Medicaid: States' Payments for Outpatient Prescription Drugs Page: 4 of 41
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Table 1: Characteristics of Selected Market-Based Prices
Price determination statute or Data
Price Definition method regulation availability
Average The average price paid to Manufacturers calculate Yes Not publicly
Manufacturer manufacturers by wholesalers AMP based on actual available
Price (AMP) for drugs distributed to the retail sales data and report it to
pharmacy class of trade.a the Centers for Medicare
& Medicaid Services
Best Price The lowest price available from Manufacturers calculate Yes Not publicly
the manufacturer to any Best Price based on available
wholesaler, retailer, provider, actual sales data and
health maintenance report it to CMS.b
organization, or nonprofit or
government entity, with some
Federal A price that is intended to equal On behalf of the federal Yes Publicly
Supply or better the prices charged to a government, the available
Schedule manufacturer's most favored Department of Veterans
(FSS) Price nonfederal customer under Affairs (VA) negotiates
comparable terms and FSS Prices based on
conditions. FSS Prices are manufacturer-reported
available to all direct federal data on actual sales to
purchasers of pharmaceuticals, their most favored
although other lower prices may commercial customers.d
be available to the largest
Source: GAO analysis of CMS and VA data.
Note: Retail pharmacies that dispense prescription drugs to Medicaid beneficiaries may be unable to purchase
drugs at AMP, Best Price, or FSS Price.
aSee 42 U.S.C. 1396r-8(k)(1). According to CMS, transactions used to calculate AMP are to reflect cash discounts
and any adjustments that affect the price realized, but are not to include prices to direct federal purchasers based
on the Federal Supply Schedule (FSS), prices from direct sales to hospitals or health maintenance organizations,
or prices to wholesalers when they relabel drugs they purchase under their own label. There is no definition in
the statute for "retail pharmacy class of trade."
bThe Omnibus Reconciliation Act of 1990 created AMP and Best Price for use in the Medicaid program to calculate
drug rebates. As we noted in our February 2005 report, we found considerable variation in the methods
manufacturers used to determine AMP and Best Price. See GAO, Medicaid Drug Rebate Program: Inadequate
Oversight Raises Concerns about Rebates Paid to States, GAO-05-102 (Washington, D.C.: Feb. 4, 2005).
CSee 42 U.S.C. 1396r-8(c)(1)(C). CMS has further defined Best Price as the lowest price at which the
manufacturer sells the drug to any purchaser in any pricing structure, including capitated payments, with some
exceptions. Best Price is required to be reduced to account for price adjustments such as discounts and rebates,
but is not to include prices charged to certain federal purchasers (including prices to direct federal purchasers
based on the FSS) and other select purchasers.
dSee Pub. L. No. 102-585, 603, 106 Stat. 4943, 4971-75. The Veterans Health Care Act of 1992 required that drug
manufacturers list their brand-name drugs on the FSS in order for purchases of such drugs to be eligible for
Medicaid payment. During a multiyear contract period, FSS Prices may not increase faster than inflation.
GAO-06-69R States' Medicaid Payments for Prescription Drugs
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United States. Government Accountability Office. Medicaid: States' Payments for Outpatient Prescription Drugs, text, October 31, 2005; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc302656/m1/4/: accessed September 20, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.