Unit Rebate Amount Calculation for Single Source or Innovator Multiple Source Drugs

Definition of Baseline Average Manufacturer Price and Baseline CPI-U

A drug’s baseline Average Manufacturer Price (AMP) and baseline Consumer Price Index for all Urban Users (CPI-U) values vary depending upon the drug’s market date. The current definitions for both the baseline AMP and the baseline CPI-U follow:

baseline AMP* – The AMP for the first quarter after the drug’s market date.

baseline CPI-U* – The CPI-U for the month prior to the first quarter after the drug’s market date.

* Please note that this methodology is applied to drugs with market dates of October 1, 1993 or greater.

Definition of Quarterly CPI-U

The quarterly CPI-U is equal to the CPI-U value of the month prior to the quarter being calculated.

Unit Remate Amount Calculation Example for “S” or “I” Drugs (That Are Not Clotting Factor (CF) or Exclusively Pediatric (EP) Drugs)

Product “X” baseline AMP = 0.277450

Product “X” quarterly AMP = 0.311824

Product “X” quarterly BP = 0.267440

Product “X” baseline CPI-U = 151.6

Quarter “X” quarterly CPI-U = 175.0

Step 1: Basic Rebate Calculation

  • The basic rebate amount for Single Source or Innovation (S/I) drugs is the greater of AMP minus BP or AMP times 23.1%
  • The basic rebate amount for S/I drugs with an EP indicator is the greater of AMP minus BP or AMP times 17.1%
  • The basic rebate amount for S/I drugs with a CF indicator is the greater of AMP minus BP or AMP times 17.1%

Formula: Basic Rebate Amount = the greater of the Quarterly AMP x 23.1% or the Quarterly AMP – the Quarterly BP

  • Quarterly AMP x 23.1% = 0.311824 x 0.231 = 0.0720313440
  • This value is rounded to 7 places = 0.0720313
  • Quarterly AMP – Quarterly BP = 0.311824 - 0.267440 = 0.044384000
  • This value is rounded to 7 places = 0.0443840
  • The greater of the two results (i.e., 0.0720313 and 0.0443840) is 0.0720313; therefore, the Basic Rebate Amount equal 0.0720313

Step 2: Additional Rebate Calculation

Formula: (Baseline AMP / Baseline CPI-U) x Quarterly CPI-U

  • Baseline AMP / Baseline CPI-U = (0.277450 / 151.6) x 175 = 0.3202675396
  • This amount is rounded to 7 places = 0.3202754
  • Compare the additional rebate amount (0.3202754) to the quarterly AMP (0.311824): if the number is less than the quarterly AMP, subtract it from the quarterly AMP to determine the additional rebate amount; if the number is equal to or greater than the quarter’s AMP, the additional rebate amount is equal to zero.
  • In this example, 0.3202754 is greater than 0.311824; therefore, the Additional URA = 0.000000

Step 3: Total Rebate Calculation

Formula: total rebate amount = Basic Rebate Amount (Rounded to 7 Places) + Additional Rebate Amount (Rounded to 7 Places)

  • Basic Rebate + Additional Rebate = 0.0720313 + 0.000000 = 0.0720313
  • This amount is rounded to 6 places = 0.072031
  • This amount is rounded to 4 places = 0.0720
  • Total Rebate Amount = 0.0720

Step 4: Comparison of Total Rebate Amount to Quarterly AMP

  • If the total rebate amount is greater than the quarterly AMP, it is reduced to equal AMP.
  • Total Rebate Amount = 0.0720
  • Quarterly AMP = 0.311824
  • Since the quarterly AMP is greater than the total rebate amount, the total rebate amount does not change.