340B Ceiling Price Calculation

May 2015

As part of the continuous efforts to improve program integrity with the 340B Drug Pricing Program, HRSA would like to provide an update on the development of the 340B pricing system designed to calculate and verify 340B ceiling prices.  This secure, web-based system will allow authorized users from covered entities the ability to view 340B ceiling prices for covered outpatient drugs.  Manufacturers participating in the 340B Program will be able to easily upload their quarterly pricing data for their portfolio of covered outpatient drugs and validate their prices with the HRSA-verified 340B ceiling price. This new system will strengthen HRSA’s commitment to transparency and our ability to ensure manufacturer compliance with 340B requirements. HRSA continues to make progress in its efforts to make the system available to manufacturers and covered entities and we will provide details on the timelines and instructions for testing and fully implementing the system as we move forward. 

340B Ceiling Price Calculation

The 340B ceiling price refers to the maximum amount that a manufacturer can charge a covered entity for the purchase of a 340B covered outpatient drug.  The 340B ceiling price is statutorily defined as the Average Manufacturer Price (AMP) reduced by the rebate percentage, which is   commonly referred to as the Unit Rebate Amount (URA).  HRSA obtains the AMP and URA data from the Centers for Medicare & Medicaid Services (CMS) as part of quarterly reporting for the Medicaid Drug Rebate Program.  This figure is then multiplied by the package size and case package size to produce a price that is used in the marketplace for purchasing covered outpatient drugs.  For example, the AMP minus the URA indicates the cost of one pill.  HRSA calculates the price of the total number of pills in the bottle (package size), and then the price of the multiple packages (case package size), which results in the 340B ceiling price and the corresponding quantity at which covered entities actually purchase the covered outpatient drug.

Manufacturers

Currently, manufacturers submit the AMP and URA to CMS for quarterly Medicaid Drug Rebate Program reporting, which HRSA uses to calculate 340B ceiling prices. Receiving this information directly from manufacturers under the new system will allow HRSA to more efficiently identify discrepancies among the ceiling price variables and resolve them with minimal burden on the industry.  The manufacturer will be assigned log-in credentials for individuals within the organization to access the system and upload pricing data. HRSA will have mechanisms in place to validate the identity of the individuals authorized to access the system.  When the manufacturer’s pricing data is uploaded into the system, it will then compare the manufacturer’s pricing data with the 340B ceiling price calculated by HRSA and identify any price discrepancies among ceiling price variables.  If a discrepancy exists, the manufacturer will receive a system-generated e-mail notification to access the system and resolve the price discrepancies.  Once the data are validated, the 340B ceiling price becomes ready to be published in the pricing system.  If a discrepancy is not able to be resolved, HRSA will conduct additional inquiry and work with manufacturers to take corrective action as necessary. 

In order to create appropriate log-in credentials  and facilitate the rollout of the system, we are requesting that manufacturers verify the accuracy and completeness of the information on file for each labeler code in the 340B Drug Pricing Program database.  Manufacturers should review the database record for each of their labeler codes and submit a manufacturer change request form to 340Bpricing@hrsa.gov if any updates are necessary. If considering a change to the authorizing official, please ensure that the new designee is a corporate officer or someone who would be otherwise authorized to legally bind the company to the terms of the Pharmaceutical Pricing Agreement (Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, etc.).

Covered Entities

Covered entities will be assigned log-in credentials for individuals within the organization to access the system and view 340B ceiling prices.  HRSA will have mechanisms in place to validate the identity of individuals authorized to access the system.  The pricing system will serve as a mechanism for covered entities to verify that they are not paying more than the posted 340B ceiling price for a covered outpatient drug.

HRSA looks forward to working with the stakeholders as we roll-out the new pricing system to ensure it is meeting statutory requirements and the needs of the users.