EP429: Following the Dollar Through Pharmacy Acronyms Like WAC, AWP, and NADAC, With Luke Slindee, PharmD

AWP stands for Average Wholesale Price. It's also been called Ain't What's Paid. That is not a joke — it's an acknowledgment that the list price a pharma manufacturer sets is just a number they pick. They can choose anything they want. WAC (Wholesale Acquisition Cost) is typically AWP times 0.8 — also not calculated, also just chosen. For generic drugs, even that fixed ratio disappears and the numbers become, in Luke Slindee's word, gibberish.

In this episode, Stacey Richter speaks with Luke Slindee, PharmD, a senior pharmacy consultant at Myers and Stauffer — the firm that calculates the NADAC (National Average Drug Acquisition Cost) benchmark on behalf of CMS — about what these acronyms actually mean and why every single player in the drug supply chain has an incentive for prices to go higher.

WHAT YOU'LL LEARN

✅ What AWP, WAC, and NADAC actually mean: AWP and WAC are list prices set at pharma's sole discretion — not calculated, just chosen — while NADAC is the one benchmark in this system that reflects what pharmacies actually pay wholesalers for drugs, based on a CMS retail price survey

✅ Why pharma sets list prices high: PBMs demand rebates to put drugs on formulary, so manufacturers set list prices high enough to absorb the rebate and still net their target — inflating AWP inflates the rebate that can be offered, and the entire chain benefits from a higher number

✅ How branded drug pricing flows through wholesalers: pharmacies buy branded drugs from wholesalers at roughly a 4% discount from WAC — but that purchase price is tied to the volume of generics bought from the same wholesaler, a structure that punishes small independent pharmacies

✅ Why generic AWP and WAC values are meaningless: one multiple sclerosis drug (generic equivalent of Aubagio/teriflunomide) has pharmacies buying it for 69 cents per tablet while the highest generic AWP among competing manufacturers is $343 per tablet — and if a PBM contract is AWP-based, the plan sponsor can be billed close to that while the PBM's own pharmacy dispenses and pockets the spread

✅ How spread pricing works and why it stays hidden: PBMs charge plan sponsors more than they pay pharmacies, call the difference a trade secret, and plan sponsors have no idea what a fair price is — unless they use the publicly available NADAC data at data.medicaid.gov to benchmark what pharmacies actually paid

✅ The downstream consequences for pharmacies: the same math that enriches PBMs and wholesalers forces independent pharmacies to buy high and sell low, driving staff walkouts at chain pharmacies, indie closures, and pharmacy deserts in rural and underserved communities

WHY THIS MATTERS

Every player in the drug supply chain benefits when prices are higher. That is not an accident — it is what the system produces. As Antonio Ciaccia says: where there's mystery, there's margin. The NADAC exists to remove some of that mystery — it is free and public at data.medicaid.gov. Plan sponsors who benchmark their PBM reimbursement rates against NADAC can start to quantify what is being pocketed in the middle.

=== LINKS === 🔗 Show Notes with all mentioned links: https://cc-lnk.com/EP429

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09:52 Why is it important for plan sponsors to understand the going rate for every point in the supply chain?

10:21 How do manufacturers come up with a list price?

10:40 What does AWP stand for?

10:59 What does WAC stand for?

11:06 How are AWP and WAC numbers chosen by the manufacturer?

13:22 What is the difference between AWP and WAC?

14:54 How much are wholesalers paying to manufacturers?

16:43 How much is the pharmacy paying for branded drugs from a wholesaler?

17:34 Why might pharmacies be buying drugs for less than what wholesalers are paying?

18:17 Substack article by Benjamin Jolley, PharmD, on this topic.

19:22 EP423 with Joey Dizenhouse.

20:33 Why do things get weird when a PBM gets involved?

21:58 How does all of this work for generic manufacturers?

25:20 EP344 with Steven Quimby, MD.

26:15 How did Civica Rx come about?

32:21 What's the difference between the NADAC and the AWP value?

36:04 Luke discusses the downstream effects to pharmacies.