Draft Affordable Care Act Federal Upper Limits

The Affordable Care Act modified the previous statutory provisions that establish a Federal Upper Limit(FUL) on multiple source drugs. Effective October 1, 2010, the Social Security Act was revised to require that the Secretary calculate FULs as no less than 175 percent of the weighted average (determined on the basis of manufacturer utilization) of the most recently reported monthly average manufacturer prices (AMP). In order to facilitate this change, CMS is issuing draft FUL reimbursement files (for review and comment only), for multiple source drugs, including the draft methodology used to calculate the FULs in accordance with the Affordable Care Act. These draft FUL prices are based on the most recently reported monthly AMP and AMP unit data. For example, we used the monthly AMP and AMP unit data for covered outpatient drugs that manufacturers reported to CMS for the month of August 2011 to develop the files that we released in October 2011.

To begin our implementation of these changes, we are posting the draft FUL files (July 2011 [ZIP], August 2011 [ZIP], September 2011 [ZIP], October 2011 [ZIP], November 2011 [ZIP], December 2011 [ZIP], January 2012 [ZIP], February 2012 [ZIP], March 2012 [ZIP], April 2012 [ZIP], and May 2012 [ZIP]) and the draft Affordable Care Act Federal Upper Limit Methodology and Data Elements Guide to the draft FUL files. We are not posting monthly AMPs for individual drugs on any of the draft FUL files. Rather, we are posting the weighted average of monthly AMPs in a FUL group. Further, we note that section 2503(d) of the Affordable Care Act specifies that the FULs amendments "shall take effect … without regard to whether or not final regulations to carry out such amendments have been promulgated by such date." Please note that the draft FULs do not apply to B-rated drugs.

Starting with the files that we post to our website in January 2012 (based on the monthly AMP and AMP unit data for covered outpatient drugs that manufacturers reported to CMS starting with the month of October 2011), we changed the information technology system and grouping methodology we use to establish a FUL Product Group and assign national drug codes (NDC) to each of those groups. This has alleviated the need for an Unmatched File.

We will accept comments (link to) on the draft Affordable Care Act FULs and the methodology used to calculate the FUL. Please submit your comments to FUL@cms.hhs.gov. We will consider all comments received, but we do not plan to respond to individual comments.

Following a period of releasing the FULS in draft format, CMS plans to publish the final Affordable Care Act FULs. At that time, the prior FULs calculated using the methodology at 42 CFR 447.332 (FUL Changes Made To Transmittal No.37 and Transmittal No.37 – FUL November 20, 2001), as in effect on December 31, 2006, under the authority of the Medicare Improvements for Patients and Providers Act of 2008 will no longer be in effect.

Federal Upper Limits Prior to the Affordable Care Act

In 1987, regulations limited the amount which Medicaid could reimburse for drugs with available generic drugs under the Federal Upper Limit (FUL) Program. These limits are intended to assure that the Federal government acts as a prudent buyer of drugs. The concept of the upper limits program is to achieve savings by taking advantage of the current market prices.

Until the passage of the Omnibus Budget Reconciliation Action of 1990 (OBRA '90), FUL could be established only if all versions of a drug product had been classified as therapeutically equivalent (A-rated) by the Food and Drug Administration (FDA) in its publication "Approved Drug Products with Therapeutic Equivalence Evaluations" and at least three suppliers were listed in the current editions of published national compendia. OBRA '90 expanded that criteria and permitted the establishment of a FUL for a drug product if there are three (or more) versions of the product rated therapeutically equivalent (A-rated) regardless of the rating of other versions (B-rated) and at least three suppliers are listed in the current editions of published national compendia.

On July 15, 2008, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), Public Law 110-275, was enacted.  As a result of this legislation, we are prohibited from taking any action, prior to October 1, 2009, to impose FULs for multiple source drugs established under 42 CFR 447.514(b) as published in the final rule on July 17, 2007. In accordance with the law, the specific upper limit under 42 CFR 447.332 (as in effect on December 31, 2006) applicable to payments for multiple source drugs shall continue to apply through September 30, 2009, for purposes of Federal financial participation. Accordingly, the Centers for Medicare & Medicaid Services (CMS) resumed publishing the FULs for multiple source drugs, using the methodology in 42 CFR 447.332 as in effect on December 31, 2006.

Effective December 15, 2010, CMS will not apply the FULs to B-rated drugs.

Page last updated on 7/30/2012