I Was Wondering About the AWP Roll-Back

How many people noticed that the significant savings (~4-5%) arranged by consultants on behalf of employer coalitions occurred about the same time the AWP increases (~4%) occurred?  I suspect that nearly all employers eventually entered into contracts at similar rates.  If so, then the increased revenues for pharmacies due to the AWP increases may have been mostly offset by the lower reimbursement rates.  Even though employers thought they were enjoying significant savings from their new contracts they actually were paying similar prices.

Despite what the press releases claimed about the impact of the settlement, employers will likely not receive an effective 4% decrease in their drug prices.  The PBM contracts with their network pharmacies typically allow adjustments in reimbursement to maintain pricing levels in the event of such a settlement.  I just question why the PBMs did not use these contract clauses to automatically lower client pricing in the first place rather than forcing them to enter into new contracts during renewal.  (Just kidding, I actually know why.)

AARP Rx Watchdog Report; brand-name drug prices exceed inflation once again

As expected, price increases for brand-name drugs commonly used by older Americans exceeded the rate of inflation. Yet the key driver of increased drugs costs remain the introduction and utilization of new brand-name drugs. Americans (young or old) that wish to get the best value from their drug dollar need to look for generic alternatives. Nearly every major drug category has generic versions of different brand-name drugs that provide similar, if not equal or better, value than the brand-name drugs with no generic versions. For example, patients could ask their doctor about using generic versions of :

• Mevacor, Pravachol or Zocor instead of Lipitor
• Prilosec (or even Prilosec OTC) instead of Prevacid, Aciphex, or Protonix
• Prozac, Paxil or Zoloft for a variety of brand-name antidepressants

This is only a small sample of the generic alternatives that can truly help increase the value of drug therapy. Ask your doctor or pharmacist for recommendations. Your health plan or prescription drug plan also may provide lists of recommended alternatives.

"During the 12-months ending September 2006, the prices manufacturers charge wholesalers and other direct purchasers for 193 brand-name drugs widely used by older Americans continued to rise much faster than the general inflation rate. The manufacturer’s price increase for brand-name drugs, on average, was 6.2 percent—more than one-and-ahalf times the inflation rate of 3.7 percent. During the same 12-month period, the wholesale list prices set by manufacturers for 75 generic drugs widely used by older Americans decreased, on average, by 0.7 percent. "

First Databank AWP Litigation Impact

While the press releases and court documents suggest a 4% savings to clients as a result of this successful settlement. The following factors may impact that estimate:

We evaluated the impact in 2002 using AWP, WAC & adjudicated prices weighted by our actual utilization. For brand drugs:

• AWP increased by 7.4%
• WAC increased by 5.3%
• AWP/WAC increased from 13.6% to 15.9%, a total of 2.3%

Other factors that should impact this 4% savings include:

• Since 2001, the utilization of generics have increased dramatically (e.g., 10%) which will lower the overall impact of any price changes.
• PBMs and pharmacies routinely include clauses that let them modify pricing in the event of government or legal action that impacts prices .
• PBMs and pharmacies could easily modify their maximum allowable cost (MAC) list to increase prices on generics.

This situation may lead to pricing indexed on average manufacturer price AMP and average selling price (ASP).