What is a DAW Code?
DAW stands for "Dispense as Written". In the healthcare and pharmacy industry, it's a code used during the claims adjudication process to tell the insurance provider why a pharmacist is dispensing a particular medication—either the brand-name drug or a generic equivalent. These codes are critical for ensuring correct payment and adherence to a prescriber's instructions. While DAW might seem like a simple concept, the nuances of the various codes are complex and have a profound impact on patient out-of-pocket costs and pharmacy reimbursement.
The DAW code is a numeric value transmitted with an electronic pharmacy claim. It clarifies the reason for dispensing a specific product when a therapeutically equivalent generic may be available. These codes are not just for the pharmacist; they are integral to how insurance payers process and reimburse claims.
A Breakdown of Dispense as Written (DAW) Codes
The National Council for Prescription Drug Programs (NCPDP) sets the standards for DAW codes. The following are the most common codes and their meanings:
Prescriber Intent (DAW 1)
- DAW 1: Substitution Not Allowed by Prescriber. This is the most direct form of DAW. It is used when the prescriber indicates, through a specific instruction like writing "Dispense as Written" or "DAW" on the prescription, that the brand-name product is medically necessary. This mandates that the pharmacist must dispense the brand-name drug, even if a generic alternative exists.
Patient Choice (DAW 2)
- DAW 2: Substitution Allowed – Patient Requested Product Dispensed. This code is used when the prescriber permits generic substitution, but the patient explicitly requests the brand-name drug instead. In this scenario, the patient is often responsible for the cost difference between the more expensive brand and the generic, in addition to their standard copay.
Market and Supply Issues (DAW 4, 8)
- DAW 4: Substitution Allowed – Generic Drug Not in Stock. A pharmacist uses this code when a generic substitution is permitted, but the generic product is temporarily unavailable from the pharmacy's usual wholesale supplier. This allows the pharmacist to dispense the brand-name version in its place. Supporting documentation, such as wholesaler invoices, may be required during an audit to prove the generic's unavailability.
- DAW 8: Substitution Allowed – Generic Drug Not Available in Marketplace. This is used when the generic version of the drug is not currently being manufactured, distributed, or is simply unavailable throughout the national marketplace. This differs from DAW 4, which relates to a specific pharmacy's stock issues. Documentation is also key here for reimbursement.
Other Common DAW Codes
- DAW 0: No Product Selection Indicated. This is the default code used for most prescriptions. It indicates that the prescriber has not specified a preference for either the brand or generic. When a generic is available, the pharmacist will dispense it to save the patient money.
- DAW 3: Substitution Allowed – Pharmacist Selected Product Dispensed. This is used when the pharmacist makes the decision to dispense the brand-name drug instead of the available generic, often for a specific reason that must be documented. This code is not commonly used and may trigger audits from insurers.
- DAW 5: Substitution Allowed – Brand Drug Dispensed as Generic. In rare cases, a brand-name drug might be dispensed but billed to the payer as a generic. This could occur if the brand is cheaper or the patient falls under a specific program (e.g., 340B).
- DAW 7: Substitution Not Allowed – Brand Drug Mandated by Law. A state law or regulation may require the dispensing of a brand-name drug, overriding generic substitution.
- DAW 9: Substitution Allowed – Plan Requests Brand Dispensed. Some insurance plans may prefer the brand-name drug for specific medications, even when generic substitution is permitted by the prescriber. The pharmacist follows the plan's instructions in this case.
The Financial Impact of DAW Codes
DAW codes have a direct and often significant financial impact on both patients and pharmacists. Patients who receive a brand-name drug instead of a generic, particularly under DAW 1 or DAW 2, may face substantially higher out-of-pocket costs. Some insurance plans implement penalties where the patient pays their brand copay plus the cost difference between the brand and generic. In some instances, this penalty amount may not even count toward the patient's deductible or out-of-pocket maximums.
For pharmacists and pharmacies, incorrect DAW code usage can lead to a cascade of negative consequences. It can result in claim rejections, delays in patient care, and receiving only the generic reimbursement rate for a more expensive brand-name product. Inaccurate DAW codes are also a frequent discrepancy found during pharmacy audits, potentially leading to recoupment of payments by insurance payers. To avoid these issues, pharmacies must train their staff to use the codes correctly and maintain meticulous documentation.
Comparison of Common Dispensing Scenarios
| Scenario | DAW Code | Initiated By | Action/Reason | Typical Patient Cost Impact |
|---|---|---|---|---|
| Default Dispensing | 0 | None (Standard) | No preference indicated, generic is available and dispensed. | Lower (Generic) |
| Prescriber Mandate | 1 | Prescriber | Brand drug is medically necessary; no substitution allowed. | Higher (Brand), but potentially covered if justified |
| Patient Request | 2 | Patient | Patient requests brand, despite generic availability. | Higher (Brand), potentially with an additional penalty |
| Supply Issue | 8 | Pharmacist | Generic is not available in the marketplace. | Higher (Brand), but often reimbursed at brand rate |
Roles and Responsibilities
Several key stakeholders are involved in the DAW process, and understanding their roles is crucial:
- Prescriber: The physician or other healthcare provider is responsible for determining if a brand-name drug is medically necessary (DAW 1). They must provide clear instructions, often by actively indicating "dispense as written" on the prescription.
- Pharmacist: The pharmacist must accurately interpret the prescriber's intent and apply the correct DAW code during billing. They must also inform the patient of potential cost differences, especially in DAW 2 situations, before dispensing.
- Patient: Patients have a right to discuss generic substitution with their prescriber and pharmacist. While they can request a brand drug (DAW 2), they should be aware of the financial implications.
- Payer (Insurance Company): The insurance company processes the claim based on the submitted DAW code and their formulary rules. Incorrect DAW codes can lead to claim rejections or reduced reimbursement.
Conclusion
Understanding what is a DAW code on a prescription? reveals a layer of complexity behind every medication you pick up. While a simple numeric code, it represents a crucial communication link between the prescriber, pharmacist, and insurance payer. It dictates not only what medication is dispensed but also how it is paid for, directly influencing patient costs and pharmacy reimbursements. For patients, being aware of DAW codes and the implications of choosing a brand-name drug can help manage healthcare expenses effectively. For pharmacies, accurate DAW code usage and diligent record-keeping are vital for operational efficiency and proper financial management. This system ensures that all parties follow the correct protocol, from prescription to final dispense.
For more detailed information on regulations regarding DAW codes, refer to state-specific pharmacy laws, such as those published by the Ohio Board of Pharmacy.
