AWP, WAC, NADAC and MAC: Pharmacy Pricing Benchmarks Compared

A pharmacy that opens a PBM audit notice, or reviews a remittance line paying less than its invoice shows, may be looking at one of four pricing benchmarks: average wholesale price (AWP), wholesale acquisition cost (WAC), National Average Drug Acquisition Cost (NADAC), and maximum allowable cost (MAC). Each measures something different, and a PBM audit that flags the wrong NDC or package size against one of them can turn into a recoupment demand before the pharmacy identifies which benchmark was even in play. The benchmark and formula a network agreement applies are specific to that contract's rate schedule; pharmacies should read it drug by drug rather than assume it matches a different contract.

Average Wholesale Price Is a Compendium Number, Not a Paid Price

AWP is a benchmark published by private pricing compendia, not a price any party in the transaction actually paid. Medi-Span and RedBook currently publish AWP values, based on information drug manufacturers provide. First Databank, a third major compendium, stopped publishing AWP in 2011 after settling a class action over its AWP figures, though it said it would keep publishing other pricing data such as WAC. A contract line that reimburses a claim at "AWP minus" a stated percentage discounts a number the compendium assigned to that drug's NDC, not the price the pharmacy paid its wholesaler. Because AWP is not based on actual sales transactions, a rate built on AWP can fall below acquisition cost even when the pharmacy is paid exactly what the contract specifies.

Wholesale Acquisition Cost Is the Manufacturer's List Price

WAC is the price a drug's manufacturer publishes for selling to a wholesaler, before the rebates and discounts wholesalers and large buyers typically negotiate afterward. The same compendia that track AWP publish WAC from the prices manufacturers report. Because WAC excludes those downstream discounts, it tends to sit above what retail pharmacies pay, on average, to acquire a drug. WAC can appear in a network agreement as one of the price indexes in the reimbursement formula, and separately as a reference point some state agencies have used when setting MAC prices.

National Average Drug Acquisition Cost Is Built From Real Invoices

NADAC is the one benchmark in this group built mainly from the invoice prices pharmacies paid, not from a price a manufacturer or compendium reported. The Centers for Medicare & Medicaid Services contracts with the accounting firm Myers and Stauffer LC to survey retail community pharmacies nationwide and build NADAC from their purchase invoices, publishing updated figures weekly with a full monthly release. Federal Medicaid regulation requires state Medicaid programs to reimburse pharmacies based on actual acquisition cost, and NADAC is one benchmark CMS allows a state to adopt to satisfy that requirement; many states list it in their ingredient-cost formulas. A commercial PBM contract can reference NADAC too, though this Medicaid regulation does not require it to.

Maximum Allowable Cost Is the Payor's Own Number

MAC departs from the other three benchmarks in kind, not merely in method. No independent compendium publishes a MAC list. Each PBM builds its own MAC lists from the pricing sources it chooses, and a state Medicaid program that runs a MAC program sets its own MAC prices. A PBM's MAC rate can sit above, at, or below NADAC or WAC for the same drug, and a pharmacy may not be told which reference point was used unless the contract or state law requires disclosure. Agreements can name AWP, WAC and MAC together in a lesser-of formula, and MAC appears to be the predominant basis for generic claims. A shortfall never challenged through a MAC appeal or a broader audit appeal is a loss the pharmacy absorbs, and the invoice evidence either challenge requires comes from the pharmacy's own purchase records, not from any of these four benchmarks.

AWP and WAC are prices someone reported. NADAC is an average of the invoice prices pharmacies paid. MAC is the most the payor decided to pay for the drug.

Why Early Legal Counsel Is Critical

It is critical that pharmacies retain experienced healthcare defense counsel promptly after identifying a reimbursement shortfall tied to one of these benchmarks, or after receiving a PBM audit notice that depends on one. Early legal intervention can determine which benchmark actually governs the disputed claim, preserve the invoice documentation a MAC appeal or an audit appeal requires, and prevent a shortfall from being absorbed as an unchallenged loss or folded into a larger audit finding. Delaying review narrows the appeal window some states set by statute.

How Health Law Alliance Can Help

Health Law Alliance's attorneys have overseen 2,000+ audits. If a PBM's reimbursement does not match the benchmark your contract specifies, or a MAC appeal has stalled without a response, contact Health Law Alliance's PBM audit defense attorneys for a free, confidential consultation.