More bad news for community pharmacies.

Implications: On September 5, 2007 First DataBank issued an update on the class action litigation pertaining to the publishing of AWP (Average Wholesale Price) for pharmaceuticals. AWP Settlement Update Both Medispan and First Databank have announced that they will adjust their method of calculating AWP prices on certain drugs to WAC or Direct Price times a factor of 1.20 rather than 1.25 as had been done previously. For pharmacies this translates into a 4% reduction in the reported AWP. Based on an average brand name prescription drug price of $150.00 this amounts to nearly a $6.00 reduction in pharmacy reimbursement or approximately a 35% reduction in gross profit. First DataBank will also cease publishing AWP's altogether two years after the effective date of the final court order. The fairness hearing related to the final approvement of the settlment is scheduled for Jaunuary 22, 2008. They will continue to publish alternative pricing information such as WAC, Direct Price, SWP and FUL.

Analysis: Obviously pharmacies can not withstand such a drastic change to the basis of cost for determinig pharmacy payments and the subsequent decrease in reimbursement. 

If and when these changes take place, there will have to be a complete overhaul and restructuring of third-party contracts between pharmacies and pharmacy benefit managers. (PBM's) 

With the pending changes to AMP prices that are imminent, the time to re-evaluate pharmacy reimbursement and develop a new standard for which the basis of the cost of a drug is determined for the purposes of reimbursement has arrived.

Hopefully a standardized, transparent, more equitable model can finally be developed. The question is: Can the process be facilitated before the reimbursement cuts take effect and what will impact will it have on pharmacies profitability in the meantime?