$46/box Alcohol Swabs — Medicare 2019 Spend
Author credit: Whitney Puyang, PittPharmacy PharmD Candidate 2023
Back in 1969, there was this grand ole dream that an Average Wholesale Price, or AWP, would be set for every medical product that could be billed so that insurance companies and the Government could set costs and reimburse accordingly. This would be the proper value of a product, setting fair prices for both consumer and producer.
An ambitious dream and system was soon overrun by predatory pricing from manufacturers, wholesalers, and pharmacies who now charge Medicare Part D $46 for a box of 100-count alcohol wipes.
(Yes, you read that right.)
Those little boxes of alcohol wipes? The little squares, so disposable and readily available, so essential to anything that needs to be clean! Even paying $5 for them over-the-counter seems like a lot. The ones we carry at Blueberry Pharmacy cost just $1.02 for that same box.
But Medicare paid up to $46 a box for them in 2019, accounting for a whopping total of $80+ million spent.
But if Medicare was charged $1.02 per box, Blueberry’s price, instead of $45, that could have been only $4.3 million taken out of taxpayers’ pockets. Imagine having a cool $75 mil to spend elsewhere (or to not pay in taxes to begin with). Now imagine that kind of predatory pricing being standard across every single prescription/medical product, and you can start to see why American healthcare is so expensive.
Digging into the data further, nearly $76 million was spent on alcohol swabs produced by manufacturers that set high AWPs. Surely there has to be some rhyme or reason why the prices are set so high by manufacturers — these are “averages” after all, right? Maybe the cost of labor or ingredient cost of those little cotton pads? Maybe they’re extracting alcohol from hand-picked magic beans, harvested only by climbers from giant organic beanstalks, which is why the price is inflated so high.
As reasonable as that sounds, the truth is that manufacturers make AWPs so high because they know collusion with other entities allows them to abuse the system. Even the boxes of swabs with high AWPs only cost Blueberry Pharmacy $1.80/box to acquire. Manufacturers know that since pricing is based off of the AWP, more pharmacies will buy their product for the higher reimbursement that will ensue. AWPs also aren’t strictly regulated, leading to much abuse. In fact, there have been lawsuits in the past raised against wholesalers and other entities that decide AWPs all over the United States; many insurers are even slowly turning against using AWP, and turning to alternate methods to determine pricing.
However, pricing that involves AWP is still the predominant factor for how medications are priced — meaning that this twisted price, like the core of a black hole, distorts everything within its reach, including your prescription costs. Nearly EVERY pharmacy out there sets their retail price (sometimes referred to as Usual and Customary, U&C, or list price) using an algorithm based on AWP.
You probably have other things you want to spend money on, aside from medical equipment and medications. The extra $44/box Medicare paid could be a week’s grocery bill for a single person, or the internet bill, or gas. Our healthcare system is reaching an event horizon of financial corruption and part of that is how arbitrarily expensive the prices are set for simple items. Arguably, the system would have been better off if people just went out to their community Blueberry Pharmacy and purchased their own $1 boxes of alcohol swabs out of pocket.
The next time you wonder why your deductible was met so quickly, or why everything is so expensive: know that AWP is slowly sucking in your finances and spaghetti-fying the healthcare system.
References:
CMS 2019 Medicare Part D Spending Dashboard
Average Wholesale Price for Prescription Drugs: Is There a More Appropriate Pricing Mechanism?
