THOMAS W. CORBETT, JR. Attorney General Pharma Conference National State Attorney General Program May 10-11, 2007 James A. Donahue, III Chief Deputy Attorney General Antitrust Section
The Zen of AWP How knowing what AWP is and should be can provide enlightenment
The Theory System needed to purchase drugs while neither enriching, nor impoverishing pharmacists System had to provide efficiency incentives Needed replicatability
The Problems The Lake Wobegon Problem The Surveys Lying, Cheating and Stealing
The Lake Wobegon Problem Part 1: An average means that someone is paying an above average price for drugs and losing money on a sale to a government program Part 2: Since AWP was first adopted in the 1960s, the pharmacy business has changed so that all drugs stores are above average.
The Surveys Price are determined by surveys conducted by private reporting services No one is required to be honest with these services. Think of the penalty you would face if you answered a survey question dishonestly.
Lying, Cheating and Stealing As the difference between AWP and actual wholesale prices grew, an opportunity arose to “ market the spread. ” Effect of marketing the spread is reverse competition: Competition to offer ever greater spreads which mean higher prices.
Lying, Cheating Stealing Part II Differences between AWP and real wholesale prices have grown across the board. Markups can be used for marketing, rebates, detailing. AWP is the major tool to limit transparency in drug pricing.
The Bottom Line As Judge Stearns stated in rejecting a similar argument, “ The suggestion that Congress would deliberately condone a bribery scheme using public funds to enrich drug manufacturers and physicians is, to say the least, unusual. ”
Pennsylvania’s AWP Lawsuit Filed in March Now removed to MDL, Motion for remand pending. Allege fraudent pricing on 319 drugs by 37 defendant drug company defendants. Involves both doctor dispensed and pharmacist dispensed drugs.
The Future of AWP Various other average pricing guides My favorite: Competitive Bidding
Role of Attorneys General Recover Damages for State Agencies Recover Damages for Consumers Obtain industry Reform Perform Law Enforcement Role: Deterence