DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland   21244-1850 
 
CMCS Informational Bulletin 
 
DATE:  November 27, 2013 
 
FROM:  Cindy Mann 
    Center for Medicaid and CHIP Services 
 
SUBJECT:  Anticipated Finalization of Affordable Care Act Federal Upper Limits for 
Multiple Source Drugs 
 
 
Today the Centers for Medicare & Medicaid Services (CMS) is announcing its intention to finalize 
the Federal Upper Limits (FUL) for multiple source drugs in July 2014. 
 
We will provide further detailed guidance for states to use to implement the Affordable Care Act 
FULs, but, based on consultation with states, we are providing this advance notice of our intention to 
finalize the FULs in July 2014 to help states plan.  We encourage states to begin to consider what 
revisions may be needed to their contracts with pharmacy claims processors and the pricing 
compendia, as well as the need to submit state plan amendments (SPA) in order to accommodate the 
FUL data into their pharmacy reimbursement systems. 
 
Since September 2011, we have published monthly draft average manufacturer price (AMP)-based 
FUL files as well as the methodology used in the calculation of those FULs on the Medicaid.gov 
website for the purpose of soliciting feedback from states, pharmacies, and other stakeholders.  We 
received valuable comments from stakeholders, carefully considered these comments, and 
incorporated them into our determination of FULs where appropriate.  In particular, many 
stakeholders noted that the AMP-based FULs fluctuated from month-to- month.  After analyzing the 
FULs and examining possible reasons for the monthly fluctuation, we developed a draft three-month 
rolling average (3-MRA) FUL, which uses the most recently reported and two previous months of 
AMP data to calculate a FUL that yields less variance on a month-to-month basis.  We have 
published the 3-MRA file in draft on the Medicaid.gov website since October 2012. 
 
Our analysis shows that the aggregate state payments by ingredient costs using either the draft 
monthly AMP-based FUL or the draft 3-MRA FUL, calculated with state utilization data reported 
quarterly to CMS, are generally above those payments using the draft National Average Drug 
Acquisition Cost (NADAC) pricing.  Therefore, we expect that the use of the NADAC pricing could 
allow states to meet the FULs aggregate upper limit, and states may want to consider the use of the 
NADAC.  We want to remind states that CMS recently finalized the NADAC files, which are 
voluntary for states to use.  However, we note that a state must submit a SPA in accordance with the 
state plan requirements if it decides to use NADACs as a basis for payment. 
 
We recognize that pharmacy providers should be reimbursed adequately for their professional 
services. As states revise their reimbursement for the ingredient cost of a drug to stay within the FUL  CMCS Informational Bulletin  Page 2 
 
aggregate, 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. 
 
For more information on the FULs, please visit http://www.medicaid.gov/Medicaid-CHIP-Program-
Information/By-Topics/Benefits/Prescription-Drugs/Federal-Upper-Limits.html.  For more 
information on NADAC, please visit http://www.medicaid.gov/Medicaid-CHIP-Program-
Information/By-Topics/Benefits/Prescription-Drugs/Survey-of-Retail-Prices.html.