Tuesday, August 30, 2011

National Average Drug Acquisition Costs (NADAC)

The Center for Medicare and Medicaid Services (CMS) is looking to change its model to set drug reimbursement costs given to open-door--patients can come in and drop off prescriptions--community pharmacies. It is being called the National Average Drug Acquisition Cost (NADAC).

The current model is for states to reimburse open-door community pharmacies based off of a Average Wholesale Price (AWP). Both look at an average cost of medication to a pharmacy as a means to setting a baseline of reimbursement. The difference between this method and the new method proposed is the issue of transparency.

A pharmacy purchases its drugs, sells its drugs and then submits its cost to the state (or Pharmacy Benefit Manager, a.k.a. PBM) for reimbursement. This composes of a time lag between when the product leaves the pharmacy and when the anticipated payment is made. If the price fluctuates, the pharmacy lost control of what drug it would sell for what price. This makes the operation of a business fundamentally challenging and often frustrating.

With AWP, there are ways states, PBMs (and even pharmacies, hence the introduction of Maximum Allowable Costs, a.k.a. MAC) try to circumvent or change the amount reimbursed in order to try to save money. This often leaves the pharmacy stuck with the bill. The hope is that NADAC will make the amount a pharmacy receives in reimbursement transparent so pharmacies can more accurately count for what payment they will receive.