Frequently Asked Questions

As stated in the above response, reimbursement to IHS and Tribal providers through the encounter rate is an option available to all states as a means to satisfying the requirement to reimburse such providers in accordance with the requirements at 42 CFR 447.518(a)(2). However, states that choose to utilize the encounter rate for reimbursement should be aware that since it is an "all-inclusive rate" (or bundled payment), any drug included in that rate is not eligible for rebates through the Medicaid Drug Rebate Program, as it does not meet the definition of a ""covered outpatient drug"" at section 1927(k)(2) and (3) of the Act. In order to meet the definition of ""covered outpatient drug"" and therefore be eligible for rebates, amongst other requirements, there must be a direct reimbursement for the drug and it cannot be reimbursed as part of a bundled payment.

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FAQ ID:94771

The provisions of this final rule related to pharmacy payments do not apply to MCO payment or reimbursement methodologies, including MCO providers participating in the 340B program.

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FAQ ID:94776

As noted in the comment and response in the preamble to the final rule (81 FR 5216), CMS declined to set a threshold in order to allow flexibility to recognize changes that take place in the pharmaceutical marketplace with regard to mail order business. CMS further noted that manufacturers may make reasonable assumptions that a pharmacy is a retail community pharmacy when the majority of the drugs are not dispensed through the mail. A "majority" is generally determined as greater than 50 percent, which could be interpreted as greater than 50 percent. In addition, in cases where a single entity owns both a retail community pharmacy and a mail order pharmacy, manufacturers may exclude the sales to the mail order side of business and include sales to the retail community pharmacy side when calculating AMP, and include the mail order sales when they are calculating AMP for a 5i drug not generally dispensed through retail community pharmacies. Since the definition of retail community pharmacy at 1927(k)(11) of the Act excludes a pharmacy that "dispenses prescription medications primarily through the mail", CMS believes the number of prescriptions dispensed would be a reasonable basis to determine whether the pharmacy dispenses "primarily through the mail."

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FAQ ID:94781

As discussed in the final rule (81 FR 5250), if a specialty pharmacy meets the definition of a retail community pharmacy at section 1927(k)(10) of the Act, sales for such drugs would be included in AMP. This is true even in the event there are a low number of AMP eligible sales. Because CMS is permitting manufacturers to use a presumed inclusion approach when calculating AMP, and to make reasonable assumptions, an AMP will likely be generated for such drugs.

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FAQ ID:94786

CMS does not require that two separate NDC-9s be blended, however, the agency believes that in certain circumstances, a manufacturer may blend the AMPs of two NDC-9. For example, if a manufacturer acquires a product from a different labeler and has made necessary arrangements with the prior manufacturer, it may have product with the old labeler code (ex. 12345) as well as product from its own labeler code (ex. 67890) in the market at the same time while the supply of the drug under the old labeler code is depleted. Since the two NDC-9s are essentially the same product/strength combination, it may be reasonable to blend the AMPs and report the same AMP for both NDCs. As always, it is recommended that manufacturers retain written documentation of any reasonable assumptions made in the calculation of AMP. Manufacturers may contact CMS for further guidance and discussion as the facts and circumstances of each case should be evaluated independently.

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FAQ ID:94791

The lowest price available means it is the lowest price available to the best price eligible entity. The best price must include applicable discounts, rebates, or other transactions that adjust prices either directly or indirectly to the best price eligible entities. See 42 CFR 447.505(b) and section 1927(c) of the Act.

We have provided the following example:

If a manufacturer sells a drug to a hospital but also provides a rebate to a PBM (which is excluded from best price); however, the PBM rebate is designed to subsequently adjust the drug price available from the manufacturer to the hospital (the best price eligible entity), the rebate or discount is included in the best price (see 42 CFR 447.505(c)(17)).

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FAQ ID:94796

As discussed in the final rule, any prices provided by manufacturers to 340B covered entities are excluded from AMP and best price. This would include inpatient manufacturer prices provided to children's hospitals, critical access hospitals, rural referral centers, sole community hospitals, and freestanding cancer hospitals, where those entities qualify as 340B entities as described in regulation (see 81 FR 5253, 5257-5258).

For specific questions regarding whether a covered entity meets the definition of covered entity as described in section 340B(a)(4) of the Public Health Service Act, please contact the Health Resources and Services Administration (HRSA) at 340Bpricing@hrsa.gov

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FAQ ID:94801

Yes, to the extent they meet the requirements defined in the final regulation at 42 CFR 447.508(a)(4) and (5). This section of the regulation provides that nominal price sales to entities would be excluded from best price when purchased by an entity that is:

• Described in section 501(c)(3) of the Internal Revenue Code (IRC) of 1986 and exempt from tax under section 501(a) of that Act or is State-owned or Operated; and,
• Providing the same services to the same type of population as a covered entity described in 340B(a)(4) of the Public Health Service Act, but does not receive Federal funding under a provision of law referred in such section.

To determine whether an entity is ""non-profit or charitable organization"" under 501(c)(3) of the Internal Revenue Code (IRC), the IRS has an on-line tool and manufacturers can access that tool at https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations. As specified in the final rule, using this readily available information, manufacturers may make certain reasonable assumptions, in the absence of specific guidance, in their determinations of whether an entity is a non-profit or charitable organization, provided those reasonable assumptions are consistent with the requirements and intent of section 1927 of the Act and federal regulations(81 FR 5226).

The second prong of the regulation provides that the entity must provide services similar to 340B entities listed at 340B(a)(4) but do not receive Federal funding under this section of the law. The entities listed at www.hrsa.gov/opa/eligibility-and-registration/index.html include Title X Family planning clinics and sexually transmitted disease clinics. Therefore, to the extent non-profit family planning clinics provide the same types of services as Title X Family Planning clinics and/or sexually transmitted disease clinics, the nominal price sales to these entities would be exempt.

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FAQ ID:94806

Section 1927(k)(1)(C) of the Act requires that in the case of a manufacturer that approves, allows, or otherwise permits any drug of the manufacturer to be sold under a new drug application (NDA) approved under section 505(c) of Federal Food, Drug and Cosmetic Act (FFDCA), AMP shall be inclusive of the average price paid for such drug by wholesalers for drugs distributed to retail community pharmacies. Therefore, as stated in a comment and response in the final rule, when a manufacturer is selling two versions of a product (both the AG and the brand) under the same NDA, in such cases the price of the drug would be blended for AMP, even if the manufacturer distinguishes the two products using different NDCs (81 FR 5260). Furthermore, as discussed in the final rule (81 FR 5260), CMS does not believe the manufacturer should determine a separate best price for each NDC simply because the two manufacturers of the same company identify the same drug using different NDCs.

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FAQ ID:94811

Regulations at 42 CFR 447.506(c) indicate that a primary manufacturer holding the NDA must include the best price of an authorized generic drug in its computation of best price for a single source or an innovator multiple source drug during a rebate period to any manufacturer, wholesaler, retailer, provider, HMO, non-profit entity, or governmental entity in the United States, only when such drugs are being sold by the manufacturer holding the NDA.

Transfer sales that take place between two manufacturers would be included in AMP only to the extent the secondary manufacturer is acting as a wholesaler in accordance with section 1927(k)(11) of the Act.

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FAQ ID:94816