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When Do I Use a DAW Code?

The importance of DAW codes, how they could be eating into your profits and what you can do about it. 

 Author: Wanda Lund, Product Lead, Net-Rx™

To answer this question, let’s first understand what a Dispense as Written (DAW) code is. A DAW code specifies the prescriber’s instructions to the payer regarding substitution of a generic equivalent or to dispense the specific prescribed medication. If the medication prescribed or a therapeutic equivalent is not available, the pharmacy has the ability to utilize certain DAW codes to communicate to the payer why they are filling the prescription the way they are. DAW codes are an important part of pharmacy billing and the code used in the prescription will factor into how the third party payer responds.

The DAW code affects how the third party payer adjudicates and handles the claim in the following ways: 

  • Reimbursement Rates – Invalid or inappropriate DAW usage may result in generic rate payments of brand name drugs, which may cause losses for the pharmacy
  • Formulary Selection – Drugs not on the payer’s formulary list may result in higher copays for the patient, as well as generic reimbursement on brands
  • Claim Rejections – Missing or invalid DAW code rejects cause extra processing time and rebills in the pharmacy, along with workflow interruptions and delays in the delivery of patients’ medication
  • Audit Triggers – If the pharmacy is audited with insufficient documentation supporting their DAW usage, the third party payer can take money back from the pharmacy at a later date

The Dispense as Written codes are defined below, and include a scenario in which the DAW would be used, as well as the expected third party payer outcomes as seen in the pharmacy: 

DAW CODE (Field 408-D8)     DAW Code DefinitionsPharmacy Use Case/ScenarioExpected Payer Outcomes
00No Product Selection IndicatedA generic equivalent does not existGeneric or Single-Source Brand dispensed; to be paid at contract rate
01Physician DAW - Medically necessaryPrescriber indicates the medication is to be dispensed as it is writtenBrand Drug dispensed – Payer may require prior authorization; patient copay amount may increase
02Patient Requested BrandSubstitution is allowed but the patient requests the brand be dispensedMultiple outcomes possible based on the patient’s plan; rejection, prior authorization required, generic rate payment, increased copay
03Pharmacist Selected BrandSubstitution is allowed but the pharmacist determined the brand should be dispensedIf accepted, pharmacy may be paid at generic rate, patient copay may increase, prior authorization may be required
04Generic Not in Stock (Drug not available at the dispensing pharmacy)Substitution is allowed but the pharmacy dispenses brand because  generic is not currently in their inventoryIf accepted, pharmacy may be paid at generic rate & patient copay may increase
05Brand Dispensed; Priced as GenericSubstitution is allowed but the pharmacist utilized the brand as generic (i.e., pharmacy purchased the brand drug at a low price)If accepted, patient copay may increase. Brands may be priced and paid at generic or MAC rate.
06Used by Other Claim Processors (undefined)Used in very specific instances as instructed and defined by the claims processorNot in general use; used only when instructed by payer (documentation is important)
07Substitution Not Allowed; Brand Mandated by LawUsed when prevailing law prohibits substitution, even if generic is allowed by the prescriber and available in the marketplaceIf accepted, plan is expected to pay as contracted (i.e., Medicaid). If claim is not billed to Medicaid, it may reject, require prior authorization, and/or pharmacy may be paid at generic rate.
08Generic Not Available in MarketplaceSubstitution is allowed, but generic is either unavailable in the market, not distributed or not manufacturedIf appropriate & payer’s market information corresponds, Brands will be paid at brand rate. Inappropriate use may cause audit triggers.*
09Other/Reserved: Substitution Allowed by Prescriber; Plan Requires BrandSubstitution is allowed but the plan requires brandIf accepted, plan is expected to pay as contracted. If DAW is inadvertently submitted, and no longer valid, pharmacy may be paid at generic rate.

*As with any DAW code, inappropriate use may cause audit triggers.

Based on a Net-Rx study of claims billed within a one week date range, 30% of brand claims submitted with DAW 3 (pharmacist selected brand) or DAW 4 (generic not in stock) were NOT paid at a brand rate. And 65% of all brand claims submitted with a DAW 5 (brand dispensed, priced as generic), were paid at a generic rate. Both of these situations often result in a loss or negatively impacts the pharmacy with possible lower reimbursement, audit triggers or both. This is why it is important to submit claims accurately; to get paid for what was dispensed.

DAW article - Brand Claims graphic

There are technology solutions available that work as safeguards to catch potential errors or missed opportunities both before and after adjudication.

A pre edit solution, like Script-IQ™, can alert the pharmacy of current DAW usage, before claims are sent to the payer. This can help improve workflow, lead to fewer transactions which may reduce transaction fees, provide risk avoidance, improve cash flow and optimize reimbursement. Take a look at the below examples:

  • If the claim is submitted with a brand that has an available generic but the DAW code is 0 or blank (no product selection indicated), a pre edit can notify the pharmacy of this so they can either switch to a generic equivalent or use a proper DAW code based on the prescriber’s order.
  • Pharmacist usage of DAW 3 (pharmacist selected brand) rarely results in reimbursement at the contracted rate and should always be verified and well-documented. A pre edit will help identify these so the pharmacy can review and adjust the claim before adjudicating to the payer.
  • Often times DAW 4 (generic not in stock) results in a generic rate payment. An alert to the usage of this code will allow the pharmacy to review their inventory and determine if they have the option of switching to the generic or if they are able to order the brand and utilize a more appropriate DAW code to ensure maximum reimbursement.
  • A pharmacy’s usage of DAW 5 (brand dispensed, priced as generic) may price a brand drug as a generic and result in under-reimbursement. Messaging from a pre edit will warn the pharmacy to determine if changes are necessary to ensure optimized reimbursement and avoid audit triggers.

A post edit solution, like EditRx, will identify whether DAW code usage has led to under-reimbursement by payers. It will also show generic rate payments on brand name drugs, identify substitution opportunities, and overall DAW utilization by the pharmacy to improve future outcomes.

DAW article - table graphic

Here are just some of the ways a post edit solution can highlight opportunities:

  • To avoid potential audit triggers, post edits can identify DAW codes used on prescriptions that do not require or should not include a DAW, such as generics, single source brands or OTC medications. A post edit report can identify these claims enabling the pharmacy to make adjustments as necessary and inform staff of proper DAW usage on future claims.
  • Outdated usage of DAW 7 (substitution not allowed), DAW 8 (generic not available in marketplace) or DAW 9 (substitution allowed by prescriber, plan requires brand) can result in low reimbursement or losses. Plans update their formularies, new generics enter the market and patients switch from Medicaid to private insurance, which can render previously submitted DAW codes invalid. Post edits can identify reimbursement changes on these claims so the pharmacy is able to switch to the generic or the new preferred medication and remove the now invalid DAW code to avoid generic rate payments on brand name drugs.
  • Post edit solutions can allow the pharmacy to see generic substitution opportunities that may have been missed during the billing process. The pharmacy may want to review the payer messaging on claims submitted with DAW 2 (patient requested brand) to determine if/when the prior authorization is set to expire. With this information, the pharmacy can proactively reach out to the doctor to extend the prior authorization or discuss with their patient the benefits of switching to generic (i.e., lower copay).
  • Claims submitted with DAW codes often require supporting documentation from the payer, explaining why specific the DAW code was used. To prepare for retrospective payer reviews, the pharmacy can identify all DAW claims with post edit reporting. This is helpful in assessing internal records to ensure the proper documentation is in order should a payer audit arise.

DAW code usage affects many parts of a claim. If not used appropriately, dispense as written codes can eat into your profits, lead to possible audit triggers, affect reimbursement and disrupt workflow. Applying technology like pre edit and post edit solutions can help the pharmacy identify code usage before and after claim adjudication. These solutions go hand in hand, allowing the pharmacy to confirm whether the codes being submitted are valid, if the claim requires modification or if the drug dispensed needs to be switched to a therapeutic or generic equivalent alternative. Together, these solutions can help ensure your pharmacy is using DAW codes appropriately for optimized reimbursement, reduced rejections and audit triggers.

If you would like to learn more about the pre and post edit solutions offered by Net-Rx™, please contact us.

Net-Rx Brand Claims Study, December 2020, M. Peterkin



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