Maximum Allowable Cost (MAC)

Key facts

Set by

PBMs, health plans and some state Medicaid programs

Applies mainly to

Generic and other multiple source drugs

Methodology

Usually proprietary; there is no single federal formula

Medicare Part D rule

Pricing standards must be updated at least every 7 days, 42 CFR 423.505

State oversight

Many states regulate PBM MAC updates and appeals

What is Maximum Allowable Cost?

A MAC list assigns one reimbursement ceiling to a group of equivalent generic products, typically defined by ingredient, strength and dosage form. A pharmacy that dispenses any product in the group is paid no more than the MAC amount for ingredient cost, plus a dispensing fee, even if it bought a more expensive version.

MAC pricing encourages pharmacies to buy lower-cost generic sources. Unlike Wholesale Acquisition Cost or NADAC, MAC amounts are set by each payer, are often confidential, and can differ between a PBM's contracts with pharmacies and its contracts with plan sponsors.

How MAC lists work

MAC programs share a few common mechanics:

• Inclusion: payers decide which drugs go on a MAC list, usually generics with multiple suppliers and stable availability.
• Pricing inputs: payers may reference acquisition cost surveys, wholesaler prices, NADAC or their own purchasing data, but the exact formula is rarely disclosed.
• Updates and appeals: MAC amounts change as generic prices move, and many state laws require PBMs to update lists regularly and let pharmacies appeal rates below their acquisition cost.
• State Medicaid: some states publish a state MAC list for fee-for-service claims, while others rely on NADAC as the main generic benchmark.

Why MAC matters

For independent pharmacies, MAC rates that lag behind rising generic costs can mean dispensing at a loss, which is why MAC appeals and transparency were early targets of state PBM laws. In Rutledge v. Pharmaceutical Care Management Association (2020), the U.S. Supreme Court held that ERISA did not preempt an Arkansas law regulating PBM MAC reimbursement.

For employers and plan sponsors, a difference between the MAC used to pay pharmacies and the MAC used to bill the plan is one source of spread pricing. For analysts, comparing payer rates with NADAC shows whether reimbursement is keeping pace with acquisition cost during generic shortages or price spikes.