July 30, 2007
Of all pharma's marketing tactics, the hardest to swallow was "marketing the spread." This was a scheme developed in the 1990s for physician-administered drugs (PADs)—injectables, cancer drugs, etc., which are purchased from wholesalers by physicians and reimbursed by Medicare or third-party payers. Until recently, reimbursement was based on Average Wholesale Price (AWP). This sounds like it ought to mean the average of prices paid to wholesalers, but in practice, it was always closer to sticker price. Manufacturers discovered that they could give physicians a tidy bonus by creating a spread between AWP and what docs paid.