Reference Based Rx Pricing

PBM’s have traditionally used Average Wholesale Price (AWP) and Maximum Allowable Cost (MAC) as pricing benchmarks. Now there is another method……………..

Your current PBM contract reimbursement rates are based on both of these. AWP prices are inflated much like a sticker price on a new car. You get a discount off the sticker price exactly the same as you do with PPO’s on hospital and physician charges. We all know how that has been working out – a 50% discount off double the price………….

MAC prices are whatever the PBM wants them to be and can change 24/7.

Dust off your PBM contract and notice the “discounts”. It may be AWP – 70% for generic drugs for example.

There is another method to benchmark Rx costs. It’s based on what retail pharmacies pay on average for drugs as reported to the government. A plan sponsor can establish a Reference Based Pricing plan for Rx benefits using this data.

NADAC pricing is public – you can look up your drug and compare what your plan paid and what the average price pharmacies paid for the same drug. NADAC Pricing.

A 2018 Milliman White Paper Report, NADAC – plus: An Emerging Paradigm in Pharmacy Pricing? is an informative short read. For a copy write to

David Belk M.D.

I’ve been saying this for seven years now. Here’s a talk I gave just two weeks ago on it (among other things):