Tuesday, August 17, 2021

10 Definitions, Related to Prescription Drug Prices, All Purchasers of PBM Services Should Know

The first half of 2021 has seen more brand-name drug list price increases than all of 2020, according to an analysis by 46Brooklyn, a nonprofit drug research firm. The increases reverse the downward trend in brand name drug price increase frequency that's been observed over the last decade, 46Brooklyn reported. Through July 10, there were 78 list price increases of brand-name drugs, a number nearly equal to the full amount of July price increases occurring in the last three years. 

But despite 2021 having more list price increases than 2020, there is no change in the weighted average brand name drug price increase. This suggests that though increases are happening more frequently than last year, the size of the increases is comparable to those over the last several years, 46Brooklyn reported. 

The price increases in July 2021 have a modest weighted average increase of 2 percent, representing about $1.3 billion in prior year Medicaid expenditures. Net prices have been declining despite list price increases, according to 46Brooklyn. For more on this, check out the Gross-to-Net Bubble update. 

Below are ten definitions, related to prescription drug prices, all purchasers of PBM services should know.

  • Acquisition Cost is defined as the invoice price to the pharmacy for a prescription drug dispensed to a patient, minus the amount of all discounts and other cost reductions attributable to such dispensed drug.

  • Average Manufacturer Price (AMP) is the average price paid to the manufacturer for the drug in the United States by wholesalers for drugs distributed to retail community pharmacies and by retail community pharmacies that purchase drugs directly from the manufacturer. The health reform law excludes payments and rebates or discounts provided to certain providers and payers from the calculation of AMP.  

  • Average Sales Price (ASP) is a manufacturer’s unit sales of a drug to all purchasers in the United States in a calendar quarter divided by the total number of drug units sold by the manufacturer in that same quarter. The ASP is net of any price concessions such as volume, prompt pay, and cash discounts; free goods contingent on purchase requirements; chargebacks; and rebates other than those obtained through the Medicaid drug rebate program. Certain sales are exempt from the calculation of ASP, including sales at a nominal charge.

  • Average Wholesale Price (AWP) is not based on actual transactional, marketplace price data.  Despite its name and its sometime use as a price index, the published AWP is not an average of actual wholesale prices. It is not intended to represent, and cannot be assumed to reflect, actual transaction prices. A wholesaler or other direct purchaser from a pharmaceutical manufacturer may agree to sell its products to one or more of its customers at prices that on their face are effectively lower than the published AWP. AWP information does not reflect any such lower pricing that may be made available in actual purchase transactions through a variety of methods, including, but not limited to, purchase, prompt-pay or other discounts, volume or other rebates or credits, or a variety of other price reduction arrangements.

  • Direct Price (DP) is the price directly reported to AWP publishers by a manufacturer as the list price at which non-wholesalers and healthcare providers may purchase drug products from that manufacturer. These publishers generally do not receive a reported DP for drugs that are sold by a manufacturer exclusively through wholesalers, although in some cases both a DP and a WAC may be provided at the manufacturer’s discretion. Like AWP, DP does not represent an actual sales price in any single transaction or group of transactions between a manufacturer and a non-wholesaler or healthcare provider, as any manufacturer may agree to sell its products to one or more customers at a lower price through any number of methods, including, but not limited to, discounts, rebates, credits or other net price reduction arrangements.

  • Federal Supply Schedule (FSS) are prices paid to manufacturers by the VA, other federal agencies, and certain other entities, such as Indian tribal governments, are set by the Federal Supply Schedule (FSS). Under the Veterans Health Care Act of 1992, manufacturers must make drugs available to covered entities at the FSS price as a condition of eligibility for Medicaid reimbursement.  FSS prices are negotiated with manufacturers by the VA.15 In general, the FSS price may be no higher than the lowest contractual price charged by the manufacturer to any non-federal purchaser under similar terms and conditions. In order to determine this price, manufacturers supply the VA with information on price discounts and rebates offered to different customers and the terms and conditions involved. Under certain conditions, the VA may accept an FSS price that is higher than the price offered to some non-federal customers. According to the GAO, average FSS prices are more than 50 percent below the non-federal average manufacturer’s price.
  • Ingredient Cost is the cost to the pharmacy for dispensed drugs.

  • Maximum Allowable Cost (MAC) list generally refers to a payer or PBM‐generated list of products that includes the upper limit or maximum amount that a plan will pay for generic drugs and brand name drugs that have generic versions available (multi‐source brands). Essentially, no two MAC lists are alike and each PBM picks and chooses products for their MAC lists, using different criteria to derive and apply prices to the list.  

  • Suggested Wholesale Price (SWP) is the price that a manufacturer suggests wholesalers charge when selling the manufacturer’s drug to the wholesaler’s customers, as reported by the manufacturer. The SWP does not necessarily represent the actual sales price used by a wholesaler in any specific transaction or group of transactions with its own customers. Wholesalers determine the actual prices at which they sell drug products to their respective customers, based on a variety of competitive, customer and market factors.

  • Wholesale Acquisition Cost (WAC) is the price directly reported to publishers, like Wolters Kluwer Health, by a manufacturer as the list price at which wholesalers may purchase drug products from that manufacturer.  WAC does not represent an actual sales price in any single transaction or group of transactions between a manufacturer and a wholesaler, as any manufacturer may agree to sell its products to one or more customers at a lower price through any number of methods, including, but not limited to, discounts, rebates, credits or other net price reduction arrangements.
Education is key to use of lowest net cost drugs in pharmacy benefit plans. Only the most sophisticated purchasers of PBM services will have the knowledge and confidence to bind lowest net costs for prescription drugs into contract language and benefit design. Hence, your competitive advantage includes executing good analysis of the correct information then deciding what all of this suggests for your organization. 

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.