Consumer Price Index-Urban (CPI-U)
Definition
The Consumer Price Index-Urban (CPI-U) measures the average change over time in the prices paid by urban consumers for a market basket of goods and services. In the pharmaceutical pricing context, CPI-U is used as the inflation benchmark in the Medicaid Drug Rebate Program’s inflation penalty mechanism.
When a manufacturer increases the price of a single-source or innovator multiple-source drug faster than the rate of CPI-U inflation, an additional rebate penalty is applied to the URA calculation. This inflation adjustment increases the URA, which in turn lowers the 340B ceiling price for that drug.
The CPI-U adjustment creates a financial disincentive for manufacturers to raise drug prices faster than inflation. For covered entities, drugs with significant CPI-U adjustments may have 340B ceiling prices that are substantially below their current WAC, representing deeper-than-average discounts.
Frequently Asked Questions
Why Consumer Price Index-Urban (CPI-U) Matters
The CPI-U inflation adjustment can significantly deepen the 340B discount on drugs that have experienced above-inflation price increases. Covered entities with high volumes of such drugs benefit from the CPI-U mechanism.
How Virtue 340B Uses It
Virtue 340B references CPI-U in the context of explaining 340B pricing dynamics and helping covered entities understand why ceiling prices vary across drugs.