§5000D Designated Drugs During Noncompliance Periods

Summary

Manufacturers, producers, or importers must pay a tax when they sell certain drugs on days called "noncompliance" days. The tax is set so that the tax makes up a specific share of the total price (price plus tax). A drug hits a noncompliance period if it is put on the HHS negotiation list and then the maker does not have the required pricing agreement or HHS has not made a related determination. Noncompliance periods include: the period starting the March 1st after a drug is listed (October 2nd for the 2026 special case) until an agreement is in place or HHS acts; a later period starting November 2nd (August 2nd in 2026) until a negotiated maximum fair price or HHS action; a renegotiation period that starts on November 2nd two years before a new price year for selected drugs being renegotiated; and any period that begins when HHS says required information is overdue and ends when the information is sent. The tax rate rises the longer the noncompliance continues: 65% for the first 90 days, 75% for days 91–180, 85% for days 181–270, and 95% after that. Days do not count as noncompliance if the maker has notified HHS of terminated agreements and none of its drugs are covered by certain Medicare or manufacturer discount programs, until the maker signs a new applicable agreement or its drugs regain coverage (ending the suspension the last day of the following February). "Applicable agreements" include Medicare coverage gap discounts, manufacturer discount programs, and Medicaid rebate deals. The government may apply similar rules for U.S. territories, treat sales timed to avoid the tax as if they happened during noncompliance, apply export rules, and issue regulations to run the program. "Designated drug" means a negotiation-eligible drug on the HHS list that is made in or brought into the United States.