WAC Drug Pricing Explained

WAC is defined in US federal law. AWP is not: CMS says AWP "is set using industry-recognized AWP reference sources (e.g., RedBook, Medi-Span), as there is no statutory definition." WAC, by contrast, is defined in section 1847A(c)(6)(B) of the Social Security Act as the manufacturer's list price to wholesalers or direct purchasers (CMS, Part B Drug Payment Limits Overview, March 2026, p. 2).

Approach: The only US drug pricing data I can search is the Medicaid NADAC price files, which list prices but don't define WAC or AWP. So I took the definitions from the CMS overview of Part B drug payment limits.

Side-by-side (all from the CMS overview, pp. 2 and 4)

	WAC (wholesale acquisition cost)	AWP (average wholesale price)
Legal basis	Defined in the Social Security Act, section 1847A(c)(6)(B)	"No statutory definition"
What it is	The manufacturer's list price for wholesalers or direct purchasers in the US. It leaves out prompt-payment and other discounts, rebates or price cuts, and uses the most recent month for which information is available	Whatever the industry AWP reference sources publish
Where the figure comes from	Wholesale price guides and other drug pricing publications (e.g., RedBook, Medi-Span)	Industry AWP reference sources (e.g., RedBook, Medi-Span)
How it compares with ASP	CMS says WAC is "typically" higher than ASP, though by how much varies	The overview does not compare AWP with ASP or WAC

How Medicare Part B uses each one

• WAC is a fallback for the average sales price (ASP):
  • New drugs with no ASP yet: the limit is up to 103% of WAC (section 1847A(c)(4)(B)(i)).
  • Single-source drugs whose ASP is higher than WAC: in some cases the limit is 106% of WAC (section 1847A(b)(4)).
  • Biosimilars: if the reference biological's ASP is higher than its WAC, the add-on is based on the reference biological's WAC.
  • Drugs not on the Part B Payment Limit File: MACs "may" use 106% of the lowest-priced brand WAC or the median generic WAC, whichever is lower.
• AWP is used only in two narrow cases:
  • Pneumococcal, influenza, COVID-19 and Hepatitis B vaccines: the limit is 95% of AWP (section 1842(o)(1)(A)(iv)).
  • Drugs paid under the hospital outpatient payment system (OPPS) that have no billing (HCPCS) code yet: the limit is 95% of AWP (section 1833(t)(15)).

The CMS overview does not say how big the gap between AWP and WAC usually is, and none of the data I can search reports one.

Sources:

• CMS, Part B Drug Payment Limits Overview (March 2026)

ASP and NADAC are both based on actual transaction prices, not list prices, but they come from different points in the supply chain. ASP is what manufacturers say they receive from all US buyers after price concessions, and it sets Medicare Part B payment. NADAC is the average invoice price retail pharmacies pay, and state Medicaid programs may use it.

Approach: I searched the CMS Medicaid NADAC price files, which hold the published rates but not the method behind them. I took the definitions from the CMS Part B Drug Payment Limits Overview (March 2026) and Medicaid.gov's Retail Price Survey page. I couldn't open the NADAC methodology PDF on Medicaid.gov (access was refused).

ASP (average sales price): Medicare Part B (CMS overview, pp. 1–2)

• Who reports it: all Part B drug manufacturers "must" report ASP data. They must calculate it each calendar quarter and submit it no later than 30 days after the quarter ends.
• How it's calculated: the manufacturer's sales to all US purchasers for an 11-digit NDC, minus "many price concessions such as discounts" as defined in section 1847A(c) of the Social Security Act (see 42 CFR § 414.804 and § 414.904).
• How it's used: CMS calculates payment limits every quarter and publishes them by HCPCS code in the Part B Drug Payment Limit File. Most drugs are paid at 106% of ASP. When a HCPCS code covers several NDCs, CMS uses a volume-weighted ASP.
• Biosimilars: the limit is the biosimilar's own ASP plus 6% of the reference biological's ASP, or plus 8% for qualifying biosimilars (section 1847A(b)(8)(B)).
• Price checks: CMS replaces ASP with AMP or WAMP (widely available market price) when the OIG reports that ASP is at least 5% higher than either one (42 CFR § 414.904(d)(3)).

NADAC (National Average Drug Acquisition Cost): Medicaid (Medicaid.gov, Retail Price Survey)

• What it is: NADAC gives state Medicaid agencies covered outpatient drug prices "by averaging survey invoice prices from retail community pharmacies across the United States." Both independent and chain pharmacies are surveyed.
• Who runs it: CMS contracts with Myers & Stauffer, LC to carry out the survey.
• Updates: prices are updated weekly and monthly. An updated methodology took effect in December 2024.
• State use: states "have the option of using the NADAC files." A state that uses NADAC as a basis for payment must submit a State Plan Amendment.
• Part B link: when a MAC (Medicare Administrative Contractor) sets its own price for a drug and no ASP data exist, it uses the most recently published NADAC. If there is no NADAC either, it uses the VA Federal Supply Schedule price, and failing that, the invoice price (CMS overview, p. 4).

What a NADAC record looks like: each record gives one NDC's per-unit rate for one weekly snapshot. For example, atorvastatin 80 mg tablet (NDC 82009017910) is listed at $0.06926 per tablet (each), effective 2026-09-23, in the 2026 snapshots of 7 and 14 October. It is classified "G" for rate setting, with pharmacy type C/I ^[1][2].

All four benchmarks side by side

	WAC	AWP	ASP	NADAC
Price point	Manufacturer list price to wholesalers or direct purchasers	Published by industry reference sources	Manufacturer's net sales price to all US purchasers	Retail pharmacy invoice price
Discounts deducted?	No	Not stated	Yes, many price concessions	Reflects invoices
Source	Pricing guides (RedBook, Medi-Span)	RedBook, Medi-Span	Manufacturer reports	Monthly pharmacy survey
Legal basis	SSA §1847A(c)(6)(B)	"No statutory definition"	SSA §1847A(c)	Not stated in the sources I opened
Updated	Most recent month	Not stated	Quarterly	Weekly and monthly
Main use	Fallback when there's no ASP (103% or 106% of WAC)	Certain vaccines and OPPS drugs without a HCPCS code (95% of AWP)	Medicare Part B (usually 106% of ASP)	Optional basis for state Medicaid pharmacy payment

CMS says WAC is "typically" higher than ASP, and AMP is also typically higher than ASP. Neither source I opened compares NADAC with the other benchmarks.

Sources:

• CMS, Part B Drug Payment Limits Overview (March 2026)
• Medicaid.gov, Retail Price Survey (NADAC)

WAC is used mainly as a reference price, not as the price anyone actually pays. Three kinds of user show up in the official sources: government payers that build reimbursement formulas on it (Medicare Part B, many state Medicaid programs, and CMS's drug price negotiation program), states that use it to monitor price increases, and the price compendia that publish it.

Approach: I first searched the CMS Medicaid NADAC price files and the Medicare Part B drug spending data. Neither mentions WAC, so the findings below come from official CMS, Medicaid.gov and Texas Legislature pages. I couldn't open the California HCAI pages (access was refused).

1. Medicare Part B (CMS and its Medicare Administrative Contractors). WAC is the fallback when there is no usable ASP (average sales price). New drugs are paid at up to 103% of WAC, and some drugs at 106% of WAC. MACs "may" use WAC for drugs not on the payment limit file (CMS Part B Drug Payment Limits Overview). I covered this in detail earlier.

2. State Medicaid pharmacy payment. Many states use WAC in their ingredient-cost formula, usually as one option in a "lowest of" calculation alongside NADAC. Examples from CMS's state table (Medicaid.gov). The table is dated quarter ending September 2022, so current state plans may differ.

State	WAC-based formula
Alabama	WAC -4% for brand drugs, WAC +0% for generics
Alaska	WAC plus 1%
Illinois	WAC minus 4.4% (single source), WAC minus 17.5% (multiple source)
Kentucky	WAC plus 0%
New Jersey	WAC minus 2%; WAC less 1% for physician-administered drugs
New Mexico	WAC plus 6%
New York	WAC less 3.3% (brand), WAC less 17.5% (generic)
Tennessee	WAC minus 3% (brand), WAC minus 6% (generic)
Arkansas, Texas	WAC used when there is no NADAC
Colorado, Kansas, Maine	WAC is part of the "lower of" comparison

3. Medicare Drug Price Negotiation Program (CMS). For Part D, "CMS uses a standardized pricing metric (Wholesale Acquisition Cost [WAC]) to calculate a 'standard default refund amount'." This is the amount the manufacturer refunds to pharmacies so they effectively get the negotiated maximum fair price (MFP). For Part B, CMS's draft guidance of 16 July 2026 offers four options for this refund amount, and two of them use WAC: an ASP-volume-weighted average WAC at HCPCS code level, or WAC at NDC-11 level. Comments closed 18 September 2026 (CMS fact sheet).

4. State drug price transparency laws. These use WAC to track list-price increases. The example I confirmed is Texas, Health and Safety Code Chapter 441, added by HB 2536 in 2019 (enrolled bill text):

• Definition: Sec. 441.0001 defines WAC as the manufacturer's list price to wholesalers or direct purchasers in the US. It "does not include any rebates, prompt pay or other discounts, or other reductions in price."
• Annual report: by the 15th day of each calendar year, a manufacturer "shall" report current WAC for FDA-approved drugs sold in or into Texas (Sec. 441.0002(a)).
• Price-increase report: due within 30 days, for drugs costing at least $100 for a 30-day supply, when WAC rises "40 percent or more over the preceding three calendar years or 15 percent or more in the preceding calendar year" (Sec. 441.0002(c)).

California (HCAI's CTRx programme) also requires manufacturers to report WAC increases and new drug launches, but I couldn't open its pages to confirm the thresholds.

5. Price compendia. RedBook and Medi-Span publish WAC, and CMS and Texas both define it by reference to "wholesale price guides or other publications of drug pricing data." The CMS negotiation guidance likewise relies on WAC "as published in the pharmaceutical pricing database compendia."

Commercial uses (wholesaler invoicing, pharmacy benefit manager (PBM) contracts, list-price discussions) are not covered by any official source I opened, so I've left them out.

Sources:

• CMS, Part B Drug Payment Limits Overview
• Medicaid.gov, Medicaid Covered Outpatient Prescription Drug Reimbursement Information by State
• CMS, Manufacturer Effectuation of MFP Draft Guidance for 2028 (fact sheet)
• Texas Legislature, HB 2536 (86R), enrolled version