Question:

Can you clarify the term “average wholesale price,” which is often used related to drugs? 

Answer:

Average wholesale price (AWP) is a benchmark that has been used for more than 40 years for pricing and reimbursement of prescription drugs for both government and private payers. It was intended to represent the average price that wholesalers used to sell medications to providers, including physicians, pharmacies, and other customers. 

However, it is not a true representation of actual market prices for either generic or brand-name drug products. AWP has often been compared to the “list price” or “sticker price,” meaning it is an elevated drug price rarely identifies what is actually paid.

Also, AWP is not a government-regulated figure, does not include buyer volume discounts or rebates often involved in prescription drug sales, and has been discredited by the federal government as a reliable cost/price benchmark.

Although hospitals continue to use AWP for pricing, other alternatives are becoming the standard. 

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