Principles on Average Wholesale Price Reforms

The Biotechnology Industry Organization (BIO), in anticipation of possible debates on the changes to the Medicare reimbursement formula for currently covered drugs, has developed the following principles for consideration of various proposals. While we acknowledge that the current formula "Average Wholesale Price" (AWP) minus five percent may be changed, BIO urges Members of Congress to carefully consider the potential effects of various proposed changes to AWP on the quality of patient care and access to biotechnology products.

Any changes to AWP may have a disproportionate impact on the biotechnology industry, since a large percentage of covered products in the outpatient setting are biologics, products that are often associated with unique costs for handling and administration. BIO urges policymakers to consider these costs, and the potential impact on biotechnology, before implementing changes to AWP that could hamper access to biotechnology products.

Principle 1-The quality of patient care must be the main consideration if changes to AWP are made.

Any changes to the AWP formula that limit patient access to the most innovative and effective products available will negatively affect patient care. Biotechnology products and other medicines covered by Medicare represent a unique form of therapy that can improve patient quality of life by eliminating hospitalizations and other more costly forms of care. BIO will support only those efforts that ensure adequate reimbursement for covered products so that all Medicare beneficiaries have access to the best our health care system has to offer.

Principle 2-Any reimbursement benchmark for providers should be independent of government pricing mandates.

BIO is staunchly opposed to government fee schedules or price controls, which have been shown to hamper innovation. Any replacement for AWP or changes to AWP calculations must not be based on government price controls, instead, should reflect prices that the affected providers pay. Prices such as the Federal Supply Schedule (FSS) or other prices unilaterally set by the government should not be considered.

Principle 3-If changes to AWP are made, these changes should take into account the professional services of physicians and other providers that accompany the administration of covered products.

A large number of the products currently covered by Medicare are for treatment of oncology, hemophilia, kidney disease and other life-threatening illnesses. As a result, the providers administering the products are often providing a wide range of other services. Some provider organizations have presented evidence that their members are not being adequately reimbursed for their professional services and that any differential between AWP and provider acquisition cost goes to make up this gap. BIO urges Congress to address this issue so that any AWP changes do not negatively affect patient access to care.

Principle 4-If changes to AWP are made, these changes should take into account the fact that the handling, storage and administration of biologic products often involves unique costs.

Biologic products administered by physicians are by their very nature complicated. Virtually all require special handling well beyond what is required of the oral medications that are most familiar to policymakers and patients. Moreover, administration of these products can often take several hours and a significant dedication of resources. Any change to physician reimbursement must take into account these unique costs so that biologic products are available to Medicare patients who need them.


The Biotechnology Industry Organization (BIO) represents more than 1,000 biotechnology companies, academic institutions, state biotechnology centers and related organizations in all 50 U.S. states and 33 other nations. BIO members are involved in the research and development of health care, agricultural, industrial and environmental biotechnology products.

BIO's website has a variety of talking points on the potential for harm from price controls and also lists the hundreds of members the organization has-many of which are small companies dependent on venture capital streams that could be significantly harmed by price controls or even the threat of price controls.