340B Program Listens to Reason – No Need for Two AMP Calculations

May 17, 2007

As pharmaceutical manufacturers all know by now, the Deficit Reduction Act changed the definition of the average manufacturer price reported to the Centers for Medicare & Medicaid Services for purposes of the Medicaid Rebate Program, requiring that customary prompt pay discounts to wholesalers are no longer to be deducted in the calculation of AMP as of the first quarter of 2007.  (And if you don’t know this already, please contact Jeff Wasserstein or Alan Kirschenbaum right away!)

Under the 340B program, manufacturers are required to offer certain PHS covered entities a discounted price, which is the AMP minus the unit rebate amount (which is the greater of 15.1% of AMP or AMP minus best price).  With the shift in the calculation in AMP mandated by CMS, one might have thought that this would carry over to other programs, such as the 340B program, as well, since the definition of AMP is tied into the definitions set up by the Medicaid Drug Rebate statute, 42 U.S.C. § 1396r-8.  Until recently, however, the Office of Pharmacy Affairs (OPA) at the Health Resources and Services Administration (HRSA), which administers the 340B program, insisted that manufacturers calculate two AMPs, one using the new methodology for CMS’s purposes under the Medicaid Rebate Program, and one to be used for calculating the 340B ceiling price that included prompt pay discounts. 

Thankfully, OPA listened to reason and rescinded this policy, which directed manufacturers to calculate AMP for purposes of the 340B program by taking into account prompt pay discounts, contrary to the DRA.  A May 9 Dear Manufacturer letter from Jimmy Mitchell, Director of OPA, the letter rescinds OPA’s January 30 letter, which had set forth the requirement that manufacturers calculate two separate AMPs.  As you can see in the attached letter, OPA has listened to reason and decided that a single AMP that meets the DRA’s statutory requirements should be used for both programs.

Categories: Reimbursement