AMP: Average Manufacturer Pricing

This is a new generation of a number that will be used for calculations to determine how much Medicare will pay pharmacy providers for generic prescription pharmaceuticals. This is an attempt to bring costs down to a number that is both a reasonable payment to providers while at the same time taking millions of dollars in costs out of the Medicare system. Experts challenge the change due to the unlikely end result of actually paying providers what would cover the cost of doing business with Medicare customers. This new number is a blend of what manufacturers charge to huge customers like warehousing chains and large wholesale distributors as well as very large mail order pharmacy customers buying from the manufacturer. Large customers contract with generic manufacturers and leverage the volume to lower costs. AMP is challenging to the majority of providers as they are not purchasing at the levels of mail order pharmacies or at the level of large chains. Mail order pharmacy pricing included in AMP is the most challenging. Mail order purchases are large, are almost always at a contract price due to volume, and will cause the AMP numbers to be far below market pricing. Most providers purchase from wholesalers who have enjoyed a large margin on generics. Chains, mail order, and wholesaler pricing could be 30% lower than market pricing that providers are paying for product. The generation of this new number AMP and using it in calculations for pharmacy provider payments is going to change the industry. The bottom line for providers is that a calculation using AMP starts out with a number far less than cost. The AMP number is far below market pricing, and then multiples as well as dispensing fees are added to that number to get to a payment amount. This new number AMP is an effort to phase out the average wholesale price AWP that was the industry standard. AWP as well as AMP are both numbers that could be far from market pricing.