Prescription drugs are a crucial component of health care, with millions of Americans relying on their medications to manage chronic conditions, recover from illnesses and improve their quality of life. However, the cost of prescription drugs can be prohibitively expensive, especially for those without insurance or with limited financial resources.
Laws have been created to lower prescription drug prices, but pricing methods are often different and hard to understand. Consider the Average Wholesale Price (AWP) and the National Average Drug Acquisition Cost (NADAC).
What’s the difference?
The AWP is a list price that is often marked up by intermediaries in the supply chain, such as wholesalers, distributors and pharmacy benefit managers. The average wholesale price does not necessarily reflect the actual cost of a drug and can result in higher prices for patients and insurers.
In contrast, the NADAC is based on actual prices that pharmacies pay for drugs, providing a more accurate reflection of the true cost of medications.
A study published in the American Journal of Managed Care compared NADAC pricing to AWP for six commonly used prescription drugs and found that AWP prices were on average 1.6 times higher than NADAC prices. This suggests that AWP pricing may overestimate the cost of prescription drugs, leading to higher prices for patients and insurers.
Further, pricing data was analyzed for nearly 7,000 prescription drugs over a three-year period. The study found NADAC pricing was lower than AWP on a majority of prescription drugs, according to a study by the Journal of Managed Care & Specialty Pharmacy.
Such transparency and accuracy on prescription drug prices carries several benefits.
- It can lead to lower overall health care spending for private insurers, Medicare and Medicaid.
- NADAC pricing is publicly available, which empowers patients and insurers to more easily compare prices across different pharmacies, and to spot when a drug might be overpriced. This reduces the chances of price gouging.
- It has the potential to make prescription drugs more accessible and affordable for all Americans.
If you’re an employer offering health insurance to your employees and you’re interested in learning more about pharmacy benefit managers that base their pricing on NADAC, don’t hesitate to reach out. Oswald can help you understand how this pricing model can help reduce costs and maintain the sustainability of your plan.
To learn more or discuss your employee benefits program, visit our Employee Benefits page or contact:
Brad Heter, CIC
Regional Sales Manager
Note: This communication is for informational purposes only, and is not intended to offer legal, tax, or client-specific risk management advice. Information in this communication is not meant to describe specific coverages that may be advisable or available to you or your company, or to interpret specific coverages that may already be in place. General insurance descriptions in this communication do not include complete insurance policy definitions, terms, and/or conditions, and should not be relied on for coverage interpretation. Actual insurance policies must always be consulted for full coverage details and analysis. View our privacy notice.