By skyforbes 
Section 44123 directs new federal dollars to the Centers for Medicare and Medicaid Services through fiscal year 2033, earmarking those funds for a nationwide survey of pharmacy invoice prices. The measure instructs CMS to gather purchase data not only from traditional storefront pharmacies but also from mail order, specialty, and other non-retail channels. By combining those datasets, the agency intends to calculate a new benchmark for the average acquisition cost of every covered outpatient drug that state Medicaid programs reimburse. The survey expands the decade-old National Average Drug Acquisition Cost, or NADAC, process, which already samples thousands of community pharmacies each month and publishes a public price file that many states use to set ingredient reimbursements. CMS launched the first official NADAC file in November 2013 and continues to update it weekly based on submitted invoices.
The retail‐only scope of NADAC leaves notable blind spots. State Medicaid agencies routinely reimburse high-volume mail-order networks for specialty antivirals, oncology agents, and biologics that never pass through a corner drugstore. Contract pharmacies linked to large health systems often manage those orders. Without invoice evidence from those channels, CMS must infer prices, a practice that critics argue overpays for certain single-source drugs and underpays for others. Section 44123 addresses the gap by underwriting a broader survey that will continue for eight additional fiscal years. Long-term funding signals that Congress wants a durable evidence base rather than a pilot. For administrators who track Medicaid prescription revenue, that time horizon is essential. This means that any price effects that emerge in 2026 or 2027 will likely persist through at least 2033 and become embedded in state rate methodologies.
CMS will contract with an external accounting firm, currently Myers and Stauffer, to collect de-identified purchase invoices. Retail and non-retail respondents will transmit electronic files that list National Drug Codes, quantities, and net prices after rebates or prompt-pay discounts. CMS analysts then standardize, trim outliers, and publish means for each NDC at least quarterly, although past practice suggests monthly or weekly updates remain feasible. The statute explicitly permits CMS to require “any reasonable documentation” that validates the accuracy of invoices. Expect a companion rule outlining file formatting, secure transfer protocols, and an appeal pathway in the event a pharmacy disputes the posted mean. Because federal funds underwrite the work, CMS will not bill participating pharmacies for the cost of data collection.
Participation is no longer voluntary. A pharmacy that refuses or neglects to supply invoices within the specified window risks a civil monetary penalty under Title XIX enforcement authority. The Office of Inspector General updates penalty ceilings annually to reflect inflation; the most recent adjustment sets the fine for failing to provide drug price information at approximately $23,000 per day. That amount can escalate rapidly if a large chain or mail order operation ignores multiple survey cycles. CMS may also refer repeated non-compliance to the Department of Justice for injunctive relief. In short, the statute moves the survey from a data call that many independent pharmacies once ignored to a regulatory obligation that carries weighty financial risk.
State Medicaid agencies already spend close to nine hundred billion dollars annually, with prescription drugs accounting for nearly nine percent of that outlay. Acquisition cost data inform the “ingredient” portion of reimbursement, while dispensing fees cover labor and overhead. When CMS replaces estimated costs with actual invoice means, expensive specialty categories often decline, pulling total drug spend downward. Yet, generic injectables and some low-volume orphan drugs occasionally rise when the survey reveals tight supply chains and genuinely high costs. Hospitals that operate contract pharmacies within the 340B program should model the effect on spread margins, as lower Medicaid reimbursements indirectly shrink 340B savings tied to those claims.
If you are a healthcare leader, here are five steps to take: First, review every retail and non-retail pharmacy relationship within the system. Confirm that each partner understands the new requirement and that their compliance teams monitor CMS survey notices. Penalties assessed to an integrated mail order subsidiary ultimately affect the parent system’s consolidated income statement. Second, revisit multi-year state Medicaid contract negotiations. Many states include NADAC, plus a dispensing fee, in their managed care capitation rates. As the new survey broadens NADAC inputs, ingredient costs embedded in those calculations will shift. Third, tune financial forecasts. A five percent swing in Medicaid drug reimbursement can offset projected gains from value-based arrangements in ambulatory care. Use sensitivity analyses that bracket both moderate and significant price changes for top formulary lines. Fourth, strengthen data analytics. Section 44123 makes invoice-level transparency the regulatory expectation. Compile internal acquisition data from your own outpatient or specialty pharmacies to benchmark against forthcoming CMS releases. Differences that exceed two standard deviations warrant investigation because they might flag either group purchasing inefficiencies or errors in the CMS mean. Fifth, anticipate operational adjustments in purchasing timelines. Pharmacies may increase invoice frequency or shift wholesalers to influence average acquisition cost, a behavior known as the “survey effect.” Monitor for abrupt supplier changes that occur primarily around survey windows, and assess whether such shifts compromise drug availability for high-acuity service lines.
Health-system legal counsel should track CMS rulemaking in the Federal Register once the statute is enacted. The interim final rule will define record-keeping expectations, retention period, and the exact civil penalty structure. Information technology teams must align secure file transfer protocols with the portal CMS, which is likely to be an expansion of the existing Myers and Stauffer secure site. Internal audit should test a sample invoice batch for completeness and data-field accuracy before the first submission deadline. If your organization outsources mail order, consider embedding reporting clauses into the next contract renewal that require the partner to indemnify the health system for penalties resulting from their omission. Although Section 44123 places liability on the pharmacy license holder, reputational risk often extends to branded hospital entities listed on shared marketing materials.
Congress has debated several approaches to Medicaid drug spending for more than a decade. Earlier reforms introduced inflation-linked rebates on brand drugs and encouraged states to pool supplemental rebate negotiations. NADAC filled a critical transparency gap by revealing actual ingredient costs, rather than relying on the average wholesale price, a figure widely criticized for inaccurate markups. Extending the survey to mail-order venues follows that logic in an era when specialty drugs drive a growing share of Medicaid expenditures. Economists expect the move to sharpen state bargaining power with manufacturers and reduce upward pressure on managed care capitation rates. From a patient perspective, the survey itself will not change drug availability. Yet states may cycle any savings into broader formulary coverage, lower copays for optional populations, or higher dispensing fees aimed at sustaining small rural pharmacies.