42 CFR § 50.504 - Allowable cost of drugs.
(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;
(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.