Manufacturer Discount Program agreement

(b) Agreement term and renewal. (1) A Manufacturer Discount Program agreement described in this section is valid for an initial term of not less than 12 months and automatically renews for a period of 1 year on each subsequent January 1, except as described in paragraph (b)(3) this section, unless terminated in accordance with paragraph (c) of this section.

(2) For calendar year 2025, an agreement holder must enter into such agreement no later than March 1, 2024, and the initial 12-month term of such agreement begins on January 1, 2025 and ends on December 31, 2025.

(3) For calendar year 2026 and subsequent years, a Manufacturer Discount Program agreement will become effective on the first day of a calendar quarter as follows:

(i) An agreement holder must enter into the agreement no later than the last day of the first month of a calendar quarter in order for the agreement to be effective on the first day of the next calendar quarter.

(ii) If an agreement holder enters into the agreement after the last day of the first month of a particular calendar quarter, the agreement becomes effective on the first day of the second calendar quarter after the calendar quarter in which the manufacturer entered into the agreement.

(iii) An initial term that begins on January 1 will end on December 31 of the same calendar year. An initial term that begins on April 1, July 1, or October 1 will end on December 31 of the following calendar year.

(c) Termination of Manufacturer Discount Program agreement—(1) Termination by CMS. (i) CMS may terminate a Manufacturer Discount Program agreement for a knowing and willful violation of the requirements of such agreement or other good cause shown in relation to a manufacturer's participation in the Manufacturer Discount Program, including good cause as set forth in paragraph (c)(1)(ii) of this section.

(ii) CMS may terminate a Manufacturer Discount Program agreement for good cause, in the case of a primary manufacturer under the Medicare Drug Price Negotiation Program, upon submission of a request from such manufacturer to terminate its applicable agreements under the Manufacturer Discount Program in connection with a notice of the primary manufacturer's decision that it is unwilling to participate in, or continue its participation in, the Medicare Drug Price Negotiation Program. If CMS determines such a notice complies with all requirements set forth in applicable regulations and guidance for the Medicare Drug Price Negotiation Program, the primary manufacturer's request will constitute good cause under paragraph (c)(1) of this section to terminate the primary manufacturer's applicable agreements under the Manufacturer Discount Program. The primary manufacturer's applicable agreements include any Manufacturer Discount Program agreement for which the primary manufacturer is the agreement holder, as well as any arrangement under § 423.2708(b)(2) in which FDA-assigned labeler codes of the primary manufacturer are covered under the Manufacturer Discount Program agreement of another manufacturer. If applicable, CMS will effectuate termination of coverage of such FDA-assigned labeler codes of the primary manufacturer that are covered under the Manufacturer Discount Program agreement of another manufacturer in accordance with paragraph (c)(1)(v)(A)(1) of this section.

(iii) Any termination by CMS must not be effective earlier than 30 days from the date of the notice to the manufacturer of such termination. If a hearing is timely requested by the manufacturer in accordance with paragraph (c)(1)(iv) of this section, such termination must not be effective prior to resolution of timely appeal requests received in accordance with the requirements of this section.

(iv) CMS will provide, upon written request, a manufacturer a hearing concerning a termination by CMS as follows:

(A) This hearing will take place prior to the effective date of the termination with sufficient time for the termination to be repealed prior to the effective date if CMS determines repeal would be appropriate. If a manufacturer or CMS receives an unfavorable decision from the hearing officer, the manufacturer or CMS may request review by the CMS Administrator within 30 calendar days of receipt of the notification of such determination. The decision of the CMS Administrator is final and binding.

(B) A timely request for a hearing before a hearing officer or review by the CMS Administrator will stay termination until the parties have exhausted their appeal rights under the Manufacturer Discount Program, which means either the timeframes to pursue a hearing before a hearing officer or review by the CMS Administrator have passed or a final decision by the Administrator has been issued and there is no remaining opportunity to request further administrative review.

(C) In the case of a termination by CMS under paragraph (c)(1)(ii) of this section with respect to a primary manufacturer under the Medicare Drug Price Negotiation Program, the hearing will be held solely on the papers. The only question to be decided in such hearing is whether the primary manufacturer has asked to rescind its request to terminate under paragraph (c)(1)(ii) of this section prior to the effective date of the termination. If so, CMS will automatically grant such request from the primary manufacturer to rescind its request to terminate under paragraph (c)(1)(ii) of this section.

(v) In addition to the termination under paragraph (c)(1)(ii) of this section of any Manufacturer Discount Program agreement for which the primary manufacturer is the agreement holder, CMS will effectuate the removal of labeler code(s) that are covered under the Manufacturer Discount Program agreement of another manufacturer and termination of coverage of any specific NDC(s) of applicable drugs and selected drugs of a primary manufacturer that are covered under the Manufacturer Discount Program agreement of another manufacturer as follows:

(A) If a primary manufacturer provides notice to CMS that it is unwilling to participate in, or continue its participation in, the Medicare Drug Price Negotiation Program, consistent with paragraph (c)(1)(ii) of this section, no earlier than 30 days from the date CMS sends the notice of termination to the manufacturer in accordance with paragraph (c)(1)(iii) of this section, CMS will effectuate—

(1) The removal of the FDA-assigned labeler code(s) of the primary manufacturer from any Manufacturer Discount Program agreement of another manufacturer whereby such labeler codes of the primary manufacturer are covered in accordance with § 423.2708(b)(2); and

(2) The termination of coverage under any Manufacturer Discount Program agreement specific to NDCs of applicable drugs and selected drugs for which the primary manufacturer is the holder of the new drug application or biologics license application. Such termination of coverage under this paragraph (c)(1)(v)(A)(2) will apply to all applicable drug and selected drug NDCs of the primary manufacturer for which the labeler code is assigned to a manufacturer other than the primary manufacturer and for which the primary manufacturer is the new drug application or biologics license application holder for such drug.

(B) The removal of labeler code(s) in accordance with paragraph (c)(1)(v)(A)(1) of this section and the termination of coverage specific to NDCs in accordance with paragraph (c)(1)(v)(A)(2) of this section do not affect the agreement holder's responsibility to reimburse Part D sponsors for applicable discounts for applicable drugs with such labeler code(s) or such NDCs that were incurred under the agreement before the effective date of removal or termination.

(2) Termination by the manufacturer. An agreement holder may terminate its Manufacturer Discount Program agreement for any reason. The effective date of the termination is as follows:

(i) If the agreement holder notifies CMS of its intent to terminate before January 31 of a calendar year, January 1 of the succeeding calendar year.

(ii) If the agreement holder notifies CMS of its intent to terminate on or after January 31 of a calendar year, January 1 of the second succeeding calendar year.

(3) Post-termination obligations. Termination of a Manufacturer Discount Program agreement under the requirements of this section does not affect the agreement holder's responsibility to reimburse Part D sponsors for applicable discounts for applicable drugs having NDCs with labeler code(s) covered by such agreement that were incurred under the agreement prior to the effective date of the termination.

(4) Reinstatement. Reinstatement in the Manufacturer Discount Program subsequent to termination is available to a manufacturer only upon payment of any and all outstanding applicable discounts and penalties incurred under any previous Manufacturer Discount Program agreement or Coverage Gap Discount Program agreement. The timing of the reinstatement must be consistent with the requirements at § 423.2752(b).

(d) Automatic assignment upon change of ownership. In the event of a change in ownership of a manufacturer that is an agreement holder, the Manufacturer Discount Program agreement is automatically assigned to the new owner, and all terms and conditions of the agreement remain in effect as to the new owner unless terminated in accordance with requirements at § 423.2752(c). The new agreement holder agrees to be bound by and to perform all the duties and responsibilities under the Manufacturer Discount Program, and assumes all obligations and liabilities of, and all claims incurred against, the prior agreement holder under the Manufacturer Discount Program agreement whether arising before or after the effective date of the change of ownership.