Innovation

PBM Contracting Strategy - Average Wholesale Price (AWP)


A core principle at Health Strategy is that a plan sponsor’s PBM agreement is fundamental to a comprehensive pharmacy benefit. Our contracting strategy starts with time-tested, algorithmic based definitions and pricing conditions. Slight nuances in these critical terms can be worth millions of dollars and if not accounted for properly, result in inaccurate total drug cost projections.

Average Wholesale Price (AWP) Definition –

Average wholesale price (AWP) is a published price for a drug product based on data obtained from manufacturers, distributers and other suppliers.  Although AWP does not represent the average of wholesale prices from actual transactions in the marketplace, it is used as the cost basis for pricing prescription drug claims.  There are several key criteria that must be addressed in the contractual AWP definition to protect payers from potential manipulation of AWP values used to reconcile contractual discount guarantees.  For example, the use of an average AWP, the use of an AWP for a different package size for a drug, or the use of AWP for repackaged or relabeled NDCs may increase the cost basis from which discount guarantees are determined, thus inflating the reported discounts.

A strong AWP definition is critical to ensure the accurate reconciliation of contractual discount guarantees.

Take Health Strategy’s PBM Agreement Assessment –

How does your contract’s average wholesale price (AWP) definition stack up against Health Strategy’s best practice? Health Strategy assesses over 35 factors when analyzing a PBM contract (Contract Vulnerability Assessment). Given the interdependencies, it is not enough to have “most of them.”

Take Health Strategy’s PBM agreement assessment today to see how your contract stacks up against Health Strategy best practices.

Take Health Strategy’s PBM agreement assessment today to see how your contract stacks up against Health Strategy best practices.