(a) General. As required under section 1860D-14B(b)(1)(C)(ii) of the Act, CMS will reduce the total rebate amount determined under § 428.201(a), if any is owed, for a generic Part D rebatable drug or biosimilar when CMS determines there is a severe supply chain disruption during the applicable period 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 § 428.201(a), if any is owed, for a generic Part D rebatable drug or biosimilar by 75 percent for the applicable period in which the event occurred or began or, the following applicable period if the request is submitted less than 60 calendar days before the end of an applicable period.
(2) Extension of reduction. If CMS determines a severe supply chain disruption continues into a second consecutive applicable period as set forth in paragraph (c)(5) of this section, then CMS will reduce the total rebate amount determined under § 428.201(a), if any is owed, for a generic Part D rebatable drug or biosimilar by 75 percent for that second applicable period.
(3) Application of reduction. If CMS determines there is a severe supply chain disruption for an NDC-11, CMS will apply any reduction of the rebate amount as determined under paragraphs (b)(1) and (2) of this section to a Part D rebatable drug at the NDC-9 level.
(4) Limitation on rebate reductions. CMS will not apply multiple rebate reductions for the same Part D rebatable drug and applicable period.
(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—(1) Eligible drug. Subject to paragraph (b)(3) of this section, eligibility for a rebate reduction under this section is limited to generic Part D rebatable drugs and biosimilars 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 to receive consideration for a reduction in the rebate amount owed determined under 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 as 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 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. In accordance with paragraph (b)(1) of this section, CMS will grant a reduction in the total rebate amount determined under § 428.201, 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 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. If CMS determines that a generic Part D rebatable drug or biosimilar that received a reduction of the rebate amount as determined under paragraph (b)(1) of this section continues to be affected by the severe supply chain disruption, CMS will grant a single extension of the reduction for 1 additional consecutive applicable period and reduce the total rebate amount determined under § 428.201, if any is owed, as set forth in 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 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. 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 period 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) 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. 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 request 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 Exemption 3 or Exemption 4 in 5 U.S.C. 552.