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THOMAS W. CORBETT, JR. Attorney General Pharma Conference National State Attorney General Program

THOMAS W. CORBETT, JR. Attorney General Pharma Conference National State Attorney General Program May 10-11, 2007 James A. Donahue, III Chief Deputy Attorney General Antitrust Section. The Zen of AWP. How knowing what AWP is and should be can provide enlightenment. The Theory.

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THOMAS W. CORBETT, JR. Attorney General Pharma Conference National State Attorney General Program

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  1. THOMAS W. CORBETT, JR. Attorney General Pharma Conference National State Attorney General Program May 10-11, 2007 James A. Donahue, III Chief Deputy Attorney General Antitrust Section

  2. The Zen of AWP • How knowing what AWP is and should be can provide enlightenment

  3. The Theory • System needed to purchase drugs while neither enriching, nor impoverishing pharmacists • System had to provide efficiency incentives • Needed replicatability

  4. The Problems • The Lake Wobegon Problem • The Surveys • Lying, Cheating and Stealing

  5. The Lake Wobegon Problem • Part 1: An average means that someone is paying an above average price for drugs and losing money on a sale to a government program • Part 2: Since AWP was first adopted in the 1960s, the pharmacy business has changed so that all drugs stores are above average.

  6. The Surveys • Price are determined by surveys conducted by private reporting services • No one is required to be honest with these services. • Think of the penalty you would face if you answered a survey question dishonestly.

  7. Lying, Cheating and Stealing • As the difference between AWP and actual wholesale prices grew, an opportunity arose to “market the spread.” • Effect of marketing the spread is reverse competition: Competition to offer ever greater spreads which mean higher prices.

  8. Lying, Cheating Stealing Part II • Differences between AWP and real wholesale prices have grown across the board. • Markups can be used for marketing, rebates, detailing. • AWP is the major tool to limit transparency in drug pricing.

  9. The Bottom Line • As Judge Stearns stated in rejecting a similar argument, “The suggestion that Congress would deliberately condone a bribery scheme using public funds to enrich drug manufacturers and physicians is, to say the least, unusual.”

  10. Pennsylvania’s AWP Lawsuit • Filed in March 2004. • Now removed to MDL, Motion for remand pending. • Allege fraudent pricing on 319 drugs by 37 defendant drug company defendants. • Involves both doctor dispensed and pharmacist dispensed drugs.

  11. The Future of AWP • Various other average pricing guides • My favorite: Competitive Bidding

  12. Role of Attorneys General • Recover Damages for State Agencies • Recover Damages for Consumers • Obtain industry Reform • Perform Law Enforcement Role: Deterence

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