Title 42—Public Health--Volume 1
PART 427—MEDICARE PART B DRUG INFLATION REBATE PROGRAM
§ 427.10   Basis and scope.
(a) Basis. This part implements section 1847A(i) of the Social Security Act (“the Act”).
(b) Scope. This part sets forth the requirements of the Medicare Part B Drug Inflation Rebate Program, which requires, for each calendar quarter, manufacturers to pay rebates for certain single source drugs and biological products with prices that increase faster than the rate of inflation.
(c) Severability. Were any provision of this part to be held invalid or unenforceable by its terms, or as applied to any person or circumstance, such provisions would be severable from this part and the invalidity or unenforceability would not affect the remainder thereof or any other part of this subchapter or the application of such provision to other persons not similarly situated or to other, dissimilar circumstances.
§ 427.20   Definitions.
As used in this part, the following definitions apply:
Allowed charges means the amount that is inclusive of the beneficiary coinsurance and Medicare payment for the covered Part B item or service.
Applicable calendar quarter means a calendar quarter (January 1 to March 31, April 1 to June 30, July 1 to September 30, or October 1 to December 31), starting with January 1, 2023.
Applicable threshold means the amount determined under § 427.101(c)(2).
Average sales price (ASP) means the manufacturer's price for a quarter for a drug represented by a particular 11-digit National Drug Code (NDC-11) determined under § 414.804 of this chapter.
Benchmark period Consumer Price Index for All Urban Consumers (CPI-U) means the CPI-U as set forth in § 427.302(e).
Billing and payment code means the specific code used to classify and report a drug or biological for purposes of Medicare Part B payment. A Healthcare Common Procedure Coding System (HCPCS) code, as established by CMS, is an example of a billing and payment code used to describe a drug or biological and for which CMS may publish a payment amount.
Billing and payment code FDA approval or licensure date means the earliest approval or licensure date for any FDA application number associated with any NDC ever assigned to the billing and payment code.
Billing unit means the identifiable quantity of a drug or biological product associated with a billing and payment code (for example, a HCPCS code), as established by CMS.
Biosimilar biological product has the meaning set forth in section 1847A(c)(6)(H) of the Act.
CPI-U means the monthly Consumer Price Index for All Urban Consumers (United States city average) index level for all items from the Bureau of Labor Statistics.
Food and Drug Administration (FDA) application means, for the purposes of calculating the Part B rebate amount, a New Drug Application (NDA) or Biologics License Application (BLA) approved by the FDA.
Final action claim means a non-rejected claim for which a Medicare payment has been made, and for which all disputes and adjustments have been resolved.
First marketed date means the earliest date of first sale of any NDC-11 within a billing and payment code among all products and package sizes under the same FDA application. The first marketed date will be identified using ASP data reported by NDC-11 to CMS by a manufacturer as required under sections 1927(b)(3)(A)(iii)(I) and 1847A(f)(2) of the Act, if available.
Grouped billing and payment code, for the purposes of Part B rebate calculations, means a billing and payment code, such as a HCPCS code, other than a Not Otherwise Classified (NOC) code, that typically contains multiple drug products approved under multiple NDAs or BLAs and may be inclusive of, but are not limited to, multiple source billing codes.
Inflation-adjusted payment amount means the amount determined under § 427.302(g).
Manufacturer has the meaning set forth in section 1847A(c)(6)(A) of the Act.
National Drug Code (NDC) means the unique identifying prescription drug product number that is listed with FDA identifying the product and package size and type.
Not Otherwise Classified (NOC) code means a billing and payment code, including an unclassified, unspecified, or unlisted code, for drugs and biological products for which no specific billing and payment code is assigned.
Part B rebatable drug means, subject to the exclusions set forth in § 427.101(b), a single source drug or biological product, including a biosimilar biological product but excluding a qualifying biosimilar biological product, for which payment is made under Part B.
Payment amount benchmark quarter means the calendar quarter set forth in § 427.302(c).
Payment amount in the payment amount benchmark quarter means the amount set forth in § 427.302(d).
Rebate period CPI-U means the CPI-U set forth in § 427.302(f).
Single source drug or biological product has the meaning set forth in section 1847A(c)(6)(D) of the Act.
Sold or marketed means, with respect to an NDC, that the NDC has either a date of first sale identified using ASP data reported by NDC-11 to CMS by a manufacturer as required under sections 1927(b)(3)(A)(iii)(I) and 1847A(f)(2) of the Act, or an NDC Directory start marketing date prior to or during the applicable calendar quarter and meets any of the following criteria:
(1) The NDC has units reported for the rebate quarter;
(2) The end marketing date is during the rebate quarter;
(3) The end marketing date is after the rebate quarter; or
(4) The end marketing date is missing.
Specified amount means the amount set forth in § 427.302(b).
Subsequently approved drug means a drug first approved or licensed by the FDA after December 1, 2020.
Unit means, with respect to a Part B rebatable drug, with respect to each National Drug Code (including package size) associated with a drug or biological, the lowest identifiable quantity (such as a capsule or tablet, milligram of molecules, or grams) of the drug or biological that is dispensed, exclusive of any diluent without reference to volume measures pertaining to liquids as reported under section 1847A(b)(2)(B) of the Act.
§ 427.100   Definitions.
As used in this subpart, the following definitions apply:
EUA Declaration means the March 27, 2020, Emergency Use Authorization (EUA) Declaration for Drugs and Biological Products under section 564 of the Food, Drug, and Cosmetic (FD&C) Act.
Individual who uses such a drug or biological means a unique Medicare Part B beneficiary who was furnished the Part B drug or biological that was covered under Part B during the applicable calendar quarter, identified using final action claims data with dates of service during the calendar year set forth in § 427.101(b)(6) and with allowed charges greater than zero.
§ 427.101   Identification of Part B rebatable drugs.
(a) Determination of Part B rebatable drugs. (1) For each applicable calendar quarter, CMS will:
(i) Identify single source drugs or biological products, including biosimilar biological products, covered under Part B; and
(ii) Identify the applicable billing and payment code for each drug or biological product set forth in paragraph (a)(1)(i) of this section.
(2) For a drug or biological product identified under paragraph (a)(1) of this section, CMS will determine whether the drug or biological product meets the exclusion criteria set forth in paragraph (b) or (c) of this section as of the first day of the applicable calendar quarter.
(3) To determine whether a drug or biological product is a Part B rebatable drug under this section, CMS will use the most recent available data submitted to CMS by manufacturers pursuant to section 1927(b)(3)(A)(iii) of the Act or section 1847A(f)(2), as applicable, and other available data, including but not limited to information available at FDA.gov and information in drug pricing compendia, as applicable.
(b) Excluded product categories. The following categories of products are not considered Part B rebatable drugs:
(1) Qualifying biosimilar biological products. Biological products as defined under section 1847A(b)(8)(B)(iii) of the Act.
(2) Products with historically excepted grouped billing and payment codes. Single source drugs or biological products that were within the same billing and payment code as of October 1, 2003, and which, as required under section 1847A(c)(6)(C)(ii) of the Act, are treated as multiple source drugs.
(3) Products billed under a NOC code. A drug or biological product billed under a NOC code.
(4) Radiopharmaceutical drugs and biological products. A separately payable radiopharmaceutical drug or biological product not paid under section 1847A of the Act.
(5) Skin substitutes. A product included within the suite of cellular- and tissue-based products that aid wound healing.
(6) Drugs with average total allowed charges under the applicable threshold. Drugs and biological products for which the Medicare Part B average total allowed charges for a year per individual that uses such drug or biological are below the applicable threshold, as set forth in paragraph (c) of this section.
(7) Certain vaccines and other products. The following products:
(i) The vaccines as set forth in section 1861(s)(10) of the Act, which includes the influenza, pneumococcal, hepatitis B, and COVID-19 vaccines.
(ii) Monoclonal antibodies used for treatment or post-exposure prophylaxis of COVID-19 that are covered and paid for under section 1861(s)(10) of the Act. This exclusion will apply to applicable quarters until the end of the calendar year in which the EUA Declaration ends.
(iii) Monoclonal antibodies that are used for pre-exposure prophylaxis of COVID-19 that are covered and paid for under section 1861(s)(10) of the Act. This exclusion will apply to applicable calendar quarters even after the year in which the EUA Declaration ends, as long as after the EUA Declaration is terminated, these products have an FDA-approved application or license.
(8) Generic drugs. Part B drugs approved under an Abbreviated New Drug Application (ANDA) submitted under section 505(j) of the Federal Food, Drug, and Cosmetic Act (FD&C Act).
(c) Drugs and biological products with average total allowed charges below the applicable threshold. For each applicable calendar quarter, CMS will identify drugs and biological products with Part B average total allowed charges for a year per individual that uses such a drug or biological product that are below the applicable threshold determined under the calculations set forth in this section. Such drugs and biological products are not considered Part B rebatable drugs and will be excluded from the identification of Part B rebatable drugs in paragraph (a) of this section.
(1) Average total allowed charges for a year per individual. For each drug or biological that is identified as set forth in paragraph (a) of this section, CMS will calculate average total allowed charges for a year per individual as follows:
(i) For single source drugs and biological products assigned to only one billing and payment code, CMS will sum the allowed charges from final action claims greater than $0 and divide the summed amount by the number of individuals who use such a drug or biological with allowed charges for this billing and payment code.
(ii) For single source drugs and biological products assigned to more than one billing and payment code, CMS will sum the allowed charges from final action claims greater than $0 for all billing and payment codes and divide the summed amount by the number of individuals who use such a drug or biological with allowed charges for these billing and payment codes.
(iii) For single source drugs and biological products previously crosswalked to a grouped billing and payment code:
(A) If crosswalked to a grouped billing and payment code during the full year, CMS will calculate the average total allowed charges per individual per year for the drug using allowed charges and the number of individuals who used the drug or biological product based on claims for the previously grouped billing and payment code during the year.
(B) If crosswalked to a grouped billing and payment code and later assigned to a unique billing and payment code for part of the year, CMS will calculate average total allowed charges per individual per year by:
( 1 ) Summing the total allowed charges billed under the unique billing and payment code for the drug with dates of service on or after the Medicare effective date for this unique billing and payment code and identifying the individuals on those claims.
( 2 ) Summing the total allowed charges on claims billed under the previously grouped billing and payment code and identifying individuals with claims prior to the unique billing and payment code's effective date.
( 3 ) Summing the total allowed charges as determined in paragraphs (c)(1)(iii)(B)( 1 ) and ( 2 ) of this section and dividing by the total number of individuals, de-duplicated for individuals determined under paragraphs (c)(1)(iii)(B)( 1 ) and ( 2 ).
(2) Applicable threshold. CMS will calculate the applicable threshold for an applicable calendar quarter as follows:
(i) For applicable calendar quarters in 2023, the applicable threshold is equal to $100.
(ii) For applicable calendar quarters in 2024, the applicable threshold is equal to $100 increased by the percentage increase in the CPI-U for the 12-month period ending with June of 2023.
(iii) For applicable calendar quarters in each subsequent calendar year, the applicable threshold is equal to the unrounded applicable threshold calculated for the prior calendar year increased by the percentage increase in the CPI-U for the 12-month period ending with June of the previous year.
(iv) If the resulting amount under paragraphs (c)(2)(i) through (iii) of this section is not a multiple of $10, CMS will round that amount to the nearest multiple of $10.
(3) Application of the applicable threshold at the billing and payment code level. For each applicable calendar quarter, CMS will apply the exclusion of drugs and biological products identified in paragraph (c)(1) of this section, with average total allowed charges for a year per individual less than the applicable threshold set forth in paragraph (c)(2) of this section, to applicable billing and payment codes as follows:
(i) For single source drugs or biological products assigned to a unique billing and payment code, CMS will exclude the assigned billing and payment code for an applicable calendar quarter if the average total allowed charges for a year per individual are less than the applicable threshold.
(ii) For a single source drug or biological product that is assigned to more than one billing and payment code during a year, CMS will exclude all such assigned billing and payment codes for an applicable calendar quarter.
(4) Definition of year. For purposes of the calculations set forth in this section, a year is defined as the 4 consecutive calendar quarters beginning 6 calendar quarters before the applicable calendar quarter. CMS will use final action claims from the Medicare fee-for-service claims repository where separate payment was allowed for the applicable billing and payment code for dates of service within a year to calculate Part B average total allowed charges for that year.
§ 427.200   Definitions.
As used in this subpart, inflation-adjusted beneficiary coinsurance means the coinsurance adjustment as determined under this subpart.
§ 427.201   Computation of beneficiary coinsurance and adjusted Medicare payment for Part B rebatable drugs with price increases faster than inflation.
(a) Methodology. CMS must use the methodology set forth in this section to calculate the inflation-adjusted beneficiary coinsurance and associated adjusted Medicare payment percentage for Part B rebatable drugs as set forth in §§ 410.152(m), 419.41(e), and 489.30(b)(6) of this chapter.
(b) Calculation of inflation-adjusted beneficiary coinsurance. To calculate the inflation-adjusted beneficiary coinsurance for Part B rebatable drugs with respect to a calendar quarter, CMS compares the payment amount, as set forth in paragraph (b)(3) of this section, to the inflation-adjusted payment amount for the applicable calendar quarter.
(1) If the payment amount exceeds the inflation-adjusted payment amount, the inflation-adjusted beneficiary coinsurance is calculated by multiplying the inflation-adjusted payment amount by 0.20.
(2) If the inflation-adjusted payment amount does not exceed the payment amount, the adjustment to the beneficiary coinsurance set forth in paragraph (b)(1) of this section is not applied.
(3) CMS will use the published payment amount in quarterly pricing files published by CMS as the payment amount in this determination.
(c) Exclusions. Any drug that is excluded from Part B rebatable drugs as set forth in § 427.101(b) is not subject to inflation-adjusted beneficiary coinsurance.
§ 427.300   Definitions.
As used in this subpart, the following definitions apply:
340B Program is the program under section 340B of the Public Health Service (PHS) Act.
Refundable single-dose container or single-use package drug has the meaning set forth in § 414.902 of this chapter.
§ 427.301   Calculation of the total Part B rebate amount to be paid by manufacturers.
(a) Total rebate. Subject to paragraph (b) of this section, the total rebate amount to be paid for a Part B rebatable drug, as identified under § 427.101, for an applicable calendar quarter is equal to the product of the per unit Part B rebate amount of such drug, as determined under § 427.302, and the billing units of the Part B rebatable drug furnished during the applicable calendar quarter, as identified as set forth in § 427.303. The rebate amount may be reduced as set forth in subpart E of this part or adjusted as set forth in subpart F of this part.
(b) Apportionment of the Part B rebate amount. CMS will identify billing and payment codes for which multiple manufacturers report ASP, as set forth in sections 1927(b)(3) and 1847A(f) of the Act, for NDCs assigned to the billing and payment code. CMS will calculate the rebate amount owed by each manufacturer by:
(1) Determining the total billing units sold for each NDC assigned to the billing and payment code, by multiplying the number of units reported by a manufacturer in ASP data submissions at the NDC-11 package level by the number of billing units per NDC-11 reporting unit.
(2) Summing the individual manufacturer's total billing units sold during the applicable calendar quarter (for all NDCs of the manufacturer assigned to the billing and payment code).
(3) Summing all manufacturers' total billing units sold during the applicable calendar quarter for all NDCs of the Part B rebatable drug assigned to the billing and payment code.
(4) Dividing the resulting amount from paragraph (b)(2) of this section by the resulting amount from paragraph (b)(3) of this section.
(5) Multiplying the resulting amount from paragraph (b)(4) of this section by the total rebate amount as determined under paragraph (a) of this section.
(c) Apportionment of the Part B rebate amount when reported units for NDCs within a billing and payment code are missing, negative, or equal to zero.
(1) When there are multiple NDCs in a grouped billing and payment code and the manufacturer-reported ASP units for all NDCs are either missing, negative, or equal to zero but there is a positive rebate amount calculated under § 427.302(a), CMS will:
(i) With respect to NDCs that were sold or marketed during the applicable calendar quarter and for which all NDCs assigned to the grouped billing and payment code lack manufacturer-reported ASP data for the applicable calendar quarter, equally apportion a positive rebate amount to NDCs with missing ASP units that were sold or marketed during the applicable calendar quarter by dividing the total rebate amount for the grouped billing and payment code by the total number of NDCs sold or marketed during the applicable calendar quarter within the billing and payment code; and
(ii) With respect to NDCs that were not sold or marketed during the applicable calendar quarter and lack manufacturer-reported ASP units for the applicable calendar quarter, NDCs with negative manufacturer-reported ASP units for the applicable calendar quarter, and NDCs with manufacturer-reported ASP units equal to zero for the applicable calendar quarter, apportion a $0 rebate amount to each respective NDC. If all NDCs assigned to the grouped billing and payment code are determined under this subparagraph, no rebate will be assessed for that billing and payment code.
(2) When there are multiple NDCs in a grouped billing and payment code and the manufacturer-reported ASP units for some but not all NDCs assigned to the grouped billing and payment code are either missing, negative, or equal to zero but there is a positive rebate amount calculated under § 427.302(a), CMS will:
(i) With respect to NDCs that were not sold or marketed during the applicable calendar quarter and lack manufacturer-reported ASP units for the applicable calendar quarter, NDCs with negative manufacturer-reported ASP units for the applicable calendar quarter, and NDCs with manufacturer-reported ASP units equal to zero for the applicable calendar quarter, apportion a $0 rebate amount to each respective NDC;
(ii) With respect to NDCs that were sold or marketed during the applicable calendar quarter and lack manufacturer-reported ASP units for the applicable calendar quarter, and NDCs that were sold or marketed during the applicable calendar quarter and for which respective NDCs have positive manufacturer-reported units by, apportion rebate amounts as follows:
(A) Solely for purposes of the calculation determined under this paragraph (c)(2)(ii) of this section, assign to NDCs that were sold or marketed during the applicable calendar quarter and lack manufacturer-reported ASP units for the applicable calendar quarter the number of ASP units that is equal to the lowest positive number of manufacturer reported ASP units for any NDC in the grouped billing and payment code;
(B) Determine the total billing units sold for each NDC assigned to the billing and payment code, by multiplying the number of units reported by a manufacturer in ASP data submissions at the NDC-11 package level by the number of billing units per NDC-11 reporting unit;
(C) With respect to all NDCs of each individual manufacturer assigned to the billing and payment code, sum the total billing units for such NDCs sold during the applicable calendar quarter;
(D) Sum the total billing units sold during the applicable calendar quarter for all NDCs of the Part B rebatable drug assigned to the billing and payment code, including those assigned a ASP unit value as set forth in paragraph (c)(2)(ii)(A) of this section;
(E) Divide the resulting amount from paragraph (c)(2)(ii)(C) of this section by the resulting amount from paragraph (c)(2)(ii)(D) of this section; and
(F) Multiply the resulting amount from paragraph (c)(2)(ii)(E) of this section by the total rebate amount as determined under paragraph (a) of this section.
§ 427.302   Calculation of the per unit Part B rebate.
(a) Formula for calculating the per unit Part B rebate amount. CMS will calculate the per unit Part B rebate amount for a Part B rebatable drug and applicable calendar quarter by determining the amount by which the specified amount, as determined under paragraph (b) of this section, exceeds the inflation-adjusted payment amount, as determined under paragraph (g) of this section.
(b) Identification of the specified amount for the applicable calendar quarter. For each applicable calendar quarter, subject to paragraph (b)(3) of this section, the specified amount is equal to the amount determined under section 1847A(i)(3)(A)(ii)(I)(aa) or (bb) of the Act, as applicable, for the calendar quarter.
(1) Subject to paragraph (b)(2) of this section, the first applicable calendar quarter for a Part B rebatable drug shall be no earlier than the calendar quarter beginning January 1, 2023 and shall be the later of one of the following:
(i) The first full calendar quarter that is at least the third calendar quarter after the payment amount benchmark quarter identified in paragraphs (c)(1) through (5) of this section.
(ii) The calendar quarter beginning January 1, 2023.
(2) Notwithstanding paragraph (b)(1) of this section, for a Part B rebatable drug that was billed under a NOC code during the calendar quarter beginning July 1, 2021, or the third full calendar quarter after the effective date of the drug's assigned billing and payment code other than a NOC code, whichever is later, the first applicable calendar quarter is the first full calendar quarter that follows the payment amount benchmark quarter identified in paragraphs (c)(1) through (5) of this section.
(3) If all NDCs in the billing and payment code have neither manufacturer-reported ASP nor Wholesale Acquisition Cost (WAC) price data available for the applicable calendar quarter, CMS will use WAC price data from other public sources, if available, to calculate 106 percent of WAC, which will serve as the specified amount.
(c) Identification of the payment amount benchmark quarter. For each Part B rebatable drug, CMS will identify the applicable payment amount benchmark quarter as set forth in paragraphs (c)(1) through (3) of this section, as applicable, subject to paragraphs (c)(4) and (5) of this section, using the earliest first marketed date of any NDC ever marketed under any FDA application under which any NDCs that have ever been assigned to the billing and payment code as of the applicable calendar quarter have been marketed, and using the earliest approval or licensure date of any FDA application under which any NDCs that have ever been assigned to the billing and payment code as of the applicable calendar quarter have been marketed:
(1) For a Part B rebatable drug first approved or licensed by the FDA on or before December 1, 2020, and with a first marketed date on or before December 1, 2020, the payment amount benchmark quarter is the calendar quarter beginning July 1, 2021.
(2) For a Part B rebatable drug first approved or licensed by the FDA after December 1, 2020, the payment amount benchmark quarter is the third full calendar quarter after a drug's first marketed date.
(3) For a Part B rebatable drug first approved or licensed by the FDA on or before December 1, 2020, but with a first marketed date after December 1, 2020, the payment amount benchmark quarter is the third full calendar quarter after a drug's first marketed date.
(4) Notwithstanding paragraph (c)(3) of this section, for a Part B rebatable drug that was billed under a NOC code during the calendar quarter beginning July 1, 2021, or the third full calendar quarter after such drug's first marketed date, whichever is later, the payment amount benchmark quarter is the third full calendar quarter after the Part B rebatable drug is assigned a billing and payment code other than a NOC code.
(5) For a Part B rebatable drug that is a selected drug (as defined in section 1192(c) of the Act) with respect to a price applicability period (as defined in section 1191(b)(2) of the Act), in the case such Part B rebatable drug is no longer considered to be a selected drug, for each applicable quarter beginning after the price applicability period with respect to such drug, the payment amount benchmark quarter is the calendar quarter beginning January 1 of the last year during such price applicability period with respect to such selected drug.
(d) Identification of the payment amount in the payment amount benchmark quarter. CMS will identify the payment amount in the payment amount benchmark quarter using the published payment limit for the billing and payment code for the applicable payment amount benchmark quarter identified as set forth in paragraph (c) of this section.
(1) For a Part B rebatable drug, subject to paragraphs (d)(1)(i) and (ii) of this section and except as provided in paragraph (d)(2) of this section, CMS will identify the payment amount in the payment amount benchmark quarter using the published payment limit for the billing and payment code for the applicable payment amount benchmark quarter determined under section 1847A of the Act.
(i) If a published payment limit is not available for the applicable payment amount benchmark quarter, CMS will use the lower of 106 percent of manufacturer-reported ASP or 106 percent of manufacturer-reported WAC.
(ii) If neither a published payment limit nor manufacturer-reported ASP or WAC data are available, CMS will use WAC data from other public sources to calculate 106 percent of WAC, which, solely for the purposes of this section, CMS will consider to be the payment amount for the payment amount benchmark quarter.
(2) For a Part B rebatable drug previously billed under a grouped billing and payment code during the payment amount benchmark quarter and later billed under a unique billing and payment code, CMS will use the grouped billing and payment code payment limit as the payment amount in the payment amount benchmark quarter.
(e) Identification of the benchmark period CPI-U. For each Part B rebatable drug, CMS will identify the applicable benchmark period CPI-U at the billing and payment code level as set forth in paragraphs (e)(1) and (2) of this section, subject to paragraphs (e)(3) through (5) of this section:
(1) For a Part B rebatable drug first approved or licensed by the FDA on or before December 1, 2020, and with a first marketed date on or before December 1, 2020, the benchmark period CPI-U is the CPI-U for January 2021.
(2) For a Part B rebatable drug first approved or licensed by the FDA after December 1, 2020, the benchmark period CPI-U is the CPI-U for the first month of the first full calendar quarter after a drug's first marketed date.
(3) Notwithstanding paragraph (e)(2) of this section, for a Part B rebatable drug first approved or licensed by FDA on or before December 1, 2020, and with a first marketed date after December 1, 2020, the benchmark period CPI-U is the CPI-U for the first month of the first full calendar quarter after a drug's first marketed date.
(4) Notwithstanding paragraph (e)(3) of this section, for a Part B rebatable drug that was billed under a NOC code during the calendar quarter beginning July 1, 2021, or the third full calendar quarter after such drug's first marketed date, whichever is later, the benchmark period CPI-U is the CPI-U for the first month of the first full calendar quarter after the Part B rebatable drug is assigned a billing and payment code other than a NOC code.
(5) Notwithstanding paragraph (e)(4) of this section, for a Part B rebatable drug that is a selected drug (as defined in section 1192(c) of the Act) with respect to a price applicability period (as defined in section 1191(b)(2) of the Act), in the case such Part B rebatable drug is no longer considered to be a selected drug, the benchmark period CPI-U is the CPI-U for the July of the year preceding the last year during such price applicability period.
(f) Identification of the rebate period CPI-U. For each Part B rebatable drug by billing and payment code, CMS will identify and use the greater of the benchmark period CPI-U index level or the CPI-U index level for the first month of the calendar quarter that is two calendar quarters before the applicable calendar quarter in which the Part B rebatable drug is furnished.
(g) Determination of inflation-adjusted payment amount. For each applicable calendar quarter and for each Part B rebatable drug by billing and payment code, CMS will calculate the inflation-adjusted payment amount by dividing the rebate period CPI-U by the benchmark period CPI-U and then multiplying the quotient by the payment amount in the payment amount benchmark quarter, determined under paragraph (d) of this section.
§ 427.303   Determination of total number of billing units.
(a) General. For each Part B rebatable drug, CMS will determine the total number of billing units of the billing and payment code subject to a rebate in the applicable calendar quarter using final action Medicare fee-for-service claims for which Medicare payment was allowed and greater than zero.
(b) Total billing units. Using final action claims in the Medicare fee-for-service claims repository, at least 3 months after the end of the applicable calendar quarter, CMS will determine the total number of billing units for a Part B rebatable drug in an applicable calendar quarter by identifying separately payable claim lines for the billing and payment code for dates of service in that applicable calendar quarter and excluding the following billing units in claim lines as applicable:
(1) Billing units of drugs acquired through the 340B Program. CMS will exclude billing units acquired under the 340B Program as identified through—
(i) Separately payable units in all professional claim lines for dates of service during 2023 and 2024 that were billed with the “JG” or “TB” modifiers and separately payable billing units in claim lines for professional claims with dates of service during 2023 and 2024 from suppliers that are associated with covered entities listed by the Health Resources and Services Administration (HRSA) 340B Office of Pharmacy Affairs Information System (OPAIS) as participating in the 340B Program. CMS will use National Provider Identifiers (NPI) and/or Medicare Provider Numbers (MPN), or other fields in the OPAIS database (such as name and address) if NPI or MPN is not available, to identify these suppliers and the claims submitted with such identifiers;
(ii) Separately payable billing units in claim lines for institutional claims that are billed with the “JG” or “TB” modifiers and units in institutional claims from covered entities that are critical access hospitals and Maryland waiver hospitals with dates of service from January 1, 2023 through December 31, 2023. CMS will use NPIs and MPNs, or other fields in the OPAIS database (such as name and address) if NPI or MPN are not available, to identify these suppliers and the claims submitted with such identifiers;
(iii) Separately payable billing units in claim lines for institutional claims that are billed with the “JG” or “TB” modifiers for claims with dates of service from January 1, 2024 through December 31, 2024; and
(iv) Separately payable billing units in claim lines billed with the “TB” modifier for claims with dates of service on or after January 1, 2025.
(2) Billing units with a rebate under section 1927 of the Social Security Act. Subject to paragraph (b)(2)(i) of this section, CMS will exclude billing units from claims with dates of service during a month within an applicable calendar quarter if the units are furnished to a dually eligible Medicare beneficiary who has Medicaid coverage that may provide cost-sharing assistance.
(i) CMS will not exclude billing units from claims when the Medicare beneficiary has Medicaid coverage that does not include cost-sharing assistance, including Specified Low-Income Medicare Beneficiaries (SLMB), Qualified Disabled and Working Individuals (QDWI), and Qualifying Individuals (QI) beneficiaries.
(ii) [Reserved]
(3) Billing units that are packaged into the payment amount for an item or service and are not separately payable. CMS will exclude billing units that are packaged into the payment amount for an item or service and are not separately payable.
(4) Billing units when a drug is no longer a Part B rebatable drug. In situations where a Part B rebatable drug that is a single source drug becomes a multiple source drug during an applicable calendar quarter, CMS will:
(i) Determine if such drug has become a multiple source drug by reviewing FDA's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations” (commonly known as the Orange Book) for a drug that is that is rated as therapeutically equivalent to such drug; and,
(ii) If a therapeutically equivalent drug is identified as set forth in paragraph (b)(4)(i) of this section, determine if the therapeutically equivalent drug was sold or marketed during the applicable calendar quarter; and
(iii) Exclude billing units of such drug furnished on and after the first day of the calendar month in which the therapeutically equivalent drug was first sold or marketed during the applicable calendar quarter.
(5) Billing units subject to discarded drug refunds. CMS will exclude billing units of discarded refundable single-dose container or single-use package drugs for which a refund is owed as set forth in § 414.940 of this chapter from the calculation of rebate amounts. For applicable calendar quarters beginning on or after January 1, 2024, these billing units will be excluded as part of the reconciliation process described at § 427.501(d).
§ 427.304   Adjustments for changes to billing and payment codes.
(a) Changes in billing unit dose description. If there has been a change to the dose description for a Part B rebatable drug (causing a new billing and payment code to be assigned), CMS will calculate a conversion factor based on the ratio of the billing unit dose description for the current billing and payment code to the billing unit dose description for the prior billing and payment code. CMS will apply the conversion factor to the payment amount in the payment amount benchmark quarter, as set forth in § 427.302(d), before applying the percentage by which the rebate period CPI-U for the calendar quarter exceeds the benchmark period CPI-U.
(b) Instances when a new billing and payment code is assigned. If a new billing and payment code is assigned for a Part B rebatable drug, CMS will use the payment amount in the payment amount benchmark quarter, the payment amount benchmark quarter, and the benchmark quarter CPI-U of the prior billing and payment code to calculate the per unit Part B rebate amount under § 427.302.
(c) Documentation. CMS will maintain a crosswalk reflecting the changes in billing and payment codes and dose descriptions as applicable.
§ 427.400   Definitions.
As used in this subpart, the following definitions apply:
Currently in shortage means that at least one NDC-10 assigned to the billing and payment code of a Part B rebatable drug with the status “currently in shortage” is on a shortage list maintained by the FDA under section 506E of the FD&C Act.
Drug shortage or shortage means a period of time when the demand or projected demand for the drug within the United States exceeds the supply of the drug (see section 506C(h)(2) of the FD&C Act).
Natural disaster means any natural catastrophe, including, but not limited to any of the following: hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought, or regardless of cause, any fire, flood, or explosion.
Other unique or unexpected event means any exogenous, unpredictable event outside of a manufacturer's control, including, but not limited to, a geopolitical disruption, pandemic, or act of terror.
Plasma-derived product means a licensed biological product that is derived from human whole blood or plasma, as indicated on the approved product labeling.
Severe supply chain disruption means a change in production or distribution that is reasonably likely to lead to a significant reduction in the U.S. supply of a Part B rebatable biosimilar biological product by a manufacturer and significantly affects the ability of the manufacturer of the biosimilar biological product to fill orders or meet expected demand for its product in the United States for at least 90 days. This definition does not include interruptions in manufacturing due to matters such as routine maintenance, manufacturing quality issues, or insignificant changes made in the manufacturing process for the drug.
§ 427.401   Reducing the rebate amount for Part B rebatable drugs currently in shortage.
(a) General. As required under section 1847A(i)(3)(G)(i) of the Act, CMS will reduce the total rebate amount determined under § 427.301(a), if any is owed, for a Part B rebatable drug that is currently in shortage, as set forth in § 427.400, at any point during the applicable calendar quarter.
(b) Calculation of the reduced rebate amount. (1) For each applicable calendar quarter beginning on or after January 1, 2023, the reduced total rebate amount for a Part B rebatable drug currently in shortage will be calculated using the following formula:
Reduced Total Rebate Amount = the total rebate amount multiplied by (1 minus applicable percent reduction) multiplied by (percentage of time drug was currently in shortage during the applicable calendar quarter) added to the total rebate amount multiplied by (1 minus percentage of time drug was currently in shortage during the applicable calendar quarter)
(2) For purposes of paragraph (b)(1) of this section, the applicable percent reduction is:
(i) For a Part B rebatable drug that is a plasma-derived product:
(A) 75 percent for the first 4 consecutive applicable calendar quarters such drug is currently in shortage.
(B) 50 percent for the second 4 consecutive applicable calendar quarters such drug is currently in shortage.
(C) 25 percent for each subsequent applicable calendar quarter such drug is currently in shortage.
(ii) For a Part B rebatable drug that is not a plasma-derived product:
(A) 25 percent for the first 4 consecutive applicable calendar quarters such drug is currently in shortage.
(B) 10 percent for the second 4 consecutive applicable calendar quarters such drug is currently in shortage.
(C) 2 percent for each subsequent applicable calendar quarter such drug is currently in shortage.
(iii) Except as provided in paragraph (b)(iv) of this section, CMS will apply the greatest applicable percent reduction as set forth in paragraph (b)(2)(i)(A) or (b)(2)(ii)(A) of this section starting with the first applicable calendar quarter that a Part B drug or biological product is described as currently in shortage regardless of whether the drug or biological product meets the definition of a Part B rebatable drug or whether a rebate amount is owed for that calendar quarter, starting with the calendar quarter that begins January 1, 2023.
(iv) If any applicable calendar quarter for which a rebate reduction determined under § 427.402 has been granted would be the first of the four consecutive applicable calendar quarters described in paragraph (b)(2)(i)(A) or (b)(2)(ii)(A) of this section and the Part B rebatable drug or biological product continues to be currently in shortage after the rebate reduction period described in § 427.402, CMS will treat the quarter following the final quarter in which the rebate reduction determined under § 427.402 applies as the first of the four consecutive applicable calendar quarters so described.
(3) For purposes of paragraph (b)(1) of this section, the percentage of time the drug is currently in shortage during the applicable calendar quarter is equal to the number of days such drug is currently in shortage in an applicable calendar quarter, divided by the total number of days in the applicable calendar quarter.
(c) Application of reduction. CMS will apply a reduction of the rebate amount as determined under paragraph (b) of this section to all the NDCs under the relevant billing and payment code.
§ 427.402   Reducing the rebate amount for certain Part B rebatable drugs when there is a severe supply chain disruption.
(a) General. As required under section 1847A(i)(3)(G)(ii) of the Act, CMS will reduce the total rebate amount determined under § 427.301(a), if any is owed, for a Part B rebatable biosimilar biological product when CMS determines there is a severe supply chain disruption during the applicable calendar quarter such as that caused by a natural disaster or other unique or unexpected event.
(b) Calculation of the reduced rebate amount —(1) Initial reduction. If CMS determines the criteria set forth in paragraph (c)(4) of this section are met, then CMS will reduce the total rebate amount determined under § 427.301(a), if any is owed, for a Part B rebatable biosimilar biological product by 75 percent for the applicable calendar quarter in which the event occurred or began, or the following applicable calendar quarter if the request is submitted less than 60 calendar days before the end of an applicable calendar quarter, and the 3 subsequent applicable calendar quarters.
(2) Extension of reduction. If CMS determines a severe supply chain disruption continues into a fifth applicable calendar quarter as set forth in paragraph (c)(5) of this section, then CMS will reduce the total rebate amount determined under § 427.301(a), if any is owed, for a Part B rebatable biosimilar biological product by 75 percent for that fifth applicable calendar quarter and an additional 3 consecutive applicable calendar quarters.
(3) Application of reduction. If CMS determines there is a severe supply chain disruption for an NDC-11 assigned to a billing and payment code, CMS will apply any reduction of the rebate amount as determined under paragraphs (b)(1) and (2) of this section to all the NDCs under the relevant billing and payment code.
(4) Limitation on rebate reductions. CMS will not apply multiple rebate reductions for the same Part B rebatable drug and applicable calendar quarter.
(i) If a manufacturer believes there are multiple events causing severe supply chain disruptions during the same 4 applicable calendar quarters for the same Part B rebatable biosimilar biological product and submits multiple rebate reduction requests for the same product, CMS will grant no more than 1 rebate reduction determined under paragraph (b)(1) or (2) of this section for that product for those consecutive applicable calendar quarters.
(ii) If CMS grants a rebate reduction request under this section, and the Part B rebatable biosimilar biological product subject to the reduction appears as currently in shortage during any of the 4 applicable calendar quarters as the ones for which the severe supply chain disruption reduction request was granted, CMS will reduce the rebate amount as determined under paragraph (b)(1) of this section and will not grant a reduction determined under § 427.401 during those applicable calendar quarters.
(iii) If a Part B rebatable biosimilar biological product that is currently in shortage experiences a severe supply chain disruption, CMS will reduce the rebate amount as determined under paragraph (b)(1) of this section and will not grant a reduction determined under § 427.401 during those applicable calendar quarters.
(c) Eligibility for a rebate reduction —(1) Eligible drug. Subject to paragraph (b)(3) of this section, eligibility for a rebate reduction under this section is limited to Part B rebatable biosimilar biological products for which a manufacturer submits a rebate reduction request under this section.
(2) Timing. For a natural disaster or other unique or unexpected event occurring on or after August 2, 2024, that the manufacturer believes caused a severe supply chain disruption, the manufacturer must submit the rebate reduction request within 60 calendar days from the first day that the natural disaster or other unique or unexpected event occurred or began in order to receive consideration for a reduction in the rebate amount owed as set forth in paragraph (b)(1) of this section.
(3) Required elements of a rebate reduction request. To receive consideration for a reduction in the rebate amount owed determined under paragraph (b)(1) of this section, the manufacturer must submit to CMS information and supporting documentation to substantiate the evaluation criteria set forth in paragraph (c)(4) of this section. Such information and supporting documentation include the following:
(i) Evidence that the severe supply chain disruption directly affects the manufacturer itself, a supplier of an ingredient or packaging, a contract manufacturer, or a method of shipping or distribution that the manufacturer uses to make or distribute the Part B rebatable biosimilar biological product(s), such as a change in the production or distribution of the Part B rebatable biosimilar biological product(s) that is reasonably likely to lead to a significant reduction in the U.S. supply of product and significantly affects the manufacturer's ability to fill orders or meet expected demand for the Part B rebatable biosimilar biological product(s) for at least 90 days;
(ii) Information about when the manufacturer expects supply of the Part B rebatable biosimilar biological product(s) to meet expected demand;
(iii) Evidence that the natural disaster or other unique or unexpected event caused the severe supply chain disruption, including when the natural disaster or other unique or unexpected event occurred or began occurring, and the expected or actual duration of the severe supply chain disruption; and
(iv) Evidence of the manufacturer's physical presence related to manufacturing the Part B rebatable biosimilar biological product(s) in a geographic area where a natural disaster or other unique or unexpected event occurred. If the manufacturer is not physically present in a geographic area where a natural disaster or other unique or unexpected event occurred, but believes there is a severe supply chain disruption caused by a natural disaster or other unique or unexpected event that affects the manufacturer's Part B rebatable biosimilar biological product(s), the information and supporting documentation may include evidence of the impact of the natural disaster or other unique or unexpected event on the supply chain of the Part B rebatable drug or biosimilar, on a supplier of an ingredient or packaging, or method of shipping or distribution that the manufacturer uses.
(4) Evaluation criteria. In accordance with paragraph (b)(1) of this section, CMS will grant a reduction in the rebate amount determined under § 427.301(a), if any is owed, if a manufacturer submits to CMS a request in writing for an eligible drug, in accordance with the timing set forth in paragraph (c)(2) of this section, demonstrating that:
(i) A severe supply chain disruption has occurred during the applicable calendar quarter;
(ii) The severe supply chain disruption directly affects the manufacturer itself, a contract manufacturer, a supplier of an ingredient or packaging, or a method of shipping or distribution that the manufacturer uses in a significant capacity to make or distribute the Part B rebatable biosimilar biological product; and
(iii) The severe supply chain disruption was caused by a natural disaster or other unique or unexpected event.
(5) Rebate reduction extensions. If CMS determines that a Part B rebatable biosimilar biological product that received a reduction of the rebate amount as determined under paragraph (b)(1) of this section continues to be affected by a severe supply chain disruption, CMS will grant a single extension of the reduction for 4 additional consecutive applicable calendar quarters and reduce the rebate amount calculated at § 427.301(a), if any is owed as determined under paragraph (b)(2) of this section.
(i) To receive consideration for a rebate reduction extension, a manufacturer must submit a request with updated or new information and supporting documentation on why the Part B rebatable biosimilar biological product continues to be affected by the severe supply chain disruption during the fifth through eighth applicable calendar quarters.
(ii) A manufacturer must submit the rebate reduction extension request at least 60 calendar days before the start of the fifth applicable calendar quarter to receive consideration for a reduction in the rebate amount owed, if any, as determined under paragraph (b)(2) of this section.
(6) Decision to grant or deny a request. CMS will review rebate reduction requests and rebate reduction extension requests within 60 calendar days of receipt of all documentation, if feasible, beginning with the applicable calendar quarter that begins on October 1, 2024.
(i) CMS will deny a rebate reduction request that does not meet the criteria set forth in paragraph (c)(4) of this section or that is incomplete or untimely based on the requirements set forth in this paragraph (c).
(ii) CMS will deny a rebate reduction extension request that does not meet the criteria set forth in paragraph (c)(5) of this section, that is incomplete or untimely based on the requirements set forth in paragraph (c)(5), or if a reduction determined under paragraph (b)(1) of this section was not granted for such biosimilar biological product.
(iii) CMS' decisions to deny a request are final and will not be subject to an appeals process.
(7) Public disclosure of information. CMS will keep confidential, to the extent allowable under law, any requests for a rebate reduction, including supporting documentation. Information provided as part of a request for a rebate reduction that the submitter indicates is a trade secret or confidential commercial or financial information will be protected from disclosure if CMS determines the information meets the requirements set forth under Exemptions 3 and/or 4 in 5 U.S.C. 552.
§ 427.500   Definitions.
As used in this subpart, date of receipt is the calendar day following the day on which a report of a rebate amount (as set forth in §§ 427.501(b) through (d) and 427.502(b) and (c) is made available to the manufacturer of a Part B rebatable drug by CMS.
§ 427.501   Rebate Reports and reconciliation.
(a) General. This section applies to Part B rebatable drugs for all applicable calendar quarters except as otherwise set forth in § 427.502 regarding the applicable calendar quarters in calendar years 2023 and 2024.
(b) Preliminary Rebate Report. A Preliminary Rebate Report will be provided to each manufacturer of a Part B rebatable drug at least 1 month prior to the issuance of the Rebate Report as set forth in paragraph (c) of this section for an applicable calendar quarter.
(1) The Preliminary Rebate Report for each Part B rebatable drug will include the following information:
(i) The NDC(s) and billing and payment codes identified for the Part B rebatable drug set forth in § 427.20.
(ii) Total number of billing units as determined under § 427.303.
(iii) Payment amount benchmark quarter and payment amount in the payment amount benchmark quarter as determined under § 427.302(c) and (d).
(iv) Applicable calendar quarter specified amount as determined under § 427.302(b).
(v) Applicable benchmark period and rebate period CPI-Us as set forth in § 427.302(e) and (f).
(vi) Inflation-adjusted payment amount as determined under § 427.302(g).
(vii) The amount, if any, by which the specified amount as determined under § 427.302(b) exceeds the inflation-adjusted payment amount as determined under § 427.302(g) for the Part B rebatable drug for the applicable calendar quarter as set forth in § 427.302.
(viii) Any applied reductions as determined under §§ 427.401 and 427.402.
(ix) Rebate amount due as determined under § 427.301(a).
(2) [Reserved]
(c) Rebate Report. A Rebate Report will be provided to each manufacturer of a Part B rebatable drug no later than 6 months after the end of each applicable calendar quarter.
(1) The Rebate Report will include the information specified in paragraph (b)(1) of this section, with the inclusion of any revisions to such information resulting from CMS' review of a Suggestion of Error as set forth in § 427.503, if applicable, and any CMS-determined recalculations from paragraph (d)(2) of this section.
(2) The Rebate Report is the invoice of a manufacturer's rebate amount due as determined under § 427.301, if any, for a Part B rebatable drug for an applicable calendar quarter.
(d) Reconciliation of the rebate amount. CMS will perform reconciliation of a rebate amount provided in a Rebate Report specified in paragraph (c) of this section for an applicable calendar quarter in the following circumstances:
(1) Regular reconciliation. Except as otherwise set forth in § 427.502, CMS will perform one regular reconciliation of the rebate amount within 12 months of the date of receipt of the Rebate Report for each applicable calendar quarter to include revisions to the information used to calculate the rebate amount set forth in paragraph (c)(1) of this section.
(i) Preliminary reconciliation. At least 1 month prior to the issuance of a report with the reconciled rebate amount for an applicable calendar quarter as set forth in paragraph (d)(1)(ii) of this section, CMS will conduct a preliminary reconciliation of the rebate amount for an applicable calendar quarter based on the information set forth in paragraphs (b)(1)(i) through (ix) of this section and provide the information set forth in paragraphs (b)(1) and (d)(1)(i)(A) through (F) of this section to the manufacturer of a Part B rebatable drug for the applicable calendar quarter, if applicable:
(A) Updated total number of rebatable units, as determined under § 427.303.
(B) Updated payment amount benchmark quarter and payment amount in the payment amount benchmark quarter, as determined under § 427.302(c) and (d) if any inputs are restated within the reconciliation run-out period.
(C) Applicable calendar quarter specified amount as determined under § 427.302(b), if any inputs are restated within the reconciliation run-out period.
(D) The excess amount by which the specified amount exceeds the inflation-adjusted payment amount as determined under § 427.302, if any inputs are restated within the reconciliation run-out period.
(E) Reconciled total rebate amount as determined under § 427.301(a).
(F) The difference between the total rebate amount due as specified on the Rebate Report set forth in paragraph (c) of this section and the reconciled rebate amount as set forth in this paragraph (d)(1)(i).
(ii) Report with reconciled rebate amount. With the inclusion of any additional revisions to such information resulting from CMS' review of a Suggestion of Error as set forth in § 427.503, if applicable, a report with the reconciled rebate amount will be provided to each manufacturer of a Part B rebatable drug within 12 months after the issuance of the Rebate Report described in paragraph (c) of this section.
(2) CMS identification of error and manufacturer misreporting. CMS may recalculate a rebate amount and provide the manufacturer of a Part B rebatable drug a report with a reconciled rebate amount when:
(i) CMS identifies an agency error in the information specified in paragraphs (c) and (d)(1) of this section, including reporting system or coding errors, not later than 3 years from the date of receipt by a manufacturer of a reconciled rebate amount for the applicable calendar quarter; or
(ii) CMS determines at any time that the information used by CMS to calculate the rebate amount was inaccurate due to manufacturer misreporting.
(3) Impact of reconciliation on rebate amount. A reconciliation as set forth in this paragraph (d) could result in an increase, decrease, or no change to the rebate amount, as determined under § 427.301, owed by a manufacturer for the applicable calendar quarter for the Part B rebatable drug compared to the amount described in the Rebate Report described in paragraph (c) of this section or an amount described in a previous reconciliation.
(i) A report with a reconciled rebate amount that is an increase to the rebate amount is the invoice for such additional amount due on the manufacturer's rebate amount as determined under § 427.301 for a Part B rebatable drug for an applicable calendar quarter.
(ii) [Reserved]
(4) Drugs included in a reconciliation. A drug covered under Part B that does not meet the requirements of a rebatable drug specified in subpart B for an applicable calendar quarter will not be included in a reconciliation under this paragraph (d).
§ 427.502   Rebate Reports for applicable calendar quarters in calendar years 2023 and 2024.
(a) Transition rule for reporting. Section 1847A(i)(1)(C) of the Act allows CMS to delay the timeframe for reporting the information and rebate amount described in § 427.501(c) for applicable calendar quarters in calendar years 2023 and 2024 until not later than September 30, 2025.
(b) Rebate Report information for applicable calendar quarters in calendar years 2023 and 2024. The Rebate Reports for applicable calendar quarters in calendar years 2023 and 2024 will include the information set forth in § 427.501(b)(1).
(c) Rebate Report procedures for applicable calendar quarters in calendar years 2023 and 2024. Rebate amounts for the applicable calendar quarters in calendar year 2023 and 2024 will be reported as follows:
(1) The 4 applicable calendar quarters in calendar year 2023 will be consolidated into a single report and manufacturers will receive a single Preliminary Rebate Report followed by a single Rebate Report.
(i) Discarded drug units for which a refund is owed will be removed from the total number of billing units in the single Preliminary Rebate Report for the applicable calendar quarters in calendar year 2023.
(ii) For this single Preliminary Rebate Report for the applicable calendar quarters in calendar year 2023, the Suggestion of Error period as set forth in § 427.503 will be 30 calendar days.
(iii) No regular reconciliation of the rebate amount as set forth in § 427.501(d)(1) will be conducted for the rebate amount in the single Rebate Report for the applicable calendar quarters in calendar year 2023.
(2) The four applicable calendar quarters in calendar year 2024 will be consolidated into a single report and manufacturers will receive a single Preliminary Rebate Report followed by a single Rebate Report.
(i) For this single Preliminary Rebate Report for the applicable calendar quarters in calendar year 2024, the Suggestion of Error period as set forth in § 427.503 will be 30 calendar days.
(ii) Nine months after issuance of the single Rebate Report, CMS will perform one regular reconciliation for the applicable calendar quarters in calendar year 2024 in order to include revisions to the information used, determined under § 427.501(b)(1), to calculate the rebate amount. Such reconciliation will be as determined under § 427.501(d) inclusive of a preliminary reconciliation and a report with the reconciled rebate amount.
(iii) The Suggestion of Error period for the preliminary reconciliation for the applicable calendar quarters in calendar year 2024 will be 10 calendar days.
§ 427.503   Suggestion of Error.
(a) General. The manufacturer of a Part B rebatable drug may submit a Suggestion of Error about the information in their Preliminary Rebate Report and the report detailing the preliminary reconciliation of the rebate amount to CMS, for its discretionary consideration, if the manufacturer believes that there is a mathematical error or errors to be corrected before the Rebate Report or a subsequent reconciliation of the rebate amount, as applicable, is finalized.
(1) Section 1847A(i)(8) of the Act precludes administrative or judicial review on the determination of units as set forth in § 427.303, the determination of whether a drug is a Part B rebatable drug as set forth in § 427.101, and the calculation of the rebate amount as set forth in § 427.301, inclusive of any reconciled rebate amount.
(2) [Reserved]
(b) Process of submission. Subject to the scope and timing requirements specified in paragraphs (a) and (c) of this section, manufacturers may submit the Suggestion of Error and provide supporting documentation (if applicable).
(c) Timing. Except as set forth in § 427.502 for applicable calendar quarters in calendar year 2023 and 2024, a manufacturer must submit its Suggestion of Error for the applicable calendar quarter within 10 calendar days from the date of receipt of a Preliminary Rebate Report or a preliminary reconciliation of a rebate amount using the method and process established by CMS in paragraph (b) of this section.
(d) Notice. (1) CMS will include any revisions to the calculation of the rebate amount, if determined necessary by CMS based on the Suggestion of Error submitted under this section prior to issuance of the Rebate Report as set forth in § 427.501(c) or § 427.502(c) as well as any report of reconciled rebate amount as set forth in § 427.501(d) or § 427.502(c)(2)(ii).
(2) CMS will notify the manufacturer whether CMS revised its calculation of the rebate amount based on the Suggestion of Error.
§ 427.504   Manufacturer access to Rebate Reports.
(a) General. CMS will establish a method and process for a manufacturer of the Part B rebatable drug to:
(1) Access the manufacturer's Rebate Report as set forth in §§ 427.501 and 427.502, including any report of reconciled rebate amount as set forth in §§ 427.501(d) and 427.502(c)(2)(ii);
(2) Submit a Suggestion of Error as set forth in §§ 427.502(c)(1)(ii) and (c)(2)(i) and 427.503; and
(3) Pay a rebate amount as set forth in § 427.505.
(b) [Reserved]
§ 427.505   Deadline and process for payment of rebate amount.
(a) Rebate amounts owed by a manufacturer. For a rebate amount owed by a manufacturer, payment is due no later than 11:59 p.m. Pacific Time (PT) on the 30th calendar day after the date of receipt of information regarding the rebate amount on—
(1) A Rebate Report as set forth in § 427.501(c) or § 427.502(c)(1) or (2); or
(2) A report of a reconciled rebate amount as set forth in § 427.501(d) or § 427.502(c)(2)(ii).
(b) Failure to pay a rebate amount. Failure to pay a rebate amount due timely and in full may result in an enforcement action as described in subpart G of this part.
(c) Refund to the manufacturer. If a reconciled rebate amount for an applicable calendar quarter as set forth in § 427.501(d) or § 427.502(c)(2)(ii) is less than what the manufacturer paid for that applicable calendar quarter, CMS will initiate the process to provide a refund equal to the excess amount paid within 60 days of the date of receipt of the report with such reconciled rebate amount.
§ 427.600   Civil money penalty notice and appeals procedures.
(a) General. CMS may impose a civil money penalty on a manufacturer that fails to pay the rebate amount determined in § 427.301(a) on a Part B rebatable drug as set forth in § 427.101, by the payment deadline as set forth in § 427.505(a) for such drug for such applicable calendar quarter.
(b) Determination of the civil money penalty amount. CMS may impose a civil money penalty for each failure by a manufacturer to provide an inflation rebate for an applicable calendar quarter equal to 125 percent of the rebate amount determined in § 427.301(a).
(1) The civil money penalty is in addition to the rebate amount due.
(2) If a reconciled rebate amount as determined in § 427.501(d) or § 427.502(c)(2)(ii) results in an increase to the rebate amount due, a separate civil money penalty may be imposed for the failure by a manufacturer to provide an inflation rebate for the applicable quarter for the increase to the rebate amount due.
(c) Notice of imposition of civil money penalties. If CMS makes a determination to impose a civil money penalty described in paragraph (b) of this section, CMS will send a written notice of its decision to impose a civil money penalty that includes the following:
(1) A description of the basis for the determination.
(2) The basis for the penalty.
(3) The amount of the penalty.
(4) The date the penalty is due.
(5) The manufacturer's right to a hearing as set forth in paragraph (e)(3) of this section.
(6) Information about where to file the request for a hearing.
(d) Collection. (1) A manufacturer must pay the civil money penalty in full within 60 calendar days after the date of the notice of imposition of a civil money penalty from CMS under paragraph (c) of this section.
(2) In the event a manufacturer requests a hearing, pursuant to 42 CFR part 423, subpart T, the manufacturer must pay the amount in full within 60 calendar days after the date of a final decision by the Departmental Appeal Board, to uphold, in whole or in part, the civil money penalty.
(3) If the 60th calendar day described in paragraphs (d)(1) and (2) of this section is a weekend or a Federal holiday, then the timeframe is extended until the end of the next business day.
(e) Appeal procedures for civil money penalties. Section 1128A(c)(2) of the Act provides that CMS may not collect a civil money penalty until the affected party has had notice and the opportunity for a hearing.
(1) Manufacturers may appeal the following determinations:
(i) A CMS determination that the rebate amount was not paid by the applicable payment deadline as set forth in § 427.505.
(ii) The calculation of the amount of the civil money penalty.
(2) If CMS decides to impose a civil money penalty, CMS will provide the manufacturer with notice pursuant to the process set forth in paragraph (c) of this section.
(3) A manufacturer has a right to a hearing following a decision by CMS to impose a civil money penalty following the administrative appeal process and procedures established in 42 CFR part 423, subpart T.
(f) Other applicable provisions. The provisions of section 1128A of the Act (except subsections (a) and (b) of section 1128A of the Act) apply to civil money penalties under this section to the same extent that they apply to a civil money penalty or procedures under section 1128A of the Act.
(g) Bankruptcy. In the event that a manufacturer declares bankruptcy, as described in title 11 of the United States Code, and as a result of the bankruptcy, fails to pay either the full rebate amount owed or the total sum of civil money penalties imposed, the Government reserves the right to file a proof of claim with the bankruptcy court to recover the unpaid amount of the rebates and civil money penalties owed by the manufacturer.