A Wee Dose of Radical Transparency

You may have noticed the short-audio pod I launched two weeks ago.  If you missed it, have a listen here.  This week's episode zooms in on transparency with pricing.

With prescription drug pricing, an outsider looking in would say, ‘That can’t be!’, or ‘You’ve got to be kidding me, right?!’

But it’s the case in far too many pharmacy benefit contracts that I see.

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 though – You will come up short every time. Discount guarantees off of a list price such as AWP often 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 #RadicalTransparency and want to learn more, we offer a contract health assessment through our ApexRx program.  My Certified Pharmacy Benefit Specialist (CPBS) Apex colleagues and I welcome the opportunity to help you.  I can be reach via LinkedIn messaging or at [email protected].