For people who regularly work in the pharmaceutical industry within the government pricing space, the question of how a URA is calculated may be one easily answered. For even the most seasoned pharma executives not exposed to government pricing on a regular basis, this question, much less the acronym URA, can be quite foreign. This clarifies what a URA is and how it’s calculated.
WHAT IS A URA?
URA stands for “Unit Rebate Amount” and is associated with the Medicaid Drug Rebate Program.
Drug manufacturers participating in the Medicaid Drug Rebate Program must complete and report monthly and quarterly “AMP Calculations” (Average Manufacturer Price calculations). The process aims to calculate the average price paid by a retail pharmacy for a given drug.
Pharmaceutical drug manufacturers will owe rebates to the over 300 Medicaid programs in various states, based upon the URAs derived from these AMP calculations and the utilization driven through the various programs. The intent here is that manufacturers are paying the agreed upon rebate rates, based upon what the drug is being acquired for by the pharmacies, as the pharmacies are the entities seeking reimbursement from Medicaid when Medicaid beneficiaries have their prescriptions filled.
HOW IS A URA CALCULATED?
As the intent is to provide those not entirely familiar with the process of calculating an URA, we’ve left out line extension scenarios to avoid potential confusion. If you have no idea what I’m talking about, no worries! Call us on that subject later for further clarification.
Once the Base URA is calculated, both brand and generic drugs can be subject to Inflationary Penalties if the AMP has increased faster than the rate of inflation, using the Consumer Price Index. These Inflationary Penalties were designed to serve as price protection for the government to help ensure that a drug currently being used by government programs doesn’t increase in price drastically in a short timeframe.
Below are four examples that walk through the calculations for brand and generic manufacturers: