AWP Trudges On: Moving Day(s)
here are two topics for this column: 1. The long and difficult search for a replacement for AWP (average wholesale price) continues — generating some more observations. 2. George (and Nancy) are moving — generating some shareable observations.
First, AWP’s woes. A company that struggles with reporting drug prices has recently started a blog on the subject. Go to it at http://www.goldstandard.com/2011/11/awpand-the-future-of-drug-price-benchmarks-3/ and spend a few moments reading a summary of the current status. It is one of the most concise I have seen. They asked for comments and observations and (hopefully) some new ideas. Not being bashful (and having invented AWP in 1969), I offered mine as follows: It is good to see somebody opening the discussion with a clear statement of the problem. Obviously, I have been an observer as well as participant. My primary observation is: The free enterprise system requires that the seller and the buyer meet and agree on the price. The sellers are the drug manufacturers (not the pharmacies). The primary buyers are government entities and private insurance companies. All of the others are furnishers of services (not drugs) and should bargain with those that they serve. The only other methodology that could work 36
George Pennebaker, Pharm.D.
would require one of the members of the drug supply chain to be totally transparent — making ALL of its financial data available. The current condition is that the free enterprise system is working everywhere except in the United States. The buyers (primarily governments) are bargaining with the manufacturers and getting good prices. The U.S. has one outstanding exception. California’s Medicaid program (Medi-Cal) sits down with the manufacturers and bargains, resulting in huge rebates that are paid by the manufacturers directly to the State. (Note: I have not been directly involved, so I do not know any of the agreed-upon details, but I do know the annual total dollars and they are very high.) Since no company will make financial data totally available, the only viable solution that I see is to change things so that the free enterprise system can take effect and solve the problem. Of course, if you have any comments, observations, or maybe even solutions, please share them with me and/or the blog. If you wish to remain anonymous, email them to me and I will pass them on as you wish, without identifying the source. I’m a rather retired but not reticent curmudgeon who enjoys sharing in controversial discussions. Meanwhile, it seems that each of the alphabet soup collection of replacements for AWP has proponents, but not