Skip to main content
DrugPrice

Average Wholesale Price (AWP)

A benchmark price for drugs that historically served as the basis for pharmacy reimbursement, often called the "sticker price that nobody pays."

How It Works

AWP was the dominant pharmacy reimbursement benchmark in the U.S. from the 1970s through the early 2000s but has been repeatedly discredited as a fictional number. First Databank, which historically published AWP, settled litigation in 2009 acknowledging that AWP was set at roughly 1.25 times WAC by convention rather than by actual market observation. AWP is typically WAC plus a 20-25% markup, though some generics carry AWPs inflated 10x or more above acquisition cost, a legacy of the "spread" era when pharmacies bought generics cheaply and billed Medicaid at AWP. CMS responded by developing the National Average Drug Acquisition Cost (NADAC) in 2013 as a transparent replacement, and state Medicaid programs have largely migrated to NADAC-based or AAC-based reimbursement. AWP still appears in some commercial pharmacy contracts and in 340B ceiling-price calculations as a reference point. For Orange Book drugs, AWP-based payment historically produced irrational margins: a generic with $5 acquisition cost might carry an AWP of $100, yielding a $95 pharmacy spread. The False Claims Act AWP litigation wave of the 2000s (Bristol-Myers Squibb, AstraZeneca, GSK, and others settled collectively for billions) effectively ended AWP as a Medicare Part B benchmark; Part B now uses Average Sales Price (ASP) plus 6%, a cost-plus model that has dramatically reduced oncology drug spread.

Related Terms

  • Wholesale Acquisition Cost (WAC), The manufacturer's list price for a drug sold to wholesalers, often called the "sticker price" before any rebates or discounts.
  • National Average Drug Acquisition Cost (NADAC), A CMS-published benchmark reflecting the actual average price retail pharmacies pay to acquire drugs from wholesalers, updated weekly.
  • Average Cost per Claim, The average amount Medicare pays per 30-day supply claim for a prescription drug, including both the plan's payment and the beneficiary's out-of-pocket cost.

Explore Drug Data

Most Expensive DrugsGeneric Drug WatchSearch All Drugs

About This Definition

This definition is part of the DrugPrice Drug Pricing Glossary, 49 terms explaining how prescription drug pricing works in the United States. All definitions are written in plain language for patients, caregivers, journalists, and healthcare professionals.

this entity is one of the U.S. Medicare prescription-drug pricing concepts that recurs across this site. The definition above is the technical answer; the paragraphs below add the practical context for how the concept connects to the CMS Medicare Part D Drug Spending data data behind every per-entity page on the site.

In the CMS Medicare Part D Drug Spending data data, this concept shapes one or more of the fields that drive the per-entity grades and rankings on this site. The methodology page describes which fields feed into which output; this glossary entry documents the underlying term.

Source: CMS Medicare Part D Spending, 2026.