Transcript Beyond AWP…

Beyond Average
Wholesale Price….
Sapna N. Patel
UCSF Pharm. D. Candidate 2008
Preceptor Dr. Craig S. Stern
March 13, 2008
Relevance to Pro Pharma
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Average Wholesale Price (AWP) originally considered
payment benchmark
Pending lawsuit settlement may cause AWP
discontinuation
Alternatives to AWP create differences in contracts
between Pharmacy Benefit Managers (PBMs) and clients
Clients may have increased drug product expenditures as
payment benchmarks change
Pro Pharma consultants must take an active role in
learning alternative pricing strategies and how they are
used to help save clients from increased costs
Contracts with PBMs
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Clients make prescription coverage contracts with
PBMs
Unclear contract definitions of pricing terms and lack
of disclosure increase costs for the client
PBMs obtain much higher discounts for drug
purchases that do not translate to client plans (ex:
higher AWP markdowns)
Contracts need to be clarified to achieve savings
with new price benchmarks
Average Wholesale Price (AWP)
 AWP
does not represent the true
cost of the product to purchasers so
several new drug payment
benchmarks as alternative options
more representative of true costs
 AWP= WAC + 20%
Alternatives to AWP
Wholesale Acquisition Cost (WAC)
 Average Manufacturer Price (AMP)
 Average Sales Price (ASP)
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WAC
“list price”, “wholesale net price”, “book
price”
 Cost that wholesalers pay
manufacturers for drug products
 Serves as basis for price negotiation
between manufacturers and private
payers (discounts and rebates are
subtracted from WAC) for both medical
and pharmacy benefit products
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Calculating WAC
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Price varies by manufacturer
Each manufacturer has their own formula (not
readily accessible) to determine the price
First DataBank, Medispan, and Red Book
report WAC prices based on information
supplied by manufacturer
AWP = WAC + 20%
WAC
Pros:
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Publicly available
Published on daily
basis
Payment benchmark
Cons:
 Not available on all drug products
 Varies by manufacturer
 Non-inclusive of negotiated
discounts and rebates between
manufacturer and private payers
Does not apply to generic drugs
under Medicaid
AMP
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Average price paid by retail pharmacies or
drug wholesalers to manufacturers for drug
products distributed to retail pharmacies
Made by CMS for determining Medicaid
rebates
Replaced AWP for calculating the Federal
Upper Limit (FUL)-currently set as 250% of
drug’s AMP
Calculating AMP
Computed every quarter by
individual drug manufacturers
 Total retail sales dollar value per
each drug type and strength/ #
units sold
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AMP
Pros
 Publicly available
 Reported monthly
 Initiation as benchmark
in Medicaid generic
reimbursement
Cons
 Lag time to publication
 Can be below the
acquisition cost of
independent pharmacies
 Variable, based on
individual manufacturer’s
sales data
 Brand-name Medicaid drug
products still use AWP
ASP
Close match to the manufacturer
reported actual sale price
 Includes discounts based on volume,
rebates and other price reductions
 Replaced AWP as a payment method
for drugs under Medicare’s medical
benefit
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Calculating ASP
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ASP is the weighted average of all
nonfederal sales to wholesalers
Net price= Drug Cost- Discounts, rebates,
and other benefits tied to the purchase of
the drug product, whether paid to the
wholesaler or retailer
Physician Office Drugs/Medicare Part B:
ASP+6%
ASP
Pros
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Publicly available
Reimbursement
incentives for
preferred, lower-cost
products
Reduces drug
payments for
Medicare versus
AWP
Larger groups pay
lower prices
Cons
 6-12
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month lag time from sale
to publication
Volume based discountsdisadvantage to small buyers
Preference for highest cost
drug products
Medicare Reimbursement
(ASP+6%) creates difficulty in
retrieving acquisition costs of
infrequently used drugs
Summary
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Alternatives to AWP will create differences in
contracts between PBMs and clients
Clients need to be concerned about contracts as
these payment shifts occur to prevent increasing
costs
Pro Pharma consultants must also be aware
contracts in regards to use of alternative pricing
options and their applications in an effort to save
clients from unnecessary drug product costs
References
1.http://www.amcp.org/amcp.ark?p=1529B561 AMCP Guide
to Pharmaceutical Payment Methods
2.http://www.amcp.org/amcp.ark?c=amcp_search&sc=index
&v=a/glossary of managed care terms. March 4, 2008.
3.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.
4. Borden,D,Breimhorst M, Change in AWP Pricing
Methodology-Class Action Settlement. Pharmaceutical
Strategies Group.
5. http://www.wdstudio.ca/demos/pbc/wpcontent/uploads/2007/10/contracts-article-for-website-th92707.doc