Will TRICARE Boost WAC for PBM Pricing?

Implications: Last week, the Department of Defense (DoD) gave a big boost to Wholesale Acquisition Cost (WAC) as a pricing benchmark for pharmacy reimbursement, breathing new life into this alternative list price.  While the DoD validates WAC for now, I still expect computed (non-list) benchmarks to become the norm for retail pharmacy and PBMs.

Analysis: In Legal Victory by Pharmacy Saves AWP (for now) (Council site), I noted that a recent court ruling has cast doubt on the First Databank settlement.  The Settlement called for First Databank to stop publishing Average Wholesale Price (AWP) data no more than 2 years after the final court order.
 
Wholesale Acquisition Cost (WAC) has been touted as a replacement for AWP. WAC is the manufacturer's list price to drug to wholesalers or direct purchasers, excluding prompt pay or other discounts.

Nine states currently incorporate WAC into ingredient cost reimbursement formulas for retail Medicaid prescriptions. In addition, NACDS proposed WAC-based reimbursement for brand drugs in June 2005 Congressional testimony, a position that they reiterated in a February 2007 comments about AMP to CMS.

Even if the original settlement had gone through, WAC would still have been available, as indicated on FDB’s web site: “First DataBank will continue to publish all other available drug pricing information, including WAC, Direct Price, and suggested wholesale price, as well as our clinical drug information.”  

Many people, including yours truly and the CFO of Medco Health Solutions (MHS), expected Average Manufacturer Price (AMP) to emerge as a new retail reimbursement benchmark rather than WAC. (See PBMs: Little Impact if Benchmark Changes to AMP – Council Site) 

TRICARE LIKES WAC

In case you don’t know, TRICARE provides a pharmacy benefit to all eligible Uniformed Services members called TRICARE Pharmacy Program Services (or TPharm). Eligible beneficiaries may fill prescription medications at military treatment facility (MTF) pharmacies; through the TRICARE Mail Order Pharmacy (TMOP); at TRICARE retail network pharmacies (TRRx); and at non network pharmacies.

Express Scripts (ESRX) currently has both the retail pharmacy and mail order contracts.

On Tuesday, the Department of Defense issued a consolidated (TMOP & TRRx) Request for Proposal (RFP) for TPharm. You can read the RFP for yourself by visiting the homepage for Solicitation No. H94002-07-R-0004. 

I am quite intrigued to see that WAC is the pricing benchmark.   For example, the “Total Expected Government Cost for Reimbursement of Retail Network Pharmacy Costs” (or TEGCFRORNPC) is computed using WAC (minus a discount from WAC and plus a dispensing fee). The Government also provided average WAC data for non-specialty brand name, non-specialty generic, specialty brand and specialty generic prescriptions under TPharm. (See Section L Attachment 6.)