How the 9/26/09 AWP Calculation Change Affects Pharmacy Profit

Click on chart to enlarge picture

As you can see from the chart above a pharmacy submitting a claim for a drug with a $1000 AWP before the 9/26/09 AWP calculation change (WAC x 1.25) would make a $30 profit above WAC. If their contract discount does not change, after the conversion to the WAC x 1.20 calculation, they would lose $3.33 (below WAC). In order to keep the pharmacy profit approximately the same the discount off of AWP would have to change to about 13.568%.

This primarily affects Brand Name drugs since most generics are priced at lesser of MAC, U/C, or advertised discounts. The pharmacy would be affected on a generic drug that was not priced at “lesser of” but the profit structures on generics are vastly different than brands. Actual costs or WACs of generics are much, much less than the chart above indicates. Pharmacies were allowed to gain a profit advantage on generics in order to initiate, promote and reward switching.


Developed by Barry Pascal, PharmD, Pro Pharma Pharmacist