Pharmaceutical Pricing Agreement

General Instructions for Completing the
Pharmaceutical Pricing Agreement (PPA)
In accordance with the guidance found in the May 7, 1993, Federal Register, (link here)
Section 340B provides that a manufacturer who sells covered outpatient drugs to
eligible entities must sign a pharmaceutical pricing agreement (the "Agreement") with
the Secretary of Health and Human Services (the "Secretary") in which the
manufacturer agrees to charge a price for covered outpatient drugs that will not exceed
the average manufacturer price ("AMP") decreased by a rebate percentage.
Manufacturer is defined in the guidance listed above, as follows:
The term "Manufacturer" has the meaning as set forth in section 1927(k)(5) of the Social
Security Act and includes all entities engaged in –
(1) the production, preparation, propagation, compounding, conversion, or
processing of prescription drug products, either directly or indirectly by
extraction from substances of natural origin, or independently by means of
chemical synthesis, or by a combination of extraction and chemical synthesis,
or
(2) the packaging, repackaging, labeling, relabeling, or distribution of prescription
drug products. A manufacturer must hold legal title to or possession of the
NDC number for the covered outpatient drug. Such term does not include a
wholesale distributor of drugs or a retail pharmacy licensed under State law.
"Manufacturer" also includes an entity, described in (1) or (2) above, that sells
outpatient drugs to covered entities, whether or not the manufacturer participates in the
Medicaid rebate program. Furthermore, the Pharmaceutical Pricing Agreement provides
that the term also includes any contractor who fulfills the responsibilities pursuant to the
PHS drug pricing agreement.
Please print the attached Pharmaceutical Pricing Agreement (PPA) in its entirety and
have it signed by a corporate officer, such as the Chief Executive Officer. The form
utilizes Adobe Acrobat Reader in an interactive format allowing you to input all
applicable information on the computer. However, the form cannot be saved with your
information for future use. You must print the form to submit it to the Office of
Pharmacy Affairs Branch (OPA).
If your organization would like to receive a signed original, please ensure that you
submit TWO signed originals to the OPA. Otherwise, the OPA will send you a copy of
the document once it is counter-signed by the Associate Administrator, Healthcare
Systems Bureau, Health Resources and Services Administration.
If you have any questions, please contact the Pharmacy Services Support Center at
1-800-628-6297 or via e-mail at [email protected].

Section 340B of the Public Health Service Act
Pharmaceutical Pricing Agreement
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PHARMACEUTICAL PRICING AGREEMENT
(hereinafter referred to as the "Agreement")
Between
THE SECRETARY OF HEALTH AND HUMAN SERVICES
(hereinafter referred to as the "Secretary")
and
THE MANUFACTURER
Identified in Section IX of this Agreement
(hereinafter referred to as the "Manufacturer")
The Secretary, on behalf of the Department of Health and Human Services, and the
Manufacturer for purposes of section 602 of the Veterans Health Care Act of 1992,
Public Law No. 102-585, which enacted section 340B of the Public Health Service Act
(hereinafter referred to as "the Act"), 42 U.S.C. 256b, hereby agree to the following:
I. Definitions
The terms defined in this section will, for the purposes of this agreement, have the
meanings specified in the Act and section 1927(k) of the Social Security Act, as
interpreted and applied herein:
(a) "Average Manufacturer Price (hereinafter referred to as the "AMP")"
means the average unit price paid to the Manufacturer for the drug in all
States by wholesalers for drugs distributed to the retail pharmacy class of
trade, after deducting customary prompt pay discounts (excluding direct sales
to hospitals, health maintenance organizations and to wholesalers where the
drug is relabeled under the distributor's national drug code number). Federal
Supply Schedule prices are not included in the calculation of AMP. AMP
includes cash discounts allowed and all other price reductions (other than
rebates under section 1927 of the Social Security Act), which reduce the
actual price paid. It is calculated as a weighted average of each drug of
prices for all the Manufacturer's package sizes for each calendar quarter.
Specifically, it is calculated as net sales divided by the numbers of units sold,
excluding free goods (i.e., drugs or any other items given away, but not
contingent on any purchase requirements). For bundled sales, the allocation
of the discount is made proportionately to the dollar value of the units of each
drug sold under the bundled arrangements. The AMP for a calendar quarter
must be adjusted by the Manufacturer, if cumulative discounts or other
arrangements subsequently adjust the prices actually realized.
(b) "Best Price" has the meaning given it in section 1927(c)(1)(C) of the Social
Security Act, and section I(d) of the Medicaid Rebate Agreement.
(c) "Bundled Sale" refers to the packaging of drugs of different types where the
total price for the package is less than the purchase price of the drugs, if
purchased separately.

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Section 340B of the Public Health Service Act
Pharmaceutical Pricing Agreement
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(d) "Covered Drug" means an outpatient drug as set forth in section 1927(k) of
the Social Security Act. For purposes of coverage under the Agreement, all
covered outpatient drugs are identified by the NDC number.
(e) "Covered Entity" means:
(1) certain Public Health Service grantees, "look-alike" Federally Qualified
Health Centers and disproportionate share hospitals as described in
section 340B(a)(4) of the Act; and
(2) in the case of a covered entity that is a distinct part of a hospital, the
hospital itself shall not be considered a covered entity unless it meets
the requirements of section 340B(a)(4)(L) of the Act, as determined by
the Secretary.
(f) "Manufacturer" has the meaning as set forth in section 1927(k)(5) of the
Social Security Act except that, for purposes of the Agreement, it shall also
mean the entity holding legal title to or possession of the NDC number for the
covered outpatient drug. The term includes:
(1) any Manufacturer who sells covered outpatient drugs to covered
entities, whether or not the Manufacturer participates in the Medicaid
rebate program; and
(2) any contractors which fulfill the responsibilities pursuant to the
Agreement, unless excluded by the Secretary.
(g) "Centers for Medicare and Medicaid Services (CMS) (formerly the Health
Care Financing Administration)" means the agency of the Department of
Health and Human Services having the delegated authority to administer the
Medicaid and Medicare Programs.
(h) "Medicaid Rebate Program and Medicaid Rebate Agreement" mean,
respectively, the program, and a signed agreement between the Secretary
and the Manufacturer, to implement the provisions of section 1927 of the
Social Security Act.
(i) "National Drug Code (NDC)" means the identifying drug number maintained
by the Food and Drug Administration (FDA). For purposes of the Agreement,
the NDC number will be used including labeler code (which is assigned by the
FDA and identifies the establishment), product code (which identifies the
specified product or formulation), and package size code when reporting
requested information.

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Section 340B of the Public Health Service Act
Pharmaceutical Pricing Agreement
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(j) "Over the Counter Drug" means a drug that may be sold without a
prescription and which is prescribed by a physician (or other persons
authorized to prescribe such drugs under State law).
(k) "Quarter" means a calendar quarter unless otherwise specified.
(l) "Rebate Percentage" means an amount (expressed in a percentage) equal to
the average total rebate required under section 1927(c) of the Social Security
Act with respect to each dosage, form, and strength of a single source or
innovator multiple source drug during the preceding calendar quarter; divided
by the AMP for such a unit of the drug during such quarter.
(m) "the Secretary" means the Secretary of Health and Human Services, or any
successor thereto, or any officer or employee of the Department of Health
and Human Services or successor agency to whom the authority to
implement this agreement has been delegated.
(n) "Unit of the Drug" means a drug unit in the lowest identifiable amount (e.g.,
tablet or capsule for solid dosage forms, milliliter for liquid forms, gram for
ointments or creams). The Manufacturer will specify the unit associated with
each covered outpatient drug, as part of the submission of data, in
accordance with the Secretary's instructions provided pursuant to Section II of
the Agreement.
(o) "Wholesaler" means any entity, having a wholesale distributor's license, to
which a Manufacturer sells the covered outpatient drug, but which does not
relabel or repackage the covered outpatient drug.
II. MANUFACTURER'S RESPONSIBILITIES
Pursuant to requirements under section 340B of the Act, the Manufacturer agrees to the
following:
(a) for single source and innovator multiple source drugs, to charge covered
entities a price for each unit of the drug that does not exceed an amount equal
to the AMP for the covered outpatient drug reported (or which would have
been reported had the Manufacturer participated in the Medicaid rebate
program) to the Secretary in accordance with the Manufacturer's
responsibilities under section 1927(b)(3) of the Social Security Act, reduced by
the rebate percentage;
(b) for multiple source, noninnovator multiple source, and over the counter drugs,
the AMP is reduced by 11%, as described in 1927(c)(3)(B)(ii) of the Social
Security Act;

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Pharmaceutical Pricing Agreement
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(c) for those Manufacturers that do not have a reporting requirement under
section 1927(b)(3) of the Social Security Act for covered outpatient drugs, to
submit to the Secretary upon request, a list of such covered outpatient drugs,
and the AMP, baseline AMP, and the Best Price of such covered outpatient
drugs;
(d) to retain all records that may be necessary to provide the information
described in paragraph (c) of this section for not less than 3 years from the
date of their creation;
(e) to afford the Secretary or his designee reasonable access to records of the
Manufacturer relevant to the Manufacturer's compliance with the terms of the
Agreement;
(f) to permit CMS to share AMP and unit rebate amount submitted under the
Medicaid Rebate Agreement on covered outpatient drugs with the Secretary or
his designee for purposes of carrying out the Agreement; and
(g) to participate in the HRSA Prime Vendor Program as provided by section
340B(a)(8) of the Act unless otherwise agreed to by the Secretary.
III. SECRETARY'S RESPONSIBILITIES
Pursuant to the requirements under section 340B of the Act, the Secretary agrees to the
following:
(a) to make available a list of covered entities on the HRSA, Office of Pharmacy
Affairs web site (http://www.bphc.hrsa.gov/opa/), or otherwise, for access by
participating Manufacturers, covered entities, State Medicaid agencies, and
the general public. This information will be updated, to the extent practicable,
on a quarterly basis;
(b) with respect to a covered entity that bills Medicaid using a cost basis for drug
purchases, to require the entity to submit its pharmacy Medicaid provider
number. The Secretary shall provide respective State Medicaid agencies with
the list of such entities and their Medicaid provider numbers. Based on these
provider numbers, the State agencies will create an exclusion file which will
exclude data from these entities when generating Medicaid rebate requests.
(c) to require each covered entity to retain purchasing and dispensing records of
covered outpatient drugs under the Agreement and of any claims for
reimbursement submitted for such drugs under Title XIX of the Social Security
Act for not less than 3 years.

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Section 340B of the Public Health Service Act
Pharmaceutical Pricing Agreement
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IV. DISPUTE RESOLUTION
(a) If the Manufacturer believes that a covered entity has violated the prohibition
against resale or transfer of covered outpatient drugs, section 340B(a)(5)(B),
or the prohibition against duplicate discounts or rebates, section
340B(a)(5)(A), the Manufacturer can access the elective dispute resolution
process in the following manner:
(1) The Manufacturer shall attempt in good faith to resolve the matter with
the covered entity.
(2) If unable to resolve the dispute, the Manufacturer may provide written
notice of the discrepancy to the Secretary.
(3) The Secretary, at his discretion, will initiate an informal dispute
resolution process.
(4) If the Secretary finds, after conclusion of the dispute resolution
process, that the entity is in violation of such prohibitions, the entity
shall be liable to the Manufacturer of the covered outpatient drug that
is the subject of the violation in an amount equal to the reduction in the
price of the drug as described in section II(a) of the Agreement.
Pursuant to section 340B(a) (4) and (5) a covered entity also could be
removed from the list of eligible entities.
(b) The Manufacturer may challenge the presence of an entity on the list of
eligible entities issued by the Secretary. Upon presentation of appropriate
information documenting the entity's ineligibility, the Secretary shall take such
steps as necessary to carry out his responsibilities under paragraph III(a) of
the Agreement.
(c) If the Secretary believes that the Manufacturer has not complied with the
provisions of the Agreement, or has refused to submit reports, or has
submitted false information pursuant to the Agreement, the Secretary, at his
discretion, may initiate the informal dispute resolution process. If so found, the
Secretary may require the Manufacturer to reimburse the entity for discounts
withheld and can also terminate the Agreement. A Manufacturer who does not
have an agreement with the Secretary pursuant to the Act, will no longer be
deemed to meet the requirements of section 1927(a)(5)(A) of the Social
Security Act.
(d) A covered entity's failure to comply with the audit requirement pursuant to
section 340B(a)(5)(C) of the Act shall be cause for the Manufacturer to notify
the Secretary or his designee and for the Secretary to initiate the informal
dispute resolution process. Such action will not relieve the Manufacturer from

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Section 340B of the Public Health Service Act
Pharmaceutical Pricing Agreement
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its obligation to conform to the pricing requirements as provided in section
340B(a) of the Act and the Agreement.
(e) Nothing in this paragraph shall preclude the Manufacturer or the Secretary
from exercising such other remedies as may be available by law.
V. CONFIDENTIALITY PROVISIONS
(a) Information disclosed by the Manufacturer in connection with the Agreement,
except as otherwise required by law, will not be disclosed by the Secretary or
his designee in a form which reveals the Manufacturer, except as necessary to
carry out the provisions of section 340B of the Act, and to permit review by the
Comptroller General.
(b) The Manufacturer will hold audit information obtained from the covered
entities confidential. If the Manufacturer receives further information on such
data, that information shall also be held confidential. Nothing in this paragraph
shall preclude the Manufacturer from making such information available to the
Secretary to enable the Secretary to carry out the provisions of section 340B
of the Act.
VI. NONRENEWAL AND TERMINATION
(a) Unless otherwise terminated by either party pursuant to the terms of the
Agreement, the Agreement shall be effective for an initial period of 1 year,
beginning on the date specified in section IX of the Agreement. It shall be
automatically renewed for additional successive terms of 1 year unless the
Manufacturer gives written notice of intent not to renew the Agreement at least
90 days before the end of the applicable period.
(b) The Manufacturer may terminate the Agreement for any reason. Such
termination shall become effective the later of the first day of the first calendar
quarter beginning 60 days after the Manufacturer gives written notice
requesting termination, and the ending date of the term of the Agreement, if
notice has been given 90 days before the end of the term.
(c) The Secretary may terminate the Agreement for a violation of the Agreement
or other good cause upon 60 days prior written notice to the Manufacturer of
the existence of such violation or other good cause. The Secretary shall
provide the Manufacturer, upon request, the opportunity to participate in an
informal dispute resolution process concerning the termination, but such a
process shall not delay the effective date of the termination. Disputes arising
under a contract between a Manufacturer and a covered entity should be
resolved according to the terms of that contract. Actions taken by the parties in
such disputes are not grounds for termination of the Agreement with the

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Section 340B of the Public Health Service Act
Pharmaceutical Pricing Agreement
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Secretary, except to the extent that there is a violation of the provisions of the
Agreement.
(d) If the Agreement is not renewed or is terminated, the Manufacturer is
prohibited from entering into another Agreement as provided in section 340B
of the Act until a period of one complete calendar quarter has elapsed from the
effective date of the termination, unless the Secretary finds good cause for
earlier reinstatement.
(e) Any nonrenewal or termination will not affect the ceiling price under
paragraph II(a) for any covered outpatient drug purchased before the effective
date of termination.
VII. GENERAL PROVISIONS
(a) Any notice required to be given pursuant to the terms and provisions of the
Agreement will be sent in writing.
(1) Notice to the Secretary will be sent to:
Healthcare Systems Bureau
Office of Pharmacy Affairs
5600 Fishers Lane
Mail Stop 10C-03
Rockville, Maryland 20857
(2) Notice concerning data transfer and information systems issues is to be
sent to the same address as listed above (section VII(a)(1) of this
Agreement).
(3) Notice to the Manufacturer will be sent to the address as provided with the
Agreement and updated upon Manufacturer notification to the Secretary at
the address in the Agreement.
(b) The Manufacturer will be permitted to audit the records of each covered entity
(1) that directly pertain to the entity's compliance with the prohibition on
(A) the resale or other transfer of covered outpatient drugs to persons not
patients of the entity, section 340B(a)(5)(B), and
(B) duplicate discounts pertaining to the rebate under section 1927 of the
Social Security Act, section 340B(a)(5)(A);
(2) in accordance with procedures established by the Secretary relating to the
number, duration, and scope of audits; and

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Section 340B of the Public Health Service Act
Pharmaceutical Pricing Agreement
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(3) at the Manufacturer's expense.
(c) No provision in the Agreement shall prohibit the Manufacturer from charging a
price for a drug that is lower than the ceiling price as described in section II(a)
of the Agreement.
(d) In the event of a transfer in ownership of the Manufacturer, the Agreement is
automatically assigned to the new owner.
(e) Nothing in the Agreement will be construed to require or authorize the
commission of any act contrary to law. If any provision of the Agreement is
found to be invalid by a court of law, the Agreement will be construed in all
respects as if any invalid or unenforceable provisions were eliminated, and
without any effect on any other provision.
(f) Nothing in the Agreement shall be construed as a waiver or relinquishment of
any legal rights of the Manufacturer or the Secretary under the Constitution,
the Act, or Federal laws, or State laws.
(g) The Agreement shall be construed in accordance with Federal common law,
and ambiguities shall be interpreted in the manner which best effectuates the
statutory scheme.
(h) Except for changes of addresses, the Agreement will not be altered except by
an amendment in writing signed by both parties. No person is authorized to
alter or vary the terms unless the alteration appears by way of a written
amendment, signed by duly appointed representatives of the Secretary and
the Manufacturer.
(i) In the event that a due date falls on a weekend or Federal holiday, items will
be due on the first business day following that weekend or Federal holiday.
VIII. EFFECTIVE DATE
The Agreement will be effective upon signing but will in no way alter the effective date
upon which drug discounts were to be given to covered entities under any previously
signed Pharmaceutical Pricing Agreement between the Secretary and the Manufacturer.

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Section 340B of the Public Health Service Act
Pharmaceutical Pricing Agreement
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IX. SIGNATURES
FOR THE SECRETARY OF HEALTH AND HUMAN SERVICES
By:

_____________________________________

Title: Associate Administrator
Healthcare Systems Bureau
Health Resources and Services Administration
Date: _____________________________________
ACCEPTED FOR THE MANUFACTURER
I certify that I have made no alterations, amendments, or other changes to this pricing
agreement.
Printed
By:
___ ___________________________
Name: _________________________
(Signature)
Title: ________________________________________________________________
Phone Number: __________________ Ext. _______ FAX Number: ___________________
e-Mail Address:________________________________________________________
Date: _____________________________________
Manufacturer Labeler Code(s): ___________________________________________
Name of Manufacturer: __________________________________________________
Manufacturer Address:

________________________________________________
________________________________________________
________________________________________________
________________________________________________

Contact Person: _______________________________________________________
Title: _________________________________________________________________
Phone Number: __________________ Ext. _______ FAX Number: ___________________
e-Mail Address:________________________________________________________

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