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Focus on the Drug Payment Methods Landscape. Academy of Managed Care Pharmacy April 17, 2009. Overview. AMCP updating its payment references Environmental scan of payment today Payment methods Payment sources Impact of AMP Other payment methods and developments. I. AMCP Updates.

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Focus on the drug payment methods landscape

Focus on the Drug Payment Methods Landscape

Academy of Managed Care Pharmacy

April 17, 2009


  • AMCP updating its payment references

  • Environmental scan of payment today

    • Payment methods

    • Payment sources

    • Impact of AMP

    • Other payment methods and developments


  • To continue providing comprehensive, unbiased information about payment methodologies and related issues during a period of significant change

Guide and library updating in 2009
Guide and Library Updating in 2009

  • Guide to Pharmaceutical Payment Methods

    • JMCP summer publication

    • Online access at>>Public Policy & Advocacy>>Pharmaceutical Payment Methods

  • Related Interactive Library

    • Online access late summer

    • Same link as Guide

  • Ii environmental scan of payment today

    II. Environmental Scan of Payment Today

    Payment sources for retail rx drugs billions 2007
    Payment Sources for Retail Rx Drugs Billions; 2007

    Total = $227.5


    Source: National Health Spending in 2007…. Health Affairs Volume 28, Number 1; 2009.

    Payment sources for non retail drugs
    Payment Sources for Non-Retail Drugs

    • No data similar to retail Rx data

    • Evidence that size of market may be comparable to $227 billion retail Rx

      • Express Scripts estimates that only 43% of prescription drug costs are paid as pharmacy benefits – 57% paid as medical benefits (1)

      • Aetna estimated that “infusable” drug sales were $41.5 billion in 2008 (2)

        1.Applying Management Techniques to Drugs in the Medical Benefit. Express Scripts presentation to PCMA. March 24, 2009

        2. Medical Pharmaceutical Management: a payor perspective. Aetna Pharmacy Management. 2009

    Payment methods 2009
    Payment Methods - 2009

    Retail Rx DrugsMedical Benefit Drugs

    Medicare AWP, WAC, Negotiated ASP with few AWP, WAC exceptions

    Medicaid AWP, WAC ASP, AWP, WAC

    Private Ins AWP, WAC, Negotiated AWP, ASP

    Awp impact on drug payment
    AWP Impact on Drug Payment

    • Retail Rx: AWP dominates as the basis of payment to pharmacies by almost all government and private insurers

    • Non-Retail: Approximately 45% of private insurance payment (covered lives) is based on AWP (1)

      • Almost all Medicare and Medicaid payment to physician offices and hospital outpatient departments is based on ASP.

    • Source: Data on file. Tag & Associates, Inc. 2008

    Back of the envelope awp impact


    Medicare Part D; Medicaid; most private insurance

    45% of private insurance; Medicare and Medicaid exceptions

    “Back of the Envelope” AWP Impact



    Source: Tag & Associates, Inc. estimates from data on file.

    Payment methods and developments
    Payment Methods and Developments

    • ABP (Alternate Benchmark Price)

    • ASP

    • AMP

    • WAC

    • AWP


    • Created and published by First DataBank

    • Currently same $ amount as AWP


    • ASP = Manufacturer sales to all US purchasers, net of all price concessions and non-Medicaid rebates, volume weighted, calculated quarterly

      • Exclude sales that are nominal in amount or excluded from Medicaid Best Price calculation

    • Developments

      • Hospital OP payment lowered to ASP + 4% in 2009; will be lower in 2010


    • AMP = weighted average price across all package sizes of a drug for the lowest identifiable quantity of the drug (e.g., 1 ml, 1 tab) paid to the manufacturer by US wholesalers for a pharmaceutical distributed to the retail pharmacy class of trade

    • Does not include customary prompt-pay discounts and all sales/discounts to PBMs and HMOs

    Amp status
    AMP Status

    • In effect for rebate calculation

    • On hold for Federal Upper Limit (FUL) reimbursement

      • Deficit Reduction Act of 2005 required CMS to publish AMP and set the FUL on payment for generic drugs at AMP plus 250 percent

      • NACDS-NCPA injunction prevents implementation

      • FUL computed using AWP, although some states establish reimbursement limits below FUL at a state maximum allowable cost (MAC)

      • Ball in Congress’ court


    • Reported list price established by manufacturer

    • Does not include discounts and price concessions

    Awp who is this man and why is he smiling
    AWP – Who Is This Man and Why Is He Smiling?


    George Pennebaker, the Father of AWP

    Created in 1969 for Medi-Cal to simplify pharmacy claims processing

    Replaced payment based on actual acquisition cost with a new standard reference price -- AWP

    101 North Columbus Street

    Suite 201

    Alexandria, Virginia 22314 USA



    [email protected]