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