What is the primary basis for PBMs billing terms to a plan sponsor?

The primary basis for pharmacy benefit managers (PBMs) billing terms to a plan sponsor is the Average Wholesale Price (AWP). AWP serves as a reference point for determining the pricing of prescription drugs. It represents the average price at which wholesalers sell medications to pharmacies, although it does not always reflect the actual transaction prices.

Using AWP as a basis allows PBMs to negotiate pricing and reimbursement rates with pharmacies and effectively manage costs for plan sponsors. In this context, AWP helps to establish the average market price for medications, which can then be utilized by PBMs to create pricing structures that ensure that plan sponsors receive competitive rates while still covering pharmacies' costs.

While the other options, such as Maximum Allowable Cost (MAC) and Wholesale Acquisition Cost (WAC), are also used in the pharmaceutical pricing landscape, they serve different purposes. MAC, for example, is used to determine the maximum reimbursement amount for generic drugs, which is significant but not the primary basis for overall billing terms. WAC reflects the manufacturer's list price and is not typically the basis for billing to plan sponsors as it can vary widely and may not offer the same level of standardization or consistency as AWP. The Discounted Pharmacy Rate refers to specific discounts negotiated at