Average wholesale price settlement:
Validate the cost neutrality of your PBM pricing with an independent review

A recent U.S. court ruling will effect significant changes in prescription drug pricing and impact plan sponsors and the way they contract with pharmacy benefit managers (PBMs) moving forward. The suit alleged that two major publishers of drug pricing information – First DataBank and Medi-Span – inflated the average wholesale price (AWP), widely used as a benchmark for pricing prescription drugs, for hundreds of brand-name drugs from late 2001 to 2005.

As a result of the final settlement and related actions, First DataBank and MediSpan will adjust AWPs downward by four percent for nearly all brand-name medications and some generics effective September 26, 2009, the date stipulated by the final settlement.

All pharmacy benefit arrangements will be impacted. Depending upon the approach taken by your PBM, you, as a plan sponsor, will need to re-contract financial terms at some point. Given the significant dollars spent on prescription drugs, you should take measures to ensure your financial interests are protected both short and long term. Right now, it’s critical that you ensure any pricing adjustments made by your PBM reflect your utilization and result in the same or lower ingredient costs on a drug-by-drug basis and in aggregate, and that no other pricing terms change.

PBM pricing is extremely complex, and there is no one consistent approach across PBMs for ensuring cost neutrality. While each method is designed to preserve economic equivalence, this might not be accomplished for every plan sponsor. Also, each PBM will be heavily invested in its preferred approach. For all these reasons, you should determine economic cost neutrality through independent validation.

Buck Consultants can conduct an independent pricing review to validate economic neutrality. Our review will compare prescription drug claims paid in the three months prior to September 26 with those paid in the month following the AWP adjustment. The results of our independent review will either confirm the appropriateness of proposed new pricing terms or indicate the pricing adjustments needed to achieve economic equivalence, giving you the leverage you need to negotiate with your PBM in very short order.

We’ve prepared a set of frequently asked questions to help you understand the situation and steps you can take to prepare your organization for a positive outcome.

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