Pricing terms, decoded
There is no single “price” for a drug. There are a dozen, each built for a different purpose by a different party. Here's what each one actually means — and which ones are real transaction prices versus made-up benchmarks.
The one idea that unlocks the rest
Some prices are list prices — a sticker the seller made up, before any discount. Others are transaction prices — what money actually changed hands. Confusing the two is the single biggest source of pricing myths. When you meet a new acronym, ask first: list, or real?
NADAC — National Average Drug Acquisition Cost
What it is: the average price retail pharmacies actually pay to buy a drug from wholesalers. A real transaction price — arguably the closest thing to “true cost” that's public.
Who makes it: CMS (the federal Medicare/Medicaid agency), from a voluntary monthly survey of pharmacy purchase invoices. Published weekly, free, per NDC.
Why it matters: most state Medicaid programs now reimburse pharmacies based on NADAC plus a dispensing fee. It's the pricing backbone of this whole site — every NADAC chart you see here comes from that survey.
The catch: it's a retail-pharmacy survey, so it doesn't cover drugs given in hospitals or clinics, and participation is voluntary.
WAC — Wholesale Acquisition Cost
What it is: the manufacturer's official list price to wholesalers. A list price — the number the manufacturer publishes before any of the discounts and rebates that almost always follow.
Who makes it: the manufacturer, unilaterally. When you read that a drug's “price rose 9%,” it's usually WAC that moved. Reported into commercial databases (Medi-Span, First Databank) that pharmacies license.
The catch: almost nobody pays WAC. It's the starting point for negotiations, not the ending point — but because it's a public list, contracts and news stories lean on it heavily.
AWP — Average Wholesale Price
What it is: a benchmark that historically sat about 20% above WAC (many drugs are literally AWP = WAC × 1.2). Widely used in pharmacy contracts as the number reimbursement is calculated off of — e.g. “AWP minus 18%.”
The catch: it's so detached from reality that the industry joke is AWP stands for “Ain't What's Paid.” It's a list benchmark, not a real price — but it remains embedded in thousands of contracts.
ASP — Average Sales Price
What it is: the average price a manufacturer actually sold a drug for, including most discounts and rebates. A real, net transaction price.
Who makes it: manufacturers report it to CMS quarterly. Medicare Part B (drugs administered in a clinic — infusions, injectables) pays ASP + 6%.
Why it matters: for clinic-administered drugs ASP is the reimbursement world. DrugDashboards shows the ASP payment limit on those drugs' pages — often the only public price for a hospital-only injectable NADAC never sees.
AMP and Best Price — the Medicaid engine
AMP (Average Manufacturer Price): the average price wholesalers and pharmacies pay a manufacturer for a drug. Reported to CMS but confidential — used to calculate Medicaid rebates, not published per-drug.
Best Price: the lowest price a manufacturer offers almost any buyer. Medicaid gets at least this good a deal. Together, AMP and Best Price drive the rebates manufacturers owe Medicaid — covered on the Medicaid page.
MAC — Maximum Allowable Cost
What it is: a ceiling a payer (usually a PBM) sets on what it will reimburse for a generic drug — regardless of what the pharmacy actually paid. Each PBM keeps its own MAC list.
The catch: MAC lists are proprietary, differ between PBMs, and can be updated slowly — so a pharmacy can pay more for a generic than the MAC pays back, losing money on the fill (an “underwater” claim). More on the community pharmacy page.
FUL — Federal Upper Limit
A federal cap on what Medicaid will pay for common multi-source generics, set at 175% of the weighted average AMP. It keeps federal Medicaid spending on cheap generics in check.
Two more you'll hear at the counter
U&C (Usual and Customary): the cash price a pharmacy would charge a walk-in with no insurance. Plans often pay the lower of their contracted rate or U&C.
Ingredient cost + dispensing fee: a pharmacy's reimbursement is almost always these two parts — a benchmark for the drug itself (NADAC, MAC, or AWP-minus) plus a flat professional fee for filling it. When the fee doesn't cover the real cost of dispensing, pharmacies lose money even on drugs they buy well.
Quick reference
Real transaction prices: NADAC (what pharmacies pay), ASP (what manufacturers sold for), AMP (Medicaid's basis). List / benchmark prices: WAC (manufacturer sticker), AWP (WAC + ~20%), MAC and FUL (payer ceilings).