OBJECTIVES: To explain the relevance of and provide guidance for using a new cost metric, the National Average Drug Acquisition Cost (NADAC) for US based economic evaluations.  The key feature of NADAC is that a single cost is reported for a unit of all pharmaceutically equivalent drugs. The cost is an average of the per unit cost paid by the current month’s national sample of retail pharmacies.  METHODS: We propose a costing procedure and provide a detailed overview of costing for five diverse drugs and compare estimates to AWP, the current metric used as an estimate for acquisition cost. With data from 2014 and enumerated specific National Drug Codes (NDC) included in each estimate, we used the July cost as the base-case and the range observed over the year as a measure of uncertainty. For AWP we used its value on July 1. To eliminate the impact of obsolete NDCs we only considered the AWPs of NDCs that had an associated NADAC in 2014.  The base-case was estimated as the average of AWP across equivalent NDCs and the range was the low and high AWP. RESULTS: In one example, 500mg cephalexin had a NADAC of $0.09662 in July. This cost was based on 22 NDCs and was updated 11 times throughout the year. The range was [$0.08877, $0.12138] per unit. By contrast the distribution of AWPs for the same 22 NDCs had an average of $1.35606 and range of [$1.2259, $1.376]. In other drugs the ratio of NADAC and AWP ranged from 7-89%. CONCLUSIONS: NADAC has limitations, but appears to provide a better estimate of true drug acquisition cost than AWP. Given the wide discrepancy observed between NADAC and AWP it appears using AWP, even discounted, may introduce bias in economic evaluations.