Drug Reimbursement Methods – A Moving Target
In the early days of home infusion therapy, pricing was built on “list price.” Then came AWP followed by a trail of commonly used methodologies such as ASP and WAC and many more. With all of the confusing acronyms and changing methods, there are probably plenty of providers who are missing out on getting the full value of their reimbursements.
To help sort out today’s drug reimbursements, I will focus on the three most prevalent methods and will explain what the acronyms represent and how they are derived.
- AWP—Average Wholesale Price: AWP is based on self-reported prices charged by wholesalers and manufacturers, excluding actual transactions through a variety of methods such as purchase, prompt pay or other discounts; volume or other rebates or credits; or other price reduction arrangements. Reimbursement is generally AWP minus a percentage and may be plus a fixed dispensing fee although when drugs are reimbursed on a factor of AWP, there is typically a per day rate to cover the supplies and services. This reimbursement method is commonly used by third-party payers.
- ASP—Average Sale Price: As of January 1, 2005, the Medicare Prescription Drug Improvement and Modernization Act (commonly known as the MMA) changed the basis of reimbursement for prescription drugs from AWP to ASP. ASP is based on actual sales transactions reported by wholesalers and includes all forms of rebates such as those mentioned above. ASP is approximately 26% lower than AWP for brand drugs and 68% lower for generic drugs. This method is used for drugs covered under Medicare Part B.
- WAC—Wholesaler Acquisition Cost: WAC reimbursement is based on the actual cost wholesalers pay when they purchase drugs from manufacturers. The prices are reported directly by distributors themselves as opposed to ASP, which is typically reported by one of the wholesalers. However, like AWP, WAC fails to reflect rebates and discounts the way ASP does. WAC is approximately 22% lower than AWP and is an alternative pricing methodology to AWP and ASP.
Because reimbursement methods can vary, you have to stay up-to-date on reimbursement rates and make sure your contracts are negotiated in your business’ best interest. Here are some resources that can help you find rates and manage your contracts.
Pricing: This information is published in three major sources—First DataBank, Medi-Span and RED BOOK. ASPs are published by the Centers for Medicare and Medicaid Services (CMS).
Contracts: You have a golden opportunity to protect your business welfare through contract negotiations. AWP, ASP and WAC can vary based upon supply and demand, which dictates the reimbursement you will receive for services rendered. Depending upon which methodology is used, AWP+/- , ASP or WAC, you should make sure that you include a clause that states “AWP +/- (ASP or WAC) or cost, whichever is greater. The goal is to make sure you will not lose money due to fluctuations in AWP, ASP, WAC or any other methodology that your payer uses.
For more information on how Mediware Reimbursement Services can help manage your infusion reimbursement, click here.