AWP is not Going Away

Wednesday, May 25, 2011 | 0

By Joe Paduda
CompPharma and Health Strategy Associates

Average Wholesale Price the much-declaimed pharmaceutical pricing metric is not going away anytime soon.

Certainly not this fall, and very likely not next fall either.

AWP is published by several firms, including Wolters Kluwer. WK's version, branded Medi-Span, was supposed to be sun-setted later this year, a result of a legal settlement. That is not going to happen, for the simple reason that buyers, sellers, pharmacies, pharmacy benefit managers, payers, Medicaid agencies and pharma can't find a suitable alternative.

As WK stated, "Wolters Kluwer Health intends to publish AWP (or a similarly determined benchmark price) until relevant industry or governmental organizations develop a viable, generally accepted alternative price benchmark to replace AWP."

While stakeholders did agree on using WAC (wholesale acquisition cost) as a potential substitute, WAC is suitable primarily for brand drugs, as it does not apply to multi-source (generic) drugs. It also suffers from some of the same problems as AWP WAC is the "list price" and doesn't reflect rebates, discounts, allowances, or other price concessions. That means, it really isn't the actual price here's how one knowledgeable group put it:

"Wholesale Acquisition Cost" prices are currently available for many, but not all drugs. WAC may be susceptible to the same concerns that rendered AWP ineffective: it is a manufacturer-reported value not readily amenable to audit, and there is no reason for confidence that it could not ultimately be inflated well beyond any actual market price. Particularly since it has been defined in federal law as an "undiscounted list price" WAC would require continuous adjustments (markups or markdowns) by states based on acquisition cost surveys."

There are also other AWP publishers which are not affected by the legal settlement. Gold Standard, First DataBank, and Thomson Reuters have not revealed any plans to stop publishing.

What does this mean for you?

AWP is here for the foreseeable future; it's pretty flawed, but it's better than any of the alternatives out there today.

Joe Paduda is co-owner of CompPharma, a consortium of pharmacy benefit managers, and owner of Health Strategy Associates, a Connecticut-based employer consulting firm. This column was reprinted with his permission from his Managed Care Matters blog, at http://joepaduda.com