The pharma industry is still in a bit of a tizzy about the lawsuits alleging improprieties in pricing, with some saying there will be wholesale changes (pun intended) while others ho-hum the notion. But, as more information comes out regarding the McKesson – First DataBank suits, there appears to be more to the notion that changes are in the wind.
This is not just an item of passing interest; the plaintiffs in the suit alleged that these pricing practices have cost payers upwards of $6 billion over a three-year period.
There are two separate suits. McKesson’s suit, located in California, is still in process and McKesson has vowed to fight to the bitter end. The First Data suit ended in October when First Data agreed to a settlement, wherein they will stop providing wholesale pricing data in 2008.
Some see FDB’s capitulation as leading to the death of the AWP pricing methodology. I don’t, even though the demise of this metric would be most welcome. But other trends in the sector make it likely AWP is going to slowly diminish in importance.
The case for the persistence of AWP is that it is broadly used today, and even with the disappearance of FDB, there are other sources for AWP pricing – RedBook and Medispan specifically. And these firms have not been charged with the kind of pricing manipulation that led to the FDB settlement. FDB’s version of AWP results in prices that are about 5% higher than those provided by the other sources. Therefore, payers who change to RedBook or Medispan will see a rather quick reduction in costs. The key will be to make sure prices don’t creep up as the entities comprising the pharma supply chain figure out how to recapture lost revenues.
Conversely, AWP is fast disappearing in generic pricing, where it is being replaced by MAC, FUL, and other methodologies that seem to provide a more objective and less fungible baseline.
The reason AWP is so reviled is few payers believe, and with good reason, it has any real objective basis. Therefore, payers perceive they are being over-charged, and if the plaintiffs in the two suits are correct, the over-charge is material.
Nearly all pharmacies have clauses that will allow changes in their reimbursement rates if a lawsuit impacts the pricing methodology. The PBMs can unilaterally increase their MAC prices to help make up any differences.