Definition
Best Price
Best Price is the lowest price a manufacturer makes available for a brand-name covered outpatient drug to almost any U.S. purchaser during a rebate period, after discounts, and it helps set the rebate the manufacturer owes Medicaid.
1 min readReviewed September 14, 2026
Also known as: Medicaid Best Price, BP
Key facts
- Legal basis
- Social Security Act Section 1927(c)(1)(C)
- Regulation
- 42 CFR 447.505
- Applies to
- Single source and innovator multiple source drugs, not generics
- Reported
- Quarterly to CMS, confidentially
- Rebate effect
- Basic rebate is the greater of 23.1 percent of AMP or AMP minus Best Price
What is Best Price?
Best Price is part of the bargain behind the Medicaid Drug Rebate Program: Medicaid receives at least the deepest discount a manufacturer gives most other customers. Manufacturers report it each quarter alongside Average Manufacturer Price (AMP), and CMS uses both to calculate the unit rebate amount.
Best Price includes cash discounts, free goods contingent on a purchase, volume discounts, chargebacks and most rebates other than Medicaid rebates. A large discount or rebate to a single customer, such as a hospital or HMO, can therefore set Best Price even when invoice prices look normal.
What is excluded from Best Price
The statute and regulation carve out a list of prices, including:
- Prices charged under the 340B Drug Pricing Program.
- Prices to the Department of Veterans Affairs, Department of Defense, Indian Health Service and Federal Supply Schedule purchasers.
- Prices negotiated by Medicare Part D plans and certain state pharmaceutical assistance programs.
- Nominal prices, meaning prices below 10 percent of AMP, to certain safety-net providers.
- Maximum fair prices set under the Medicare Drug Price Negotiation Program.
Why Best Price matters
Best Price shapes commercial contracting. A discount that sets a new Best Price raises the Medicaid rebate on every Medicaid unit of that drug, so manufacturers weigh the Medicaid cost before offering discounts deeper than 23.1 percent off AMP to hospitals, clinics or other purchasers.
It also affects outcome-based contracts. A 2020 CMS final rule allows manufacturers to report multiple Best Prices for drugs sold under qualifying value-based purchasing arrangements, beginning in 2022, so a price that applies only when a drug fails to work does not automatically reset Medicaid rebates for all units.
Through the unit rebate amount, Best Price also flows into 340B ceiling prices, which are calculated as AMP minus that rebate.