Within the complex system of drug pricing, Wholesale Acquisition Cost (WAC) is a foundational term. Understanding WAC provides insight into how drug prices are initially established and negotiated throughout the pharmaceutical supply chain. WAC serves as a starting point in a drug’s price journey, influencing many subsequent transactions.
Defining Wholesale Acquisition Cost
Wholesale Acquisition Cost (WAC) is the manufacturer’s stated list price for a drug sold to wholesalers or direct purchasers. This figure does not incorporate any discounts, rebates, or other price adjustments that may occur later in the supply chain. WAC is formally defined in U.S. law (42 U.S. Code ยง 1396r-8(k)(6)) as the manufacturer’s list price for a drug or biological to wholesalers or direct purchasers, excluding discounts or rebates.
WAC’s Role in Drug Pricing
WAC serves as a primary benchmark for various transactions and negotiations within the pharmaceutical industry. Wholesalers typically purchase drugs from manufacturers at or near the WAC, establishing their initial acquisition cost. Pharmacies then acquire drugs from these wholesalers, often referencing WAC for their purchase prices, though further markups or discounts apply. Pharmacy Benefit Managers (PBMs) use WAC as a starting point when negotiating reimbursement rates with pharmacies and calculating rebates with manufacturers. While WAC is a published list price, the final transaction price often differs due to various agreements, discounts, and rebates.
How WAC Affects Patients
WAC is generally not the price a patient pays at the pharmacy counter. Patient out-of-pocket costs are influenced by their insurance plan benefits, deductibles, co-pays, and co-insurance. Other pricing benchmarks, such as Average Wholesale Price (AWP) or National Average Drug Acquisition Cost (NADAC), are often used by PBMs and insurers to determine patient costs. While WAC does not directly dictate what a patient pays, it indirectly influences patient costs. Increases in WAC can lead to higher prices throughout the supply chain, which can ultimately translate to increased costs for health plans and higher out-of-pocket expenses for patients through premiums, deductibles, or co-payments.
WAC in the Pharmaceutical Supply Chain
WAC functions as a foundational pricing element underpinning the pharmaceutical supply chain, serving as a known reference point for all subsequent transactions from the moment a drug leaves the manufacturer. Wholesalers, who act as intermediaries, rely on WAC to determine their purchasing costs, and as drugs move from wholesalers to pharmacies, WAC continues to serve as a benchmark for pricing agreements. Insurers and PBMs also integrate WAC into their models for calculating reimbursements to pharmacies and negotiating rebates with manufacturers. This consistent reference point allows various entities to calculate their respective costs and potential margins, providing a standardized starting figure even as the actual transaction prices evolve with discounts and agreements along the distribution path.