Frequently Asked Questions

Pharmacy provider reimbursement rates should be consistent with efficiency, economy, and quality of care while assuring sufficient beneficiary access, in accordance with section 1902(a)(30)(A) of the Act. As states revise their reimbursement for the ingredient cost of a drug to stay within the FUL, they should also consider whether their current dispensing fee continues to provide adequate reimbursement for the cost of dispensing a prescription to a Medicaid beneficiary, as well as the need to submit a SPA. If a state determines that any change to reimbursement rates are needed, they are responsible for submitting a SPA demonstrating compliance with applicable requirements in the final rule with comment.

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A FUL will only be calculated when pharmaceutically and therapeutically equivalent multiple source drug products are available for purchase by retail community pharmacies on a nationwide basis (see 81 FR 5300, 5302-5304).

CMS plans to regularly monitor the availability of drugs by reviewing the FDA drug shortage list for drugs that have a FUL calculated, but are not likely to have enough supply in the market to meet current demand. Further, CMS plans to monitor weekly pricing changes available to us in the most current national survey of pricing to consider changes to the multiplier used to calculate the FULs, based on average retail community pharmacies' acquisition costs. It is also important to note that CMS currently publishes a monthly and weekly file of NADAC pricing values, which states can use to monitor those changes in average retail community pharmacies' acquisition costs as they apply the FUL aggregate reimbursement. CMS will not calculate a FUL for a given drug if the agency determines that there is a lack of availability of that drug to retail community pharmacies on a nationwide basis.

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The 340B ceiling prices can be calculated by the states using the formula in section 340B of the Public Health Service Act, which is based on the average manufacturer price (AMP) minus the unit rebate amount (URA).

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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).

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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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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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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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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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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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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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