As used in this subpart, the following definitions apply:

Currently in shortage means that at least one NDC-10 assigned to the billing and payment code of a Part B 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).

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 Part B rebatable biosimilar biological product by a manufacturer and significantly affects the ability of the manufacturer of the biosimilar biological product 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.

(a) General. As required under section 1847A(i)(3)(G)(i) of the Act, CMS will reduce the total rebate amount determined under § 427.301(a), if any is owed, for a Part B rebatable drug that is currently in shortage, as set forth in § 427.400, at any point during the applicable calendar quarter.

(b) Calculation of the reduced rebate amount. (1) For each applicable calendar quarter beginning on or after January 1, 2023, the reduced total rebate amount for a Part B rebatable drug currently in shortage will be calculated using the following formula:

Reduced Total Rebate Amount = the total rebate amount multiplied by (1 minus applicable percent reduction) multiplied by (percentage of time drug was currently in shortage during the applicable calendar quarter) added to the total rebate amount multiplied by (1 minus percentage of time drug was currently in shortage during the applicable calendar quarter)

(2) For purposes of paragraph (b)(1) of this section, the applicable percent reduction is:

(i) For a Part B rebatable drug that is a plasma-derived product:

(A) 75 percent for the first 4 consecutive applicable calendar quarters such drug is currently in shortage.

(B) 50 percent for the second 4 consecutive applicable calendar quarters such drug is currently in shortage.

(C) 25 percent for each subsequent applicable calendar quarter such drug is currently in shortage.

(ii) For a Part B rebatable drug that is not a plasma-derived product:

(A) 25 percent for the first 4 consecutive applicable calendar quarters such drug is currently in shortage.

(B) 10 percent for the second 4 consecutive applicable calendar quarters such drug is currently in shortage.

(C) 2 percent for each subsequent applicable calendar quarter 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 calendar quarter that a Part B drug or biological product is described as currently in shortage regardless of whether the drug or biological product meets the definition of a Part B rebatable drug or whether a rebate amount is owed for that calendar quarter, starting with the calendar quarter that begins January 1, 2023.

(iv) If any applicable calendar quarter for which a rebate reduction determined under § 427.402 has been granted would be the first of the four consecutive applicable calendar quarters set forth in paragraph (b)(2)(i)(A) or (b)(2)(ii)(A) of this section and the Part B rebatable drug or biological product continues to be currently in shortage after the rebate reduction period set forth in § 427.402, CMS will treat the quarter following the final quarter in which the rebate reduction determined under § 427.402 applies as the first of the four consecutive applicable calendar quarters 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 calendar quarter is equal to the number of days such drug is currently in shortage in an applicable calendar quarter, divided by the total number of days in the applicable calendar quarter.

(c) Application of reduction. CMS will apply a reduction of the rebate amount as determined under paragraph (b) of this section to all the NDCs under the relevant billing and payment code.

(a) General. As required under section 1847A(i)(3)(G)(ii) of the Act, CMS will reduce the total rebate amount determined under § 427.301(a), if any is owed, for a Part B rebatable biosimilar biological product when CMS determines there is a severe supply chain disruption during the applicable calendar quarter 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 § 427.301(a), if any is owed, for a Part B rebatable biosimilar biological product by 75 percent for the applicable calendar quarter in which the event occurred or began, or the following applicable calendar quarter if the request is submitted less than 60 calendar days before the end of an applicable calendar quarter, and the 3 subsequent applicable calendar quarters.

(2) Extension of reduction. If CMS determines a severe supply chain disruption continues into a fifth applicable calendar quarter as set forth in paragraph (c)(5) of this section, then CMS will reduce the total rebate amount determined under § 427.301(a), if any is owed, for a Part B rebatable biosimilar biological product by 75 percent for that fifth applicable calendar quarter and an additional 3 consecutive applicable calendar quarters.

(3) Application of reduction. If CMS determines there is a severe supply chain disruption for an NDC-11 assigned to a billing and payment code, CMS will apply any reduction of the rebate amount as determined under paragraphs (b)(1) and (2) of this section to all the NDCs under the relevant billing and payment code.

(4) Limitation on rebate reductions. CMS will not apply multiple rebate reductions for the same Part B rebatable drug and applicable calendar quarter.

(i) If a manufacturer believes there are multiple events causing severe supply chain disruptions during the same 4 applicable calendar quarters for the same Part B rebatable biosimilar biological product and submits multiple rebate reduction requests for the same product, CMS will grant no more than 1 rebate reduction determined under paragraph (b)(1) or (2) of this section for that product for those consecutive applicable calendar quarters.

(ii) If CMS grants a rebate reduction request under this section, and the Part B rebatable biosimilar biological product subject to the reduction appears as currently in shortage during any of the 4 applicable calendar quarters as the ones 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 determined under § 427.401 during those applicable calendar quarters.

(iii) If a Part B rebatable biosimilar biological product 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 determined under § 427.401 during those applicable calendar quarters.

(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 Part B rebatable biosimilar biological products 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 in order to receive consideration for a reduction in the rebate amount owed as set forth in 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 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 Part B rebatable biosimilar biological product(s), such as a change in the production or distribution of the Part B rebatable biosimilar biological product(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 Part B rebatable biosimilar biological product(s) for at least 90 days;

(ii) Information about when the manufacturer expects supply of the Part B rebatable biosimilar biological product(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 Part B rebatable biosimilar biological product(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 Part B rebatable biosimilar biological product(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 Part B 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 rebate amount determined under § 427.301(a), 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 calendar quarter;

(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 Part B rebatable biosimilar biological product; 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 Part B rebatable biosimilar biological product that received a reduction of the rebate amount as determined under paragraph (b)(1) of this section continues to be affected by a severe supply chain disruption, CMS will grant a single extension of the reduction for 4 additional consecutive applicable calendar quarters and reduce the rebate amount calculated at § 427.301(a), 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 Part B rebatable biosimilar biological product continues to be affected by the severe supply chain disruption during the fifth through eighth applicable calendar quarters.

(ii) A manufacturer must submit the rebate reduction extension request at least 60 calendar days before the start of the fifth applicable calendar quarter to receive consideration for a reduction in the rebate amount owed, if any, as determined under 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 calendar quarter 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), or if a reduction determined under paragraph (b)(1) of this section was not granted for such biosimilar biological product.

(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 Exemptions 3 and/or 4 in 5 U.S.C. 552.