AWP (Average Wholesale Price)
Average Wholesale Price (AWP) is a benchmark price for prescription drugs that represents the average price wholesalers charge pharmacies, commonly used by insurance companies and PBMs to calculate reimbursement rates for pharmacy claims.
Exam Tip
AWP = primary drug reimbursement benchmark. Reimbursement formula: AWP - discount % + dispensing fee. MAC pricing applies to generics. AWP is set by manufacturers, not based on actual transactions.
What Is AWP (Average Wholesale Price)?
AWP is the most widely used drug pricing benchmark in the United States, serving as the basis for pharmacy reimbursement calculations by insurance companies and Pharmacy Benefit Managers (PBMs). Despite its name, AWP does not reflect actual wholesale transaction prices and is often called "Ain't What's Paid" in the industry.
Drug Pricing Benchmarks
| Benchmark | Definition | Use |
|---|---|---|
| AWP | Published average wholesale price | Most common reimbursement basis |
| WAC (Wholesale Acquisition Cost) | Manufacturer's list price to wholesalers | Increasingly used as AWP alternative |
| AAC (Actual Acquisition Cost) | What the pharmacy actually paid | Used by some state Medicaid programs |
| MAC (Maximum Allowable Cost) | Insurer-set max for generics | Limits reimbursement for multi-source drugs |
How AWP Affects Reimbursement
Pharmacy reimbursement is typically calculated as:
| Formula | Example |
|---|---|
| AWP - % discount + dispensing fee | AWP - 15% + $2.00 |
| MAC + dispensing fee | MAC price + $2.00 (for generics) |
Where AWP Is Published
- Medi-Span (Wolters Kluwer)
- Red Book (IBM Micromedex)
- First Databank (FDB)
- CMS Drug Pricing Files (for Medicaid)
Key Points for Pharmacy Technicians
- AWP is set by manufacturers and published in drug pricing databases
- AWP typically exceeds the actual acquisition cost by 15-25%
- Generic drugs are often reimbursed using MAC pricing instead of AWP
- Understanding AWP helps technicians resolve billing and adjudication issues
Exam Alert
AWP falls under the Order Entry and Processing domain on the PTCE. Know that AWP is the primary reimbursement benchmark, that reimbursement is typically AWP minus a percentage plus a dispensing fee, and that MAC pricing applies to generic drugs.
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Related Terms
Adjudication (Pharmacy)
Adjudication is the real-time electronic process by which a pharmacy submits a prescription claim to a patient's insurance plan and receives an immediate approval, rejection, or request for additional information.
Formulary
A formulary is a list of prescription drugs approved for coverage by a health insurance plan, pharmacy benefit manager (PBM), or healthcare institution, organized into tiers that determine patient cost-sharing.
MAC Pricing (Maximum Allowable Cost)
Maximum Allowable Cost (MAC) pricing is a reimbursement limit set by insurance companies and PBMs on the amount they will pay for generic and multi-source brand-name drugs, ensuring pharmacies dispense the most cost-effective version available.
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