Wednesday, March 18, 2009

Farewell, AWP

Yesterday, Judge Patti Saris approved the settlement in the long-running First Databank Average Wholesale Price (AWP) litigation, rejecting objections raised by the pharmacy industry. Judge Saris also offered some damning words about AWP as a pricing benchmark for pharmacy reimbursement, adding further urgency to the need for an alternative model.

So what happens now?
  • The WAC-to-AWP spread will be rolled back to 1.20 from 1.25 (a 4% reduction) for many drugs, not just the 1400 NDCs in the case.

  • First Databank will stop publishing Blue Book AWP values within the next two years.

As always, I encourage you to read Judge Saris' (surprisingly well-written) decision for yourself: Order Granting Final Approval of Settlement – March 17, 2009. You should also read First DataBank's statement.

OBJECTIONS TO THE SETTLEMENT

I’ve been following this saga for some time on Drug Channels. Here are the two key articles that will catch you up:

Briefly, First Databank's plan to roll back the AWP-to-WAC markup for so many drugs and discontinue publishing the Blue Book AWP data is not formally required by the settlement. Many pharmacy groups objected to this outcome because a roll-back of this crucial benchmark price would translate into lost dollars for pharmacies that get reimbursed based on AWP.

Objectors include a who’s who of the pharmacy association world: the National Community Pharmacists Association (NCPA), the National Association of Chain Drug Stores (NACDS), the Food Marketing Institute (FMI), the Long Term Care Pharmacy Alliance (LTCPA), the American Society of Consultant Pharmacists (ASCP), the Independent Pharmacy Cooperative (IPC), and the Pharmaceutical Care Management Association (PCMA).

Judge Saris soundly rejected their objections and offered these stinging words:

“[T]hese pharmacies (both chain and independent) and PBMs, reimbursed on the basis of AWP, were unjustly enriched when drug prices were fraudulently inflated during the scheme, yet they have not been asked to disgorge their profits. None of the pharmacies protested the windfalls they received when prices were unilaterally inflated by five percent.” (page 14)

Needless to say, the pharmacy groups are not happy. Click here to read NACDS’ statement.

THE FUTURE OF PHARMACY REIMBURSEMENT

Judge Saris left no doubt about her views on AWP as a pharmacy reimbursement benchmark:

“AWP has been exposed as a faux inflated price unrelated to actual drug prices. Reliance on AWP is a trap for unwary and unsophisticated TPP (third-party payors) purchasers and results in consumers paying unwarranted co-payments.” (page 13)

Keep in mind that Judge Saris has previously identified “speed limits” for the WAC-to-AWP markup in unrelated AWP litigation. (See Judge Saris on Fictitious AWPs.)

Pay attention. The stakes have just been raised in the Average Manufacturer Price (AMP) debate.