(a) General. For each Part D rebatable drug, CMS will determine the total number of units as follows:

(1) Use of PDE data to determine total units dispensed. To determine the total number of units of each Part D rebatable drug dispensed under Part D and covered by Part D plan sponsors during an applicable period, CMS will use the quantity dispensed reported on the PDE record for each Part D rebatable drug with gross covered prescription drug costs greater than zero.

(2) Crosswalk to AMP units. CMS will crosswalk the information from the PDE record to database(s) that includes the unit type (for example, each, capsule) for the Part D rebatable drug, matching on the NDC of the Part D rebatable drug. If the unit type obtained from such database does not match the AMP unit type reported by a manufacturer to the Medicaid Drug Programs system, CMS will convert the total units reported on the PDE to the AMP units reported.

(b) Removal of certain units. CMS will exclude certain units from the total number of units dispensed of a Part D rebatable drug, with respect to an applicable period, as follows:

(1) Removal of units when a generic drug is no longer a Part D rebatable drug. To determine whether a generic drug that meets the definition of a Part D rebatable drug on the first day of an applicable period ceases to meet such definition later in the applicable period, CMS will—

(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. (i) For the applicable period beginning October 1, 2025, and subsequent applicable periods, CMS will exclude from the total number of units determined under paragraph (a) of this section units for which a manufacturer provided a discount under the 340B Program (“340B units”) as follows:

(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. CMS will exclude units from the total number of units dispensed of a Part D rebatable drug when those units are associated with a Part D rebatable drug that has been billed as compounded.