Fair and Accurate Medicaid Pricing Act Becomes Law: Officially Closes AMP “Loophole” Related to Authorized Generics

The Fair and Accurate Medicaid Pricing Act (Act) imposes two changes related to how pharmaceutical manufacturers calculate Average Manufacturer Price (AMP) for purposes of the Medicaid Drug Rebate Program (MDRP). First, the Act prohibits manufacturers from blending sales of brands and authorized generics sold under the same New Drug Application (NDA) into one AMP by amending 42 U.S.C. § 1396r-8(k)(1)(C) to require exclusion of the sales of the authorized generic in the AMP for the branded drug.   

Second, the Act closes the so-called “loophole” that previously allowed some primary manufacturers to include the transfer price of an authorized generic sold to and re-labeled by another, secondary manufacturer in the AMP for the branded drug for injected, infused, inhaled, implanted, or instilled drugs that are not generally dispensed through retail community pharmacies (5i Drugs). Prior to passage of the Act, CMS took the position in the preamble to the final AMP rule that if the secondary manufacturer repackages and relabels the drug and subsequently sells it wholesale, the price of the drug paid by the secondary manufacturer to the primary manufacturer would not be included in the primary manufacturer’s AMP for the branded product. Nonetheless, because CMS’s position was not in binding regulation, many pharmaceutical manufacturers adopted an opposite position. 

Arent Fox previously analyzed the final AMP rule and our original alert may be accessed here. The Act is effective October 1, 2019, and will impact manufacturer AMP calculations for the months of October. If you have questions about the Act, please contact Stephanie Trunk or the Arent Fox attorney who regularly handles your matters.