Signature
S = R - P_340B; S_share = (R - P_340B) / R
| Inputs | Definition | Unit |
|---|---|---|
R | Payment the covered entity receives from the payer for the unit, greater than zero | dollars per unit |
P_340B | Acquisition cost of the unit at or below the ceiling price | dollars per unit |
S | Reimbursement minus acquisition cost at the 340B price | dollars per unit |
|---|---|---|
S_share | Spread divided by the reimbursement for the unit | proportion |
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.
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Implementations
Excel
Spread and share for one unit
With the reimbursement in Reimbursement and the 340B price in Price340B, the formulas return the spread and its share of the payment.
=Reimbursement-Price340B; =(Reimbursement-Price340B)/Reimbursement
Assumptions
Payment unaffected by the entity's acquisition cost
The payer pays the same amount whatever the entity paid for the drug. Where a payer adjusts payment for 340B acquisition, R is the adjusted rate.
Eligible patient and no duplicate discount
The unit is dispensed to a patient of the covered entity, and for Medicaid patients the unit is not also subject to a Medicaid rebate.
Worked examples
Unit reimbursed at 106 per cent of average sales price
Following the article, a unit bought at the ceiling price of 76.90 dollars is reimbursed at 106% of an average sales price of 98 dollars, 103.88 dollars. The spread is 26.98 dollars, about 26% of the payment. The figures are illustrative.
R = 103.88; P_340B = 76.90; S = 26.98; S_share = 0.2597
Same unit from a payer with a lower rate
If the payer reimburses 85 dollars for the same unit, the spread falls to 8.10 dollars, about 10% of the payment.
R = 85; P_340B = 76.90; S = 8.10; S_share = 0.0953
Common errors
Treating the spread as a saving to the payer
The spread is kept by the covered entity; the payer's cost is what it reimburses, which the programme changes only when payment rules respond to it. In an economic evaluation the discount is a transfer from manufacturer to covered entity.
Using one average spread for all payers
The spread differs by payer, and some units earn none. An estimate of the programme's value to an entity weights spreads by its payer mix.
Sources
Ceiling price that sets the acquisition cost
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 minus URA; the maximum a covered entity can be charged, and so the acquisition cost used in the spread.
Duplicate discount and diversion prohibitions
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)(5)(A) (prohibition of duplicate discounts or rebates for drugs subject to a Medicaid rebate) and (a)(5)(B) (prohibition of resale or transfer to a person who is not a patient of the entity).
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