Average Wholesale Price

The average wholesale price (AWP) is a prescription drugs term referring to the average price at which wholesalers sell drugs to physicians, pharmacies, and other customers. While it the term is intended as such, in practice, it is a figure reported by commercial publishers of drug pricing data. According to the Red Book, published by Thomson Medical Economics, the pricing information is “based on data obtained from manufacturers, distributors, and other suppliers.”

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The AWP has often been equated with a “sticker price” or “list price,” as those terms are used in the automobile industry. It has become an important prescription drug pricing benchmark for payers throughout the health care industry. Payments are typically based on AWP minus some percentage. Despite its name, however, the AWP is not an accurate reflection of actual market prices for drugs. As noted, it is a price derived from self-reported manufacturer data for both branded and generic drugs. There are no requirements or conventions that the AWP reflect the price of any actual sale of drugs by a manufacturer, or that it be updated at established intervals. It is not defined in law or regulation, and it fails to account for the deep discounts available to various payers, including certain federal agencies, providers, and large purchasers, such as HMOs. Consequently, the AWP has been the subject of great criticism and scrutiny.

References

• Dawn M. Gencarelli (June 7, 2002). "Average Wholesale Price for Prescription Drugs: Is There a More Appropriate Pricing Mechanism?" (pdf). National Health Policy Forum. Retrieved on March 9, 2007.