Par. 3. Sections 47.5000D-2 and 47.5000D-3 are added to read as follows:
(a) Imposition of tax —(1) In general. Section 5000D(a) of the Internal Revenue Code (Code) imposes a tax (section 5000D tax) on applicable sales made by a manufacturer, producer, or importer during a day described in section 5000D(b).
(2) Attachment of tax. The section 5000D tax attaches when a manufacturer, producer, or importer of units of a designated drug makes an applicable sale of such units during a day described in section 5000D(b).
(3) Person liable for tax. A manufacturer, producer, or importer of units of a designated drug that makes an applicable sale of such units during a day described in section 5000D(b) is liable for the section 5000D tax imposed on such sale.
(4) Identification of applicable sales —(i) In general. A manufacturer, producer, or importer of units of a designated drug must employ a reasonable method to identify the applicable sales of such units, if any, that it makes during a day described in section 5000D(b). A manufacturer, producer, or importer's method of identifying such applicable sales must be based on its books, records, or other information. For example, a subsidiary may rely on historical sales data collected and analyzed by its parent, provided that such data and analysis meet the requirements of paragraph (a)(4)(ii) of this section and are otherwise reasonable.
(ii) Books, records, and other information. Books, records, and other information used to identify applicable sales must reflect transactions pertaining to the drug or biological product selected for inclusion on the list of selected drugs published under section 1192(a) of the Social Security Act that predate the first day of the calendar quarter in which the applicable sales occurred by no more than 24 months.
(iii) Disregard of Medicare part B sales permissible prior to March 1, 2026. For periods described in section 5000D(b) that begin prior to March 1, 2026, a manufacturer, producer, or importer's method may disregard sales of drugs or biological products furnished or administered by a hospital, physician, or other provider of services or supplier, the recipient of which is an individual enrolled under Medicare part B of title XVIII of the Social Security Act, including an individual enrolled in a Medicare Advantage plan under part C of such title, if payment may be made under part B for such units. See section 1192(b)(2) of the Social Security Act.
(iv) Safe harbor —(A) In general. A manufacturer, producer, or importer may satisfy the requirements of this paragraph (a)(4) by using the safe harbor percentage provided in guidance published in the Internal Revenue Bulletin (see § 601.601 of this chapter), as applicable to the relevant calendar quarter, to identify its applicable sales. Such safe harbor percentage is a rounded average of the percentage of all sales that are applicable sales of a sample of qualifying single-source drugs (as defined in section 1192(e) of the Social Security Act) that is large enough to yield meaningful results, as determined by the analysis of certain manufacturer- and patient-level data conducted by the Centers for Medicare and Medicaid Services (CMS).
(B) No election required. No election is required for a manufacturer, producer, or importer to use the safe harbor described in paragraph (a)(4)(iv)(A) of this section.
(C) Must use safe harbor for four consecutive calendar quarters. Except as provided in paragraph (a)(4)(iv)(E) of this section, a manufacturer, producer, or importer that uses the safe harbor described in paragraph (a)(4)(iv)(A) of this section must continue to use the safe harbor for a period of four consecutive calendar quarters, including the calendar quarter in which the safe harbor is first used.
(D) Uniform application required. A manufacturer, producer, or importer that uses the safe harbor described in paragraph (a)(4)(iv)(A) of this section for sales made during any day described in section 5000D(b) falling within a calendar quarter must apply the safe harbor to all sales by such manufacturer, producer, or importer during all days described in section 5000D(b) falling within that calendar quarter. Thus, if a manufacturer, producer, or importer uses the safe harbor described in paragraph (a)(4)(iii)(A) of this section with respect to one sale of a designated drug during a day described in section 5000D(b), it must use the safe harbor for all sales of that designated drug and all sales of any other designated drug that occur in that calendar quarter during a day described in section 5000D(b).
(E) Updates to safe harbor percentage. Any update to the safe harbor percentage described in paragraph (a)(4)(iv)(A) of this section will use a calculation methodology similar to that described in paragraph (a)(4)(iv)(A) of this section, use the most recent analysis that the Internal Revenue Service (IRS) has received from CMS of data available to CMS, and relieve a manufacturer, producer, or importer from an existing obligation under paragraph (a)(4)(iv)(C) of this section to use the safe harbor described in this paragraph (a)(4)(iv) as of the effective date of such updated safe harbor percentage. If a manufacturer, producer, or importer continues to use the safe harbor described in this paragraph (a)(4)(iv) after the safe harbor percentage is updated, such manufacturer, producer, or importer must use the updated safe harbor percentage on and after the effective date of such updated safe harbor percentage and for the remainder of any period required by paragraph (a)(4)(iv)(C) of this section.
(v) Recalculation of liability not permitted. Once a section 5000D tax liability is reported to the IRS for a particular calendar quarter, the manufacturer, producer, or importer liable for the section 5000D tax may not later recalculate its section 5000D tax liability for that quarter using a different method to identify its applicable sales. The correction of a mathematical or clerical error, or the use of corrected data from the same historical period used to originally identify the applicable sales, does not alone constitute the recalculation of a section 5000D tax liability using a different method.
(b) Calculation of tax —(1) In general. (i) For any applicable sale of units of a designated drug during a day described in section 5000D(b), the amount of the section 5000D tax is the amount such that the applicable percentage is equal to the ratio of such tax divided by the sum of such tax and the price of such applicable sale expressed as a percentage. This ratio may be expressed as follows:
Equation 1 to Paragraph (b)(1)(i)
Applicable Percentage = Tax/(Tax + Price)
(ii) See paragraph (b)(2) of this section for rules relating to the effect of certain invoicing methods on the determination of price.
(2) Charging tax as line item; effect on price —(i) Presumption if no separate charge for tax is made. If no separate charge is made for the section 5000D tax on the invoice or similar document pertaining to an applicable sale, the amount charged for units of the designated drug is presumed to include both the proper amount of section 5000D tax and the price. In such cases, the price excludes the portion of the amount charged allocable to the section 5000D tax so charged, and no section 5000D tax is due on the amount of section 5000D tax so charged.
(ii) Separately charged tax not part of price. If the section 5000D tax is separately charged on the invoice or similar document pertaining to an applicable sale, the section 5000D tax so charged is not included in the price. Thus, if a manufacturer, producer, or importer calculates the section 5000D tax and charges it as a separate item on the invoice or similar document pertaining to an applicable sale, the amount of section 5000D tax so charged is not included in the price for purposes of calculating the section 5000D tax under paragraph (b)(1) of this section, and no section 5000D tax is due on the amount of section 5000D tax so charged.
(3) Example— (i) Facts. Manufacturer X is the manufacturer, producer, or importer of 409,000 units of Designated Drug H (that is, it makes the first sale of those units). During a day described in section 5000D(b), and no more than 90 days since the first such day, Manufacturer X sells 100,000 units of Designated Drug H to Wholesaler A at $1.00 per unit, 300,000 units of Designated Drug H to Wholesaler B at $0.90 per unit, and 9,000 units of Designated Drug H to Wholesaler C at $1.12 per unit. Manufacturer X has reasonably determined that the applicable sale consists of 35 percent of the units of Designated Drug H in each such sale. Manufacturer X has not separately invoiced any section 5000D tax to Wholesalers A, B, or C.
(ii) Analysis— (A) In general. To calculate its section 5000D tax liability with respect to its sales of Designated Drug H to Wholesalers A, B, and C, Manufacturer X must aggregate its section 5000D tax liability for the applicable sales by applying the presumption described in paragraph (b)(2)(i) of this section.
(B) Step 1. Manufacturer X begins by determining the applicable sales within each of the sales described in paragraph (b)(3)(i) of this section. The applicable sale within the sale to Wholesaler A is 35,000 units (100,000 units × 0.35). The applicable sale within the sale to Wholesaler B is 105,000 units (300,000 units × 0.35). And the applicable sale within the sale to Wholesaler C is 3,150 units (9,000 units × 0.35).
(C) Step 2. Next, Manufacturer X determines the amount charged for the applicable sales. The amount charged for the applicable sale to Wholesaler A is $35,000.00 (35,000 units × $1.00 per unit). The amount charged for the applicable sale to Wholesaler B is $94,500.00 (105,000 units × $0.90 per unit). And the amount charged for the applicable sale to Wholesaler C is $3,528.00 (3,150 units × $1.12 per unit).
(D) Step 3. Manufacturer X then determines the correct tax and price with respect to each amount charged for the applicable sales under the presumption provided in paragraph (b)(3)(i) of this section. Of the $35,000.00 Manufacturer X charged for the applicable sale to Wholesaler A (35,000 of 100,000 units), Manufacturer X allocates $22,750.00 to the section 5000D tax and $12,250.00 to the price ($22,750.00/($22,750.00 + $12,250.00) = 0.65). Of the $94,500.00 Manufacturer X charged for the applicable sale to Wholesaler B (105,000 of 300,000 units), Manufacturer X allocates $61,425.00 to the section 5000D tax and $33,075.00 to the price ($61,425.00/($61,425.00 + $33,075.00) = 0.65). And of the $3,528.00 Manufacturer X charged for the applicable sale to Wholesaler C (3,150 of 9,000 units), Manufacturer X allocates $2,293.20 to the section 5000D tax and $1,234.80 to the price ($2,293.20/($2,293.20 + $1,234.80) = 0.65).
(E) Step 4. Manufacturer X's section 5000D tax liability for the applicable sales is $86,468.20 ($22,750.00 + $61,425.00 + $2,293.20 = $86,468.20). This amount, when divided by the sum of the tax and the price of the applicable sales, equals 65 percent ($86,468.20/($86,468.20 + $46,559.80) = 0.65).
(c) Anti-abuse rule. If a manufacturer, producer, or importer engages in any transaction (or series of transactions) with a principal purpose of avoiding the section 5000D tax or substantially reducing the purported price at which a sale is made, including transactions made other than at arm's length, such transaction (or series of transactions) may be adjusted, recharacterized, or otherwise recast by the Secretary for purposes of determining the correct section 5000D tax liability. Whether a transaction (or series of transactions) has a principal purpose of avoiding the section 5000D tax or substantially reducing the purported price of an applicable sale is determined based on all of the facts and circumstances, including, but not limited to, a comparison of the purported business purpose for, and the section 5000D tax consequences of, the transaction (or series of transactions).
(d) Severability. The provisions of this section are separate and severable from one another and any other section of this part. If any provision of this section is stayed or determined to be invalid, it is the intention of the Department of the Treasury and Internal Revenue Service that the remaining provisions and sections of this part shall continue in effect.
(e) Applicability date. This section applies to sales of designated drugs on or after [date of publication of final regulations in the Federal Register ].