Applicable discounts

(a) Defined. For purposes of the Manufacturer Discount Program, applicable discount means, subject to the requirements of this section, with respect to an applicable drug of a manufacturer dispensed during a year to an applicable beneficiary who has—

(1) Not incurred costs, as defined at § 423.100, for covered Part D drugs (as defined at § 423.100) in the year that are equal to or exceed the annual out-of-pocket threshold specified at § 423.104(d)(5)(iii) for the year, 10 percent of the negotiated price of such drug; and

(2) Incurred costs, as defined in § 423.100, for covered Part D drugs (as defined at § 423.100) in the year that are equal to or exceed the annual out-of-pocket threshold specified at § 423.104(d)(5)(iii) for the year, 20 percent of the negotiated price of such drug.

(b) Application of supplemental benefits. For Part D plans offering supplemental benefits (as defined in § 423.100), the value of any applicable discount under the Manufacturer Discount Program is calculated before the application of supplemental benefits.

(c) Application of other coverage. The applicable discount is calculated before any coverage or financial assistance under another health or prescription drug benefit plan or program that provides prescription drug coverage or financial assistance.

(d) Application of discount phase-in for specified manufacturers and specified small manufacturers—(1) Applicable LIS percent. For an applicable drug of a specified manufacturer (as described at § 423.2716(a)) that is marketed as of August 16, 2022 (as described in paragraph (d)(3) of this section) and dispensed for an applicable beneficiary who is a subsidy eligible individual (as defined in section 1860D-14(a)(3) of the Act), the applicable discount is as follows:

(ii) For the individual who has incurred costs equal to or exceeding the annual out-of-pocket threshold for the year—

(A) For 2025, 1 percent;

(B) For 2026, 2 percent;

(C) For 2027, 5 percent;

(D) For 2028, 8 percent;

(E) For 2029, 10 percent;

(F) For 2030, 15 percent; and

(G) For 2031 and each subsequent year, 20 percent.

(2) Applicable small manufacturer percent. For an applicable drug of a specified small manufacturer (as described at § 423.2716(b)) that is marketed as of August 16, 2022 (as described in paragraph (d)(3) of this section) and dispensed for an applicable beneficiary, the applicable discount is as follows:

(i) For the individual who has not incurred costs equal to or exceeding the annual out-of-pocket threshold for the year—

(A) For 2025, 1 percent;

(B) For 2026, 2 percent;

(C) For 2027, 5 percent;

(D) For 2028, 8 percent; and

(E) For 2029 and each subsequent year, 10 percent.

(ii) For the individual who has incurred costs equal to or exceeding the annual out-of-pocket threshold for the year—

(A) For 2025, 1 percent;

(B) For 2026, 2 percent;

(C) For 2027, 5 percent;

(D) For 2028, 8 percent;

(E) For 2029, 10 percent;

(F) For 2030, 15 percent; and

(G) For 2031 and each subsequent year, 20 percent.

(3) An applicable drug of a specified manufacturer or a specified small manufacturer, as applicable, is considered to have been marketed as of August 16, 2022 if the applicable drug had Part D expenditures on or before August 16, 2022, and did not have a marketing end date on the FDA NDC SPL Data Elements File before August 17, 2022.

(e) Straddle claims. In the case of a claim for an applicable drug for an applicable beneficiary that straddles multiple phases of the Part D benefit for claims that do not fall entirely—

(1) Above the annual deductible specified at § 423.104(d)(1), the manufacturer provides the applicable discount on only the portion of the negotiated price that falls above the deductible; and

(2) Below or entirely above the annual out-of-pocket threshold specified at § 423.104(d)(5)(iii), the manufacturer provides the applicable discount on each portion of the negotiated price in accordance with this section based on the benefit phase into which each portion of the negotiated price falls.

(f) Claims not subject to discount. The following claims involving an applicable drug are not subject to discounts under the Manufacturer Discount Program:

(1) Medicare Secondary Payer claims.

(2) Medicaid Subrogation claims.

(3) Non-standard format coordination of benefits claims.

(4) Manual claims with a service provider identification qualifier of “Other”.

(g) Impact of applicable discount on enrollee cost sharing. (1) Except as specified in paragraph (g)(2) of this section, the applicable discount does not affect the application of the standard 25 percent coinsurance under § 423.104(d)(2) or the application of the copayment amount under § 423.104(d)(5).

(2) If, after the applicable discount is applied to the negotiated price of an applicable drug, the enrollee cost sharing specified under the plan would exceed such negotiated price minus the applicable discount, the enrollee cost sharing is the negotiated price minus the applicable discount.