Maximum Allowable Cost (MAC) Pricing

Maximum Allowable Cost (MAC) pricing is a payment model contractually agreed to in the marketplace by all participants. The model ensures that those purchasing health insurance benefits, including consumers, do not overpay for generic drugs. MAC price reimbursement is an effective pricing tool because MAC prices are updated frequently to keep pace with market changes in the purchase prices of generic drugs available to pharmacies. AMCP supports the use of MAC pricing as a managed care tool to encourage the dispensing of cost-saving generic drugs and thereby benefiting the overall health care system. 

MAC pricing is designed to promote competitive pricing for pharmacies as an incentive for them to purchase less costly generic drugs available in the market, regardless of the manufacturer’s list price, since manufacturers will charge different amounts for equally interchangeable generic drugs. If a pharmacy purchases the higher‐priced product, it may not make as much profit or, in limited instances, may lose money on that specific purchase. Alternatively, if they purchase generic drugs at a more favorable price, they are more likely to make a profit. MAC pricing plays an important role in keeping economic incentives aligned for both payers and pharmacies. 

MAC prices are driven by factors inherent in marketplace competition, including how long the drug has been generic, how many manufacturers are making generic versions, how widely available the generic drug is accessible for purchase, and whether there have been problems in manufacturing (such as access to basic ingredients or product recalls). Drugs that have been generic longer are more likely to have greater competition and, therefore, lower pharmacy‐purchasing prices. In general, market competition reflected in MAC pricing supports payers’ goals of keeping drug costs down for consumers and payers and not overpaying for generic drugs. 

Payers and pharmacy benefit managers (PBMs) operate in a highly competitive environment; therefore, it is essential to ensure that their contracted pharmacies are encouraged to purchase less costly generics available in the market. MAC pricing policies must balance the need for confidentiality with the pharmacies’ need for predictable reimbursement. If MAC price information is publicly disclosed, it would have an anti‐competitive effect on health plans, employers, and other payers. Competing health plans would have access to others’ pricing information and MAC reimbursement calculations, allowing both the potential opportunity to price fix. This may drive up drug prices for health plans, employers, other payers, and consumers. Similarly, if MAC pricing policies are opaque or unpredictable to community pharmacies, it may impact the long-term sustainability of pharmacies to provide care for members of their community.

AMCP strongly supports market-based competition and reasonable contractual negotiation between private parties.

Accordingly, AMCP would oppose the following: 

• All federal or state requirements with respect to MAC list calculations, including requirements that payers disclose to pharmacies the proprietary methodology used to calculate pharmacy MAC reimbursement.
• Requirements that payers may only use specific sources for setting MAC payment rates on each list included under a contract, and that payers must specify the sources utilized for each list and each client.
• Requirements which dictate the frequency with which MAC lists must be updated, and that establish a statutory process for notification, including who must be notified and the exact timing of notification. 
• State and federal intervention into private contracts to mandate one party’s profitability, including requirements that payers must pay a specific margin above MAC to pharmacies to guarantee greater pharmacy profits, and provisions that allow pharmacies to refuse to dispense a prescription for which they may not be guaranteed a profit. 

AMCP supports, as a best practice, payers providing a fair and timely MAC appeals process related to a contracted pharmacy’s MAC pricing inquires or disputes. AMCP recognizes that there are instances when the MAC pricing must be revised based on certain environmental factors e.g., if the supply of available products is diminished or limited. 

Examples of where MAC pricing may be suspended include when raw ingredient availability reduces the number of trade available products on the market and when litigation or the threat of litigation lead to an injunction or concern within the marketplace, thereby limiting the number of manufacturers who offer a product. Plans need the flexibility to adjust for these market circumstances. 

Also, AMCP supports, as a best practice, payers including a provision in the contract that provides for notification of updates to the MAC list within a specified time period. 

See also:

• AMCP Where We Stand statement on Government Regulation of Prescription Drug Pricing: https://www.amcp.org/policy-advocacy/policy-resource-center/where-we-stand-position-statements/government-mandated-pharmacy-benefits
• AMCP Where We Stand series: https://www.amcp.org/policy-advocacy/policy-resource-center/where-we-stand-position-statements

Revised by the AMCP Board of Directors, October 2021

Approved by AMCP Board of Directors, December 2013