Federal Upper Limit (FUL)

Key facts

Legal basis

Social Security Act Section 1927(e)(4)

Regulation

42 CFR 447.512 and 447.514

Formula

175 percent of the weighted average of the most recent monthly AMPs

Applies to

Multiple source drugs with therapeutically equivalent versions

Published by

CMS, updated monthly

What is a Federal Upper Limit?

FULs limit what the federal government will help pay for generic and other multiple source drugs in Medicaid. A FUL is a reimbursement ceiling for the ingredient cost of a drug, not a price that manufacturers charge or pharmacies pay.

Under the Affordable Care Act of 2010, CMS calculates each FUL as 175 percent of the weighted average of the most recently reported monthly Average Manufacturer Prices (AMPs) for pharmaceutically and therapeutically equivalent products available nationally to retail community pharmacies. CMS implemented this formula in the 2016 Covered Outpatient Drugs final rule.

How FULs are applied

The limit works differently from a per-claim price cap:

• Aggregate test: the limit applies to a state's total spending on FUL drugs rather than to each claim, so a state may pay above the FUL on some claims if overall spending stays within the limit.
• Brand medically necessary: the limit does not apply when a prescriber certifies that a specific brand is medically necessary.
• Acquisition cost check: if the 175 percent calculation falls below average retail community pharmacy acquisition cost as measured by the national survey behind NADAC, CMS raises the multiplier so the FUL is not set below that cost.

Why FULs matter

For state Medicaid budgets and pharmacy reimbursement analysts, FULs define the federal ceiling on generic ingredient cost payments. States compare their own pharmacy payment methods, often NADAC or a state Maximum Allowable Cost (MAC) list, against FULs to confirm aggregate spending complies.

Because FULs are built from confidential AMP data, the monthly FUL file is one of the few public signals derived from manufacturer-reported prices for generics. Month-to-month changes can reflect new generic entrants, price increases or products leaving the market.