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PRICING IN THE UNITED STATES: Public Sector

  • The United States pays several times more for prescription drugs compared to other industrialized nations

  • As per The New York Times report, the US spends $39,000 for HIV drugs per year compared to the $75 in Africa

In the United States, pharmaceutical companies provide a rebate to government agencies. The rebates are usually calculated o the basis of the Average Wholesale Price.

AVERAGE WHOLESALE PRICE (AWP)

•The price which the pharmaceutical prices suggests the wholesalers charge the retailers •These prices are published •Benchmark for pricing and reimbursement of drugs for governmental and private organizations

AVERAGE MANUFACTURER PRICE (AMP)

•The price which the wholesalers pay to the pharmaceutical companies which are sold at the retail stores •Medicaid drug rebate liabilities are determined using the AMP

FEDERAL SUPPLY SCHEDULE (FSS)

•This is the price available for all the federal purchases •It is mandatory that this price should not be more than the price given for the most favored non-federal purchaser •These prices are generally published •FSS is used as the standard by all federal agencies •Pharmaceutical companies get incentives by including their products in the FSS list •It is mandatory for Medicaid to cover all the products included in the FSS list

BEST PRICE

•This is the price paid by the private sector purchaser •Generally used to calculate the rebate for Medicare program

FEDERAL CEILING PRICE

•The maximum price that the pharmaceutical company charge the big 4 which includes VA, DoD, PHS and Coast Guard •

VA NATIONAL CONTRACT PRICE

•Prices that VA obtains after VA gets by inviting manufacturers after competitive bidding •VA gets more discounts (up to 85% of AWP) because of bidding


DoD NATIONAL CONTRACT PRICE

•Prices that DoD obtains after DoD gets by inviting manufacturers after competitive bidding

Drug prices and discounts in the United States

DEFICIT REDUCTION ACT 2005

  • Coverage of the outpatient prescriptions is the benefit program that all the states have elected

  • The reimbursement is done is for drugs which are prescribed and dispensed by pharmacies

  • Medicaid gets substantial rebates and is paying one of the lowers net prices

  • Medicaid payment has two components

  • Initial payment to the pharmacies

  • Rebates Medicaid receives from the manufacturers

  • Omnibus Budget Reconciliation Act of 1990 created the Medicaid Rebate Program


How does the rebate work?

  • The Centres for Medicare and Medicaid Services calculates unit rebate amount (URA) for each drug. Then it multiplies each URA with the number of units that are purchased in that particular rebate period. Then the providers collects back the amount from the manufacturer

  • Medicaid rebate program varies from state to state

Average Manufacturer Price is used to calculate the rebates


Medicaid drug rebate calculations for outpatient prescriptions

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