Full Disclosure: I work for Costplusdrugs.com.
I love a nerdy price index as much as anyone — especially in the land of prescription drugs! In this article, I’m going to run through some drug price indices that exist today, argue criteria for what I think it takes to be an actual drug price index (since I can’t seem to find any ‘official’ criteria), and then propose my biggest point of all: That we at Costplusdrugs.com have a new drug price index available called the Cuban Price List or CPL.
Let’s first break down the vegetable soup of some acronyms and drug price lists or indices when it comes to drug pricing, shall we? 🤓
- AMP — Average Manufacturer’s Price, “is the average price wholesalers and other large purchasers pay manufacturers for prescription drugs that are sold to retail pharmacies.” — NIH
- This index isn’t as germane to retail prices in pharmacies, other than, if it’s higher, it’s just going to be even more at the retail pharmacy.
- WAC — Wholesale Acquisition Cost, is “…the manufacturer’s list price for [a] drug or biological to wholesalers or direct purchasers in the United States, not including prompt pay or other discounts, rebates or reductions in price…” — US Code definition.
- Ditto to AMP. Although, some state Medicaid programs have WAC in their lesser of logic to reimburse some claims. Most pharmacies can buy brands around WAC minus 3%, (bigger pharmacies get a higher % discount) but all bets are off when it comes to finding a formula for pharmacies buying generics at WAC-__%. It could be as much as 98–99% off for generics. Not super transparent what these discounts are. Note that last part of the definition — not including discounts, rebates or other reductions in price. That part makes it troublesome as an index, because everyone gets different discounts, rebates and other reductions.
- ASP — Average Sales Price — is, “the revenue from a manufacturer’s sales of a drug to all purchasers in the U.S. in a calendar quarter divided by the total number of units of the drug sold by the manufacturer in the same quarter. The ASP is net of any discounts.” — Alliance for Health Policy. These are for Healthcare Common Procedure Coding System or HCPCS drugs — they are over in your medical benefits; you won’t likely be picking them up at the pharmacy. These are drugs also that need to be infused, inserted, or injected by a healthcare professional. Along with the drug is some procedure as well (drugs need someone to infuse them into the patient, etc.) The ASP is published quarterly by CMS. These drugs are also billed under Medicare part B, not D.
- I could go on for days about how ASP is pretty neglected and ignored when it comes to markups of ASP for plans, but let’s just say for the purposes of this article that ASP is not used for reimbursing pharmacy benefit drug claims. Hundreds of percentage markups of ASP are used in medical benefits reimbursement, and these claims aren’t going to happen at your retail drugstore.
- AWP — Average Wholesale Price, is, “the published list price for a drug sold by wholesalers to retail pharmacies and nonretail providers.” — KFF Generally, this is a 20% markup of WAC for brand name drugs, according to— NASHP.
- I’ll be blunt and also call it, “Ain’t What’s Paid,” because retail pharmacies pay nowhere near AWP. It’s a false markup on WAC. I think of all the price benchmarks, this is the most inaccurate price index of all because of the hefty markup, and yet, it’s the most often used benchmark in commercial pharmacy benefits for calculating reprices and contracting. Go figure! Start with a terrible inaccurate index, to begin with, and enjoy even less accurate outcomes! 😡 For example, PBMs will reimburse pharmacies by bucket as a % off of AWP — generic drugs, brand drugs, and specialty drugs.
- NADAC — National Average Drug Acquisition Cost, a monthly survey of average invoice prices of retail pharmacies for invoice costs from wholesalers, published through Medicaid.gov on a regular basis. Note that participation in the NADAC is voluntary in most cases. — Read their methods here.
- It’s somewhat better than AWP, but it still has flaws. Not all drugs have a NADAC unit cost published (read on for an example). And, off-invoice discounts are still not accounted for with this index. Last — it’s voluntary, meaning that bigger chains don’t participate in NADAC. The bigger the chain, the bigger the discounts and off-invoice rebates and discounts, so this too is often a flawed price benchmark index. (And disclosure: I used to work for the contractor who administers the NADAC.) I also forgot about lag — invoices can lag months usually. We all know price changes happen much more quickly than that in the marketplace — so is the file really that up to date with the current market?
- AAC — Average Acquisition Cost — these are state Medicaid plan surveys done on averaging invoice costs of community pharmacies in their respective states, and sometimes with mandated participation by community practice pharmacy providers under the state Medicaid plan. (If you’re curious about which states use either AAC or NADAC for Medicaid reimbursement, you can review the table here.)
- Same flaw as NADAC though — off-invoice rebates are happening and unaccounted for with these indices. The good news is that in some states, participating in the state AAC program is mandated by Medicaid, but again, off-invoice shenanigans may be afoot.
- There are many others (EAC, FUL, MAC, U&C, etc. You can see decent definitions of all of these here.) Not as helpful when discussing price indices for drugs, however.
Okay, per above, each and every one of these price benchmarks has flaws. Some you have to pay for to see through what we call drug compendia. Drug compendia are like Wikipedia for drug pricing for the tens of thousands of NDCs or national drug codes on the market at any time. There are two major drug pricing compendia in the US:
- FirstDataBank and
(BTW, subscriptions to these compendia are not low cost.) Also, there have been some legal cases in the past with the publishing of some of these price indices as well by the compendia. I’ll let you read the info linked above to learn more about what happened in the past with these prices within the compendia.
The bottom line that I’m trying to explore here with you: What makes a drug list or index valid and/or reliable? I honestly don’t know if there are real criteria. I can’t really find any. But if I was writing criteria that all of these drug indices had in common, they’d be the following:
An Ideal Drug Pricing Index or List Should Be:
- 1. Regularly updated (most if not all above are regularly updated).
- 2. Freely and openly published and available (not all are above, but some are — like state AAC lists, NADAC, and ASP quarterly files.) This should include the ultimate buyer as well — is the metric or benchmark available to all?
- 3. Accurate (NADAC and State AAC lists are better than AWP, but they still aren’t 100% accurate, because discounts happen all the time off-invoice between a wholesaler and retail pharmacy, as an example — rebates are a good example of off-invoice discounting, and YES! There are drug rebates on generic drugs too!)
- 4. Fully transparent (this goes hand in hand with accuracy and no off-invoice rebate shenanigans.) And, read on for more about transparency (or lack thereof) with some of these price indices.
If this is the criteria for a drug pricing list, friends — I have a new one for you — the Cuban Price List or CPL. In full disclosure (again), I work at Mark Cuban Cost Plus Drug Company, PBC — but even with this disclaimer front and center, hear me out.
At Costplusdrugs.com, we publish our own actual acquisition costs. On every drug, and on every drug’s page. Here’s just one example:
And now, under “manufacturing” you can see our actual acquisition cost or CPL cost for 30 suppositories of mesalamine 1000 mg of $20.40, or $0.68 each in terms of the Cuban cost.
Okay, next — let’s look at the indices for this drug in comparison.
- AWP = whoopsie, I can’t publish this on this drug or any drug, because AWPs are confidential according to the compendia. (So much for transparency!)
- NADAC = So, I pulled the most recent NADAC file as I write this on 2/4/23, which was last updated 1/31/23. For 1,000 mg mesalamine suppositories, the NADAC on this list is $2.21204 per suppository.
- AAC = I tend to use Alabama AAC, because it’s easy to pull. That, and I believe it’s a mandatory participation state for Medicaid pharmacy providers (so at least all are in with invoices, or at least it used to be mandatory participation). That being said, the most recent file is dated 1/31/23, and the effective date on the Alabama AAC for this 1,000 mg suppository with an AAC of $2.03382 per suppository. I also tossed in Idaho’s AAC on this drug, which is $3.33402 on 1/30/23 (which is the most recent list as well.) While we’re in the I’s, I also picked Iowa’s AAC, published 2/1/23 at $2.44776 per suppository.
Let’s review — here are the costs per suppository and per quantity of 30 for each of the indices above:
If you’re not convinced, let’s take another drug — how about imatinib 400 mg #30? Here’s that analysis, both without, and with the 15% markup on costplusdrugs.com:
Still not convinced? Here’s another example of a drug that is rarely found inside the NADAC or state AAC lists, because it’s not frequently used (tolvaptan 30 mg tablets):
I could go on, but let’s stop there. Now that we know all but one of these prices to all the other published indices on what CostPlusDrugs.com pays, we have next to ask —
Why are wholesalers’ prices different and in many cases higher, and why would any pharmacy or self-funded employer for that matter pay higher prices instead of trying to buy direct from manufacturers like Costplusdrugs.com does, or buy from costplusdrugs.com?
This is the mystery that has cost patients and self-funded plans billions of dollars each year!
To attempt to answer the ‘why’ — is difficult, because few actually publish their costs. No one wants to show their math. Because commercial self-funded employers don’t know or understand costs, they ‘trust’ intermediaries like PBMs and TPAs to provide a fair deal, which with vertical integration these days does not happen. (Not to mention, WE are the customer when it comes to Medicare Part D and Medicaid drug pricing!)
But — back to the CPL. Let’s run it through the criteria above — does it meet the criteria for being an actual legitimate price index?
An Ideal Drug Pricing Index or List Should Be:
- 1. Regularly updated — we keep our list updated at all times at Cost Plus Drugs.
- 2. Freely and openly published and available — all costs are freely and openly published on costplusdrugs.com. We also have an API that we’re willing to share for free with others as well. And, it’s accessible to the ultimate buyer.
- 3. Accurate — again, it’s our company’s actual acquisition costs. We’re not hiding anything. We even show our markup of 15%!
- 4. Transparent — just go to costplusdrugs.com and check the cost on a drug — any drug! It’s. Right. There.
So, when people come to Costplusdrugs.com about comps to Maximum Allowable Cost (MAC) list or lists, or what price we are relative to NADAC or AWP — we can run the numbers, but why? If we’re accurate, up-to-date, freely published, and transparent, does it really matter what we are relative to two different price indices that aren’t accurate and possibly flawed? The cost published on the CPL is our actual cost.
Of course, we can and often do run claims repricings, and guess what? We’re way below AWP (which, recall is a 20% markup or more of WAC at least on brands, even more on generics) and even NADAC in many instances! We can save Americans $ with this index! We could save Americans billions within Medicare Part D and Medicaid plans as well with the CPL as an index. Here’s one study where we could have saved American taxpayers $3.6 billion!
Our cost is our actual cost, period. While putting together Costplusdrugs.com, have we not-so-accidentally created another drug price index as well with the Cuban Price List or CPL? I argue yes, we have! It’s regularly updated, freely available, accurate, and transparent — it meets the criteria for an index!
What about discount cards?
Discount cards have provided another avenue for Americans to save on their prescription drugs — no doubt about it. However, what’s missing from them relative to being a drug index is that the dispensing fee and the ingredient costs are all rolled together, which is not transparent and never really does show the true cost of a prescription drug within the equation. For these reasons, the indices created by the discount cards really aren’t valid, because they’re not transparent, and all fees (including the dispensing fee) are lumped together with the ingredient cost.
What about brands?
I know what you’re thinking — what about brand drugs? Specialty drugs? Drugs with REBATES?
That’s a fair point. But, as we continue to add more new brands and specialty drugs to our fold, we don’t want to play the rebate game. Could the CPL then become the cure for this country’s drug rebate addiction? I hope so! Grab your popcorn and stay tuned. 🍿
In conclusion, I think not only has our team developed a low-cost option for patients who need more affordable options for their prescription drugs when they’re out of options, which is awesome, but I think along the way through our public-facing, regularly updated, fully transparent, and accurate publication of our prices, we have in fact created a published price index as well with the Cuban Price List or CPL.
Erin L. Albert is VP of Pharmacy Relations at Costplusdrugs.com.