Drug pricing can be a confusing business… and much of the confusion stems from a drug’s average wholesale price, or AWP.

On the surface, the AWP might seem to be… well, the average wholesale price or the average price of a drug. But the price to who? As straightforward as the acronym sounds, the reality behind the AWP is more complicated.

AWP is a calculated price that is a markup of 1.20 on the drug companies’ “list price” to wholesalers (wholesale acquisition cost, or WAC) or to large buyers (direct price, or DP). The 1.20 markup is the result of a consent decree requirement from a 2009 legal settlement that applied to the industry due to price file manipulation by First DataBank and Medispan, managers of large drug price files for many administrative service vendors. However, pharmacy benefit managers (PBMs) and other vendors that use price file services are under no obligation to provide the actual cost of a drug, so the AWP is more akin to a car’s “sticker price” – a starting point from which the actual purchase price can be manipulated.

When administering prescription plans for insurers and self-funded employers, PBMs apply discounts and rebates to the AWP before landing on a final price. But not only is this price arbitrary at best, the PBM may hold back a portion of the discounts and rebates for themselves. So what you ultimately pay bears little resemblance to the actual cost of the drug.

Additionally, some PBMs classify certain generic drugs as brand drugs, further manipulating the AWP in order to take advantage of a greater margin between the actual cost of the drug and the AWP brand discount applied to claims for brand name drugs.

MedBen Rx gets around this margin manipulation by avoiding the AWP altogether. Instead, we use a pricing methodology that reflects what something much closer to what pharmacies pay for drugs. Our pharmacy solutions save clients, on average, 11% compared to the AWP approach. And the rebates go back to the plan.

The MedBen Rx difference simplifies pricing while reducing your costs. Learn more by contacting Vice President of Sales & Marketing Brian Fargus at bfargus@medben.com.