CFR > Title 42 - Public Health > CHAPTER IV—CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES > SUBCHAPTER C—MEDICAL ASSISTANCE PROGRAMS (parts 430 to 456) > PART 447—PAYMENTS FOR SERVICES > SUBPART I—Payment for Drugs (§447.500 to §447.520) > 447.514—Upper limits for multiple source drugs.

447.514—Upper limits for multiple source drugs.

(a) Establishment and issuance of a listing. (1) CMS will establish and issue listings that identify and set upper limits for multiple source drugs that meet the following requirements:
(i) The FDA has rated two or more drug products as therapeutically and pharmaceutically equivalent in its most current edition of “Approved Drug Products with Therapeutic Equivalence Evaluations” (including supplements or in successor publications), regardless of whether all such formulations are rated as such and only such formulations shall be used when determining any such upper limit.
(ii) At least two suppliers meet the criteria in paragraph (a)(1)(i) of this section.
(2) CMS publishes the list of multiple source drugs for which upper limits have been established and any revisions to the list in Medicaid Program issuances.
(b) Specific upper limits. The agency's payments for multiple source drugs identified and listed periodically by CMS in Medicaid Program issuances must not exceed, in the aggregate, payment levels determined by applying for each drug entity a reasonable dispensing fee established by the State agency plus an amount established by CMS that is equal to 250 percent of the AMP (as computed without regard to customary prompt pay discounts extended to wholesalers) for the least costly therapeutic equivalent.
(c) Ensuring a drug is for sale nationally. To assure that a drug is for sale nationally, CMS will consider the following additional criteria:
(1) The AMP of a terminated NDC will not be used to set the Federal upper limit (FUL) beginning with the first day of the month after the actual termination date reported by the manufacturer to CMS.
(2) Except as set forth in paragraph (c)(3) of this section, the AMP of the lowest priced therapeutically and pharmaceutically equivalent drug that is not less than 40 percent of the next highest AMP will be used to establish the FUL.
(3) When the FUL group includes only the brand name drug and the first new generic or authorized generic drug which has entered the market, the criteria in paragraph (c)(2) of this section will not apply.