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CMS on a quarterly basis the lowest price it makes available to any wholesaler, retailer, health

maintenance organization, or nonprofit entity within the United States, detennined inclusive of

cash

discounts,

free

goods,

volume

discounts,

and

other

rebates.

This

is

known

as

the

manufacturer's "best price." 42 U.S.c. §1396r-8(c)(l)(C)(l) and (ii)(l).

44.

The Rebate Agreements also require each drug manufacturer to pay each state's

Medicaid plan a quarterly rebate. Manufacturers utilize the best price to calculate the amount of

this rebate, which is paid to the state on a per-unit basis.

45.

Other

programs

enacted

by

Congress

to

save

the

government

money

on

prescription medications are tied to accurate compliance with the rebate and reporting

requirements of the Medicaid Rebate Act. For example, Congress implemented the Drug Pricing

Program ("DPP") in the Veterans' Health Care Act of 1992 providing price protections for

federally-fnnded PHS or Section 340b entities including black lung clinics, state-operated AIDS

drug purchasing assistance programs, hemophilia diagnostic treatment centers, urban Indian

organizations,

and

disproportionate

share

programs,

among

others.

42

U.S.C.

§256b(a)(4).

Each of the Defendant Manufacturers participates in the DPP. As participants, each Defendant

Manufacturer signs an agreement with the Department of Health and Human Services

guaranteeing that PHS entities are charged no more than a particular price for covered

medications - a price calculated using a formula incorporating Defendant Mannfacturers'

reported best price 42 U.S.C. §256b(a)(l) and (2).

46.

Similarly, the best price calculations enter into the price Defendant Manufacturers

charge government entities under the Federal Supply Schedule, which covers the healthcare

programs of the Department of Defense, the Veterans' Administration, the Bureau of Prisons,

and federally-funded Indian healthcare programs.

12

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