By: Kay Morgan, Senior Vice President of Drug Products and Industry Standards Research and Compliance
Prescription drug spending in the U.S. increased to $307 billion dollars in 2010.1 Although drug costs account for roughly 10 percent of U.S. healthcare spending, ranking behind hospital stays and professional services, it is shockingly high when compared to drug spending in other developed nations. The U.S. accounts for only 4.5 percent of the world’s population, but fully 42 percent of annual worldwide prescription drug expenditures. By 2019, HHS predicts that U.S. drug spend will increase to $457.8 billion. Approximately 50 percent of the total bill is paid for by private health insurance plans.2
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Published in Chain Drug Review by authors: George Kitchens and Elsevier’s Gold Standard President, Marianne Messer
The need for a new drug price benchmark has been a key concern for pharmacy industry leaders since First Databank announced that it would remove the Average Wholesale Price (AWP) from its database back in 2010. Industry leaders from across the drug supply chain agree with the benchmark criteria for a new standard price drug type outlined in the September 2010 issue of the Journal of Managed Care Pharmacy (September 2010). According to the article, the price benchmark designed to replace average wholesale prices (AWP) must fulfill these standards:
- Transparency: The benchmark must bear a genuine relationship to the actual acquisition cost of the drug. In addition to this “relevance” definition, transparency also refers to being “understandable.”
- Accessibility: The benchmark must be readily accessible to and adoptable by the pharmacy industry.
- Comprehensiveness: The benchmark must be available for all branded and generic drug groups. Initial files from the Center for Medicare & Medicaid Services (CMS) included Average Manufacturer Price (AMP) for only a portion of drug groups with no clear timeline for the addition of other drug groups.
- Timeliness: The benchmark must be updated with a frequency appropriate to quickly changing actual acquisition costs– especially for generic products.
- Manipulation: The benchmark is immune to manipulation.
Other important criteria include administrative simplicity, durability, stability, auditability, freedom from anti-competitiveness and acknowledgement of distribution complexity.
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