How to Calculate Reimbursement from NADAC
By Dylan Sanson, Pharmacist & Pharmacy Manager · Published
For independent pharmacies, knowing exactly how a payer calculates your reimbursement is just as important as knowing your acquisition cost. A growing number of payers — led by state Medicaid programs — now reimburse pharmacies using a transparent formula built around NADAC plus a professional dispensing fee.
The NADAC Reimbursement Formula
At its simplest, the formula looks like this:
Reimbursement = (NADAC per unit × Quantity Dispensed) + Professional Dispensing FeeThe ingredient cost portion is meant to cover what you actually paid for the drug, while the dispensing fee is meant to cover the cost of professional services — counseling, labeling, verification, and overhead. This structure is endorsed by CMS as the most accurate way to reimburse pharmacies.
Who Pays Pharmacies Using NADAC?
- State Medicaid fee-for-service (FFS) programs — the majority of states now use NADAC as the primary ingredient cost benchmark for FFS claims.
- Medicaid managed care plans — many MCOs are required (or choose) to follow the same FFS methodology, including NADAC + dispensing fee.
- Select commercial PBM contracts — a small but growing number of transparent PBM arrangements use NADAC-based reimbursement instead of MAC or AWP discounts.
For a deeper comparison of pricing benchmarks, see our breakdown of NADAC vs WAC.
Understanding the Professional Dispensing Fee
Professional dispensing fees are set by each state Medicaid agency, typically informed by a cost-of-dispensing (COD) survey of in-state pharmacies. As of recent CMS-approved state plan amendments, dispensing fees generally fall in the $9 to $13 per prescription range. A few examples:
- Many states pay around $10.00–$10.50 per prescription for most pharmacies.
- Some states use a tiered fee, paying higher rates to pharmacies that serve rural or low-volume areas.
- Specialty and 340B claims may use different dispensing fees.
Always check your state Medicaid provider manual for the exact dispensing fee that applies to your pharmacy.
Worked Example
Suppose you dispense 90 tablets of Metformin 500 mg with a NADAC of $0.0234 per unit, and your state Medicaid pays a $10.50 dispensing fee.
If your actual acquisition cost is at or below NADAC, the dispensing fee is what produces your margin on this claim.
Why This Matters for Independent Pharmacies
Many commercial PBM contracts reimburse below NADAC — sometimes far below — and pair that with a dispensing fee of $0 to $1. When you compare those payments to the transparent NADAC + dispensing fee model used by Medicaid, it becomes obvious which contracts are leaving you underwater.
Tracking reimbursement against NADAC weekly is one of the strongest data points you can bring to PBM contract negotiations.
How to Use NADAC Lookup to Verify Reimbursement
- Search the drug or NDC on NADAC Lookup to get the current per-unit NADAC.
- Multiply by the quantity dispensed to get the expected ingredient cost.
- Add your state Medicaid (or contracted) dispensing fee.
- Compare the total to what the payer actually paid — any shortfall is a flag for appeal or contract review.
With NADAC Lookup Pro ($29/mo), you can save your most-dispensed drugs, see full price history, and get alerts when NADAC changes — so your reimbursement math always uses the latest data.