PART 51—BRANDED PRESCRIPTION DRUG FEE Authority: 26 U.S.C. 7805; sec. 9008, Pub. L. 111-148, 124 Stat. 119. Section 51.8 also issued under 26 U.S.C. 6302(a); Section 51.6302-1 also issued under 26 U.S.C. 6302(a). Source: T.D. 9544, 76 FR 51249, Aug. 18, 2011, unless otherwise noted. § 51.1 Overview. (a) The regulations in this part 51 are designated “Branded Prescription Drug Fee Regulations.” (b) The regulations in this part 51 provide guidance on the annual fee imposed on covered entities engaged in the business of manufacturing or importing branded prescription drugs by section 9008 of the Patient Protection and Affordable Care Act (ACA), Public Law 111-148 (124 Stat. 119 (2010)), as amended by section 1404 of the Health Care and Education Reconciliation Act of 2010 (HCERA), Public Law 111-152 (124 Stat. 1029 (2010)). All references in these regulations to section 9008 are references to section 9008 of the ACA, as amended by section 1404 of HCERA. Unless otherwise indicated, all other section references are to sections in the Internal Revenue Code. All references to “fee” in these regulations are references to the fee imposed by section 9008. (c) Section 9008(b)(4) sets an applicable fee amount for each year, beginning with 2011, that will be apportioned among covered entities with aggregate branded prescription drug sales of over $5 million to government programs or pursuant to coverage under such programs. Generally, each covered entity is liable for a fee in each fee year that is based on its sales of branded prescription drugs in the sales year that corresponds to the fee year in an amount determined by the Internal Revenue Service (IRS) under the rules of this part. [T.D. 9684, 79 FR 43639, July 28, 2014] § 51.2 Explanation of terms. (a) In general. (b) Agencies. Agencies (1) The Centers for Medicare and Medicaid Services of the Department of Health and Human Services (CMS); (2) The Department of Veterans Affairs (VA); and (3) The Department of Defense (DOD). (c) Branded prescription drug In general. branded prescription drug (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)) (FFDCA); 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)). (2) Prescription drug. prescription drug (d) Branded prescription drug sales. branded prescription drug sales (e) Covered entity In general. covered entity (i) A single-person covered entity; or (ii) A controlled group. (2) Single-person covered entity. single-person covered entity (3) Controlled group. controlled group (4) Special rules for controlled groups. (i) A foreign entity subject to tax under section 881 is included within a group under section 52(a) or 52(b); and (ii) A person is treated as being a member of a controlled group if it is a member of the group on the end of the day on December 31st of the sales year. (5) Covered entity status Rule. (ii) Example. (A) Facts. (B) Analysis. (f) Designated entity In general. designated entity (i) Filing Form 8947, “Report of Branded Prescription Drug Information”; (ii) Receiving IRS communications about the fee for the group; (iii) Filing an error report for the group, if applicable, as described in § 51.7; and (iv) Paying the fee to the government. (2) Selection of designated entity Controlled group selection of a designated entity. (ii) Requirement for affiliated groups; agent for the group. (iii) IRS selection of a designated entity. (g) Fee year. fee year (h) Government programs. government programs (1) The Medicare Part B program; (2) The Medicare Part D program; (3) The Medicaid program; (4) Any program under which branded prescription drugs are procured by the Department of Veterans Affairs; (5) Any program under which branded prescription drugs are procured by the Department of Defense; and (6) The TRICARE retail pharmacy program. (i) Manufacturer or importer. manufacturer or importer (j) NDC. NDC (k) Orphan drugs In general. orphan drug (2) Exclusions. orphan drug (i) Any drug for which there has been a final assessment or court order disallowing the full section 45C credit taken for the drug; or (ii) Any drug for any sales year after the calendar year in which the FDA approved the drug for marketing for any indication other than the treatment of a rare disease or condition for which a section 45C credit was allowed, regardless of whether a section 45C credit was allowed for the drug before, in the same year as, or after this FDA designation. (3) FDA marketing approval for treatment of another rare disease or condition. (4) Examples. Example 1: Allowance of section 45C credit and later FDA marketing approval of drug for an indication other than the treatment of a rare disease or condition. Facts. (ii) Analysis. Example 2: FDA marketing approval of drug for an indication other than the treatment of a rare disease or condition and later allowance of section 45C credit. Facts. (ii) Analysis. Example 3: Allowance of section 45C credit and subsequent allowance of section 45C credit with no intervening FDA marketing approval of drug for an indication other than the treatment of a rare disease or condition for which a section 45C credit was allowed. Facts. (ii) Analysis. (l) Sales taken into account. sales taken into account (m) Sales year. sales year [T.D. 9684, 79 FR 43639, July 28, 2014, as amended by T.D. 9823, 82 FR 34612, July 26, 2017] § 51.3 Information requested from covered entities. (a) In general. (b) Due date. [T.D. 9684, 79 FR 43641, July 28, 2014] § 51.4 Information provided by the agencies. (a) In general. (b) Medicare Part D In general. (2) Discounts, rebates, and other price concessions In general. discounts, rebates, and other price concessions (A) Any direct and indirect remuneration (DIR) (within the meaning of paragraph (b)(2)(ii) of this section), 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 a paragraph (b)(2)(iii) of this section); and (B) Any coverage gap discount amount (within the meaning of paragraph (b)(2)(iv) of this section). (ii) Direct and indirect remuneration. direct and indirect remuneration actually paid (iii) Detailed DIR Report. Detailed DIR Report (iv) Coverage gap discount amount. coverage gap discount amount (c) Medicare Part B In general. (i) CMS will use data reported by manufacturers pursuant to section 1847A(c) of the Social Security Act to calculate the annual weighted average sales price (ASP) for each Healthcare Common Procedure Coding System (HCPCS) code for the sales year. (ii) CMS will use the Medicare Part B National Summary Data File located at http://www.cms.gov/NonIdentifiableDataFiles/03_PartBNationalSummaryDataFile.asp (2) Calculation In general. (ii) Example of a Part B sales report: HCPCS NDC Part B J9876 12345-6789-01 $789,000 12345-6789-02 0 12345-6789-03 0 12345-6800-80 0 12345-6800-90 0 (3) HCPCS code; single entity. (4) HCPCS code; multiple manufacturers and/or multiple drugs Step one. (A) The annual weighted ASP for the HCPCS code; (B) The total number of allowed billing units paid by Medicare Part B for each HCPCS code during the sales year; (C) The names of the entities engaged in manufacturing each NDC assigned to the HCPCS code; and (D) Those entities (if any) identified in paragraph (c)(4)(i)(C) of this section that are manufacturing branded prescription drugs assigned to the HCPCS code. (ii) Step two. (A) Calculate the proportion of sales, expressed as a percentage, attributed to each NDC assigned to the HCPCS code by determining the percentage of total sales reported to CMS by each manufacturer of NDC(s) that are assigned to the HCPCS code. For example, if HCPCS code JXXXX contains three drugs with a total of $310,000 sales reported by manufacturers to CMS for the sales year, and $100,000 was reported for Drug A, $200,000 was reported for Drug B, and $10,000 was reported for Drug C, the proportion of sales attributed to each NDC will be 32.26 percent for Drug A, 64.52 percent for Drug B, and 3.22 percent for Drug C; and (B) For each NDC, multiply the product of the annual weighted ASP and the total allowed billing units paid by Medicare Part B for the HCPCS code by the proportion of sales calculated in paragraph (c)(4)(ii)(A) of this section to determine the sales reportable to the IRS (that is, percentage × (annual weighted ASP × allowed units) = total sales reported to IRS for the NDC). The sales for each manufacturer's NDCs assigned to a HCPCS code are summed and the total sales for each manufacturer's NDCs in a HCPCS code will be reported to the IRS. (5) HCPCS code; unable to establish a reliable proportion of sales. (d) Medicaid. (2) For any covered entity identified in the first five (or six) digits of an NDC during any of the four quarters of a sales year, CMS will use the following methodology to derive the sales figures that account for third-party payers, such as Medicare Part B: (i) Report total dollars per NDC for AMP minus URA multiplied by the units reported by a state or states. (ii) Determine the percentage of the total amount reimbursed that is the Medicaid amount of that reimbursement. For example, if the total amount reimbursed is $100,000, and the Medicaid amount reimbursed is $20,000, then the percentage is 20 percent. (iii) Multiply the percentage of the Medicaid amount of that reimbursement (in the example in paragraph (d)(2)(ii) of this section, 20 percent) by the dollar figure derived from paragraph (d)(2)(i) of this section (AMP minus URA multiplied by units) to get the new adjusted sales dollar totals. (e) Department of Veterans Affairs. (f) Department of Defense. (g) TRICARE. [T.D. 9684, 79 FR 43641, July 28, 2014; 79 FR 57784, Sept. 26, 2014] § 51.5 Fee calculation. (a) Fee components In general. (2) Calculation of branded prescription drug sales. (3) Applicable amount. Fee year Applicable amount 2011 $2,500,000,000 2012 2,800,000,000 2013 2,800,000,000 2014 3,000,000,000 2015 3,000,000,000 2016 3,000,000,000 2017 4,000,000,000 2018 4,100,000,000 2019 and thereafter 2,800,000,000 (4) Sales taken into account. Covered entity's branded prescription drug sales during the calendar year that are: Percentage of branded prescription drug sales taken into account is: Not more than $5,000,000 0 More than $5,000,000 but not more than $125,000,000 10 More than $125,000,000 but not more than $225,000,000 40 More than $225,000,000 but not more than $400,000,000 75 More than $400,000,000 100 (b) Determination of branded prescription drug sales. (c) Determination of sales taken into account. (2) For each sales year, the IRS will calculate the aggregate branded prescription drug sales taken into account for all covered entities. The resulting number is the denominator of the ratio described in paragraph (d)(2) of this section. (d) Allocated fee calculation. (1) The numerator of which is the covered entity's branded prescription drug sales taken into account during the sales year (described in paragraph (c)(1) of this section); and (2) The denominator of which is the aggregate branded prescription drug sales taken into account for all covered entities during the same year (described in paragraph (c)(2) of this section). (e) Adjustment amount In general. (2) Amounts paid to a covered entity because of an adjustment amount. [T.D. 9684, 79 FR 43643, July 28, 2014] § 51.6 Notice of preliminary fee calculation. (a) Content of notice. (1) The covered entity's allocated fee; (2) The covered entity's branded prescription drug sales, by NDC, by Program; (3) The covered entity's branded prescription drug sales taken into account after application of § 51.5(a)(4); (4) The aggregate branded prescription drug sales taken into account for all covered entities; (5) The covered entity's adjustment amount calculated as described in § 51.5(e); and (6) A reference to the fee dispute resolution procedures set forth in guidance published in the Internal Revenue Bulletin. (b) Time of notice. [T.D. 9684, 79 FR 43644, July 28, 2014] § 51.7 Dispute resolution process. (a) In general. (b) Error report information. (1) Entity name, address, and Employer Identification Number (EIN) as previously reported on the Form 8947; (2) The name, telephone number, fax number, and email address (if available) of one or more employees or representatives of the entity with whom the IRS may discuss the claimed errors. If the representative is not an employee of the covered entity who is authorized under section 6103 or designated on Form 8947 to discuss the information reported on Form 8947 with the IRS, a Form 2848, “Power of Attorney and Declaration of Representative,” must be filed with the error report; (3) For an error in the drug sales data reported by a Program, the name of the Program that reported the data, the NDC, the specific amount of sales data disputed, the proposed corrected amount, an explanation of why the Agency should use the proposed corrected data instead, and documentation of any Program drug sales data or other information used to establish the existence of any errors. (4) For a mathematical calculation error, the specific calculation element(s) that the entity disputes and its proposed corrected calculation; (5) For a rebate data error, the NDC for the drug to which it relates; a discussion of whether the data used in the preliminary fee calculation matches previously reported Form 8947 data on rebates; and, if the data used in the preliminary fee calculation does match the Form 8947 data, an explanation of why the Form 8947 data was erroneous and why the IRS should use the proposed corrected data instead; (6) For the listing of an NDC for an orphan drug, the name and NDC of the orphan drug; a discussion of whether the data used in the preliminary fee calculation matches previously reported Form 8947 data on orphan drugs; and, if the data used in the preliminary fee calculation does match the Form 8947 data, an explanation of why the Form 8947 data was erroneous and why the IRS should use the proposed corrected data instead; (7) For any other asserted error, an explanation of the nature of the error, how the error affects the fee calculation, an explanation of how the entity established that an error occurred, the proposed correction to the error, and an explanation of why the IRS or Agency should use the proposed corrected data instead; (8) If an entity is using data to establish the existence of an error and that data was not reported on Form 8947 or contained in the notification of the preliminary fee calculation, a description of what the data is, how the entity acquired the data, and who maintains it; and (9) Documentation of any rebate and orphan drug data, or other information used to establish the existence of any errors. (c) Form, manner, and timing of submission. (d) Finality. [T.D. 9684, 79 FR 43644, July 28, 2014] § 51.8 Notification and payment of fee. (a) Notification of final fee calculation. (1) The covered entity's allocated fee; (2) The covered entity's adjustment amount calculated as described in § 51.5; (3) The covered entity's branded prescription drug sales, by NDC, by Program; (4) The covered entity's branded prescription drug sales taken into account after application of § 51.5(a)(4); (5) The aggregate branded prescription drug sales taken into account for all covered entities; and (6) The final determination with respect to error reports. (b) Differences in preliminary fee calculation and final fee calculation. (c) Payment of final fee. (d) Joint and several liability. [T.D. 9684, 79 FR 43644, July 28, 2014] § 51.9 Tax treatment of fee. (a) Treatment as an excise tax. (b) Deficiency procedures. (c) Limitation on assessment. (d) Application of section 275. [T.D. 9684, 79 FR 43645, July 28, 2014] § 51.10 Refund claims. Any claim for a refund of the fee must be made by the person that paid the fee to the government and must be made on Form 843, “Claim for Refund and Request for Abatement,” in accordance with the instructions for that form. [T.D. 9684, 79 FR 43645, July 28, 2014] § 51.11 Applicability date. (a) Except as otherwise provided in this section, §§ 51.1 through 51.10 apply on and after July 28, 2014. (b) Section 51.2(e)(3) applies on and after July 24, 2017. [T.D. 9684, 79 FR 43645, July 28, 2014, as amended by T.D. 9823, 82 FR 34612, July 26, 2017] § 51.6302-1 Method of paying the branded prescription drug fee. (a) Fee to be paid by electronic funds transfer. (b) Effective/applicability date. [T.D. 9684, 79 FR 43645, July 28, 2014]