![]() ![]() Examples of adjustments include bulk purchasing discounts, prompt payment discounts and distribution fees.įor brand-name drugs, there is less room for negotiations and wholesalers purchase based on discounted rates off WAC. This is the published price that manufacturers provide wholesalers or direct purchasers before any negotiated adjustments. Pharmacy Pricing: Manufacturers, Wholesalers and Pharmacies Wholesale Acquisition Cost (WAC)ĭespite its name, WAC does not represent the actual sale price of a drug from the manufacturer to the wholesaler. Pharmacy Benefit Report: Facts & Figures, p. Based on Novartis Pharmaceuticals Corporation. The WAC is a list price that approximates what conventional pharmacies pay wholesalers for single-source brand-name drugs.ī. Note: AWP = average manufacturer price WAC = wholesale acquisition cost AWP = average wholesale priceĪ. Retailers include pharmacies, hospitals, group purchasing organizations and mail-order programs.įigure 1: Flow of Funds for Single-source Brand-name Drugs Purchased at a Retail Pharmacy and Managed by a Pharmacy Benefit Manager for an Employer’s Health Plan Chargebacks are payments from manufacturers to distributors. Rebates are payments from manufacturers to pharmaceutical benefit managers. 1 Services represent contractual relationships between entities. Figure 1 illustrates the major players, flow of product and funding. Many players are involved in the supply and funding of drugs to consumers in the United States. Measuring Prescription Drug Prices-Prescription Drug Supply Chain: Flow of Products and Funding With that understanding, actuaries are uniquely equipped to contribute to increased transparency, more competition, better aligned incentives among the various stakeholders and resultant mitigation of the increases in total cost of care for health in the United States. By understanding the entire drug pricing process from start to finish, actuaries can bring a holistic view that allows them to understand the incentives of market participants and how the different components of drug prices interact. In their work with payers and other clients, actuaries develop the in-depth knowledge required to understand drug pricing approaches and the different terms and definitions used by manufacturers, pharmacy benefits managers (PBMs), pharmacies and payers. It is also helpful to explore drug pricing approaches applied in the United States compared to those used in other countries. other global comparison nations (11 percent)-it is important to understand how prescription drug prices are measured. When contemplating the economic impact of prescription drug prices in the United States-and how they contribute to the 18|11 gap between the portion of GDP that health care costs comprise in the United States (18 percent) vs. What Is the Price Anyway? By understanding the drug pricing process, actuaries can help develop new payment methods Scott Fry, Tze Min Lim and Gregory Warren May 2020 ![]()
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