An In-Depth Look at the Final AMP Rule

Feb 04, 2016

On January 21, 2016, the Centers for Medicare and Medicaid Services (CMS) released the Covered Medicaid Outpatient Drugs Final Rule (commonly called the “Final AMP rule”), which implements several changes to pharmacy reimbursement for brand and generic drugs dispensed to the Medicaid population in all States and U.S. territories reimbursed under fee-for-service. The following is an in-depth look at the Final AMP rule, with key takeaways for Pharmacy, provided by AmerisourceBergen Government Affairs.


  • The final rule is effective April 1, 2016. However, 24 states (AR, CA, CT, GA, IL, IN, MA, MD, ME, MI, MN, MO, MT, NE, NY, OK, SD, TN, UT, VA, VT, WI, WV, and WY) and the District of Columbia (DC) will need legislative and/or regulatory action to implement the changes of the final rule. These states will need to submit a state plan amendment (SPA) to implement the required reimbursement and dispensing fee changes by June 30, 2017 to be effective April 1, 2017. The SPA will go through public comment.

    Note: All other states have already moved to AAC/NADAC or moved or planning to move to managed care.
  • CMS will publish 2 draft versions of Average Manufacturer Price (AMP)-based Federal Upper Limits (FULs) in February and March for stakeholder comment. Final AMP-based FULs will be effective on April 1, 2016.

Key Points for Pharmacy:

  • The final rule implements a shift in reimbursement, requiring pharmacy ingredient costs be reimbursed based on average acquisition cost (AAC) – a benchmark that is closer to the actual price that pharmacy providers pay to acquire drug products marketed or sold by specific manufacturers. CMS allows states the flexibility to establish their AAC reimbursement; states can base this reimbursement on certain benchmarks like National Average Drug Acquisition Cost (NADAC) or Average Manufacturer Price (AMP).
  • States have the flexibility to determine the professional dispensing fee, but are required to include those costs associated with ensuring the appropriate covered outpatient drugs are provided to Medicaid beneficiaries. States also have the ability to assess differing dispensing fees based upon provider type or services rendered.
  • States that desire to change ingredient cost reimbursement or the professional dispensing fee must demonstrate such change reflects actual costs and does not negatively impact Medicaid beneficiary pharmacy access and must consider both the ingredient cost and professional dispensing fee when adjusting either or both.
  • Federal Upper Limits (FUL) will be calculated for multiple source drugs when there are at least 3 drug products that are therapeutically and pharmaceutically equivalent and available for purchase by retail community pharmacies on a nationwide basis. Only pharmaceutically and therapeutically equivalent formulations will be used to determine such limit, and the limit will only be applied to those equivalent drug products.
  • FULs will be calculated at 175% of the weighted average of the most recently reported monthly AMPs and if the FUL is below the average retail community pharmacy acquisition cost, CMS will adopt the NADAC value as the FUL for the therapeutic class.
  • Sales to specialty, home health care, or home infusion could be included in AMP calculations if the entity does not dispense medications primarily through the mail, and satisfies the definition of a retail community pharmacy (the entity operates as an independent, chain, supermarket, or mass merchandiser pharmacy that is licensed as a pharmacy by the state and dispenses medications to the general public at retail prices).
  • CMS declined to extend AAC standard to Medicaid managed care plans and noted that Medicaid managed care plans are permitted flexibility to reimburse for ingredient cost and professional dispensing fees at the levels necessary to achieve adequate access to a network of providers

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