OIG studies question AWP

Monday, December 31, 2001

WASHINGTON - A slew of recent OIG reports studying the discount below AWP at which pharmacies purchase brand name drugs in various states is strengthening CMS's argument that average wholesale prices might distort drug prices, healthcare attorneys are saying.

"They're trying to verify that drugs are being purchased substantially below the average wholesale price," said Lisa Smith of the Amarillo, Texas-based Brown & Fortunato. "These reports give them additional documentation that they should move far away from AWP."

The OIG has reviewed pharmacy acquisition costs in four states: Washington, Texas, Colorado and Indiana. It found that each state hovers around the national average for overall discount below AWP, which is 21.84% for brand name drugs and 65.93% for generic drugs. The OIG has selected a total of eight states for which it will study pharmacy acquisition costs. The remaining states are Florida, Montana, West Virginia and Wisconsin.

To conclude each of its reports, the OIG states: "We believe that the difference between AWP and pharmacy acquisition costs, as determined by our review, was significant enough to warrant consideration by the state in any evaluation of their Medicaid drug program."

Smith said the OIG is telling Medicaid "to take a hard look" at its pharmacy acquisition costs and that it might want to rethink the AWP reimbursement method. Several alternatives to AWP have been proposed but little has come of them so far. They include actual acquisition cost plus a dispensing fee, average manufacturer prices reported to Medicaid, actual market prices (similar to price data used by the VA and Medicaid), and competitive bidding, Smith said. HME