Index of Generic Drug Acquisition Costs Now Available to Pharmacies Nationwide; Commercial Plan Sponsors Likely to Shift Away from AWP


Medi-Span announced Friday the inclusion of National Average Drug Acquisition Cost (NADAC) data in its point-of-sale pricing products for retail pharmacies; First DataBank made a similar announcement last December. These two providers dominate drug pricing data; accordingly NADAC is now routinely available to pharmacies nationwide

NADAC closely tracks generic acquisition costs; the current drug pricing standard (average wholesale price, or AWP) does not. AWP creates an information asymmetry that favors the seller (e.g. a PBM selling services to an employer), and this enables large margins on generics. NADAC substantially narrows this information asymmetry, and is likely to narrow generic margins

PBMs are most negatively affected; ESRX is most affected among the PBMs by virtue of its greater mail order presence. Retailers are somewhat less affected; CVS is most affected among retailers by virtue of its large PBM operations. Wholesalers are least affected in the short term; however if falling generic margins lead to a loss of independent pharmacies, wholesalers could be seriously affected in the mid- to longer-term. ABC is most at risk among wholesalers; having taken over WAG’s generic volume it is more levered to generics than peers; and, unless ABC anticipated falling generic margins on the NADAC roll out it may have underpriced its relationship with WAG


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