In the United States the Average Wholesale Price (AWP) is a prescription drugs term referring to the average price at which drugs are purchased at the wholesale level. The term was originally intended to convey real pricing information to third-party payors, including government prescription drug programs. Commercial publishers of drug pricing data such as Red Book and First DataBank have published AWP data since at least 1970. According to the Red Book, published by Thomson Medical Economics, the pricing information is “based on data obtained from manufacturers, distributors, and other suppliers.” Whatever method such information was obtained, it turns out that published AWPs are grossly inflated relative to actual market prices for drugs.
For decades, AWP has been used to determine third-party reimbursement throughout the health care industry because third party payers have no other reliable method of obtaining real market prices (most contracts contain confidentiality clauses). Reimbursement amounts are typically based on AWP minus some percentage. Because published AWPs often dramatically exceed the real prices of drugs, many states have brought lawsuits against the pharmacuetical manufacturers and others, alleging fraud and violations of consumer protection laws.
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