| About Elsevier / Gold Standard | About Elsevier CDS | Resource Center |
| Vol 1 - Issue 1 | November 2011 |
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AWP and the Future of Drug Price Benchmarks
The Average Wholesale Price (AWP) has long been the drug price benchmark for establishing reimbursement payment terms between payers, PBM’s, and pharmacies. Created in 1969 by George Pennebaker to address the need for a reference price to adjudicate California Medicaid drug claims, AWP became the standard nationwide as the shift from paper to real-time drug reimbursement claims required the use of common pricing fields. However, as early as the 1980’s, industry pundits referred to AWP as “ain’t what’s paid” because of the common and significant gap between AWP and the actual acquisition cost of a drug. Derivation of AWP AWP, as published in the major drug compendia, comes from three potential sources:
With the exception of the Gold Standard Drug Database, which has always distinguished between reported and calculated figures, AWP was commonly published as a single price type, regardless of how it was derived. Criticism and Withdrawal of AWP Critics have long charged that AWP is not an average at all and is subject to manipulation and artificial interpretation. The pricing benchmark was implicated in a Medicare Part B fraud investigation for being at least partly to blame for the fact that Medicare was consistently billed more than drugs actually cost. In 2005, a lawsuit was filed by the Prescription Access Litigation (PAL) project, which alleged a conspiracy to arbitrarily increase AWP. As a result of that lawsuit, First Databank (FDB), the original publisher of the AWP price type, chose to exclude AWP from its drug price data. Due to the allegations about AWP and FDB’s withdrawal of it, interest in a finding a new standard drug price type for reimbursement and claims adjudication grew and has become more urgent. Alternatives to AWP AWP is by no means the only price type available. Listed here, with brief descriptions, are others that are available but have not been commonly used for reimbursement purposes: Actual Acquisition Cost (AAC) – Final price paid by the pharmacy after subtraction of all discounts New Price Benchmark Industry leaders and interested parties have engaged in an active dialogue about establishing a new drug price benchmark, largely agreeing that the criteria suggested by the Journal of Managed Care Pharmacy (September 2010) captures the characteristics needed. The benchmark criteria for a new standard price type are:
A brand new price type, the National Average Drug Acquisition Cost (NADAC), which is based on voluntary surveys of pharmacy invoices, has been proposed as the new standard. However, it is not yet widely available and it does not meet all of the essential criteria for a satisfactory national standard. The following table shows the currently available alternatives to AWP and how they measure against a consolidated version of the desired criteria:
Unfortunately, neither the eight existing alternatives nor the new NADAC meet the desired criteria. So, for the time being, AWP is still used as the industry standard. Although Elsevier/Gold Standard is committed to supplying AWP for as long as our customers require it, we also believe that the scrutiny it has received over recent years has brought to light not only AWP’s flaws, but those of other price types. A new standard that more closely meets criteria to satisfy all facets of the industry should, and likely will, be found. This article will be posted on our blog and we invite you to comment on the current and future state of AWP and other price types.
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