Average wholesale price for prescription drugs: is there a more appropriate pricing mechanism?

This paper defines the average wholesale price (AWP), which has become an important benchmark for prescription drug pricing and reimbursement.The paper briefly explains the AWP's various uses in the pricing of prescription drugs, highlights some of the problems that have emerged as a result of the way it is reported and used, and explores some of the possibilities for reform. The paper also contains a glossary of commonly used terms, as well as an appendix that lists the state Medicaid reimbursement formulas.