Unbiased Analysis of Today's Healthcare Issues

What does drug ‘price’ mean anyway?

Written By: Jason Shafrin - Aug• 25•11

How much do drugs cost?  The answer to this question depends who you are and how you want to measure cost.  For instance, MediSpan‘s Master Drug Data Base (MDDB) defines drugs prices as follows:

  • Wholesaler Acquisition Cost (WAC) – the cost reported to Medi-Span by a manufacturer at which wholesalers purchase drug products from that manufacturer. The WAC does not necessarily represent the actual sales price in any single transaction, as any manufacturer may agree to sell its products to one or more wholesalers at a lower price with that wholesaler through the inclusion of any number of methods, such as discounts or rebates.
  • Average Wholesale Price (AWP) – the most common wholesaler price charged to its customers
  • Direct Price (DP) - represents the price reported to Medi-Span by a manufacturer at which non-wholesalers, who may re-sell directly or indirectly to retailers, purchase drugs from that manufacturer.
  • Manufacturer’s Suggested Wholesale Price (SWP) – The SWP represents the manufacturer’s suggested price for drug products sold by wholesalers to their customers.
  • CSM Federal Upper Limit (CMS FUL) – CMS has developed a list of multiple-source drug products with upper price limits for each specific strength and dosage form in its Medicaid Manual. The manual establishes ceiling prices for each set of therapeutically equivalent drug products according to the formula in the Medicaid final regulation published July 31, 1987 by CMS’s parent organization, the Department of Health and Human Services (HHS). The rule’s aggregate reimbursement ceiling is set at 150% of the lowest published price for therapeutically equivalent multiple-source drug products. CMS periodically updates the list of covered drug products.
  • Average AWP (AAWP) – average of all AWPs for each multi-source drug product in a given Generic Product Packaging Code (GPPC), not including the originator drug products.
  • Generic Equivalent Average Price (GEAP) -  The GEAP is a generic price applicable for all drug products sharing the same GPPC.

The correct price to use depends on your particular research question.

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2 Comments

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