Payment for legend drug and non‐legend drug (OTC) prescriptions are reimbursed at the lesser of the following:

  1. AAC plus a reasonable dispensing fee
  2. The Usual and Customary (UAC) price charged the general public
  3. The Gross Amount Due (GAD), if provided

The reimbursement amount is determined by adding $7.93 (the fixed component) to the ingredient cost and dividing the sum by 0.9804 (the variable component). An additional $0.15 is added if the pharmacy has been certified as providing free delivery service to people enrolled in Medicaid. Another $0.50 is added if the pharmacy dispenses a premium preferred generic.

Table 1- VDP Reimbursement Calculation

Value Component

$7.93

Fixed component

0.9804

Variable component

$0.15

Delivery incentive (based on provider file) applied to all legend claims after all calculations are complete. Note: 340B pharmacies do not receive delivery incentive.

$0.50

Premium Preferred Generic (PPG) incentive applied to all Medicaid PPG drugs after all calculations are complete. Note: Incentive does not apply to $0.00 total payment amount claims.

For example, if the ingredient cost of a drug is $10.00, the pharmacy's total reimbursement is calculated in the following way: 

$10.00 plus $7.93 = $17.93 

$17.93 divided by 0.9804 = $18.28

Pharmacies with a delivery agreement add $0.15 = $18.43

Pharmacies dispensing a premium preferred generic drug add $0.50 = $18.93

If the submitted UAC or GAD price for this item is less than the amount calculated above, the pharmacy will receive payment for the UAC or GAD price.  Pharmacy staff should submit their true UAC price for all claims.

The total dispensing fee shall not exceed $200 per prescription.

  • Refer to the Enrollment chapter of this manual to learn about the delivery incentive.  
  • Refer to the Drug Policy chapter of this manual to learn about premium preferred generic drugs.
  • Refer to the 340B Resources chapter of this manual to learn more about requirements for the 340B Drug Pricing Program eligible pharmacies.

Certain products may differ from this reimbursed calculation, such as home health supplies, vitamin and minerals, influenza vaccines, and long-acting injectables. Refer to the Formulary search, and the Drug Pricing section of the drug details page, for information on specific pricing.