As used in this subpart, the following definitions apply:

340B Program is the program under section 340B of the Public Health Service (PHS) Act.

Refundable single-dose container or single-use package drug has the meaning set forth in § 414.902 of this chapter.

(a) Total rebate. Subject to paragraph (b) of this section, the total rebate amount to be paid for a Part B rebatable drug, as identified under § 427.101, for an applicable calendar quarter is equal to the product of the per unit Part B rebate amount of such drug, as determined under § 427.302, and the billing units of the Part B rebatable drug furnished during the applicable calendar quarter, as identified as set forth in § 427.303. The rebate amount may be reduced as set forth in subpart E of this part or adjusted as set forth in subpart F of this part.

(b) Apportionment of the Part B rebate amount. CMS will identify billing and payment codes for which multiple manufacturers report ASP, as set forth in sections 1927(b)(3) and 1847A(f) of the Act, for NDCs assigned to the billing and payment code. CMS will calculate the rebate amount owed by each manufacturer by:

(1) Determining the total billing units sold for each NDC assigned to the billing and payment code, by multiplying the number of units reported by a manufacturer in ASP data submissions at the NDC-11 package level by the number of billing units per NDC-11 reporting unit.

(2) Summing the individual manufacturer's total billing units sold during the applicable calendar quarter (for all NDCs of the manufacturer assigned to the billing and payment code).

(3) Summing all manufacturers' total billing units sold during the applicable calendar quarter for all NDCs of the Part B rebatable drug assigned to the billing and payment code.

(4) Dividing the resulting amount from paragraph (b)(2) of this section by the resulting amount from paragraph (b)(3) of this section.

(5) Multiplying the resulting amount from paragraph (b)(4) of this section by the total rebate amount as determined under paragraph (a) of this section.

(c) Apportionment of the Part B rebate amount when reported units for NDCs within a billing and payment code are missing, negative, or equal to zero.

(1) When there are multiple NDCs in a grouped billing and payment code and the manufacturer-reported ASP units for all NDCs are either missing, negative, or equal to zero but there is a positive rebate amount calculated under § 427.302(a), CMS will:

(i) With respect to NDCs that were sold or marketed during the applicable calendar quarter and for which all NDCs assigned to the grouped billing and payment code lack manufacturer-reported ASP data for the applicable calendar quarter, equally apportion a positive rebate amount to NDCs with missing ASP units that were sold or marketed during the applicable calendar quarter by dividing the total rebate amount for the grouped billing and payment code by the total number of NDCs sold or marketed during the applicable calendar quarter within the billing and payment code; and

(ii) With respect to NDCs that were not sold or marketed during the applicable calendar quarter and lack manufacturer-reported ASP units for the applicable calendar quarter, NDCs with negative manufacturer-reported ASP units for the applicable calendar quarter, and NDCs with manufacturer-reported ASP units equal to zero for the applicable calendar quarter, apportion a $0 rebate amount to each respective NDC. If all NDCs assigned to the grouped billing and payment code are determined under this subparagraph, no rebate will be assessed for that billing and payment code.

(2) When there are multiple NDCs in a grouped billing and payment code and the manufacturer-reported ASP units for some but not all NDCs assigned to the grouped billing and payment code are either missing, negative, or equal to zero but there is a positive rebate amount calculated under § 427.302(a), CMS will:

(i) With respect to NDCs that were not sold or marketed during the applicable calendar quarter and lack manufacturer-reported ASP units for the applicable calendar quarter, NDCs with negative manufacturer-reported ASP units for the applicable calendar quarter, and NDCs with manufacturer-reported ASP units equal to zero for the applicable calendar quarter, apportion a $0 rebate amount to each respective NDC;

(ii) With respect to NDCs that were sold or marketed during the applicable calendar quarter and lack manufacturer-reported ASP units for the applicable calendar quarter, and NDCs that were sold or marketed during the applicable calendar quarter and for which respective NDCs have positive manufacturer-reported units by, apportion rebate amounts as follows:

(A) Solely for purposes of the calculation determined under this paragraph (c)(2)(ii) of this section, assign to NDCs that were sold or marketed during the applicable calendar quarter and lack manufacturer-reported ASP units for the applicable calendar quarter the number of ASP units that is equal to the lowest positive number of manufacturer reported ASP units for any NDC in the grouped billing and payment code;

(B) Determine the total billing units sold for each NDC assigned to the billing and payment code, by multiplying the number of units reported by a manufacturer in ASP data submissions at the NDC-11 package level by the number of billing units per NDC-11 reporting unit;

(C) With respect to all NDCs of each individual manufacturer assigned to the billing and payment code, sum the total billing units for such NDCs sold during the applicable calendar quarter;

(D) Sum the total billing units sold during the applicable calendar quarter for all NDCs of the Part B rebatable drug assigned to the billing and payment code, including those assigned a ASP unit value as set forth in paragraph (c)(2)(ii)(A) of this section;

(E) Divide the resulting amount from paragraph (c)(2)(ii)(C) of this section by the resulting amount from paragraph (c)(2)(ii)(D) of this section; and

(F) Multiply the resulting amount from paragraph (c)(2)(ii)(E) of this section by the total rebate amount as determined under paragraph (a) of this section.

(a) Formula for calculating the per unit Part B rebate amount. CMS will calculate the per unit Part B rebate amount for a Part B rebatable drug and applicable calendar quarter by determining the amount by which the specified amount, as determined under paragraph (b) of this section, exceeds the inflation-adjusted payment amount, as determined under paragraph (g) of this section.

(b) Identification of the specified amount for the applicable calendar quarter. For each applicable calendar quarter, subject to paragraph (b)(3) of this section, the specified amount is equal to the amount determined under section 1847A(i)(3)(A)(ii)(I)(aa) or (bb) of the Act, as applicable, for the calendar quarter.

(1) Subject to paragraph (b)(2) of this section, the first applicable calendar quarter for a Part B rebatable drug shall be no earlier than the calendar quarter beginning January 1, 2023 and shall be the later of one of the following:

(i) The first full calendar quarter that is at least the third calendar quarter after the payment amount benchmark quarter identified in paragraphs (c)(1) through (5) of this section.

(ii) The calendar quarter beginning January 1, 2023.

(2) Notwithstanding paragraph (b)(1) of this section, for a Part B rebatable drug that was billed under a NOC code during the calendar quarter beginning July 1, 2021, or the third full calendar quarter after the effective date of the drug's assigned billing and payment code other than a NOC code, whichever is later, the first applicable calendar quarter is the first full calendar quarter that follows the payment amount benchmark quarter identified in paragraphs (c)(1) through (5) of this section.

(3) If all NDCs in the billing and payment code have neither manufacturer-reported ASP nor Wholesale Acquisition Cost (WAC) price data available for the applicable calendar quarter, CMS will use WAC price data from other public sources, if available, to calculate 106 percent of WAC, which will serve as the specified amount.

(c) Identification of the payment amount benchmark quarter. For each Part B rebatable drug, CMS will identify the applicable payment amount benchmark quarter as set forth in paragraphs (c)(1) through (3) of this section, as applicable, subject to paragraphs (c)(4) and (5) of this section, using the earliest first marketed date of any NDC ever marketed under any FDA application under which any NDCs that have ever been assigned to the billing and payment code as of the applicable calendar quarter have been marketed, and using the earliest approval or licensure date of any FDA application under which any NDCs that have ever been assigned to the billing and payment as of the applicable calendar quarter have been marketed:

(1) For a Part B rebatable drug first approved or licensed by the FDA on or before December 1, 2020, and with a first marketed date on or before December 1, 2020, the payment amount benchmark quarter is the calendar quarter beginning July 1, 2021.

(2) For a Part B rebatable drug first approved or licensed by the FDA after December 1, 2020, the payment amount benchmark quarter is the third full calendar quarter after a drug's first marketed date.

(3) For a Part B rebatable drug first approved or licensed by the FDA on or before December 1, 2020, but with a first marketed date after December 1, 2020, the payment amount benchmark quarter is the third full calendar quarter after a drug's first marketed date.

(4) Notwithstanding paragraph (c)(3) of this section, for a Part B rebatable drug that was billed under a NOC code during the calendar quarter beginning July 1, 2021, or the third full calendar quarter after such drug's first marketed date, whichever is later, the payment amount benchmark quarter is the third full calendar quarter after the Part B rebatable drug is assigned a billing and payment code other than a NOC code.

(5) For a Part B rebatable drug that is a selected drug (as defined in section 1192(c) of the Act) with respect to a price applicability period (as defined in section 1191(b)(2) of the Act), in the case such Part B rebatable drug is no longer considered to be a selected drug, for each applicable quarter beginning after the price applicability period with respect to such drug, the payment amount benchmark quarter is the calendar quarter beginning January 1 of the last year during such price applicability period with respect to such selected drug.

(d) Identification of the payment amount in the payment amount benchmark quarter. CMS will identify the payment amount in the payment amount benchmark quarter using the published payment limit for the billing and payment code for the applicable payment amount benchmark quarter identified as set forth in paragraph (c) of this section.

(1) For a Part B rebatable drug, subject to paragraphs (d)(1)(i) and (ii) of this section and except as provided in paragraph (d)(2) of this section, CMS will identify the payment amount in the payment amount benchmark quarter using the published payment limit for the billing and payment code for the applicable payment amount benchmark quarter determined under section 1847A of the Act.

(i) If a published payment limit is not available for the applicable payment amount benchmark quarter, CMS will use the lower of 106 percent of manufacturer-reported ASP or 106 percent of manufacturer-reported WAC.

(ii) If neither a published payment limit nor manufacturer-reported ASP or WAC data are available, CMS will use WAC data from other public sources to calculate 106 percent of WAC, which, solely for the purposes of this section, CMS will consider to be the payment amount for the payment amount benchmark quarter.

(2) For a Part B rebatable drug previously billed under a grouped billing and payment code during the payment amount benchmark quarter and later billed under a unique billing and payment code, CMS will use the grouped billing and payment code payment limit as the payment amount in the payment amount benchmark quarter.

(e) Identification of the benchmark period CPI-U. For each Part B rebatable drug, CMS will identify the applicable benchmark period CPI-U at the billing and payment code level as set forth in paragraphs (e)(1) and (2) of this section, subject to paragraphs (e)(3) through (5) of this section:

(1) For a Part B rebatable drug first approved or licensed by the FDA on or before December 1, 2020, and with a first marketed date on or before December 1, 2020, the benchmark period CPI-U is the CPI-U for January 2021.

(2) For a Part B rebatable drug first approved or licensed by the FDA after December 1, 2020, the benchmark period CPI-U is the CPI-U for the first month of the first full calendar quarter after a drug's first marketed date.

(3) Notwithstanding paragraph (e)(2) of this section, for a Part B rebatable drug first approved or licensed by FDA on or before December 1, 2020, and with a first marketed date after December 1, 2020, the benchmark period CPI-U is the CPI-U for the first month of the first full calendar quarter after a drug's first marketed date.

(4) Notwithstanding paragraph (e)(3) of this section, for a Part B rebatable drug that was billed under a NOC code during the calendar quarter beginning July 1, 2021, or the third full calendar quarter after such drug's first marketed date, whichever is later, the benchmark period CPI-U is the CPI-U for the first month of the first full calendar quarter after the Part B rebatable drug is assigned a billing and payment code other than a NOC code.

(5) Notwithstanding paragraph (e)(4) of this section, for a Part B rebatable drug that is a selected drug (as defined in section 1192(c) of the Act) with respect to a price applicability period (as defined in section 1191(b)(2) of the Act), in the case such Part B rebatable drug is no longer considered to be a selected drug, the benchmark period CPI-U is the CPI-U for the July of the year preceding the last year during such price applicability period.

(f) Identification of the rebate period CPI-U. For each Part B rebatable drug by billing and payment code, CMS will identify and use the greater of the benchmark period CPI-U index level or the CPI-U index level for the first month of the calendar quarter that is two calendar quarters before the applicable calendar quarter in which the Part B rebatable drug is furnished.

(g) Determination of inflation-adjusted payment amount. For each applicable calendar quarter and for each Part B rebatable drug by billing and payment code, CMS will calculate the inflation-adjusted payment amount by dividing the rebate period CPI-U by the benchmark period CPI-U and then multiplying the quotient by the payment amount in the payment amount benchmark quarter, determined under paragraph (d) of this section.

(a) General. For each Part B rebatable drug, CMS will determine the total number of billing units of the billing and payment code subject to a rebate in the applicable calendar quarter using final action Medicare fee-for-service claims for which Medicare payment was allowed and greater than zero.

(b) Total billing units. Using final action claims in the Medicare fee-for-service claims repository, at least 3 months after the end of the applicable calendar quarter, CMS will determine the total number of billing units for a Part B rebatable drug in an applicable calendar quarter by identifying separately payable claim lines for the billing and payment code for dates of service in that applicable calendar quarter and excluding the following billing units in claim lines as applicable:

(1) Billing units of drugs acquired through the 340B Program. CMS will exclude billing units acquired under the 340B Program as identified through—

(i) Separately payable units in all professional claim lines for dates of service during 2023 and 2024 that were billed with the “JG” or “TB” modifiers and separately payable billing units in claim lines for professional claims with dates of service during 2023 and 2024 from suppliers that are associated with covered entities listed by the Health Resources and Services Administration (HRSA) 340B Office of Pharmacy Affairs Information System (OPAIS) as participating in the 340B Program. CMS will use National Provider Identifiers (NPI) and/or Medicare Provider Numbers (MPN), or other fields in the OPAIS database (such as name and address) if NPI or MPN is not available, to identify these suppliers and the claims submitted with such identifiers;

(ii) Separately payable billing units in claim lines for institutional claims that are billed with the “JG” or “TB” modifiers and units in institutional claims from covered entities that are critical access hospitals and Maryland waiver hospitals with dates of service from January 1, 2023 through December 31, 2023. CMS will use NPIs and MPNs, or other fields in the OPAIS database (such as name and address) if NPI or MPN are not available, to identify these suppliers and the claims submitted with such identifiers;

(iii) Separately payable billing units in claim lines for institutional claims that are billed with the “JG” or “TB” modifiers for claims with dates of service from January 1, 2024 through December 31, 2024; and

(iv) Separately payable billing units in claim lines billed with the “TB” modifier for claims with dates of service on or after January 1, 2025.

(2) Billing units with a rebate under section 1927 of the Social Security Act. Subject to paragraph (b)(2)(i) of this section, CMS will exclude billing units from claims with dates of service during a month within an applicable calendar quarter if the units are furnished to a dually eligible Medicare beneficiary who has Medicaid coverage that may provide cost-sharing assistance.

(i) CMS will not exclude billing units from claims when the Medicare beneficiary has Medicaid coverage that does not include cost-sharing assistance, including Specified Low-Income Medicare Beneficiaries (SLMB), Qualified Disabled and Working Individuals (QDWI), and Qualifying Individuals (QI) beneficiaries.

(ii) [Reserved]

(3) Billing units that are packaged into the payment amount for an item or service and are not separately payable. CMS will exclude billing units that are packaged into the payment amount for an item or service and are not separately payable.

(4) Billing units when a drug is no longer a Part B rebatable drug. In situations where a Part B rebatable drug that is a single source drug becomes a multiple source drug during an applicable calendar quarter, CMS will:

(i) Determine if such drug has become a multiple source drug by reviewing FDA's most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations” (commonly known as the Orange Book) for a drug that is that is rated as therapeutically equivalent to such drug; and,

(ii) If a therapeutically equivalent drug is identified as set forth in paragraph (b)(4)(i) of this section, determine if the therapeutically equivalent drug was sold or marketed during the applicable calendar quarter; and

(iii) Exclude billing units of such drug furnished on and after the first day of the calendar month in which the therapeutically equivalent drug was first sold or marketed during the applicable calendar quarter.

(5) Billing units subject to discarded drug refunds. CMS will exclude billing units of discarded refundable single-dose container or single-use package drugs for which a refund is owed as set forth in § 414.940 of this chapter from the calculation of rebate amounts. For applicable calendar quarters beginning on or after January 1, 2024, these billing units will be excluded as part of the reconciliation process described at § 427.501(d).

(a) Changes in billing unit dose description. If there has been a change to the dose description for a Part B rebatable drug (causing a new billing and payment code to be assigned), CMS will calculate a conversion factor based on the ratio of the billing unit dose description for the current billing and payment code to the billing unit dose description for the prior billing and payment code. CMS will apply the conversion factor to the payment amount in the payment amount benchmark quarter, as set forth in § 427.302(d), before applying the percentage by which the rebate period CPI-U for the calendar quarter exceeds the benchmark period CPI-U.

(b) Instances when a new billing and payment code is assigned. If a new billing and payment code is assigned for a Part B rebatable drug, CMS will use the payment amount in the payment amount benchmark quarter, the payment amount benchmark quarter, and the benchmark quarter CPI-U of the prior billing and payment code to calculate the per unit Part B rebate amount under § 427.302.

(c) Documentation. CMS will maintain a crosswalk reflecting the changes in billing and payment codes and dose descriptions as applicable.