2.4 Dispense as Written (DAW) Codes & Product Selection Logic
Key Takeaways
- NCPDP Dispense as Written (DAW) codes 0 through 9 communicate product selection rationale, prescriber instructions, and generic substitution choices in electronic claims.
- DAW 0 signifies generic substitution is permitted (default code); DAW 1 indicates the prescriber legally mandated the brand name; DAW 2 indicates the patient requested the brand name.
- DAW 2 submissions trigger financial penalties where the patient pays the standard brand copay plus the full difference between the brand cost and generic MAC cost.
- DAW 5 indicates the pharmacy dispensed the brand-name product but billed it at the generic MAC price; DAW 7 is used when state law mandates brand dispensing for narrow therapeutic index (NTI) drugs.
- Improper use of DAW codes (e.g., billing DAW 1 without explicit prescriber handwriting) is a major audit trigger leading to 100% PBM clawbacks.
2.4 Dispense as Written (DAW) Codes & Product Selection Logic
In modern pharmacy practice, generic substitution is one of the most effective mechanisms for containing healthcare expenditures. The FDA's Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book) establishes therapeutic equivalence ratings (such as AB ratings), indicating that a generic bioequivalent formulation can be substituted for a brand-name drug with the same clinical efficacy and safety profile.
To communicate why a specific product (brand vs. generic) was selected and dispensed, the National Council for Prescription Drug Programs (NCPDP) established the Dispense as Written (DAW) code field (NCPDP Field 408-D8). Accurate selection of DAW codes 0 through 9 directly dictates whether the claim will be approved, how much the patient will be charged, and whether the claim will withstand a third-party PBM audit.
1. Complete Taxonomy of DAW Codes (0 through 9)
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| NCPDP DAW CODE TAXONOMY (0 - 9) |
| |
| [DAW 0] No Product Selection Indicated (Generic Allowed / Dispensed) |
| [DAW 1] Prescriber Mandated Brand ("Brand Medically Necessary") |
| [DAW 2] Patient Requested Brand Name Product |
| [DAW 3] Pharmacist Selected Brand Name Product |
| [DAW 4] Generic Out of Stock / Brand Dispensed at Generic Price |
| [DAW 5] Brand Dispensed as Generic (Billed at Generic MAC Price) |
| [DAW 6] Payer Administrative Override / Prior Authorization Required |
| [DAW 7] Brand Mandated by State Law (Narrow Therapeutic Index Drugs) |
| [DAW 8] Generic Not Available in Marketplace (National Shortage) |
| [DAW 9] Plan-Preferred Brand (PBM Mandates Brand over Generic) |
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| DAW Code | Title / Definition | Clinical & Operational Triggers | Audit Documentation Requirements |
|---|---|---|---|
| 0 | No Product Selection Indicated | The default code used when dispensing an AB-rated generic, or when dispensing a single-source brand drug that has no generic equivalent. Indicates substitution is permitted. | Standard valid prescription; no special notations required. |
| 1 | Substitution Not Allowed by Prescriber | The prescriber explicitly mandates the brand-name drug. In most states, the prescriber must write "Brand Medically Necessary," "Dispense as Written," or "DAW" in their own handwriting (or select the specific electronic toggle in the EHR). | Written prescription showing handwritten DAW phrase or EHR audit log proving electronic prescriber mandate. |
| 2 | Substitution Allowed - Patient Requested Product Dispensed | The prescriber allowed generic substitution, but the patient explicitly requests the brand-name medication. | Patient signed consent/acknowledgment form agreeing to pay brand differential cost. |
| 3 | Substitution Allowed - Pharmacist Selected Product Dispensed | The pharmacist exercises professional judgment to dispense the brand product (e.g., specific generic brand unavailable or patient has known sensitivity to an inactive generic binder). Rarely reimbursed by commercial PBMs. | Detailed pharmacist clinical notes in PMS documenting rationale. |
| 4 | Substitution Allowed - Generic Drug Not in Stock | The pharmacy is temporarily out of stock of the generic equivalent and dispenses the brand-name product to avoid interrupting patient therapy. | Wholesaler out-of-stock invoice or PMS inventory exception log. |
| 5 | Substitution Allowed - Brand Dispensed as a Generic | The pharmacy dispenses the physical brand-name product from stock but bills the PBM at the generic MAC price and charges the patient the generic tier copay. Common when brand acquisition cost is lower than generic due to bulk purchasing. | Claim record showing reimbursement capped at generic MAC pricing. |
| 6 | Override | Used for administrative overrides or specific payer-directed prior authorization scenarios. | PBM help desk authorization reference number in PMS notes. |
| 7 | Substitution Not Allowed - Brand Mandated by Law | State pharmacy law prohibits generic substitution for specific Narrow Therapeutic Index (NTI) medications (e.g., warfarin, levothyroxine, carbamazepine, lithium, digoxin) unless explicit prescriber/patient consent is documented. | Reference to state pharmacy board statute and clinical chart notes. |
| 8 | Substitution Allowed - Generic Not Available in Marketplace | The generic medication is FDA-approved, but a nationwide manufacturing disruption, recall, or raw material shortage makes generic procurement impossible across all wholesalers. | Documentation of national drug shortage (FDA/ASHP shortage databases) and wholesaler zero-stock confirmation. |
| 9 | Other / Plan-Preferred Brand | The PBM formulary mandates dispensing the brand-name drug over the generic equivalent because the PBM has secured massive manufacturer rebates that make the brand net-cheaper for the plan. | Formulary directive or electronic adjudication response code. |
2. Financial Penalties: The DAW 2 Differential Calculation
When a prescriber permits generic substitution but the patient insists on receiving the brand-name drug (DAW 2), almost all commercial insurers and Medicare Part D plans impose a substantial financial penalty known as the Brand-over-Generic Copay Differential (also termed the "ancillary charge" or "MAC penalty").
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| DAW 2 BRAND COPAY DIFFERENTIAL FORMULA |
| |
| Total Patient Out-of-Pocket = Standard Brand Tier Copayment |
| + (Brand Allowed Cost - Generic MAC Cost) |
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Comprehensive Calculation Example
A patient presents a prescription for Lipitor (atorvastatin) 20 mg (#30 tablets). The physician wrote for generic substitution (DAW 0), but the patient demands the brand-name Lipitor.
- PBM Benefit Structure:
- Tier 1 Generic Copay: $10.00
- Tier 2 Preferred Brand Copay: $40.00
- Contracted Pricing:
- Brand Lipitor Allowed Cost: $280.00
- Generic Atorvastatin MAC Allowed Cost: $15.00
Step-by-Step Mathematical Calculation:
- Calculate the Ingredient Cost Difference (Ancillary Penalty):
- Add the Standard Brand Tier Copayment:
- Plan Payment:
[!IMPORTANT] Patient Counseling on DAW 2: If the patient had accepted generic atorvastatin, they would have paid only $10.00. By requesting the brand-name Lipitor under DAW 2, their out-of-pocket cost skyrocketed from $10.00 to $305.00. The technician must inform the patient of this financial difference before dispensing.
3. PBM Audit Pitfalls & DAW Compliance Rules
PBM auditors heavily scrutinize DAW codes because improper coding costs payers millions of dollars annually. Common audit red flags include:
- Billing DAW 1 on a Pre-Printed Prescription Pad:
- If a prescription pad has "Dispense as Written" pre-printed with a checked box, most PBMs and state laws deem this invalid. The prescriber must write the phrase by hand.
- Defaulting to DAW 1 on Telephone Prescriptions:
- A technician or pharmacist cannot enter DAW 1 on a verbal order unless the prescriber explicitly states: "Dispense brand name Lipitor, brand medically necessary."
- Billing DAW 2 as DAW 1:
- Submitting DAW 1 when the patient requested the brand (to save the patient from paying the DAW 2 penalty) constitutes insurance fraud under the False Claims Act and results in 100% claim clawback plus potential network termination.
A prescriber writes a prescription for Synthroid (levothyroxine) and explicitly writes 'Brand Medically Necessary' in her own handwriting on the face of the prescription. Which NCPDP DAW code must the pharmacy technician enter when submitting the claim?
A patient presents a prescription for brand-name Lexapro. The physician authorized generic substitution, but the patient refuses the generic escitalopram and demands the brand-name product. The brand drug costs $240.00, the generic MAC cost is $20.00, and the patient's plan has a $35.00 brand copay. Under standard DAW 2 rules, what will the patient pay?
A community retail pharmacy has an excess inventory of brand-name Norvasc that was purchased at a steep promotional discount. The pharmacy dispenses brand Norvasc to a patient but bills the PBM at the generic amlodipine MAC rate, charging the patient the Tier 1 generic copay. Which DAW code accurately reflects this billing transaction?
Due to a global active pharmaceutical ingredient (API) disruption, generic flecainide acetate is completely unavailable from all drug wholesalers nationwide. The pharmacy dispenses the brand-name formulation (Tambocor). Which DAW code should be submitted on the electronic claim to document the national generic marketplace shortage?