Tag Archives: WAC

What is WAC and is it Outdated?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.”

References:

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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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Behind the Scenes at Hepatitis, Inc.

By: Marcus J. Hopkins, Blogger

The Hepatitis Appropriations Partnership (HAP) and the National Viral Hepatitis Roundtable (NVHR) hosted a panel discussion on Wednesday, July 29th, 2015, in Washington, D.C. to discuss the burgeoning Viral Hepatitis crises in the United States. The purpose of the roundtable was bring together Hepatitis advocacy groups, national organizations, drug manufacturers, and government officials to help attendees gain a better understanding of the political, medical, and social landscapes upon which the Hepatitis game is played.

If that last statement sounds glib and slightly nefarious, it should – the meeting, at times, became quite contentious, as these roundtables frequently do. Any time you put a large number of people together in one room, each of whom answer to different stakeholders, tempers tend to flare, emotions run high, and civility can take a backseat. This is the nature of the high stakes game of addressing infectious disease action plans, policies, and expenditures.

Perhaps the biggest issue that faces those attempting to address Viral Hepatitis (VH) is one of clarity – virtually every representative in the room made some argument that their biggest hurdle was the lack of comprehensive information of one sort, or another.

From the Centers for Disease Control and Prevention (CDC) Division of Viral Hepatitis’ perspective, the information gap centers primarily around the lack of consistent surveillance techniques, data, and reporting:

Each state collects data about Hepatitis differently…if they collect data, at all. Because the CDC has yet to specifically define how to track VH, each state has its own interpretation of how they monitor and account for the virus. Some states track acute Hepatitis, others track chronic cases, and some simply don’t track the virus at all. As a result, attempting to gain a realistic and accurate understanding of the breadth and scope of the epidemic is incalculably difficult.

From the perspective of the Centers for Medicaid and Medicare Services (CMS), the information gap centers around the cost of treatment:

What differentiates Medicaid from Medicare is that the latter is a national federal program, making it much easier to plan for the cost of treatment. Because Medicare is legally prohibited from bargaining for better drug prices, the cost of drugs is stable, across the board – it is easily quantifiable and expenditures can be accurately tracked.

Medicaid, however, does not benefit from a national infrastructure – it is 56 different programs, each of which has its own negotiated pricing agreement with pharmaceutical companies. This means that there could ostensibly be 56 different prices being paid for the same drug. This makes quantifying the cost the Medicaid on a national level much more difficult.

Complicating the process is the fact that publicly releasing the prices being paid by each Medicaid program is prohibited by law. As a direct result, Federal monitoring of drug costs must rely on antiquated pricing averages – Average Wholesale Cost (AWC), Wholesale Acquisition Cost (WAC), and National Average Drug Acquisition Cost (NADAC) – which do not accurately reflect the prices that are actually being paid.

An additional frustration for CMS is the lack of transparency on the part of pharmaceutical companies. These private entities are extremely secretive about the formulas they use to determine the price of their drugs. This lack of clarity has become a hot topic, in recent years, thanks in no small part to the high price of HCV therapies.

Participants at the meeting, when attempting to ask why releasing the actual prices being paid by Medicaid programs, were met with the argument, “Well, the pharmaceutical companies aren’t being transparent about why their drugs cost so much.”

These types of non-answers leave everyone with a bad taste in their mouths. The CMS is unhappy, because advocates and organizations keep needling them for information they cannot legally release;

Advocates are frustrated, because no one will explain why it’s illegal to release this information to the public, as Medicaid is a taxpayer-funded program, and this information should be made available without filing a Freedom of Information Act (FOIA) request.

Hepatitis organizations are frustrated by the lack of accountability this type of answer exemplifies. CMS’ response attempts to take the onus of responsibility and place it directly upon pharmaceutical companies, despite the argument made by pharmaceutical companies that, as private entities, they are entitled to their proprietary information. As a result, HCV organizations find themselves attempting to get specific pricing answers from both private and public entities, both of whom redirect those requests to the other.

A big issue that kept resurfacing throughout the roundtable was the lack of clarity around why the Medicaid Prior Authorization (PA) requirements are more rigorous for HCV therapies than for virtually every other disease or condition. Again, because there are 56 different Medicaid programs, each program has its own set of PA requirements, some of which have come under heightened scrutiny.

One of the more onerous requirements involves behavioral or lifestyle prerequisites in order to receive approval for treatment. According to several representatives present, some of these requirements include abstinence from alcohol consumption and/or intravenous drug use. The apparent thinking behind these restrictions is that treatment is too expensive to “waste” on clients who will simply be re-infected at a later date.

This places HCV in the unique position of being one of the only conditions for which treatment is predicated upon whether or not those infected are exhibiting certain behaviors. Perhaps the best comparison made by one of the participants was to HIV treatment – how would the conversation go if receiving treatment for HIV was predicated upon whether or not the client abstained from sexual activity?

From the Office of Management and Budget (OMB), the lack of clarity revolved around the disparity in funding levels between HIV and VH:

In a very informative set of slides, the OMB representative provided estimated infection rates – HIV – 1.17 million; VH – 3.6 million – versus the funding levels for those respective diseases. Funding for HIV far outstrips that for VH, despite the cost of a curative treatment being lower (meaning a one-time cost, for most patients, versus a lifetime expenditure for many Medicaid/Ryan White clients).

What the OMB rep also accurately pointed out is that, in the world of disease funding, every cause is very protective of the money funneled to their particular cause, and HIV advocates, in particular, are loathe to even discuss the possibility of reallocating HIV funds for us in VH initiatives.

From my own perspective, the incredulity expressed over the spending disparity between HIV and VR is somewhat misplaced. We’ve been dealing with HIV for almost 35 years, and for the first half of those years (at least), HIV was seen as a death sentence for anyone unfortunate enough to become infected. It should, therefore, come as no surprise that more funds are allocated for HIV, than for VH.

Additionally, the viruses have fundamentally different “infection-to-death” timelines, when left untreated. HCV, as an example, is a relatively slow-acting disease – as one person so aptly phrased it, “When someone is diagnosed with HCV, the narrative is, ‘They’ve got maybe another 30 years.” HIV, however, poses far greater risks to patients who go untreated, as the nature of the virus leaves its host highly susceptible to death by way of secondary infection.

This explanation, however, rarely provides a true sense of urgency and understanding to people who are not infected with HIV, not involved in the community, aren’t as educated about the virus, or who are only looking at numbers on a page. As many times in as many ways as people can explain the peril, until HIV actually has an impact upon someone, it’s very difficult to comprehend the nature of the threat.

All of these issues of clarity boil down to one significant sticking point – resources are scarce. Neither the Federal nor state governments has the money or the manpower to actively pursue a comprehensive plan of attack on VH issues.

Surveillance is bad, data is incomplete, and, realistically, that situation isn’t likely to change any time soon. Testing, reporting, and tracking all cost money – money that just isn’t there to spend.

Programs tasked with treating or paying for HCV treatments are focused more on immediate, short-term costs, rather than looking at early, fast-acting, easily tolerate curative treatment in terms of long-term savings. With Conservative austerity policies being the flavor of the week, that’s unlikely to change in the current political environment.

Those austere spending policies in place, everyone’s “piece of the pie” is what it is – if you give more money to VH, it has to come from somewhere else, and no one’s willing to forego their own dollars. And, regardless of how many people say we “…need to ask for a bigger pie,” the political reality is that we’re more likely to get a smaller pie, after the dust settles. That is unlikely to change.

It’s a sad reality to face, but the big issue is money, on every front, and no one has a clear picture of how to get more of it; moreover, without transparent pricing information, we’re unlikely to wind up with a clear strategy for how to spend what money is there.

Lest one think that I left this roundtable feeling enervated and hopeless, that’s not the case. Rather, I find myself more dedicated to continuing the course of my research efforts, and doing my best to refine them; to finding better ways to get around the CDC’s lack of clear reporting requirements in order to provide a hopefully clearer picture of the “real” state of the HCV epidemic in the U.S. For those of us who have dedicated our lives to serving the HIV community, transitioning over to HCV is a natural step, resources be damned.

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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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