§ 423.2720 Determination of phase-in eligibility.
For each manufacturer with one or more FDA-assigned labeler codes covered by a Manufacturer Discount Program agreement, CMS will determine whether the manufacturer is a specified manufacturer or a specified small manufacturer when the manufacturer executes a Manufacturer Discount Program agreement, or, in the case of a manufacturer whose FDA-assigned labeler code(s) is covered by another manufacturer's Manufacturer Discount Program agreement, when such labeler code(s) is first added to such agreement. In applying the aggregation rule at § 423.2716(c), CMS will attribute expenditures for a drug to a manufacturer based on the NDC(s) for the drug, as reported on PDE records. Specifically, CMS will match the labeler code extracted from the first 5 digits of each NDC to the manufacturer to whom the labeler code is assigned by the FDA.
(a) Identification of specified manufacturers. (1) A manufacturer is considered to have had a Coverage Gap Discount Program agreement in 2021, as specified at § 423.2716(a)(1), if the manufacturer—
(i) Had a Coverage Gap Discount Program agreement in effect during 2021; or
(ii) Participated in the Coverage Gap Discount Program in 2021 by means of an arrangement whereby its labeler code(s) was covered by another manufacturer's Coverage Gap Discount Program agreement in effect during 2021.
(2) Part D total expenditures. In calculating the Part D total expenditures for 2021, CMS will include the total expenditures, as defined at § 423.2704, reported on all final action, non-delete PDE records submitted as of June 30, 2022 for all Part D drugs with dates of dispensing in benefit year 2021.
(i) For purposes of calculating each manufacturer's Part D total expenditures for applicable drugs and percent share of Part D total expenditures for 2021, CMS will—
(A) Identify the relevant NDCs attributable to the manufacturer as reported on the PDE record based on the manufacturer's FDA-assigned labeler code extracted from the first 5 digits of each NDC;
(B) Calculate the Part D total expenditures for applicable drugs of the manufacturer by summing the 2021 Part D total expenditures for all relevant NDCs attributable to the manufacturer; and
(C) Divide the 2021 Part D total expenditures for all applicable drugs of the manufacturer by the 2021 Part D total expenditures for all Part D drugs, then multiply by 100 to calculate the manufacturer's percent share.
(ii) If the manufacturer's Part D total expenditures for its applicable drugs are less than 1.0 percent of the 2021 Part D total expenditures, CMS will consider the manufacturer to have satisfied the Part D total expenditure criterion for specified manufacturer phase-in eligibility, specified at § 423.2716(a)(2).
(3) Part B total expenditures. In calculating the Part B total expenditures for all drugs and biological products for 2021, CMS will include all Part B Carrier, durable medical equipment (DME), and Outpatient Medicare Part B Fee-for-Service claim line items with a drug- or biological product-related Healthcare Common Procedure Coding System (HCPCS) code submitted as of December 31, 2022.
(i) For purposes of calculating each manufacturer's Part B total expenditures for applicable drugs that are single source drugs and biological products and each manufacturer's percent share of Part B total expenditures for 2021, CMS will—
(A) Map all identified HCPCS codes to NDCs;
(B) Identify all mapped HCPCS codes in paragraph (a)(3)(i)(A) of this section that map to NDCs associated with single source drugs or biological products;
(C) Identify all mapped HCPCS codes identified in paragraph (a)(3)(i)(B) of this section that map only to NDCs associated with single source drugs or biological products of the same manufacturer, consistent with the aggregation rule at § 423.2716(c), based on the manufacturer's FDA-assigned labeler code(s) extracted from the first 5 digits of each NDC;
(D) Attribute 2021 Part B total expenditures for all applicable drugs that are single source drugs or biological products identified in paragraph (a)(3)(i)(C) of this section to each manufacturer, consistent with the aggregation rule at § 423.2716(c), based on the manufacturer's FDA-assigned labeler code(s) extracted from the first 5 digits of each NDC; and
(E) Divide the 2021 Part B total expenditures attributed to each manufacturer in paragraph (a)(3)(i)(D) of this section by the 2021 Part B total expenditures for all drugs and biological products, then multiply by 100 to calculate the manufacturer's percent share.
(ii) If the manufacturer's Part B total expenditures for its applicable drugs that are single source drugs and biologicals are less than 1.0 percent of the 2021 Part B total expenditures, CMS will consider the manufacturer to have satisfied the Part B total expenditure criterion for specified manufacturer phase-in eligibility, specified at § 423.2716(a)(3).
(b) Identification of specified small manufacturers. (1) For each specified manufacturer identified in paragraph (a) of this section, CMS will determine if the 2021 total expenditures under Part D for any one of the manufacturer's specified drugs covered under a Coverage Gap Discount Program agreement for 2021, and covered under Part D in 2021, are equal to or greater than 80 percent of the total expenditures for all of its specified drugs covered under Part D in 2021, as required under § 423.2716(b)(2), as follows.
(i) Identification of specified small manufacturer drugs. (A) For purposes of this section, one specified small manufacturer drug includes—
(1) For drug products, all dosage forms and strengths of a drug with the same active moiety and the same holder of the new drug application (NDA), as described in section 505(c) of the Federal Food, Drug, and Cosmetic Act, inclusive of products that are marketed under different NDAs.
(2) For biological products, all dosage forms and strengths of the biological product with the same active ingredient and the same holder of the biologics license application (BLA), as described in section 351(a) of the Public Health Service Act, inclusive of products that are marketed under different BLAs.
(B) CMS will identify the holder of the NDA or BLA as reported in Drugs@FDA or the FDA Purple Book, respectively.
(C) If a drug is a fixed combination drug, as described in 21 CFR 300.50, with two or more active ingredients or active moieties, the distinct combination of active ingredients or active moieties will be considered one active ingredient or active moiety for the purpose of identifying a specified small manufacturer drug.
(D) CMS will attribute 2021 Part D total expenditures for one specified small manufacturer drug, including authorized generic drugs and repackaged and relabeled drugs, as applicable, to a specified manufacturer based on the NDC(s) for the drug, as reported on PDE records, by matching the labeler code extracted from the first 5 digits of each NDC to the manufacturer to whom the labeler code is assigned by the FDA.
(ii) Calculation of Part D total expenditures for each drug for 2021. CMS will calculate the Part D total expenditures for each drug, aggregated in accordance with paragraph (b)(1)(i) of this section, attributable to the manufacturer by summing the Part D total expenditures for all NDCs under each drug as reported on all final action, non-delete PDE records submitted as of June 30, 2022, with dates of dispensing in benefit year 2021.
(iii) Calculation of each specified drug's percent share of the specified manufacturer's Part D total expenditures for applicable drugs for 2021. CMS will divide the 2021 Part D total expenditures for each drug, aggregated in accordance with paragraph (b)(1)(i) of this section, by the 2021 Part D total expenditures for all applicable drugs of the manufacturer, as determined under paragraph (a)(2) of this section, then multiply by 100 to determine the percent share.
(iv) Part D total expenditures for a specific drug for 2021 and small manufacturer phase-in eligibility. If the 2021 Part D total expenditures for one specified drug of the manufacturer are equal to or greater than 80 percent of the manufacturer's 2021 Part D total expenditures for all of its specified drugs, CMS will consider the manufacturer to have satisfied the criterion at § 423.2716(b)(2) for specified small manufacturer phase-in eligibility.
(2) [Reserved]
(c) Written notice of determination. (1) CMS will issue a phase-in eligibility determination notice to each manufacturer that has executed and has in effect a Manufacturer Discount Program agreement when such determination is made, delivered by electronic mail, to the primary point of contact as identified by the manufacturer.
(2) In the case of a manufacturer that participates in the Manufacturer Discount Program by means of an arrangement whereby its labeler code(s) is covered by another manufacturer's Manufacturer Discount Program agreement, CMS will issue a phase-in eligibility determination notice to the agreement holder.