Signature
P_340B = max(AMP - URA, 0.01)
| Inputs | Definition | Unit |
|---|---|---|
AMP | Medicaid average manufacturer price for the smallest unit of measure in the preceding calendar quarter | dollars per unit |
URA | Medicaid rebate per unit for the same quarter, the basic rebate plus any additional inflation rebate | dollars per unit |
P_340B | Maximum price a covered entity can be required to pay for the smallest unit of the drug | dollars per unit |
|---|
Function
340B ceiling price function
Maps a covered outpatient drug's average manufacturer price and its Medicaid unit rebate amount for the preceding calendar quarter to the maximum price a covered entity can be required to pay for the smallest unit of the drug. The statute sets the ceiling as AMP reduced by the rebate percentage, the Medicaid rebate per unit divided by AMP, which is AMP minus the unit rebate amount.
Implementations
Excel
Ceiling price with penny pricing
With the AMP in AvgMfrPrice and the unit rebate amount in UnitRebateAmt, Excel calculates to six decimal places and applies the 0.01 dollar floor; ROUND(,2) of the result gives the published value.
=MAX(ROUND(AvgMfrPrice-UnitRebateAmt,6),0.01)
Assumptions
Rules effective from 1 January 2019
The ceiling price regulation was published on 5 January 2017 and took effect on 1 January 2019. For a new drug without an AMP, the ceiling price is estimated from the wholesale acquisition cost minus the rebate percentage until an AMP is available.
Quarterly calculation by product
The manufacturer calculates the ceiling price for each National Drug Code every quarter. AMP and URA refer to the same unit of measure and the preceding quarter.
Worked examples
Branded drug with the minimum rebate only
Using the article's illustrative figures, a branded single-source drug has an AMP of 100 dollars and a unit rebate amount of 23.10 dollars, the 23.1% minimum rebate. The ceiling price is 76.90 dollars per unit.
AMP = 100; URA = 23.10; P_340B = 76.90
Drug with a large inflation rebate at the penny floor
An AMP of 100 dollars with a unit rebate amount of 101.10 dollars, possible for a drug whose price has risen much faster than inflation, gives a calculated price of minus 1.10 dollars. The ceiling price is set at 0.01 dollars. The figures are illustrative.
AMP = 100; URA = 101.10; P_340B = 0.01
Common errors
Using the current quarter's AMP
The ceiling price for a quarter uses the AMP and URA from the preceding calendar quarter. Pairing a quarter's prices with its own AMP misstates the ceiling whenever AMP changes between quarters.
Reporting a zero or negative ceiling price
When the URA equals or exceeds AMP, the formula gives zero or less. The regulation sets the ceiling at 0.01 dollars in that case, and an analysis that uses a zero acquisition cost understates it.
Sources
Statutory ceiling price
United States Code, Title 42, section 256b. Limitation on prices of drugs purchased by covered entities (Public Health Service Act section 340B). Accessed 29 September 2026. Subsection (a)(1) (amount not to exceed the average manufacturer price in the preceding calendar quarter reduced by the rebate percentage) and (a)(2)(A) (rebate percentage: average total rebate required under section 1927(c) for a unit, divided by the AMP for that unit).
Ceiling price regulation and penny pricing
Code of Federal Regulations, Title 42, section 10.10. Ceiling price for a covered outpatient drug. Accessed 29 September 2026. Paragraph (a) (ceiling price equal to AMP from the preceding calendar quarter for the smallest unit of measure minus URA, to six decimal places, published rounded to two), (b) (a result below 0.01 dollars gives a ceiling price of 0.01 dollars) and (c) (estimation for new drugs from wholesale acquisition cost).
HRSA final rule on the ceiling price
Health Resources and Services Administration, Department of Health and Human Services. 340B Drug Pricing Program ceiling price and manufacturer civil monetary penalties regulation: final rule. Federal Register. 2017;82(3):1210-1230 (5 January 2017; effective date changed to 1 January 2019 by 83 FR 61563). Discussion of section 10.10: ceiling price equal to AMP minus URA; comments on penny pricing and alternatives considered; regulation text.
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