Branded Prescription Drug Fee Program

Section 9008 of the Affordable Care Act set forth the Branded Prescription Drug Fee Program (BPD). In general, the government drug programs specified in section 9008, including Medicaid, are required to report drug sales information to the Department of Treasury each year so that the fees can be accurately calculated.

The Secretary of the Treasury determines the amount of the fee to be paid by each manufacturer according to the manufacturer’s share of branded prescription drug sales to specified government programs. The specified government programs are Part B and Part D of Medicare, Medicaid, and TRICARE as well as programs operated by the Department of Veterans Affairs (VA) and the Department of Defense (DOD).

Each year, the law requires that the Secretary of Health and Human Services provide information on branded prescription drug sales for each manufacturer to the Secretary of the Treasury. The annual fees must be paid no later than September 30th of the payment year.

The Medicaid sales formula for each quarter of each BPD fee year is as follows:

  1. Calculate total dollars per branded NDC using the following formula:
    AMP-URA x total units1 reported by state(s)
  2. For each NDC, determine the percentage of Total Amount Reimbursed2 that is the Medicaid portion of that reimbursement. For example, if Total Amount Reimbursed is $100,000, and Medicaid Amount Reimbursed is $20,000, then the percentage equals 20%.
  3. Multiply the percentage of the Medicaid amount of that reimbursement (in the example above, 20%) by the dollar figure derived from Step 1 (AMP-URA x units) to get the new adjusted sales dollar totals.

BPD Disputes

The IRS issues guidance for those manufacturers that wish to dispute the BPD sales data provided by the government drug programs. All disputes must be sent to IRS, in the form and manner prescribed by their guidance. In some instances, where manufacturer disputes are based on alleged Medicaid data inaccuracies (e.g., state units reported, unit rebate amount calculation), the IRS will forward such disputes to Centers for Medicaid and CHIP Services (CMCS) for review and resolution.

For Medicaid, state utilization data impacts the methodology for calculating the annual BPD fees. As a result, the accuracy of the state utilization data is essential to ensuring that Medicaid’s drug sales information is reported correctly to the Department of Treasury. Prior to the annual calculation of the Medicaid sales amounts, all states and manufacturers receive information from CMS, instructing them to ensure that the state utilization data is accurate and reminding them that, if utilization data inaccuracies exist, manufacturers should contact the state and copy CMS to ensure any discrepancies can be corrected before the time CMCS calculates the BPD sales fee. CMS has emailed the following guidance to states and manufacturers on this topic, CMS Medicaid BPD Guidance to States and CMS Medicaid BPD Guidance to Manufacturers and attached is a document on Best Practices Guidance for Effective Review of BPD Disputes Sent to Medicaid by IRS for your use to prevent disputes.

Questions regarding the BPD program for Medicaid should be sent to

Additional Tips for Complete & Responsive Medicaid BPD Disputes

Based on the Medicaid BPD disputes received through IRS to date, the following information is offered to help manufacturers understand what dispute data will generally be considered non-responsive. In order to avoid using ineffective data to try and substantiate Medicaid BPD disputes, manufacturers should:

  • Provide a similar level of detail and supporting documentation for suspected understated utilization data as for overstated utilization data. Lack of detailed data for all disputed NDCs may result in inadequate time to respond to the manufacturer’s entire dispute.
  • Exclude non-federal Medicaid units (e.g., state-only Medicaid utilization, State Pharmacy Assistance Program utilization) in disputes to IRS. This utilization data is not included in the Medicaid BPD sales calculation; therefore, disputes of such data may result in inadequate time to respond to the manufacturer’s entire dispute.
  • Exclude any supplemental rebate units in Medicaid BPD sales disputes to IRS. Manufacturers report supplemental rebates separately to IRS for purposes of the BPD program; therefore, disputes related to supplemental rebates will be addressed by the IRS during the dispute process.
  • Remember that drugs terminated or deleted from the MDRP prior to any part of the BPD fee year may still have been paid for by a state within the calculated fee year. Therefore, disputes solely on the basis that a drug was terminated or deleted prior to the BPD fee year will usually not warrant further CMS Medicaid review.

Page last updated on April 20, 2015

1 This calculation would apply to Medicaid utilization reported by states for any of the four quarters of each BPD fee year.

2 The Medicaid sales formula for each quarter of the BPD program includes the percentage of the Total Amount Reimbursed, however, the original sales formula did not take into account that zero may be a valid value in the MCO Medicaid Amount Reimbursed and Total Amount Reimbursed Fields. Because zeros are now permissible in these fields, MCO records received from states with zero reimbursement values will be calculated with a proxy amount of .01 in both the Medicaid Amount Reimbursed and the Total Amount Reimbursed fields. This proxy amount will not be reflected in DDR or, but will be used in the methodology to derive each manufacturer’s calculated fee.