August 18, 2019

White pills

 

A few weeks ago, I released the 2nd episode of ‘Wee Dose of Radical Transparency’. It covers something my ApexRx colleagues & I see far too often with pharmacy benefits contracts.

I’m talking about AWP, or Average Wholesale Price. Most recognize AWP as the most widely used pricing index for pharmacy benefits contracts.

I’m here to tell you that AWP is neither average or based on actual wholesale prices. AWP is not based on actual transactional, marketplace price data. It is not derived from actual prices paid for drug products in transactions between wholesalers and their customers. And, it does not reflect any discounts, rebates, or other price reductions that wholesalers may offer to their customers in connection with those transactions.

A wholesaler or other direct purchaser from a pharmaceutical manufacturer may agree to sell its products to one or more of its customers at a price that is effectively different than the published AWP.

So, in short, negotiating prescription drug costs based primarily upon discounts based off of list price like AWP is fruitless. Why? Because it reflects only a “made up” or “fictional” list price and not actual acquisition cost.

Don’t get me wrong, list price indexes are important. If used as a basis for negotiation alone – You will come up short every time. Discount guarantees off of a list price such as AWP can lead to excessive overpayments.

Worse yet – Most plan sponsors are not aware of this.

Have I peaked your interest yet? Are you interested in seeing how defining your own pricing benchmark could drop costs out of your pharmacy benefits contract?

If you’re interested in this concept of transparency and want to learn more, we offer a PBM contract health assessment through our ApexRx program.

Just reach out to me at slong@apexbg.com or find me at https://apexbg.com/team-member/scott-long/.

Scott Long

Authored By

Scott Long, CPBS, CHVP, CSFS

Executive Advisor

 

Meet Scott