A primer on prescription drug pricing benchmarks in the United States

Abstract

The price of a prescription drug can be difficult to determine in the United States. Pricing benchmarks are reference points used to determine acquisition costs as drugs are physically moved through the supply chain, to reimburse pharmacies, to calculate rebates, and to determine patient payments. Public health insurance programs, including Medicare and Medicaid, leverage different pricing benchmarks to pay for drugs for their beneficiaries, and the same drug can vary in price by program. The goal of this primer is to explain the most commonly used drug pricing benchmarks and their current contexts for use.

Determining the price of a drug in the United States can be difficult for multiple reasons. First, there are many parties involved in the distribution and reimbursement of prescription drugs in the United States¹ and not all of them use the same drug pricing benchmark in their negotiations and transactions. Second, there is a lack of transparency around the net prices (italicized words are defined in the Glossary) paid for prescription drugs since rebates, discounts, and other price concessions are often proprietary. Third, there are many pricing benchmarks that have been created over time, often for different programs (eg, Medicare, Medicaid) and for different purposes (eg, acquisition costs as drugs move through the supply chain; reimbursement from pharmacy benefit managers [PBMs] or payers [herein, payers collectively refers to health plans and insurers] to pharmacies; rebates from manufacturers to PBMs or payers; and patient payments) (Table). In this primer, we discuss the most commonly used drug pricing benchmarks in the United States and describe their current contexts for use.

TABLE 1.

Common Drug Pricing Benchmarks Used in the United States

Benchmark	Description	Common usesa						Source	Availability
		a. Wholesaler acquisition costs	b. Pharmacy acquisition costs	c. Manufacturer rebates	d1. Pharmacy reimbursement	d2. Provider reimbursement	e. Patient out-of-pocket paymentb
WAC	Manufacturer-reported list price, widely used as a basis for prices paid by wholesalers to manufacturers, especially for brand-name drugs. Leveraged across multiple other transactions	X	X	X	X	X	X	Set by manufacturers and published by commercial entities	All brand-name drugs and most generic drugs
AWP	List price widely used as a basis for pharmacy reimbursement by PBMs, especially for generic drugs. Leveraged across multiple other transactions	X	X	X	X	X	X	Published by commercial entities	Brand-name and generic drugs
MAC	One of several ceiling prices used to set maximum generic drug reimbursement to pharmacies. Not based on actual product dispensed				X		X	Set by PBM or Medicaid program	Generic drugs, brand-name drugs with generic equivalents available
GER	Similar to MAC but rates are calculated based on AWP of actual product dispensed				X			Calculated by pharmacy or PSAO	Generic drugs
BER	Similar to GER but for brand-name drugs and calculated based on AWP or WAC				X				Brand-name drugs
U&C	Retail pharmacy price for a cash-paying patient and one of several ceiling prices for generic drug reimbursement to pharmacies				X		X	Set by pharmacy	Brand-name and generic drugs
340B ceiling price c	Lower price available from manufacturers to covered entities (eg, hospitals and clinics that serve low-income and uninsured individuals), ceiling used as a maximum price paid by these entities	X	X					Calculated by manufacturers based on AMP and confidentially reported by HRSA	Drugs available through Medicaid or Medicare Part B
NADAC	Average price pharmacies pay wholesalers or manufacturers, used to set Medicaid reimbursement to pharmacies				X	X	X	Calculated by CMS using average of invoiced prices from voluntary pharmacy surveys	Drugs available through Medicaid
AMP	Average price wholesalers pay manufacturers, used to determine statutory rebates that manufacturers must provide to Medicaid			X				Calculated by manufacturers using sales data and reported by CMS	Drugs available through Medicaid
Best price	Lowest price available from manufacturers to supply chain entities, used to determine statutory rebates that manufacturers must provide to Medicaid			X				Calculated by manufacturers using sales data and reported by CMS	Drugs available through Medicaid
ASP	Weighted average of prices paid by supply chain entities to manufacturers net of most discounts, used to set Medicare reimbursement to providers or clinics for outpatient drugs filled through the medical benefit					X	X	Calculated by manufacturers using sales data and reported by manufacturers	Despite being available for most drugs, it is only used for provider-administered drugs in Part B
MFP	Medicare-negotiated price, used for selected drugs in the Medicare Drug Price Negotiation Program	X	X		X	X	X	Negotiated price between Medicare and manufacturer	Brand-name drugs selected to participate in the Medicare Drug Price Negotiation Program

^a Uses correspond to steps a-e in Figures 1–2. d1 corresponds to step d1 in Figure 1, whereas d2 corresponds to step d2 in Figure 2. These reflect common uses and may not cover all cases.

^b Patient out-of-pocket payment amounts refer to amounts based on coinsurance or prior to meeting a deductible and not to fixed copays (which are set and do not use benchmarks to calculate patient cost-sharing). Typically, whichever benchmark is used as a basis for calculating reimbursement to pharmacies or providers (steps d1-d2, Figures 1–2) is the benchmark that is used to calculate patient coinsurance or deductible amounts (step e, Figures 1–2). The exception to this is GER and BER, since these are trued up at the end of a period and do not necessarily represent the amount that is paid to the pharmacy for a given prescription.

^c Not all transactions applying 340b ceiling prices are shown in this table or in the figures. Please refer to description in the text.

AMP = average manufacturer price; ASP = average sales price; AWP = average wholesale price; BER = brand effective rate; CMS = Centers for Medicare & Medicaid Services; GER = generic effective rate; HRSA = Health Resources & Services Administration; MAC = maximum allowable cost; MFP = maximum fair price; NADAC = National Average Drug Acquisition Cost; PBM = pharmacy benefit manager; PSAO = Pharmacy Services Administration Organization; U&C = usual & customary; WAC = wholesale acquisition cost.

A Brief Overview of Health Insurance Programs

Before discussing benchmarks, we introduce the different health insurance programs that exist in the United States and their drug expenditures. In 2023, retail prescription drug expenditures summed to $450 billion.² The two largest health insurance programs accounting for these expenditures were commercial insurance ($175.5 billion or 39%) and Medicare Part D ($144.6 billion or 32%).² This was followed by out-of-pocket patient expenditures ($58.3 billion or 13%), Medicaid ($51 billion or 11%), and other health insurance programs ($15.2 billion or 3%), including the Children’s Health Insurance Program, Department of Defense, and Department of Veterans Affairs.² In this primer, we will focus on the drug pricing benchmarks relevant for the 3 programs responsible for the greatest expenditures: commercial insurance, Medicare, and Medicaid. We will also discuss pricing benchmarks used to determine out-of-pocket patient payments, including for cash-paying patients who do not use insurance to pay for prescription medications.

Commercial insurance, Medicare, and Medicaid are different health insurance programs. Each has its own rules around eligibility, how it works, and which drug pricing benchmarks are relevant. In brief, commercial insurance typically is either provided by employers to their employees and dependents or purchased through the Affordable Care Act exchanges. Medicare does not depend on employment. Instead, Medicare is a federal entitlement program that provides hospital (Part A), medical (Part B), and prescription drug (Part D) insurance to adults aged 65 years and above or to adults who qualify based on certain disabilities or specific conditions, such as permanent kidney failure or amyotrophic lateral sclerosis.³ Most outpatient prescription drugs are covered by Part D; however, if a prescription drug meets certain requirements, such as being provider-administered, then it may be covered by Part B.

Medicaid provides health insurance coverage to those who are eligible based on income level. Medicaid is a jointly funded federal-state entitlement program administered by states under federal oversight, resulting in eligibility criteria and benefits that vary by state. Medicaid can be administered directly by the state Medicaid agency (eg, the agency directly negotiates with manufacturers and pharmacies), or in the case of Medicaid managed care, states contract with private managed care organizations to administer the program.

Drug Pricing Benchmarks Relevant Across Multiple Health Insurance Programs

WHOLESALE ACQUISITION COST

Wholesale Acquisition Cost (WAC) is determined by the drug manufacturer and defined by statute for the Medicare program.⁴ WAC is the manufacturer’s list price to wholesalers and does not include any discounts or rebates. As such, WAC prices do not typically represent the actual amount paid by any entity. WAC is reported by manufacturers to commercial publishers of drug pricing data who sell access to the pricing information (eg, First Databank, Medi-Span, and Red Book).

WAC is primarily used in the prescription drug supply chain as the benchmark for negotiating discounts and ultimate prices paid between manufacturers, wholesalers, and pharmacies or providers (steps a and b, Figures 1–2), especially for brand-name drugs. Depending on the benchmark preferences of the parties involved, WAC may be used in other transactions as well. It is further used as a basis to negotiate rebates paid by manufacturers to PBMs or payers (step c, Figures 1–2). WAC is also used to determine PBM or payer reimbursement to pharmacies (step d1, Figure 1). WAC may be used as a basis for calculating reimbursement to providers (step d2, Figure 2) in commercial plans, for example for new drugs that do not have an Average Sales Price (ASP) (discussed later), although ASP is more commonly used in this step.^4,5 Typically, whichever benchmark is used as a basis for calculating reimbursement to pharmacies or providers (steps d1-d2, Figures 1–2) is the benchmark that is used to calculate patient coinsurance amounts (step e, Figures 1–2), so WAC may be used for this purpose as well.

FIGURE 1.

Common Pricing Benchmarks Used for Drugs Filled Through the Pharmacy Benefit

PBM = pharmacy benefit manager.

FIGURE 2.

Common Pricing Benchmarks Used for Outpatient Drugs Filled Though the Medical Benefit

AVERAGE WHOLESALE PRICE

Average Wholesale Price (AWP) is reported by commercial publishers of drug pricing data but is not a statutorily defined pricing benchmark. Following litigation settled in 2009 over reports of inflated AWP,⁶ publishers now report AWP for brand-name drugs as 120% of WAC. In contrast, commercially published AWP for generic drugs is not consistently related to WAC and may not be updated to reflect WAC price reductions following ongoing generic competition.

AWP is commonly used by PBMs in negotiating reimbursement to pharmacies (step d1, Figure 1). For example, AWP is used for calculating the Generic Effective Rate (GER) (explained below) used in pharmacy reimbursement. Beyond this, AWP may be used as the basis for any of the negotiations in which WAC is used, depending on the benchmark preferences of the parties involved.

MAXIMUM ALLOWABLE COST

For generic drugs, Maximum Allowable Cost (MAC) is one of several ceiling prices for reimbursement by PBMs to pharmacies (step d1, Figure 1). Because generic drugs are interchangeable, pharmacies may source them from multiple manufacturers. MAC sets a fixed reimbursement amount for a given generic product and strength, regardless of manufacturer. As a result, MAC is not directly tied to the pharmacy’s acquisition cost of a given drug.

PBMs generally reimburse pharmacies (step d1, Figure 1) at either the lesser of MAC and usual & customary (U&C) (discussed below) or by using an AWP-based benchmark, like GER, to provide manufacturer-specific reimbursement. MAC is also used as a ceiling price in Medicaid for pharmacy reimbursement of brand-name drugs with generic equivalents available.

GER AND BRAND EFFECTIVE RATE

GER is calculated from AWP and used by PBMs to calculate pharmacy reimbursement (step d1, Figure 1). A GER establishes a benchmark-based payment rate, such as AWP-80% or AWP-90%, that reflects the pharmacy’s expected acquisition cost for all the generics sourced over a period. Rather than establish one pharmacy reimbursement amount for each drug active ingredient and strength regardless of which generic manufacturer’s version was purchased (MAC), a GER is calculated based on the AWP of each product actually dispensed. AWP or WAC may be used to calculate a Brand Effective Rate (BER), which is used in some contracts according to the preferences of the parties involved.

U&C

U&C is the price that retail pharmacies charge cash-paying patients (step e, Figure 1). Additionally, U&C is often one of the ceiling prices used by PBMs to reimburse pharmacies for generic drugs (step d1, Figure 1).

Although U&C is typically the price pharmacies charge cash-paying patients, it is not used when a patient uses a discount card, such as GoodRx, to pay for the drug. When a patient uses a discount card, a PBM has typically negotiated a payment amount to the pharmacy on behalf of the discount card program.⁷ The patient pays this negotiated amount (step e, Figure 1), which is based on the benchmark used by the PBM in negotiating the payment amount.

340B CEILING PRICE

The 340B federal program was created by the Veterans Health Care Act of 1992 and established a discounted drug price program for eligible health care organizations. Through the program, any manufacturer participating in Medicaid or Medicare Part B must allow qualifying hospitals and clinics (eg, treating low-income and uninsured patients), called “covered entities,” to buy outpatient prescription drugs at the 340B ceiling price, which represents a significant discount of approximately 20% to 50%.^8,9 The 340B ceiling price is the maximum statutory price a manufacturer can charge a covered entity for the purchase of a covered outpatient drug. This ceiling price in a given quarter is equal to Average Manufacturer Price (AMP) (discussed below) from 2 quarters prior minus the unit rebate amount (discussed below).¹⁰ This price is calculated by manufacturers and reported to the Health Resources & Services Administration, which confidentially publishes the price to 340B-eligible purchasers.¹⁰ 340B transactions may differ from the depictions in Figures 1–2 when the 340B covered entity contracts with a pharmacy to administer the program on its behalf. In this situation, a “ship-to, bill-to” arrangement is used, in which the covered entity clinic issues the payment to the wholesaler but the purchased drugs are shipped to the administering pharmacy.¹¹

Drug Pricing Benchmarks Specific to Medicaid

NATIONAL AVERAGE DRUG ACQUISITION COST

National Average Drug Acquisition Cost (NADAC) is a regulated price calculated from actual sales data that is often used by state Medicaid agencies to reimburse pharmacies (step d1, Figure 1).^11–13 NADAC is reported by the Center for Medicare & Medicaid Services (CMS) following a monthly survey of pharmacy acquisition costs.¹⁴ However, state Medicaid programs may also conduct their own surveys to determine local actual acquisition costs rather than use NADAC.¹⁵ NADAC is the average unit cost for a drug based on invoices from the wholesaler or manufacturer to the pharmacy, which reflect discounts provided at the line-item level but not aggregate discounts or off-invoice rebates. NADAC is publicly reported individually for brand-name drugs at the National Drug Code (NDC) level and as a nonvolume weighted average for all generic formulations at the ingredient and strength level. For brand-name drugs, NADAC is generally 5% below WAC and 20% below AWP; for generic drugs, NADAC is 45%-50% below WAC and 80%-90% below AWP.¹⁶ NADAC may also be used by state Medicaid programs to reimburse providers for drugs covered by the medical benefit (step d2, Figure 2).

AMP

AMP is a statutorily regulated price calculated by drug manufacturers and submitted to CMS. It is defined as, “the average price paid to the manufacturer by wholesalers for drugs distributed to retail community pharmacies and by retail community pharmacies that purchase drugs directly from the manufacturers.”¹⁷ AMP was originally created as part of the Medicaid drug rebate program in the Omnibus Budget Reconciliation Act of 1990. Its definition, as well as minimum AMP-based rebate amounts, were updated by the Patient Protection and Affordable Care Act of 2010.¹⁷ AMP is primarily used for calculating statutory rebates to be paid by manufacturers to Medicaid programs for drugs dispensed to Medicaid beneficiaries (step c, Figures 1–2).

AMP generally tracks the net price paid by a pharmacy for a drug, as it includes both invoice and after-invoice discounts provided to retail pharmacies (unlike NADAC, which only considers on-invoice, line-item discounts). However, nonpharmacy discounts, such as prompt-pay discounts to wholesalers, discounts under the Medicare Coverage Gap Discount Program, and rebates to PBMs, are excluded from calculations.¹⁷ AMP also excludes sales to mail order and nonretail specialty pharmacies. CMS uses manufacturer-provided AMP and other data to calculate rebate amounts for drugs at the NDC level; this rebate amount is confidentially reported to state Medicaid agencies for use when invoicing drug manufacturers. For generic drugs, CMS publicly reports a weighted AMP across manufacturers for a given active ingredient and strength; brand-name drug AMP is confidential.

For drugs that are not typically dispensed at retail pharmacies and that are inhaled, infused, instilled, implanted, or injected (called “5i drugs”), an alternative “5i AMP” is used.¹⁷ Unlike traditional AMP, 5i AMP calculations can include sales to specialty pharmacies. By statute, however, it also includes discounts excluded from traditional AMP, including PBM rebates. This lowers the 5i AMP and can lower manufacturer Medicaid rebate liability.

BEST PRICE

Best Price is a statutorily regulated price reported by manufacturers to CMS.¹⁷ It is used to calculate the Medicaid rebate for brand-name drugs (step c, Figures 1–2). Best Price is the lowest price available in a period to supply chain entities, such as wholesalers, pharmacies, providers, and health maintenance organizations. Best Price excludes most discounts under federal programs, such as rebates and coverage gap discounts in the Part D program, as well as discounts provided directly to patients (such as coupons) or direct sales to patients. Notably, Best Price excludes “PBM rebates, discounts, or other financial transactions” unless those transactions “are designed to adjust prices at the retail or provider level.”¹⁸ This has led to inconsistent treatment of rebates as Best Price by manufacturers,¹⁹ though many manufacturers include rebates in Best Price because of the integrated nature of PBMs and mail order or specialty pharmacies.

USE OF PRICING BENCHMARKS IN CALCULATING MEDICAID REBATES

For most brand-name drugs, Medicaid requires a statutory rebate from the manufacturer (step c, Figures 1–2), called the Unit Rebate Amount.²⁰ The Unit Rebate Amount is the sum of the base rebate amount and the additional rebate amount. The base rebate amount for brand-name drugs is the greater of (1) 23.1% of AMP or (2) the difference between AMP and Best Price. For other types of brand-name drugs (such as those exclusively approved for pediatric indications and certain clotting factors), the base rebate is the greater of (1) 17.1% of AMP or (2) the difference between AMP and Best Price.^21,22 For generic drugs, the base rebate amount is 13% of AMP. The additional rebate amount, also called the inflation penalty, is calculated as the difference between the current period AMP and the base date AMP adjusted for inflation (based on the consumer price index for all urban consumers).^21,22 Furthermore, states can further negotiate supplemental rebates.²¹

Drug Pricing Benchmarks Specific to Medicare

ASP

ASP is a statutorily regulated price reported by manufacturers to CMS on a quarterly basis. It was created through the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. ASP is used as a basis to reimburse providers for provider-administered drugs (step d2, Figure 2) under the Medicare Part B program but may also be used by other payers, such as commercial insurers, as well. ASP is net of all discounts except for discounts that are excluded from Best Price; depending on a manufacturer’s treatment of PBM rebates under Best Price, ASP may include or exclude rebates (though rebates are less prevalent for provider-administered drugs). CMS uses ASP to calculate and publicly report reimbursement amounts for Medicare Part B; these reimbursement amounts are typically ASP+6%. For qualifying biosimilars, there is a temporary increase from ASP+6% to ASP+8%.²³ In calculating the reported reimbursement amount, CMS will use the lower of WAC and ASP in a given period; CMS will also report a reimbursement amount of AMP+3% if the ASP exceeds the AMP by certain thresholds over the previous 4 quarters.²⁴ Therefore, although it is possible to estimate ASP from the publicly reported reimbursement files, other pricing benchmarks may be used without disclosure.

For generic drugs, CMS reports a reimbursement amount based on a volume-weighted average ASP for all interchangeable formulations, including the brand-name product. This encourages providers to select a lower-cost option so that the reimbursement exceeds their acquisition cost, driving down reimbursement over time to reflect the shift toward lower-cost products. For biosimilar drugs, CMS reports a separate reimbursement amount for each biosimilar, which may perversely encourage providers to select the most expensive version of the biologic or biosimilar to maximize the 6% or 8% add-on.

Notably, Part B reimbursement amounts in a given quarter reflect the ASP reported 2 quarters prior (ie, prices in quarter 1 are averaged and reported in quarter 2 and then reimbursement rates are prospectively established for quarter 3). This means that price increases will not be reflected in provider payments for 2 quarters, which may moderate manufacturer pricing changes for Part B drugs.

MAXIMUM FAIR PRICE

The Inflation Reduction Act of 2022 created the Medicare Drug Price Negotiation Program. The Maximum Fair Price (MFP) is the final price that is negotiated between Medicare and the manufacturer. MFP may be used across any transaction if the drug product is eligible for and selected for the program. Both Part D (starting 2026) and Part B (starting 2028) drugs are eligible for selection if they meet other statutory criteria. For the selected drugs, pharmacies are reimbursed by the PBM or payer at MFP (step d1, Figure 1). Pharmacies either buy from the wholesaler at MFP (step b, Figure 1), and then the wholesaler is trued up with the manufacturer via a chargeback (step a, Figure 1), or the pharmacies buy from the wholesalers at WAC (step b, Figure 1) and the manufacturer provides a rebate to the pharmacy to achieve MFP (not shown in Figure 1).

For drugs filled through Part B, the manufacturer is required to sell products to providers at the MFP (steps a-b, Figure 2). Medicare fee-for-service plans are required to reimburse providers at 106% of MFP (step d2, Figure 2),²⁵ but the statute does not define provider reimbursement for Medicare Advantage plans.²⁶ Further, for Medicare Advantage plans, patient cost-sharing for MFP-eligible Part B drugs cannot exceed the cost-sharing charged in fee-for-service Medicare Part B, which is 20% of the amount a provider is reimbursed (ie, 106% of MFP) (step e, Figure 2).

Conclusions

In this primer, we introduce commonly used drug pricing benchmarks in the United States across commercial, Medicare, and Medicaid health insurance programs as well as for cash-paying patients. We highlight whether benchmarks are used for acquisition costs, reimbursement to pharmacies or providers, manufacturer rebates, and/or patient payments. This primer can serve as a resource for understanding the complexities of the prescription drug payment and reimbursement landscape as it continues to evolve.

Disclosures

The Managed Care Pharmacy Primer Series is supported by AMCP, the AMCP Foundation, and the Judith A. Cahill Memorial Fund. Dr Hung is supported by Career Development Award Number IK2 HX003359 from the US Department of Veterans Affairs Health Services R&D Service.

Dr Hung and Mr Dickson disclose receipt of honoraria for their work on this article. Dr Hung reports honoraria and conference registration from AMCP, research grants from Abbott and AstraZeneca, consulting fees from Genentech/Roche, and research grants from the National Institutes of Health and Veterans Affairs. Mr Dickson is employed by AHIP (America’s Health Insurance Plans).

Glossary

Glossary

	All definitions are developed by the authors or adapted from the AMCP Managed Care Glossary, available at https://www.amcp.org/about/managed-care-pharmacy-101/managed-care-glossary.
340B ceiling price:	Maximum price for an outpatient prescription drug that a manufacturer participating in Medicaid or Medicare Part B must provide to covered entities (eg, hospitals and clinics treating low-income and uninsured patients). This ceiling price is equal to the Average Manufacturer Price from 2 quarters prior minus the unit rebate amount and typically reflects a significant discount of approximately 20% to 50%.
Average Manufacturer Price (AMP):	The average price paid to a pharmaceutical manufacturer by wholesalers for drugs distributed to retail pharmacies, net of prompt-pay (cash) discounts. AMP is statutorily regulated and used to calculate Medicaid rebates for brand-name and generic drugs.
Average Sales Price (ASP):	A manufacturer’s average sales price to all purchasers, net of discounts, rebates, chargebacks, and credits for drugs and biologicals covered under Medicare Part B. It is calculated by dividing the total revenue earned by the total units sold.
Average Wholesale Price (AWP):	The average price that wholesalers sell the drug to their customers. It is not regulated by the government and is a generally accepted drug payment benchmark for many payers. AWP is thought of as a “sticker price” that rarely reflects the actual price after discounts have been subtracted.
Best Price:	Statutorily regulated price reported by manufacturers to CMS used to calculate Medicaid rebates for brand-name drugs.
Brand Effective Rate (BER):	Calculated from AWP or WAC and may be used by pharmacy benefit managers to calculate pharmacy reimbursement for brand-name drugs.
Cash-paying patients:	Customers who do not use insurance to pay for prescription medications (eg, customer does not have insurance, customer has insurance but the medication is not covered).
Centers for Medicare & Medicaid Services (CMS):	CMS is a federal agency within the US Department of Health and Human Services. CMS is responsible for Medicare, Medicaid, and State Children’s Health Insurance Program.
Generic Effective Rate (GER):	Calculated from AWP and may be used by pharmacy benefit managers to calculate pharmacy reimbursement for generic drugs. Instead of applying a single pharmacy reimbursement amount for each drug regardless of which generic manufacturer’s product was purchased, GER is calculated based on the AWP of each product actually dispensed.
Maximum Allowable Cost (MAC):	The maximum amount that a state Medicaid agency or commercial plan will pay for generic drugs and brand-name drugs that have generic equivalents. A reimbursement limit per individual multiple-source pharmaceutical entity, strength, and dosage form (eg, $0.50 per fluoxetine 20-mg capsule).
Maximum Fair Price (MFP):	Final price that is negotiated between Centers for Medicaid & Medicare Services on behalf of the Medicare program and manufacturers as part of the Medicare Drug Price Negotiation Program.
Medicare Fee-for-Service (FFS):	A combination of Medicare Part A and B with an optional addition of Part D. Patients receive care from any provider who accepts Medicare patients and the provider bills Medicare directly.
Medicare Advantage:	An alternative to Medicare FFS that provides Medicare Part A and B coverage and may come with Part D. Beneficiaries join a private Managed Medicare plan and see network providers only.
National Average Drug Acquisition Cost (NADAC):	Regulated price calculated from actual sales data based on voluntary pharmacy survey data that is used by state Medicaid agencies to reimburse pharmacies. NADAC is the average unit cost for a drug at the invoice level from the wholesaler to the pharmacy and reflects discounts provided at the line-item level but not aggregate discounts or off-invoice rebates.
Net Price:	Amount paid by an entity after accounting for any discounts or price concessions.
Unit Rebate Amount:	Statutory rebate required by Medicaid from the manufacturer for most brand-name drugs.
Usual & Customary (U&C):	A retail pharmacy’s cash price for a drug when the customer is paying entirely out-of-pocket—without using insurance (eg, uninsured customer or drug is not covered by insurance) or a discount card.
Wholesale Acquisition Cost (WAC):	Manufacturer’s list price for a prescription drug for sale to wholesalers or other direct purchasers. WAC is published by pricing services, such as First Databank, Medi-Span, and Red Book, but does not include discounts, rebates, or other manufacturer incentives.