Wholesaler acquisition cost

To establish EAC, most third parties use a standardized drug cost estimate that often is based on average wholesaler price (AWP) or wholesaler acquisition cost (WAC). Theoretically, AWP is the price that the wholesaler charges to pharmacies, but in reality, AWP is the list price rather than the actual price. Just as the sticker price for a car is an overestimate of the price someone actually pays for the car, AWP is an overestimate of the price pharmacies pay for the drug product. A government study found that pharmacies purchase brand-name drug products from the wholesalers at an average rate of AWP less 21.84 percent (OIG, 2001)... 

Average wholesaler price (AWP) Estimated acquisition cost (EAC) Maximum allowable cost (MAC)... 

The most obvious cost associated with an inventory is the acquisihon cost. This is the cost the pharmacy pays to the supplier, be it the manufacturer, the wholesaler, or other sources. TTie cost associated with the acquisition cost includes the markup the wholesaler may impose, discormts offered (e.g., cash or quantity discounts), and cost of the product itself. 

Ps. the wholesaler s initial unit selling price, i.e., the retailer s unit acquisition cost in the absence of the discount. 

We find simple contracts that achieve coordination in both the traditional supply chain and the supply chain with drop-shipping. According to these contracts, in the traditional channel the wholesaler subsidizes a portion of customer acquisition expenses as well as compensates the retailer for inventory carried over. In the case of drop-shipping inventory compensation goes from the retailer to the wholesaler. If the wholesaler can choose the wholesale price, the proportion of the customer acquisition expenses to subsidize, and the inventory compensation, an arbitrary split of profits can be achieved. In any case, the proportion of profits that the wholesaler captures coincides with the proportion of customer acquisition costs she subsidizes. Therefore, the higher the subsidy, the higher the wholesale price and the higher the wholesaler s profits. 

The wholesaler buys the product at a fixed unit cost c and sells it to the retailer at a fixed unit wholesale price w. The retailer holds inventory and sells it to the customers at a fixed unit price r. The retailer here is the sole decision maker who decides on both the stocking quantity and the customer acquisition spending. Similar to model /,... 

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