Drug pricing · how it works

Where drug prices come from: what the pharmacy pays vs what you pay

Last updated November 5, 2026 · Reviewed by the LowerScript editorial team · Español

The price the pharmacy pays to get a drug and the price you pay at the counter are two different numbers. NADAC, the National Average Drug Acquisition Cost, is a federal survey-based average of what retail pharmacies pay for drugs. It is not a price list for patients, and what you pay depends on how you pay: insurance, cash, or a discount card.

What the pharmacy pays: NADAC

The Centers for Medicare & Medicaid Services (CMS) publishes NADAC. CMS says its Retail Price Survey focuses on the purchase prices retail community pharmacies pay for covered outpatient drugs, and that NADAC files average survey invoice prices from independent and chain retail community pharmacies across the United States.

The methodology document describes NADAC as reflective of actual invoice costs that pharmacies pay to acquire prescription and over-the-counter drugs. The data come from voluntary monthly surveys of a random sample of retail pharmacies, and the survey asks for the purchase price of the drug, the drug ingredient cost only.

CMS updates the NADAC files weekly. State Medicaid agencies can use them when they set what they reimburse pharmacies.

What NADAC leaves out

• The pharmacist's professional services. CMS treats the professional dispensing fee, which reflects the pharmacist's professional services and costs to transfer a drug to the patient, separately from the drug's cost.
• Some discounts and rebates. The methodology says discounts or rebates that are not on the invoice at the drug line-item level are not factored in.
• 340B purchases. Invoices for drugs bought through the 340B program are requested to be left out of the survey.
• What patients pay. NADAC measures what pharmacies pay to acquire drugs. It is not a copay, a cash price or a card price.

Why prices differ

An HHS research memo from 2000 explains that drug makers charge different buyers different prices, based on things such as how sensitive each buyer is to price, how much volume it buys and how much it can influence what gets prescribed. It describes discounts and rebates as the tools that bring prices down for those buyers, and notes that people with no drug coverage have tended to pay the most. The memo is older, so treat it as background on how pricing works, not as today's prices.

Medicaid has its own arrangement: the Medicaid Drug Rebate Program is a partnership among CMS, state Medicaid agencies and participating drug makers that helps offset federal and state costs of most outpatient drugs dispensed to Medicaid patients.

At the counter, the price you see also depends on how the claim is run. An insurance copay, a cash price and a discount card price can all differ for the same drug. We explain why pharmacy prices can differ in Why pharmacy prices differ, compare the routes in Cash price vs insurance copay, and show how a card fits in Discount card vs insurance.

Where to look at the data

NADAC is public. CMS describes it on its Retail Price Survey page and publishes the files on Data.Medicaid.gov. They are built for states and analysts rather than patients, so a NADAC figure will not match your receipt. To see what a drug costs near you with and without a card, use our price check.

Frequently asked questions

Sources (checked 5 November 2026)

• Medicaid.gov: Retail Price Survey (NADAC) — what NADAC measures, who is surveyed, and that the files are updated weekly.
• CMS: NADAC methodology (PDF) — NADAC as actual invoice costs for acquiring drugs, the voluntary monthly survey, ingredient cost only, and what is excluded (340B invoices, discounts or rebates not on the invoice line).
• Medicaid.gov: Pharmacy pricing — that the professional dispensing fee is addressed separately, and that the comparisons are not for direct reimbursement.
• Medicaid.gov: Medicaid Drug Rebate Program — the one-sentence description of the rebate program.
• HHS ASPE: Why different purchasers pay different prices for prescription drugs (2000) — why buyers pay different prices; a 2000 memo, used only as background.
• Data.Medicaid.gov: NADAC dataset — the public location of the NADAC files; the page loaded but the dataset description was not shown, so nothing else was taken from it.

This page is general information, not medical, legal or financial advice, and it shows no drug prices. For questions about your medicines, ask your doctor or pharmacist. LowerScript is a discount program, not insurance.

More: Why pharmacy prices differ · Cash price vs insurance copay · Discount card vs insurance  |  All savings guides