Manufacturer certifications that the average wholesale prices provided to Medicaid programs are the "true provider acquisition cost" will be sought in future rebate discussions.

"A necessary component to any negotiated resolution with a manufacturer" will be "the obligation to certify that the prices it reports to First DataBank reflect true wholesale prices," according to a recent letter from the National Association of Medicaid Fraud Control Units to state Medicaid pharmacy directors.

An ongoing investigation by NAMFCU, the Justice Department and state attorneys general "will result in fundamental changes regarding the reporting of pharmaceutical prices and a consequent reduction in the cost of drugs to government health care programs," the letter declares. DoJ began making inquiries into the calculation of AWPs more than three years ago.

The letter informs state Medicaid pharmacy directors that average wholesale drug prices reported by First DataBank to Medicaid will be based on "market prices rather than the prices identified by manufacturers."

First DataBank is "implementing these changes on a voluntary basis and without any additional charges to the states," the February NAMFCU letter states.

"Additionally, FDB will no longer report a price for a product unless its manufacturer has certified the completeness and accuracy of the pricing information submitted," NAMFCU reported.

The investigation by state and federal fraud units has "revealed a pattern of misrepresentations by some manufacturers of the average wholesale prices and wholesale acquisition costs of certain of their products," NAMFCU said.

The alleged misrepresentations, which the organization believes will be corrected with the changes to FDB's reporting, "relate only to a limited number of medications, generally infusion, inhalation and injectable products."

While the investigation is focusing on a relatively small subset of government pharmaceutical purchases, the front-page coverage of the initial findings in USA Today April 6 carries greater weight from its confluence with increasing Republican interest in U.S. drug prices compared to Canada and Mexico (¹ Also see "Sen. Gorton Sets April Deadline For Alternatives To International Pricing Bill" - Pink Sheet, 10 April, 2000.).

Most government pharmaceutical purchases are tied to the "average manufacturers price" as defined in the OBRA '90 Medicaid rebate law.

Several inquiries into pricing for the Medicaid program are ongoing, including an HHS Inspector General study on the potential for repackagers to skirt the "best price" calculation and a Philadelphia U.S. Attorney's investigation into PBM-contracting (² Also see "Medicaid "Best Price" Rebates Not Working, Oklahoma Official Testifies" - Pink Sheet, 3 April, 2000.).

In the March 15 issue of First DataBank's PriceAlert pricing guide, the editor disputes the perception that AWPs are listed solely based on the price reported by manufacturers.

"In order to determine the AWP, First DataBank surveys national wholesalers to ascertain what the price is. This is based on their AWP price files," PriceAlert Editor Kay Morgan wrote.

"We contact the wholesalers to determine what the markup should be for a new company. First DataBank then confirms that the markup is accurate and current."

"A survey may be performed on a single NDC number or on a manufacturer's entire product line," the article explains. "In either case, a survey will be performed with all national wholesalers to determine the appropriate AWP."

The company lists manufacturer-reported costs as suggested wholesale price which, according to FDB, is "frequently" the same as AWP. "However, we are having more instances where they are different."

The AWP investigation was publicized three days after introduction of a bill that would permanently extend a Congressional mandate that requires the Medicare program to reimburse for self-injectable products that are administered in a physician's office.

The Medicare Drug Coverage Preservation Act of 2000 (HR 4149) was introduced April 3 by Rep. Bilirakis (R-Fla.)

AWP Price Certifications Sought From Manufacturers In DoJ Investigation

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