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

Step 1: Calculate the Standard Rebate

To determine a line extension drug’s standard rebate calculation, add the basic rebate amount to any calculated additional rebate amount.

Basic Rebate Calculation

The basic rebate amount for all line extension single source or innovator multiple scoure (S/I) drugs is the greater of average manufacturer price (AMP) minus BP or AMP times 23.1%.

Additional Rebate Calculation

To determine if any additional rebate amount is owed for a quarter, the following calculation is performed:

  1. Divide baseline AMP by baseline consumer price index for urban consumers (CPI-U)
  2. Multiply the result by the quarterly CPI-U
  3. Compare the result of step 2 to the quarterly AMP
  4. If the resulting amount is less than the quarterly AMP, the additional rebate owed is equal to the difference between these two figures. If the resulting amount is equal to or more than the quarterly AMP, no additional rebate is due.

Step 2: Calculate the Alternative Rebate for Line Extension Drugs

To determine a line extension drug’s alternative rebate amount, the following calculation is performed:

  1. For each potential initial drug, divide the calculated quarterly additional rebate amount for the line extension drug’s initial drug by the initial drug’s quarterly AMP to arrive at the highest additional rebate ratio.
  2. Multiply the highest additional rebate ratio by the line extension drug’s quarterly AMP.

Step 3: Calculate the Total Rebate for Line Extension S or I Drugs

To determine a line extension drug’s total rebate amount, the following calculation is performed:

  1. Compare the “standard” rebate amount to the calculated “alternative” rebate amount to determine which value is greater.
  2. The greater of the “standard” or the “alternative” rebate amount will equal the line extension drug’s total rebate amount.
  3. If the resulting total rebate amount is greater than or equal to the product’s AMP for the quarter being calculated, the total rebate amount will equal AMP; if the resulting amount is less than the product’s AMP for the quarter being calculated, the total rebate amount will equal that calculated amount.

View Unit Rebate Amount (URA) calculation example for line extension "S" or "I" drugs.