Best Practices for DAW Billing in Pharmacies

In what should be a fairly straightforward process, proper DAW billing practices can be convoluted. Despite NCPDP guidance to standardize adjudication practices, PBMs do not always adopted these standards, leaving the pharmacy in a gray area of what proper DAW billing should look like.

Due to the variability between each PBM’s (and even individual Plan Sponsor) expectations for DAW billing, pharmacies need to have a multi-pronged approach that includes understanding biologic terminology (PAAS Audit Assistance members can see this month’s article, Insulin Substitution Review: Understanding Purple Book Terminology), a list of core “DAW billing guidelines” to follow, and additional considerations to guide your pharmacy in the scenarios where billing may not be straightforward.

Every claim adjudication comes with its own unique set of circumstances, making it difficult to establish a process that can be applied universally. Furthermore, audit tactics continue to morph and industry dynamics, such as the 2024 elimination of retroactive DIR fees, make the pharmacy’s reimbursement more transparent at point-of-sale, potentially driving DAW considerations. As such, having a grasp on the suggested DAW best practices is necessary.

PAAS Tip 1:

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When using a DAW, be sure to have supporting documentation

Pharmacies must ensure documentation exists on the hardcopy anytime they are billing a DAW (other than DAW 0). If the PBM audits a claim with a particular DAW, documentation on the hardcopy needs to support the DAW billed or the pharmacy will risk potential recoupment. Passive DAW 1 indicators on electronic scripts (e.g., a simple DAW checkbox) have been known to be challenged by PBMs, requiring further documentation. Additionally, pharmacies need to be mindful of their state laws and Medicaid requirements on DAW 1. Some state Medicaid programs require an explicit handwritten or electronic note stating “Brand Medically Necessary” in order for a DAW 1 to be billed appropriately.

PAAS Tip 2: Where applicable, bill the generic/interchangeable biosimilar of the medication utilizing a DAW 0 first, unless the prescriber or patient has indicated a preference for the product dispensed (DAW 1, DAW 2, respectively). Make note of any rejected messages received and follow adjudication logic.

Let’s walk through an example of billing a Lantus® prescription, including the suggested corresponding DAW, for a patient who has never been on this medication before. Claim adjudication would typically begin with Semglee®, an interchangeable biosimilar product to Lantus®, utilizing a DAW 0, similar to choosing an A or AB-rated generic medication to bill first in place of a brand medication.

In instances where there is only an unbranded biologic or an authorized generic on the market, such as the case with Humalog®, pharmacies can attempt to bill the unbranded biologic (insulin lispro) first. Recall that an authorized generic or unbranded biologic is considered the same product as the brand name/reference product since they have the same NDA/BLA number, per the Orange Book and #11 in the Purple Book FAQ Resource. Therefore, both the reference product (Humalog®) and the unbranded biologic (insulin lispo) can be billed as a DAW 0.

Subsequent steps should be guided by the reject message received. For example, if a patient’s plan requires a different reference product be dispensed, such as Basaglar®, the prescriber must be contacted to approve as this is not considered to be a product that can be freely substituted. In addition, documentation of the conversation should be included in a clinical note that includes the date, title, and name of the person spoke with, a recap of the conversation, and pharmacy staff initials.

If the claim for Semglee® returns the reject message “Lantus required by plan”, Lantus® should be billed with a DAW 9 – plan requires brand – along with a notation on the hardcopy. Should the plan require an unbranded biologic equivalent (e.g., insulin glargine-yfgn), PAAS would recommend billing that as a DAW 0.

Unfortunately, adjudication rejections are not always explanatory – not surprising with opaque PBMs, but frustrating for pharmacies and technicians. Their lack of communication can be intentional, leading to underpaid claims or forcing pharmacies to play a guessing game of how to bill the claim correctly based on formularies. If there are predominate plans/payors in your market, having access to their formulary may help save you team a lot of headaches.

PAAS Tip 3: Do not use DAW 9 unless adjudication logic or plan formulary explicitly shows the plan requires brand.

This is a newer piece of guidance. In the absence of an adjudication reject that states, “Drug X not on Formulary, bill Drug Y as DAW 9” (or something analogous), PBMs have questioned why a DAW 9 was used when in fact the plan formulary does not show the drug product billed is plan-preferred. The better question is why didn’t the PBM reject the claim if it wasn’t not covered? Protect yourself by being able to substantiate why the pharmacy is billing a brand or reference product as DAW 9 (as stated in PAAS Tip #1). Looking at the plan’s formulary may help guide your decision on whether a DAW 9 is appropriate or not. Express Scripts and Humana put out communications that list products they expect to be billed as DAW 9, but be mindful that some Plans may not accept DAW 9 on any claims and formularies can change at any time. Technicians need to watch adjudication messaging closely – even for paid claims. If a PBM rejects a DAW 9 stating the Plan Benefit design doesn’t allow the use, a DAW 0 may be the pharmacy’s only choice.

PAAS Tip 4: In instances where adjudication rejections are unclear, take an all-encompassing approach to determine what medication and DAW to bill.

One of the more common DAW questions we get at PAAS encompasses the situation where both the brand and generic (or reference product and interchangeable biosimilar), result in a paid claim with DAW 0, one with a positive margin and the other in a negative margin. What options does the pharmacy have without increasing their risk of recoupment?

One consideration is cost of the product to the patient. State laws commonly have language obligating the pharmacy to dispense the most cost-effective medication to the patient. Therefore, the copay of the brand vs. generic needs to be taken into consideration when determining if the pharmacy can bill for the product that results in a positive margin. In cases where the copays are the same and the patient truly prefers the brand, billing DAW 2 may be appropriate in that scenario (and consider researching the Plan Formulary for a DAW 9 indication). If the copays are not the same, review the adjudication messaging results for any clues and consult the plan’s formulary. PBMs have been known to prefer a Brand and, instead of rejecting the generic, significantly underpaying on the generic. With so many claims underwater, it’s hard to know the difference, so diligence may be prudent. In instances where a product’s unbranded biologic/authorized generic results in a lower cost to the patient, a DAW 0 can be used. Ultimately, determining which product to bill should not be based solely on pharmacy reimbursement.

PAAS Tip 5: Watch claim adjudication messaging carefully – even on paid claims. Rechallenge DAW 9 when new prescriptions are issued and be careful at the beginning of Plan years (particularly the New Year).  

Pharmacies can fall into the habit of billing a DAW 9 solely based on history. Plan formularies change often and sporadically with new medications being introduced to the market, and products having generic/interchangeable biologics available that previously were not. Therefore, ensuring the DAW historically used is still warranted is a great preventative step.

PAAS Tips:

Meredith Thiede, PharmD
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