Skip to main content
DrugPrice

340B Ceiling Price

The maximum price a drug manufacturer can charge a 340B-eligible covered entity for a covered outpatient drug, calculated by statutory formula based on AMP and best price rebates.

How It Works

340B ceiling prices are set by the formula in 42 U.S.C. 256b(a)(1): the ceiling price equals the Average Manufacturer Price (AMP) for the calendar quarter minus the Unit Rebate Amount (URA), which is the rebate manufacturers owe Medicaid under the Medicaid Drug Rebate Program. For brand-name drugs, the URA equals the greater of 23.1% of AMP or AMP minus Best Price, plus a CPI-indexed inflation penalty if AMP increases exceed inflation. For generics, the URA is 13% of AMP. Since 340B ceiling price = AMP - URA, brand-name 340B ceilings typically run 50-70% of AMP, which itself often runs 85-95% of WAC, yielding effective 340B discounts of roughly 25-50% off commercial WAC, with deeper discounts on drugs with large inflation penalties. The HHS 340B Ceiling Price database (launched 2019 under a 2010 ACA mandate) is accessible to covered entities through the HRSA 340B OPAIS system but is not public. Penalty pricing of $0.01 ("penny pricing") applies to drugs with AMP increases far exceeding inflation; a handful of long-established drugs including certain insulins and inhalers trade at penny prices in 340B. The 340B ceiling price formula intersects with IRA: the Medicare negotiated Maximum Fair Price becomes the new 340B ceiling price for negotiated drugs starting 2026, effectively extending IRA savings to safety-net providers. Manufacturer disputes over 340B ceiling price calculation methodology (particularly around AMP-Medicaid interaction and "orphan drug exclusion" where drugs designated for orphan indications are excluded from 340B at non-rural hospitals) are ongoing through HRSA administrative dispute resolution and federal court litigation.

Related Terms

  • 340B Drug Pricing Program, A federal program requiring drug manufacturers to sell outpatient drugs at significant discounts (25-50% off) to eligible hospitals and clinics serving low-income patients.
  • Wholesale Acquisition Cost (WAC), The manufacturer's list price for a drug sold to wholesalers, often called the "sticker price" before any rebates or discounts.
  • Manufacturer Rebate, A post-sale discount paid by a drug manufacturer to a PBM or insurer in exchange for favorable formulary placement, reducing the effective net price below the list price.
  • IRA Medicare Drug Negotiation, The process under the Inflation Reduction Act where CMS negotiates a "maximum fair price" directly with manufacturers for selected high-cost Medicare drugs.

Explore Drug Data

Most Expensive DrugsGeneric Drug WatchSearch All Drugs

About This Definition

This definition is part of the DrugPrice Drug Pricing Glossary, 49 terms explaining how prescription drug pricing works in the United States. All definitions are written in plain language for patients, caregivers, journalists, and healthcare professionals.

this entity is one of the U.S. Medicare prescription-drug pricing concepts that recurs across this site. The definition above is the technical answer; the paragraphs below add the practical context for how the concept connects to the CMS Medicare Part D Drug Spending data data behind every per-entity page on the site.

In the CMS Medicare Part D Drug Spending data data, this concept shapes one or more of the fields that drive the per-entity grades and rankings on this site. The methodology page describes which fields feed into which output; this glossary entry documents the underlying term.

Source: CMS Medicare Part D Spending, 2026.