Below is an article we published in March, 2010 and a response it solicited from one of our subscribers (published with his permission). We welcome feed back on all of our publications!
AWP CHANGES
On September 26th 2009, the Average Wholesale Price (AWP) for over 95% of brand medications changed. "The New England Carpenters vs. McKesson & First Data Bank" ruling required that effective September 26th 2009, the Average Wholesale Price (AWP) of 1442 specific National Drug Codes (NDC), be reduced from a Wholesale Acquisition Cost (WAC) mark up of 1.25% to 1.20%.
First DataBank & Medi-Span also announced a voluntary roll back of all brand medications that had an AWP markup greater than 1.20%. This voluntary AWP adjustment from First DataBank increased the effected number of NDCs to over 20,000.
Finally, AWP is expected to be replaced by WAC in 2011.
COMMENT: AWP is the basis for PBM payments to pharmacies. Consider changing contracts to WAC now to prepare for 2011. Payers and purchasers are not receiving compensation for the inflated AWPs that they have been paying on for years. Pharmacies, PBMs, Health Plans, etc., don’t want to be disadvantaged so they requested the previous prices be based on AWP = WACx1.25. If you wish to pay a more cost-based price, then consider contracts based on a cost of WACx1.2.
From: John Cronin
Sent: Thursday, March 11, 2010
To: Dr.Craig Stern
Subject: RE: Pharmacy Benefit News #127
Craig:
Couldn’t help but notice the comment in this newsletter that “Payers and purchasers are not receiving compensation for the inflated AWPs that they have been paying on for years.” As you are aware, PBM contracts with pharmacies were quickly adjusted over the years to compensate for the “inflated AWPs” with reimbursements falling from AWP -12% to AWP -17% on average. When the First Data Bank case was settled, many, but not all, PBMs re-adjusted their reimbursement rates to keep pharmacies whole – something that was necessary in order to maintain the pharmacy networks. The major payer who did not make that change in California is the Medi-Cal program, which has had two federal lawsuits challenging their (in)action.
Despite what the federal judge in Mass. has to say on the matter, the reality is that most PBMs were not paying pharmacies based on “inflated AWPs”; how the PBMs dealt with payers is a matter you know better than I. I’m not sure this distinction is clear from your comment and hope you’ll clarify it in a future newsletter.
Thanks
John A. Cronin, Pharm.D., J.D.
Wednesday, March 17, 2010
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