When people argue about whether a pharmacy is paid “fairly,” they are usually arguing about two numbers: the cost of the medicine and the cost of dispensing it. NADAC addresses the first.
What NADAC measures
The National Average Drug Acquisition Cost is a published estimate of the average price retail community pharmacies pay to acquire a drug. CMS builds it from a voluntary monthly survey of pharmacies’ invoice prices, and publishes the resulting per-unit costs as public reference files. Because it is based on actual invoices rather than on a list price, it is widely treated as a neutral measure of acquisition cost.
Why states use it as a floor
A reimbursement model that pays “acquisition cost plus a professional dispensing fee” tries to ensure a pharmacy is not paid less than it spent to buy and dispense a medicine. Many state PBM-reform laws therefore set the reimbursement floor at NADAC plus a professional dispensing fee:
- the NADAC component covers the medicine itself; and
- the professional dispensing fee covers the cost of filling the prescription (pharmacist time, counselling, overhead).
The exact dispensing-fee amount, and whether the floor applies only to Medicaid or also to commercial prescriptions, is set state by state — which is what the State Tracker records for each state.