Transcript AWP - Pro Pharma Pharmaceutical Consultants, Inc

Average Wholesale Price (AWP)
Sapna N. Patel
UCSF Pharm. D. Candidate 2008
Preceptor Dr. Craig S. Stern
March 7, 2008
Relevance to Pro Pharma
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Pro Pharma consultants use AWP on a daily basis
Pro Pharma clients seek more efficient drug spending
One of the major goals at Pro Pharma is to decrease
unnecessary expenditures for the client
Pro Pharma clients use Pharmacy Benefit Managers
(PBMs), such as Express Scripts, to process prescription
claims
PBMs use the AWP from Medispan, Red Book, First Data
Bank to price drug products
Inflated AWP translates directly to increased costs for
clients
Periodic audits are made to ensure that the PBM listed
AWP is similar to Pro Pharma’s updated AWP on file
Typical Distribution Chain
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Manufacturers provide drug products to
wholesalers, direct purchasers (hospitals/HMOs),
federal facilities, Medicaid program, PBMs
Wholesalers provide drug products to pharmacies
Pharmacies provide products to both PBMs and
Medicaid
Lastly pharmacies provide drug products to cashpaying customers
What is AWP?
Amount paid by the pharmacy to the wholesaler
 Price dependant on drug strength, dosage form,
package size, and manufacturer
 Originally considered the drug payment
benchmark
 “Sticker Price” it rarely represents actual price of
drug after discounts used
 Reflects an elevated number compared to
Wholesale Acquisition Cost (WAC)
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AWP Listings
AWP can be found in 3 major data sources:
 First Data Bank
 MediSpan
 RedBook
How is AWP Determined?
AWP pricing is based on information received
from manufacturers, distributors and other
suppliers
 No requirement that AWP should display the
price of any actual sale of drugs by a
manufacturer
 AWP is NOT defined by current laws or
regulations
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How is AWP used?
 Medicaid:
use AWP to determine payment
reimbursements to retail pharmacies for
supplying drug products to Medicaid
patients
 Medicare: use AWP to determine the cost
of drug products given in a physician’s
office
How is AWP used (cont)?
PBMs, insurance carriers, and other
managed care organizations (MCOs): use
AWP to calculate payments to retail pharmacies
for supplying drug products to patients
 Pharmacies: use AWP as a cost basis for
pricing prescriptions to patients, the Usual and
Customary Price
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Current Issues
Recent ongoing debates regarding the most
appropriate way to calculate how payers, such
as government, employers, and health plans,
should reimburse pharmacists and other
providers for drugs
 Payment for drugs has been based on
benchmark prices, such as the AWP, do not
accurately reflect the actual acquisition costs
paid for by providers such as pharmacists,
physicians and hospitals
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Current Issues (cont)
 Many
now believe that federal-based
programs such as Medicare and
Medicaid have paid more than is
necessary for prescription drugs
 Excess spending on federally funded
programs creates unnecessary burden
on taxpayers
Current Issues (cont)
Ongoing Lawsuit against First Data Bank:
 Plantiffs include unions and employers
 Accuses First Data Bank of increasing AWP from 20%
to 25% based on information received from drug
manufacturer McKesson
 Estimated billions of dollars lost as a result inflated
AWP rates
 May shift to permanent discontinuation of AWP usage
as price benchmark
 First Data Bank does not admit any fault and has not
agreed to pay any damages
Summary
AWP is historically considered a pricing
benchmark
 Pro Pharma consultants use AWP daily
 A major aim for Pro Pharma consultants is to
help control costs for the clients to create a
more efficient drug spending
 Inflated AWP means increased costs to clients
 Periodic audits are made to ensure that the
PBM listed AWP is similar to this updated AWP
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References
1.http://www.amcp.org/amcp.ark?c=amcp_search&sc=index&v=a/
glossary of managed care terms. March 4, 2008.
2.http://www.amcp.org/amcp.ark?c=amcp_search&sc=index&v=a/
A Guide to Understanding Common Prescription Drug Pricing
Terms. March 4, 2008.
3.http://www.medicalnewstoday.com/articles/53634.php. March 5,
2008
4.Borden,D,Breimhorst M, Change in AWP Pricing MethodologyClass Action Settlement. Pharmaceutical Strategies Group.
5. http://www.amcp.org/amcp.ark?p=1529B56 AMCP guide to
Pharmaceutical Payment Methods Executive Summary. March
5, 2008.