This subpart is applicable to programs or projects for health services which are supported in whole or in part by Federal financial assistance, whether by grant or contract, administered by the Public Health Service. It applies to Federal funds and to non-Federal funds which are required to be expended as a condition to receiving Federal funds under such programs or projects.

As used in this subpart:

(a) Public Health Service means the Office of the Assistant Secretary for Health, Health Resources and Services Administration, National Institutes of Health, Centers for Disease Control, Alcohol, Drug Abuse and Mental Health Administration, Food and Drug Administration, and all of their constituent agencies.

(b) Secretary means the Secretary of Health and Human Services and any other officer or employee of the Department of Health and Human Services to whom the authority involved has been delegated.

(c) Program funds means (1) Federal funds provided through grant or contract to support a program or project covered by § 50.501, and (2) any non-Federal funds that are required as a condition of such grant or contract to be expended to carry out such program or project.

(d) Provider means one who furnishes medical or pharmaceutical services or supplies for which program funds may be expended under any of the programs or projects described in § 50.501.

(e) Acquisition cost means the price generally and currently paid by providers for a drug marketed or sold by a particular formulator or labeler in the package size of drug most frequently purchased by providers, as determined by the Secretary on the basis of drug price information furnished by the Department.

It is the policy of the Secretary that program funds which are utilized for the acquisition of drugs be expended in the most economical manner feasible. In furtherance of this policy, the Secretary has established, in 45 CFR part 19, a procedure for determining the Maximum Allowable Cost for drugs which are purchased with program funds.

(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 75, subpart E, no separate dispensing fee will be recognized.

(b) In determining whether a dispensing fee is reasonable, the Secretary will take into account:

(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.