PART 428—MEDICARE PART D DRUG INFLATION REBATE PROGRAM Authority: 42 U.S.C. 1395w-114b, 1302, and 1395hh. Source: 89 FR 98588, Dec. 9, 2024, unless otherwise noted. Subpart A—General Provisions § 428.10 Basis and scope. (a) Basis. (b) Scope. (c) Severability. § 428.20 Definitions. As used in this part, the following definitions apply: Annual manufacturer price (AnMP) Applicable period Applicable period Consumer Price Index for All Urban Consumers (CPI-U) Applicable threshold Average manufacturer price (AMP) Benchmark period CPI-U Benchmark period manufacturer price Covered Part D Drug CPI-U First marketed date Inflation-adjusted payment amount Manufacturer National Drug Code (NDC) Part D rebatable drug (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 Subsequently approved drug Unit Subpart B—Determination of Part D Rebatable Drugs § 428.100 Definitions. As used in this subpart, the following definitions apply: Individual who uses such a drug or biological Gross covered prescription drug costs § 428.101 Identification of Part D rebatable drugs. (a) Determination of Part D rebatable 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. (1) Average annual total cost. (2) Applicable threshold. (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. Subpart C—Determination of the Rebate Amount for Part D Rebatable Drugs § 428.200 Definitions. As used in this subpart, the following definitions apply: 340B Program Line extension New formulation Oral solid dosage form § 428.201 Calculation of the total rebate amount to be paid by manufacturers. (a) Total rebate. (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. (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. (b) Calculation of the AnMP for 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. (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. (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. (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. (g) Situations in which manufacturers do not report units under section 1927(b)(3)(A)(iv) of the Act. (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. [89 FR 98588, Dec. 9, 2024, as amended at 90 FR 20808, May 16, 2025] § 428.203 Determination of the total number of units dispensed under Part D. (a) General. (1) Use of PDE data to determine total units dispensed. (2) Crosswalk to AMP units. (b) Removal of certain units. (1) Removal of units when a generic drug is no longer a Part D rebatable drug. (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. (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. § 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 initial drug. (b) Calculation of the inflation rebate amount ratio. (c) Calculation of the alternative total rebate amount. (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. [89 FR 98588, Dec. 9, 2024, as amended at 90 FR 20808, May 16, 2025] Subpart D—Reducing the Rebate Amount for Part D Rebatable Drugs in Shortage and When There Is a Severe Supply Chain Disruption or Likely Shortage § 428.300 Definitions. As used in this subpart, the following definitions apply: Biosimilar Currently in shortage Drug shortage shortage Generic Part D rebatable drug Likely to be in shortage Natural disaster Other unique or unexpected event Plasma-derived product Severe supply chain disruption § 428.301 Reducing the rebate amount for Part D rebatable drugs currently in shortage. (a) General. (b) Calculation of the reduced rebate amount. Equation 1 to Paragraph (b)(1) Reduced Total multiplied by minus multiplied by added to multiplied by minus (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. [89 FR 98588, Dec. 9, 2024, as amended at 90 FR 20808, May 16, 2025] § 428.302 Reducing the rebate amount for certain Part D rebatable drugs when there is a severe supply chain disruption. (a) General. (b) Calculation of the reduced rebate amount Initial reduction. (2) Extension of reduction. (3) Application of reduction. (4) Limitation on rebate reductions. (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 Eligible drug. (2) Timing. (3) Required elements of a rebate reduction request. (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. (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. (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. (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. § 428.303 Reducing the rebate amount for generic Part D rebatable drugs likely to be in shortage. (a) General. (b) Calculation of the reduced rebate amount Initial reduction. (2) Extension of reduction. (3) Application of reduction. (4) Limitation on rebate reductions. (c) Eligibility for a rebate reduction Eligible drug. (2) Timing. (3) Required elements of a rebate reduction request. (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. (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. (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. (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. Subpart E—Reports of Rebate Amounts, Reconciliation, Suggestion of Error, and Payments § 428.400 Definitions. For the purposes of this subpart, date of receipt § 428.401 Rebate Reports and reconciliation. (a) General. (b) Preliminary Rebate Report. (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. (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. (3) The manufacturer's rebate amount due is reported as a dollar amount rounded to the nearest cent. (d) Reconciliation of the rebate amount. (1) Regular reconciliation. (i) Preliminary reconciliation. (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. (2) CMS identification of an error or manufacturer misreporting. (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. (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. [89 FR 98588, Dec. 9, 2024, as amended at 90 FR 50021, Nov. 5, 2025] § 428.402 Rebate Reports for applicable periods beginning October 1, 2022, and October 1, 2023. (a) Transition rule for reporting. (b) Rebate Report information for applicable periods beginning October 1, 2022, and October 1, 2023. (c) Rebate Report procedures for applicable periods beginning October 1, 2022, and October 1, 2023. (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 within 21 months after the Rebate Report set forth in this paragraph (c)(1) 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 within 9 months after the Rebate Report and within 33 months after the Rebate Report specified in this paragraph (c)(2) is issued to include the information determined under § 428.401(d)(1)(i)(A) through (G). [89 FR 98588, Dec. 9, 2024, as amended at 90 FR 50021, Nov. 5, 2025; 91 FR 12081, Mar. 12, 2026] § 428.403 Suggestion of Error. (a) General. (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. (c) Timing. (d) Notice. (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. (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. (1) Upon receipt of a rebate amount, payment is due no later than 11:59 p.m. Pacific Time (PT) on the 30th calendar day after the date of receipt of information regarding the rebate amount on— (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. [89 FR 98588, Dec. 9, 2024, as amended at 90 FR 50021, Nov. 5, 2025] Subpart F—Enforcement of Manufacturer Payment of Rebate Amounts § 428.500 Civil money penalty notice and appeals procedures. (a) General. (b) Determination of the civil money penalty amount. (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. (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. (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. (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. (g) Bankruptcy.