Components of a pharmacy's drug price

AWP - "AWP" is an acronym for Average Wholesale Price. A pharmacy acquires this price from a commercial listing, but usually pays less. However, the drug coverage entities (i.e. insurance companies and government drug coverage programs) reimburse the pharmacy based on this price. The amount of the AWP depends on whether the drug is a brand or generic version, drug costs from development, research, patnent, manufacturing, marketing, distribution, and others beyond the scope of this definition. Drug costs may often be inflated due to the fact that the manufacturer has a monopoly from the patents on brand versions.

% (percent) mark-up - this means the gross profit or the percentage above the cost (let's assume for simplicity that "cost" means AWP). If the selling price has a mark-up of 30% on an AWP of one dollar than the price would be $1.30.

Professional fee - this is a service fee tacked onto the price by the pharmacy

Final cost - this usually includes all of the AWP, % mark-up, and professional fee but will depend how a particular pharmacy builds their price. The price structure will vary from one pharmacy to another.

Co-pay - a fee (instituted by an insurance company or other similar entity) that the patient will pay to help share the cost. This fee will generally be higher for brand drugs and lower for generics.

The pharmacy will then charge the third party an amount equal to the final cost minus the co-pay.