Frequently Asked Questions

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

Even though there were specific examples of bona find service fees provided in statute, the four-part test remains the definitive test to qualify a payment as a bona fide service fee. Therefore, manufacturers are responsible for meeting all four parts of the definition of bona fide service fee before a fee can qualify as a bona fide service fee (see 81 FR 5177-5178).

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FAQ ID:94821

The statutory line extension provisions went into effect on January 1, 2010. It is the manufacturers' responsibility to identify their line extension drugs, calculate rebates, and pay the states consistent with the statute as of this effective date, regardless of the approval date of the drugs.

The line extension provisions that are finalized in the final rule with comment are effective prospectively as of April 1, 2016. CMS will not be setting up any special process for retroactive rebate calculations for line extension drugs; therefore, manufacturers of line extension drugs should ensure that all rebates for line extension drugs are calculated and paid appropriately to states as of January 1, 2010.

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FAQ ID:94826

Effective April 1, 2016, each quarter, the labeler of the line extension drug should determine the initial brand name listed drug for its line extension drug taking into consideration which active initial drug has the highest additional rebate ratio for that quarter. Additionally, the labeler of the line extension drug needs to ensure that the NDC of the initial drug with the highest additional rebate ratio is updated in the Drug Data Reporting for Medicaid (DDR) system, as appropriate, each quarter.

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FAQ ID:94831

The requirements of the line extension provision of the final rule are effective as of the effective date of the final rule (April 1, 2016).

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FAQ ID:94836

A manufacturer's recalculation of its ACA Base Date AMP value can be reported any time during the four quarters allowable period per the final rule with comment beginning 2Q 2016.

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FAQ ID:94841

In accordance with regulations at 42 CFR 447.510(d)(2), monthly AMP is calculated based on a weighted average of prices for all the manufacturer's package sizes (NDC 11) of each covered outpatient drug sold by the manufacturer during a month. It is calculated as the net sales divided by the number of units sold, excluding goods or any other items specifically excluded in statute or regulation. In accordance with the requirements of 42 CFR 447.510(d)(2)(iii) the smoothing of lagged price concessions occurs at the NDC-9 level as part of the monthly AMP calculation.

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FAQ ID:94846

CMS has previously provided guidance regarding the reporting of zero or negative AMP in Manufacturer Release #80 (January 5, 2010) in which we specify that if a calculated monthly AMP is zero or negative, we recommend that manufacturers report the most recent prior month's positive AMP. However, the actual calculated monthly AMP should be used to calculate the quarterly AMP. If the quarterly AMP is zero or negative, we recommend that manufacturers report the most recent positive AMP value. Please see Manufacturer Release #80: https://www.medicaid.gov/Medicaid-CHIP-Program-Information/ByTopics/Benefits/Prescription-Drugs/Downloads/Rx-Releases/MFR-Releases/mfr-rel-080.pdf. (PDF, 127.6 KB)

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FAQ ID:94851