In a recent post on the IVI-sponsored Health Affairs blog series, David Tawes and Marta Wosinka examine consequences of the disconnection between market prices and reimbursement, specifically in that Medicare still uses 2003 average wholesale prices (AWPs) for some drugs. Tawes and Wosinka point out that, in the case of drugs where the actual costs of acquisition are lower than the amount reimbursed by Medicare, physicians are incentivized to over-prescribe the drug. When the reverse is true, they explain that patients are likely to encounter difficulty in finding suppliers willing to accept lower Medicare payments. Tawes and Wosinka further describe policy actions that may be taken to correct these issues.

Read the full article here.

About the Health Affairs/IVI Featured Blog Series: Drugs and Medical Innovation — In partnership with Health Affairs, IVI is proud to sponsor the “Drugs and Medical Innovation” blog series. On an ongoing basis, articles in this series will explore topics such as value-based reimbursement, drug policy and pricing, balancing short-term access against long-term rates of innovation, and other relevant issues. Our goal is to create an open forum for sharing ideas and debating issues in these areas, extending the discussion to a broader audience.