Title 42—Public Health--Volume 1
PART 447—PAYMENTS FOR SERVICES
§ 447.508   Exclusion from best price of certain sales at a nominal price.
(a) Exclusion from best price. Sales of covered outpatient drugs by a manufacturer at nominal prices are excluded from best price when purchased by the following entities:
(1) A covered entity as described in section 340B(a)(4) of the PHSA.
(2) An ICF/IID providing services as set forth in § 440.150 of this chapter.
(3) A State-owned or operated nursing facility providing services as set forth in § 440.155 of this chapter.
(4) A public or non-profit entity, or an entity based at an institution of higher learning whose primary purpose is to provide health care services to students of that institution, that provides family planning services described under section of 1001(a) of PHSA, 42 U.S.C. 300.
(5) An entity that:
(i) Is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of that Act or is State-owned or operated; and
(ii) Is providing the same services to the same type of population as a covered entity described in section 340B(a)(4) of the PHSA but does not receive funding under a provision of law referred to in such section.
(b) Nonapplication. This restriction does not apply to sales by a manufacturer of covered outpatient drugs that are sold under a master agreement under 38 U.S.C. 8126.
(c) Rule of construction. Nothing in this section is construed to alter any existing statutory or regulatory prohibition on services for an entity described paragraph (a)(5) of this section, including the prohibition set forth in section 1008 of the PHSA.
§ 447.509   Medicaid drug rebates (MDR).
(a) Determination of rebate amount —(1) Basic rebate for single source drugs and innovator multiple source drugs. The amount of basic rebate for each dosage form and strength of a single source drug or an innovator multiple source drug is equal to the product of:
(i) The total number of units of each dosage form and strength paid for under the State plan in the rebate period (as reported by the State); and
(ii) The greater of:
(A) The difference between the AMP and the best price for the dosage form and strength of the drug; or
(B) The AMP for the dosage form and strength of the drug multiplied by one of the following percentages:
( 1 ) For a clotting factor, 17.1 percent;
( 2 ) For a drug approved by FDA exclusively for pediatric indications, 17.1 percent; or
( 3 ) For all other single source drugs and innovator multiple source drugs, 23.1 percent.
(2) Additional rebate for single source and innovator multiple source drugs. In addition to the basic rebate described in paragraph (a)(1) of this section, for each dosage form and strength of a single source drug or an innovator multiple source drug, the rebate amount will be increased by an amount equal to the product of the following:
(i) The total number of units of such dosage form and strength paid for under the State plan in the rebate period.
(ii) The amount, if any, by which:
(A) The AMP for the dosage form and strength of the drug for the period exceeds:
(B) The base date AMP for such dosage form and strength, increased by the percentage by which the consumer price index for all urban consumers (United States city average) for the month before the month in which the rebate period begins exceeds such index associated with the base date AMP of the drug.
(3) Total rebate. The total rebate amount for single source drugs and innovator multiple source drugs is equal to the basic rebate amount plus the additional rebate amount, if any.
(4) Treatment of new formulations. (i) In the case of a drug that is a line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form, the rebate obligation for the rebate periods beginning January 1, 2010 through September 30, 2018 is the amount computed under paragraphs (a)(1) through (3) of this section for such new drug or, if greater, the product of all of the following:
(A) The AMP of the line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form.
(B) The highest additional rebate (calculated as a percentage of AMP) under this section for any strength of the original single source drug or innovator multiple source drug.
(C) The total number of units of each dosage form and strength of the line extension product paid for under the State plan in the rebate period (as reported by the State).
(ii) In the case of a drug that is a line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form, the rebate obligation for the rebate periods beginning on October 1, 2018 through December 31, 2021 is the amount computed under paragraphs (a)(1) through (3) of this section for such new drug or, if greater, the amount computed under paragraph (a)(1) of this section plus the product of all of the following:
(A) The AMP of the line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form.
(B) The highest additional rebate (calculated as a percentage of AMP) under this section for any strength of the original single source drug or innovator multiple source drug.
(C) The total number of units of each dosage form and strength of the line extension product paid for under the State plan in the rebate period (as reported by the State).
(iii) In the case of a drug that is a line extension of a single source drug or an innovator multiple source drug, provided that the initial single source drug or innovator multiple source drug is an oral solid dosage form, the rebate obligation for the rebate periods beginning on and after January 1, 2022 is the amount computed under paragraphs (a)(1) through (3) of this section for such new drug or, if greater, the amount computed under paragraph (a)(1) of this section plus the product of all of the following:
(A) The AMP of the line extension of a single source drug or an innovator multiple source drug.
(B) The highest additional rebate (calculated as a percentage of AMP) under this section for any strength of the original single source drug or innovator multiple source drug.
(C) The total number of units of each dosage form and strength of the line extension product paid for under the State plan in the rebate period (as reported by the State).
(iv) The alternative rebate is required to be calculated if the manufacturer of the line extension drug also manufactures the initial brand name listed drug or has a corporate relationship with the manufacturer of the initial brand name listed drug.
(5) Limit on rebate. For a rebate period beginning after December 31, 2009, and before January 1, 2024, in no case will the total rebate amount exceed 100 percent of the AMP of the single source or innovator multiple source drug.
(6) Rebate for drugs other than a single source drug or innovator multiple source drug. The amount of the basic rebate for each dosage form and strength of a drug other than a single source drug or innovator multiple source drug will be equal to the product of:
(i) The total number of units of such dosage form and strength for which payment was made under the State plan for the rebate period; and
(ii) The AMP for the dosage form and strength for the rebate period multiplied by 13 percent.
(7) Additional rebate for drugs other than a single source drug or innovator multiple source drug. In addition to the basic rebate described in paragraph (a)(6) of this section, for each dosage form and strength of a drug other than a single source drug or innovator multiple source drug, the rebate amount will be increased by an amount equal to the product of the following:
(i) The total number of units of such dosage form and strength paid for under the State plan in the rebate period.
(ii) The amount, if any, by which:
(A) The AMP for the dosage form and strength of the drug for the period exceeds the base date AMP for such dosage form and strength, increased by the percentage by which the consumer price index for all urban consumers (United States city average) for the month before the month in which the rebate period begins exceeds such index associated with the base date AMP of the drug.
(B) The base date AMP has the meaning of AMP set forth in sections 1927(c)(2)(A)(ii)(II), 1927(c)(2)(B) and 1927(c)(3)(C) of the Act.
(8) Total rebate. The total rebate amount for a drug other than a single source drug or innovator multiple source drug is equal to the basic rebate amount plus the additional rebate amount, if any.
(9) Limit on rebate. For a rebate period beginning after December 31, 2014, and before January 1, 2024, in no case will the total rebate amount exceed 100 percent of the AMP for a drug other than a single source drug or innovator multiple source drug.
(b) Rebates for drugs dispensed through Medicaid managed care organizations (MCOs). (1) Manufacturers participating in the Medicaid drug rebate program will provide a rebate for covered outpatient drugs dispensed to individuals enrolled in Medicaid MCOs if the MCO is contractually required to provide such drugs.
(2) Manufacturers are exempt from the requirement in paragraph (b)(1) of this section if such drugs are the following:
(i) Dispensed by health maintenance organizations including MCOs that contract under section 1903(m) of the Act; and
(ii) Discounted under section 340B of the PHSA.
(c) Federal offset of rebates. States must remit to the Federal government the amount of the savings resulting from the following increases in the rebate percentages.
(1) For single source or innovator multiple source drugs other than blood clotting factors and drugs approved by FDA exclusively for pediatric indications:
(i) If AMP minus best price is less than or equal to AMP times 15.1 percent, then the offset amount is the full 8.0 percent of AMP (the difference between 23.1 percent of AMP and 15.1 percent of AMP).
(ii) If AMP minus best price is greater than AMP times 15.1 percent but less than AMP times 23.1 percent, then the offset amount is the difference between AMP times 23.1 percent and AMP minus best price.
(iii) If AMP minus best price is equal to or greater than AMP times 23.1 percent, then there is no offset amount.
(2) For single source or innovator multiple source drugs that are clotting factors and drugs approved by FDA exclusively for pediatric indications that are subject to a rebate percentage of 17.1 percent of AMP:
(i) If AMP minus best price is less than or equal to AMP times 15.1 percent, then the offset amount is the full 2.0 percent of AMP (the difference between 17.1 percent of AMP and 15.1 percent of AMP).
(ii) If AMP minus best price is greater than AMP times 15.1 percent but less than AMP times 17.1 percent, then the offset amount is the difference between AMP times 17.1 percent and AMP minus best price.
(iii) If AMP minus best price is equal to or greater than AMP times 17.1 percent, then there is no offset amount.
(3) For a drug that is a line extension of a single source or innovator multiple source drug that is an oral solid dosage form, the offset amount is the difference between the unit rebate amount (URA) calculation for the drug calculated based on the applicable rebate percentage in section 1927 of the Act prior to the Affordable Care Act and the calculation of the URA for the line extension drug, if greater, in accordance with the Affordable Care Act.
(4) For a drug other than a single source drug or innovator multiple source drug, the offset amount is equal to 2.0 percent of the AMP (the difference between 13.0 percent of AMP and 11.0 percent of AMP).
(d) Manufacturer misclassification of a covered outpatient drug and recovery of unpaid rebate amounts due to the misclassification and other penalties —
(1) Definition of misclassification. A misclassification in the MDRP has occurred when a manufacturer has:
(i) Reported and certified to the agency its drug category or drug product information related to a covered outpatient drug that is not supported by the statute and applicable regulations; or,
(ii) Reported and certified to the agency its drug category or drug product information that is supported by the statute and applicable regulations, but pays rebates to States at a level other than that associated with that classification.
(2) Manufacturer notification by the agency of drug misclassification. If the agency determines that a misclassification has occurred as described in paragraph (d)(1) of this section, the agency will send written and electronic notification of this misclassification to the manufacturer of the covered outpatient drug, which may include a notification that past rebates are due. The manufacturer has 30 calendar days from the date of notification to:
(i) Provide the agency such drug product and drug pricing information needed to correct the misclassification of the covered outpatient drug and calculate rebate obligations due, if any, pursuant to paragraph (d)(3) of this section. The required pricing data submitted by the manufacturer to the agency shall include the best price information for the covered outpatient drug, if applicable, for the rebate periods for which the manufacturer misclassified the covered outpatient drug; and,
(ii) Certify applicable price and drug product data after entered into the system by the agency.
(3) Manufacturer payment of unpaid rebates due to misclassification determined by agency.
(i) When the agency has determined that a manufacturer has misclassified a covered outpatient drug as described in paragraph (d)(1) of this section, such that rebates are owed to the States, and notification has been provided to the manufacturer as provided under paragraph (d)(2) of this section, a manufacturer must pay to each State an amount equal to the sum of the products of:
(A) The difference between:
( 1 ) The per URA paid by the manufacturer for the covered outpatient drug to the State for a period during which the drug was misclassified; and
( 2 ) The per URA that the manufacturer would have paid to the State for the covered outpatient drug for each period, as determined by the agency based on the data provided and certified by the manufacturer under paragraph (d)(2) of this section, if the drug had been correctly classified by the manufacturer; and,
(B) The total units of the drug paid for under the State plan in each period.
(ii) Manufacturers must pay such rebates to the States for the period or periods of time that such covered outpatient drug was misclassified, based on the formula described in this section, within 60 calendar days of notification by the agency to the manufacturer of the misclassification, and provide documentation to the agency that the States were contacted by the manufacturer, and that such payments were made to the States within the 60 calendar days.
(4) Agency authority to correct misclassifications and additional penalties for drug misclassification. The agency will review the information submitted by the manufacturer based on the notice sent under paragraph (d)(2) of this section. If a manufacturer fails to comply with paragraph (d)(2) of this section within 30 calendar days from the date of the notification by the agency of the misclassification to the manufacturer under paragraph (d)(1) of this section, fails to pay the rebates that are due to the States as a result of the misclassification within 60 calendar days from the date of the notification, if applicable, and/or fails to provide to the agency such documentation that such rebates have been paid, as described in paragraph (d)(3) of this section, the agency may do any or all of the following:
(i) Correct the misclassification of the drug in the system on behalf of the manufacturer, using any pricing and drug product information that may have been provided by the manufacturer. In such case, the manufacturer must certify the applicable correction within 30 calendar days.
(ii) Suspend the misclassified drug and the drug's status as a covered outpatient drug under the manufacturer's rebate agreement from the MDRP, and exclude the misclassified drug from FFP in accordance with section 1903(i)(10)(E) of the Act.
(iii) Impose a civil monetary penalty (CMP) for each rebate period during which the drug is misclassified, not to exceed an amount equal to the product of:
(A) The total number of units of each dosage form and strength of such misclassified drug paid for under any State plan during such a rebate period; and
(B) 23.1 percent of the AMP for the dosage form and strength of such misclassified drug for that period.
(iv) Other actions and penalties available under section 1927 of the Act (or any other provision of law), including referral to the HHS Office of the Inspector General and termination from the MDRP.
(5) Transparency of manufacturers' drug misclassifications. The agency will make available on a public website an annual report as required under section 1927(c)(4)(C)(ii) of the Act on the covered outpatient drug(s) that were identified as misclassified during the previous year, any steps taken by the agency with respect to the manufacturer to reclassify the drugs and ensure the payment by the manufacturer of unpaid rebate amounts resulting from the misclassifications, and a disclosure of the expenditures from the fund created in section 1927(b)(3)(C)(iv) of the Act.
§ 447.510   Requirement and penalties for manufacturers.
(a) Quarterly reports. A manufacturer must report product and pricing information for covered outpatient drugs to CMS not later than 30 days after the end of the rebate period. The quarterly pricing report must include the following:
(1) AMP, calculated in accordance with § 447.504.
(2) Best price, calculated in accordance with § 447.505.
(3) Customary prompt pay discounts, which are reported as an aggregate dollar amount for each covered outpatient drug at the nine-digit NDC level, provided to all wholesalers in the rebate period.
(4) Prices that fall within the nominal price exclusion, which are reported as an aggregate dollar amount and include all sales of single source and innovator multiple source drugs to the entities listed in § 447.508(a) for the rebate period.
(b) Reporting revised quarterly AMP, best price, customary prompt pay discounts, or nominal prices. (1) A manufacturer must report to CMS any revision to AMP, best price, customary prompt pay discounts, or nominal prices for a period not to exceed 12 quarters from the quarter in which the data were due. Any revision request that exceeds 12 quarters will not be considered, except for the following reasons:
(i) The change is a result of the drug category change or a market date change.
(ii) The change is an initial submission for a product.
(iii) The change is due to termination of a manufacturer from the MDR program for failure to submit pricing data and must submit pricing data to reenter the program.
(iv) The change is due to a technical correction; that is, not based on any changes in sales transactions or pricing adjustments from such transactions.
(v) The change is to address specific rebate adjustments to States by manufacturers, as required by CMS or court order, or under an internal investigation as defined at § 447.502, or an Office of Inspector General (OIG) or Department of Justice investigation.
(vi) The change is a result of a VBP arrangement, as defined in § 447.502, requiring the manufacturer to make changes outside of the 12-quarter rule in this paragraph (b), when the outcome must be evaluated outside of the 12-quarter period.
(2) A manufacturer must report revised AMP within the 12-quarter time period, except when the revision would be solely as a result of data pertaining to lagged price concessions.
(c) Base date AMP report —(1) Reporting period. A manufacturer may report a revised Deficit Reduction Act (DRA) base date AMP to CMS within the first 4 full calendar quarters following July 17, 2007.
(2) Recalculation of the DRA base date AMP. (i) A manufacturer's recalculation of the DRA base date AMP must only reflect the revisions to AMP as provided for in § 447.504 in effect from October 1, 2007 to December 14, 2010.
(ii) A manufacturer may choose to recalculate the DRA base date AMP on a product-by-product basis.
(iii) A manufacturer must use actual and verifiable pricing records in recalculating the DRA base date AMP.
(3) Reporting a revised Affordable Care Act base date AMP. A manufacturer may report a revised Affordable Care Act base date AMP to CMS within the first 4 full calendar quarters following April 1, 2016.
(4) Recalculation of the Affordable Care Act base date AMP. (i) A manufacturer's recalculation of the Affordable Care Act base date AMP must only reflect the revisions to AMP as provided for in § 447.504.
(ii) A manufacturer may choose to recalculate the Affordable Care Act base date AMP on a product-by-product basis.
(iii) A manufacturer must use actual and verifiable pricing records in recalculating the Affordable Care Act base date AMP.
(d) Monthly AMP —(1) Definition. Monthly AMP means the AMP that is calculated on a monthly basis. A manufacturer must submit a monthly AMP to CMS not later than 30 days after the last day of each prior month.
(2) Calculation of monthly AMP. Monthly AMP is calculated based on § 447.504, except the period covered is based on monthly, as opposed to quarterly, sales.
(i) The monthly AMP is calculated based on the weighted average of prices for all the manufacturer's package sizes of each covered outpatient drug sold by the manufacturer during a month.
(ii) It is calculated as net sales divided by number of units sold, excluding goods or any other items specifically excluded in the statute or regulations. Monthly AMP is calculated based on the best data available to the manufacturer at the time of submission.
(iii) In calculating monthly AMP, a manufacturer must estimate the impact of its lagged AMP-eligible price concessions using a 12-month rolling percentage in accordance with the methodology described in this paragraph (d)(2).
(A) For each NDC-9 with at least 12 months of AMP-eligible sales, after adjusting for sales excluded from AMP, the manufacturer calculates a percentage equal to the sum of the price concessions for the most recent 12-month period (inclusive of the current reporting period) available associated with sales subject to the AMP reporting requirement divided by the total in dollars for the sales subject to the AMP reporting requirement for the same 12-month period.
(B) For each NDC-9 with less than 12 months of AMP-eligible sales, the calculation described in paragraph (d)(2)(iii)(A) of this section is performed for the time period equaling the total number of months of AMP-eligible sales.
(iv) The manufacturer multiplies the applicable percentage described in paragraph (d)(2)(iii)(A) or (B) of this section by the total in dollars for the sales subject to the AMP reporting requirement (after adjusting for sales excluded from AMP) for the month being submitted. The result of this multiplication is then subtracted from the total in dollars for the sales subject to the AMP reporting requirement (after adjusting for sales excluded from AMP) for the month being submitted.
(v) The manufacturer uses the result of the calculation described in paragraph (d)(2)(iv) of this section as the numerator and the number of units sold in the month (after adjusting for sales excluded from AMP) as the denominator to calculate the manufacturer's AMP for the NDC for the month being submitted.
(vi) Example. After adjusting for sales excluded from AMP, the total lagged price concessions over the most recent 12-month period available associated with sales for NDC 12345-6789 subject to the AMP reporting requirement equal $200,000, and the total in dollars for the sales subject to the AMP reporting requirement for the same period equals $600,000. The lagged price concessions percentage for this period equals 200,000/600,000 = 0.33333. The total in dollars for the sales subject to the AMP reporting requirement for the month being reported equals $50,000 for 10,000 units sold. The manufacturer's AMP calculation for this NDC for this month is: $50,000−(0.33333 × $50,000) = $33,334 (net total sales amount); $33,334/10,000 = $3.33340 (AMP).
(3) Timeframe for reporting revised monthly AMP. A manufacturer must report to CMS revisions to monthly AMP for a period not to exceed 36 months from the month in which the data were due, except as allowed in paragraph (b)(1) of this section.
(4) Exception. A manufacturer must report revisions to monthly AMP within the 36-month time period, except when the revision would be solely as a result of data pertaining to lagged price concessions.
(5) Terminated products. A manufacturer must not report a monthly AMP for a terminated product beginning with the first month after the expiration date of the last lot sold.
(6) Monthly AMP units. A manufacturer must report the total number of units that are used to calculate the monthly AMP in the same unit type as used to compute the AMP to CMS not later than 30 days after the last day of each month.
(e) Certification of pricing reports. Each report submitted under paragraphs (a) through (d) of this section must be certified by one of the following:
(1) The manufacturer's chief executive officer (CEO).
(2) The manufacturer's chief financial officer (CFO).
(3) An individual other than a CEO or CFO, who has authority equivalent to a CEO or a CFO; or
(4) An individual with the directly delegated authority to perform the certification on behalf of an individual described in paragraphs (e)(1) through (3) of this section.
(f) Recordkeeping requirements. (1) A manufacturer must retain records (written or electronic) for 10 years from the date the manufacturer reports data to CMS for that rebate period.
(i) The records must include these data and any other materials from which the calculations of the AMP, the best price, customary prompt pay discounts, and nominal prices are derived, including a record of any assumptions made in the calculations.
(ii) The 10-year timeframe applies to a manufacturer's quarterly and monthly submissions of pricing data, as well as any revised pricing data subsequently submitted to CMS.
(2) A manufacturer must retain records beyond the 10-year period if all of the following circumstances exist:
(i) The records are the subject of an audit, or of a government investigation related to pricing data that are used in AMP, best price, customary prompt pay discounts, or nominal prices of which the manufacturer is aware.
(ii) The audit findings or investigation related to the AMP, best price, customary prompt pay discounts, or nominal price have not been resolved.
(g) Data reporting format. All product and pricing data, whether submitted on a quarterly or monthly basis, must be submitted to CMS in an electronic format designated by CMS.
(h) Suspension of manufacturer's NDRA for late reporting of drug pricing and drug product information.
(1) If a manufacturer fails to timely provide information required to be reported to the agency under section 1927(b)(3)(A) of the Act, and paragraphs (a) and (d) of this section, the agency will provide written notice to the manufacturer of failure to provide timely information. If such information is not reported within 90 calendar days of the date of the notice communicated to the manufacturer electronically and in writing by the agency, such failure by the manufacturer to report such information in a timely manner shall result in suspension of the manufacturer's rebate agreement for all covered outpatient drugs furnished after the end of the 90-day calendar period. The rebate agreement will remain suspended until the date the information is reported to the agency in full and certified, and the agency reviews for completeness, but not for a period of fewer than 30 calendar days. Continued suspension of the rebate agreement could result in termination for cause. Suspension of a manufacturer's rebate agreement under this section applies for Medicaid purposes only and does not affect manufacturer obligations and responsibilities under the 340B Program or reimbursement under Medicare Part B during the period of the suspension.
(2) During the period of the suspension, the covered outpatient drugs of the manufacturer are not eligible for FFP. The agency will notify the States 30 calendar days before the beginning of the suspension period for the manufacturer's rebate agreement and any applicable associated labeler rebate agreements.
(i) Manufacturer audits of State-provided information. A manufacturer may only initiate a dispute, request a hearing, or seek an audit of a State regarding State drug utilization data, during a period not to exceed 12 quarters from the last day of the quarter from the State invoice postmark date.
§ 447.511   Requirements for States.
(a) Invoices submitted to participating drug manufacturers. Within 60 days of the end of each quarter, the State must bill participating drug manufacturers an invoice which includes, at a minimum, all of the following data and any subsequent changes to the data fields on the CMS-R-144 Medicaid Drug Rebate Invoice form:
(1) The State code.
(2) National Drug Code.
(3) Period covered.
(4) Product FDA list name.
(5) Unit rebate amount.
(6) Units reimbursed.
(7) Rebate amount claimed.
(8) Number of prescriptions.
(9) Medicaid amount reimbursed.
(10) Non-Medicaid amount reimbursed.
(11) Total amount reimbursed.
(b) Data submitted to CMS. On a quarterly basis, the State must submit drug utilization data to CMS, which will be the same information as submitted to the manufacturers on the CMS-R-144, as specified in paragraph (a) of this section. The state data submission will be due no later than 60 days after the end of each rebate period. In the event that a due date falls on a weekend or Federal holiday, the submission will be due on the first business day following that weekend or Federal holiday. Any adjustments to previously submitted data will be transmitted to the manufacturer and CMS in the same reporting period.
(c) State that has participating Medicaid Managed care organizations (MCO). A State that has participating Medicaid managed care organizations (MCO) which includes covered outpatient drugs in its contracts with the MCOs, must report data described in paragraph (a) of this section for covered outpatient drugs dispensed to individuals eligible for medical assistance who are enrolled with the MCO and for which the MCO is required under contract for coverage of such drugs under section 1903 of the Act. These data must be identified separately from the data pertaining to drugs that the State reimburses on a fee-for-service basis.
(d) State data certification. Each data submission in this section must be certified by one of the following:
(1) The State Medicaid Director (SMD);
(2) The Deputy State Medicaid Director (DSMD);
(3) An individual other than the SMD or DSMD, who has authority equivalent to an SMD or DSMD; or
(4) An individual with the directly delegated authority to perform the certification on behalf of an individual described in paragraphs (d)(1) through (3) of this section.
(e) State data certification language. Each data submission by a state must include the following certification language: “I hereby certify, to the best of my knowledge, that the state's data submission is complete and accurate at the time of this submission, and was prepared in accordance with the state's good faith, reasonable efforts based on existing guidance from CMS, section 1927 of the Act and applicable Federal regulations. I further certify that the state has transmitted data to CMS, including any adjustments to previous rebate periods, in the same reporting period as provided to the manufacturer. Further, the state certifies that it has applied any necessary edits to the data for both CMS and the manufacturer to avoid inaccuracies at both the NDC/line item and file/aggregate level. Such edits are to be applied in the same manner and in the same reporting period to both CMS and the manufacturer.”
§ 447.512   Drugs: Aggregate upper limits of payment.
(a) Multiple source drugs. Except for brand name drugs that are certified in accordance with paragraph (c) of this section, the agency payment for multiple source drugs must not exceed, in the aggregate, the amount that would result from the application of the specific limits established in accordance with § 447.514. If a specific limit has not been established under § 447.514, then the rule for “other drugs” set forth in paragraph (b) of this section applies.
(b) Other drugs. The agency payments for brand name drugs certified in accordance with paragraph (c) of this section and drugs other than multiple source drugs for which a specific limit has been established under § 447.514 must not exceed, in the aggregate, payment levels that the agency has determined by applying the lower of the following:
(1) AAC plus a professional dispensing fee established by the agency; or
(2) Providers' usual and customary charges to the general public.
(c) Certification of brand name drugs. (1) The upper limit for payment for multiple source drugs for which a specific limit has been established under § 447.514 does not apply if a physician certifies in his or her own handwriting (or by an electronic alternative means approved by the Secretary) that a specific brand is medically necessary for a particular beneficiary.
(2) The agency must decide what certification form and procedure are used.
(3) A check off box on a form is not acceptable but a notation like “brand necessary” is allowable.
(4) The agency may allow providers to keep the certification forms if the forms will be available for inspection by the agency or HHS.
§ 447.514   Upper limits for multiple source drugs.
(a) Establishment and issuance of a listing. (1) CMS will establish and issue listings that identify and set upper limits for multiple source drugs available for purchase by retail community pharmacies on a nationwide basis that FDA has rated at least three drug products as pharmaceutically and therapeutically equivalent in the “Approved Drug Products with Therapeutic Equivalence Evaluations” which is available at http://www.accessdata.fda.gov/scripts/cder/ob/. Only pharmaceutically and therapeutically equivalent formulations will be used to determine such limit, and such limit will only be applied to those equivalent drug products.
(2) CMS publishes the list of multiple source drugs for which upper limits have been established and any revisions to the list in Medicaid Program issuances.
(b) Specific upper limits. (1) The agency's payments for multiple source drugs identified and listed periodically by CMS in Medicaid Program issuances must not exceed, in the aggregate, prior to the application of any federal or state drug rebate considerations, payment levels determined by applying for each pharmaceutically and therapeutically equivalent multiple source drug product, a professional dispensing fee established by the state agency plus an amount established by CMS that is equal to 175 percent of the weighted average of the most recently reported monthly AMPs for such multiple source drugs, using manufacturer submitted utilization data for each multiple source drug for which a Federal upper limit (FUL) is established.
(2) Exception. If the amount established by CMS in paragraph (b)(1) of this section for a pharmaceutically and therapeutically equivalent multiple source drug product is lower than the average retail community pharmacies' acquisition cost for such drug product, as determined by the most current national survey of such costs, CMS will use a percent of the weighted average of the most recently reported monthly AMPs that equals the most current average acquisition costs paid by retail community pharmacies as determined by such survey.
(c) Ensuring a drug is for sale nationally. To assure that a multiple source drug is for sale nationally, CMS will consider the following additional criteria:
(1) The AMP of a terminated NDC will not be used to set the Federal upper limit (FUL) beginning with the first day of the month after the termination date reported by the manufacturer to CMS.
(2) The monthly AMP units data will be used to calculate the weighted average of monthly AMPs for all multiple source drugs to establish the FUL.
(d) The FUL will be applied as an aggregate upper limit.
§ 447.516   Upper limits for drugs furnished as part of services.
The upper limits for payment for prescribed drugs in this subpart also apply to payment for drugs provided as part of skilled nursing facility services and intermediate care facility services and under prepaid capitation arrangements.
§ 447.518   State plan requirements, findings, and assurances.
(a) State plan. (1) The State plan must describe comprehensively the agency's payment methodology for prescription drugs, including the agency's payment methodology for drugs dispensed by all of the following:
(i) A covered entity described in section 1927(a)(5)(B) of the Act.
(ii) A contract pharmacy under contract with a covered entity described in section 1927(a)(5)(B) of the Act.
(iii) An Indian Health Service, tribal and urban Indian pharmacy.
(2) The agency's payment methodology in paragraph (a)(1) of this section must be in accordance with the definition of AAC in § 447.502.
(b) Findings and assurances. Upon proposing significant State plan changes in payments for prescription drugs, and at least annually for multiple source drugs and triennially for all other drugs, the agency must make the following findings and assurances:
(1) Findings. The agency must make the following separate and distinct findings:
(i) In the aggregate, its Medicaid expenditures for multiple source drugs, identified and listed in accordance with § 447.514(a), are in accordance with the upper limits specified in § 447.514(b).
(ii) In the aggregate, its Medicaid expenditures for all other drugs are in accordance with § 447.512.
(2) Assurances. The agency must make assurances satisfactory to CMS that the requirements set forth in §§ 447.512 and 447.514 concerning upper limits and in paragraph (b)(1) of this section concerning agency findings are met.
(c) Recordkeeping. The agency must maintain and make available to CMS, upon request, data, mathematical or statistical computations, comparisons, and any other pertinent records to support its findings and assurances.
(d) Data requirements. (1) When proposing changes to either the ingredient cost reimbursement or professional dispensing fee reimbursement, States are required to evaluate their proposed changes in accordance with the requirements of this subpart, and States must consider both the ingredient cost reimbursement and the professional dispensing fee reimbursement when proposing such changes to ensure that total reimbursement to the pharmacy provider is in accordance with requirements of section 1902(a)(30)(A) of the Act. States must provide adequate cost-based data, such as a State or national survey of retail pharmacy providers or other reliable cost-based data other than a survey, to support any proposed changes to either or both of the components of the reimbursement methodology. States must submit to CMS the proposed change in reimbursement and the supporting data through a State plan amendment formal review process. Research and data must be based on pharmacy costs and be sufficient to establish the adequacy of both current ingredient cost reimbursement and professional dispensing fee reimbursement. Submission by the State of data that are not based on pharmacy costs, such as market-based research (for example, third party payments accepted by pharmacies), to support the professional dispensing fee would not qualify as supporting data.
(2) A State participating in VBP arrangements approved under a CMS-authorized supplemental rebate agreement (SRA) must report data described in paragraph (d)(3) of this section on an annual basis.
(3) Within 60 days of the end of each year, the State must submit all of the following data, including cumulative data to date:
(i) State.
(ii) National drug code(s) (for drugs covered under the CMS-authorized VBP SRA).
(iii) Product's FDA list name.
(iv) Number of prescriptions.
(v) Cost to the State to administer the CMS-authorized VBP SRA (for example, systems changes, tracking outcomes, etc.).
(vi) Total savings generated by the supplemental rebate due to the CMS-authorized VBP SRA.
§ 447.520   Federal Financial Participation (FFP): Conditions relating to physician-administered drugs.
(a) Availability of FFP. No FFP is available for physician-administered single source drugs or the multiple source drugs identified under paragraph (c) of this section that are covered outpatient drugs for which a State has not required the submission of claims using codes that identify the drugs sufficiently for the State to invoice a manufacturer for rebates in a manner consistent with the requirements of this section. In the case of multiple source drugs not identified under paragraph (c), a failure to comply with the requirements of this section may result in FFP being withheld as provided under 42 CFR 430.35. 40
40 https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-C/part-430.
(1) Single source drugs. For a covered outpatient drug that is a single source, physician-administered drug, administered on or after January 1, 2006, a State must require providers to submit claims for using National Drug Code (NDC) numbers to secure rebates and receive FFP.
(2) Multiple source drugs. For a covered outpatient drug that is a multiple source, physician-administered drug on the list published by CMS described in paragraph © of this section, administered on or after January 1, 2008, a State must require providers to submit claims using NDC numbers to secure rebates and receive FFP.
(3) States are required to invoice for rebates consistent with this section for multiple source physician-administered drugs that are CODs and that are not on the top 20 multiple source physician-administered drug list published under paragraph (c) of this section, or may be subject to a withhold of FFP as provided under 42 CFR 430.35. 41
41 Ibid.
(b) Required coding. As of January 1, 2007, a State must require providers to submit claims for a covered outpatient drug that is described in paragraph (a)(1) or (2) of this section that is a physician-administered drug using NDC numbers. As of November 19, 2024, a State must also comply with this requirement for a covered outpatient drug that is a physician-administered drug described in paragraph (a)(3) of this section.
(c) Top 20 multiple source physician-administered drug list. The top 20 multiple source physician-administered drug list, identified by the Secretary as having the highest dollar volume of physician-administered drugs dispensed under the Medicaid program, will be published and may be modified from year to year to reflect changes in such volume.
(d) Hardship waiver. A State that requires additional time to comply with the requirements of this section may apply to the Secretary for an extension.
§ 447.522   Optional coverage of investigational drugs and other drugs not subject to rebate.
(a) Medicaid coverage of investigational drugs may be provided at State option under section 1905(a)(12) of the Act when such drug is the subject of an investigational new drug application (IND) that has been allowed by FDA to proceed.
(b) A State agency electing to provide coverage of an investigational drug must include in its State plan a description of the coverage and payment for such drug.
(c) The State plan must indicate that any reimbursement for investigational drugs by the State are consistent with FDA regulations at 21 CFR part 312 if they are to be eligible to receive FFP for these drugs.
(d) Medicaid coverage of other drugs may be provided at State option under section 1905(a)(12) of the Act provided that they are not eligible to be covered as covered outpatient drugs in the Medicaid Drug Rebate program.
(e) Investigational drugs and other drugs are not subject to the rebate requirements of section 1927 of the Act provided they do not meet the definition of a covered outpatient drug as set forth in section 1927(k) of the Act.