Glossary

340B Ceiling Price is the maximum amount that can be charged to a Covered Entity for a Covered Outpatient Drug in the PHS/340B Program.

340B Covered Entities are those facilities and programs eligible to purchase discounted drugs through the PHS/340B Program. Covered Entities include, but are not limited to, federally qualified health center lookalike programs; certain disproportionate share hospitals owned by, or under contract with, state or local governments; and several categories of facilities or programs funded by Federal PHS grant dollars, including federally qualified health centers, AIDS drug assistance programs, hemophilia treatment centers, STD and TB grant recipients, and family planning clinics.

A 5i (or 5-I) product is a drug that is inhaled, infused, instilled, implanted, or injected and not generally dispensed through a Retail Community Pharmacy (RCP).

Authorized Generic (AG) refers to a drug that is the same formulation and is approved under the New Drug Application (NDA) as the original drug but is marketed, sold, and/or distributed under a different labeler code, product code, trade name, trademark, or packaging than the brand name drug.

Average Manufacturer Price (AMP) means the average price paid to the manufacturer for a Covered Outpatient Drug by wholesalers for drugs distributed to retail community pharmacies; and by retail community pharmacies that purchase drugs directly from the manufacturer.

An Abbreviated New Drug Application (ANDA) is an application submitted to the FDA that contains information to show that a product is identical in active ingredient, dosage form, strength, route of administration, labeling, quality, performance characteristics, and intended use, among other things to a previously approved application.

Average Sale Price (ASP) is equal to a manufacturer’s sales to all purchasers in the United States except those excluded by statute, divided by the number of units sold for a calendar quarter. ASP is used to calculate the reimbursement rate for drugs administered on an outpatient basis under Medicare Part B.


Baseline AMP means, for Single Source and Innovator Multiple Source drugs, the calculated AMP for the first full calendar quarter after the day on which the drug was first marketed. For Non-Innovator drugs, if the NDC's Market Date is on or before April 1, 2013, the Baseline AMP is equal to the AMP for the third quarter of 2014. If the NDC's Market Date is after April 1, 2013, the Baseline AMP is equal to the AMP for the fifth full calendar quarter after the drug was first marketed.

Baseline CPI-U is used to calculate the Additional Rebate (also known as the inflation penalty) for the Medicaid rebate. For Single Source and Innovator Multiple Source drugs marketed on or after October 1, 1993, it is the published Consumer Price Index - Urban ("CPI-U") for the month prior to the first full quarter after the product's Market Date. For Non-Innovator Multiple Source Drugs marketed on or before April 1, 2013, the baseline CPI-I is September 2014. For Non-Innovator Multiple Source Drugs marketed after April 1, 2013, it is the CPI-U for the last month of the quarter in which the product is launched.

The Big 4 is used when discussing the Federal Supply Schedule (FSS/VA contract) and refers to the Department of Veterans Affairs (VA), the Department of Defense, the Public Health Service (inclusive of the Indian Health Service) (PHS), and the Coast Guard.

Best Price (BP) is the lowest net price paid to the manufacturer during the rebate period to any eligible entity in the United States in any pricing structure in the same quarter for which AMP is computed for Single Source and Innovator Multiple Source drugs.

A bona fide service fee (BFSF) is a payment made by a manufacturer to an entity that represents fair market value for a an itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement; and that are not passed on in whole or in part to a client or customer of an entity, whether or not the entity takes title to the drug.

A bundled sale is based on the arrangement under which a rebate, discount, or other price concession is conditioned upon the purchase of the same drug, drugs of different types, or another product or some other performance requirement (e.g., market share), or where the resulting discounts or other price concessions are greater than those available had the bundled drugs been purchased separately or outside the bundled arrangement, regardless of the physical packaging of the products.

A chargeback is a payment issued to a wholesaler for the difference between the Wholesaler Acquisition Cost (WAC) and a contract price charged by the wholesaler to the customer with whom the manufacturer has entered into a contract.

Class of Trade (COT) is a market segment classification assigned to a manufacturer’s direct and indirect customers based on their business activity, often for purposes of identifying the treatment of their sales and discounts in the government pricing calculations.


For purposes of the VA/FSS Contract, Covered Drugs include (1) single-source drugs; (2) innovator multiple-source drugs; and (3) biological products described in 24 C.F.R. § 600.3, including products licensed under section 351 of the Public Health Services Act. Prescription drugs that later become available over-the-counter are not considered “Covered Drugs” as of the date of their change in status.

A Covered Entity is a facility eligible to purchase drugs through the PHS/340B Program.

For purposes of Medicaid, a Covered Outpatient Drug (COD) is prescription drug approved or marketed under a New Drug Application ("NDA"), a Supplemental New Drug Application ("SNDA"), an Abbreviated New Drug Application ("ANDA"), an Antibiotic Drug Approval ("ADA"), Abbreviated Antibiotic Drug Approval ("AADA"), a biologics license agreement ("BLA"), or the Drug Efficacy Study Implementation ("DESI") Program; or, an over the counter ("OTC") where a State Medicaid program reimburses for the product and the product is prescribed, subject to statutory limitations.

Consumer Price Index- Urban (CPI-U) is the index of consumer prices developed and updated by the U.S. Department of Labor.

A Customary Prompt Payment Discount (CPPD) is a discount off the purchase price of a drug routinely offered by the manufacturer to a wholesaler or other direct purchaser for prompt payment within a specified timeframe, and consistent with customary business practices for payment.

A Direct Sale is a sale to a customer who purchases directly from the manufacturer and not through a wholesaler or other middleman.

Dual Pricing refers to the option on the VA/FSS contract for manufacturers to sell their Covered Drugs to the Big 4 entities at the Federal Ceiling Price and at a negotiated price to Other Government Agencies based on a Tracking Customer.

Federal Ceiling Price (FCP) is the maximum price a manufacturer can charge for Covered Drugs to the Big 4. FCP must be at least 24 percent below the Non-Federal Average Manufacturer Price (NFAMP).

The Federal Supply Schedule (FSS) is the collection of contracts used by Federal agencies, U.S. territories, Indian tribes and other specified entities to purchase supplies and services from outside vendors, including pharmaceutical products. FSS terms, conditions, and prices are negotiated by the VA and is often referred to as the “VA Contract.”

A Group Purchasing Organization (GPO) is an organization that acts as a purchasing agent to negotiate lower prices in the marketplace on behalf of its members.

An Indirect Sale is a sale made through a wholesaler to a customer with a contract with the manufacturer for a lower price, resulting in a chargeback.

The Industrial Funding Fee (IFF) is a fee collected by pharmaceutical manufacturers on behalf of the VA for operating the FSS program. It is added on to the cost of all products purchased through the FSS and remitted quarterly to the VA.

Ab Innovator Multiple Source Drug (“I” Drug) is a multiple source drug that was originally marketed under an NDA approved by FDA, including an authorized generic drug. It also includes a drug product marketed by any cross-licensed producers, labelers, or distributors operating under the NDA and a covered outpatient drug approved under a BLA, a PLA, establishment license application (ELA) or ADA.

J Codes are used for reimbursement for primarily injectable drugs that ordinarily cannot be self-administered such as chemotherapy, immunosuppressive drugs and inhalation solutions, and some orally administered drugs.

A Labeler Code is the first five (5) digits of the NDC-11 that is assigned by the FDA and identifies the manufacturer of a drug.

A Lagged Price Concession (LPC) refers to any discount or rebate that is realized after the sale of the drug such as rebates and chargebacks. It does not include CPPDs or any other discount included on the invoice.

For purposes of Medicaid, Medicare, and the PHS/340B Program, a Manufacturer is an entity engaged in the “production, preparation, propagation, compounding, conversion or processing of prescription drug products, either directly or indirectly, by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis,” or “in the packaging, repackaging, labeling, relabeling, or distribution of prescription drug products.” For authorized generic products, this also includes the original holder of the NDA and for drugs subject to private label arrangements, this includes the entity under whose own label or trade name the product is distributed.

For the VA/FSS Contract, a Manufacturer is the entity that produces, prepares, propagates, compounds, converts, or processes prescription drug products, or an entity that packages, repackages, labels, re-labels or distributes prescription drug products. It does not include a wholesaler, distributor, or retail pharmacy.

Medicaid Drug Program System (MDP) is the website used by pharmaceutical manufacturers to submit their monthly and quarterly MDRP data. MDP replaced the Drug Data Reporting System (DDR).

The Medicaid Drug Rebate Program (MDRP), or Medicaid for purposes of Government Pricing, is the Federal drug rebate program that was started in 1991 under the Omnibus Budget Reconciliation Act ("OBRA") of 1990, providing rebates to state Medicaid agencies for drugs dispensed to Medicaid patients.

Medicare provides health care services to individuals over the age of 65 or certain individuals with disabilities. Part B covers hospital stays and skilled nursing home care.


Medicare Part D refers to the prescription drug coverage that is part of Medicare.

A New Drug Application (NDA) is an application submitted to the FDA for a license to market a drug for a specific indication.

The National Drug Code (NDC) is the 11-digit numerical code maintained by the FDA where the first 5 digits refer to the labeler code, the middle 4 digits refer to the product code, and the last 2 digits refer to the package size.

For purposes of Medicaid, a Nominal Price refers to a sale that is at a price less than 10% of the same quarter AMP and is to a 340B Covered Entity, an intermediate care facilities for the mentally retarded, a state-owned or operated nursing facilities, a 501(c)(3) organizations providing the same type of services to the same type of population as 340B Covered Entities, a public or non-profit family planning clinics, including university health centers that provide family planning services, or any other facility or entity that the Secretary determines is a safety net provider to which sales of such drugs at a nominal price would be appropriate, based on certain factors such as type of facility or entity, services provided by the facility or entity, and patient population.

For purposes of the VA/FSS contract, a Nominal Price refers to a sale that is at a price less than 10% of the most recently calculated third quarter Non-FAMP and is designed to benefit the public by financially aiding disadvantaged, not-for-profit covered drug dispensaries, or researchers using a drug for an experimental or nonstandard purpose.

Non-Federal Average Manufacturer Price (NFAMP or Non-FAMP) means the average price of a single form and dosage unit of a Covered Drug that is paid by wholesalers, including cash discounts, chargebacks, rebates, or similar price reductions during that period to wholesalers. It excludes nominal sales and all sales made through the FSS and PHS/340B contracts. NFAMP is reported quarterly and annually to the VA.

Non-Innovator Multiple Source Drug (N Drug) means:

• A multiple source drug that is not an innovator multiple source drug or a single source drug;

• A multiple source drug marketed under an ANDA or an abbreviated ADA;

• A covered outpatient drug that entered the market before 1962 that was not originally marketed under an NDA; or

• Any drug that has not gone through an FDA approval process, but otherwise meets the definition of covered outpatient drug, including those marketed via an over-the-counter monograph.

Other Government Agencies (OGA) are customers permitted to purchase from the Federal Supply Schedule, other than the Big 4, at prices not limited to the Federal Ceiling Price.

A Prior Quarter Adjustment Statement (PQAS) is the form used by manufacturers to reconcile prior quarter Medicaid rebate adjustments, such as a response to an adjustment to the units by a state for prior quarters, to report disputed units, and/or to report adjustments to prior rebate payments because of changes in pricing data.

The Reconciliation of State Invoice (ROSI) is the form manufacturers submit with their rebate payments to the states.

A Retail Community Pharmacy (RCP) means an independent, chain, supermarket or mass merchandiser pharmacy that is licensed by the State and dispenses medications to the general public at retail prices.

Rebate per Unit (RPU) or Unit Rebate Amount (URA) is the amount manufacturers pay quarterly to the States for Medicaid utilization.

Single Source Drug (S Drug) is a covered outpatient drug that is produced or distributed under an original NDA and has an approved NDC number issued by FDA, including a drug product marketed by any cross-licensed producers or distributors operating under the NDA. It also includes a covered outpatient drug approved under a BLA, a PLA, an ELA, or ADA.

A State Pharmaceutical Assistance Program (SPAP) is a program administered by the State for a non-Medicaid population, (e.g., the disabled, indigent, low-income elderly or other financially vulnerable persons). An SPAP must be approved by CMS for manufacturers to be able to exclude rebates paid to the program from BP.

A program where Manufacturers contract with the State to pay a supplemental, or additional, rebate in addition to the rebate payable under the MDRP. A State Supplemental Rebate Program must be approved by CMS for manufacturers to be able to exclude rebates paid to the program from BP

For Medicaid, the Termination Date is the expiration date of the last lot sold by the manufacturer unless the product is removed from the market for health or safety reasons, or due to FDA action. In that case, the termination date is the date on which the product is removed.

A Tracking Customer (TC) is used in the VA/FSS contract. It is a customer, or category of customers, against which the FSS pricing is tracked. The manufacturer must maintain a ratio between the Tracking Customer price and the FSS price. If the Tracking Customer’s price decreases below the price required to maintain the ratio, the manufacturer must notify the VA and lower the FSS price of the Covered Drug.

Tricare (TRRx) is the program that obtains refunds on prescriptions of Covered Drugs dispensed by retail pharmacies to TRICARE beneficiaries.

Unit Rebate Amount (URA) or Rebate per Unit (RPU) is the amount manufacturers pay quarterly to the States for Medicaid utilization.

Wholesale Acquisition Cost (WAC) means the manufacturer’s list price for the drug or biological to wholesalers or direct purchasers as reported in wholesale price guides or other publications of drug pricing data.

For purposes of Medicaid, Medicare, and the PHS/340B Program, a Wholesaler is an entity engaged in the distribution of prescription drugs to retail community pharmacies, including, but not limited to, manufacturers , re-packers, distributors, own-label distributors, private-label distributors , jobbers, brokers, warehouses (including manufacturers' and distributors' warehouses, chain drug warehouses, and wholesale drug warehouses), independent wholesale drug traders, and retail community pharmacies that conduct wholesale distributions.

For purposes of the VA/FSS Contract, a wholesaler is defined as a merchant middleman, including a prime vendor or similar distribution system, who sells primarily to retailers, other merchants, or industrial, institutional, and commercial users mainly for resale or business use.