Pricing Policy Update

Important Notice for Wolters Kluwer Health’s Medi-Span Customers:

Wolters Kluwer Health would like to provide its Medi-Span customers with an update about its previously announced plan to discontinue publishing Average Wholesale Price information (AWP) in its drug information files. In May 2007, we announced that we would work with customers, professional and trade organizations and industry leaders to facilitate the creation of sustainable drug price benchmarks that could replace AWP. Despite our efforts and those of other industry participants, no comprehensive alternative benchmark price is yet available. Recently, the NCPDP's Special Committee on AWP recommended WAC as a possible replacement price benchmark for single-source products, but industry participants have not uniformly adopted that recommendation. That Special Committee also made no recommendation on a replacement price benchmark for multi-source products.

Wolters Kluwer Health remains committed to providing benchmark pricing information that is useful to its customers and the industry. Based on comments from our customers and other industry participants, we understand that discontinuation of AWP before development and industry-wide acceptance of a viable alternative price benchmark to replace AWP could create significant customer problems and confusion or disruption throughout the entire healthcare industry. We also recognize that changes to the data published in our drug information products may impact our customers’ businesses and require significant lead time for them to make corresponding technical and contractual adjustments. It appears that consensus around a comprehensive alternative pricing standard will not be reached this year in time for such necessary adjustments to be made before the end of 2011, as we had expected.

As a result, Wolters Kluwer Health intends to publish AWP (or a similarly determined benchmark price) until relevant industry or governmental organizations develop a viable, generally accepted alternative price benchmark to replace AWP. Wolters Kluwer Health expects to continue to support industry efforts to identify a widely accepted, alternative benchmark and, once such a viable AWP alternative exists, to work with its customers to migrate to publication of that new price benchmark in place of AWP, under an appropriate implementation and transition schedule.

To promote a clear understanding of the nature and source of the AWP included in Medi-Span’s drug information products, we wish to call your attention to the following:

»»First, despite its name or possible use as an index, the AWP published by Wolters Kluwer Health is not an “average” of actual wholesale prices. It is not derived from, and does not reflect, either the actual prices paid in sale transactions between wholesalers (meant to include any who buy direct from manufacturers) and their customers, or any actual discounts, rebates or other price reductions offered by wholesalers in connection with those transactions. In fact, a wholesaler may agree to sell its drug product to one or more of its customers at a price that is lower than the Medi-Span-reported AWP.

»»Second, Wolters Kluwer Health relies entirely on pricing information reported to it by drug manufacturers in determining the AWP that it publishes for a particular drug. Wolters Kluwer Health does not perform any (i) independent investigation into or verification of any pricing information reported to it by manufacturers, or (ii) any survey or independent analysis of actual prices paid by wholesalers, retailers, hospitals, physicians or other drug purchasers in the marketplace.

A complete explanation of Wolters Kluwer Health’s AWP Policy is available at www.medispan.com/common/pdf/wkh_AWP_policy.pdf. You are encouraged to review that AWP Policy carefully and in its entirety, both before using the pricing information contained in the Medi-Span drug information products and when making ongoing decisions about reasonable and appropriate uses of that information.

The following is a summary of certain information contained in the Wolters Kluwer Health AWP policy, and is qualified by the more complete information contained in that policy. In some cases, the AWP included in Medi-Span drug information products is the price that a manufacturer supplies to Wolters Kluwer Health and designates as the manufacturer’s Suggested Wholesale Price (SWP). If a manufacturer does not provide an SWP, the Medi-Span-published AWP is determined by applying a markup to the Wholesale Acquisition Cost (WAC) or Direct Price (DP) provided to Wolters Kluwer Health by the manufacturer. In most cases, the markup is a standard 20% over the manufacturer-supplied WAC or DP, but the markup may be lower than 20% if there is historical data supporting such a lower markup. It is important to note that, when the published AWP is based on a manufacturer-provided SWP, it may be greater than 120% of the manufacturer-reported WAC or DP.

If you have any questions, feel free to contact your account manager or our customer support department at 1-800-388-8884 or via email at MediSpan-Support@wolterskluwer.com.