Terms of the Game

This glossary contains definitions for key terms you may see throughout the game or in the broader prescription drug pricing conversation.

Brand-name Drug

A drug sold by a drug company under a patented name or trademark.

Brown Bagging

A medication is purchased through a specialty pharmacy and shipped directly to the patient, who takes it to the provider's office for administration.


Occurs when an insurance company assigns expensive copays to a drug, exceeding the total cost of the drug, and the pharmacy benefit manager requires the pharmacy to pay back some, or all, of the overpayment.

Copayment or Copays

The fixed amount an insured patient pays for a covered health care service after the deductible has been paid.

Enrollment Year

The period in which a patient is covered by their health insurance plan; the patient cannot alter their plan during this time.


A list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. Also called a drug list.

Generic Drug

A prescription drug with the same active-ingredient formula as a brand-name drug but is not sold under a patented name. Generic drugs usually cost less than brand-name drugs.

Health Coverage

Legal entitlement to payment or reimbursement for a patient’s health care costs, generally under a contract with a health insurance company, a group health plan offered in connection with employment or a government program, like Medicare or Medicaid.

Health Insurance

A contract that requires your health insurer to pay some or all of your health care costs in exchange for a premium.

Health Insurers

Any entity that contracts to administer or pay for the costs of health care services.


When a doctor, hospital, pharmacy or other provider accepts your health insurance plan.

List Price

The price of a prescription drug set by the drug manufacturer.

Net Price

The price of prescription drugs after rebates, discounts, and other adjustments.


When a doctor, hospital, pharmacy or other provider does not accept your health insurance plan.

Out-of-Pocket Costs

Patient expenses for medical care that aren’t reimbursed by insurance. Out-of-pocket costs can include things like deductibles, coinsurance, and copayments.

Patent Thicketing

A practice referring to portfolios of numerous, overlapping patents on the same pharmaceutical, which allegedly deters competition due to the risk of infringement and the high cost of patent litigation.

Pharmaceutical Companies

Any business licensed to research, develop, manufacture, market or distribute drugs. Also referred to as drug makers and drug manufacturers.

Pharmacy Benefit Managers (PBMs)

The middlemen between drug makers and health insurers that claim to save patients money by negotiating deals to save on drug costs.

Prior Authorization

Approval from a health plan that is required before you get a service or fill a prescription in order for the service or prescription to be covered by your plan.


Payments from drug manufacturers to pharmacy benefit managers in relation to prescription drugs dispensed to health insurance members.

Spread Pricing

Occurs when a pharmacy benefit manager charges health plans more for prescription drugs than they pay the pharmacy. Pharmacy benefit managers pocket the difference or spread in this pricing game. The price paid to pharmacies is often less than the cost for pharmacies to acquire the drugs.

Step Therapy

A cost-control strategy requiring patients to try a lower cost prescription drug that treats a given condition before “stepping up” to a similar, yet more expensive, prescription drug. The health plan won’t cover the more expensive drug until the lower-cost medication has failed to treat the patient’s condition.


Prescription drugs are typically placed in tiers based on type: generic, preferred brand, non-preferred brand and specialty; patients’ financial responsibility varies depending on the tier assigned by the plan.

Vertical Integration

The combination of entities at different levels of the health care supply chain. For example, when a health plan owns a pharmacy benefit manager.

White Bagging

The distribution of patient‐specific medication from a pharmacy, typically a specialty pharmacy, to the physician's office, hospital or clinic for administration.