Pricing Formulas

340B Ceiling Price Calculation

Pursuant to section 340B(a)(1) of the PHSA, the 340B ceiling price is calculated by subtracting the unit rebate amount (URA The CMS Medicaid Drug Rebate (MDR) system performs the URA calculation using the drug manufacturer's pricing. The specific methodology used is determined by law and depends upon the drug's classification. Drug manufacturers remain responsible for correctly calculating the URA for their covered outpatient drugs.) from the average manufacturer price (AMP) for the smallest unit of measure of each covered outpatient drug (this is identified by the product’s 11-digit National Drug Code (NDC A unique 11-digit, 3-segment code numeric identifier assigned to each medication listed under Section 510 of the US Federal Food, Drug, and Cosmetic Act. The segments identify the labeler or vendor, product (within the scope of the labeler), and trade package (of this product). The first segment (4 or 5 digits) is assigned by the Food and Drug Administration (FDA). The second segment (3 or 4 digits) identifies a specific strength, dosage form, and formulation for a particular firm. The third segment (1 or 2 digits) identifies package forms and sizes.).

Drug manufacturers participating in CMS Centers for Medicare and Medicaid Services, the federal agency within Health and Human Services (HHS) that administers the Medicare and Medicaid programs, including the Medicaid drug rebate program and the Medicare Part D prescription drug benefit.’ Medicaid Drug Rebate Program (MDRP) The Medicaid Drug Rebate Program is a program that includes CMS, state Medicaid agencies, and participating drug manufacturers that helps to offset the federal and state costs of most outpatient prescription drugs dispensed to Medicaid patients. report the AMP for each of their products to CMS each quarter, and CMS subsequently calculates the corresponding URA for each of those products. The published 340B ceiling price will be rounded to two decimal places.

The following statutory formula is used for calculating the 340B Ceiling Price Manufacturers who participate in the Medicaid Drug Rebate Program (MDRP) enter into an agreement with the Secretary of Health and Human Services under which the manufacturer must agree to charge a price no greater than the statutory pricing formula (340B ceiling price) when selling covered outpatient drugs to 340B covered entities. In order to calculate the 340B ceiling price, the Unit Rebate Amount (URA) is subtracted from the Average Manufacturer Price (AMP) for the smallest unit of measure [340B Ceiling Price = (AMP – URA)]. Under section 340B(a) of the Public Health Service Act (PHSA), the 340B ceiling price is calculated by subtracting the unit rebate amount (URA) from the average manufacturer price (AMP) for the smallest unit of measure of each covered outpatient drug (as identified by the product's 11-digit National Drug Code (NDC). To ensure that the final price is operational in the marketplace, HRSA then multiplies this amount by drug's package size (PS), defined as the number of billing units in the labeled quantity from which the pharmacist dispenses, and the case pack size (CSP), defined as the number of salable units in the shipping container [340B Ceiling Price = (AMP-URA) x PS x CSP].:

340B Ceiling Price = (AMP - URA)

Additionally, the following information will be displayed to covered entities:

• The raw ceiling price

  • AMP minus the URA, before it is rounded to two decimal places

• The package size (PS Defines the size of a single package for an NDC (i.e., if a case of a dozen bottles of 100 pills, PS = 100).)

  • The quantity of a unit of measure, in the same units as AMP is reported, contained in one package sold by a manufacturer under a 11-digit NDC

• The case pack size (CSP Defines the size of the cases for an NDC (i.e., if a case of a dozen bottles of 100 pills, CSP = 12).)

  • the number of salable units in the shipping container that an individual purchaser could procure

  • the CSP is what a covered entity could purchase rather than what a wholesaler would receive from a manufacturer

• The package adjusted price

  • the amount operational in the marketplace after HRSA multiplies (AMP – URA) by the PS and by the CSP

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