Tag Archives: private insurers

What is WAC and is it Outdated?

HEAL Blog is the recipient of the ADAP Advocacy Association’s 2015-2016 ADAP Social Media Campaign of the Year Award
By: Marcus J. Hopkins, Blogger

Every time we mention Hepatitis C (HCV) drugs, we talk about price; specifically, we speak about “Wholesale Acquisition Costs” (WACs), and how that company-designated measure sets the baseline for pricing throughout the healthcare landscape. But, the reality of pharmaceutical pricing is far messier than just the WAC cost. In response to last week’s HEAL Blog entry regarding HCV drugs and Medicare, one quite savvy worker within the public healthcare arena rightly noted that “nobody really pays that price,” which brings up a couple of equally (if not more important) questions: (1.) If nobody pays that price, why is it even used; and (2.) Why does no one actually pay those prices?

A WAC “…is, with respect to a pharmaceutical or biological, the manufacturer’s list price for the pharmaceutical or biological to wholesalers or direct purchasers in the United States, not including prompt pay or other discounts, rebates or reductions in price, for the most recent month for which the information is available, as reported in wholesale price guides or other publications of pharmaceutical or biological pricing data (PharmaLink, n.d.).” That definition is pretty loaded, because it really spells out the ingredients (and the problems) in the drug pricing sausage that is so frustrating to advocates and patients, alike. What one program, insurer, or individual pays for drugs may or may not be the same price paid by another, and that makes determining the actual cost of drugs problematic.

Flow chart demonstrating the confusing nature of the Wholesale Acquisition Costs

Photo Source: National Academy of Sciences

Pharmaceutical companies like to bandy about the phrase, “What the market will bear,” in relation to how they price their products, which isn’t really a fair statement, because they essentially have a captive market. They know that the products they manufacture are going to be purchased by government healthcare programs like Medicare, Medicaid, Ryan White Part B, and the Veterans Affairs (V.A.), and that those programs are essentially (and sometimes literally) required to provide their products to their clients. Outside of the U.S., in more civilized First World healthcare climes, private insurers are essentially nonexistent, as Universal Healthcare Coverage is the norm, and they can set the price they’re willing to pay, manufacturer be damned. So, “what the market will bear” really ends up meaning, “How much we can get U.S. government programs to pay without kicking up too much of a fuss.”

When the aforementioned reader says that we know it to be the case that “nobody really pays that price,” he’s 100% correct. Medicare programs are Federally-funded, state-administered programs, meaning that all fifty states, the District of Columbia, and the territories all have the ability to individually negotiate directly with manufacturers to get drug rebates and discounted prices, meaning that each individual program may pay entirely different prices, and those prices are not public information, due to existing Trade Secrets laws that prevent that data from being released from official sources. The V.A. automatically gets the “best price,” meaning that they’ll ostensibly pay the lowest price, so they’re not really in the equation. Medicare Part D, however, is a different kettle of fish, because it is essentially a market of private insurers who are reimbursed through the national Medicare program for their expenditures, and price negotiations are, for better or worse, left up to those private insurers’ employees. According to research, while having more insurers on the Part D marketplace lowers costs to consumers, the Medicaid approach of state employees doing the negotiating actually works out to be cheaper than those “Free Market” solutions.

Because the WAC is a baseline measure against which all discounts and rebate agreements are measured, it makes determining the actual end price of drugs very difficult to determine publicly, and frankly, it’s a terrible model for the U.S. to continue participating in if programs are expected to exist in perpetuity. At some point, “what the market will bear” will become “What tuned-in Americans are willing to tolerate.”

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Disclaimer: HEAL Blogs do not necessarily reflect the views of the Community Access National Network (CANN), but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about Hepatitis-related issues and updates. Please note that the content of some of the HEAL Blogs might be graphic due to the nature of the issues being addressed in it.

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