Title 42—Public Health--Volume 1
PART 428—MEDICARE PART D DRUG INFLATION REBATE PROGRAM
§ 428.10   Basis and scope.
(a) Basis. This part implements section 1860D-14B of the Social Security Act (“the Act”).
(b) Scope. This part sets forth the requirements of the Medicare Part D Drug Inflation Rebate Program, which requires, for each 12-month applicable period, manufacturers to pay rebates for certain 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.
§ 428.20   Definitions.
As used in this part, the following definitions apply:
Annual manufacturer price (AnMP) means the amount determined under § 428.202(b).
Applicable period means a 12-month period beginning with October 1 of a year (beginning with October 1, 2022).
Applicable period Consumer Price Index for All Urban Consumers (CPI-U) means, with respect to an applicable period, the CPI-U for the first month of such applicable period (that is, October).
Applicable threshold means the amount determined under § 428.101(b)(2).
Average manufacturer price (AMP) means the average price paid to the manufacturer for the drug by wholesalers for drugs distributed to retail community pharmacies and retail community pharmacies that purchase drugs directly from the manufacturer, determined under § 447.504 of this chapter.
Benchmark period CPI-U means the CPI-U identified as set forth in § 428.202(e).
Benchmark period manufacturer price means the amount determined under § 428.202(d).
Covered Part D Drug has the meaning set forth in section 1860D-2(e) of the Act and § 423.100 of this chapter.
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.
First marketed date means the date that a manufacturer is required to report for a Part D rebatable drug as its “market date” under section 1927(b)(3)(A)(v) of the Act.
Inflation-adjusted payment amount means the amount determined under § 428.202(f).
Manufacturer has the meaning set forth in section 1927(k)(5) of the Act.
National Drug Code (NDC) means the unique identifying prescription drug product number that is listed with FDA identifying the product.
Part D rebatable drug means, subject to the exclusion set forth in § 428.101(b), a drug or biological that is a covered Part D drug that, as of the first day of the applicable period, is:
(1) A drug approved under a New Drug Application (NDA) under section 505(c) of the Federal Food, Drug, and Cosmetic (FD&C) Act;
(2) A generic drug approved under an Abbreviated New Drug Application (ANDA) under section 505(j) of the FD&C Act (“section 505(j) ANDA”), in the case where:
(i) The reference listed drug approved under an NDA under section 505(c) of the FD&C Act, including any authorized generic drug as defined in section 505(t)(3) of the FD&C Act, is not being marketed, as identified in the Food and Drug Administration's (FDA) NDC Directory;
(ii) There is no other drug approved under section 505(j) of the FD&C Act that is rated as therapeutically equivalent in FDA's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations” (commonly known as the Orange Book), and that is being marketed, as identified in FDA's NDC Directory;
(iii) The manufacturer is not a “first applicant” during the “180-day exclusivity period,” as those terms are defined in section 505(j)(5)(B)(iv) of the FD&C Act; and
(iv) The manufacturer is not a “first approved applicant” for a competitive generic therapy, as that term is defined in section 505(j)(5)(B)(v) of the FD&C Act; or
(3) A biological licensed under section 351 of the Public Health Service (PHS) Act, including a biosimilar.
Payment amount benchmark period means the period identified as set forth in § 428.202(c).
Subsequently approved drug means a Part D rebatable drug first approved or licensed by the FDA after October 1, 2021.
Unit means, with respect to a Part D rebatable drug, the lowest dispensable amount (such as a capsule or tablet, milligram of molecules, or grams) of the Part D rebatable drug, as reported under section 1927 of the Act.
§ 428.100   Definitions.
As used in this subpart, the following definitions apply:
Individual who uses such a drug or biological means a unique Medicare Part D beneficiary who was dispensed the Part D drug or biological that was covered by their Part D plan sponsor during the applicable period, identified using Prescription Drug Event (PDE) data with dates of service during the applicable period and with gross covered prescription drug costs greater than zero.
Gross covered prescription drug costs has the meaning set forth in § 423.308 of this chapter.
§ 428.101   Identification of Part D rebatable drugs.
(a) Determination of Part D rebatable drugs. (1) For each applicable period, CMS will use PDE data to identify all covered Part D drugs.
(2) CMS will match the covered Part D drugs identified in the PDE data with application numbers using FDA sources to determine whether each covered Part D drug is a drug or biological approved under an NDA under section 505(c) of the FD&C Act, approved under an ANDA under section 505(j) of the FD&C Act, or licensed under a Biologics License Application (BLA) under section 351 of the PHS Act, as of the first day of the applicable period.
(3) For a covered Part D drug identified in the PDE that is approved under an ANDA under section 505(j) of the FD&C Act, CMS will determine whether such drug meets the criteria in section 1860D-14B(g)(1)(C)(ii) of the Act as of the first day of the applicable period as follows:
(i) To determine whether the reference listed drug or an authorized generic of the reference listed drug is being marketed, as required under section 1860D-14B(g)(1)(C)(ii)(I) of the Act, CMS will use FDA's NDC Directory, including historical information from NDC Directory files such as discontinued, delisted, and expired listings, provided by the FDA or published on the FDA website.
(ii) To determine whether another drug has been approved under an ANDA that is therapeutically equivalent to the Part D rebatable drug identified as set forth in this paragraph (a)(3), CMS will use FDA's Orange Book. To determine if this therapeutically equivalent drug is being marketed, as required under section 1860D-14B(g)(1)(C)(ii)(II) of the Act, CMS will use FDA's NDC Directory, including historical information from NDC Directory files, such as discontinued, delisted, and expired listings, provided by the FDA or published on the FDA website.
(iii) To determine whether the manufacturer of the drug identified as set forth in this paragraph (a)(3) is a first applicant during the 180-day exclusivity period, or whether the manufacturer of this drug is a first approved applicant for a competitive generic drug therapy, CMS will refer to publicly available FDA sources such as the Orange Book and may consult with FDA for technical assistance as needed.
(b) Drugs and biologicals with average annual total cost below the applicable threshold. For each applicable period, CMS will identify drugs and biologicals with average annual total costs under Part D for such applicable period, per individual who uses such drug or biological, that are below the applicable threshold in accordance with the steps described in this paragraph (b). Such drugs and biologicals are not considered Part D rebatable drugs and will be excluded from the identification of Part D rebatable drugs set forth in paragraph (a) of this section.
(1) Average annual total cost. For each drug or biological that is identified as set forth in paragraph (a) of this section, CMS will calculate average annual total costs under Part D per individual who uses such drug or biological by dividing the gross covered prescription drug costs for the drug or biological by the number of individuals who use such drug or biological in the applicable period. When calculating the gross covered prescription drug costs for the drug or biological, CMS will exclude PDE records indicating the drug or biological was billed as a compound.
(2) Applicable threshold. CMS will calculate the applicable threshold for an applicable period as follows:
(i) For the applicable period beginning October 1, 2022, the applicable threshold is equal to $100.
(ii) For the applicable period beginning October 1, 2023, the applicable threshold is equal to $100 increased by the percentage increase in CPI-U for the 12-month period beginning October 1, 2023.
(iii) For subsequent applicable periods, the applicable threshold is equal to the applicable threshold for the prior applicable period increased by the percentage increase in the CPI-U for the 12-month period beginning with October of the previous period.
(iv) If the resulting amount determined under paragraph (b)(2)(ii) or (iii) of this section is not a multiple of $10, CMS will round that amount to the nearest multiple of $10.
§ 428.200   Definitions.
As used in this subpart, the following definitions apply:
340B Program is the program under section 340B of the PHS Act.
Line extension has the meaning set forth in § 447.502 of this chapter.
New formulation has the meaning set forth in § 447.502 of this chapter.
Oral solid dosage form has the meaning set forth in § 447.502 of this chapter.
§ 428.201   Calculation of the total rebate amount to be paid by manufacturers.
(a) Total rebate. (1) Subject to paragraph (b) of this section, the total rebate amount to be paid by a manufacturer for a Part D rebatable drug, identified as set forth in § 428.101, for an applicable period is equal to:
(i) The product of the per unit Part D rebate amount of such drug, as determined under § 428.202(a), and the total number of units dispensed of such drug under Part D, as determined under § 428.203; or
(ii) In the case of a Part D rebatable drug that is a line extension of a Part D rebatable drug that is an oral solid dosage form, the amount determined under § 428.204.
(2) The rebate amount may be reduced in accordance with subpart D of this part or adjusted in accordance with subpart E of this part.
(b) Drugs and biologicals excluded from Part D rebate calculations. CMS will exclude from the Part D drug inflation rebate calculations described in this subpart—
(1) Drugs and biologicals that meet the definition of a Part D rebatable drug but whose manufacturers do not have an agreement in effect with the HHS Secretary under section 1927 of the Act at any point during the applicable period, as determined by CMS through consultation with Medicaid Drug Rebate Program staff and review of the Medicaid Drug Programs system.
(2) Drugs and biologicals that meet the definition of a Part D rebatable drug but, for the entire duration of the applicable period, are excluded from the definition of covered outpatient drugs as defined in section 1927(k)(2)-(4) of the Act and § 447.502 of this chapter, as determined by CMS through consultation with Medicaid Drug Rebate Program staff and review of the Medicaid Drug Programs system.
§ 428.202   Calculation of the per unit Part D rebate amount.
(a) Formula for calculating the per unit Part D rebate amount. CMS will calculate the per unit Part D rebate amount for a Part D rebatable drug and applicable period by determining the amount by which the AnMP for the Part D rebatable drug, as calculated in accordance with paragraph (b) of this section, exceeds the inflation-adjusted payment amount, as calculated in accordance with paragraph (f) of this section.
(b) Calculation of the AnMP for the applicable period. Subject to paragraph (g) of this section, CMS will calculate the AnMP for a Part D rebatable drug using the AMP reported by a manufacturer under sections 1927(b)(3)(A)(i)(I) and (ii) of the Act for each calendar quarter of the applicable period and units reported by a manufacturer under section 1927(b)(3)(A)(iv) of the Act for each month of the applicable period.
(1) CMS will calculate the AnMP for a Part D rebatable drug as the sum of the following:
(i) The product of—
(A) The AMP for the Part D rebatable drug reported for the calendar quarter beginning October of the applicable period; and
(B) The sum of the monthly units reported for the calendar quarter beginning October of the applicable period divided by the sum of the monthly units reported for the 4 calendar quarters in the applicable period.
(ii) The product of—
(A) The AMP for the Part D rebatable drug reported for the calendar quarter beginning January of the applicable period; and
(B) The sum of the monthly units reported for the calendar quarter beginning January of the applicable period divided by the sum of the monthly units reported for the 4 calendar quarters in the applicable period.
(iii) The product of—
(A) The AMP for the Part D rebatable drug reported for the calendar quarter beginning April of the applicable period; and
(B) The sum of the monthly units reported for the calendar quarter beginning April of the applicable period divided by the sum of the monthly units reported for the 4 calendar quarters in the applicable period.
(iv) The product of—
(A) The AMP for the Part D rebatable drug reported for the calendar quarter beginning July of the applicable period; and
(B) The sum of the monthly units reported for the calendar quarter beginning July of the applicable period divided by the sum of the monthly units reported for the 4 calendar quarters in the applicable period.
(2) The first applicable period for a Part D rebatable drug will be the earliest applicable period that follows the payment amount benchmark period identified as set forth in paragraphs (c)(1) through (4) of this section.
(c) Identification of the payment amount benchmark period. As applicable under this paragraph, CMS will use information reported by a manufacturer under section 1927(b)(3) of the Act, including without limitation the date of FDA approval or licensure and the first marketed date, to identify the payment amount benchmark period as set forth in paragraphs (c)(1) and (2) of this section, subject to paragraphs (c)(3) through (5) of this section:
(1) For a Part D rebatable drug first approved or licensed by the FDA on or before October 1, 2021, the payment amount benchmark period is the period beginning on January 1, 2021, and ending on September 30, 2021;
(2) For a subsequently approved drug, the payment amount benchmark period is the first calendar year beginning after the drug's first marketed date;
(3) Notwithstanding paragraph (c)(1) of this section, for a Part D rebatable drug first approved or licensed by the FDA on or before October 1, 2021, for which there are no quarters during the period beginning on January 1, 2021, and ending on September 30, 2021, for which AMP has been reported under section 1927(b)(3) of the Act for the NDC-9, including information as set forth in paragraph (d)(3), the payment amount benchmark period is the first calendar year no earlier than calendar year 2021 in which such NDC-9 has at least 1 quarter of AMP reported;
(4) Notwithstanding paragraph (c)(2) of this section, for a subsequently approved drug for which there are no quarters during the first calendar year beginning after the drug's first marketed date for which AMP has been reported under section 1927(b)(3) of the Act for the NDC-9, including information as set forth in paragraph (d)(3) of this section, the payment amount benchmark period is the first calendar year in which such NDC-9 has at least 1 quarter of AMP reported; and
(5) Notwithstanding paragraphs (c)(1) through (4) of this section, for a Part D 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 D rebatable drug is no longer considered to be a selected drug, for each applicable period beginning after the price applicability period with respect to such drug, the payment amount benchmark period is the last calendar year of such price applicability period with respect to such selected drug.
(d) Calculation of benchmark period manufacturer price. Subject to paragraphs (d)(3) and (g) of this section, CMS will calculate the benchmark period manufacturer price for a Part D rebatable drug using the AMP reported by a manufacturer under sections 1927(b)(3)(A)(i)(I) and (ii) of the Act for each calendar quarter of the payment amount benchmark period and the monthly units reported by a manufacturer under section 1927(b)(3)(A)(iv) of the Act during the payment amount benchmark period.
(1) For a Part D rebatable drug with a payment amount benchmark period identified as set forth in paragraph (c)(1) of this section, CMS will calculate the benchmark period manufacturer price as the sum of the following:
(i) The product of—
(A) The AMP reported for the calendar quarter beginning January 2021; and
(B) The sum of the monthly units reported for the calendar quarter beginning January 2021 divided by the sum of the monthly units reported for the 3 quarters of the payment amount benchmark period.
(ii) The product of—
(A) The AMP reported for the calendar quarter beginning April 2021; and
(B) The sum of the monthly units reported for the calendar quarter beginning April 2021 divided by the sum of the monthly units reported for the 3 quarters of the payment amount benchmark period.
(iii) The product of—
(A) The AMP reported for the calendar quarter beginning July 2021; and
(B) The sum of the monthly units reported for the calendar quarter beginning July 2021 divided by the sum of the units reported for the 3 quarters of the payment amount benchmark period.
(2) For a Part D rebatable drug with a payment amount benchmark period identified under paragraphs (c)(2) through (5) of this section, CMS will calculate the benchmark period manufacturer price as the sum of the following:
(i) The product of—
(A) The AMP reported for the calendar quarter beginning January of the payment amount benchmark period; and
(B) The sum of the monthly units reported for the calendar quarter beginning January of the payment amount benchmark period divided by the sum of the monthly units reported for the 4 quarters of the payment amount benchmark period.
(ii) The product of—
(A) The AMP reported for the calendar quarter beginning April of the payment amount benchmark period; and
(B) The sum of the monthly units reported for the calendar quarter beginning April of the payment amount benchmark period divided by the sum of the monthly units reported for the 4 quarters of the payment amount benchmark period.
(iii) The product of—
(A) The AMP reported for the calendar quarter beginning July of the payment amount benchmark period; and
(B) The sum of the monthly units reported for the calendar quarter beginning July of the payment amount benchmark period divided by the sum of the monthly units reported for the 4 quarters of the payment amount benchmark period.
(iv) The product of—
(A) The AMP reported for the calendar quarter beginning in October of the payment amount benchmark period; and
(B) The sum of the monthly units reported for the calendar quarter beginning October of the payment amount benchmark period divided by the sum of the monthly units reported for the 4 quarters of the payment amount benchmark period.
(3) To the extent that a new NDC-9 of a Part D rebatable drug is reported under section 1927 of the Act and AMP has not been reported for such NDC-9 under section 1927(b)(3)(A)(i)(I) or (ii) of the Act during the period set forth in paragraph (c)(1) or (2) of this section, as applicable, CMS will identify the payment amount benchmark period and calculate the benchmark period manufacturer price for such NDC-9 using other information reported by a manufacturer under section 1927(b)(3) of the Act for the Part D rebatable drug, as available, such as the base date AMP if such base date AMP is reported for a calendar quarter that overlaps with the period set forth in paragraph (c)(1) or (2) of this section. Base date AMP has the meaning set forth in § 447.509(a)(7)(ii)(B) of this title.
(e) Identification of the benchmark period CPI-U. For each Part D rebatable drug, CMS will identify the benchmark period CPI-U 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 D rebatable drug first approved or licensed by the FDA on or before October 1, 2021, the benchmark period CPI-U is the CPI-U for January 2021.
(2) For a subsequently approved drug, the benchmark period CPI-U is the CPI-U for January of the first calendar year beginning after a drug's first marketed date.
(3) Notwithstanding paragraph (e)(1) of this section, for a Part D rebatable drug first approved or licensed by the FDA on or before October 1, 2021, for which there are no quarters during the period beginning on January 1, 2021, and ending on September 30, 2021, for which AMP has been reported under section 1927(b)(3) of the Act for the NDC-9, including information as set forth in paragraph (d)(3) of this section, the benchmark period CPI-U is the CPI-U for January of the payment amount benchmark period identified under paragraph (c)(3) of this section.
(4) Notwithstanding paragraph (e)(2) of this section, for a subsequently approved drug for which there are no quarters during the first calendar year beginning after the drug's first marketed date for which AMP has been reported under section 1927(b)(3) of the Act for the NDC-9, including information as set forth in paragraph (d)(3) of this section, the benchmark period CPI-U is the CPI-U for January of the payment amount benchmark period identified as set forth in paragraph (c)(4) of this section.
(5) Notwithstanding paragraphs (e)(1) through (4) of this section, for a 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 D rebatable drug is no longer considered to be a selected drug, the benchmark period CPI-U is the CPI-U for January of the last calendar year of such price applicability period.
(f) Calculation of inflation-adjusted payment amount. For an applicable period for each Part D rebatable drug, CMS will calculate the inflation-adjusted payment amount by dividing the applicable period CPI-U by the benchmark period CPI-U and then multiplying the quotient by the benchmark period manufacturer price.
(g) Situations in which manufacturers do not report units under section 1927(b)(3)(A)(iv) of the Act. For the purpose of calculating the AnMP as determined under paragraph (b) of this section and the benchmark period manufacturer price as determined under paragraph (d) of this section—
(1) If there is 1 or more quarter(s) in the payment amount benchmark period or applicable period for which a manufacturer has not reported units under section 1927(b)(3)(A)(iv) of the Act but has reported AMP under sections 1927(b)(3)(A)(i)(I) and (ii) of the Act, CMS will calculate the benchmark period manufacturer price or AnMP, as applicable, using data only from quarter(s) with units. Quarter(s) in the payment amount benchmark period or applicable period for which a manufacturer has not reported units under section 1927(b)(3)(A)(iv) of the Act will be excluded from the calculation.
(2) If there are no quarters of the payment amount benchmark period or applicable period for which a manufacturer has reported units under section 1927(b)(3)(A)(iv) of the Act, but the manufacturer has reported AMP under sections 1927(b)(3)(A)(i)(I) and (ii) of the Act for at least 1 quarter of such period or, with respect to paragraph (d)(3), there exists other information reported by a manufacturer under section 1927(b)(3) of the Act for the Part D rebatable drug to identify the payment amount benchmark period, CMS will use the AMP or other information as applicable as set forth in paragraph (d)(3) reported for 1 quarter to calculate the benchmark period manufacturer price or AnMP, respectively. If AMP is reported for more than 1 quarter, CMS will use the average of the AMP over the calendar quarters of the payment amount benchmark period or applicable period for which AMP is reported to calculate the benchmark period manufacturer price or AnMP, respectively.
§ 428.203   Determination of the total number of units dispensed under Part D.
(a) General. For each Part D rebatable drug, CMS will determine the total number of units as follows:
(1) Use of PDE data to determine total units dispensed. To determine the total number of units of each Part D rebatable drug dispensed under Part D and covered by Part D plan sponsors during an applicable period, CMS will use the quantity dispensed reported on the PDE record for each Part D rebatable drug with gross covered prescription drug costs greater than zero.
(2) Crosswalk to AMP units. CMS will crosswalk the information from the PDE record to database(s) that includes the unit type (for example, each, capsule) for the Part D rebatable drug, matching on the NDC of the Part D rebatable drug. If the unit type obtained from such database does not match the AMP unit type reported by a manufacturer to the Medicaid Drug Programs system, CMS will convert the total units reported on the PDE to the AMP units reported.
(b) Removal of certain units. CMS will exclude certain units from the total number of units dispensed of a Part D rebatable drug, with respect to an applicable period, as follows:
(1) Removal of units when a generic drug is no longer a Part D rebatable drug. To determine whether a generic drug that meets the definition of a Part D rebatable drug on the first day of an applicable period ceases to meet such definition later in the applicable period, CMS will—
(i) Review FDA's NDC Directory, including historical information from NDC Directory files such as discontinued, delisted, and expired listings provided by the FDA or published on the FDA website to determine whether the reference listed drug or an authorized generic of the reference listed drug is being marketed;
(ii) Review the most recent version of the downloadable FDA Orange Book to determine whether another drug has been approved under a section 505(j) ANDA that is therapeutically equivalent to such generic drug. If CMS determines that FDA has approved such a therapeutically equivalent drug under a section 505(j) ANDA, CMS will then: use the FDA's NDC Directory, including historical information from NDC Directory files such as discontinued, delisted, and expired listings provided by the FDA or published on the FDA website to determine the marketing status of such therapeutically equivalent drug and whether, during the applicable period, the therapeutically equivalent drug was marketed; and
(iii) Exclude from the total number of units determined under paragraph (a) of this section any units dispensed on or after the first day of the calendar month that a generic drug no longer meets the definition of a Part D rebatable drug.
(2) Exclusion of units acquired through the 340B Program. (i) For the applicable period beginning October 1, 2025, and subsequent applicable periods, CMS will exclude from the total number of units determined under paragraph (a) of this section units for which a manufacturer provided a discount under the 340B Program (“340B units”) as follows:
(A) For the applicable period beginning October 1, 2025, 340B units will be excluded from the total number of units dispensed for claims with a date of service on or after January 1, 2026.
(B) For the applicable period beginning October 1, 2026, and applicable periods thereafter, 340B units will be excluded from the total number of units dispensed.
(ii) To determine the total number of such units for which a manufacturer provided a discount under the 340B Program, CMS will use data reflecting the total number of units of a Part D rebatable drug for which a discount was provided under the 340B Program and that were dispensed during the applicable period.
(3) Exclusion of compounded drug units. CMS will exclude units from the total number of units dispensed of a Part D rebatable drug when those units are associated with a Part D rebatable drug that has been billed as compounded.
§ 428.204   Treatment of new formulations of Part D rebatable drugs.
In the case of a Part D rebatable drug that is a line extension of a Part D rebatable drug that is an oral solid dosage form, the rebate amount for an applicable period is equal to the amount determined under § 428.201(a)(1)(i) for such new drug or, if greater, the alternative total rebate amount. CMS will determine the alternative total rebate amount for such new formulations according to the following:
(a) Identification of the initial drug. The initial drug that CMS will use to calculate the inflation rebate amount ratio is the initial drug identified in accordance with § 447.509(a)(4)(iii)(B) of this chapter for the last quarter of the applicable period or, if an initial drug was not identified in the last quarter, the initial drug identified for a quarter most recently in that applicable period.
(b) Calculation of the inflation rebate amount ratio. The inflation rebate amount ratio is equal to the per unit Part D rebate amount for the initial drug, as determined under § 428.202(a), divided by the AnMP for that initial drug for the applicable period.
(c) Calculation of the alternative total rebate amount. The alternative total rebate amount is equal to the product of all of the following:
(1) The AnMP for the applicable period, as determined under § 428.202(b), of the Part D rebatable drug that is a line extension of a Part D rebatable drug that is an oral solid dosage form.
(2) The inflation rebate amount ratio as determined under paragraph (b) of this section.
(3) The total number of units dispensed under Part D identified as set forth in § 428.203.
§ 428.300   Definitions.
As used in this subpart, the following definitions apply:
Biosimilar has the meaning set forth in section 351(i) of the PHS Act.
Currently in shortage means that at least one NDC-10 of a Part D 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).
Generic Part D rebatable drug means a generic drug approved under an ANDA under section 505(j) of the FD&C Act that meets the sole source criteria specified in § 428.101(a)(3).
Likely to be in shortage means that a generic Part D rebatable drug is likely to be described as currently in shortage during a subsequent applicable period without such rebate reduction.
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 generic Part D rebatable drug or biosimilar by a manufacturer and significantly affects the ability of the manufacturer of the generic drug or biosimilar 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.
§ 428.301   Reducing the rebate amount for Part D rebatable drugs currently in shortage.
(a) General. As required under section 1860D-14B(b)(1)(C)(i) of the Act, CMS will reduce the total rebate amount determined under § 428.201(a), if any is owed, for a Part D rebatable drug that is currently in shortage, as set forth in § 428.300, at any point during the applicable period.
(b) Calculation of the reduced rebate amount. (1) For each applicable period beginning on or after October 1, 2022, the reduced total rebate amount for a Part D rebatable drug currently in shortage will be calculated using the following formula:
(2) For purposes of paragraph (b)(1) of this section, the applicable percent reduction is:
(i) For a Part D rebatable drug that is a generic drug or plasma-derived product:
(A) 75 percent for the first applicable period such drug is currently in shortage.
(B) 50 percent for the second applicable period such drug is currently in shortage.
(C) 25 percent for each subsequent period such drug is currently in shortage.
(ii) For a Part D rebatable drug that is not a generic drug or plasma-derived product:
(A) 25 percent for the first applicable period such drug is currently in shortage.
(B) 10 percent for the second applicable period such drug is currently in shortage.
(C) 2 percent for each subsequent applicable period 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 period that a Part D drug or biological is described as currently in shortage, regardless of whether the drug or biological meets the definition of a Part D rebatable drug or whether a rebate amount is owed for that applicable period, starting with the applicable period that begins October 1, 2022.
(iv) If an applicable period for which a rebate reduction determined under § 428.302 or 428.303 has been granted would be the first applicable period described in paragraph (b)(2)(i)(A) or (b)(2)(ii)(A) of this section and the Part D rebatable drug or biosimilar continues to be in shortage after the rebate reduction period described din § 428.302 or 428.303, as applicable, CMS will treat the applicable period following the applicable period in which the rebate reduction determined under § 428.302 or 428.303 applies as the first applicable period 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 period is equal to the number of days such drug is currently in shortage in an applicable period, divided by the total number of days in the applicable period.
(c) Application of reduction. CMS will apply a reduction of the rebate amount as determined under paragraph (b) of this section to the Part D rebatable drug at the NDC-9 level.
§ 428.302   Reducing the rebate amount for certain Part D rebatable drugs when there is a severe supply chain disruption.
(a) General. As required under section 1860D-14B(b)(1)(C)(ii) of the Act, CMS will reduce the total rebate amount determined under § 428.201(a), if any is owed, for a generic Part D rebatable drug or biosimilar when CMS determines there is a severe supply chain disruption during the applicable period 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 § 428.201(a), if any is owed, for a generic Part D rebatable drug or biosimilar by 75 percent for the applicable period in which the event occurred or began or, the following applicable period if the request is submitted less than 60 calendar days before the end of an applicable period.
(2) Extension of reduction. If CMS determines a severe supply chain disruption continues into a second consecutive applicable period as set forth in paragraph (c)(5) of this section, then CMS will reduce the total rebate amount determined under § 428.201(a), if any is owed, for a generic Part D rebatable drug or biosimilar by 75 percent for that second applicable period.
(3) Application of reduction. If CMS determines there is a severe supply chain disruption for an NDC-11, CMS will apply any reduction of the rebate amount as determined under paragraphs (b)(1) and (2) of this section to a Part D rebatable drug at the NDC-9 level.
(4) Limitation on rebate reductions. CMS will not apply multiple rebate reductions for the same Part D rebatable drug and applicable period.
(i) If a manufacturer believes there are multiple events causing severe supply chain disruptions during the same applicable period for the same generic Part D rebatable drug or biosimilar and submits multiple rebate reduction requests for the same drug or biosimilar, CMS will grant no more than 1 rebate reduction determined under paragraph (b)(1) or (2) of this section for that product for the applicable period.
(ii) If CMS grants a rebate reduction request under this section and the generic Part D rebatable drug or biosimilar subject to the reduction appears as currently in shortage during the same applicable period as the one 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 as set forth in § 428.301 during that applicable period.
(iii) If a generic Part D rebatable drug or biosimilar 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 as set forth in § 428.301 during that applicable period.
(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 generic Part D rebatable drugs and biosimilars 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 to receive consideration for a reduction in the rebate amount owed determined under 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 as 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 generic Part D rebatable drug(s) or biosimilar(s), such as a change in the production or distribution of the generic Part D rebatable drug(s) or biosimilar(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 generic Part D rebatable drug(s) or biosimilar(s) for at least 90 days;
(ii) Information about when the manufacturer expects supply of the generic Part D rebatable drug(s) or biosimilar(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 generic Part D rebatable drug(s) or biosimilar(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 generic Part D rebatable drug(s) or biosimilar(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 generic Part D 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 total rebate amount determined under § 428.201, 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 period;
(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 generic Part D rebatable drug or biosimilar; 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 generic Part D rebatable drug or biosimilar that received a reduction of the rebate amount as determined under paragraph (b)(1) of this section continues to be affected by the severe supply chain disruption, CMS will grant a single extension of the reduction for 1 additional consecutive applicable period and reduce the total rebate amount determined under § 428.201, if any is owed, as set forth in 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 generic Part D rebatable drug or biosimilar continues to be affected by the severe supply chain disruption during the second applicable period.
(ii) A manufacturer must submit the rebate reduction extension request at least 60 calendar days before the start of the second consecutive applicable period to receive consideration for a reduction in the rebate amount owed, if any, determined under paragraph (b)(2) of this section, except for when the initial request is made less than 60 calendar days before the end of an applicable period such that the initial rebate reduction is applied to the next applicable period rather than the applicable period in which the event that caused the severe supply chain disruption occurred or began. In these cases, the rebate reduction extension request must be submitted at least 60 calendar days prior to the end of the applicable period in which the initial reduction determined under paragraph (b)(1) of this section is applied.
(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 period 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) of this section, or if a reduction determined under paragraph (b)(1) of this section was not granted for such generic Part D rebatable drug or biosimilar.
(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 request 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 Exemption 3 or Exemption 4 in 5 U.S.C. 552.
§ 428.303   Reducing the rebate amount for generic Part D rebatable drugs likely to be in shortage.
(a) General. As required under section 1860D-14B(b)(1)(C)(iii) of the Act, CMS will reduce the total rebate amount determined under § 428.201, if any is owed, for a generic Part D rebatable drug when CMS determines that the generic Part D rebatable drug is likely to be in shortage, as set forth in § 428.300.
(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 owed by the manufacturer for a generic Part D rebatable drug by 75 percent for the applicable period in which the request was submitted or the following applicable period, depending on the timing of the submission of the request.
(2) Extension of reduction. If CMS determines the generic Part D rebatable drug is likely to be in shortage in a second applicable period as set forth in paragraph (c)(5) of this section, then CMS will reduce the total rebate amount owed by the manufacturer for a generic Part D rebatable drug by 75 percent for a second consecutive applicable period.
(3) Application of reduction. If CMS determines that an NDC-11 is likely to be in shortage, CMS will apply any reduction of the rebate amount as determined under paragraphs (b)(1) and (2) of this section to the generic Part D rebatable drug at the NDC-9 level.
(4) Limitation on rebate reductions. If CMS grants a rebate reduction request under this section, and the generic Part D rebatable drug subject to the reduction is currently in shortage during the same applicable period as the one for which the 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 § 428.301 during that applicable period.
(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 generic Part D rebatable drugs for which a manufacturer submits a rebate reduction request under this section.
(2) Timing. The manufacturer must submit the rebate reduction request before the start of the next applicable period in which the manufacturer believes the generic Part D rebatable drug is likely to be in shortage to receive consideration for a reduction in the rebate amount owed determined under 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 demonstrates a generic Part D rebatable drug is likely to be in shortage, including anticipated cause(s) of the shortage and information about why the manufacturer believes the generic Part D rebatable drug is likely to be in shortage; and
(ii) Evidence of the anticipated start date and duration of the potential drug shortage, the actions the manufacturer is taking to avoid the potential drug shortage, and how the reduction of the rebate amount would reduce the likelihood of the drug appearing on an FDA shortage list.
(4) Evaluation criteria. In accordance with paragraph (b)(1) of this section, CMS will grant a reduction in the rebate amount 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) The generic Part D rebatable drug is likely to be in shortage;
(ii) The manufacturer is taking actions to avoid the potential drug shortage; and
(iii) The reduction of the rebate amount would reduce the likelihood of the drug appearing on an FDA shortage list.
(5) Rebate reduction extensions. If CMS determines that a generic Part D rebatable drug that received a reduction of the rebate amount as determined under paragraph (b)(1) of this section continues to be affected by the potential drug shortage, CMS will grant a single extension of the reduction for 1 additional consecutive applicable period and reduce the total rebate amount determined under § 428.201, 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 generic Part D rebatable drug continues to be affected by the potential drug shortage during the second applicable period.
(ii) A manufacturer must submit the rebate reduction extension request at least 60 calendar days before the start of the second consecutive applicable period in which the manufacturer believes the generic Part D rebatable drug is likely to be in shortage to receive consideration for a reduction in the rebate amount owed, if any, in accordance with 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 period 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) of this section, or if a reduction determined under paragraph (b)(1) of this section was not granted for such generic Part D rebatable drug.
(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 Exemption 3 or Exemption 4 in 5 U.S.C. 552.
§ 428.400   Definitions.
For the purposes of this subpart, date of receipt is the calendar day following the day in which a report of a rebate amount (as set forth in §§ 428.401(b), (c), and (d) and 428.402(b) and (c)) is made available to the manufacturer of a Part D rebatable drug by CMS.
§ 428.401   Rebate Reports and reconciliation.
(a) General. This section applies to Part D rebatable drugs for all applicable periods except as otherwise set forth in § 428.402 for the applicable periods beginning October 1, 2022, and October 1, 2023.
(b) Preliminary Rebate Report. A Preliminary Rebate Report will be provided to each manufacturer of a Part D 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 period.
(1) The Preliminary Rebate Report for each Part D rebatable drug will include the following information:
(i) The NDC(s) identified for the Part D rebatable drug as set forth in § 428.20;
(ii) The total number of units dispensed under Part D for the Part D rebatable drug for the applicable period as determined under § 428.203;
(iii) The payment amount benchmark period and benchmark period manufacturer price as set forth in §§ 428.202(c) and (d);
(iv) The AnMP for the Part D rebatable drug for the applicable period as determined under § 428.202(b);
(v) The amount, if any, of the excess AnMP for the Part D rebatable drug for the applicable period as set forth in § 428.202(a);
(vi) The benchmark period and applicable period CPI-Us as set forth in §§ 428.202(e) and 428.20, respectively;
(vii) The inflation-adjusted payment amount as set forth in § 428.202(f);
(viii) Any applied reductions determined under §§ 428.301, 428.302, and 428.303; and
(ix) The rebate amount due as set forth in § 428.201(a).
(2) If the Part D rebatable drug is a line extension, the Preliminary Rebate Report will also include the following information as set forth in § 428.204:
(i) The NDC for the initial drug;
(ii) The inflation rebate amount ratio for the initial drug; and
(iii) The alternative total rebate amount.
(c) Rebate Report. A Rebate Report will be provided to each manufacturer of a Part D rebatable drug no later than 9 months after the end of each applicable period.
(1) The Rebate Report will include the information described in paragraphs (b)(1) and (2) of this section, if applicable, with the inclusion of any revisions to such information resulting from CMS' review of a Suggestion of Error as set forth in § 428.403, 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 in § 428.201(a), if any, for a Part D rebatable drug for an applicable period.
(d) Reconciliation of the rebate amount. CMS will perform reconciliation of the rebate amount provided in a Rebate Report as determined in paragraph (c) of this section for an applicable period in the following circumstances:
(1) Regular reconciliation. Except as otherwise described in § 428.402, CMS will perform a reconciliation of the rebate amount within 12 months of the date of receipt of the Rebate Report for an applicable period and a second reconciliation approximately 24 months thereafter to include revisions to the information used to calculate the rebate amount as 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 period as set forth in paragraph (d)(1)(ii) of this section, CMS will conduct a preliminary reconciliation of the rebate amount for an applicable period based on the information specified in paragraphs (d)(1)(i)(A) through (G) of this section, and CMS will provide the information specified in paragraphs (d)(1)(i)(A) through (G) to the manufacturer of a Part D rebatable drug for the applicable period, if applicable:
(A) Updated total number of rebatable units, including updates submitted by a prescription drug plan (PDP) or Medicare Advantage Prescription Drug (MA-PD) plan sponsor and updates to 340B units (as applicable to the dates of service and applicable periods set forth in § 428.203(b)(2)(i)(A) and (B)), or units otherwise excluded as determined under § 428.203(b);
(B) The inflation-adjusted payment amount as determined under § 428.202(f) if any inputs are restated or newly reported within the reconciliation run-out period;
(C) Updated payment amount benchmark period and benchmark period manufacturer price as set forth in § 428.202(c) and (d) if any inputs are restated or newly reported;
(D) The excess amount by which the AnMP exceeds the inflation-adjusted payment amount for the applicable period as determined under § 428.202(a), using the most recent AMP (if any inputs are restated or newly reported within the reconciliation run-out period);
(E) Updated data on line extension calculations, including the initial drug identified as set forth in § 447.509(a)(4)(iii)(B) of this chapter, the inflation rebate amount ratio, and the alternative total rebate amount as determined under § 428.204 if any inputs are restated or newly reported within the reconciliation run-out period;
(F) The reconciled rebate amount as determined under § 428.201(a); and
(G) 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 a 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 § 428.403, if applicable, a report with the reconciled rebate amount will be provided to each manufacturer of a Part D rebatable drug within 12 months and 36 months after the issuance of the Rebate Report set forth in paragraph (c) of this section.
(2) CMS identification of an error or manufacturer misreporting. CMS may recalculate a rebate amount and provide the manufacturer of a Part D rebatable drug a report with a reconciled rebate amount when:
(i) CMS identifies an error in the information specified in paragraphs (c) and (d)(1) of this section, including reporting system or coding errors, not later than 5 years from the date of receipt by a manufacturer of a reconciled rebate amount for the applicable period; 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 determined under this paragraph (d) could result in an increase, decrease, or no change to the rebate amount as determined under § 428.201(a) owed by a manufacturer for the applicable period for the Part D rebatable drug compared to the amount described in the Rebate Report set forth 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 set forth in § 428.201 for a Part D rebatable drug for an applicable period.
(ii) [Reserved]
(4) Drugs included in a reconciliation. A drug covered under Part D that does not meet the requirements of a rebatable drug set forth in § 428.101 for an applicable period will not be included in a reconciliation as determined under this paragraph (d).
§ 428.402   Rebate Reports for applicable periods beginning October 1, 2022, and October 1, 2023.
(a) Transition rule for reporting. Section 1860D-14B(a)(3) of the Act allows CMS to delay the timeframe for reporting the information and rebate amount set forth in § 428.401 for the applicable periods beginning October 1, 2022, and October 1, 2023, until not later than December 31, 2025.
(b) Rebate Report information for applicable periods beginning October 1, 2022, and October 1, 2023. The Rebate Reports for the applicable periods beginning October 1, 2022, and October 1, 2023, will include the information set forth in § 428.401(b)(1).
(c) Rebate Report procedures for applicable periods beginning October 1, 2022, and October 1, 2023. Rebate amounts for the applicable periods beginning October 1, 2022, and October 1, 2023, will be reported as follows:
(1) The Rebate Report for the applicable period beginning October 1, 2022, will be issued no later than December 31, 2025. The Preliminary Rebate Report for such applicable period will be issued at least 1 month prior to the Rebate Report.
(i) For this single Preliminary Rebate Report for the applicable period, the Suggestion of Error period as set forth in § 428.403 will be 30 calendar days.
(ii) The rebate amount will be reconciled 21 months after the Rebate Report set forth in paragraph (c)(1) of this section is issued to include the information set forth in § 428.401(d)(1)(i)(A) through (G).
(iii) The Suggestion of Error period for the reconciliation set forth in paragraph (c)(1)(ii) of this section will be 10 calendar days.
(2) The Rebate Report for the applicable period beginning October 1, 2023, will be issued no later than December 31, 2025. The Preliminary Rebate Report for such applicable period will be issued at least 1 month prior to the Rebate Report.
(i) For this single Preliminary Rebate Report for the applicable period, the Suggestion of Error period as set forth in § 428.403 will be 30 calendar days.
(ii) The rebate amount will be reconciled 9 months after the Rebate Report and 33 months after the Rebate Report specified in paragraph (b)(2) of this section is issued to include the information determined under § 428.401(d)(1)(i)(A) through (G).
§ 428.403   Suggestion of Error.
(a) General. Manufacturers of Part D rebatable drugs 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, as applicable, is finalized.
(1) Section 1860D-14B(f) of the Act precludes administrative or judicial review on the determination of units as set forth in § 428.203, the determination of whether a drug is a Part D rebatable drug as set forth in § 428.101, and the calculation of the rebate amount as set forth in § 428.201(a) 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 § 428.402 for the applicable periods beginning on October 1, 2022, and October 1, 2023, a manufacturer must submit its Suggestion of Error for the applicable period 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 set forth 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 § 428.401(c) or § 428.402(c) as well as any report of a reconciled rebate amount as set forth in § 428.401(d) or § 428.402(c)(1)(ii) and (c)(2)(ii).
(2) CMS will notify the manufacturer whether CMS revised its calculation of the rebate amount based on the Suggestion of Error.
§ 428.404   Manufacturer access to Rebate Reports.
(a) General. CMS will establish a method and process for a manufacturer of the Part D rebatable drug to:
(1) Access the Rebate Report as set forth in §§ 428.401 and 428.402, including any report of a reconciled rebate amount as set forth in §§ 428.401 and 428.402;
(2) Submit a Suggestion of Error as set forth in §§ 428.402(c) and 428.403; and
(3) Pay a rebate amount as set forth in § 428.405.
(b) [Reserved]
§ 428.405   Deadline and process for payment of rebate amount.
(a) Rebate amounts owed by a manufacturer. For payment of a rebate amount owed by a manufacturer:
(1) Upon receipt of a rebate amount, payment is due no later than 11:59 p.m. Pacific Time (PT) on the 30 calendar days after the date of receipt of information regarding the rebate amount on—
(i) A Rebate Report as set forth in § 428.401(c) or § 428.402; or
(ii) A report of a reconciled rebate amount as set forth in § 428.401(d) or § 428.402.
(2) Failure to pay a rebate amount due timely and in full may result in an enforcement action as described in subpart F of this part.
(b) Refund to the manufacturer. If a reconciled rebate amount for an applicable period as set forth in § 428.401(d) or § 428.402 is less than what the manufacturer paid for that applicable period, 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.
§ 428.500   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 set forth in § 428.201(a) on a Part D rebatable drug set forth in § 428.20, by the payment deadline as set forth in section § 428.405(a) for such drug for such applicable period.
(b) Determination of the civil money penalty amount. CMS may impose a civil money penalty for each failure by a manufacturer to provide an applicable inflation rebate equal to 125 percent of the rebate amount determined in § 428.201(a).
(1) The civil money penalty is in addition to the rebate amount due.
(2) If a reconciled rebate amount as determined in § 428.401(d) or § 428.402(c)(1)(ii) or (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 period 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 set forth 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) 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 as set forth in 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 § 428.405.
(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.