Published October 1, 2026
Every week, the Centers for Medicare and Medicaid Services publishes a spreadsheet. It lists thousands of drugs and, next to each one, a single dollar figure: the national average of what retail pharmacies paid wholesalers for it. That spreadsheet is called NADAC, and over the last decade it has quietly become one of the most consequential numbers in American pharmacy. It now determines, directly or indirectly, what pharmacies get paid for a large share of the prescriptions they fill.
What NADAC actually is
NADAC stands for National Average Drug Acquisition Cost. CMS contracts a vendor to survey retail community pharmacies about the invoice prices they paid for drugs, then averages the responses into a per-unit cost for each drug. The file is published weekly, with a monthly version as well, and it covers roughly 93 to 97 percent of covered outpatient drugs.
The survey is voluntary, and that detail matters more than it sounds. For years, the respondents were disproportionately independent pharmacies, because large chains largely did not participate. NADAC therefore reflected something close to what an independent pharmacy pays, not what a giant chain with massive purchasing leverage pays. Keep that in mind; it becomes important in a moment.
From reference file to paycheck benchmark
When CMS first published NADAC in draft form back in 2012, states were not permitted to use it for Medicaid reimbursement. Once the files were finalized, states began adopting NADAC as the ingredient-cost basis for paying pharmacies, typically structured as "NADAC plus a professional dispensing fee." The logic was straightforward: instead of reimbursing pharmacies based on inflated list prices like Average Wholesale Price, pay them based on what drugs actually cost to acquire, plus a separate fee for the work of dispensing.
Several states have now written this into law, requiring pharmacy benefit managers to reimburse pharmacies at NADAC plus the state's Medicaid dispensing fee. Arkansas, Georgia, Kentucky, Tennessee, and West Virginia are among the early adopters. Iowa passed legislation in 2025 moving its retail pharmacy reimbursement to NADAC with a dispensing fee, effective for prescription drug benefits beginning January 1, 2026. The trend is clearly toward NADAC-based payment, driven by state efforts to curb a practice called spread pricing.
Spread pricing, in one paragraph
Spread pricing is the PBM business model that NADAC-based reimbursement is designed to kill. It works like this: the PBM tells the health plan a drug costs one amount, pays the pharmacy a lower amount, and keeps the difference, the "spread." For a generic that a pharmacy acquired for pennies, the spread can be enormous relative to the drug's cost. NADAC-based laws attack this by pegging the pharmacy's payment to a public, auditable acquisition number instead of whatever the PBM's proprietary price list says.
The 2024 controversy
Here is where the voluntary-survey detail came back to bite. In 2024, for the first time, large chain pharmacies participated in the NADAC survey in significant numbers and reported much lower invoice prices, reflecting their superior purchasing power. The national averages dropped. For independent pharmacies, which cannot buy at chain prices, reimbursement tied to the new lower NADAC suddenly did not cover their actual acquisition costs.
The independents' trade groups cried foul, and honestly they had a point: a "national average" that mixes two very different purchasing tiers can systematically underpay the smaller tier. This has pushed policymakers toward ideas like mandatory survey participation, state-level acquisition cost surveys, or tiered benchmarks that account for pharmacy purchasing power. The controversy is unresolved, and it is the single most important thing to understand about NADAC's limitations: an average is only as fair as the mix behind it.
What NADAC leaves out
NADAC is built on invoice prices. It does not capture off-invoice discounts, rebates, or other price concessions, which means a pharmacy's true net cost can be lower than the published number. There is also a reporting lag: the survey data is weeks old by publication, so NADAC can miss fast-moving price spikes and drops. For drugs with volatile generic markets, the weekly file can lag reality by enough to matter for reimbursement.
My honest take
I am bullish on NADAC as a transparency instrument and cautious about it as a payment instrument. As a public, weekly, auditable measure of acquisition cost, it is a genuine public good; nothing else lets you see what pharmacies pay at this scale. As the basis for paychecks, it needs the methodology fights resolved: who is surveyed, how chains and independents are weighted, and how fast the numbers update. The states moving to NADAC-plus-dispensing-fee are running a live experiment on those questions. I will be watching Iowa's 2026 rollout closely, because it is the cleanest test of whether the model works at scale.
Frequently asked questions
Who uses NADAC for reimbursement?
Most state Medicaid programs now use NADAC as a component of pharmacy reimbursement, and several states have legislated NADAC plus a dispensing fee as the required basis for PBM payments to pharmacies. Private payers use it less, though that is changing.
Why did NADAC drop in 2024?
Large chain pharmacies began participating in the voluntary survey and reported significantly lower invoice prices than the independent pharmacies that had dominated responses. The lower chain prices pulled the national averages down.
Is NADAC the same as what my pharmacy paid?
Not exactly. It is a national average of invoice prices, excluding off-invoice rebates and discounts. Your specific pharmacy may have paid more or less, and net costs after rebates can differ from the published figure.
Browse the actual numbers.
The NADAC Drug Price Lookup searches the official CMS weekly file across 340 common drugs, free and with no account.
Educational reference only: NADAC figures are national averages from the CMS weekly file. Reimbursement policy varies by state and payer. Nothing here is medical, financial, or legal advice.