title: What is the price benchmark to replace average wholesale price (AWP)?
abstract: An article on the front page of the Wall Street Journal on October 6, 2006, thrust into the public media the otherwise esoteric controversy concerning the use of average wholesale price (AWP) as the primary basis for reimbursements to pharmacies for pharmaceuticals in the United States. Although used widely for nearly 40 years, AWP had been criticized prior to this investigative report as unreliable, subject to manipulation, and not representative of the actual purchase price for pharmaceuticals. The Wall Street Journal article, based on a tentative settlement of litigation in which First DataBank (San Francisco, CA) and the McKesson Corporation (San Francisco, CA) were accused of unilaterally increasing AWPs, included the findings that (a) at least since 2003, AWP was not based on calculation of an "average" wholesale price but instead reflected the pricing of McKesson Corporation, a single drug wholesaler; and (b) AWP had undergone a systematic change beginning in 2001 when First DataBank had converted its markups of wholesale acquisition cost (WAC) to a common multiplier of 1.25,1 effectively increasing the AWP by 4% for AWPs that were previously calculated using a multiplier of 1.20. In March 2009, the future of AWP became uncertain as a result of circumstances surrounding the court settlement of the litigation that had begun in 2005 against First DataBank. On March 17, 2009, U.S. District Court Judge Patti B. Saris approved the proposed settlement of 2 civil action lawsuits filed by private health plan payers of pharmaceuticals against the 2 largest publishers of AWP, First DataBank (along with wholesaler McKesson) and Medi-Span (Indianapolis, IN, subsidiary of Wolters Kluwer Health). On March 30, 2009, Judge Saris signed a final order and judgment certifying the class (of "Private Payor" purchasers) which settled 2 national class action lawsuits against the 2 largest publishers of AWP. As part of the formal settlement, Medi-Span and First DataBank agreed to adjust the markup factor used to calculate AWP downward to 1.20 times WAC "for any prescription pharmaceutical" that had "a mark up factor basis from WAC to AWP in excess of 1.20" for the 1,442 specific national drug code (NDC) numbers that were listed in the court complaint. The "rollback" of AWP as a result of reducing the WAC/DP (direct price) multiplier to no more than 1.20 was implemented by First DataBank and Medi-Span on September 26, 2009, 180 days from the date of the judgment, as ordered. At the same time, these AWP publishers voluntarily implemented price modifications to all products that had a WAC markup greater than 1.20. This decision expanded the list of NDC numbers from the 1,442 specified in the lawsuit to well over 50,000 items. The expanded list included both prescription and nonprescription (over-the-counter [OTC]) items, both active and inactive NDC numbers on the drug database, as well as a variety of markup factors. The adjusted AWPs had markup factors that ranged from 1.20 to 1.33. About two-thirds to three-fourths of the NDC numbers with adjusted AWPs had a pre-settlement WAC markup of 1.25. This U.S. District Court decision on March 30, 2009, was also accompanied by separate announcements from the defendants Medi-Span and First DataBank that they would voluntarily discontinue publication of AWP.
authors: Academy of Managed Care Pharmacy, 100 North Pitt Street, Alexandria, VA 22314, USA. fcurtiss@amcp.org
authors: Frederic R
authors: FR
authors: Curtiss
authors: Phillip
authors: P
authors: Lettrich
authors: Kathleen A
authors: KA
authors: Fairman
mesh_terms: D019985:Benchmarking; D016527:Drug Costs; D006801:Humans; D007356:Insurance, Pharmaceutical Services / Q000191:economics*; D004364:Pharmaceutical Preparations / Q000191:economics; D012051:Reimbursement Mechanisms; D014481:United States
chemical_list: D004364:Pharmaceutical Preparations