can be forwarded to a DEA field office.
The theft of CIT drugs should be immediately reported to a DEA office or local police.
A report of theft must be made on a DEA 106 form.
DEA 222 ORDER FORM
This form must be used to order only CI and CII drugs.
Each order form contains three copies. Copy I, Copy II and Copy III.
There are ten lines on each order fonn. Only one item can be entered on one line. For each item,
one must include name of the drug (Ritalin), the dosage fonn of the drug (tablet) and the volume or
unit of the drug in each container(# 100).
Copy ill should be kept by the person filling out the DEA fonn. Copy I and IT should be submitted
to the supplier.
The supplier records the date and quantity shipped to the purchaser on Copy I and II. Copy II is
sent to the DEA by supplier and Copy I should be kept by supplier for his own record. Any partial
supply of the drug must be filled by supplier within 60 days from the order date.
Upon receiving the order fotm from the supplier, the purchaser must record all the received
items on the appropriate line with date received.
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TO CHECK VALIDITY OFDEANUMBER

The DEA number is nine characters consisting of two letters followed by seven numbers.
The first letter generally gives an idea about the registrant. If person is a prescriber then it would
begin with anA orB; ifitis amid-level prescriber then it would begin with an M. If it is a distributor
then it would begin with a P or R.
The second letter is usually the first letter of the last name of registrant.
The rest of the six characters are computer generated, unique for each registrant. The last seventh
character is the key to verifying the validity of the DEAnumber.
*'
To verify a DEA number
Add the first, third and fifth number of the DEAn umber.
II
Add the second, fou1th and six number of the DEA number and multiply by two.
ill
Add the resultant sums of (II) to (I).
IV
The final most light number of this sum should match with the ninth digit of the provider DEA
number.
For example, Dr. AyanShroffwithDEA#BS 2435786 can be verified by:
The first letter " B" is indicated prescriber.
The second letter should be the first initial of the last name of prescriber, therefore it should
be "S" in this case.
Now adding the first, third and fifth digits of given DEA number will give us 2 + 3 + 7 = 12.
Now adding the second, fourth and six digits of given DEA number will give us 4 + 5 + 8 = 17.
Now multiply the resultant sum of second, fourth and sixth digits by "2' (17 X 2 = 34)
Now add this sum to the sum of the first, third and fifth digits of the DEA number# 12 + 34 = 46.
The number 6 (the final most right number of sum) should match the last number of the DEA
number BS 2435786, and therefore the provided DEA number is valid.
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2-Pharmacy Management
x
Functions of ratios in financial analysis: There are a few important ratios that indicate the
profitability, efficiency and overall financial positions of a phannacy.
Ratios indicating profitability:
1.
2.
3.
4.
Net profit to net sales (NP:NS)

Net profit to net worth (NP:NW)
Net profit to total assets (NP:TA)
Net profit to inventory (NP:IN)
1.
Net profit to net sales (NP:NS): It can be calculated by dividing net profit by net sales. It is
expressed as a percentage. The normal ratio lies between 3 to 7o/o.
2.
Net profit to net worth (NP:NW): It can be calculated by dividing net profit by net worth. It
is considered the best among other ratios for calculating profitability. The ratio lies between 20 to
25%. A 15% is acceptable for older pharmacies and 40% is attainable for newer pharmacies.
3.
Net profit to total assets (NP:TA): It is nonnally calculated by dividing net profit by total
assets. The nonnal acceptable ratio lies between 10 to 15%.
4.
Net profit to inventory (NP:IN): It can be calculated by dividing net profit by inventories. It
is a good indicator of both profitability and efficiency. The nonnal acceptable ratio lies between
$0.2 1 to $0.27.
Ratio indicating efficiency:
1.
Inventory turnover rate (IN:TOR)

Net sales to inventory (NS:IN)
Net sales to networking capital (NS:NWC)
Net sales to net worth (NS:NW)
Account receivable collection time (AIR CT)
Accounts payable remittance type (AlP RT)
'
2.
3.
4.
5.
6.
1.
Inventory turnover rate: It is nonnally calculated by dividing the cost of goods sold by the
average of beginning and ending inventory. The inventory turnover rate should be 4 as a minimum,
with a target of 6 or higher.
2.
Net sales to inventory: It can be calculated by dividing net sales by net inventory. The ratio
nonnally ranges from 6 to 9.
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3.
Net sales to networking capital: The networking capital tmnover is computed by dividing net sales
by net working capital. Networking capital assets is cmrent assets minus current liabilities. The
normal ratio range is 4 to 8. Ratios greater than 8 are considered inadequate capitalization or
overtrading. A value below 4 indicates undertrading or too much capitalization.
4.
Net sales to net worth: This is normally calculated by dividing net sales by net worth. Net
worth is normally expressed by total assets m_i nus total liabilities. The normal ratio range
is from 3 to 8. Greater than 8 is considered under capitalization and overtrading while below 3
indicates undertrading.
5.
Accounts receivable collection time: It is normally calculated by dividing year end accounts recei v
able by mean credit sales per day. This ratio is a direct measure of efficient credit management.
Normally, a 30 day collection period is a reasonable target.
AIR = Year end account receivable
Mean credit sales per day

6.
Accounts payable remittance time: This is normally calculated by dividing year end accounts
payable divided by 1nean credit purchase per day.
AlP = Year end account payable
Mean credit purchase per day

x
Liquidity normally measure's a pharmacy's ability to meet its current liabilities with little
or no intenuption in the regular conduct of business.
Solvency measures a pharmacy's ability to meet current liabilities with moderate change in
the composition of current assets.
Ratio indicating liquidity and solvency:
l.
2.
3.
Acid test ratio

Current ratio
Inventory to net working capital (IN:NWC)
1.
Acid test ratio: It is also known as quick ratio. It is nonnally calculated by dividing the sum
of cash and accounts receivable by the cUITent liabilities. The nonnal ratio is 1:1.
2.
Current ratio: It is calculated by dividing current assets by current liabilities. The minimum
standard value is 2: 1.
3.
Inventory to networking capital: It is calculated by dividing mean inventory by NWC. Mean

inventory is the average of the beginning and ending inventory for the accounting period. This
ratio is an indirect measure of liquidity and solvency.
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Krisman
A high ratio indicates low liquidity and too much inventory. A ratio of 80% is a reasonable target.
D
Ratio indicating financial position:
1.
Total liabilities to net worth (TL:NW)

Founded debt to net working capital (FD:NWC)
Fixed assets to net worth (FA:NW)
2.
3.
L
Total liabilities to net worth: This ratio can be calculated by dividing total liabilities by net
wot1h. It is expressed as a percentage. It is the most direct measure of the financial position
of the pharmacy. A ratio of 50% or lower is acceptable.
2.
Founded debt to net working capital: It is nmmally calculated by dividing long term liabilities by net
working capital. It is also expressed as a percentage. Long term liabilities are defined as liabilities
extending longer than one year. The nonnal acceptable value of a ratio is 20 to 25.
3.
Fixed assets to net worth: This is calculated by dividing depreciated fixed assets by net worth. It
helps to identify overinvestment in fixed assets.Ahigh value indicates over investment in fixed
assets while a low value indicates there is a need for remodeling. The target value would be 20%
or less.
Demand and Price Elasticity
Elastic demand: If the relative change in revenue is greater than the relative change in price, it will
be defined as elastic demand.
Inelastic demand: If the relative change in revenue is less than the relative change in price,
it is known as inelastic demand or price inelasticity.
Unitary elasticity: When the relative change in price and revenue are equal, it is defined as unitary
elasticity.
Coefficient of elasticity: The coefficient of elasticity can be calculated by the following
fommla:
E= QIP
where
E =coefficient of elasticity
Q=the relative change in quantity expressed as a percentage
P = the relative change in price expressed as a percentage
For example, if we reduce the piice forTolnaftate cream from $3 to $2.80 and this will increase
the sale ofTolnaftate tubes from 55 to 85 tubes, what would be the coefficient of elasticity?
18

Krisman
Q=The relative change in quantity as a percentage= 85 x 100/55 = (154.54%)
(154.54-100)
= 54.54%
P =The relative change in price as a percentage= 2.8 x 100/3 = (93%)

= (100-93) = 7%
E = Q!P = 54.54/7 = 7.79
A coefficient of over one normally indicates an increase in revenue, whereas a coefficient

below one reflects a loss since price reduction does not quite increase the sales of
merchandise. When E = 1, it is a unitary elasticity.
DUR (Drug Utilization Review)

x
DUR: It is the process of quantitatively and systematically reviewing prescription claims

data to evaluate the appropriateness of chug therapy.
It is normally divided into following subcategories:
1.
Prospective DUR
RetrospectiveDUR
2.
1.
Prospective DUR: This type ofDUR study is normally done before or at the time of
dispensing the diug, e.g. dispensing dtugs to a patient at any retail pharmacy store.
2.
Retrospective DUR: This type ofDUR study is normally done after dispensing the drug.
e.g. review of drug utilization for a patient admitted to a hospital for sulfa hypersensitivity.
Advantages of DUR:
1.
It helps to identify the physician's prescribing and the patient's drug utilization pattern.
2.
It improves the drug therapy process by eliminating previously occurring medication regimen
problems.
DRG (Diagnosis Related Groups)

DRG: It is known as diagnosis related groups. It helps cut down healthcare cost. It is a
choice of payment for most third party payers. The reimbursement under DRG is
considered prospective reimbursement.
Under this payment method, medical problems are classified and the amount to treat each
. particular disease is pre-calculated. e.g. Mr. Mehta is admitted toAdecare hospital for
coronary bypass surgery.
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Under DRG, the cost (including surgery, patient's stay in hospital and medications) for this
particular medical problem is $6500. Third party insurance companies are going to pay only
$6500 toAdecare hospital regardless of the service provided.
This will discourage a hospital from keeping a patient for a prolonged period of time.
Now, if the actual cost to treat Mr. Mehta's medical condition comes to $7200, thenAdecare
hospital has to pay the difference ($700) from its own pocket. Similarly, if the
actual cost comes $5300,Adecare hospital will make an additional profit.
Retrospective and Prospective payment systems
Prospective reimbursement: A fonn of reimbursement in which a healthcare service

provider is paid in advance, e.g. paying a health-insurance company fixed amounts every
month.
Retrospective reimbursement: A fom1 of reimbursement in which a healthcare service
provider is paid after submitting a claim, e.g. submitting medicaid claims after dispensing
drugs.
Medicare and Medicaid

Medicare: It is title 18 of the Social Security Act. It was enacted in 1965.
It is a federal program designed to provide supplemental healthcare coverage for the elderly
and some permanently disabled patients.

It is funded and administered by the federal government. It consists of two parts:
Part A and Part B.
Medicare does not cover any outpatient prescription drug.
Medicare Part A:
*
*
The hospital insurance is mandatory. It also covers nursing home service, home health
services and hospital services.
Coverage and benefits of Part A are very limited.
It also includes cost-sharing provisions.
Medicare Part B:
*
*
*
Part B coverage is optional.

It covers medical and surgical services.
Part B coverage includes an annual deductible and coinsurance.
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Medicare Modernization Act (MMA)
On December 8, 2003, President Bush signed the Medicare Prescription Drug,

Improvement and Modernization Act (known as Medicare Modernization Act, or "MMA"
of2003.)
MMA will make a voluntary prescription drug benefit available for the first time to more than
400 million Medicare beneficiaries. In addition to offering a prescription benefit, the MMA is
going to introduce the following new regulations:
1.
It will add new preven6ve medical benefits for seniors.
2.
It will make a wealthier seniors pay a higher monthly Part B premium for physician services.
3.
In the area of pharmacy, it will change the way that Medicare pays for covered outpatient
Pan B drugs (i.e. immunosuppressants, oral cancer drugs, oral antiemetic chugs) and lower
the reimbursement rates for Medicare durable medical equipment (DME).
4.
The MMA will also create a national competitive bidding program for drugs and durable
medical equipment starting in 2007.
5.
This law also includes provisions that affect state Medicaid programs, under a new provision, and will create tax-free health savings accounts and increase the availability of generic
medications to Medicaid recipients.
6.
This law will also add the Medicare Part D prescription drug benefit program in 2006 and
enable beneficiaries to enroll in national or regionally-based insurance plans that cover
prescription drugs.
J\lledicare Approved Prescription Drug Discount Card Program
To provide Medicare beneficiaries, especially those without prescription coverage, with

discount on their prescription medications, MMA establishes a Medicare approved drug
discount card program.
All Medicare beneficiaries, entitled to or enrolled in Medicare Pa11A and/or Part 8, would
be eligible for the Medicare-approved discount card (without any income limit).
The program will operate for the 18 month period beginning in June 2004, continuing
through the end of2005, to provide "interim relief' from prescription drug costs to uninsured
Medicare beneficiaries before the Medicare Palt D prescription drug coverage program
begins in 2006.
The actual savings may vary, however the card holder may save up to 10 to 25% on prescription 1nedications dispensed through community and mail order pharmacies.
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The Medicare approved discount cards will have a Medicare-approved seal. Just as Medicare-approved discount cards are voluntary for beneficiaries, they are also voluntary for
pharmacies. Individual, chain, and mail order pharmacies have been signing contracts and
making business decisions about which discount cards they will and will not accept in their
stores.
Medicaid: It is title 19 of the Social Security Act.
It is funded and administered by the federal and state governments and administered by
state governments under direct supervision of the federal government.
It is a joint federal and state government program that provides healthcare coverage for
poor and medically indigent patients.
Medicaid benefits are more comprehensive than medicare benefits.

Medicaid services include:
1.
2.
3.
4.
5.
Inpatient and outpatient hospital services

Lab and X -ray services
Physician services
Skilled Nursing Facility services
Home Healthcare services
Health Brief Model (HBM)
It was first proposed by Rodenstock and later modified by Becker. According to this model,
the authors have hypothesized that people generally do not engage in preventive healthcare
practices or participate in health detection and screening programs unless they view themselves
vulnerable and/or have certain kinds of health relevant problems.
There are three categories of behavior related to healthcare, these include:
1.
Health behavior
illness behavior
Sick-role behavior
2.
3.
Health behavior: It is defined as any activity undertaken by an individual who believes

himself or herself to be healthy, for the purpose of preventing illness.
*
*
*
*
Weight reduction screening program

Exercise program
Stress reduction
Regular self-examination for breast or testicular cancer
Change in diet to reduce fat or cholesterol consumption
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Krisman
illness behavior: It is defined as any activity undertaken by an individual who believes he/
she may be ill.
*
*
*x
Discussing health problems with a family member, friend or pharmacist

Making an appointment to see physician
Self-testing to determine blood pressure or blood sugar level
Experimenting with OTC products
Sick-role behavior: It is defmed as an activity undertaken by an individual who considers
themselves to be i11 or who have been diagnosed by a health professional as being ill.
x
x
x
Following medical advice

Taking medication as prescribed
Selecting an appropriate OTC product
Staying home from work or school
Compliance and Factors affecting compliance

x
Compliance: It is defined as patient's willingness and initiative for taking medications

and supporting the healthcare provider for treatment of his/her disease.
Factors affecting compliance:
*x
x'
*x
'
x
'
*
*
*
*
*
*
'i<
'
Age
Cost of m.edication
Disease (psychiatric)
Satisfaction with care
Side effects of prescribed medication
Belief in efficacy of treatment
Education
Satisfaction of care
Frequency of administration
Multiple drug therapies
Family size
Duration of therapy
Unpleasant taste of medication
Knowledge of the disease
Important Definitions
AAC CActualAcquisition Cost): The actual price paid by a pharmacy after all trade, volume
and cash discounts.
AWP (Average Wholesale Price): The published ''list price" of a particular drug product.
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Krisman
EAC (EstimatedAcquisition Cost): The third party's estimate of the price paid by
pharmacies for a particular drug product.
MAC (Maximum Allowable Cost): The maximum amount that will be paid by third party
to pharmacy for a patticular product.
Capitation: A prospective form of reimbursement in which pharmacy receives a specific

amount of n1oney each month for each patient who is eligible to receive prescription
regardless of service provided.
Coinsurance: It is one type of cost sharing plan in which patients pay a specified percentage
of all loses incurred.
'I'
"
Copayment: It is one type of cost sharing plan in which the patient has to pay a flxed
amount each time a service is provided.
Deductible: It is one type of cost sharing plan in which a patient has to pay a specified
amount during a specific period of time before beneflts are paid by third party.
COMMUNICATION
Interpersonal communication is a common but complex practice that is essential in dealing

with patients and other healthcare providers.
The communication is normally divided into two subcategories:
1.
Verbal communication
Nonverbal communication
2.
A.
Verbal communication: When sender transmits or conveys a message to another person by

means of vocalized language.
Verbal communication is composed of the following components:
1.
The sender: One who transmits a message to another person.
2.
The message: It is an element that is transmitted from one person to other person.
3.
The receiver: One who receives a message from sender.
4.
Feedback: It is the process of replying to sender according to understanding of sender's

message by receiver.
5.
Barriers: The interference that affects the receiving, sending and transmitting of message, e.g.loud
noise or telephone 1ings in the background
24

Krisman
B.
Nonverbal communication: The art of communication that does not require vocalized
languages or the written word to convey messages.
The following are elements of nonverbal communication:
1.
2.
Kinesics
Proxemics
1.
Kinesics: The manner in which one uses his/her arms, legs, hands, head and face to convey
a message to the receiver is defined as kinesics.
Examples of kinesics:
1.
2.
Varied eye contact

Relaxed posture
Slight lean toward the other person
Erect body position
Frontanial appearance
Appropriate, comfortable gestures
3.
4.
5.
6.
2.
Proxemics: The distance between two interactive people puts more emphasis on content of
communication, and it is defmed as proxemics.
It is a powerful nonverbal communication tool.
********************************************************************************
25

Krisman
3-Pharmacoeconomics
Phannacoeconomics: It is defmed as "the description and analysis of the costs of drug therapy to
healthcare systems and society." Pharmacoeconomic research identifies, measures, and compares
the costs and consequences of pharmaceutical products and services.
Pharmacoeconomic methodologies include cost minimization, cost effectiveness, cost benefit, cost
of illness, cost utility, and decision analysis.
A.
Cost determination and analysis: Cost is defined as the magnitude of resources consumed,
whereas the cost of product is defined as the monetary value of resources consumed in its
production. The concept of cost deals with the resources that are used or consumed in the
production of a good or service. Resources may include labor, plant and equipment, and
supplies. The price of a drug product is not the same as the cost of drug therapy. There are
a few cost related definitions:
l.
2.
3.
4.
5.
Direct cost
Indirect cost
Fixed cost
Variable cost
Average cost
Marginal cost
Opportunity cost
6.
7.
1.
Direct cost: It involves a transfer of money. If money is exchanged for the use of a resource,
it is defined as direct cost.
2.
Indirect cost: It does not involve any money. It is unpaid resource commitment, e.g. unpaid
assistance from a family member.
3.
Fixed cost: It does not change with increase or decrease in output, e.g. an employee's salary, or
depreciation of a plant and equipment.
4.
Variable cost: It does vary or change with a change in volume of output, e.g. sales conunission and
cost of goods sold
5.
Average cost: It is the resources consumed per unit of output. It can be calculated by dividing
total cost by volume or quantity of output.
6.
Marginal cost: It is defmed as the change in total cost of producing one additional unit of output.
26
Reference Guide for the Foreign Phannacy

7.
Krisman
Opportunity cost: It is defmed as the amount that a resource could earn in its highest valued
alternative use. It is the best measure of the value of a resource.
Pharmacoeconomic Methodologies:
1.
Methodology
Cost measurement
Outcome unit
Cost-benefit
Dollar
Dollar
==
2.
Cost-effectiveness
Dollar
Units such as blood pressure,

mm Hg, blood glucose
3.
Cost-minimization
Dollar
Assume to be equivalent in
comparative groups
-1-.
Cost-utility
Dollar
Quality-Adjusted Life Year

(QALY)
1.
Cost-benefit analysis (CBA): It is a basic tool that helps to improve the decision-making
process in the healthcare program.
The outcome measure is in dollars.
This study calculates all of the possible benefits that may occur from the program. All the benefits
must be expressed in dollar value.
Disadvantage:
It is very difficult to assign dollar values to non-financial benefits, e.g. benefits of the program that
may improve a patient's life.
Example: By using cost-benefit analysis, fmd out which of the following drugs is socially beneficial
or acceptable?
Variable
Drug A
DrugB
Acquisition cost
Administration cost
Monitoring cost
Adverse effects cost
Days at work
Extra months of life
800
200
300
200
500
500
600
50
100
0
500
1000
27

Krisman
To fmd out which drug is socially beneficial, we need to calculate B/C (Benefit/Cost).
Total cost associated with Dn1gA therapy: 1500
Total benefits associated with DrugA therapy: 1000
B/C = 100011500 = 0.667
Total cost associated with Drug B therapy: 750

Total benefits associated with Drug B therapy: 1500
B/C = 1500/750 = 2
*
*
*
If B/C < 1, the drug will not be beneficial for society.

IfB/C =1, the cost and benefit will be same.
IfB/C > 1, the drug will be beneficial for society.
In the above example, Drug B is more beneficial to society compared to Drug A.
2.
Cost-effective analysis (CEA): This technique is used to make a decision to select the
most cost effective intervention from the available alternative.
The output measure of this type of study is a health related measure rather than a financial.
e.g. blood pressure, mm Hg, or blood glucose.
3.
Cost-minimization analysis (CMA): It is defined as when two or more interventions are

examined and assumed to be equivalent in terms of a given outcome. Cost associated with each
intervention may be examined and compared, e.g. the comparison of cost of two ca.-channel
blockers which may successfully produce similar blood pressure reduction patterns in a selected
group of patients.
4.
Cost utility analysis (CUA): It is an economic tool that measures the outcome of the program
in terms of quality and quantity of life.
.
The outcome measure in CUAis cost per QALY (Quality Adjusted Life Year).
5.
Cost of illness evaluation: It is very important for evaluating new therapies.
Health Related Quantity of Life (HRQOL): According to WHO (World HealthOrganization), health is defmed as complete physical, mental and social well-being.
HRQOL nmmally focuses on nonclinical components ofhealthcare such as functional status, wellbeing, and other important health related outcomes.
HRQOL has a very large database. This database is prepared either by personal interviews,
by telephone interviews, or by postal survey.
Personal interviews, telephone interviews and postal surveys are defined standardized
questionnaires or instruments ofHRQOL.
28

Krisman
General Health Status Instruments: They normally evaluate health-related information

applicable to all ages, races, sexes and socioeconomic background.
x
General Health Status Instruments norrnally concentrate on four key health concepts:
1.
-
3.
4.
Physical functioning
Social and role functioning
Mental health
General health perceptions
SF 36 is the most commonly used General Health Status Instrument.
Disease-Specific Health Status Instruments: They nonnally focus on the effect of a

particular disease on patients. It requests detailed infonnation about effects of a disease and
treatment on patients.
Psychometrics: It is normally defined as the science of using standardized tests or scales to
evaluate attributes of an individual.
Reliability and validity are the most important psychometric properties that must be
possessed by each and every standardized test or scale.
Reliability is a measure of consistency and repeatability of measurement, while validity is a

measure of accuracy. Content validity, construct validity and criterion validity are types of
validation.
Decision Analysis: A systematic approach to decision-making under the condition of uncertainty

is defined as decision analysis.
Decision analysis helps the decision maker to:
1.
Identify the available option when faced with a decision.
2.
Predict the consequences or outcomes of each option.
3.
Determine the value of each outcome.
4.
Select the decision option that will bring the best result or outcome.
29

Krisman
4-Healthcare Delivery System

The major healthcare activities in the United States are consolidated with the Department of Health
and Human Services (DHHS). One of the principal components of this department is Healthcare
FinancingAdministration (HCFA). It is charged with the responsibilities of administering Medicare
and Medicaid.
In the U.S., patients may get health services through one of the following healthcare delivery
system.
A.
D.
Managed Care System

Long Term Care System
Hospital Pharmacy System
Retail Pharmacy System
A.
Managed Care System:
B.
c.
The principal component or segment of the Managed Care System is HMO, also known as Health
Maintenance Organization. It is a private or nonprofit entity which provides basic healthcare
services to enrolles for a fixed amount on a prepayment basis, and provides additional
supplemental services for additional payments.
HMO is also described as an organized system ofhealthcare that is capable of bringing together all
the necessary components of a healthcare system.
There are three important characteristics of an HMO:
1.
Membership is voluntary.
2.
They offer comprehensive, basic and supplemental health maintenance and treatment services.
3.
Each member has to pay a fixed arnount of m.onthly fees regardless of the service provided.
An HMO is subdivided into the following categories:
1.
2.
3.
' 1.
Staff Model HMO

Group Model HMO
Independent Practice Association (IPA)
Staff Model HMO:

They normally own facilities and directly employ physicians. The members of this type of HMO
receive heal.thcare services for a fixed monthly payment regardless of actual use of service.
30

Krisrnan
2.
Group Model HMO:
They contract directly with large, well established physician groups to provide services to
members for capitation fees or a fee-for-service.
3.
Independent PracticeAssociation:
It is the fastest growing type of HMO. In this type of HMO, an organization contracts individual
physicians to provide service on a discounted fee-for-service basis plus profit sharing.
Preferred Provider Organization:

It is similar in function to IPA, however the members of this type of organization use physicians
who are not directly under contract with HMO. When a member uses a noncontracting
physicians, he or she will not receive a full reimbursement for medical expenses.
B
Long Term Care System:
It is defmed as healthcare or health related services that require medical, nursing or supportive care
for 30 or more days.
LongTetm Care institutions normally include the following:
1.
Nursing Homes
A.
ECF
B.
SNF
C.
ICF
2.
Hospital Extended Care Units
3.
Psychiatric Hospitals
4.
Chronic Diseases Hospitals
5.
Facilities for the Mentally Retarded
6.
Half-Way houses
31

Krisman
Nursing Homes:
It is defined as a nonhospital institution which provides nursing and other health and social related
supportive services to the chronically ill and the elderly. They are subdivided into three different
categories:
3.
Extended Care Facilities (ECF)

Skilled Nursing Facilities (SNF)
Intermediate Care Facilities (ICF)
1.
ECF (Extended Care Facilities):
1.
2.
It was used in the early years of the Medicare program.

A nursing home has to meet certain criteria in order to be certified as an extended care facility.
Medicare covers only up to 100 days of post-hospital extended care services.
Today, ECFs are replaced by SNFs.
2.
SNF (Skilled Nursing Facilities):

It is a nursing home that meets the requirements for the conditions for participation in both
Medicare and Medicaid programs.

3.
Intermediate Care Facilities (ICF):
An Intermediate Care Facility is defmed as an institution recognized under the Medicaid program
which is licensed under state laws to provide health related care and services to individual who
require institution care due to their mental and physical conditions.
4.
Extended Hospital Care:
It is a defined as care provided to patients who have passed through the acute stage of their
illness, but who are still unstable and may require several months of further hospital care.
C.
Hospital Healthcare System:
.,.,,,
Generally, a hospital is classified in tenns of the physical makeup and quantitative nature of
services provided.
Hospitals are classified by:
1.
2.
Type of service
Length of stay
32

....
-.
Krisman
Ownership
Bed capacity
A.
Type of service:
It is normally divided into two subcategories:
1.
General hospital
Special hospital (Cancer, Psychiatric or Pediatric)
B.
Length of stay:
It is also divided into two different categories:
1.
Short-tenn hospitals
Long-term hospitals
*
*
Short-term hospitals: The average length of stay is less than 30 days.

Long-term hospitals: The average length of stay is more than 30 days.
C.
Type of ownership:
Hospitals are also classified by the type of ownership and usually government or non-government,
e.g. Federal', State or County hospitals, individual, partnership or S-corporations.
D.
Bed capacity:
Hospitals are also classified according to their bed capacity.
1.
2.
7.
Under 50 beds
50-99 beds
100-199 beds
200-299 beds
300-399 beds
400-499 beds
500 beds and over
D.
Retail Pharmacies:
They are also considered one of the important components of the healthcare delivery system.
However, health related services are primarily limited to dispensing medications and patient
counseling, e.g. Rite Aid, Giant, and CVS pharmacy.
")
I
3.
4.
5.
6.
33

They can be subdivided into three categories:
l.
Chain-retail pharmacy services, e.g. CVS and Rite Aid pharmacy

Individually owned pharmacies
Mail order pharmacies
2.
3.
Krisman
Retail pharmacy and individually owned pharmacies work in a similar fashion. However mail order
pharmacy service is a little bit different in aspect of retail pharmacy. The latter lacks face to face
patient counseling and OTC services.
34

Krisman
5-New Drug Approval

*
No new drug can be legally marketed in the U.S. without approval by the FDA.
The innovator company must submit an IND (Notice of Claimed Investigational Exemption for a
New Drug) for approval. After an approval ofiND from the FDA, the manufacturer may then
conduct clinical studies of its investigational new drug.
The law requires the manufacturer to submit the following information:
1.
The name of the drug

Its composition
Methods of manufacturing and quality control
Information from preclinical investigations regarding pharmacological, pharmacokinetic, and
toxicological evaluation.
2.
3.
4.
The FDA may answer within 30 days from the date the IND is filled. If the FDA approves
the IND, the innovator company may start human clinical testing of the new drug.
The testing proceeds through three different phases:
1.
Phase I clinical trial

Phase II clinical trial
Phase ill clinical trial
2.
3.
Phase I trial: The purpose of phase I clinical trial is to detect the adverse effects of the new
drug.
This phase involves a small number of subjects for study of the drug's toxicity, bioavailability,
metabolism, elimination and pharmacological action of the drug.
Initially, a number of subjects receive a low dose of the new drug, which is gradually increased
once safety of the new drug is assured.
Phase II trial: The new drug is now tested on a limited number of patients who actually suffer
from the disease for which the new drug is claimed for.
Phase II clinical trial helps to determine the efficacy of the drug and dosage at which efficacy may
occur.
Phase ill trial: This trial involves hundreds or thousands of patients. The study is often
conducted at a physician's office or hospitals that have contracted with the manufacturer to
conduct studies.
35

Krisman
A Double Blind Study is notmally conducted in this phase. It is a type of study in which the
nature of the drug is concealed from patients as well as attending physicians. In this type of
study, one group of patients receive the testing drug and the other group of patients receive
the placebo; the result of both groups is then compared to find out the true effectiveness of
the drug.
'I
If the phase III studies are favorable, the drug sponsor's may submit an NDA to the FDA .
An NDA contains a complete report including the drug's safety and efficacy which has been noted
on an IND.
By law the FDA has 180 days to review an ND A and to answer the sponsor 's company.
Phase IV trial: It is also known as postrnarketing surveillance.
Once the new drug application has been approved , the innovator company may legally distribute
the drug in interstate commerce.
Manufacturers must maintain and keep adequate postmarketing reports and records.
Manufacturers must submit any new information regarding a drug's safety and efficacy or any
serious drug interactions to the FDA.
The importance of postmarketing surveillance:
1.
To compare a drug's safety and effectiveness in a vast range or group of patients.
2.
To find out the long-term aspects of toxicity and adverse effects of the drug.
36

Krisman
6-Clinical Dru
x
It is defmed as an extensive, heterogenous collection of resources which provide information about

drugs.
Drug information sources can be classified into three important categories:
1.
2.
3.
Primary literature
Secondary literature
Tertiary literature
Primary literature: Articles appearing in pharmaceutical and medical journals have the most
current and accurate health related information. They are classified as primary literature.
Advantage:
1.
The most current and accurate health related infonnation.
Disadvantages:
1.
Pharmacists, pharmacy students, and physicians have the least contact with these type of
resources.
Secondary literature: It represents two types of resources:
1.
2.
Indexing (bibliographic)
Abstracting
They represent the most expensive investment ofliterant library.
Several considerations should be applied before selecting secondary sources:
1.
2.
Lag time
Coverage of literature
Selectivity of indexing and abstracting
Cost
3.
4.
Lag time: It is defined as time elapsed between documents published in journals versus when it
was abstracted or indexed. The article with a prolonged lag time may lack updated or current
infonnation.
37

Krisman
Coverage of literature/Selectivity of indexing and abstracting: One should pay close
attention when selecting secondary literature from journals, e.g. pharmacy-related journals
are less likely to provide article information on cardiac or neurosurgery.
Cost: The drug information is available in different sources. e.g. cd roms, standard print,
palm top or microfiche. These various sources may have different cost. It is therefore very
irnportant to evaluate individual needs at the practice site and purchase accordingly.
Advantage:
1.
More cunent and updated information compared to tertiary literature.
Disadvantages:
1.
2.
Less current and updated information compared to primary literature.

Very expensive.
Tertiary literature: Reference books and text books are considered as tertiary literature.
Advantages:
1.
2.
Easy accessibility
Less expensive
Disadvantages:
1.
2.
Lack of current and updated information.

The author may interpret incorrectly from the primary source and may provide inaccurate
information.
Classification of Drug Information Sources:
Parenteral
Drug manufacture outside of USA
1.
2.
Handbook of Injectable drugs

Guide to ParenteralAdmixture
1.
Poison information resources
2.
3.
4.
Index Nominum
Matriandale:The Extra Pharmacopoeia
USAN Dictionary of Drugs Names
USP Dictionary of Drugs Names
1.
2.
Dreisbach's Handbook of Poisoning

Clinical Toxicology of Commercial
Products
Product orientated references
1.
2.
American Drug Index

PDR
38

Krisman
~1nUAClC~
Adverse
effectj:-~
(Y fvl eofh~ '::;;
:J ~ne;ya.J
c rvJ
: . @ TextbookofADR r1f:&r'-UL 'Lt 1 . _f
~ . (}) Side effects of drug '(ljfYl ~ . ,""> S .~ ~
&,~ec{_c-c:i.~ CADf ~
&6 r~ ~)
F
Investigational drugs
l.
The NDA Pipeline

Drug Facts and Comparisons
Matriandale: The Extra Pharmacopoeia
-1 .
....
.).
3.
4.
5.
6.
Facts and Comparisons

Handbook of Nonprescription Drugs
Bluebook
Red book
Therapeutic orientated references

1.
2.
4.
Merck Manual
Applied Therapeutics
Clinical Pharmacy and Therapeutics
Cancer Chemotherapy Handbook
3.
Drug orientated references
Dispensing orientated references
l.
AHFS Drug Infonnation

USP Dispensing Infonnation
AMA Drug Evaluation
Matriandale Extrapharmocopoea
Pharmacological Basis of Therapeutics
1.
2.
USP-NF
Merck Index
Remington
')
"'
.).
-L
).
3.
39

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e erence

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Reference Guide for the Foreign Pharmacy

PHARMACEUTICAL SERVICE MANAGEMENT

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R eferen ce Guide for the Foreign Pharmacy

PURE FOOD AND DRUG ACT OF 1906

FOOD, DRUG AND COSMETIC ACT OF 1938

DURHAM HUMPHREY AMENDMENT OF 1951

This law is also known as "Prescription DrugArnendment".

It differentiates between prescription and OTC drugs.

It also authorizes oral prescriptions and prescription refills.

KEFAUVER HARRIS AMENDMENT OF 1962

It is also known as the "Drug Efficacy Amendment".

It also establishes Good Manufacturing Practice requirements.

The classification of medical devices

ORPHAN DRUG ACT OF 1983

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Reference Guide for the Foreign Pharmacy

DRUG PRICE COMPETITION AND PATENT TERM RESTORATION ACT OF

This law is also known as Waxman Hatch Amendment.

NATIONAL DRUG CODE NUMBER CNDC)

OVER THE COUNTER DRUG

It includes ingredients generally considered safe, effective and not

PATIENT PACKAGE INSERT

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Reference Guide for the Foreign Pharmacy

offer a patient counseling.

THE FDA EMPLOYS A TWO LETTER CODING SYSTEM FOR THERAPEUTIC

Drugs that are available in conventional dosage fonns and have no

Topical drugs that meet bioequivalence standards.

Dtugs meeting the necessary bioequivalence requirement.

Drugs in extended release dosage fonn with bioequivalence issues.

Topical dn1gs with bioequivalence issues.

POISON PREVENTION ACT

Sublingual dosage fonn of nitroglycerine

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Reference Guide for the Foreign Pharmacy

CSA = Controlled Substance Act

SCHEDULE IT CONTROLLED DRUGS

Cannot be refilled in any circumstances.

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Reference Guide for the Foreign Pharmacy

DISPENSING OF CIII CIV and CV, DRUGS

Cannot be refilled more than five times.

Cannot be filled for the prescription older than six months.

Do not require any DEA 222 form to fill the order.

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EMERGENCY DISPENSING OF CII DRUGS REQUIRES CERTAIN CONDITIONS

The prescriptions is immediately reduced to a written prescription by the pharmacist with

When a prescription is faxed by a prescriber that needs to be compounded and administered to a

When a prescription is faxed by a prescriber for patient residing in a hospice certified by

One file for err

One file for CIT

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Reference Guide for the Foreign Pharmacy

DESTRUCTION OF CONTROLLED DRUGS

The request to destroy controlled substances should be done on a DEA 41 form.

destroy the drug without a DEA representative .

The drug that needs to be destroyed can be forwarded to a state agency.

A report of theft must be made on a DEA 106 form.

DEA 222 ORDER FORM

This form must be used to order only CI and CII drugs.

First Section of Manan's Theory

First Section of Manan's Theory