Study finds flaws in widely-used pricing model for generic drugs

A new US industry analysis finds evidence that a longstanding price benchmark, Average Wholesale Price (AWP), does not provide an accurate representation of retail generic drug prices.

In the USA, AWP is used by traditional pharmacy benefit managers (PBMs) to set reimbursement rates for pharmacies on behalf of US health insurers and plan sponsors. The analysis concludes that, while the actual acquisition price of generic drugs purchased by retail pharmacies has decreased over the past six years, the index by which discounts for these drugs are established has increased.

Capital Rx evaluated AWP and National Average Drug Acquisition Cost (NADAC) price fluctuations from 2015 to 2020 for the top 1,200 generic drugs represented in the company’s 2019 book of business. Over this six-year period, the study found evidence of price divergence.