Civil money penalties

(a) General rule. An agreement holder that fails to provide, in accordance with the terms of its Manufacturer Discount Program agreement and the requirements of the Manufacturer Discount Program, applicable discounts for applicable drugs covered by the agreement holder's Manufacturer Discount Program agreement and dispensed to applicable beneficiaries is subject to a civil money penalty for each such failure.

(b) Notice of non-compliance. When an agreement holder fails to make a timely payment as required under § 423.2756(b), CMS will issue to the agreement holder a notice of non-compliance with information about the violation. The agreement holder has 5 business days from the date of the notice to respond to CMS.

(c) Determination of the civil money penalty amounts. CMS must impose a civil money penalty for each failure equal to the sum of:

(1) The amount an agreement holder would have paid with respect to the applicable discount; and

(2) Twenty-five percent of such amount.

(d) Notice to impose civil money penalties. If CMS makes a determination to impose a civil money penalty as set forth in paragraph (c) of this section, CMS will send to the agreement holder a written notice of such determination that includes all of the following:

(1) A description of the basis for the determination.

(2) The basis for the penalty.

(3) The amount of the penalty.

(4) The date the penalty is due.

(5) The agreement holder's right to a hearing as set forth in paragraph (e) of this section.

(6) Information about where to file the request for a hearing.

(e) Appeal procedures for civil money penalties. An agreement holder has a right to a hearing following a decision by CMS to impose a civil money penalty according to the administrative appeal process and procedures established in subpart T of this part.

(f) Collection. (1) CMS may not collect a civil money penalty until the affected party (as defined in § 423.1002) has received notice and the opportunity for a hearing under section 1128A(c)(2) of the Act.

(2) An agreement holder that has received from CMS a notice of determination to impose a civil money penalty must pay such civil money penalty in full within 60 calendar days of the date of the CMS notice of determination, except as provided in paragraph (f)(3) of this section.

(3) If the agreement holder requests a hearing to appeal in accordance with subpart T of this part, the civil money penalty is due, as applicable, once the administrative process specified in subpart T has concluded.

(4) CMS will initiate the collection of a civil money penalty owed by an agreement holder either following the expiration of 60 days from the date of the CMS notice of determination to impose a civil money penalty, or if later, the conclusion of the administrative process specified in subpart T of this part, as applicable.

(h) Bankruptcy. In the event an agreement holder declares bankruptcy, as described in title 11 of the United States Code, and as a result of such bankruptcy, fails to pay the total sum of the civil money penalties imposed, the government reserves the right to file a proof-of-claim and take any other action under bankruptcy law, as appropriate, to attempt to recover such unpaid amounts and any civil money penalties imposed by CMS under this part.