Statutory Updates to Branded Prescription Drug Fee Regulations

DEPARTMENT OF THE TREASURY <SUBAGY>Internal Revenue Service</SUBAGY> <CFR>26 CFR Part 51</CFR> <DEPDOC>[REG-103430-24]</DEPDOC> <RIN>RIN 1545-BR16</RIN> <SUBJECT>Statutory Updates to Branded Prescription Drug Fee Regulations</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Internal Revenue Service (IRS), Treasury. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document proposes amendments to regulations regarding the annual fee imposed on covered entities engaged in the business of manufacturing or importing certain branded prescription drugs. In response to the replacement of the Coverage Gap Discount Program with the new Manufacturer Discount Program by the Inflation Reduction Act of 2022, the proposed regulations would make updates regarding the discounts, rebates, and other price concessions used to determine branded prescription drug sales under Medicare Part D and would update for prior statutory changes. These proposed regulations would affect persons engaged in the business of manufacturing or importing certain branded prescription drugs. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Written or electronic comments and requests for a public hearing must be received by March 3, 2026. Requests for a public hearing must be submitted as prescribed in the “Comments and Requests for a Public Hearing” section. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at <E T="03">https://www.regulations.gov</E> (indicate IRS and REG-103430-24) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to the IRS's public docket. Send paper submissions to: CC:PA:01:PR (REG-103430-24), Room 5503, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. A plain language summary of the proposed regulations will be made available at <E T="03">https://www.regulations.gov.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Concerning the proposed regulations, contact Julia Barlow at (202) 317-6855 (not a toll-free number); concerning the submission of comments and requests to participate in the public hearing, contact the Publications and Regulations Section by phone at (202) 317-6901 (not a toll-free number) or by email at <E T="03">publichearings@irs.gov</E> (preferred). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Authority</HD> This document contains proposed amendments to the Branded Prescription Drug Fee Regulations (26 CFR part 51). The proposed regulations are issued under the express delegation of authority under section 9008(i) of the Patient Protection and Affordable Care Act, Public Law 111-148, 124 Stat. 119 (2010), as amended by section 1404 of the Health Care and Education Reconciliation Act of 2010, Public Law 111-152, 124 Stat. 1029 (2010). These acts are collectively referred to in this preamble as the “ACA.” All references in this preamble to “section 9008” are references to section 9008 of the ACA. Section 9008(i) provides that the Secretary of the Treasury or the Secretary's delegate (Secretary) “shall publish guidance necessary to carry out the purposes of [section 9008].” The proposed regulations are also issued under the express delegation of authority under section 7805(a) of the Internal Revenue Code (Code), which provides that the Secretary “shall prescribe all needful rules and regulations for the enforcement of [the Code], including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.” <HD SOURCE="HD1">Background</HD> <HD SOURCE="HD2">I. Overview</HD> The branded prescription drug fee was enacted by section 9008. Section 9008 did not amend the Code but cross-references specific Code sections. Under section 9008(a)(1), each covered entity engaged in the business of manufacturing or importing branded prescription drugs must pay an annual fee to the Secretary. Section 9008(b) provides rules for determining the amount of the annual fee for each covered entity. Specifically, section 9008(b)(1) provides that the annual fee for each covered entity for calendar years 2019 and thereafter shall bear the same ratio to $2.8 billion as (i) the covered entity's branded prescription drug sales taken into account during the preceding calendar year to (ii) the aggregate branded prescription drug sales of all covered entities taken into account during the same year. Section 9008(d)(1) generally defines the term “covered entity” to mean any manufacturer or importer with gross receipts from branded prescription drug sales. Section 9008(e)(1) defines the term “branded prescription drug sales” to mean sales of branded prescription drugs to any specified government program or pursuant to coverage under such program. Section 9008(e)(2)(A) generally defines the term “branded prescription drug” to mean (i) any prescription drug the application for which was submitted under section 505(b) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(b)), or (ii) any biological product the license for which was submitted under section 351(a) of the Public Health Service Act (42 U.S.C. 262(a)). Section 9008(e)(2)(B) defines the term “prescription drug” for purposes of section 9008(e)(2)(A)(i) to mean any drug which is subject to section 503(b) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353(b)). Section 9008(e)(4) defines the term “specified government programs” as the Medicare Part D program, the Medicare Part B program, the Medicaid program, any program under which branded prescription drugs are procured by the Department of Veterans Affairs (VA), any program under which branded prescription drugs are procured by the Department of Defense (DOD), and the TRICARE retail pharmacy program, which are collectively referred to in this preamble as the “Programs.” Section 9008(g) requires the Secretary of Health and Human Services (Secretary of HHS), the Secretary of Veterans Affairs, and the Secretary of Defense to report to the Secretary the total branded prescription drug sales for each covered entity with respect to each specified government program. Section 9008(g)(1) specifies the information that the Secretary of HHS shall report for the Medicare Part D program. Section 9008(g)(1)(A) specifies that the costs of prescription drug plans and Medicare Advantage prescription drug plans reported by the Secretary of HHS is reduced by “any per-unit rebate, discount, or other price concession provided by the covered entity.” Section 9008(b)(3) requires the Secretary to use the data provided by the Programs to calculate the fee. The Branded Prescription Drug Fee Regulations (TD 9684, 79 FR 43631 (July 28, 2014), as amended by TD 9823, 82 FR 34611 (July 26, 2017)), provide the method by which each covered entity's annual fee is calculated. The regulations also define terms and provide rules for the administration of the fee. <E T="03">See</E> 26 CFR 51.1 through 51.11 and 51.6302. Section 51.2 explains the terms used in 26 CFR part 51 for purposes of the fee imposed by section 9008 on branded prescription drugs. Section 51.2(b) defines the term “Agencies” to mean the Centers for Medicare & Medicaid Services of the Department of Health and Human Services (CMS), the VA, and the DOD. Section 51.2(i) defines “manufacturer or importer” as the person identified in the Labeler Code of the National Drug Code (NDC) for a branded prescription drug. Section 51.4 sets forth the methodologies that the Agencies are required to use to calculate the drug sales amount for each specified government program. Section 51.4(b)(1) requires CMS to determine branded prescription drug sales under Medicare Part D by aggregating the ingredient cost reported in the “Ingredient Cost Paid” field on the Prescription Drug Event (PDE) records at the NDC level, reduced by discounts, rebates, and other price concessions provided by the covered entity, for each sales year. Under § 51.2(m), the term “sales year” means the second calendar year preceding the fee year. Section 51.4(b)(2) provides that for purposes of § 51.4(b)(1), “discounts, rebates, and other price concessions” means (A) any direct and indirect remuneration (DIR) (within the meaning of § 51.4(b)(2)(ii)), which includes any DIR reported on the PDE records at the point of sale and any DIR reported on a Detailed DIR Report (within the meaning of § 51.4(b)(2)(iii)); and (B) any coverage gap discount amount (within the meaning of § 51.4(b)(2)(iv)). Section 51.4(b)(2)(iv) provides that for purposes of § 51.4(b)(2)(i)(B), the term “coverage gap discount amount” means a 50-percent manufactured-paid (sic) discount on certain drugs under the Coverage Gap Discount Program described in section 1860D-14A of the Social Security Act (SSA) (42 U.S.C. 1395w-114a). The Coverage Gap Discount Program described in section 1860D-14A of the SSA initially required a 50-percent manufacturer-paid discount on applicable drugs in certain instances. In section 53116(b) of the Bipartisan Budget Act of 2018 (BBA), Public Law 115-123, 132 Stat 64 (February 9, 2018), Congress expanded the discount to 70 percent for plan years after plan year 2018. See 42 U.S.C. 1395w-114a(g)(4)(A). <HD SOURCE="HD2">II. Inflation Reduction Act of 2022 Changes to Medicare Part D Discounts</HD> Section 11201 of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), redesigned the Medicare Part D benefit, including sunsetting the Coverage Gap Discount Program described in section ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 29k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━