Wednesday, September 19, 2007

AMP: Unloved and Unwanted

Average Manufacturer Price (AMP) gained a new set of enemies. The three major manufacturer associations -- PhRMA, BIO, and GPhA – just submitted a joint letter asking CMS acting administrator Kerry Weems to delay implementation of the AMP Final Rule. (Source: FDANews. The letter has not been made public yet.)

It’s pretty clear to me why pharmacists hate this rule, hence their swift and universal condemnation for AMP shortly after the Final Rule was published. But manufacturers have their own reasons to dislike the rule. Here are three that come to mind:
  • Compliance – Any new government rule will inevitably create implementation headaches, as the folks behind the Pharma Compliance Blog point out. The risk level went up last week when Weems highlighted compliance with regulations as a major priority.

  • Reimbursement risks – As the AWP litigation slogs on, private payors will look to AMP as a new, credible benchmark for pharmacy reimbursement. See The ASP Future is Here for details on my prediction. It’s not clear what will happen when the product price (revenues to the manufacturer) gets unbundled from the costs of the distribution system (revenues to pharmacies, wholesalers, PBMs, and providers).

  • Transparency – As currently implemented, AMP data will be made public for both brands and generics on a website at the 11-digit NDC level and updated monthly. Average Sales Price (ASP) data are already available for Medicare Part B drugs.
The Medicaid Commission’s September 2005 report helped to legitimize AMP as the debate over the Deficit Reduction Act was heating up. But does anyone still like AMP 24 months later? Even the U.S. Chamber of Commerce has jumped on the anti-AMP bandwagon!

Please post a comment (anonymously, if you choose) and tell me the pro-AMP story because I can’t locate any AMP fans outside CMS right now.


  1. There is lack of clarity on whether the larger generic companies enjoy better pricing than newer entrants to the market. Some believe prices are the same for every manufacturer, and differences in service levels, size/quality of product portfolio, etc only influence market share. They believe most big buyers already have processes in place to procure at the lowest price without disturbing service levels. There are some others who believe there is significant difference in pricing between customers (e.g. the case you highlighted about CVS' channel power) and between manufacturers.
    AMP disclosure will make pricing in the manufacturer-distributor-pharmacy market more efficient, and accelerate the move of pricing towards cost-plus (from the current discount-off-innovator price). That may still not mean cheaper access for patients, but a step forward all the same.

  2. Adam, pro AMP? Here's one. The industry did this to themselves with their shenanigans. I know companies that worked this to their benefit so it is time to pay the piper. What is wrong with that? If they'd paid more attention to doing things right to begin with I doubt we'd be in this position. Don't smoke and then complain about the cost of lung cancer treatments!

    Having said that, yes, this is a mess for everyone and compliance is going to be a huge headache and likely to trip up the best of them. There has to be joy in the ranks of compliance support providers!


  3. Compliance with the statutes, regulations, and guidance documents that exist for Government Programs has certainly never been an easy task. Manufacturers have long pointed to the obvious gaps in CMS specific guidance and regulation and asked for clarification. Manufacturers hoped that with the coming of the CMS ‘Final’ Rule, many of the fuzziest areas of AMP and BP calculations would be addressed. Unfortunately, what manufacturers have found as they digest the final rule is that CMS has created even more grey areas.

    New questions with regards to the Final Rule impact and implementation seem to arise daily. These questions are complex and challenging with limited answers provided by CMS in the Final Rule. It should come as no surprise that manufacturer associations are making a move to delay the implementation of the Rule. Even for companies who have made the necessary legal interpretations of the Rule, most simply can not implement the business process (not to mention system programming) changes quickly enough to meet the October 1 implementation date.

  4. Pro-AMP camp? Washington D.C. law firms specializing in pharmaceutical contracting and compliance.