A Closer Look at: AWP

What is AWP, and Why Does it Matter?

You may have heard about AWP and how it can impact claim reimbursement, but many people don’t understand how this critical element of the payment calculation formula actually works or know how to ensure that AWP issues don’t negatively affect their reimbursements.

What is AWP? Average Wholesale Price (AWP) is a pharmacy industry standard for the price of a given drug. Drug Manufacturers, Wholesalers, Pharmacy Benefit Managers (PBMs), Government Entities, and Pharmacies all use the AWP as the benchmark price when drugs are sold, bought, billed, and reimbursed throughout the pharmacy supply chain. 

It is important to note that while the AWP is typically not the same amount that pharmacies pay for drugs (that would be acquisition cost), it is still very important for pharmacy to maintain accurate and up to date AWP values for all NDCs that they are dispensing. 

Why Does It Matter if AWP Values are Accurate? PBM contracts often include AWP as a basis for calculating pharmacy reimbursement. They will commonly pay based on an AWP minus a percentage formula. So, if the AWP values are not correct in your Pharmacy Information System (PIS) when you adjudicate claims, there is a potential for you to receive less than you should in reimbursement. We typically refer to this scenario as ‘leaving money on the table’, and pharmacies simply cannot afford to accept less in reimbursement than they are entitled to receive.

To help combat this issue, many PIS providers offer regular AWP price file updates on a monthly or weekly basis, but this often fails to alleviate problems associated with timing issues and manual interventions in PIS inventories that affect proper updating. AWP values can change at any time, so daily updates are really the best way to ensure that your system AWP values are always accurate.

Another challenge pharmacies face is trusting that PBM carriers are also performing timely AWP updates in their systems so that they are calculating reimbursements correctly. This is a common problem, and for many PBMs there is some lag time between when a given AWP changes and when they begin to reimburse on that updated price basis. Pharmacies typically have little way of knowing when this occurs, and again there is a potential for leaving money on the table.

So, How Can You Ensure That You Are Reimbursed Correctly? The short answer is that you can let Veridikal manage it for you. We offer several AWP related Pre/Post Edits as well as reporting that ensure AWP correctness on both the pharmacy and PBM sides of the reimbursement equation.

AWP Update Edits: Veridikal has the ability to update AWPs on the fly at the point of adjudication if the pharmacy submits an AWP that is not the most current value. This ensures proper reimbursement without having to reverse and rebill claims, and reporting provides that pharmacy with details about which AWPs are out of date so that they can update their PIS pricing going forward. There are other options available on a post edit basis for pharmacies who choose a more manual approach as best to meet their needs.

AWP Rebill Edits: Veridikal has the ability to actively monitor PBM reimbursements and is aware of when a given carrier is reimbursing based on out-of-date AWP rates. We are able to flag claims in our system that are under-reimbursed in this scenario, and once we notice that the PBM has updated their pricing we can automatically reverse and rebill those claims so that they pharmacy receives the correct reimbursement, and the pharmacy is provided with reporting around these claims. For pharmacies who would prefer to manage the rebilling process manually, we also have post edit options available that drive reporting to identify claims that were incorrectly reimbursed based on inaccurate AWPs.

To learn more about Veridikal’s solutions, please visit our website at www.veridikal.com, email us at Sales@Veridikal.com,

or call (888) 975-1432.