[Code of Federal Regulations]
[Title 42, Volume 1]
[Revised as of October 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR50.504]

[Page 151-152]
 
                         TITLE 42--PUBLIC HEALTH
 
    CHAPTER I--PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH AND HUMAN 
                                SERVICES
 
PART 50_POLICIES OF GENERAL APPLICABILITY--Table of Contents
 
               Subpart E_Maximum Allowable Cost for Drugs
 
Sec. 50.504  Allowable cost of drugs.

    (a) The maximum amount which may be expended from program funds for 
the acquisition of any drug shall be the lowest of
    (1) The maximum allowable cost (MAC) of the drug, if any, 
established in accordance with 45 CFR part 19, plus a dispensing fee 
determined by the Secretary in accordance with paragraph (b) of this 
section, to be reasonable;
    (2) The acquisition cost of the drug plus a dispensing fee 
determined by the Secretary, in accordance with paragraph (b) of this 
section, to be reasonable; or
    (3) The provider's usual and customary charge to the public for the 
drug; Provided, That the MAC established for any drug shall not apply to 
a brand of that drug prescribed for a patient which the prescriber has 
certified, in accordance with paragraph (c) of this section, is 
medically necessary for that patient; And Provided further, That where 
compensation for drug dispensing is included in other costs allowable 
under the applicable program statute and regulations, the terms and 
conditions of the grant or contract, and the applicable cost principles 
prescribed in 45 CFR part 74, no separate dispensing fee will be 
recognized.
    (b) In determining whether a dispensing fee is reasonable, the 
Secretary will take into account:

[[Page 152]]

    (1) Cost components such as overhead, professional services, and 
profits,
    (2) Payment practices of third-party payment organizations, 
including other Federal programs such as titles XVIII and XIX of the 
Social Security Act; and
    (3) Any surveys by States, universities or others of costs of 
pharmacy operations and the fees charged in the particular area.
    (c) A certification by a prescriber, pursuant to paragraph (a) of 
this section, that a brand of drug is medically necessary for a 
particular patient shall be in the prescriber's own handwriting, in such 
form and manner as the Secretary may prescribe. An example of an 
acceptable certification is the notation ``brand necessary''. A 
procedure for checking a box on a form will not constitute an acceptable 
certification.