(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 or after October 1, 2018 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) 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. In no case will the total rebate amount exceed 100 percent of the AMP of the drug.

(6) Rebate for noninnovator multiple source drugs. The amount of the rebate for each dosage form and strength of a noninnovator 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.

(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 noninnovator multiple source drugs, 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).

[81 FR 5347, Feb. 1, 2016, as amended at 84 FR 12136, Apr. 1, 2019]