US citizens and residents pay more for prescription medication than those living in any other country, causing many to forgo life-saving medication. This problem is worsened by seemingly random fluctuations in price due to shifting rebates, discounts, and formulary inclusion on the part of drugmakers, payers, and pharmacy benefit managers (PBMs). Tackling price instability by considering national drug acquisition costs may be the first step to addressing high drug prices.
According to Matthew Gibbs, “Much of the country's commercial drug pricing system relies on the average wholesale price (AWP) as the point of reference for cost. Average wholesale price is based on wholesale pricing data that private companies collect from drug manufacturers. This average price doesn't include rebates or discounts, and it is typically marked up to account for margins for drug wholesalers that sell to retail pharmacies. The average wholesale price is like the manufacturer's suggested retail price which, as anyone who has ever bought a car knows, doesn't necessarily reflect its purchase price.”
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(Source: STAT, December 15th, 2022)
