2022 Q2 Rx Newsletter – Can NADAC pricing save employers at the pharmacy?

2022 Q2 Rx Newsletter – Can NADAC pricing save employers at the pharmacy?

What is NADAC Pricing?

The National Average Drug Acquisition Cost (NADAC) is intended to be  the national average of the prices at which pharmacies purchase a prescription drug from manufacturers or wholesalers.

NADAC is designed to “create a national benchmark that is reflective of the prices paid by the retail community pharmacies.” 2 The NADAC rate is defined by “drug grouping, drug category, and pharmacy type calculated as the average of the per unit cost observations.” 2 Simply put, it is the average of drug acquisition cost submitted by retail pharmacies.

The NADAC for prescription and over-the-counter covered outpatient drugs is reported at the 11-digit National Drug Code (NDC) level.

Who uses NADAC?

Currently, NADAC pricing is primarily used by Medicaid for outpatient drugs. The NADAC and comparison data are updated weekly. Each month new data is posted at Medicaid.gov based on the prior months Retail Price Survey.

What is the difference between NADAC and AWP pricing?

The AWP, or average wholesale price, is a pharmaceutical term that describes the average price at which wholesalers sell drugs to physicians, pharmacies, and other customers. AWP “has become an important prescription drug pricing benchmark for payers throughout the health care industry.” 1 Payments are typically based around AWP. For example, many state Medicaid agencies utilized published drug pricing benchmarks like AWP in the past “as a primary mechanism to determine payment for drug ingredient costs.” 2

However, AWP is not an accurate reflection of actual market prices for drugs because it is derived from self-reported drug manufacturer data. Moreover, this benchmark has faced a lot of criticism, scrutiny, and litigation because of concerns that many AWPs are artificially inflated. 2

Since 2002, AWP has been under scrutiny and the subject of investigations, litigation, and legislative proposals. In September of 2011, a major publisher of pharmacy data discontinued its publication of AWP, which “heightened the need for an alternative data source for states to use when setting drug ingredient costs.” 2

As more states begin to adjust their legislature to include NADAC pricing outside of just Medicaid, some may begin to see lower costs associated with their pharmacy medications.

 

Sources:

  1. “Average Wholesale Price for Prescription Drugs: Is There a More Appropriate Pricing Mechanism?”, National Library of Medicine, accessed May, 2, 2022, https://www.ncbi.nlm.nih.gov
  2. “Methodology for Calculating the National Average Drug Acquisition Cost (NADAC) for Medicaid Covered Outpatient Drugs”, Centers for Medicare & Medicaid Services, accessed May 2, 2022, https://www.medicaid.gov/nadacmethodology
  3. “Pharmacy Pricing”, Medicaid.gov, accessed May 2, 2022, https://www.medicaid.gov/medicaid/prescription-drugs/pharmacy-pricing

 

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