From: Santoli, Jeanne (CDC/CCID/NCIRD)

Sent: Monday, December 15, 2008 6:59 PM

To: NCIRD Immunization Grantee Mailbox (CDC)

Cc: Denson, Deberal (CDC/CCID/NCIRD); Davis, Carolyn Grace

(CDC/CCHP/NCBDDD); Galloway, Lisa (CDC/CCID/NCIRD); Somerfeldt, Sally

(CDC/CCID/NCIRD); Fasano, Nancy (CDC/CCID/NCIRD); Rogers, Denise

(CDC/CCID/NCIRD); Ballew, Jennifer (CDC/CCID/NCIRD) (CTR); Smith, Julie

(CDC/CCID/NCIRD)

Subject: Federal Excise Tax Credit Process, level 2

Dear Grantees:

Below is a description of the process we will be using for Federal
Excise Tax Credits moving forward. In addition to the text that explains
the processes for vaccines in federal and grantee virtual inventories,
you will see a list of five Q/As that we thought would be helpful in
clarifying the process for you.

The information from the body of this email is also included in the
attached Word document.

If you have additional questions, please contact Deberal Denson at
[[Ddenson@cdc.gov]{.underline}](mailto:Ddenson@cdc.gov).

Thanks,\
Jeanne

FET Credit Process

December 15, 2008

With the implementation of centralized distribution, there are key
changes related to processing returned expired vaccines for federal
excise tax (FET) credits. These changes are described in items A and B
listed below.

A. FET credit process for vaccines in federal operating inventory

Vaccines in federal operating inventory are those that are available for
purchase on CDC's vaccine purchase contracts, whether these vaccines
were purchased using CDC's contracts or other mechanisms. For vaccines
distributed through McKesson Specialty Distribution, CDC has assumed
responsibility for processing the return of nonviable vaccines for FET
credit, a task that was previously performed by grantees. Grantees
should instruct their providers to return their nonviable vaccines to
McKesson Specialty Distribution sites for the return to manufacturers.
Details are provided in the PPOC User's Guide, available at:
[[http://www.cdc.gov/vaccines/programs/vmbip/downloads/newsletters/ppoc-ug-09-18-08.pdf]{.underline}](http://www.cdc.gov/vaccines/programs/vmbip/downloads/newsletters/ppoc-ug-09-18-08.pdf).

Vaccines in federal operating inventory are not segregated by funding
source (VFC, 317, and state) or by grantee. Therefore, it is not
possible to determine the funding source of returned nonviable vaccine
and vaccine that expires while still on the shelf in federal inventory
(such as influenza). To ensure proper FET credit across funding sources,
credit for vaccines in federal operating inventory will be based on bulk
order purchases applied to the nonviable vaccines returned to McKesson
Specialty Distribution rather than on the actual returns themselves. To
assign credit based on purchases, CDC will review all VFC and 317 bulk
order purchases on the CDC contract and all state replenishment order
purchases on CDC contracts and other mechanisms for each NDC sent to
McKesson Specialty Distribution for the period of time since the last
excise tax credit was requested. The credit associated with each NDC
will then be allocated across funding sources in the same proportions
that purchases were made, including credit to CDC for VFC and 317
purchases and credit to states for state purchases.

For example, suppose there are 2,000 doses of NDC \# 12345-0006-43
returned to McKesson Specialty Distribution and CDC's review of that
NDC's purchase data reveals that 80% of the vaccine was purchased with
VFC funds, 12% with 317 funds, and 8% with state funds (either on the
CDC contract or state contract). Then 80% of the FET credit will be
allocated to the CDC VFC account, 12% to the CDC 317 account, and 8%
will be distributed across grantees that purchased the vaccine with
state or local funds in accordance with the proportion of that NDC that
each grantee purchased.

Upon processing FET credit request letters, CDC will provide each
grantee with information about the amount of credit being requested on
behalf of that grantee for the return of nonviable federal inventory
vaccines. We expect to process the first FET credit on December 1, 2008
based on purchase data from July 1, 2007 through June 30, 2008.
Thereafter, the date in which CDC receives a nonviable vaccine report
from McKesson Specialty Distribution will determine the date ranges used
to calculate FET credit for the vaccines listed on that report. We
anticipate another large FET request early in 2009 and then monthly
requests after that.

B. FET credit process for vaccines in a grantee's virtual inventory

These are the only vaccines in inventory at the centralized distribution
depot that are distinguishable by grantee and funding source. McKesson
Specialty Distribution will track these returns by grantee, and grantees
shall be responsible for working with McKesson Specialty Distribution to
process the return of nonviable non-federal vaccines (e.g., DT) for FET
credits. Outlined below is the process for returning and obtaining FET
credit for nonviable vaccines in a grantee's virtual inventory.

-   Nonviable vaccines are returned to McKesson Specialty Distribution
    by providers. Vaccines that expire in virtual inventory before they
    are shipped to providers will be returned for FET credit.

-   Grantee will receive from McKesson Specialty Distribution a listing
    of nonviable vaccine on a quarterly basis.

-   Following receipt of this report, the grantee will forward to
    McKesson Specialty Distribution an FET credit request letter
    addressed to the appropriate vaccine manufacturer; this letter
    should list the vaccines to be returned and other information
    necessary for the manufacturer to process the credit.

-   McKesson Specialty Distribution will place the grantee FET credit
    request letter in the package of vaccine to be returned to the
    vaccine manufacturer. McKesson Specialty Distribution will mail the
    nonviable vaccine to the manufacturer.

-   Grantee will receive credit from the vaccine manufacturer.

A Frequently Asked Questions (FAQ) sheet is included for your
convenience.

Federal Excise Tax Credit Frequently Asked Questions

1\. Why are credits based on the proportion of purchases rather than
actual doses returned by a grantee's provider?

Vaccines in federal operating inventory and vaccines that are returned
as nonviable are not segregated by funding source or by grantee, so it
is not possible to determine which source of funding (VFC, 317, or state
funds) should receive the FET credit. Using prior purchase data allows
CDC to distribute the credit across funding sources such that each
funding source receives its proportion share of the FET credit.

2\. If my providers return a total of 30 doses of DTaP vaccine, will I
get FET for 30 doses of DTaP vaccine?

No. CDC will aggregate all DTaP doses of that NDC that have been
returned and then divide the credit among the various funding sources as
described above.

3\. Will grantees receive a credit memo or check from the manufacturer
for state purchased doses?

Whether the grantee receives a credit or check depends upon the
processes used by the manufacturer.

4\. If a grantee purchases vaccine that comes with return privileges
from a non-CDC contract for distribution at McKesson Specialty
Distribution, and it is returned to McKesson as nonviable will they
receive full purchase price or just FET?

Any vaccine that a grantee purchases for distribution at McKesson
Specialty Distribution (with the exception on vaccines in a grantee's
virtual inventory) goes into a common federal inventory whose
distribution is not limited to that grantee's providers. In addition,
when nonviable vaccines are returned to McKesson Specialty Distribution,
they are not segregated by funding source or grantee. Thus, if vaccine
that was originally purchased with return privileges is returned to
McKesson Specialty Distribution, it will not be linked to the grantee
who purchased it.

> CDC cannot request reimbursement for nonviable vaccines returned to
> McKesson Specialty Distribution, regardless of the original purchase
> mechanism. CDC can only request FET credit on vaccine doses returned
> to McKesson Specialty Distribution by the providers.

5\. If grantees do not return vaccine(s) can they still receive FET
credit?

Yes. FET credit for vaccines in federal operating inventory will be
based on bulk order purchases applied to nonviable vaccines returned to
McKesson Specialty Distribution rather than on the actual returns. This
is one important limitation of a centralized distribution returns
process which makes it incumbent upon all grantees to educate their
providers about how the nonviable vaccine returns process works to
encourage them to collect and return nonviable vaccines to McKesson
Specialty Distribution.

This document can be found on the CDC website at:

<http://www.cdc.gov/vaccines/programs/vmbip/downloads/agm/fetcp-l2-508.doc>