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Average Wholesale Price (AWP), was first introduced in the 1960s as a basis to standardize California Medicaid payments. Over time, AWP was adopted as the pricing standard for virtually all third-party prescription programs. This includes 33 states that have written AWP into rules and statutes for the calculation of workers’ compensation prescription fee schedules, as well as the Centers for Medicare and Medicaid Services (CMS). CMS announced as recently as June 2009 that AWP is to be used for calculating prescription drug prices in a Medicare Set-Aside (MSA) settlement. During this time, market forces have been at work applying pressure to the value of AWP both as a benchmark and as the actual dollar value of drugs processed through Pharmacy Benefits Managers (PBMs).

Now, without the benefit of those market forces and as the direct result of a lawsuit challenging the validity of AWP, the two largest publishers of AWP values — FirstDatabank and MediSpan — have announced that they will cease publishing AWP within two years of the lawsuit settlement date. Stated another way, AWP will not exist as we know it by March 2011.

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