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OK, here's a drug price cheat sheet. AWP (average wholesale price) = "ideal" list price, excluding discounts WAC (wholesaler acquisition cost) = supposedly re
by mirimir 8y ago
OK, here's a drug price cheat sheet.
AWP (average wholesale price) = "ideal" list price, excluding discounts
WAC (wholesaler acquisition cost) = supposedly realistic wholesale price, excluding some discounts
ASP (average sale price) = supposedly realistic market price, including all but the best hidden discounts
Generally, AWP>WAC>ASP. And real bottom-line prices may be below ASP. Because of bundling and other well-hidden discounts.
I think that Medicare and Medicaid now use ASP. Medicare used to use AWP. For Medicaid, some states used AWP, and some WAC. Both were getting screwed by AWP-ASP and/or AWP-WAC spread, and they sued the drug industry over it.
The problem here is that PBMs are still allowed to bill at AWP or WAC.
- refurb 8y agoA slightly different viewpoint: AWP = an antiquated number currently defined as WAC+20% (it has been as high as WAC+25%, but court decisions changed that). It was the "list price" that distributors used when selling to pharmacies and was created to give them a 20% margin back when there were thousands of wholesalers and costs were higher. WAC = this is the public list price the drug companies set. Most wholesalers get at least 1-2% off this price (prompt pay discounts, etc), but many drugs are discounted much more (up to 90% off). AWP was the standard for reimbursement (payments to a pharmacy when they fill an Rx). Then Medicare realized they were paying AWP, when the real cost for the pharmacy was AWP-80% for some drugs so they created ASP for physician administered drugs (not pills that pharmacies dispense). ASP = an average of the actual price paid by pharmacies for drugs, excluding some special discounts mandated by the gov't like 340B or the Federal Supply Schedule discounts. Medicare uses ASP for all physician administered drugs (Part B) as do many private insurers. For pharmacy dispenses drugs, it's all over the place and can be AWP-X%, WAC-X% or something else. Medicaid is moving to actual acquisition cost (AAC) where the pharmacy needs to share with Medicaid what they paid and they are reimbursed that plus a dispensing fee.
- mirimir 8y agoThanks. As I recall, AWP for some generics was way more that 100 times actual prices paid by pharmacies. And even WAC for some was on the order of 100 times actual prices paid by pharmacies. Generic manufacturers were actually competing on spreads for AWP and WAC vs actual prices. Because, when there are several manufacturers, actual generic prices approach marginal cost of production. I had no clue that Medicare was still using AWP and WAC for pharmacy-dispensed drugs. That's too stupid for words. But it seems that Medicaid has figured it out.
- refurb 8y agoIt's complicated, but quite fascinating to see how we got to where we are today. You are correct that some drugs were being discounted 95%+ below AWP and the entire spread was being pocketed by pharmacies. For a very fascinating story, google Ven-a-Care Pharmacy.[1] Their entire business model turned in suing drug manufacturers on behalf of the gov't under the False Claims Act. Since they were a pharmacy, they had visibility into both the prices that drug manufacturers charged and the reimbursement the gov't paid. I believe most of their cases were related to the drug manufacturers not correctly reporting their prices to the gov't, thus causes Medicaid and Medicare to overpay. Last I heard they had collected over $300M in whistleblower settlements. [1]http://www.abajournal.com/news/article/repeat_whistleblowers_reap_millions_of_dollars_in_false_claims_suits/ http://www.abajournal.com/news/article/repeat_whistleblowers...
- mirimir 8y agoWow. What I know comes from a "you won't believe this!" conversation in some hotel bar at a conference, some years ago.