This is more of a question than anything else.
AWP (average wholesale price) as a pricing mechanism for drugs will eventually go away (due to a court order). There is an intense, if not very objective or helpful, debate re what should replace AWP.
In a conversation this morning with Jim Andrews of Cypress Care, he provided more insights into the options on the table (MAC, WAC, etc) and opined that getting rid of AWP may sound good, but the real question is, “so…then what?”
The Feds will cut reimbursement for Medicare/Medicaid, likely to the same rates the VA pays, or instead require a substantial rebate (15% – 20%) on all purchases. That’s going to happen, as Obama et al need to create savings to fund the expansion of coverage (which will cost about $1.2 trillion).
Pharma and the various intermediaries between manufacturers and patients (wholesalers, PBMs, retail stores, distributors) will have to figure out how to make up for the lost margin/revenue and/or get more efficient to reduce costs. But no matter how efficient they get, we are still looking at reduced profits for manufacturers, which they will look to make up by increasing prices to non-governmental entities. (admittedly that’s conjecture, but pretty educated conjecture)
Which brings us back to pricing. When AWP goes away, the issues inherent in pricing based on some ‘standard’ will not. However, the standard that is selected may result in more, or perhaps less, confusion than that already existing with AWP.
What does this mean for you?
Likely a headache and desire for Friday afternoon to come even faster.
May
15
What about the fact that most of the WC rates are defined in legislation/rules to use AWP as the standard? Each of the states still using AWP as their fee schedule are going to have to make sure that they change this, or they’re going to end up referring to an outdated figure.
We’re in for a bumpy ride…
I agree with Mr. Andrews, it’s not the AWP that is the problem, the issue is with pricing in general. To operate you need to know your acquisition cost and your cost to fill, and your required profit margin. For example, if your cost for 60 Hydrocodone 7.5/500 MG is $5.00, and your overhead is $5.00, and your markup is 20%, the price you will charge is $12.00. You can back into this with the AWP – % or any other reference price. The pharmacy needs to improve its purchasing power, cut expenses and negotiate with PBM’s and third-party payers for higher reimbursements. However, the industry needs a standard to base its pricing and AWP is as good as anything.
Carl Heffner
Interesting on what “CARL” stated. Here is a mark-up that would interest you. 14 HYDROCODONE 7.5/750 MG cost $59.99. That is what it is in my area.This is some mark-up.
Scanner: well, whatever “evolves from AWP will still look like a duck, walk like a duck and quack like a duck. I cannot imagine what contortions of policy would have to occur to “create” from whole cloth a new standard. But I wait with baited breath.
Carl and Sparten: My database probably has at least 15-20 prices for the same drug/strength. Most are closer to Carl but some are even higher than Sparten. Probably repackagers.
When is the go live date for switching from AWP to WAC?